As filed with the Securities and Exchange Commission on February 27, 1998
Registration No. 33-36317
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20449
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9 [X]
(Check appropriate box or boxes)
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue, New York, New York 10020
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 830-5200
BERNADETTE N. FINN
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Name and Address of Agent for Service)
Copy to: MICHAEL ROSELLA, ESQ.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
It is proposed that this filing will become effective: (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 404(c)
PART A
Item No. Prospectus Heading
1. Cover Page . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . Introduction; Table of Fees and Expenses
3. Condensed Financial
Information. . . . . . . . . . . . Financial Highlights
4. General Description General Information; Investment
of Registrant. . . . . . . . . . . Objectives, Policies and Risks
5. Management of the Fund . . . . . . Management of the Fund; Custodian,
Transfer Agent and Dividend Agent;
Distribution and Service Plan
5A. Management's Discussion
of Fund Performance. . . . . . . . Not Applicable
6. Capital Stock and Description of Common Stock; How to
Other Securities . . . . . . . . . Purchase and Redeem Shares; General
Information; Dividends and
Distributions; Federal Income Taxes
7. Purchase of Securities How to Purchase and Redeem Shares; Net
Being Offered. . . . . . . . . . Asset Value; Distribution and Service Plan
8. Redemption or Repurchase . . . . . How to Purchase and Redeem Shares
9. Legal Proceedings. . . . . . . . . Not Applicable
<PAGE>
PART B Caption in Statement of
Item No. Additional Information
10. Cover Page . . . . . . . . . . . . . Cover Page
11. Table of Contents. . . . . . . . . . Contents
12. General Information and History. . . Management of the Fund
13. Investment Objectives Investment Objectives,
and Policies . . . . . . . . . . . . Policies and Risks
14. Management of the Fund . . . . . . . Management of the Fund
15. Control Persons and Principal
Holders of Securities. . . . . . . . Management of the Fund
16. Investment Advisory Management of the Fund;
and Other Services . . . . . . . . . Distribution and Service Plan;
Custodian; Transfer Agent and
Dividend Agent; Expense Limitation
17. Brokerage Allocation . . . . . . . . . Investment Objectives, Policies and
Risks
18. Capital Stock and
Other Securities . . . . . . . . . . Description of Common Stock
19. Purchase, Redemption and Pricing How to Purchase and Redeem
of Securities Being Offered. . . . . Shares; Net Asset Value
20. Tax Status . . . . . . . . . . . . . Federal Income Taxes; New Jersey
Income Taxes
21. Underwriters . . . . . . . . . . . . Distribution and Service Plan
22. Calculations of Yield Quotations
of Money Market Funds. . . . . . . . Yield Quotations
23. Financial Statements . . . . . . . . Independent Auditor's Report,
November 26, 1997; Statement
of Net Assets, dated October 31,
1997; Statement of; Operations,
dated October 31, 1997; Statement
of Changes in Net Assets, dated
October 31, 1997; Notes to Financial
Statements, dated October 31, 1997
<PAGE>
________________________________________________________________________________
NEW JERSEY 600 FIFTH AVENUE
DAILY MUNICIPAL NEW YORK, N.Y. 10020
INCOME FUND, INC. (212) 830-5220
================================================================================
PROSPECTUS
March 2, 1998
New Jersey Daily Municipal Income Fund, Inc. (the "Fund") is an open-end
management investment company that 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 taxes and to the extent possible from New
Jersey gross income tax, as is believed to be consistent with preservation of
capital, maintenance of liquidity and stability of principal. No assurance can
be given that those objectives will be achieved. The Fund is concentrated in the
securities issued by New Jersey or entities within New Jersey and the Fund may
invest a significant percentage of its assets in a single issuer, and therefore
an investment in the Fund may be riskier than an investment in other types of
money market funds. The Fund offers two classes of shares to the general public.
The Class A shares of the Fund are subject to a service fee pursuant to the
Fund's Rule 12b-1 Distribution and Service Plan and are sold through financial
intermediaries who provide servicing to Class A shareholders for which they
receive compensation from the Manager and the Distributor. The Class B shares of
the Fund are not subject to a service fee and either are sold directly to the
public or are sold through financial intermediaries that do not receive
compensation from the Manager or Distributor. In all other respects, the Class A
and Class B shares represent the same interests in the income and assets of the
Fund.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
has been filed with the Securities and Exchange Commission (the "SEC") and is
available upon request and without charge by calling or writing the Fund at the
above address. The "Statement of Additional Information" bears the same date as
this Prospectus and is incorporated by reference into this Prospectus in its
entirety. The SEC maintains a web site (http://www.sec.gov) that contains the
Statement of Additional Information and other reports and information regarding
the Fund which have been filed electronically with the SEC.
Reich & Tang Asset Management L.P. acts as Manager of the Fund and Reich & Tang
Distributors, Inc. acts as distributor of the Fund's shares. Reich & Tang Asset
Management L.P. is a registered investment adviser. Reich & Tang Distributors,
Inc. is a registered broker-dealer and member of the National Association of
Securities Dealers, Inc.
An investment in the Fund is neither insured nor guaranteed by the United States
Government. The Fund intends to maintain a stable net asset value of $1.00 per
share although there can be no assurance that this value will be maintained.
Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the shares are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency.
This Prospectus should be read and retained by investors for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT BEING OFFERED VIA THE
INTERNET TO RESIDENTS OF PARTICULAR STATES.
<PAGE>
TABLE OF FEES AND EXPENSES
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Class A shares Class B shares
<S> <C> <C>
Management Fees 0.30% 0.30%
12b-1 Fees 0.20% 0.00%
Other Expenses 0.36% 0.35%
Administration Fees 0.21% 0.21%
Total Fund Operating
Expenses (After Fee Waiver) 0.86% 0.65%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
You would pay the following expenses on a $1000 investment, assuming 5% annual
return (cumulative through the end of each year):
Class A $9 $27 $48 $106
Class B $7 $21 $36 $81
</TABLE>
The purpose of the above fee table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a further discussion of these fees see "Management of the Fund"
and "Distribution and Service Plan" herein.
The figures reflected in this example should not be considered as a
representation of past or future expenses. Actual expenses may be greater or
less than those shown above.
2
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the period)
The following financial highlights of New Jersey Daily Municipal Income Fund,
Inc. has been audited by McGladrey & Pullen LLP, Independent Certified Public
Accountants, whose report thereon appears in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Year Ended
CLASS A October 31, October 26, 1990
---------------------------------------------------------------------- (Inception) to
1997 1996 1995 1994 1993 1992 October 31, 1991
-------- ------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations: -------- -------- -------- -------- -------- -------- --------
Net investment income.............. 0.027 0.027 0.030 0.020 0.020 0.030 0.042
Less Distributions:
Dividends from net investment income ( 0.027) ( 0.027) ( 0.030) ( 0.020) ( 0.020) ( 0.030) ( 0.042)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ========
Total Return........................ 2.70% 2.69% 3.08% 2.03% 1.98% 3.01% 4.62%*
Ratios/Supplemental Data
Net assets, end of period (000)..... $217,529 $151,421 $130,128 $ 105,929 $78,347 $ 46,374 $ 26,238
Ratios to average net assets:
Expenses......................... 0.86%+# 0.78%+# 0.72%+ 0.66%+ 0.61%+ 0.42%+ 0.27%*+
Net investment income............ 2.66%+# 2.65%+# 3.02%+ 2.02%+ 1.95%+ 2.88%+ 4.32%*+
</TABLE>
<TABLE>
<CAPTION>
February 9, 1996
Year (Commencement
Ended of Offering) to
October 31, October 31,
Class B 1997 1996
-------- ---------
<S> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 1.00 $ 1.00
Income from investment operations: -------- --------
Net investment income............... 0.029 0.020
Less distributions:
Dividends from net investment income ( 0.029) ( 0.020)
-------- --------
Net asset value, end of period...... $ 1.00 $ 1.00
======== ========
Total Return........................ 2.91% 2.77%*
Ratios/Supplemental Data
Net assets, end of period (000)..... $ 315 $ 366
Ratios to average net assets:
Expenses......................... 0.65%+# 0.61%#*
Net investment income............ 2.88%+# 2.72%#*
* Annualized
+ Net of management, administration and shareholder servicing fees waived
whichwere equivalent to .00% .06%, .18%, .26%, .35%, .70%, and .70%, of
average net assets respectively, plus expense reimbursement which were
equivalent to .00%, .00%, .00%, .00%, .00%, .04%, and .53% of average net
assets, respectively.
# Includes expense offsets.
</TABLE>
3
<PAGE>
INTRODUCTION
New Jersey Daily Municipal Income Fund, Inc. (the "Fund") is an open-end
management investment company that is a short-term, tax-exempt money market fund
whose investment objectives are to seek as high a level of current income exempt
under current law, in the opinion of bond counsel to the issuer at the date of
issuance, from regular Federal income tax, and, to the extent possible, from New
Jersey gross income tax, as is believed to be consistent with preservation of
capital, maintenance of liquidity and stability of principal by investing
principally in short-term, high quality debt obligations of the State of New
Jersey, Puerto Rico and other United States territories, and their political
subdivisions as described under "Investment Objectives, Policies and Risks"
herein. The Fund also may invest in municipal securities of issuers located in
states other than New Jersey, the interest income on 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 New Jersey income tax for New
Jersey residents. Interest on certain municipal securities purchased by the Fund
may be a preference item for purposes of the Federal alternative minimum tax.
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 of $1.00 per share, although there
can be no assurance that this value will be maintained. The Fund intends to
invest all of its assets in tax-exempt obligations; however, it reserves the
right to invest up to 20% of its assets in taxable obligations. This is a
summary of the Fund's fundamental investment policies which are set forth in
full under "Investment Objectives, Policies and Risks" herein and in the
Statement of Additional Information and may not be changed without approval of a
majority of the Fund's outstanding shares. Of course, no assurance can be given
that these objectives will be achieved.
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"), which is a registered investment adviser and which currently acts as
investment manager or administrator to fifteen other open-end management
investment companies. The Fund's shares are distributed through Reich & Tang
Distributors, Inc. (the "Distributor"), with whom the Fund has entered into a
Distribution Agreement and a Shareholder Servicing Agreement (with respect to
the Class A shares of the Fund only) pursuant to the Fund's distribution and
service plan adopted under Rule 12b-1 of the Investment Company Act of 1940, as
amended (the "1940 Act"). (See "Distribution and Service Plan" herein.)
On any day on which the New York Stock Exchange, Inc. is open for trading ("Fund
Business Day"), investors may, without charge by the Fund, purchase and redeem
shares of the Fund's common stock at their net asset value next determined after
receipt of the order. An investor's subscription will be accepted after the
payment is converted into Federal funds, and shares will be issued as of the
Fund's next net asset value determination which is made as of 12 noon on each
Fund Business Day. (See "How to Purchase and Redeem Shares", and "Net Asset
Value" herein.) Dividends from accumulated net income are declared by the Fund
on each Fund Business Day.
The Fund generally pays interest dividends monthly. Net capital gains, if any,
will be distributed at least annually, and in no event later than within 60 days
after the end of the Fund's fiscal year. All dividends and distributions of
capital gains are automatically invested in additional shares of the same Class
of the Fund unless a shareholder has elected by written notice to the Fund to
receive either of such distributions in cash. (See "Dividends and Distributions"
herein.)
The Fund intends that its investment portfolio may be concentrated in New Jersey
Municipal Obligations as defined herein and bank Participation Certificates
therein. A summary of special risk factors affecting the State of New Jersey is
set forth under "New Jersey Risk Factors" in the Statement of Additional
Information.
4
<PAGE>
The Fund's Board of Directors is authorized to divide the unissued shares into
separate series of stock, one for each of the Fund's separate investment
portfolios that may be created in the future.
INVESTMENT OBJECTIVES, POLICIES
AND RISK CONSIDERATIONS
The Fund is an open-end management investment company that is a short-term,
tax-exempt money market fund whose investment objectives are to seek as high a
level of current income exempt from regular Federal income tax and, to the
extent possible, from New Jersey gross income tax, as is believed to be
consistent with the preservation of capital, maintenance of liquidity and
stability of principal. There can be no assurance that the Fund will achieve its
investment objectives.
The Fund's assets will be invested primarily in high quality debt obligations
issued by or on behalf of the State of New Jersey, 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
Participation Certificates (which, 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) in Municipal Obligations purchased from banks, insurance
companies or other financial institutions ("Participation Certificates").
Dividends paid by the Fund which are "exempt-interest dividends" by virtue of
being properly designated by the Fund as derived from Municipal Obligations and
Participation Certificates will be exempt from regular Federal income tax
provided the Fund complies with the Internal Revenue Code of 1986, as amended
(the "Code").
Although the Supreme Court has determined that Congress has the authority to
subject the interest on bonds such as the Municipal Obligations to Federal
income taxation, existing law excludes such interest from regular Federal income
tax. Such interest, and "exempt-interest dividends" may, however, be subject to
the Federal alternative minimum tax. Securities, the interest income on which
may be subject to the Federal alternative minimum tax (including Participation
Certificates), may be purchased by the Fund without limit. Securities, the
interest income on which is subject to regular Federal, state and local income
tax, will not exceed 20% of the value of the Fund's total assets. (See "Federal
Income Taxes" herein.) Exempt-interest dividends paid by the Fund correctly
identified by the Fund as derived from obligations issued by or on behalf of the
State of New Jersey or any New Jersey local government, or their
instrumentalities, authorities or districts ("New Jersey Municipal Obligations")
will be exempt from the New Jersey gross income tax. Exempt-interest dividends
correctly identified by the Fund as derived from obligations of Puerto Rico and
the Virgin Islands, as well as any other types of obligations that New Jersey is
prohibited from taxing under the Constitution, the laws of the United States of
America or the New Jersey Constitution ("Territorial Municipal Obligations")
also should be exempt from the New Jersey gross income tax provided the Fund
complies with New Jersey law. (See "New Jersey Income Taxes" herein.) To the
extent suitable New Jersey 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 the New Jersey gross income
tax. However, 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 total assets in New Jersey Municipal Obligations, although the exact
amount of the Fund's assets invested in such securities will vary from time to
time. 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 in Municipal Obligations, the Fund reserves the right
5
<PAGE>
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 and
other New Jersey Municipal Obligations. The investment objectives of the Fund
described in this paragraph may not be changed unless approved by the holders of
a majority of the outstanding shares of the Fund that would be affected by such
a change. As used in this Prospectus, the term "majority of the outstanding
shares" of the Fund means, respectively, the vote of the lesser of (i) 67% or
more of the shares of the Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented by proxy,
or (ii) more than 50% of the outstanding shares of the Fund.
The Fund may only purchase 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)
Municipal Obligations with remaining maturities of 397 days or less and rated in
the two highest short-term rating categories by any two nationally recognized
statistical rating organizations ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal Obligations (collectively, the "Requisite
NRSROs"); (ii) Municipal Obligations or Participation Certificates which are
subject to a Demand Feature or Guarantee (as such terms are defined in rule 2a-7
of the 1940 Act) which have received a rating from an NRSRO or such guarantor
has received a rating from an NRSRO with respect to a class of debt obligations
(or any debt obligation within that class) that is comparable in priority and
security to the guarantee (unless the guarantor directly or indirectly,
controls, is controlled by or is under common control with an issuer of the
security subject to the guarantee); and the issuer of the Demand Feature or
Guarantee, or another institution, has undertaken promptly to notify the holder
of the security in the event the Demand Feature or Guarantee is substituted with
another demand feature or guarantee.; (iii) unrated Municipal Obligations
determined by the Fund's Board of Directors to be of comparable quality. In
addition, Municipal Obligations with remaining maturities of 397 days or less
but that at the time of issuance were long-term securities (i.e. with maturities
greater than 366 days) are deemed unrated and maybe 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) it has received a long-term rating from any NRSRO that is not
within the three highest 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 Municipal
Obligations or Participation Certificates. (See "Variable Rate Demand
Instruments and Participation Certificates" in the Statement of Additional
Information.) While there are several organizations that currently qualify as
NRSROs, two examples of NRSROs are Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies ("S&P'") and Moody's Investors Service, Inc.
("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in the
case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in the
case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's in
the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "VMIG-1" by Moody's and "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, the quality of an investment may cease
to be rated or its rating may be reduced such that the investment is no longer a
First Tier security or is rated below the minimum required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall reassess promptly
whether the security presents minimal credit risks and shall cause the Fund to
take such action as the Board of Directors determines is in the best interest of
the Fund and
6
<PAGE>
its shareholders. Reassessment, however, 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. First Tier Security means any
Eligible Security that: (i) is a rated security that has received a short-term
rating from the Requisite NRSROs in the highest short-term rating category for
debt obligations; (ii) is an unrated security that is as determined by the
fund's board of directors to be of comparable quality; (iii) is a security
issued by a registered investment company that is a money market fund; or (iv)
is a government security.
In addition, in the event that a security (1) is in default, (2) ceases to be an
Eligible Security, or (3) is determined to no longer present minimal credit
risks or an event of insolvency occurs with respect to the issuer of a portfolio
security or the provider of any Demand Feature or Guarantee, the Fund will
dispose of the security absent a determination by the Fund's Board of Directors
that disposal of the security would not be in the best interest of the Fund. In
the event that a security is disposed of, as soon as practicable, such
disposition shall occur 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. Provided, however, the Fund shall not invest more
than 5% of its total assets in Municipal Obligations or Participation
Certificates issued by a single issuer, unless the Municipal Obligations are
First Tier Securities.
In view of the "concentration" of the Fund in bank Participation Certificates in
New Jersey Municipal Obligations, which may be secured by bank letters of credit
or guarantees, an investment in the Fund should be made with an understanding of
the characteristics of the banking industry and the risks which such an
investment may entail which include extensive governmental regulation, 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.) Banks are subject to extensive
governmental regulations which may limit both the amounts and types of loans and
other financial commitments which may be made and interest rates and fees which
may be charged. The profitability of this industry is largely dependent upon the
availability and cost of capital funds for the purpose of financing lending
operations under prevailing money market conditions. Also, general economic
conditions play an important part in the operations of this industry and
exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations under a letter
of credit. The Fund may invest 25% or more of the net assets of any portfolio in
securities that are related in such a way that an economic, business or
political development or change affecting one of the securities would also
affect the other securities including, for example, securities the interest upon
which is paid from revenues of similar type projects, or securities the issuers
of which are located in the same state.
The Fund has adopted the following fundamental investment restrictions which
apply to all portfolios
7
<PAGE>
and which may not be changed unless approved by a majority of the outstanding
shares of each series of the Fund's shares that would be affected by such a
change. The Fund is subject to further investment restrictions that are set
forth in the Statement of Additional Information. The Fund may not:
(1) Borrow Money. This restriction shall not apply to borrowings from banks for
temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests that might otherwise require the untimely disposition
of securities, in an amount up to 15% of the value of the Fund's total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing was made.
While borrowings exceed 5% of the value of the Fund's total assets, the
Fund will not make any investments. Interest paid on borrowings will reduce
net income.
(2) 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.
(3) 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 repurchase agreements 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.
(4) Invest more than 25% of its assets in the securities of "issuers" in any
single industry, provided that the Fund may invest more than 25% of its
assets in bank Participation Certificates and there shall be no limitation
on the purchase of those Municipal Obligations and other obligations issued
or guaranteed by the United States government, its agencies or
instrumentalities. Immediately after the acquisition of any securities
subject to a Demand Feature or Guarantee (as such terms are defined in Rule
2a-7 under the Investment Company act of 1940), with respect to 75% of the
total assets of the Fund, not more than 10% of the Fund's assets may be
invested in securities that are subject to a Guarantee or Demand Feature
from the same institution. However, the Fund may only invest more than 10%
of its assets in securities subject to a guarantee or demand feature issued
by a non-controlled person.
(5) Invest in securities of other investment companies, except 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.
The Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Code. The Fund will be restricted in that at the close of each quarter
of the taxable year, at least 50% of the value of its total assets must be
represented by cash, government securities, investment company securities and
other securities limited in respect of any one issuer to not more than 5% in
value of the total assets of the Fund and to not more than 10% of the
outstanding voting securities of such issuer. In addition, at the close of each
quarter of its taxable year, not more than 25% in value of the Fund's total
assets may be invested in securities of one issuer other than government
securities. The limitations described in this paragraph 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.)
The primary purpose of investing in a portfolio of New Jersey Municipal
Obligations is the special tax treatment accorded New Jersey resident individual
investors. However, payment of interest and preservation of principal are
dependent upon the continuing ability of the New Jersey issuers and/or obligors
of state, municipal and public authority debt obligations to meet their
obligations
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thereunder. Investors should consider the greater risk of the Fund's
concentration versus the safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios of New Jersey issues
with those of more diversified portfolios including out-of-state issues before
making an investment decision. The Fund's management believes that by
maintaining the Fund's investment portfolio in liquid, short-term, high quality
investments, including the Participation Certificates and other variable rate
demand instruments that have high quality credit support from banks, insurance
companies or other financial institutions, the Fund is largely insulated from
the credit risks that may exist on long-term New Jersey Municipal Obligations.
For additional information, please refer to the Statement of Additional
Information.
NEW JERSEY RISK FACTORS
This summary is included for the purpose of providing a general description of
the credit and financial conditions of the State of New Jersey. For a more
complete description of these risk factors, see "New Jersey Risk Factors" in the
Statement of Additional Information.
After enjoying an extraordinary boom during the mid-1980's, New Jersey as well
as the rest of the Northeast slipped into a slowdown well before the national
recession which officially began in July 1990 (according to the National Bureau
of Economic Research). At the onset of that recession, New Jersey experienced
accelerated declines in its construction and manufacturing sectors and overall
increases in the rates of unemployment. In the wake of the continued expansion
of the national economy which began in late 1993, New Jersey's economy has
experienced a protracted recovery that in 1994 began to generate internal
momentum due to increases in employment and income levels. Although employment
growth in New Jersey has occurred in a variety of employment sectors, business
services and trade sectors have been the greatest generators of employment
growth in New Jersey while manufacturing jobs continued to trend downward.
Unemployment in New Jersey has continued to recede while home-building and
retail sales have continued to increase steadily from 1992 lows. New Jersey has
benefited from the national recovery. At the end of calendar year 1997, New
Jersey's recovery was in its sixth year and appears to be sustainable now that
the national economy has "soft landed." Reasons for cautious optimism in New
Jersey include increasing employment levels, a low jobless rate, and a
higher-than-national level of per capita personal income.
New Jersey's Constitution and budget and appropriations system require a
balanced budget. Pursuant to the State Constitution, no money may be drawn from
the State Treasury except for appropriations made by law. In addition, all
monies for the support of State purposes must be provided for in one general
appropriation law covering one and the same fiscal year. No general
appropriations law or other law appropriating money for any State purpose may be
enacted if the total amount of appropriations for the fiscal year exceed the
total revenue anticipated for that fiscal year. The State's current Fiscal Year
ends June 30th. The largest part of the total financial operations of the State
is accounted for in the General Fund, which is the fund into which all State
revenues not otherwise restricted by statute are deposited and from which
appropriations are made.
The primary method for State financing of capital projects is through the sale
of the general obligation bonds of the State. These bonds are backed by the full
faith and credit of the State. State tax revenues and certain other fees are
pledged to meet the principal and interest payments required to fully pay the
debt. No general obligation debt can be issued by the State without prior voter
approval.
New Jersey's local finance system is regulated by various statutes designed to
assure that all local governments and their issuing authorities remain on a
sound financial basis. Regulatory and remedial statutes are enforced by the
Division of Local Government Services (the "Division") in the State Department
of Community Affairs. The Local Budget Law imposes specific budgetary procedures
upon counties and municipalities ("local
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units"). Every local unit must adopt an operating budget which is balanced on a
cash basis, and items of revenue and appropriation must be independently audited
by a registered municipal accountant. The Division reviews all municipal and
county annual budgets prior to adoption. This process insures that every
municipality and county annually adopts a budget balanced on a cash basis,
within limitations on appropriations or tax levies, respectively, and making
adequate provision for principal of and interest on indebtedness falling due in
the fiscal year, deferred charges and other statutory expenditure requirements.
The Local Government Cap Law (the "Cap Law") generally limits the year-to-year
increase of the total appropriations of any municipality and the tax levy of any
county to either 5% or an index rate determined annually by the Director,
whichever is less. Certain exceptions exist to the Cap Law's limitation on
increases in appropriations. The principal exceptions to these limitations are
municipal and county appropriations to pay debt service requirements; to comply
with other State or Federal mandates enacted after the effective date of the Cap
Law; amounts approved by referendum; and, in the case of municipalities only, to
fund the preceding year's cash deficit or to reserve for shortfalls in tax
collections.
The Local Budget Law limits the amount of tax anticipation notes that may be
issued by local units and requires the repayment of such notes within three
months of the end of the fiscal year (six months in the case of counties) in
which issued. No local unit is permitted to issue bonds for the payment of
current expenses. Local units may not issue bonds to pay outstanding
obligations, except for refunding purposes, and then only with the approval of
the Local Finance Board. Local units may issue bond anticipation notes for
temporary periods not exceeding in the aggregate approximately ten years from
the date of issue. The debt that any local unit may authorize is limited to a
percentage of its equalized valuation basis, which is the three-year average of
the equalized value of all taxable real property and improvements within the
geographic boundaries of the local unit.
Chapter 75 of the Pamphlet Laws of 1991, signed into law on March 28, 1991,
requires certain municipalities and permits all other municipalities to adopt
the State fiscal year in place of the existing calendar fiscal year.
Municipalities that change fiscal years must adopt a six month transition budget
for January to June. Since expenditures would be expected to exceed revenues
primarily because state aid for the calendar year would not be received by the
municipality until after the end of the transition year budget, the act
authorizes the issuance of Fiscal Year Adjustment Bonds to fund the one time
deficit for the six month transition budget. The act provides that the deficit
in the six month transition budget may be funded initially with bond
anticipation notes based on the estimated deficit in the six month transition.
Notes issued in anticipation of Fiscal Year Adjustment Bonds, including
renewals, can only be issued for up to one year unless the Local Finance Board
permits the municipality to renew them for a further period. The Local Finance
Board must confirm the actual deficit experienced by the municipality. The
municipality then may issue Fiscal Year Adjustment Bonds to finance the deficit
on a permanent basis. The purpose of the act is to assist municipalities that
are heavily dependent on state aid and that have had to issue tax anticipation
notes to fund operating cash flow deficits each year. While the act does not
authorize counties to change their fiscal years, it does provide that counties
with cash flow deficits may issue Fiscal Year Adjustment Bonds as well.
New Jersey's school districts operate under the same comprehensive review and
regulation as do its counties and municipalities. Certain exceptions and
differences are provided, but the State supervision of school finance closely
parallels that of local governments. The State Department of Education has been
empowered with the necessary and effective authority in extreme cases to take
over the operation of local school districts which cannot or will not correct
severe and complex educational deficiencies.
In each school district having a Board of School Estimate, the Board of School
Estimate examines the budget request and fixes the appropriation
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amounts for the next year's operating budget after a public hearing. This board,
whose composition is fixed by statute, certifies the budget to the municipal
governing bodies and to the local board of education. If the local board of
estimate either disagrees, it must appeal to the State Commissioner of Education
(the "Commissioner") to request changes.
In each school district without a Board of School Estimate, the elected board of
education develops the budget proposal and, after public hearing, submits to the
voters of such district for approval. Previously authorized debt service is not
subject to referendum in the annual budget process. If approved, the budget goes
into effect. If defeated, the governing body of each municipality in the school
district has approximately 20 days to determine the amount necessary to be
appropriated for each item appearing in such budget. Should the governing body
fail to certify any amount determined by them to be necessary for any item
rejected at the election, the board of education of such district may appeal the
action to the Commissioner.
School district bonds and temporary notes are issued in conformity with the
School Bond Law. Schools are subject to debt limits and to State regulation of
their borrowing. The debt limitation on school district bonds depends upon the
classification of the school district, but may be as high as 4% of the average
equalized valuation basis of the constituent municipality. In certain cases
involving school districts in cities with populations exceeding 100,000, the
debt limit is 8% of the average equalized valuation basis of the constituent
municipality, and in cities with population in excess of 80,000, the debt limit
is 6% of the aforesaid average equalized valuation.
In 1982, school districts were given an alternative to the traditional method of
bond financing capital improvements pursuant to the Lease Purchase Law. The
Lease Purchase Law permits school districts to acquire a site and school
buildings through a lease purchase agreement with a private lessor corporation.
The lease purchase agreement does not require voter approval. The rent payments
attributable to the lease purchase agreement are subject to annual appropriation
by the school district and are required to be included in the annual current
expense budget of the school district. Furthermore, the rent payments
attributable to the lease purchase agreement do not constitute debt of the
school district and therefore do not impact on the school district's debt
limitation. Lease purchase agreements in excess of five years require the
approval of the Commissioner and the Local Finance Board.
The Local Authorities Fiscal Control Law provides for State supervision of the
fiscal operations and debt issuance practices of independent local authorities
and special taxing districts by the State Department of Community Affairs. The
Local Authorities Fiscal Control Law applies to all autonomous public bodies
created by counties or municipalities, which are empowered to issue bonds, to
impose facility or service charges, or to levy taxes in their districts. This
encompasses most autonomous local authorities (sewerage, municipal utilities,
parking, pollution control, improvement, etc.) and special taxing districts
(fire, water, sewer, street lighting, etc.). The Local Finance Board exercises
approval power over the creation of new authorities and special districts as
well as their dissolution. The Local Finance Board also reviews, conducts public
hearings and issues findings and recommendations on any proposed project
financing of an authority or district, and on any proposed financing agreement
between a municipality or county and an authority or special district. The
Director reviews and approves annual budgets of authorities and special
districts.
MANAGEMENT OF THE FUND
The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, has employed the Manager to serve as investment
manager of the Fund. The Manager provides persons satisfactory to the Fund's
Board of Directors to serve as officers of the Fund. Such officers, as well as
certain other employees and directors of the Fund, may be directors or officers
of Reich & Tang Asset Management, Inc., the sole general partner of the Manager
or employees of the Manager or its affiliates. Due to the services performed by
the
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<PAGE>
Manager, the Fund currently has no employees and its officers are not required
to devote full-time to the affairs of the Fund. The Statement of Additional
Information contains general background information regarding each director and
principal officer of the Fund.
The Manager is a Delaware limited partnership with its principal office at 600
Fifth Avenue, New York, New York 10020. As of January 31, 1998, the Manager was
investment manager, advisor or supervisor with respect to assets aggregating
approximately $11 billion. The Manager acts as manager or administrator of
fifteen other investment companies and also advises pension trusts, profit
sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") is 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"). Reich & Tang Asset Management, Inc. (a wholly-owned
subsidiary of NEICOP) is the sole general partner and owner of the remaining .5%
interest of the Manager. NEIC, a Massachusetts corporation, serves as the
managing general partner of NEICOP.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of NEICOP, and may be
deemed a "controlling person" of the Manager. Reich & Tang, Inc. owns directly
and indirectly approximately 13.7% of the outstanding partnership interests of
NEICOP.
MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. On August 30, 1996, The New England Mutual Life
Insurance Company ("The New England") and MetLife merged, with MetLife being the
continuing company. 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, which
exceeded $1.6 trillion at December 31, 1996 for MetLife and its insurance
affiliates. MetLife and its affiliates provide insurance or other financial
services to approximately 36 million people worldwide.
NEICOP is a holding company offering a broad array of investment styles across a
wide range of asset categories through thirteen subsidiaries, divisions and
affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the manager, include
AEW Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth
Management, Limited Partnership, Greystone Partners, L.P., Harris Associates,
L.P., Jurika & Voyles, L.P., Loomis, Sayles & Company, L.P., New England Funds,
L.P., New England Investment Associates, Inc., Snyder Capital Management, L.P.,
Vaughan, Nelson, Scarborough & McCullough, L.P., and Westpeak Investment
Advisors, L.P. These affiliates in the aggregate are investment advisors or
managers to 80 other registered investment companies.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund. Pursuant to the Investment Management Contract, the Manager receives
from the Fund a fee equal to .30% per annum of the Fund's average daily net
assets for managing the Fund's investment portfolio and performing related
services.
The recent restructuring of NEICLP did not result in a change in control of the
manager and has no impact upon the Manager's performance of its responsibilities
and obligations. The merger between The New England and MetLife resulted in an
"assignment" of the Investment Management Contract relating to the Fund. Under
the 1940 Act, such an assignment caused the automatic termination of this
agreement. On November 28, 1995, 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
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<PAGE>
Manager, approved a new Investment Management Contract effective August 30,
1996, which has a term which extends to July 31, 1998 and may be continued in
force thereafter for successive twelve-month periods beginning each August 1,
provided that such continuance is specifically approved annually by majority
vote of the Fund's outstanding voting securities or by its Board of Directors,
and in either case by a majority of the directors who are not parties to the
Investment Management Contract or interested persons of any such party, by votes
cast in person at a meeting called for the purpose of voting on such matter.
The Investment Management Contract was approved by a majority of the
shareholders of the Fund on July 12, 1996 and contains the same terms and
conditions governing the Manager's investment management responsibilities as the
Fund's previous Investment Management Contract with the Manager, except as to
the date of execution and termination.
Pursuant to the Administrative Services Contract for the Fund, the Manager
performs clerical, accounting supervision and office service functions for the
Fund and provides the Fund with the personnel to: (i) supervise the performance
of bookkeeping and related services by Investors Fiduciary Trust Company, the
Fund's bookkeeping agent; (ii) prepare reports to and filings with regulatory
authorities; and (iii) perform such other services as the Fund may from time to
time request of the Manager. The personnel rendering such services may be
employees of the Manager or its affiliates. The Manager, at its discretion, may
voluntarily waive all or a portion of the administrative services fee. For its
services under the Administrative Services Contract, the Manager receives a fee
equal to .21% per annum of the Fund's average daily net assets. Any portion of
the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares. (See "Distribution and Service
Plan" herein.)
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.
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on July 24, 1990. The authorized capital
stock of the Fund consists of twenty billion shares of stock having a par value
of one tenth of one cent ($.001) per share. The Fund's Board of Directors is
authorized to divide the unissued shares into separate series of stock, each
series representing a separate, additional investment portfolio. Shares of all
series will have identical voting rights, except where, by law, certain matters
must be approved by a majority of the shares of the affected series. Each share
of any series of shares when issued has equal dividend, distribution,
liquidation and voting rights within the series for which it was issued, and
each fractional share has those rights in proportion to the percentage that the
fractional share represents of a whole share. Generally, all shares will be
voted in the aggregate, except if voting by Class is required by law or the
matter involved affects only one Class, in which case shares will be voted
separately by Class. There are no conversion or pre-emptive 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. As of January
31, 1998, the amount of shares owned by all officers and directors as a group
was less than 1% of the outstanding shares of the Fund.
The Fund is subdivided into two classes of common stock, Class A and Class B.
Each share, regardless of class, will represent an interest in the same
portfolio of investments and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) the
Class A and Class B
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<PAGE>
shares will have different class designations; (ii) only the Class A shares will
be assessed a service fee of .20% of the average daily net assets of the Class A
shares of the Fund pursuant to the Rule 12b-1 Distribution and Service Plan of
the Fund; (iii) only the holders of the Class A shares would be entitled to vote
on matters pertaining to the Plan and any related agreements in accordance with
provisions of Rule 12b-1; and (iv) the exchange privilege will permit
shareholders to exchange their shares only for shares of the same class of a
Fund that participates in an exchange privilege with the Fund. (See "Exchange
Privilege" herein.) Payments that are made under the Plans will be calculated
and charged daily to the appropriate class prior to determining daily net asset
value per share and dividends/distributions.
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 such holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors.
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. Fund Business Day means weekdays
(Monday through Friday) except customary business holidays and Good Friday.
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 within 60 days after the end of the Fund's fiscal year. All
dividends and distributions of capital gains are automatically invested in
additional Fund shares of the same class of shares immediately upon payment
thereof unless a shareholder has elected by written notice to the Fund to
receive either of such distributions in cash.
The Class A shares will bear the service fee under the Plan. As a result, the
net income of and the dividends payable to the Class A shares will be lower than
the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of the Fund will, however, be declared
and paid on the same days at the same times and, except as noted with respect to
the service fees payable under the Plan, will be determined in the same manner
and paid in the same amounts.
HOW TO PURCHASE AND REDEEM SHARES
Investors who have accounts with Participating Organizations may invest in the
Fund through their Participating Organizations in accordance with the procedures
established by the Participating Organizations. Certain Participating
Organizations are compensated by the Distributor from its shareholder servicing
fee and by the Manager from its management fee for the performance of these
services. An investor who purchases shares through a Participating Organization
that receives payment from the Manager or the Distributor will become a Class A
shareholder. (See "Investments Through Participating Organizations" herein.) All
other investors, and investors who have accounts with Participating
Organizations but who do not wish to invest in the Fund through their
Participating Organizations, may invest in the Fund directly as Class B
shareholders of the Fund and not receive the benefit of the servicing functions
performed by a Participating Organization. Class B shares may also be offered to
investors who purchase their shares through Participating Organizations who do
not receive compensation from the Distributor or the Manager because they may
not be legally permitted to receive such as fiduciaries. The Manager pays the
expenses incurred in the distribution of Class B shares. Participating
Organizations whose clients become Class B shareholders will not receive
compensation from the Manager or Distributor for the servicing they may provide
to their clients. (See "Direct Purchase and Redemption Procedures" herein.) With
respect to both Classes of shares, the minimum initial investment in the Fund by
Participating Organizations is $1,000, which may be satisfied by initial
investments aggregating $1,000 by a Participating Organization
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on behalf of customers whose initial investments are less than $1,000. The
minimum initial investment for securities brokers, financial institutions and
other industry professionals that are not Participating Organizations is $1,000.
The minimum initial investment for all other investors is $5,000. Initial
investments may be made in any amount in excess of the applicable minimums. The
minimum amount for subsequent investments is $100 unless the investor is a
client of a Participating Organization whose clients have made aggregate
subsequent investments of $100.
The Fund sells and redeems its shares on a continuing basis at 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 and from investors directly.
In order to maximize earnings on its portfolio, the Fund normally has its assets
as fully invested as is practicable. Many securities in which the Fund invests
require immediate settlement in funds of Federal Reserve member banks on deposit
at a Federal Reserve Bank (commonly known as "Federal Funds"). Accordingly, the
Fund does not accept a subscription or invest an investor's payment in portfolio
securities until the payment has been converted into Federal Funds.
Shares will be issued as of the first determination of the Fund's net asset
value per share for each class made after acceptance of the investor's order at
the net asset value per share first determined after receipt of the order.
Shares begin accruing income dividends on the day they are purchased. The Fund
reserves the right to reject any subscription for its shares. Certificates for
Fund shares will not be issued to an investor.
Shares are issued as of 12 noon, New York City time, on any Fund Business Day on
which an order for the shares and accompanying Federal Funds are received by the
Fund's transfer agent before 12 noon. Orders accompanied by Federal Funds and
received after 12 noon, New York City time, on a Fund Business Day will not
result in share issuance until the following Fund Business Day. Fund shares
begin accruing income on the day the shares are issued to an investor.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
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 shareholder's address of record. If a shareholder
elects to redeem all the shares of the Fund he owns, all dividends accrued to
the date of such redemption will be paid to the shareholder along with the
proceeds of the redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted, or for any period during
which an emergency (as determined by the SEC) exists as a result of which
disposal by the Fund of its portfolio securities is not reasonably practicable
or as a result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or for such other period as the SEC may
by order permit for the protection of the shareholders of the Fund.
Redemption requests received by the Fund's transfer agent before 12 noon, New
York City 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, New
York City time, on any Fund Business Day becomes effective on the next Fund
Business Day.
The Fund has reserved the right to redeem the shares of any shareholder if the
net asset value of all the remaining shares in the shareholder's or his
Participating Organization's account after a withdrawal is less than $500.
Written notice of a proposed mandatory redemption will be given at
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<PAGE>
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. During the
notice period any shareholder who receives such a notice may (without regard to
the normal $100 requirement for an additional investment) make a purchase of
additional shares to increase the total net asset value at least to the minimum
amount and thereby avoid such mandatory redemption.
For Participant Investor accounts, notice of a proposed mandatory redemption
will be given only to the appropriate Participating Organization, and the
Participating Organization will be responsible for notifying the Participant
Investor of the proposed mandatory redemption. During the notice period a
shareholder or Participating Organization who receives such a notice may avoid
mandatory redemption by purchasing sufficient additional shares to increase the
total net asset value to at least $500.
The redemption of shares may result in the investor's receipt of more or less
than is paid for the shares and, thus, in a taxable gain or loss to the
investor.
Investments Through
Participating Organizations
Participant Investors may, if they wish, invest in the Fund through the
Participating Organizations with which they have accounts. "Participating
Organizations" are securities brokers, banks and financial institutions or other
industry professionals or organizations which have entered into shareholder
servicing agreements with the Manager with respect to investment of their
customer accounts in the Fund. When instructed by its customer to purchase or
redeem Fund shares, the Participating Organization, on behalf of the customer,
transmits to the Fund's transfer agent a purchase or redemption order, and in
the case of a purchase order, payment for the shares being purchased.
Participating Organizations may confirm to their customers who are shareholders
in the Fund each purchase and redemption of Fund shares for the customers'
accounts. Also Participating Organizations may send their customers periodic
account statements showing the total number of Fund shares owned by each
customer as of the statement closing date, purchases and redemptions of the Fund
shares by each customer during the period covered by the statement and the
income earned by Fund shares of each customer during the statement period
(including dividends paid in cash or reinvested in additional Fund shares).
Participant Investors whose Participating Organizations have not undertaken to
provide such confirmations and statements will receive them from the Fund
directly.
Participating Organizations may charge Participant Investors a fee in connection
with their use of specialized purchase and redemption procedures offered to
Participant Investors by the Participating Organizations. In addition,
Participating Organizations offering purchase and redemption procedures similar
to those offered to shareholders who invest in the Fund directly may impose
charges, limitations, minimums and restrictions in addition to or different from
those applicable to shareholders who invest in the Fund directly. Accordingly,
the net yield to investors who invest through Participating Organizations may be
less than by investing in the Fund directly. A Participant Investor should read
this Prospectus in conjunction with the materials provided by the Participating
Organization describing the procedures under which Fund shares may be purchased
and redeemed through the Participating Organization.
The Glass-Steagall Act limits the ability of a depository institution to become
an underwriter or distributor of securities. It is the Fund management's
position, however, that banks are not prohibited from acting in other capacities
for investment companies, such as providing administrative and shareholder
account maintenance services and receiving compensation from the Manager for
providing such services. This is an unsettled area of the law, however, and if a
determination contrary to the Fund management's position is made by a bank
regulatory agency or court concerning shareholder servicing and administration
payments to banks from the Manager, any such payments will be terminated
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and any shares registered in the banks' names, for their underlying customers,
will be re-registered in the name of the customers at no cost to the Fund or its
shareholders. In addition, state securities laws on this issue may differ from
the interpretations of Federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
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 provided that 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 not result in share issuance until the following Fund
Business Day. Participating Organizations are responsible for instituting
procedures to insure that purchase orders by their respective clients are
processed expeditiously.
Direct Purchase and Redemption Procedures
The following purchase and redemption procedures apply to investors who wish to
invest in the Fund directly and not through Participating Organizations. These
investors may obtain a current prospectus and the subscription order form
necessary to open an account by telephoning the Fund at the following numbers:
Within New York State 212-830-5220
Outside New York State (toll free) 800-221-3079
All shareholders, other than certain Participant Investors, will receive from
the Fund individual confirmations of each purchase and redemption of Fund shares
(other than draft check redemptions) and a monthly statement listing the total
number of Fund shares owned as of the statement closing date, purchase and
redemptions of Fund shares during the month covered by the statement and the
dividends paid on Fund shares of each shareholder during the statement period
(including dividends paid in cash or reinvested in additional Fund shares).
Initial Purchases of Shares
Mail
Investors may send a check made payable to "New Jersey Daily Municipal Income
Fund, Inc." along with a completed subscription order form to:
New Jersey Daily Municipal Income Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue
New York, New York 10020
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member 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.
Bank Wire
To purchase shares of the Fund using the wire system for transmittal of money
among banks, investors should first obtain a new account number by telephoning
the Fund at (212) 830-5220 (within New York State) or at (800) 221-3079 (outside
of New York State). The investors should then instruct a member commercial bank
to wire their money immediately to:
Investors Fiduciary Trust Company
ABA #101003621
Reich & Tang Funds
DDA #890752-953-8
For New Jersey Daily Municipal
Income Fund, Inc.
Account of (Investor's Name)
Fund Account #
SS #/Tax I.D. #
The investor should then promptly complete and mail the subscription order form.
Investors planning to wire funds should instruct their bank early in the day so
the wire transfer can be accomplished before 12 noon New York City time, on that
same day. There may be a charge by the investor's bank for transmitting the
money by
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bank wire, and there also may be a charge for use of Federal Funds. The Fund
does not charge investors in the Fund for its receipt of wire transfers. Payment
in the form of a "bank wire" received prior to 12 noon, New York City time, on a
Fund Business Day will be treated as a Federal Funds payment received on that
day.
Personal Delivery
Deliver a check made payable to "New Jersey Daily Municipal Income Fund, Inc."
to:
Reich & Tang Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
Electronic Funds Transfers (EFT),
Pre-authorized Credit
and Direct Deposit Privilege
You may purchase shares of the Fund (minimum of $100) by having salary, dividend
payments, interest payments or any other payments designated by you, or by
having federal salary, social security, or certain veteran's, military or other
payments from the federal government, automatically deposited into your Fund
account. You can also have money debited from your checking account. To enroll
in any one of these programs, you must file with the Fund a completed EFT
Application, Pre-authorized Credit Application, use a voided copy of check or a
Direct Deposit Sign-Up Form for each type of payment that you desire to include
in the Privilege. The appropriate form may be obtained from your broker or the
Fund. You may elect at any time to terminate your participation by notifying in
writing the appropriate depositing entity and/or federal agency. Death or legal
incapacity will automatically terminate your participation in the Privilege.
Further, the Fund may terminate your participation upon 30 days' notice to you.
Subsequent Purchases of Shares
Subsequent purchases can be made either by bank wire or by personal delivery, as
indicated above, or by mailing a check to the Fund's transfer agent at:
New Jersey Daily Municipal Income Fund, Inc.
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 07101-3232
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 following receipt by the Fund's transfer agent of the redemption order
(and any supporting documentation which 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 and on the next Fund Business Day if the redemption request is
received after 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, currently
considered by the Fund to occur 15 days after investment.
A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee. When a
signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature and 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
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<PAGE>
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,
accompanied by any certificate that may have been previously issued to the
shareholder, addressed to:
New Jersey Daily Municipal Income Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
All previously issued certificates submitted for redemption must be endorsed by
the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with signature guaranteed. Normally the redemption
proceeds are paid by check and mailed to the shareholder of record.
Checks
By making the appropriate election on their subscription order form,
shareholders may request a supply of checks which may be used to effect
redemptions from any one or more of the Classes of shares in 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 for payment, it instructs the transfer agent to redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. The use of a check to make a withdrawal enables a
shareholder in the Fund to receive dividends on the shares to be redeemed up to
the Fund Business Day on which the check clears. Checks provided by the Fund may
not be certified. Fund shares purchased by check may not be redeemed by check
until the check has cleared, which could 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. The Fund's agent bank will not honor checks which are in
amounts exceeding the value of the shareholder's account at the time the check
is presented for payment. 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 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.
Investors wishing to avail themselves of this method of redemption should elect
it on their subscription order form. Individuals and joint tenants are not
required to furnish any supporting documentation. Corporations and other
entities making this election, however, are required to furnish a certified
resolution or other evidence of authorization in accordance with the Fund's
normal practices. Appropriate authorization forms will be sent by the Fund or
its agents to corporations and other shareholders who select this option. As
soon as the authorization forms are filed in good order with the Fund's agent
bank, it will provide the shareholder with a supply of checks. This checking
service may be terminated or modified at any time.
Telephone
The Fund accepts telephone requests for redemption from shareholders who elect
this option. The proceeds of a telephone redemption
19
<PAGE>
may be sent to the shareholders at their address 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. The failure by the Fund to
employ such reasonable procedures may cause the Fund to be liable for the losses
incurred by investors due to telephone redemptions based upon unauthorized or
fraudulent instructions.
A shareholder making a telephone withdrawal should call the Fund at (212)
830-5220; outside New York State at (800) 221-3079 and state (i) the name of the
shareholder appearing on the Fund's records, (ii) the shareholder's account
number with the Fund, (iii) the amount to be withdrawn, (iv) whether such
account is to be forwarded to the shareholder's designated bank account or
address, and (v) the name of the person requesting the redemption. Usually the
proceeds are sent to the designated bank account or address on the same Fund
Business Day the redemption is effected, provided the redemption request is
received before 12 noon, New York City time and on the next Fund Business Day if
the redemption request is received after 12 noon, New York City time. The Fund
reserves the right to terminate or modify the telephone redemption service in
whole or in part at any time and will notify shareholders accordingly.
Exchange Privilege
Shareholders of the Fund are entitled to exchange some or all of their Class of
shares in the Fund for shares of the same Class of certain other investment
companies which retain Reich & Tang Asset Management L.P. as investment adviser
or manager and which participate in the exchange privilege program with the
Fund. If only one Class of shares is available in a particular exchange fund,
the shareholder of the Fund is entitled to exchange their shares for the shares
available in that exchange fund. Currently the exchange privilege program has
been established between the Fund and California Daily Tax Free Income Fund,
Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund,
Inc., Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund,
Inc., New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal
Income Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity
Fund, Inc. and Short Term Income Fund, Inc. 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. An exchange
of shares in the Fund pursuant to the exchange privilege is, in effect, a
redemption of Fund shares (at net asset value) followed by the purchase of
shares of the investment company into which the exchange is made (at net asset
value) and may result in a shareholder realizing a taxable gain or loss for
Federal income tax purposes.
There is no charge for the exchange privilege or limitation as to frequency of
exchange. The minimum amount for an exchange is $1,000, except that shareholders
who are establishing a new account with an investment company through the
exchange privilege must insure 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 may be exchanged only between the
same Class of shares of 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.
20
<PAGE>
Prospectuses may be obtained by contacting the Manager at the address or
telephone number set forth on the cover page of this Prospectus.
Instructions for exchanges may be made by sending a signature guaranteed written
request to:
New Jersey Daily Municipal Income Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
or, for shareholders who have elected that option, by telephoning the Fund at
(212) 830-5220; outside New York State at (800) 221-3079. The Fund reserves the
right to reject any exchange request and may modify or terminate the exchange
privilege at any time.
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 in
an amount approved and confirmed by the Manager. If a monthly or quarterly
withdrawal payment is chosen, a specified amount plan payment is made by the
Fund generally on the 23rd day of the month. Whenever such 23rd day of a month
or quarter is not a Fund Business Day, the payment date is the Fund Business Day
preceding the 23rd day of the month or quarter. In order to make a payment, a
number of shares equal in aggregate net asset value to the payment amount are
redeemed at their net asset value on the Fund Business Day immediately preceding
the date of payment. To the extent that the redemptions to make plan payments
exceed the number of shares purchased through reinvestment of dividends and
distributions, the redemptions reduce the number of shares purchased on original
investment, and may ultimately liquidate a shareholder's investment.
The election to receive automatic withdrawal payments may be made at the time of
the original subscription by so indicating on the subscription order form. The
election may also be made, changed or terminated at any later time by the
participant. Because the withdrawal plan involves the redemption of Fund shares,
such withdrawals may constitute taxable events to the shareholder, but the Fund
does not expect that there will be any realizable capital gains.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the SEC has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by Rule 12b-1.
The Fund's Board of Directors has adopted a 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 Class A shares of the Fund only).
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 shareholders services and for the maintenance of shareholder accounts.
The fee is accrued daily and paid monthly and any portion of the fee may be
deemed to be used by the Distributor for payments to Participating Organizations
with respect to their provision of such services to their clients or customers
who are shareholders of the Class A shares of the Fund. The Class B shareholders
will not receive the benefit of such services from Participating Organizations
and, therefore, will not be assessed a Shareholder Servicing Fee.
The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the management fee and past profits for the
following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements, for performing shareholder servicing and related
administrative functions on behalf of the Class A shares of the Fund; (ii) to
compensate certain Participating Organizations for providing assistance in
distributing the Class A Shares of the Fund; and (iii) to pay the costs of
printing and distributing the
21
<PAGE>
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 Shareholding
Servicing Fee 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.
Under the Distribution Agreement, the Distributor for nominal consideration
serves as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses including the cost of dedicated lines and CRT terminals, incurred by
the 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.
For the fiscal year ended October 31, 1997, the total amount spent pursuant to
the Plan for Class A shares was .43% 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 .23% was paid by the Manager (which may be deemed an indirect
payment by the Fund). Of the total amount paid by the Manager, $789,345 was
utilized for Broker assistance payments, $11,728 for compensation to sales
personnel, $3,054 for travel and expenses, $21,109 for Prospectus printing, and
$819 on miscellaneous expenses.
FEDERAL INCOME TAXES
The Fund has elected to qualify under the Code as a regulated investment company
that distributes "exempt-interest dividends" as defined in the Code. The Fund's
policy is to distribute as dividends each year 100% (and in no event less than
90%) of its tax-exempt interest income, net of certain deductions, and its
investment company taxable income (if any). If distributions are made in this
manner, dividends derived from the interest earned on Municipal Obligations are
"exempt-interest dividends" and are not subject to regular Federal income tax,
although as described below, such "exempt-interest dividends" may be subject to
Federal alternative minimum tax. Dividends paid from taxable income, if any, and
distributions of any realized short-term capital gains (whether from tax-exempt
or taxable obligations) are taxable to shareholders as ordinary income for
Federal income tax purposes, whether received in cash or reinvested in
additional shares of the Fund. Although it is not intended, it is possible that
the Fund may realize short-term or long-term capital gains or losses. The Fund
informs 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 for purposes of computing the amount of Social Security
benefits includible in gross income. Interest on certain "private activity
bonds" (generally, a bond issue in which more than 10% of the proceeds are used
for a non-governmental trade or business and which meets the private security or
payment test, or a bond issue which meets the private loan financing test)
issued after August 7, 1986 will constitute an item of tax preference subject to
the individual alternative minimum tax. Corporations will be required to include
in alternative minimum taxable
22
<PAGE>
income, 75% of the amount by which their adjusted current earnings (including
generally, tax-exempt interest) exceeds their alternative minimum taxable income
(determined without this item). In certain cases Subchapter S corporations with
accumulated earnings and profits from Subchapter C years will be subject to a
tax on "passive investment income", including tax-exempt interest. Although the
Fund intends to maintain a $1.00 per share net asset value, a Shareholder may
realize a taxable gain or loss upon the disposition of shares.
With respect to 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 Obligation and that the interest thereon
will be exempt from regular income taxes to the Fund to the same extent as the
interest on the underlying Municipal Obligation. Counsel has pointed out that
the Internal Revenue Service has announced that it will not ordinarily issue
advance rulings on the question of the ownership of securities or participation
interests therein subject to a put and could reach a conclusion different from
that reached by counsel.
In South Carolina v. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require states to register bonds they issue and
may subject the interest on such bonds to Federal tax if not registered, and the
Court further held that there is no constitutional prohibition against the
Federal Government's taxing the interest earned on state or other municipal
bonds. The Supreme Court decision affirms the authority of the Federal
government to regulate and control bonds such as the Municipal Obligations and
to tax such bonds in the future. The decision does not, however, affect the
current exemption from regular income tax of the interest earned on the
Municipal Obligations.
NEW JERSEY 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.
The Fund intends to be a "qualified investment fund" within the meaning of the
New Jersey gross income tax. The primary criteria for constituting a "qualified
investment fund" are that (1) such fund is an investment company registered with
the SEC which, for the calendar year in which the distribution is paid, has no
investments other than interest bearing obligations, obligations issued at a
discount, cash and cash items, including receivables and financial options,
futures, forward contracts, or other similar financial instruments relating to
interest-bearing obligations, obligations issued at a discount or bond indexes
related thereto and (2) at the close of each quarter of the taxable year, such
fund has not less than 80% of the aggregate principal amount of all of its
investments, excluding financial options, futures, forward contracts, or other
similar financial instruments relating to interest-bearing obligations,
obligations issued at a discount or bond indexes related thereto to the extent
such instruments are authorized under the regulated investment company rules
under the Code, cash and cash items, which cash items shall include receivables,
in New Jersey Municipal Obligations, Territorial Municipal Obligations and
certain other specified securities. Additionally, a qualified investment fund
must comply with certain continuing reporting requirements. In the opinion of
Sills Cummis Zuckerman Radin Tischman Epstein & Gross, P.A., special New Jersey
tax counsel to the Fund, assuming that the Fund constitutes a qualified
investment fund and that the Fund complies with the reporting obligations under
New Jersey law with respect to qualified investment funds, (a) distributions
paid by the Fund to a New Jersey resident individual shareholder will not be
subject to the New Jersey gross income tax to the extent that the distributions
are attributable to income received as interest on or gain from New Jersey
Municipal Obligations or Territorial Municipal Obligations, and (b) gain from
the sale of shares in the Fund by a New Jersey resident individual shareholder
will not be subject to the New Jersey gross income tax.
23
<PAGE>
Shareholders are urged to consult with their tax advisors with respect to the
treatment of distributions from the Fund and ownership of shares of the Fund in
their own states and localities.
GENERAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on July 24,
1990 and it is registered with the SEC as a open-end management investment
company.
The Fund prepares semi-annual unaudited and annual audited reports which include
a list of investment securities held by the Fund and which are sent to
shareholders.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-Laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of shareholders entitled to cast not less than 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
the next meeting of the shareholders called for the purpose of considering the
election or reelection of such Director or of a successor to such Director, and
until the election and qualification of his or her successor, elected at such a
meeting, or until such Director sooner dies, resigns, retires or is removed by
the vote of the shareholders.
For further information with respect to the Fund and the shares offered hereby,
reference is made to the Fund's Registration Statement filed with the SEC,
including the exhibits thereto. The Registration Statement and the exhibits
thereto may be examined at the Commission and copies thereof may be obtained
upon payment of certain duplicating fees.
NET ASSET VALUE
The net asset value of each Class of the Fund's shares is determined as of 12
noon, New York City time, on each Fund Business Day. The net asset value of a
Class is computed by dividing the value of the Fund's net assets for such Class
(i.e., the value of its securities and other assets less its liabilities,
including expenses payable or accrued but excluding capital stock and surplus)
by the total number of shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania Street, Kansas City,
Missouri 64105 is custodian for the Fund's cash and securities. Reich & Tang
Services, Inc., 600 Fifth Avenue, New York, New York 10020 is the transfer agent
and dividend agent for the shares of the Fund. The Fund's transfer agent and
custodian do not assist in, and are not responsible for, investment decisions
involving assets of the Fund.
<PAGE>
TABLE OF CONTENTS
Table of Fees and Expenses....................
Selected Financial Information................
Introduction..................................
Investment Objectives,
Policies and Risks Considerations...........
New Jersey Risk Factors.......................
Management of the Fund........................
Description of Common Stock...................
Dividends and Distributions................... NEW JERSEY
How to Purchase and Redeem Shares............. DAILY
Investment Through MUNICIPAL
Participating Organizations............... INCOME
Direct Purchase and FUND, INC.
Redemption Procedures ....................
Initial Purchases of Shares.................
Electronic Funds Transfers (EFT),
Pre-Authorized Credit and Direct
Deposit Privilege..........................
Subsequent Purchases of Shares.............. PROSPECTUS
Redemption of Shares........................
Exchange Privilege.......................... MARCH 2, 1998
Specific Amount Automatic
Withdrawal Plan...........................
Distribution and Service Plan.................
Federal Income Taxes..........................
New Jersey Income Taxes.......................
General Information ..........................
Net Asset Value...............................
Custodian and Transfer Agent..................
<PAGE>
[GRAPHIC OMITTED]
PROSPECTUS
VISTA SELECT SHARES OF NEW JERSEY DAILY MUNICIPAL INCOME FUND
March 2, 1998
New Jersey Daily Municipal Income Fund, Inc. (the "Fund") is an open-end
management investment company that 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 taxes and to the extent possible from New Jersey
gross income tax, as is believed to be consistent with preservation of capital,
maintenance of liquidity and stability of principal. No assurance can be given
that those objectives will be achieved. This Prospectus relates exclusively to
the Vista Select shares class of the Fund. The Fund is concentrated in the
securities issued by New Jersey. Additionally, the Fund may invest a significant
percentage of its assets in a single issuer, and therefore an investment in the
Fund may be riskier than an investment in other types of money market funds. The
Fund offers two classes of shares to the general public, however only Class A
shares are offered by this Prospectus. The Class A shares of the Fund are
subject to a service fee pursuant to the Fund's Rule 12b-1 Distribution and
Service Plan and are sold through financial intermediaries who provide servicing
to Class A shareholders for which they receive compensation from the Manager and
the Distributor. The Class B shares of the Fund are not subject to a service fee
and either are sold directly to the public or are sold through financial
intermediaries that do not receive compensation from the Manager or Distributor.
In all other respects, the Class A and Class B shares represent the same
interests in the income and assets of the Fund.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
has been filed with the Securities and Exchange Commission (the "SEC") and is
available upon request and without charge by calling 1-800-34-VISTA. The
"Statement of Additional Information" bears the same date as this Prospectus and
is incorporated by reference into this Prospectus in its entirety. The SEC
maintains a web site (http://www.sec.gov) that contains the Statement of
Additional Information and other reports and information regarding the Fund
which have been filed electronically with the SEC.
Investors should be aware that the Vista Select shares may not be purchased
other than through certain securities dealers with whom Vista Fund Distributors,
Inc. ("VFD") has entered into agreements for this purpose, directly from VFD or
through certain "Participating Organizations" (see "Investments Through
Participating Organizations") with whom they have accounts. Vista Select shares
have been created for the primary purpose of providing a New Jersey tax-free
money market fund product for shareholders of certain funds distributed by VFD.
Shares of the Fund other than the Vista Select shares are offered pursuant to a
separate prospectus.
Reich & Tang Asset Management L.P. acts as Manager of the Fund and Reich & Tang
Distributors, Inc. acts as distributor of the Fund's shares. Reich & Tang Asset
Management L.P. is a registered investment adviser. Reich & Tang Distributors,
Inc. is a registered broker-dealer and member of the National Association of
Securities Dealers, Inc.
An investment in the Fund is neither insured nor guaranteed by the United States
Government. The Fund intends to maintain a stable net asset value of $1.00 per
share although there can be no assurance that this value will be maintained.
Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the shares are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency.
This Prospectus should be read and retained by investors for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT BEING OFFERED VIA THE
INTERNET TO RESIDENTS OF PARTICULAR STATES.
<PAGE>
TABLE OF CONTENTS
Table of Contents......................................................... 2
Table of Fees and Expenses................................................ 3
Financial Highlights...................................................... 4
Introduction.............................................................. 5
Investment Objectives, Policies and Risk Considerations................... 6
New Jersey Risk Factors...................................................12
Management of The Fund....................................................16
Description of Common Stock...............................................19
Dividends and Distributions...............................................20
How to Purchase and Redeem Shares.........................................20
Initial Purchase of Vista Select Shares..............................21
Subsequent Purchases of Shares.......................................23
Redemption of Shares.................................................24
Exchange Privilege...................................................26
Specified Amount Automatic Withdrawal Plan...........................27
Investments Through Participating Organizations......................27
Distribution and Service Plan.............................................29
Federal Income Taxes......................................................30
New Jersey Income Taxes...................................................32
General Information ......................................................33
Net Asset Value...........................................................33
Custodian, Transfer Agent and Dividend Agent..............................34
2
<PAGE>
TABLE OF FEES AND EXPENSES
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Class A shares Class B shares
<S> <C> <C>
Management Fees 0.30% 0.30%
12b-1 Fees 0.20% 0.00%
Other Expenses 0.36% 0.35%
Administration Fees 0.21% 0.21%
Total Fund Operating
Expenses (After Fee Waiver) 0.86% 0.65%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
You would pay the following expenses on a $1000 investment, assuming 5% annual
return (cumulative through the end of each year):
Class A $9 $27 $48 $106
Class B $7 $21 $36 $81
</TABLE>
The purpose of the above fee table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a further discussion of these fees see "Management of the Fund"
and "Distribution and Service Plan" herein.
The figures reflected in this example should not be considered as a
representation of past or future expenses. Actual expenses may be greater or
less than those shown above.
3
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the period)
The following financial highlights of New Jersey Daily Municipal Income Fund,
Inc. has been audited by McGladrey & Pullen LLP, Independent Certified Public
Accountants, whose report thereon appears in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Year Ended
CLASS A October 31, October 26, 1990
---------------------------------------------------------------------- (Inception) to
1997 1996 1995 1994 1993 1992 October 31, 1991
-------- ------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations: -------- -------- -------- -------- -------- -------- --------
Net investment income.............. 0.027 0.027 0.030 0.020 0.020 0.030 0.042
Less Distributions:
Dividends from net investment income ( 0.027) ( 0.027) ( 0.030) ( 0.020) ( 0.020) ( 0.030) ( 0.042)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ========
Total Return........................ 2.70% 2.69% 3.08% 2.03% 1.98% 3.01% 4.62%*
Ratios/Supplemental Data
Net assets, end of period (000)..... $217,529 $151,421 $130,128 $ 105,929 $78,347 $ 46,374 $ 26,238
Ratios to average net assets:
Expenses......................... 0.86%+# 0.78%+# 0.72%+ 0.66%+ 0.61%+ 0.42%+ 0.27%*+
Net investment income............ 2.66%+# 2.65%+# 3.02%+ 2.02%+ 1.95%+ 2.88%+ 4.32%*+
</TABLE>
<TABLE>
<CAPTION>
February 9, 1996
Year (Commencement
Ended of Offering) to
October 31, October 31,
Class B 1997 1996
-------- ---------
<S> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 1.00 $ 1.00
Income from investment operations: -------- --------
Net investment income............... 0.029 0.020
Less distributions:
Dividends from net investment income ( 0.029) ( 0.020)
-------- --------
Net asset value, end of period...... $ 1.00 $ 1.00
======== ========
Total Return........................ 2.91% 2.77%*
Ratios/Supplemental Data
Net assets, end of period (000)..... $ 315 $ 366
Ratios to average net assets:
Expenses......................... 0.65%+# 0.61%#*
Net investment income............ 2.88%+# 2.72%#*
* Annualized
+ Net of management, administration and shareholder servicing fees waived
whichwere equivalent to .00% .06%, .18%, .26%, .35%, .70%, and .70%, of
average net assets respectively, plus expense reimbursement which were
equivalent to .00%, .00%, .00%, .00%, .00%, .04%, and .53% of average net
assets, respectively.
# Includes expense offsets.
</TABLE>
5
<PAGE>
INTRODUCTION
New Jersey Daily Municipal Income Fund, Inc. (the "Fund") is an open-end
management investment company that is a short-term, tax-exempt money market fund
whose investment objectives are to seek as high a level of current income exempt
under current law, in the opinion of bond counsel to the issuer at the date of
issuance, from regular Federal income tax, and, to the extent possible, from New
Jersey gross income tax, as is believed to be consistent with preservation of
capital, maintenance of liquidity and stability of principal by investing
principally in short-term, high quality debt obligations of the State of New
Jersey, Puerto Rico and other United States territories, and their political
subdivisions as described under "Investment Objectives, Policies and Risks"
herein. The Fund also may invest in municipal securities of issuers located in
states other than New Jersey, the interest income on 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 New Jersey income tax for New
Jersey residents.
Interest on certain municipal securities purchased by the Fund may be a
preference item for purposes of the Federal alternative minimum tax. 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 of $1.00 per share, although there can be no
assurance that this value will be maintained. The Fund intends to invest all of
its assets in tax-exempt obligations; however, it reserves the right to invest
up to 20% of its assets in taxable obligations. This is a summary of the Fund's
fundamental investment policies which are set forth in full under "Investment
Objectives, Policies and Risks" herein and in the Statement of Additional
Information and may not be changed without approval of a majority of the Fund's
outstanding shares. Of course, no assurance can be given that these objectives
will be achieved.
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"), which is a registered investment adviser and which currently acts as
investment manager or administrator to fifteen other open-end management
investment companies. The Fund's shares are distributed through Reich & Tang
Distributors, Inc. (the "Distributor"), with whom the Fund has entered into a
Distribution Agreement and a Shareholder Servicing Agreement (with respect to
Class A Shares of the Fund only) pursuant to the Fund's distribution and service
plan adopted under Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"). (See "Distribution and Service Plan" herein.)
On any day on which the New York Stock Exchange, Inc. is open for trading ("Fund
Business Day"), investors may, without charge by
6
<PAGE>
the Fund, purchase and redeem shares of the Fund's common stock at their net
asset value next determined after receipt of the order. An investor's
subscription will be accepted after the payment is converted into Federal funds,
and shares will be issued as of the Fund's next net asset value determination
which is made as of 12 noon on each Fund Business Day. (See "How to Purchase and
Redeem Shares" and "Net Asset Value" herein.) Dividends from accumulated net
income are declared by the Fund on each Fund Business Day.
The Fund generally pays interest dividends monthly. Net capital gains, if any,
will be distributed at least annually, and in no event later than within 60 days
after the end of the Fund's fiscal year. All dividends and distributions of
capital gains are automatically invested in additional shares of the same Class
of the Fund unless a shareholder has elected by written notice to the Fund to
receive either of such distributions in cash. (See "Dividends and Distributions"
herein.)
The Fund intends that its investment portfolio may be concentrated in New Jersey
Municipal Obligations as defined herein and bank Participation Certificates
therein. A summary of special risk factors affecting the State of New Jersey is
set forth under "New Jersey Risk Factors" in the Statement of Additional
Information.
The Fund's Board of Directors is authorized to divide the unissued shares into
separate series of stock, one for each of the Fund's separate investment
portfolios that may be created in the future.
Vista Select shares have been created for the primary purpose of providing a New
Jersey tax-free money market fund product for investors who purchase shares
directly from VFD, through dealers with whom VFD has entered into agreements for
this purpose or through certain "Participating Organizations" (see "Investments
Through Participating Organizations" herein) with whom they have accounts or who
acquire Vista Select shares through the exchange of shares of certain other
investment companies as hereinafter described. Vista Select shares are identical
to other shares of the Fund, which are offered pursuant to a separate
prospectus, with respect to investment objectives and yield, but differ with
respect to certain other matters. For example, shareholders who hold other
shares of the Fund may not participate in the exchange privilege described
herein and have different arrangements for redemptions by check.
INVESTMENT OBJECTIVES, POLICIES
AND RISK
CONSIDERATIONS
The Fund is an open-end management investment company that is a short-term,
tax-exempt money market fund whose investment objectives are to seek as high a
level of current income exempt from regular Federal income tax and, to the
extent possible, from New Jersey gross income tax, as is believed to be
7
<PAGE>
consistent with the preservation of capital, maintenance of liquidity and
stability of principal. There can be no assurance that the Fund will achieve its
investment objectives.
The Fund's assets will be invested primarily in high quality debt obligations
issued by or on behalf of the State of New Jersey, 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
Participation Certificates (which, 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) in Municipal Obligations purchased from banks, insurance
companies or other financial institutions ("Participation Certificates").
Dividends paid by the Fund which are "exempt-interest dividends" by virtue of
being properly designated by the Fund as derived from Municipal Obligations and
Participation Certificates will be exempt from regular Federal income tax
provided the Fund complies with Section 852(b)(5) of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code").
Although the Supreme Court has determined that Congress has the authority to
subject the interest on bonds such as the Municipal Obligations to Federal
income taxation, existing law excludes such interest from regular Federal income
tax. Such interest, and "exempt-interest dividends", however, may be subject to
the Federal alternative minimum tax. Securities, the interest income on which
may be subject to the Federal alternative minimum tax (including Participation
Certificates), may be purchased by the Fund without limit. Securities, the
interest income on which is subject to regular Federal, state and local income
tax, will not exceed 20% of the value of the Fund's total assets. (See "Federal
Income Taxes" herein.) Exempt-interest dividends paid by the Fund correctly
identified by the Fund as derived from obligations issued by or on behalf of the
State of New Jersey or any New Jersey local government, or their
instrumentalities, authorities or districts ("New Jersey Municipal Obligations")
will be exempt from the New Jersey gross income tax. Exempt-interest dividends
correctly identified by the Fund as derived from obligations of Puerto Rico and
the Virgin Islands, as well as any other types of obligations that New Jersey is
prohibited from taxing under the Constitution, the laws of the United States of
America or the New Jersey Constitution ("Territorial Municipal Obligations")
also should be exempt from the New Jersey gross income tax provided the Fund
complies with New Jersey law. (See "New Jersey Income Taxes" herein.) To the
extent suitable New Jersey Municipal Obligations are not available for
investment by the Fund, the Fund may purchase Municipal Obligations issued by
other states,
8
<PAGE>
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 the New Jersey gross income tax. However,
except as a temporary defensive measure during periods of adverse market
conditions as determined by the Manager, the Fund will invest at least 65% of
its assets in New Jersey Municipal Obligations, although the exact amount of the
Fund's assets invested in such securities will vary from time to time. 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 in Municipal Obligations, 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 total assets in Participation Certificates purchased
from banks in industrial revenue bonds and other New Jersey Municipal
Obligations. The investment objectives of the Fund described in this paragraph
may not be changed unless approved by the holders of a majority of the
outstanding shares of the Fund that would be affected by such a change. As used
in this Prospectus, the term "majority of the outstanding shares" of the Fund
means, respectively, the vote of the lesser of (i) 67% or more of the shares of
the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy or (ii) more
than 50% of the outstanding shares of the Fund.
The Fund may only purchase 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)
Municipal Obligations with remaining maturities of 397 days or less and rated in
the two highest short-term rating categories by any two nationally recognized
statistical rating organizations ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal Obligations (collectively, the "Requisite
NRSROs"); (ii) Municipal Obligations or Participation Certificates which are
subject to a Demand Feature or Guarnatee (as such terms are defined in rule 2a-7
of the 1940 Act) which have received a rating from an NRSRO or such guarantor
has received a rating from an NRSRO with respect to a class of debt obligations
(or any debt obligation within that class) that is comparable in priority and
security to the guarantee (unless the guarantor directly or indirectly,
controls, is controlled by or is under common control with an issuer of the
security subject to the guarantee); and the issuer of the Demand Feature or
Guarnatee, or another institution, has undertaken promptly to notify the holder
of the security in the event the Demand
9
<PAGE>
Feature or Guarnatee is substituted with another Demand Feature or Guarnatee;
(iii) unrated Municipal Obligations determined by the Fund's Board of Directors
to be of comparable quality. In addition, Municipal Obligations with remaining
maturities of 397 days or less but that at the time of issuance were long-term
securities (i.e. with maturities greater than 366 days) are deemed unrated and
maybe 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) it has received a long-term rating from
any NRSRO that is not within the three highest 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 Municipal Obligations or Participation Certificates. (See "Variable Rate
Demand Instruments and Participation Certificates" in the Statement of
Additional Information.) While there are several organizations that currently
qualify as NRSROs, two examples of NRSROs are Standard & Poor's Rating Services,
a division of The McGraw-Hill Companies ("S&P'") and Moody's Investors Service,
Inc. ("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA"
by S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in
the case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in
the case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's
in the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "VMIG-1" by Moody's and "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, the quality of an investment may cease
to be rated or its rating may be reduced such that the investment is no longer a
First Tier security or is rated below the minimum required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall reassess promptly
whether the security presents minimal credit risks and shall cause the Fund to
take such action as the Board of Directors determines is in the best interest of
the Fund and its shareholders. Reassessment, however, 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. First Tier Security
means any Eligible Security that: (i) is a rated security that has received a
short-term rating from the Requisite NRSROs in the highest short-term rating
category for debt obligations; (ii) is an unrated security that is as determined
by the fund's board of directors to be of comparable quality; (iii) is a
security issued by
10
<PAGE>
a registered investment company that is a money market fund; or (iv) is a
government security.
In addition, in the event that a security (1) is in default, (2) ceases to be an
Eligible Security, or (3) is determined to no longer present minimal credit
risks or an event of insolvency occurs with respect to the issuer of a portfolio
security or the provider of any Demand Feature or Guarnatee, 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 interest of the Fund. In
the event that a security is disposed of, as soon as practicable, such
disposition shall occur 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. Provided, however, the Fund shall not invest more
than 5% of its total assets in Municipal Obligations or Participation
Certificates issued by a single issuer, unless the Municipal Obligations are
First Tier Securities.
In view of the "concentration" of the Fund in bank Participation Certificates in
New Jersey Municipal Obligations, which may be secured by bank letters of credit
or guarantees, an investment in the Fund should be made with an understanding of
the characteristics of the banking industry and the risks which such an
investment may entail which include extensive governmental regulation, 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.) 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
11
<PAGE>
credit losses arising from possible financial difficulties of borrowers might
affect a bank's ability to meet its obligations under a letter of credit. The
Fund may invest 25% or more of the net assets of any portfolio in securities
that are related in such a way that an economic, business or political
development or change affecting one of the securities would also affect the
other securities including, for example, securities the interest upon which is
paid from revenues of similar type projects, or securities the issuers of which
are located in the same state.
The Fund has adopted the following fundamental investment restrictions which
apply to all portfolios and which may not be changed unless approved by a
majority of the outstanding shares of each series of the Fund's shares that
would be affected by such a change. The Fund is subject to further investment
restrictions that are set forth in the Statement of Additional Information.
The Fund may not:
(1) Borrow Money. This restriction shall not apply to borrowings from banks for
temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests that might otherwise require the untimely disposition
of securities, in an amount up to 15% of the value of the Fund's total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing was made.
While borrowings exceed 5% of the value of the Fund's total assets, the
Fund will not make any investments. Interest paid on borrowings will reduce
net income.
(2) 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.
(3) 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 repurchase agreements 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.
(4) Invest more than 25% of its assets in the securities of "issuers" in any
single industry, provided that the Fund may invest more than 25% of its
assets in bank Participation Certificates and there shall be no limitation
on the purchase of those Municipal Obligations and other obligations issued
or guaranteed by the United States government, its agencies or
instrumentalities. Immediately after the acquisition of any securities
subject to a Demand Feature or Guarnatee (as such terms are defined in Rule
12
<PAGE>
2a-7 under the Investment Company act of 1940), with respect to 75% of the
total assets of the Fund, not more then 10% of the Fund's assets may be
invested in securities that are subject to a Guarnatee or Demand Feature
from the same institution. However, the Fund may only invest more than 10%
of its assets in securities subject to a Guarnatee or Demand Feature issued
by a non-controlled person.
(5) Invest in securities of other investment companies, except 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.
The Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Code. The Fund will be restricted in that at the close of each quarter
of the taxable year, at least 50% of the value of its total assets must be
represented by cash, government securities, investment company securities and
other securities limited in respect of any one issuer to not more than 5% in
value of the total assets of the Fund and to not more than 10% of the
outstanding voting securities of such issuer. In addition, at the close of each
quarter of its taxable year, not more than 25% in value of the Fund's total
assets may be invested in securities of one issuer other than government
securities. The limitations described in this paragraph 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.)
The primary purpose of investing in a portfolio of New Jersey Municipal
Obligations is the special tax treatment accorded New Jersey resident individual
investors. However, payment of interest and preservation of principal are
dependent upon the continuing ability of the New Jersey issuers and/or obligors
of state, municipal and public authority debt obligations to meet their
obligations thereunder. Investors should consider the greater risk of the Fund's
concentration versus the safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios of New Jersey issues
with those of more diversified portfolios including out-of-state issues before
making an investment decision. The Fund's management believes that by
maintaining the Fund's investment portfolio in liquid, short-term, high quality
investments, including the Participation Certificates and other variable rate
demand instruments that have high quality credit support from banks, insurance
companies or other financial institutions, the Fund is largely insulated from
the credit risks that may exist on long-term New Jersey Municipal Obligations.
For additional information, please refer to the Statement of Additional
Information.
13
<PAGE>
NEW JERSEY RISK FACTORS
This summary is included for the purpose of providing a general description of
the credit and financial conditions of the State of New Jersey. For a more
complete description of these risk factors, see "New Jersey Risk Factors" in the
Statement of Additional Information.
After enjoying an extraordinary boom during the mid-1980's, New Jersey as well
as the rest of the Northeast slipped into a slowdown well before the national
recession which officially began in July 1990 (according to the National Bureau
of Economic Research). At the onset of that recession, New Jersey experienced
accelerated declines in its construction and manufacturing sectors and overall
increases in the rates of unemployment. In the wake of the continued expansion
of the national economy which began in late 1993, New Jersey's economy has
experienced a protracted recovery that in 1994 began to generate internal
momentum due to increases in employment and income levels. Unemployment in New
Jersey has continued to recede while home-building and retail sales have
continued to increase steadily from 1992 lows. New Jersey has benefited from the
national recovery. At the end of calendar year 1997, New Jersey's recovery was
in its sixth year and appears to be sustainable now that the national economy
has "soft landed." Reasons for cautious optimism in New Jersey include
increasing employment levels, a low jobless rate, and a higher-than-national
level of per capita personal income.
New Jersey's Constitution and budget and appropriations system require a
balanced budget. Pursuant to the State Constitution, no money may be drawn from
the State Treasury except for appropriations made by law. In addition, all
monies for the support of State purposes must be provided for in one general
appropriation law covering one and the same fiscal year. No general
appropriations law or other law appropriating money for any State purpose may be
enacted if the total amount of appropriations for the fiscal year exceed the
total revenue anticipated for that fiscal year. The State's current Fiscal Year
ends June 30th. The largest part of the total financial operations of the State
is accounted for in the General Fund, which is the fund into which all State
revenues not otherwise restricted by statute are deposited and from which
appropriations are made.
The primary method for State financing of capital projects is through the sale
of the general obligation bonds of the State. These bonds are backed by the full
faith and credit of the State. State tax revenues and certain other fees are
pledged to meet the principal and interest payments required to fully pay the
debt. No general obligation debt can be issued by the State without prior voter
approval.
New Jersey's local finance system is regulated by various statutes designed to
assure that all local governments and their issuing authorities remain on a
sound financial basis. Regulatory and remedial statutes are enforced by the
Division of Local Government
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Services (the "Division") in the State Department of Community Affairs. The
Local Budget Law imposes specific budgetary procedures upon counties and
municipalities ("local units"). Every local unit must adopt an operating budget
which is balanced on a cash basis, and items of revenue and appropriation must
be independently audited by a registered municipal accountant. The Division
reviews all municipal and county annual budgets prior to adoption. This process
insures that every municipality and county annually adopts a budget balanced on
a cash basis, within limitations on appropriations or tax levies, respectively,
and making adequate provision for principal of and interest on indebtedness
falling due in the fiscal year, deferred charges and other statutory expenditure
requirements.
The Local Government Cap Law (the "Cap Law") generally limits the year-to-year
increase of the total appropriations of any municipality and the tax levy of any
county to either 5% or an index rate determined annually by the Director,
whichever is less. Certain exceptions exist to the Cap Law's limitation on
increases in appropriations. The principal exceptions to these limitations are
municipal and county appropriations to pay debt service requirements; to comply
with other State or Federal mandates enacted after the effective date of the Cap
Law; amounts approved by referendum; and, in the case of municipalities only, to
fund the preceding year's cash deficit or to reserve for shortfalls in tax
collections.
The Local Budget Law limits the amount of tax anticipation notes that may be
issued by local units and requires the repayment of such notes within three
months of the end of the fiscal year (six months in the case of counties) in
which issued. No local unit is permitted to issue bonds for the payment of
current expenses. Local units may not issue bonds to pay outstanding
obligations, except for refunding purposes, and then only with the approval of
the Local Finance Board. Local units may issue bond anticipation notes for
temporary periods not exceeding in the aggregate approximately ten years from
the date of issue. The debt that any local unit may authorize is limited to a
percentage of its equalized valuation basis, which is the three-year average of
the equalized value of all taxable real property and improvements within the
geographic boundaries of the local unit.
Chapter 75 of the Pamphlet Laws of 1991, signed into law on March 28, 1991,
requires certain municipalities and permits all other municipalities to adopt
the State fiscal year in place of the existing calendar fiscal year.
Municipalities that change fiscal years must adopt a six month transition budget
for January to June. Since expenditures would be expected to exceed revenues
primarily because state aid for the calendar year would not be received by the
municipality until after the end of the transition year budget, the act
authorizes the issuance of Fiscal Year Adjustment Bonds to fund the one time
deficit for the six month
15
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transition budget. The act provides that the deficit in the six month transition
budget may be funded initially with bond anticipation notes based on the
estimated deficit in the six month transition. Notes issued in anticipation of
Fiscal Year Adjustment Bonds, including renewals, can only be issued for up to
one year unless the Local Finance Board permits the municipality to renew them
for a further period. The Local Finance Board must confirm the actual deficit
experienced by the municipality. The municipality then may issue Fiscal Year
Adjustment Bonds to finance the deficit on a permanent basis. The purpose of the
act is to assist municipalities that are heavily dependent on state aid and that
have had to issue tax anticipation notes to fund operating cash flow deficits
each year. While the act does not authorize counties to change their fiscal
years, it does provide that counties with cash flow deficits may issue Fiscal
Year Adjustment Bonds as well.
New Jersey's school districts operate under the same comprehensive review and
regulation as do its counties and municipalities. Certain exceptions and
differences are provided, but the State supervision of school finance closely
parallels that of local governments. The State Department of Education has been
empowered with the necessary and effective authority in extreme cases to take
over the operation of local school districts which cannot or will not correct
severe and complex educational deficiencies.
In each school district having a Board of School Estimate, the Board of School
Estimate examines the budget request and fixes the appropriation amounts for the
next year's operating budget after a public hearing. This board, whose
composition is fixed by statute, certifies the budget to the municipal governing
bodies and to the local board of education. If either the local board of
estimate disagrees, it must appeal to the State Commissioner of Education (the
"Commissioner") to request changes.
In each school district without a Board of School Estimate, the elected board of
education develops the budget proposal and, after public hearing, submits to the
voters of such district for approval. Previously authorized debt service is not
subject to referendum in the annual budget process. If approved, the budget goes
into effect. If defeated, the governing body of each municipality in the school
district has approximately 20 days to determine the amount necessary to be
appropriated for each item appearing in such budget. Should the governing body
fail to certify any amount determined by them to be necessary for any item
rejected at the election, the board of education of such district may appeal the
action to the Commissioner.
School district bonds and temporary notes are issued in conformity with the
School Bond Law. Schools are subject to debt limits and to State regulation of
their borrowing. The debt limitation on school district bonds depends upon the
classification of the school district, but may be as high as 4% of the average
equalized valuation basis of the
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constituent municipality. In certain cases involving school districts in cities
with populations exceeding 100,000, the debt limit is 8% of the average
equalized valuation basis of the constituent municipality, and in cities with
population in excess of 80,000, the debt limit is 6% of the aforesaid average
equalized valuation.
In 1982, school districts were given an alternative to the traditional method of
bond financing capital improvements pursuant to the Lease Purchase Law. The
Lease Purchase Law permits school districts to acquire a site and school
buildings through a lease purchase agreement with a private lessor corporation.
The lease purchase agreement does not require voter approval. The rent payments
attributable to the lease purchase agreement are subject to annual appropriation
by the school district and are required to be included in the annual current
expense budget of the school district. Furthermore, the rent payments
attributable to the lease purchase agreement do not constitute debt of the
school district and therefore do not impact on the school district's debt
limitation. Lease purchase agreements in excess of five years require the
approval of the Commissioner and the Local Finance Board.
The Local Authorities Fiscal Control Law provides for State supervision of the
fiscal operations and debt issuance practices of independent local authorities
and special taxing districts by the State Department of Community Affairs. The
Local Authorities Fiscal Control Law applies to all autonomous public bodies
created by counties or municipalities, which are empowered to issue bonds, to
impose facility or service charges, or to levy taxes in their districts. This
encompasses most autonomous local authorities (sewerage, municipal utilities,
parking, pollution control, improvement, etc.) and special taxing districts
(fire, water, sewer, street lighting, etc.). The Local Finance Board exercises
approval power over the creation of new authorities and special districts as
well as their dissolution. The Local Finance Board also reviews, conducts public
hearings and issues findings and recommendations on any proposed project
financing of an authority or district, and on any proposed financing agreement
between a municipality or county and an authority or special district. The
Director reviews and approves annual budgets of authorities and special
districts.
MANAGEMENT OF THE FUND
The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, has employed the Manager to serve as investment
manager of the Fund. The Manager provides persons satisfactory to the Fund's
Board of Directors to serve as officers of the Fund. Such officers, as well as
certain other employees and directors of the Fund, may be directors or officers
of Reich & Tang Asset Management, Inc., the sole general partner of the Manager
or employees of the Manager or its affiliates. Due to the services performed by
the Manager, the Fund currently has no employees
17
<PAGE>
and its officers are not required to devote full-time to the affairs of the
Fund. The Statement of Additional Information contains general background
information regarding each director and principal officer of the Fund.
The Manager is a Delaware limited partnership with its principal office at 600
Fifth Avenue, New York, New York 10020. As of January 31, 1998, the Manager was
investment manager, advisor or supervisor with respect to assets aggregating
approximately $11 billion. The Manager acts as manager or administrator of
fifteen other investment companies and also advises pension trusts, profit
sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") is 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"). Reich & Tang Asset Management, Inc. (a
wholly-owned subsidiary of NEICOP) is the sole general partner and owner of
the remaining .5% interest of the Manager. NEIC, a Massachusetts corporation,
serves as the managing general partner of NEICOP.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly and indirectly
owns approximately 47% of the outstanding partnership interests of NEICOP, and
may be deemed a "controlling person" of the Manager. Reich & Tang, Inc. owns
directly and indirectly approximately 13.7% of the outstanding partnership
interests of NEICOP.
MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. On August 30, 1996, The New England Mutual Life
Insurance Company ("The New England") and MetLife merged, with MetLife being the
continuing company. 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, which
exceeded $1.6 trillion at December 31, 1996 for MetLife and its insurance
affiliates. MetLife and its affiliates provide insurance or other financial
services to approximately 36 million people worldwide.
NEICOP is a holding company offering a broad array of investment styles across a
wide range of asset categories through thirteen subsidiaries, divisions and
affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the manager, include
AEW Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth
Management, Limited Partnership, Greystone Partners, L.P., Harris Associates,
L.P., Jurika & Voyles, L.P., Loomis, Sayles & Company, L.P., New England Funds,
L.P., New
18
<PAGE>
England Investment Associates, Inc., Snyder Capital Management, L.P., Vaughan,
Nelson, Scarborough & McCullough, L.P., and Westpeak Investment Advisors, L.P.
These affiliates in the aggregate are investment advisors or managers to 80
other registered investment companies.
The recent restructuring of NEICLP did not result in a change in control of the
manager and has no impact upon the Manager's performance of its responsibilities
and obligations. The merger between The New England and MetLife resulted in an
"assignment" of the Investment Management Contract relating to the Fund. Under
the 1940 Act, such an assignment caused the automatic termination of this
agreement. On November 28, 1995, 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 a new Investment Management Contract effective
August 30, 1996, which has a term which extends to July 31, 1998 and may be
continued in force thereafter for successive twelve-month periods beginning each
August 1, provided that such continuance is specifically approved annually by
majority vote of the Fund's outstanding voting securities or by its Board of
Directors, and in either case by a majority of the directors who are not parties
to the Investment Management Contract or interested persons of any such party,
by votes cast in person at a meeting called for the purpose of voting on such
matter.
The Investment Management Contract was approved by a majority of the
shareholders of the Fund on July 12, 1996 and contains the same terms and
conditions governing the Manager's investment management responsibilities as the
Fund's previous Investment Management Contract with the Manager, except as to
the date of execution and termination.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund. Pursuant to the Investment Management Contract, the Manager receives
from the Fund a fee equal to .30% per annum of the Fund's average daily net
assets for managing the Fund's investment portfolio and performing related
services.
Pursuant to the Administrative Services Contract for the Fund, the Manager
performs clerical, accounting supervision and office service functions for the
Fund and provides the Fund with the personnel to: (i) supervise the performance
of bookkeeping and related services by Investors Fiduciary Trust Company, the
Fund's bookkeeping agent; (ii) prepare reports to and filings with regulatory
authorities; and (iii) perform such other services as the Fund may from time to
time request of the Manager. The personnel rendering such services may be
employees of the Manager or its affiliates. The Manager, at its
19
<PAGE>
discretion, may voluntarily waive all or a portion of the administrative
services fee. For its services under the Administrative Services Contract, the
Manager receives a fee equal to .21% per annum of the Fund's average daily net
assets. Any portion of the total fees received by the Manager may be used to
provide shareholder services and for distribution of Fund shares. (See
"Distribution and Service Plan" herein.) 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.
DESCRIPTION OF
COMMON STOCK
The Fund was incorporated in Maryland on July 24, 1990. The authorized capital
stock of the Fund consists of twenty billion shares of stock having a par value
of one tenth of one cent ($.001) per share. The Fund's Board of Directors is
authorized to divide the unissued shares into separate series of stock, each
series representing a separate, additional investment portfolio. Shares of all
series will have identical voting rights, except where, by law, certain matters
must be approved by a majority of the shares of the affected series. Each share
of any series of shares when issued has equal dividend, distribution,
liquidation and voting rights within the series for which it was issued, and
each fractional share has those rights in proportion to the percentage that the
fractional share represents of a whole share. Generally, all shares will be
voted in the aggregate, except if voting by Class is required by law or the
matter involved affects only one Class, in which case shares will be voted
separately by Class. There are no conversion or preemptive rights in connection
with any shares of the Fund. All shares, when issued in accordance with the
terms of the offering, will be fully paid and nonassessable. Shares are
redeemable at net asset value, at the option of the shareholder. As of January
31, 1998, the amount of shares owned by all officers and directors as a group
was less than 1% of the outstanding shares of the Fund.
The Fund is subdivided into two classes of common stock, Class A and Class B.
Each share, regardless of class, will represent an interest in the same
portfolio of investments and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares will be assessed a service fee of .20% of the average daily net
assets of the Class A shares of the Fund pursuant to the Rule 12b-1
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<PAGE>
Distribution and Service Plan of the Fund; (iii) only the holders of the Class A
shares would be entitled to vote on matters pertaining to the Plan and any
related agreements in accordance with provisions of Rule 12b-1;and (iv) the
exchange privilege will permit shareholders to exchange their shares only for
shares of the same class of a Fund that participates in a exchange privilege
with the Fund. (See "Exchange Privilege" herein.) Payments that are made under
the Plans will be calculated and charged daily to the appropriate class prior to
determining daily net asset value per share and dividends/distributions.
Vista Select shares have been created for the primary purpose of providing a New
Jersey tax-free money market fund product for investors who purchase shares
directly from VFD, through dealers with whom VFD has entered into agreements for
this purpose (see "Investments Through Participating Organizations" herein) with
whom they have accounts, or who acquire Vista Select shares through the exchange
of shares of certain other investment companies as hereinafter described. Vista
Select shares are identical to other shares of the Fund, which are offered
pursuant to a separate prospectus, with respect to investment objectives and
yield, but differ with respect to certain other matters. For example,
shareholders who hold other shares of the Fund may not participate in the
exchange privilege described herein and have different arrangements for
redemptions by check.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if such holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors.
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. Fund Business Day means
weekdays (Monday through Friday) except customary business holidays and Good
Friday. 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 within 60 days after the end of the Fund's fiscal year. All
dividends and distributions of capital gains are automatically invested in
additional Fund shares of the same Class of shares immediately upon payment
thereof unless a shareholder has elected by written notice to the Fund to
receive either of such distributions in cash.
The Class A shares will bear the service fee under the Plan. As a result, the
net income of and the dividends payable to the Class A
21
<PAGE>
shares will be lower than the net income of and dividends payable to the Class B
shares of the Fund. Dividends paid to each Class of shares of the Fund will,
however, be declared and paid on the same days at the same times and, except as
noted with respect to the service fees payable under the Plan, will be
determined in the same manner and paid in the same amounts.
HOW TO PURCHASE AND
REDEEM SHARES
Investors may invest in Vista Select shares through VFD or through dealers with
whom VFD has entered into agreements for this purpose as described herein and
those who have accounts with Participating Organizations may invest in the Vista
Select shares through their Participating Organizations in accordance with the
procedures established by the Participating Organizations. (See "Investments
Through Participating Organizations" herein.) Only Class A shares are offered
through this Prospectus. Certain Participating Organizations are compensated by
the Distributor from its shareholder servicing fee and by the Manager from its
management fee for the performance of these services. An investor who purchases
shares through a Participating Organization that receives payment from the
Manager or the Distributor will become a Class A 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 do not receive compensation from
the Distributor or the Manager because they may not be legally permitted to
receive such as fiduciaries. The Manager pays the expenses incurred in the
distribution of Class B shares. Participating Organizations whose clients become
Class B shareholders will not receive compensation from the Manager or
Distributor for the servicing they may provide to their clients. The minimum
initial investment in the 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.
In order to maximize earnings on its portfolio, the Fund normally has its assets
as fully invested as is practicable. Many securities in which the Fund invests
require immediate settlement in funds
22
<PAGE>
of Federal Reserve member banks on deposit at a Federal Reserve Bank (commonly
known as "Federal Funds"). Accordingly, the Fund does not accept a subscription
or invest an investor's payment in portfolio securities until the payment has
been converted into Federal Funds.
Shares will be issued as of the first determination of the Fund's net asset
value per share for each Class made after acceptance of the investor's order at
the net asset value per share first determined after receipt of the order.
Shares begin accruing income dividends on the day they are purchased. The Fund
reserves the right to reject any subscription for its shares. Certificates for
Fund shares will not be issued to an investor.
Shares are issued as of 12 noon, New York City time, on any Fund Business Day on
which an order for the shares and accompanying Federal Funds are received by the
Fund's transfer agent before 12 noon. Orders accompanied by Federal Funds and
received after 12 noon, New York City time, on a Fund Business Day will not
result in share issuance until the following Fund Business Day. Fund shares
begin accruing income on the day the shares are issued to an investor.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption and no restriction on frequency of withdrawals. 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 shareholder's address of record. If a shareholder elects to
redeem all the shares of the Fund he owns, all dividends accrued to the date of
such redemption will be paid to the shareholder along with the proceeds of the
redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted, or for any period during
which an emergency (as determined by the SEC) exists as a result of which
disposal by the Fund of its portfolio securities is not reasonably practicable
or as a result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or for such other period as the SEC may
by order permit for the protection of the shareholders of the Fund.
Redemption requests received by the Fund's transfer agent before 12 noon, New
York City 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, New
York City time, on any Fund Business Day becomes effective on the next Fund
Business Day.
The Fund has reserved the right to redeem the shares of any shareholder if the
net asset value of all the remaining shares in the
23
<PAGE>
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.
During the notice period any shareholder who receives such a notice may (without
regard to the normal $100 requirement for an additional investment) make a
purchase of additional shares to increase the total net asset value at least to
the minimum amount and thereby avoid such mandatory redemption.
For Participant Investor accounts, notice of a proposed mandatory redemption
will be given only to the appropriate Participating Organization, and the
Participating Organization will be responsible for notifying the Participant
Investor of the proposed mandatory redemption. During the notice period a
shareholder or Participating Organization who receives such a notice may avoid
mandatory redemption by purchasing sufficient additional shares to increase the
total net asset value to at least $500.
The redemption of shares may result in the investor's receipt of more or less
than is paid for the shares and, thus, in a taxable gain or loss to the
investor.
INITIAL PURCHASE OF
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 "Vista Select Shares of New Jersey Daily Municipal Income Fund, Inc."
along with a completed subscription order form to:
New Jersey Daily Municipal 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.
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 New Jersey Daily Municipal Income Fund, Inc.
Account of
24
<PAGE>
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 early in the day so
the wire transfer can be accomplished before 12 noon, New York City time, on
that same day. There may be a charge by the investor's bank for transmitting the
money by bank wire, and there also may be a charge for use of Federal Funds. The
Fund does not charge investors in the Fund for its receipt of wire transfers.
Payment in the form of a "bank wire" received prior to 12 noon, New York City
time, on a Fund Business Day will be treated as a Federal Funds payment received
on that day.
SUBSEQUENT PURCHASES
OF SHARES
Subsequent purchases can be made either by bank wire or by mailing a check to:
Chase Vista Funds
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 for each
Class following receipt by the Fund's transfer agent of the redemption order
(and any supporting documentation which 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 and on the next Fund Business Day if the redemption request is
received after 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, currently
considered by the Fund to occur 15 days after investment.
A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee. When a
signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature and guaranteed by an eligible guarantor
institution which includes a
25
<PAGE>
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 (signature guarantees by notaries public are not acceptable).
Written Requests. Shareholders may make a redemption in any amount by sending
a written request to the Fund addressed to:
Chase Vista Funds
P.O. Box 419392
Kansas City, Missouri 64141-6392
Normally the redemption proceeds are paid by check mailed to the shareholder of
record.
Checks. By making the appropriate election on their subscription form,
shareholders may request a supply of checks which may be used to effect
redemptions. The checks, which will be issued in the shareholder's name, are
drawn on a special account maintained by the Fund with the 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 for payment, it instructs the Fund's transfer agent to
redeem a sufficient number of full and fractional shares in the shareholder's
account to cover the amount of the check. The use of a check to make a
withdrawal enables a shareholder in the Fund to receive dividends on the shares
to be redeemed up to the Fund Business Day on which the check clears. Checks
provided by the Fund may not be certified. Fund shares purchased by check may
not be redeemed by check until the check has cleared, which could 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. The Fund's agent bank will not honor checks which are in
amounts exceeding the value of the shareholder's account at the time the check
is presented for payment. 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 a post-dated
check. The Fund reserves the right to terminate or modify the check redemption
procedure at any time or impose additional fees following notification to the
Fund's shareholders.
26
<PAGE>
Investors wishing to avail themselves of this method of redemption should elect
it on their subscription order form. Individuals and joint tenants are not
required to furnish any supporting documentation. Corporations and other
entities making this election, however, are required to furnish a certified
resolution or other evidence of authorization in accordance with the Fund's
normal practices. Appropriate authorization forms will be sent by the Fund or
its agents to corporations and other shareholders who select this option. As
soon as the authorization forms are filed in good order with the Fund's agent
bank, it will provide the shareholder with a supply of checks. This checking
service may be terminated or modified at any time or to impose additional fees
following notification to the Fund's shareholders.
Telephone. The Fund accepts telephone requests for redemption from shareholders
who elect this option. The proceeds of a telephone redemption may be sent to the
shareholders at their address 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, for the protection of
shareholders. 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 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. The failure by the Fund to employ such reasonable procedures may
cause the Fund to be liable for the losses incurred by investors due to
telephone redemptions based upon unauthorized or fraudulent instructions.
A shareholder making a telephone withdrawal should call the Fund at
1-800-34-VISTA and state (i) the name of the shareholder appearing on the Fund's
records, (ii) the shareholder's account number with the Fund, (iii) the amount
to be withdrawn, (iv) whether such amount is to be forwarded to the
shareholder's designated bank account or address, and (v) the name of the person
requesting the redemption. Usually the proceeds are sent to the designated bank
account or address on the same Fund Business Day the redemption is effected,
provided the redemption request is received before 12 noon, New York City time
and on the next Fund Business Day if the redemption request is received after 12
noon, New York City time and on the next Fund Business Day of 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
27
<PAGE>
time and will notify shareholders accordingly.
EXCHANGE PRIVILEGE
Shareholders of the Chase Vista Select shares may exchange at relative net asset
value for Chase 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 Vista Select shares of the Fund for the shares of the
non-money market Vista Mutual Funds, in accordance with the terms of the
then-current prospectus of the fund being acquired. The prospectus of the Vista
Mutual 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 Vista Select shares by
exchange from such fund. Under the exchange privilege, 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 Vista Mutual Funds into which 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 days' written
notice.) Arrangements have been made for the acceptance of instructions by
telephone to exchange shares if certain preauthorizations or indemnifications
are accepted and on file. Further information is available from the Transfer
Agent.
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
28
<PAGE>
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, but the Fund
does not expect that there will be any realizable capital gains.
INVESTMENTS THROUGH
PARTICIPATING ORGANIZATIONS
Participant Investors may, if they wish, invest in the Fund through the
Participating Organizations with which they have accounts. "Participating
Organizations" are securities brokers, banks and financial institutions or other
industry professionals or organizations which have entered into shareholder
servicing agreements with the Fund. When instructed by its customer to purchase
or redeem Fund shares, the Participating Organization, on behalf of the
customer, transmits to the transfer agent a purchase or redemption order, and in
the case of a purchase order, payment for the shares being purchased. No
certificates are issued with respect to investments in the Fund.
Participating Organizations may confirm to their customers who are shareholders
in the Fund each purchase and redemption of Vista Select shares for the
customers' accounts. Also, Participating Organizations may send their customers
periodic account statements showing the total number of Chase Vista Select
shares owned by each customer as of the statement closing date, purchases and
redemptions of Chase Vista Select shares by each customer during the period
covered by the statement and the income earned by Chase Vista Select shares of
each customer during the statement period (including dividends paid in cash or
reinvested in additional Vista Select shares).
Participating Organizations may charge Participant Investors a fee in connection
with their use of specialized purchase and redemption procedures offered to
Participant Investors by the Participating Organizations. In addition,
Participating Organizations offering purchase and redemption procedures similar
to those offered to shareholders who invest in the Fund directly may impose
charges, limitations, minimums and restrictions in addition to or different from
those applicable to shareholders who invest in the Fund directly. Accordingly,
the net yield to investors who invest through Participating Organizations may be
less than by investing in the Fund directly. A Participant Investor should read
this Prospectus in
29
<PAGE>
conjunction with the materials provided by the Participating Organization
describing the procedures under which Vista Select shares may be purchased and
redeemed through the Participating Organization.
The Glass-Steagall Act limits the ability of a depository institution to become
an underwriter or distributor of securities. It is the Fund management's
position, however, that banks are not prohibited from acting in other capacities
for investment companies, such as providing administrative and shareholder
account maintenance services and receiving compensation from the Manager for
providing such services. This is an unsettled area of the law, however, and if a
determination contrary to the Fund management's position is made by a bank
regulatory agency or court concerning shareholder servicing and administration
payments to banks from the Manager, any such payments will be terminated and any
shares registered in the banks' names, for their underlying customers, will be
re-registered in the name of the customers at no cost to the Fund or its
shareholders. In addition, state securities laws may differ on this issue from
the interpretations of Federal law expressed herein and banks and financial
institutions may be required to register as underwriters, distributors or
dealers pursuant to state law.
In the case of qualified Participating Organizations, orders received by the
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 provided that 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 not result in share issuance until the following Fund Business
Day. Participating Organizations are responsible for instituting procedures to
insure that purchase orders by their respective clients are processed
expeditiously.
DISTRIBUTION AND
SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the SEC has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by Rule 12b-1.
The Fund's Board of Directors has adopted a 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 Class A shares only).
Under the Shareholder Servicing Agreement, the Distributor receives with respect
only to Class A shares a service fee equal to .20% per annum of the Fund's
average daily net assets (the "Shareholder Servicing Fee") for providing
personal shareholders services and for the maintenance of shareholder
30
<PAGE>
accounts. The fee is accrued daily and paid monthly and any portion of the fee
may be deemed to be used by the Distributor for payments to participating
organizations with respect to their provision of such services to their clients
or customers who are shareholders of the Class A shares of the Fund. The Class B
shareholders will not receive the benefit of such services from Participating
Organizations and, therefore, will not be assessed a Shareholder Servicing Fee.
The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the management fee and past profits for the
following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements, for performing shareholder servicing and related
administrative functions on behalf of the Class A shares of the Fund; (ii) to
compensate certain Participating Organizations for providing assistance in
distributing the Class A Shares of the Fund; and (iii) to pay the costs of
printing and distributing the Fund's prospectus to prospective investors, and to
defray the cost of the preparation and printing of brochures and other
promotional materials, mailings to prospective shareholders, advertising, and
other promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Shareholding Servicing Fee 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.
Under the Distribution Agreement, the Distributor serves as distributor of the
Fund's shares for nominal consideration and as agent for the Fund, will solicit
orders for the purchase of the Fund's shares, provided that any subscriptions
and orders will not be binding on the Fund until accepted by the Fund as
principal.
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses, including the cost of dedicated lines and CRT terminals, incurred by
the Manager and Distributor 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.
For the fiscal year ended October 31, 1997, the total amount spent pursuant to
the Plan for Class A shares was .43% of the average
31
<PAGE>
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 .23% was paid by the Manager (which may be
deemed an indirect payment by the Fund). Of the total amount paid by the
Manager, $789,345 was utilized for Broker assistance payments, $11,728 for
compensation to sales personnel, $3,054 for travel and expenses, $21,109 for
Prospectus printing, and $819 on miscellaneous expenses.
FEDERAL INCOME TAXES
The Fund has elected to qualify under the Code as a regulated investment company
that distributes "exempt-interest dividends" as defined in the Code. The Fund's
policy is to distribute as dividends each year 100% (and in no event less than
90%) of its tax-exempt interest income, net of certain deductions, and its
investment company taxable income (if any). If distributions are made in this
manner, dividends derived from the interest earned on Municipal Obligations are
"exempt-interest dividends" and are not subject to regular Federal income tax,
although as described below, such "exempt-interest dividends" may be subject to
Federal alternative minimum tax. Dividends paid from taxable income, if any, and
distributions of any realized short-term capital gains (whether from tax-exempt
or taxable obligations) are taxable to shareholders as ordinary income for
Federal income tax purposes, whether received in cash or reinvested in
additional shares of the Fund. Although it is not intended, it is possible that
the Fund may realize short-term or long-term capital gains or losses. The Fund
informs 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 for purposes of computing the amount of Social Security
benefits includible in gross income. Interest on certain "private activity
bonds" (generally, a bond issue in which more than 10% of the proceeds are used
for a non-governmental trade or business and which meets the private security or
payment test, or bond issue which meets the private loan financing test) issued
after August 7, 1986 will constitute an item of tax preference subject to the
individual alternative minimum tax. Corporations will be required to include in
alternative minimum taxable income, 75% of the amount by which their adjusted
current earnings (including generally, tax-exempt interest) exceeds their
alternative minimum taxable income (determined without this item). In addition,
in certain cases Subchapter S corporations with accumulated earnings and profits
from Subchapter C years will be subject to a tax on "passive investment income",
including tax-exempt interest. Although the Fund intends to maintain a $1.00 per
share net asset value, a Shareholder
32
<PAGE>
may realize a taxable gain or loss upon the disposition of shares.
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 Obligation and that the interest thereon
will be tax-exempt to the Fund to the same extent as the interest on the
underlying Municipal Obligations. Counsel has pointed out that the Internal
Revenue Service has announced that it will not ordinarily issue advance rulings
on the question of the ownership of securities or participation interests
therein subject to a put and could reach a conclusion different from that
reached by counsel.
In South Carolina v. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require states to register bonds they issue and
may subject the interest on such bonds to Federal tax if not registered, and the
Court further held that there is no constitutional prohibition against the
Federal Government's taxing the interest earned on state or other municipal
bonds. The Supreme Court decision affirms the authority of the Federal
government to regulate and control bonds such as the Municipal Obligations and
to tax such bonds in the future. The decision does not, however, affect the
current exemption from regular income tax of the interest earned on the
Municipal Obligations.
NEW JERSEY 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.
The Fund intends to be a "qualified investment fund" within the meaning of the
New Jersey gross income tax. The primary criteria for constituting a "qualified
investment fund" are that (1) such fund is an investment company registered with
the SEC which, for the calendar year in which the distribution is paid, has no
investments other than interest bearing obligations, obligations issued at a
discount, cash and cash items, including receivables and financial options,
futures, forward contracts, or other similar financial instruments relating to
interest-bearing obligations, obligations issued at a discount or bond indexes
related thereto and (2) at the close of each quarter of the taxable year, such
fund has not less than 80% of the aggregate principal amount of all of its
investments, excluding financial options, futures, forward contracts, or other
similar financial instruments relating to interest-bearing obligations,
obligations issued at a discount or bond indexes related thereto to the extent
such instruments are authorized under the regulated investment company rules
under the Code, cash and cash items, which cash items shall include receivables,
in New Jersey Municipal Obligations, Territorial
33
<PAGE>
Municipal Obligations and certain other specified securities. Additionally, a
qualified investment fund must comply with certain continuing reporting
requirements. In the opinion of Sills Cummis Zuckerman Radin Tischman Epstein &
Gross, P.A., special New Jersey tax counsel to the Fund, assuming that the Fund
constitutes a qualified investment fund and that the Fund complies with the
reporting obligations under New Jersey law with respect to qualified investment
funds, (a) distributions paid by the Fund to a New Jersey resident individual
shareholder will not be subject to the New Jersey gross income tax to the extent
that the distributions are attributable to income received as interest on or
gain from New Jersey Municipal Obligations or Territorial Municipal Obligations,
and (b) gain from the sale of shares in the Fund by a New Jersey resident
individual shareholder will not be subject to the New Jersey gross income tax.
Shareholders are urged to consult with their tax advisors the treatment of
distributions from the Fund and ownership of shares of the Fund in their own
states and localities.
GENERAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on July 24,
1990 and it is registered with the SEC as an open-end management investment
company.
The Fund prepares semi-annual unaudited and annual audited reports which include
a list of investment securities held by the Fund and which are sent to
shareholders.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-Laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of holders or shares entitled to cast 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
the next meeting of the shareholders called for the purpose of considering the
election or reelection of such Director or of a successor to such Director, and
until the election and qualification of his or her successor, elected at such a
meeting, or until such Director sooner dies, resigns, retires or is removed by
the vote of the shareholders.
For further information with respect to the Fund and the shares offered hereby,
34
<PAGE>
reference is made to the Fund's registration statement filed with the SEC,
including the exhibits thereto. The Registration Statement and the exhibits
thereto may be examined at the Commission and copies thereof may be obtained
upon payment of certain duplicating fees.
NET ASSET VALUE
- ----------------------
The net asset value of each Class the Fund's shares is determined as of 12 noon,
New York City time, on each Fund Business Day. The net asset value of a Class is
computed by dividing the value of the Fund's net assets for such Class (i.e.,
the value of its securities and other assets less its liabilities, including
expenses payable or accrued but excluding capital stock and surplus) by the
total number of shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.
CUSTODIAN TRANSFER AGENT
AND DIVIDEND AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania Street, Kansas City,
Missouri 64105 is custodian for the Fund's cash and securities. DST Systems,
Inc., 127 West 10th Street, Kansas City, Missouri 64105, is the transfer agent
and dividend agent for the Vista Select shares of the Fund. The Fund's custodian
and transfer agents do not assist in, and are not responsible for, investment
decisions involving assets of the Fund.
35
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
[GRAPHIC OMITTED]
P.O. Box 419392
Kansas City, Missouri 64141-6392
VSNJ-1-398
<PAGE>
- --------------------------------------------------------------------------------
EVERGREEN SHARES OF
NEW JERSEY DAILY
MUNICIPAL INCOME FUND, INC. [GRAPHIC OMITTED]
================================================================================
PROSPECTUS
March 2, 1998
New Jersey Daily Municipal Income Fund, Inc. (the "Fund") is an open-end
management investment company that 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 taxes and to the extent possible from New
Jersey gross income tax, as is believed to be consistent with preservation of
capital, maintenance of liquidity and stability of principal. The Fund offers
two classes of shares to the general public, however only Class A shares are
offered by this Prospectus. The Class A shares of the Fund are subject to a
service fee pursuant to the Fund's Rule 12b-1 Distribution and Service Plan and
are sold through financial intermediaries who provide servicing to Class A
shareholders for which they receive compensation from the Manager and the
Distributor. The Class B shares of the Fund are not subject to a service fee and
either are sold directly to the public or are sold through financial
intermediaries that do not receive compensation from the Manager or Distributor.
In all other respects, the Class A and Class B shares represent the same
interests in the income and assets of the Fund. No assurance can be given that
those objectives will be achieved. Only Evergreen Shares are offered by this
Prospectus. The Fund is concentrated in the securities issued by New Jersey or
entities within New Jersey and the Fund may invest a significant percentage of
its assets in a single issuer, and therefore an investment in the Fund may be
riskier than an investment in other types of money market funds.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
has been filed with the Securities and Exchange Commission (the "SEC") and is
available upon request and without charge by calling the Fund at 1(800)
807-2940. The "Statement of Additional Information" bears the same date as this
Prospectus and is incorporated by reference into this Prospectus in its
entirety. The SEC maintains a web site (http://www.sec.gov) that contains the
Statement of Additional Information and other reports and information regarding
the Fund which have been filed electronically with the SEC.
Investors should be aware that the Evergreen shares may not be purchased other
than through certain securities dealers with whom Evergreen Distributor, Inc.
("EDI") has entered into agreements for this purpose or directly from EDI.
Evergreen shares have been created for the primary purpose of providing a New
Jersey tax-free money market fund product for shareholders of certain funds
distributed by EDI. Shares of the Fund other than Evergreen shares are offered
pursuant to a separate Prospectus.
Reich & Tang Asset Management L.P. acts as Manager of the Fund and Reich & Tang
Distributors, Inc. acts as distributor of the Fund's shares. Reich & Tang Asset
Management L.P. is a registered investment adviser. Reich & Tang Distributors,
Inc. is a registered broker-dealer and member of the National Association of
Securities Dealers, Inc.
An investment in the Fund is neither insured nor guaranteed by the United States
Government. The Fund intends to maintain a stable net asset value of $1.00 per
share although there can be no assurance that this value will be maintained.
Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the shares are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency.
This Prospectus should be read and retained by investors for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT BEING OFFERED VIA THE
INTERNET TO RESIDENTS OF PARTICULAR STATES.
<PAGE>
TABLE OF CONTENTS
TABLE OF FEES AND EXPENSES SHAREHOLDER SERVICES
SELECTED FINANCIAL INFORMATION Effect of Banking Laws
INTRODUCTION DISTRIBUTION AND SERVICE PLAN
INVESTMENTS OBJECTIVES, FEDERAL INCOME TAXES
POLICIES AND RISKS CONSIDERATIONS NEW JERSEY INCOME TAXES
NEW JERSEY RISK FACTORS GENERAL INFORMATION
MANAGEMENT OF THE FUND NET ASSET VALUE
DESCRIPTION OF COMMON STOCK CUSTODIAN AND TRANSFER AGENT
DIVIDENDS AND DISTRIBUTIONS
HOW TO PURCHASE AND REDEEM SHARES
How to Buy Shares
How to Redeem Shares
2
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Class A shares Class B shares
<S> <C> <C>
Management Fees 0.30% 0.30%
12b-1 Fees 0.20% 0.00%
Other Expenses 0.36% 0.35%
Administration Fees 0.21% 0.21%
Total Fund Operating
Expenses (After Fee Waiver) 0.86% 0.65%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
You would pay the following expenses on a $1000 investment, assuming 5% annual
return (cumulative through the end of each year):
Class A $9 $27 $48 $106
Class B $7 $21 $36 $81
</TABLE>
The purpose of the above fee table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a further discussion of these fees see "Management of the Fund"
and "Distribution and Service Plan" herein.
The figures reflected in this example should not be considered as a
representation of past or future expenses. Actual expenses may be greater or
less than those shown above.
3
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the period)
- -------------------------------------------------------------------------------
The following financial highlights of New Jersey Daily Municipal Income Fund,
Inc. has been audited by McGladrey & Pullen LLP, Independent Certified Public
Accountants, whose report thereon appears in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Year Ended
CLASS A October 31, October 26, 1990
---------------------------------------------------------------------- (Inception) to
1997 1996 1995 1994 1993 1992 October 31, 1991
-------- ------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations: -------- -------- -------- -------- -------- -------- --------
Net investment income.............. 0.027 0.027 0.030 0.020 0.020 0.030 0.042
Less Distributions:
Dividends from net investment income ( 0.027) ( 0.027) ( 0.030) ( 0.020) ( 0.020) ( 0.030) ( 0.042)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ========
Total Return........................ 2.70% 2.69% 3.08% 2.03% 1.98% 3.01% 4.62%*
Ratios/Supplemental Data
Net assets, end of period (000)..... $217,529 $151,421 $130,128 $ 105,929 $78,347 $ 46,374 $ 26,238
Ratios to average net assets:
Expenses......................... 0.86%+# 0.78%+# 0.72%+ 0.66%+ 0.61%+ 0.42%+ 0.27%*+
Net investment income............ 2.66%+# 2.65%+# 3.02%+ 2.02%+ 1.95%+ 2.88%+ 4.32%*+
</TABLE>
<TABLE>
<CAPTION>
February 9, 1996
Year (Commencement
Ended of Offering) to
October 31, October 31,
Class B 1997 1996
-------- ---------
<S> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 1.00 $ 1.00
Income from investment operations: -------- --------
Net investment income............... 0.029 0.020
Less distributions:
Dividends from net investment income ( 0.029) ( 0.020)
-------- --------
Net asset value, end of period...... $ 1.00 $ 1.00
======== ========
Total Return........................ 2.91% 2.77%*
Ratios/Supplemental Data
Net assets, end of period (000)..... $ 315 $ 366
Ratios to average net assets:
Expenses......................... 0.65%+# 0.61%#*
Net investment income............ 2.88%+# 2.72%#*
* Annualized
+ Net of management, administration and shareholder servicing fees waived
whichwere equivalent to .00% .06%, .18%, .26%, .35%, .70%, and .70%, of
average net assets respectively, plus expense reimbursement which were
equivalent to .00%, .00%, .00%, .00%, .00%, .04%, and .53% of average net
assets, respectively.
# Includes expense offsets.
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
INTRODUCTION
- --------------------------------------------------------------------------------
New Jersey Daily Municipal Income Fund, Inc. (the "Fund") is an open-end
management investment company that is a short-term, tax-exempt money market fund
whose investment objectives are to seek as high a level of current income exempt
under current law, in the opinion of bond counsel to the issuer at the date of
issuance, from regular Federal income tax, and, to the extent possible, from New
Jersey gross income tax, as is believed to be consistent with preservation of
capital, maintenance of liquidity and stability of principal by investing
principally in short-term, high quality debt obligations of the State of New
Jersey, Puerto Rico and other United States territories, and their political
subdivisions as described under "Investment Objectives, Policies and Risks"
herein. The Fund also may invest in municipal securities of issuers located in
states other than New Jersey, the interest income on 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 New Jersey income tax for New
Jersey residents.
Interest on certain municipal securities purchased by the Fund may be a
preference item for purposes of the Federal alternative minimum tax. 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 of $1.00 per share, although there can be no
assurance that this value will be maintained. The Fund intends to invest all of
its assets in tax-exempt obligations; however, it reserves the right to invest
up to 20% of its assets in taxable obligations. This is a summary of the Fund's
fundamental investment policies which are set forth in full under "Investment
Objectives, Policies and Risks" herein and in the Statement of Additional
Information and may not be changed without approval of a majority of the Fund's
outstanding shares. Of course, no assurance can be given that these objectives
will be achieved.
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"), which is a registered investment adviser and which currently acts as
investment manager or administrator to fifteen other open-end management
investment companies. The Fund's shares are distributed through Reich & Tang
Distributors, Inc. (the "Distributor"), with whom the Fund has entered into a
Distribution Agreement and a Shareholder Servicing Agreement (with respect to
the Class A shares of the Fund only) pursuant to the Fund's distribution and
service plan adopted under Rule 12b-1 under the Investment Company Act of 1940,
as amended (the "Act"). (See "Distribution and Service Plan" herein)
On any day on which the New York Stock Exchange, Inc. is open for trading
("Fund Business Day"), investors may, without charge by the Fund, purchase and
redeem shares of the Fund's common stock at their net asset value next
determined after receipt of the order. An investor's subscription will be
accepted after the payment is converted into Federal funds, and shares will be
issued as of the Fund's next net asset value determination which is made as of
12 noon on each Fund Business Day. (See "How to Purchase and Redeem Shares," and
"Net Asset Value" herein.) Dividends from accumulated net income are declared by
the Fund on each Fund Business Day.
The Fund generally pays interest dividends monthly. Net capital gains, if
any, will be distributed at least annually, and in no event later than within 60
days after the end of the Fund's fiscal year. All dividends and distributions of
capital gains are automatically invested in additional shares of the same Class
of the Fund unless a shareholder has elected by written notice to the Fund to
receive either of such distributions in cash. (See "Dividends and Distributions"
herein.)
The Fund intends that its investment portfolio may be concentrated in New
Jersey Municipal Obligations as defined herein and bank Participation
Certificates therein. A summary of special risk factors affecting the State of
New Jersey is set forth under "New Jersey Risk Factors" in the Statement of
Additional Information.
The Fund's Board of Directors is authorized to divide the unissued shares
into separate series of stock, one for each of the Fund's separate investment
portfolios that may be created in the future.
Evergreen shares are identical to other shares of the Fund, which are
offered pursuant to a separate prospectus, with respect to investment objectives
and yield, but differ with respect to certain other matters. See "How to
Purchase and Redeem Shares" and "Shareholder Services."
5
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES
AND RISK CONSIDERATIONS
- --------------------------------------------------------------------------------
The Fund is an open-end management investment company that is a short-term,
tax-exempt money market fund whose investment objectives are to seek as high a
level of current income exempt from regular Federal income tax and, to the
extent possible, from New Jersey gross income tax, as is believed to be
consistent with the preservation of capital, maintenance of liquidity and
stability of principal. There can be no assurance that the Fund will achieve its
investment objectives.
The Fund's assets will be invested primarily in high quality debt
obligations issued by or on behalf of the State of New Jersey, 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 Participation Certificates (which, 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) in Municipal Obligations purchased from banks, insurance
companies or other financial institutions ("Participation Certificates").
Dividends paid by the Fund which are "exempt-interest dividends" by virtue of
being properly designated by the Fund as derived from Municipal Obligations and
Participation Certificates will be exempt from regular Federal income tax
provided the Fund complies with the Internal Revenue Code of 1986, as amended
(the "Code").
Although the Supreme Court has determined that Congress has the
authority to subject the interest on bonds such as the Municipal Obligations to
Federal income taxation, existing law excludes such interest from regular
Federal income tax. Such interest, and "exempt-interest dividends" may, however,
be subject to the Federal alternative minimum tax. Securities, the interest
income on which may be subject to the Federal alternative minimum tax (including
Participation Certificates), may be purchased by the Fund without limit.
Securities, the interest income on which is subject to regular Federal, state
and local income tax, will not exceed 20% of the value of the Fund's total
assets. (See "Federal Income Taxes" herein.) Exempt-interest dividends paid by
the Fund correctly identified by the Fund as derived from obligations issued by
or on behalf of the State of New Jersey or any New Jersey local government, or
their instrumentalities, authorities or districts ("New Jersey Municipal
Obligations") will be exempt from the New Jersey gross income tax.
Exempt-interest dividends correctly identified by the Fund as derived from
obligations of Puerto Rico and the Virgin Islands, as well as any other types of
obligations that New Jersey is prohibited from taxing under the Constitution,
the laws of the United States of America or the New Jersey Constitution
("Territorial Municipal Obligations") also should be exempt from the New Jersey
gross income tax provided the Fund complies with New Jersey law. (See "New
Jersey Income Taxes" herein.) To the extent suitable New Jersey 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 the New Jersey gross income tax. However, 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 total assets
in New Jersey Municipal Obligations, although the exact amount of the Fund's
assets invested in such securities will vary from time to time. 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 in Municipal Obligations, 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 and other New
Jersey Municipal Obligations. The investment objectives of the Fund described in
this paragraph may not be changed unless approved by the holders of a majority
of the outstanding shares of the Fund that would be affected by such a change.
As used in this Prospectus, the term "majority of the outstanding shares" of the
Fund means, respectively, the vote of the lesser of (i) 67% or more of the
shares of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the outstanding shares of the Fund.
6
<PAGE>
The Fund may only purchase 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)
Municipal Obligations with remaining maturities of 397 days or less and rated in
the two highest short-term rating categories by any two nationally recognized
statistical rating organizations ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal Obligations (collectively, the "Requisite
NRSROs"); (ii) Municipal Obligations or Participation Certificates which are
subject to a Demand Feature or Guarnatee (as such terms are defined in rule 2a-7
of the 1940 Act) which have received a rating from an NRSRO or such guarantor
has received a rating from an NRSRO with respect to a class of debt obligations
(or any debt obligation within that class) that is comparable in priority and
security to the guarantee (unless the guarantor directly or indirectly,
controls, is controlled by or is under common control with an issuer of the
security subject to the guarantee); and the issuer of the Demand Feature or
Guarnatee, or another institution, has undertaken promptly to notify the holder
of the security in the event the Demand Feature or Guarnatee is substituted with
another Demand Feature or Guarnatee.; (iii) unrated Municipal Obligations
determined by the Fund's Board of Directors to be of comparable quality. In
addition, Municipal Obligations with remaining maturities of 397 days or less
but that at the time of issuance were long-term securities (i.e. with maturities
greater than 366 days) are deemed unrated and maybe 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) it has received a long-term rating from any NRSRO that is not
within the three highest 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 Municipal
Obligations or Participation Certificates. (See "Variable Rate Demand
Instruments and Participation Certificates" in the Statement of Additional
Information.) While there are several organizations that currently qualify as
NRSROs, two examples of NRSROs are Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies ("S&P'") and Moody's Investors Service, Inc.
("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in the
case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in the
case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's in
the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "VMIG-1" by Moody's and "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, the quality of an investment may
cease to be rated or its rating may be reduced such that the investment is no
longer a First Tier security or is rated below the minimum required for purchase
by the Fund. If this occurs, the Board of Directors of the Fund shall reassess
promptly whether the security presents minimal credit risks and shall cause the
Fund to take such action as the Board of Directors determines is in the best
interest of the Fund and its shareholders. Reassessment, however, 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. First Tier
Security means any Eligible Security that: (i) is a rated security that has
received a short-term rating from the Requisite NRSROs in the highest short-term
rating category for debt obligations; (ii) is an unrated security that is as
determined by the fund's board of directors to be of comparable quality; (iii)
is a security issued by a registered investment company that is a money market
fund; or (iv) is a government security.
In addition, in the event that a security (1) is in default, (2) ceases to
be an Eligible Security, or (3) is determined to no longer present minimal
credit risks or an event of insolvency occurs with respect to the issuer of a
portfolio security or the provider of any Demand Feature or Guarnatee, 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 interest of the
Fund. In the event that a security is disposed of, as soon as practicable, such
disposition shall occur 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.
7
<PAGE>
All investments by the Fund will mature or will be deemed to mature within
397 days or less from the date of acquisition and the average maturity of the
Fund portfolio (on a dollar-weighted basis) will be 90 days or less. The
maturities of variable rate demand instruments held in the Fund's portfolio will
be deemed to be the longer of the period required before the Fund is entitled to
receive payment of the principal amount of the instrument through demand, or the
period remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
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. Provided, however, the Fund shall not
invest more than 5% of its total assets in Municipal Obligations or
Participation Certificates issued by a single issuer, unless the Municipal
Obligations are first Tier Securities.
In view of the "concentration" of the Fund in bank Participation
Certificates in New Jersey Municipal Obligations, which may be secured by bank
letters of credit or guarantees, an investment in the Fund should be made with
an understanding of the characteristics of the banking industry and the risks
which such an investment may entail which include extensive governmental
regulation, 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.) Banks are subject to
extensive governmental regulations which may limit both the amounts and types of
loans and other financial commitments which may be made and interest rates and
fees which may be charged. The profitability of this industry is largely
dependent upon the availability and cost of capital funds for the purpose of
financing lending operations under prevailing money market conditions. Also,
general economic conditions play an important part in the operations of this
industry and exposure to credit losses arising from possible financial
difficulties of borrowers might affect a bank's ability to meet its obligations
under a letter of credit. The Fund may invest 25% or more of the net assets of
any portfolio in securities that are related in such a way that an economic,
business or political development or change affecting one of the securities
would also affect the other securities including, for example, securities the
interest upon which is paid from revenues of similar type projects, or
securities the issuers of which are located in the same state.
The Fund has adopted the following fundamental investment restrictions
which apply to all portfolios and which may not be changed unless approved by a
majority of the outstanding shares of each series of the Fund's shares that
would be affected by such a change. The Fund is subject to further investment
restrictions that are set forth in the Statement of Additional Information. The
Fund may not:
1. Borrow Money. This restriction shall not apply to borrowings from banks for
temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests that might otherwise require the untimely disposition
of securities, in an amount up to 15% of the value of the Fund's total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing was made.
While borrowings exceed 5% of the value of the Fund's total assets, the
Fund will not make any investments. Interest paid on borrowings will reduce
net income.
2. 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.
3. 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 repurchase agreements 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.
4. Invest more than 25% of its assets in the securities of "issuers" in any
single industry, provided that the Fund may invest more than 25% of its
assets in bank Participation Certificates and there shall be no limitation
on the purchase of those Municipal Obligations and other obligations issued
or guaranteed by the United States government, its agencies or
instrumentalities. Immediately after the acquisition of any securities
subject to a Demand Feature or Guarnatee (as such terms are defined in Rule
2a-7 under the Investment Company act of 1940), with respect to 75% of the
total assets of the Fund, not more than 10% of the Fund's assets may be
invested in securities that are subject to a Guarnatee or Demand Feature
8
<PAGE>
from the same institution. However, the Fund may only invest more than 10%
of its assets in securities subject to a Guarnatee or Demand Feature issued
by a non-controlled person.
5. Invest in securities of other investment companies, except 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.
The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Code. The Fund will be restricted in that at the close of
each quarter of the taxable year, at least 50% of the value of its total assets
must be represented by cash, government securities, investment company
securities and other securities limited in respect of any one issuer to not more
than 5% in value of the total assets of the Fund and to not more than 10% of the
outstanding voting securities of such issuer. In addition, at the close of each
quarter of its taxable year, not more than 25% in value of the Fund's total
assets may be invested in securities of one issuer other than government
securities. The limitations described in this paragraph 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.)
The primary purpose of investing in a portfolio of New Jersey Municipal
Obligations is the special tax treatment accorded New Jersey resident individual
investors. However, payment of interest and preservation of principal are
dependent upon the continuing ability of the New Jersey issuers and/or obligors
of state, municipal and public authority debt obligations to meet their
obligations thereunder. Investors should consider the greater risk of the Fund's
concentration versus the safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios of New Jersey issues
with those of more diversified portfolios including out-of-state issues before
making an investment decision. The Fund's management believes that by
maintaining the Fund's investment portfolio in liquid, short-term, high quality
investments, including the Participation Certificates and other variable rate
demand instruments that have high quality credit support from banks, insurance
companies or other financial institutions, the Fund is largely insulated from
the credit risks that may exist on long-term New Jersey Municipal Obligations.
For additional information, please refer to the Statement of Additional
Information.
- --------------------------------------------------------------------------------
NEW JERSEY RISK FACTORS
- --------------------------------------------------------------------------------
This summary is included for the purpose of providing a general description
of the credit and financial conditions of the State of New Jersey. For a more
complete description of these risk factors, see "New Jersey Risk Factors" in the
Statement of Additional Information.
The combination of the northeast region's cyclical adjustment and the
national recession which officially began in July 1990 (according to the
National Bureau of Economic Research) adversely affected the growth of New
Jersey's economy. At the onset of that recession, New Jersey experienced
accelerated declines in its construction and manufacturing sectors and overall
increases in the rates of unemployment. In the wake of the continued expansion
of the national economy which began in late 1993, New Jersey's economy has
experienced a protracted recovery that in 1994 began to generate internal
momentum due to increases in employment and income levels. Although employment
growth in New Jersey has occurred in a variety of employment sectors, business
services and trade sectors have been the greatest generators of employment
growth in New Jersey while manufacturing jobs continued to trend downward. Other
evidence of New Jersey's improving economy can be found in increased
home-building above the depressed levels of 1990 through 1992 and rising
consumer spending.
New Jersey's Constitution and budget and appropriations system require a
balanced budget. Pursuant to the State Constitution, no money may be drawn from
the State Treasury except for appropriations made by law. In addition, all
monies for the support of State purposes must be provided for in one general
appropriation law covering one and the same fiscal year. No general
appropriations law or other law appropriating money for any State purpose may be
enacted if the total amount of appropriations for the fiscal year exceed the
total revenue anticipated for that fiscal year. The State's current Fiscal Year
ends June 30th. The largest part of the total financial operations of the State
is accounted for in the General Fund, which is the fund into which all State
revenues not otherwise restricted by statute are deposited and from which
appropriations are made.
9
<PAGE>
The primary method for State financing of capital projects is through the
sale of the general obligation bonds of the State. These bonds are backed by the
full faith and credit of the State. State tax revenues and certain other fees
are pledged to meet the principal and interest payments required to fully pay
the debt. No general obligation debt can be issued by the State without prior
voter approval.
New Jersey's local finance system is regulated by various statutes designed
to assure that all local governments and their issuing authorities remain on a
sound financial basis. Regulatory and remedial statutes are enforced by the
Division of Local Government Services (the "Division") in the State Department
of Community Affairs. The Local Budget Law imposes specific budgetary procedures
upon counties and municipalities ("local units"). Every local unit must adopt an
operating budget which is balanced on a cash basis, and items of revenue and
appropriation must be independently audited by a registered municipal
accountant. The Division reviews all municipal and county annual budgets prior
to adoption. This process insures that every municipality and county annually
adopts a budget balanced on a cash basis, within limitations on appropriations
or tax levies, respectively, and making adequate provision for principal of and
interest on indebtedness falling due in the fiscal year, deferred charges and
other statutory expenditure requirements.
The Local Government Cap Law (the "Cap Law") generally limits the
year-to-year increase of the total appropriations of any municipality and the
tax levy of any county to either 5% or an index rate determined annually by the
Director, whichever is less. Certain exceptions exist to the Cap Law's
limitation on increases in appropriations. The principal exceptions to these
limitations are municipal and county appropriations to pay debt service
requirements; to comply with other State or Federal mandates enacted after the
effective date of the Cap Law; amounts approved by referendum; and, in the case
of municipalities only, to fund the preceding year's cash deficit or to reserve
for shortfalls in tax collections.
The Local Budget Law limits the amount of tax anticipation notes that may
be issued by local units and requires the repayment of such notes within three
months of the end of the fiscal year (six months in the case of counties) in
which issued. No local unit is permitted to issue bonds for the payment of
current expenses. Local units may not issue bonds to pay outstanding
obligations, except for refunding purposes, and then only with the approval of
the Local Finance Board. Local units may issue bond anticipation notes for
temporary periods not exceeding in the aggregate approximately ten years from
the date of issue. The debt that any local unit may authorize is limited to a
percentage of its equalized valuation basis, which is the three-year average of
the equalized value of all taxable real property and improvements within the
geographic boundaries of the local unit.
Chapter 75 of the Pamphlet Laws of 1991, signed into law on March 28, 1991,
requires certain municipalities and permits all other municipalities to adopt
the State fiscal year in place of the existing calendar fiscal year.
Municipalities that change fiscal years must adopt a six month transition budget
for January to June. Since expenditures would be expected to exceed revenues
primarily because state aid for the calendar year would not be received by the
municipality until after the end of the transition year budget, the act
authorizes the issuance of Fiscal Year Adjustment Bonds to fund the one time
deficit for the six month transition budget. The act provides that the deficit
in the six month transition budget may be funded initially with bond
anticipation notes based on the estimated deficit in the six month transition.
Notes issued in anticipation of Fiscal Year Adjustment Bonds, including
renewals, can only be issued for up to one year unless the Local Finance Board
permits the municipality to renew them for a further period. The Local Finance
Board must confirm the actual deficit experienced by the municipality. The
municipality then may issue Fiscal Year Adjustment Bonds to finance the deficit
on a permanent basis. The purpose of the act is to assist municipalities that
are heavily dependent on state aid and that have had to issue tax anticipation
notes to fund operating cash flow deficits each year. While the act does not
authorize counties to change their fiscal years, it does provide that counties
with cash flow deficits may issue Fiscal Year Adjustment Bonds as well.
New Jersey's school districts operate under the same comprehensive review
and regulation as do its counties and municipalities. Certain exceptions and
differences are provided, but the State supervision of school finance closely
parallels that of local governments. The State Department of Education has been
empowered with the necessary and effective authority in extreme cases to take
over the operation of local school districts which cannot or will not correct
severe and complex educational deficiencies.
10
<PAGE>
In each school district having a Board of School Estimate, the Board of
School Estimate examines the budget request and fixes the appropriation amounts
for the next year's operating budget after a public hearing. This board, whose
composition is fixed by statute, certifies the budget to the municipal governing
bodies and to the local board of education. If the local board of estimate
either disagrees, it must appeal to the State Commissioner of Education (the
"Commissioner") to request changes.
In each school district without a Board of School Estimate, the elected
board of education develops the budget proposal and, after public hearing,
submits to the voters of such district for approval. Previously authorized debt
service is not subject to referendum in the annual budget process. If approved,
the budget goes into effect. If defeated, the governing body of each
municipality in the school district has approximately 20 days to determine the
amount necessary to be appropriated for each item appearing in such budget.
Should the governing body fail to certify any amount determined by them to be
necessary for any item rejected at the election, the board of education of such
district may appeal the action to the Commissioner.
School district bonds and temporary notes are issued in conformity with the
School Bond Law. Schools are subject to debt limits and to State regulation of
their borrowing. The debt limitation on school district bonds depends upon the
classification of the school district, but may be as high as 4% of the average
equalized valuation basis of the constituent municipality. In certain cases
involving school districts in cities with populations exceeding 100,000, the
debt limit is 8% of the average equalized valuation basis of the constituent
municipality, and in cities with population in excess of 80,000, the debt limit
is 6% of the aforesaid average equalized valuation.
In 1982, school districts were given an alternative to the traditional
method of bond financing capital improvements pursuant to the Lease Purchase
Law. The Lease Purchase Law permits school districts to acquire a site and
school buildings through a lease purchase agreement with a private lessor
corporation. The lease purchase agreement does not require voter approval. The
rent payments attributable to the lease purchase agreement are subject to annual
appropriation by the school district and are required to be included in the
annual current expense budget of the school district. Furthermore, the rent
payments attributable to the lease purchase agreement do not constitute debt of
the school district and therefore do not impact on the school district's debt
limitation. Lease purchase agreements in excess of five years require the
approval of the Commissioner and the Local Finance Board.
The Local Authorities Fiscal Control Law provides for State supervision of
the fiscal operations and debt issuance practices of independent local
authorities and special taxing districts by the State Department of Community
Affairs. The Local Authorities Fiscal Control Law applies to all autonomous
public bodies created by counties or municipalities, which are empowered to
issue bonds, to impose facility or service charges, or to levy taxes in their
districts. This encompasses most autonomous local authorities (sewerage,
municipal utilities, parking, pollution control, improvement, etc.) and special
taxing districts (fire, water, sewer, street lighting, etc.). The Local Finance
Board exercises approval power over the creation of new authorities and special
districts as well as their dissolution. The Local Finance Board also reviews,
conducts public hearings and issues findings and recommendations on any proposed
project financing of an authority or district, and on any proposed financing
agreement between a municipality or county and an authority or special district.
The Director reviews and approves annual budgets of authorities and special
districts.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The Fund's Board of Directors, which is responsible for the overall
management and supervision of the Fund, has employed the Manager to serve as
investment manager of the Fund. The Manager provides persons satisfactory to the
Fund's Board of Directors to serve as officers of the Fund. Such officers, as
well as certain other employees and directors of the Fund, may be directors or
officers of Reich & Tang Asset Management, Inc., the sole general partner of the
Manager or employees of the Manager or its affiliates. Due to the services
performed by the Manager, the Fund currently has no employees and its officers
are not required to devote full-time to the affairs of the Fund. The Statement
of Additional Information contains general background information regarding each
director and principal officer of the Fund.
The Manager is a Delaware limited partnership with its principal office at
600 Fifth Avenue, New York, New York 10020. As of January 31, 1998, the Manager
was investment manager, advisor or supervisor with
11
<PAGE>
respect to assets aggregating approximately $11 billion. The Manager acts as
manager or administrator of fifteen other investment companies and also advises
pension trust, profit sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") is
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"). Reich & Tang Asset Management, Inc. (a wholly-owned
subsidiary of NEICOP) is the sole general partner and owner of the remaining .5%
interest of the Manager. NEIC, a Massachusetts corporation, serves as the
managing general partner of NEICOP.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of
Metropolitan Life Insurance Company ("MetLife"). Also, MetLife directly and
indirectly owns approximately 47% of the outstanding partnership interests of
NEICOP, and may be deemed a "controlling person" of the Manager. Reich & Tang,
Inc. owns directly and indirectly approximately 13.7% of the outstanding
partnership interests of NEICOP.
MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. On August 30, 1996, The New England Mutual Life
Insurance Company ("The New England") and MetLife merged, with MetLife being the
continuing company. 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, which
exceeded $1.6 trillion at December 31, 1996 for MetLife and its insurance
affiliates. MetLife and its affiliates provide insurance or other financial
services to approximately 36 million people worldwide.
NEICOP is a holding company offering a broad array of investment styles
across a wide range of asset categories through thirteen subsidiaries, divisions
and affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the manager, include
AEW Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth
Management, Limited Partnership, Greystone Partners, L.P., Harris Associates,
L.P., Jurika & Voyles, L.P., Loomis, Sayles & Company, L.P., New England Funds,
L.P., New England Investment Associates, Inc., Snyder Capital Management, L.P.,
Vaughan, Nelson, Scarborough & McCullough, L.P., and Westpeak Investment
Advisors, L.P. These affiliates in the aggregate are investment advisors or
managers to 80 other registered investment companies.
Pursuant to the Investment Management Contract, the Manager manages the
Fund's portfolio of securities and makes decisions with respect to the purchase
and sale of investments, subject to the general control of the Board of
Directors of the Fund. Pursuant to the Investment Management Contract, the
Manager receives from the Fund a fee equal to .30% per annum of the Fund's
average daily net assets for managing the Fund's investment portfolio and
performing related services.
The recent restructuring of NEICLP did not result in a change in control of
the manager and has no impact upon the Manager's performance of its
responsibilities and obligations. The merger between The New England and MetLife
resulted in an "assignment" of the Investment Management Contract relating to
the Fund. Under the 1940 Act, such an assignment caused the automatic
termination of this agreement. On November 28, 1995, 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 an Investment Management
Contract effective August 30, 1996, which has a term which extends to July 31,
1998 and may be continued in force thereafter for successive twelve-month
periods beginning each August 1, provided that such continuance is specifically
approved annually by majority vote of the Fund's outstanding voting securities
or by its Board of Directors, and in either case by a majority of the directors
who are not parties to the Investment Management Contract or interested persons
of any such party, by votes cast in person at a meeting called for the purpose
of voting on such matter.
The Investment Management Contract was approved by a majority of the
shareholders of the Fund on July 12, 1996, and contains the same terms and
conditions governing the Manager's investment management responsibilities as the
Fund's previous Investment Management Contract with the Manager, except as to
the date of execution and termination.
Pursuant to the Administrative Services Contract for the Fund, the Manager
performs clerical, accounting supervision and office service functions for the
Fund and provides the Fund with the personnel to:
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<PAGE>
(i) supervise the performance of bookkeeping and related services by Investors
Fiduciary Trust Company, the Fund's bookkeeping agent; (ii) prepare reports to
and filings with regulatory authorities; and (iii) perform such other services
as the Fund may from time to time request of the Manager. The personnel
rendering such services may be employees of the Manager or its affiliates. The
Manager, at its discretion, may voluntarily waive all or a portion of the
administrative services fee. For its services under the Administrative Services
Contract, the Manager receives a fee equal to .21% per annum of the Fund's
average daily net assets. Any portion of the total fees received by the Manager
may be used to provide shareholder services and for distribution of Fund shares.
(See "Distribution and Service Plan" herein.) 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.
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DESCRIPTION OF COMMON STOCK
- --------------------------------------------------------------------------------
The Fund was incorporated in Maryland on July 24, 1990. The authorized
capital stock of the Fund consists of twenty billion shares of stock having a
par value of one tenth of one cent ($.001) per share. The Fund's Board of
Directors is authorized to divide the unissued shares into separate series of
stock, each series representing a separate, additional investment portfolio.
Shares of all series will have identical voting rights, except where, by law,
certain matters must be approved by a majority of the shares of the affected
series. Each share of any series of shares when issued has equal dividend,
distribution, liquidation and voting rights within the series for which it was
issued, and each fractional share has those rights in proportion to the
percentage that the fractional share represents of a whole share. Generally, all
shares will be voted in the aggregate, except if voting by Class is required by
law or the matter involved affects only one Class, in which case shares will be
voted separately by Class. There are no conversion or pre-emptive 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. As of January
31, 1998, the amount of shares owned by all officers and directors as a group
was less than 1% of the outstanding shares of the Fund.
The Fund is subdivided into two classes of common stock, Class A and Class
B. Each share, regardless of class, will represent an interest in the same
portfolio of investments and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares will be assessed a service fee of .20% of the average daily net
assets of the Class A shares of the Fund pursuant to the Rule 12b-1 Distribution
and Service Plan of the Fund; (iii) only the holders of the Class A shares would
be entitled to vote on matters pertaining to the Plan and any related agreements
in accordance with provisions of Rule 12b-1; and (iv) the exchange privilege
will permit shareholders to exchange their shares only for shares of the same
class of a Fund that participates in a exchange privilege with the Fund.
Payments that are made under the Plans will be calculated and charged daily to
the appropriate class prior to determining daily net asset value per share and
dividends/distributions.
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 such holders choose to do so,
and, in that event, the holders of the remaining shares will not be able to
elect any person or persons to the Board of Directors.
- --------------------------------------------------------------------------------
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. Fund Business
Day means weekdays (Monday through Friday) except customary business holidays
and Good Friday. There is no fixed dividend rate. In computing these dividends,
interest earned and expenses are accrued daily.
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<PAGE>
Net realized capital gains, if any, are distributed at least annually and
in no event later than within 60 days after the end of the Fund's fiscal year.
All dividends and distributions of capital gains are automatically invested in
additional Fund shares of the same Class of shares immediately upon payment
thereof unless a shareholder has elected by written notice to the Fund to
receive either of such distributions in cash.
The Class A shares will bear the service fee under the Plan. As a result,
the net income of and the dividends payable to the Class A shares will be lower
than the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of the Fund will, however, be declared
and paid on the same days at the same times and, except as noted with respect to
the service fees payable under the Plan, will be determined in the same manner
and paid in the same amounts.
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HOW TO PURCHASE AND REDEEM SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of the Fund through broker-dealers, banks or other
financial intermediaries, or directly through EDI. The minimum initial
investment is $1,000 which may be waived in certain situations. There is no
minimum for subsequent investments. In states where EDI is not registered as a
broker-dealer, shares of the Fund will only be sold through other broker-dealers
or other financial institutions that are registered. Only Evergreen shares are
offered through this Prospectus. Instructions on how to purchase shares of the
Fund are set forth in the Share Purchase Application.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss the Fund or the Fund's Manager incurs.
If such investor is an existing shareholder, the Fund may redeem shares from his
or her account to reimburse the Fund or the Fund's Manager for any loss. In
addition, such investors may be prohibited or restricted from making further
purchase in any of the Evergreen mutual funds.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in the Fund to the Fund on any
Fund Business Day, either directly or through your financial intermediary. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, the Fund
will not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to ten days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. The Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service. Certain financial intermediaries may require that
you give instructions earlier than 4:00 p.m. (Eastern time).
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend disbursing agent
for the Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts by
calling State Street at 800-423-2615 between the hours of 8:00 a.m. to 5:30 p.m.
(Eastern time) each Fund Business Day. Redemption requests made after 4:00 p.m.
(Eastern time) will be processed using the net asset value determined on the
next business day. Such redemption requests must include the shareholder's
account name, as registered with the Fund, and the account number. During
periods of drastic economic or market
14
<PAGE>
changes, shareholders may experience difficulty in effecting telephone
redemptions. Shareholders who are unable to reach State Street by telephone
should follow the procedures outlined above for redemption by mail.
The telephone redemption service is not available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in
the Fund at a designated commercial bank. State Street currently deducts a $5.00
wire charge from all redemption proceeds wired. This charge is subject to change
without notice. Redemption proceeds will be wired on the same day if the request
is made prior to 12 noon (Eastern time). Such shares, however, will not earn
dividends for that day. Redemption requests received after 12 noon will earn
dividends for that day, and the proceeds will be wired on the following business
day. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a Shareholder Services Form and send
it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827, with such shareholder's signature guaranteed by a bank or trust
company (not a Notary Public), a member firm of a domestic stock exchange or by
other financial institutions whose guarantees are acceptable to State Street.
Shareholders should allow approximately ten days for such form to be processed.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures include requiring some
form of personal identification prior to acting upon instructions and tape
recording of telephone instructions. If the Fund fails to follow such
procedures, it may be liable for any losses due to unauthorized or fraudulent
instructions. The Fund will not be liable for following telephone instructions
reasonably believed to be genuine. The Fund reserves the right to refuse a
telephone redemption if it is believed advisable to do so. Financial
intermediaries may charge a fee for handling telephone requests. Procedures for
redeeming Fund shares by telephone may be modified or terminated without notice
at any time.
Redemptions by Check. Upon request, the Fund will provide holders of Evergreen
shares, without charge, with checks drawn on the Fund that will clear through
State Street. Shareholders will be subject to State Street's rules and
regulations governing such checking accounts. Checks will be sent usually within
ten business days following the date the account is established. Checks may be
made payable to the order of any payee in an amount of $250 or more. The payee
of the check may cash or deposit it like a check drawn on a bank. (Investors
should be aware that, as in the case with regular bank checks, certain banks may
not provide cash at the time of deposit, but will wait until they have received
payment from State Street.) When such a check is presented to State Street for
payment, State Street, as the shareholder's agent, causes the Fund to redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. Checks will be returned by State Street if there
are insufficient or uncollectable shares to meet the withdrawal amount. The
check writing procedure for withdrawal enables shareholders to continue earning
income on the shares to be redeemed up to but not including the date the
redemption check is presented to State Street for payment.
Shareholders wishing to use this method of redemption should fill out the
appropriate part of the Share Purchase Application (including the Signature
Card) and mail the completed form to State Street Bank and Trust Company, P.O.
Box 9021, Boston, Massachusetts 02205-9827. Shareholders requesting this service
after an account has been opened must contact State Street since additional
documentation will be required. Currently there is no charge either for checks
or for the clearance of any checks. This service may be terminated or altered at
any time.
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SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
The Fund offers the following shareholder services. For more information
about these services or your account, contact EDI or the toll-free number on the
front of this Prospectus. Some services are described in more detail in the
Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
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<PAGE>
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $25,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account two business days after the request
is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designated a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically. In order to make a payment, a number of
shares equal in aggregate net asset value to the payment amount are redeemed at
their net asset value on the Fund Business Day immediately preceding the date of
payment. To the extent that the redemptions to make plan payments exceed the
number of shares purchased through reinvestment of dividends and distributions,
the redemptions reduce the number of shares purchased on original investment,
and may ultimately liquidate a shareholder's investment. Because the withdrawal
plan involves the redemption of Fund shares, such withdrawals may constitute
taxable events to the shareholder, but the Fund does not expect that there will
be any realizable capital gains.
Investments Through Employee Benefit and Savings Plan. Certain qualified and
non-qualified benefit and savings plans may make shares of the Fund and the
other Evergreen mutual funds available to their participants. Each Fund's
investment adviser may provide compensation to organizations providing
administrative and recordkeeping services to plans which make shares of the
Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the last
business day of each month, unless otherwise requested by a shareholder in
writing. If the transfer agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
The Fund sells and redeems its shares on a continuing basis at their net
asset value and does not impose a charge for either sales or redemptions.
In order to maximize earnings on its portfolio, the Fund normally has its
assets as fully invested as is practicable. Many securities in which the Fund
invests require immediate settlement in funds of Federal Reserve member banks on
deposit at a Federal Reserve Bank (commonly known as "Federal Funds").
Accordingly, the Fund does not accept a subscription or invest an investor's
payment in portfolio securities until the payment has been converted into
Federal Funds.
Shares will be issued as of the first determination of the Fund's net asset
value per share for each Class made after acceptance of the investor's order at
the net asset value per share first determined after receipt of the order.
Shares begin accruing income dividends on the day they are purchased. The Fund
reserves the right to reject any subscription for its shares. Certificates for
Fund shares will not be issued to an investor.
Shares are issued as of 12 noon, Eastern time, on any Fund Business Day on
which an order for the shares and accompanying Federal Funds are received by the
Fund's transfer agent before 12 noon. Orders accompanied by Federal Funds and
received after 12 noon, Eastern time, on a Fund Business Day will not
16
<PAGE>
result in share issuance until the following Fund Business Day. Fund shares
begin accruing income on the day the shares are issued to an investor.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
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 shareholder's address of record. If a shareholder
elects to redeem all the shares of the Fund he owns, all dividends accrued to
the date of such redemption will be paid to the shareholder along with the
proceeds of the redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted, or for any period during
which an emergency (as determined by the SEC) exists as a result of which
disposal by the Fund of its portfolio securities is not reasonably practicable
or as a result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or for such other period as the SEC may
by order permit for the protection of the shareholders of the Fund.
Redemption requests received by the Fund's transfer agent before 12 noon,
Eastern time, on any 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 is paid for the shares and, thus, in a taxable gain or loss to the
investor.
EFFECT OF BANKING LAWS
The Glass-Steagall Act limits the ability of a depository institution to
become an underwriter or distributor of securities. It is the Fund management's
position, however, that banks are not prohibited from acting in other capacities
for investment companies, such as providing administrative and shareholder
account maintenance services and receiving compensation from the Manager for
providing such services. This is an unsettled area of the law, however, and if a
determination contrary to the Fund management's position is made by a bank
regulatory agency or court concerning shareholder servicing and administration
payments to banks from the Manager, any such payments will be terminated and any
shares registered in the banks' names, for their underlying customers, will be
re-registered in the name of the customers at no cost to the Fund or its
shareholders. In addition, state securities laws on this issue may differ from
the interpretations of Federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
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DISTRIBUTION AND SERVICE PLAN
- --------------------------------------------------------------------------------
Pursuant to Rule 12b-1 under the 1940 Act, the SEC has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by Rule 12b-1.
The Fund's Board of Directors has adopted a 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 Shareholder Servicing Agreement, the Distributor receives with
respect only to the Class A shares a service fee equal to .20% per annum of the
Fund's Class A shares' average daily net assets (the "Shareholder Servicing
Fee") for providing personal shareholders services and for the maintenance of
shareholder accounts. The fee is accrued daily and paid monthly and any portion
of the fee may be deemed to
17
<PAGE>
be used by the Distributor for payments to Participating Organizations with
respect to their provision of such services to their clients or customers who
are shareholders of the Class A shares of the Fund. The Class B shareholders
will not receive the benefit of such services from Participating Organizations
and, therefore, will not be assessed a Shareholder Servicing Fee.
The Plan provides that the Manager may make payments from time to time from
its own resources, which may include the management fee and past profits for the
following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements, for performing shareholder servicing and related
administrative functions on behalf of the Class A Shares of the Fund; (ii) to
compensate certain Participating Organizations for providing assistance in
distributing the Class A Shares of the Fund; and (iii) to pay the costs of
printing and distributing the Fund's prospectus to prospective investors, and to
defray the cost of the preparation and printing of brochures and other
promotional materials, mailings to prospective shareholders, advertising, and
other promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Shareholding Servicing Fee 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.
Under the Distribution Agreement, the Distributor for nominal consideration
serves as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that, in addition
to the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses, including the cost of dedicated lines and CRT terminals, incurred by
the Manager and Distributor 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.
For the fiscal year ended October 31, 1997, the total amount spent pursuant
to the Plan for Class A shares was .43% 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 .23% was paid by the Manager (which may be deemed an indirect
payment by the Fund). Of the total amount paid by the Manager, $789,345 was
utilized for Broker assistance payments, $11,728 for compensation to sales
personnel, $3,054 for travel and expenses, $21,109 for Prospectus printing, and
$819 on miscellaneous expenses.
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FEDERAL INCOME TAXES
- --------------------------------------------------------------------------------
The Fund has elected to qualify under the Code as a regulated investment
company that distributes "exempt-interest dividends" as defined in the Code. The
Fund's policy is to distribute as dividends each year 100% (and in no event less
than 90%) of its tax-exempt interest income, net of certain deductions, and its
investment company taxable income (if any). If distributions are made in this
manner, dividends derived from the interest earned on Municipal Obligations are
"exempt-interest dividends" and are not subject to regular Federal income tax,
although as described below, such "exempt-interest dividends" may be subject to
Federal alternative minimum tax. Dividends paid from taxable income, if any, and
distributions of any realized short-term capital gains (whether from tax-exempt
or taxable obligations) are taxable to shareholders as ordinary income for
Federal income tax purposes, whether received in cash or reinvested in
additional shares of the Fund. Although it is not intended, it is possible that
the Fund may realize short-term or long-term capital gains or losses. The Fund
informs 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 for purposes of computing the amount of Social Security
benefits includible in gross income. Interest on certain "private activity
bonds" (generally, a bond issue in which more than 10% of the
18
<PAGE>
proceeds are used for a non-governmental trade or business and which meets the
private security or payment test, or bond issue which meets the private loan
financing test) issued after August 7, 1986 will constitute an item of tax
preference subject to the individual alternative minimum tax. Corporations will
be required to include in alternative minimum taxable income, 75% of the amount
by which their adjusted current earnings (including generally, tax-exempt
interest) exceeds their alternative minimum taxable income (determined without
this item). In addition, in certain cases Subchapter S corporations with
accumulated earnings and profits from Subchapter C years will be subject to a
tax on "passive investment income", including tax-exempt interest. Although the
Fund intends to maintain a $1.00 per share net asset value, a Shareholder may
realize a taxable gain or loss upon the disposition of shares.
With respect to 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 income taxes to the Fund to the
same extent as the interest on the underlying Municipal Obligations. Counsel has
pointed out that the Internal Revenue Service has announced that it will not
ordinarily issue advance rulings on the question of the ownership of securities
or participation interests therein subject to a put and could reach a conclusion
different from that reached by counsel.
In South Carolina v. Baker, the U.S. Supreme Court held that the
Federal government may constitutionally require states to register bonds they
issue and may subject the interest on such bonds to Federal tax if not
registered, and the Court further held that there is no constitutional
prohibition against the Federal Government's taxing the interest earned on state
or other municipal bonds. The Supreme Court decision affirms the authority of
the Federal government to regulate and control bonds such as the Municipal
Obligations and to tax such bonds in the future. The decision does not, however,
affect the current exemption from regular income tax of the interest earned on
the Municipal Obligations.
- --------------------------------------------------------------------------------
NEW JERSEY 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.
The Fund intends to be a "qualified investment fund" within the meaning of
the New Jersey gross income tax. The primary criteria for constituting a
"qualified investment fund" are that (1) such fund is an investment company
registered with the SEC which, for the calendar year in which the distribution
is paid, has no investments other than interest bearing obligations, obligations
issued at a discount, cash and cash items, including receivables and financial
options, futures, forward contracts, or other similar financial instruments
relating to interest-bearing obligations, obligations issued at a discount or
bond indexes related thereto and (2) at the close of each quarter of the taxable
year, such fund has not less than 80% of the aggregate principal amount of all
of its investments, excluding financial options, futures, forward contracts, or
other similar financial instruments relating to interest-bearing obligations,
obligations issued at a discount or bond indexes related thereto to the extent
such instruments are authorized under the regulated investment company rules
under the Code, cash and cash items, which cash items shall include receivables,
in New Jersey Municipal Obligations, Territorial Municipal Obligations and
certain other specified securities. Additionally, a qualified investment fund
must comply with certain continuing reporting requirements. In the opinion of
Sills Cummis Zuckerman Radin Tischman Epstein & Gross, P.A., special New Jersey
tax counsel to the Fund, assuming that the Fund constitutes a qualified
investment fund and that the Fund complies with the reporting obligations under
New Jersey law with respect to qualified investment funds, (a) distributions
paid by the Fund to a New Jersey resident individual shareholder will not be
subject to the New Jersey gross income tax to the extent that the distributions
are attributable to income received as interest on or gain from New Jersey
Municipal Obligations or Territorial Municipal Obligations, and (b) gain from
the sale of shares in the Fund by a New Jersey resident individual shareholder
will not be subject to the New Jersey gross income tax.
Shareholders are urged to consult with their tax advisors with respect to
the treatment of distributions from the Fund and ownership of shares of the Fund
in their own states and localities.
19
<PAGE>
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GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Fund was incorporated under the laws of the State of Maryland on July
24, 1990 and it is registered with the SEC as an open-end management investment
company.
The Fund prepares semi-annual unaudited and annual audited reports which
include a list of investment securities held by the Fund and which are sent to
shareholders.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-Laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of holders or shares entitled to cast 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 Act including the removal of Fund director(s) and communication among
shareholders, any registration of the Fund with the SEC or any state, or as the
Directors may consider necessary or desirable. Each Director serves until the
next meeting of the shareholders called for the purpose of considering the
election or reelection of such Director or of a successor to such Director, and
until the election and qualification of his or her successor, elected at such a
meeting, or until such Director sooner dies, resigns, retires or is removed by
the vote of the shareholders.
For further information with respect to the Fund and the shares offered
hereby, reference is made to the Fund's Registration Statement filed with the
SEC, including the exhibits thereto. The Registration Statement and the exhibits
thereto may be examined at the Commission and copies thereof may be obtained
upon payment of certain duplicating fees.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value of each Class of the Fund's shares is determined as of
12 noon, Eastern time, on each Fund Business Day. The net asset value of a Class
is computed by dividing the value of the Fund's net assets for such Class (i.e.,
the value of its securities and other assets less its liabilities, including
expenses payable or accrued but excluding capital stock and surplus) by the
total number of shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in
compliance with the provisions of Rule 2a-7 under the Act. Amortized cost
valuation involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, except that if
fluctuating interest rates cause the market value of the Fund's portfolio to
deviate more than 1/2 of 1% from the value determined on the basis of amortized
cost, the Board of Directors will consider whether any action should be
initiated. Although the amortized cost method provides certainty in valuation,
it may result in periods during which the value of an instrument is higher or
lower than the price an investment company would receive if the instrument were
sold. The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
Investors Fiduciary Trust Company, 801 Pennsylvania Street, Kansas
City, Missouri 64105 is custodian for the Fund's cash and securities. 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 shares of
the Fund. The Fund's transfer agent and custodian do not assist in, and are not
responsible for, investment decisions involving assets of the Fund.
20
<PAGE>
Distributor
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
537622 (REV03)
3/98
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY
DAILY MUNICIPAL 600 Fifth Avenue, New York, NY 10020
INCOME FUND, INC. (212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
March 2, 1998
Relating to New Jersey Daily Municipal Income Fund, Inc.,
Evergreen Shares of New Jersey Daily Municipal Income Fund, Inc.,
and the
Vista Select Shares of New Jersey Daily Municipal Income Fund, Inc.
Prospectuses dated March 2, 1998
This Statement of Additional Information, although not in itself a Prospectus,
expands upon and supplements the information contained in the current Prospectus
of New Jersey Daily Municipal Income Fund, Inc., Evergreen Shares of New Jersey
Daily Municipal Income Fund, Inc. and Vista Select Shares of New Jersey Daily
Municipal Income Fund, Inc. (collectively, the "Fund"), dated March 2, 1998 and
should be read in conjunction with the respective Prospectus. The respective
Prospectus may be obtained without charge from any Participating Organization or
by writing or calling the Fund.
If you wish to invest in Evergreen Shares of New Jersey Daily Municipal Income
Fund, Inc. you should obtain a separate prospectus by writing to State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 or by
calling (800)807-2940. If you wish to invest in Vista Select Shares of New
Jersey Daily Municipal Income Fund, Inc. you should obtain a separate prospectus
by writing to 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>
Table of Contents
<S> <C> <C> <C>
Investment Objectives, Yield Quotations..........................................14
Policies and Risks..............................2 Manager...................................................14
Description of Municipal Obligations................3 Expense Limitation........................................15
Variable Rate Demand Instruments Management of the Fund....................................16
and Participation Certificates.............5 Compensation Table...................................18
When-Issued Securities..........................7 Counsel and Auditors.................................18
Stand-by Commitments............................7 Distribution and Service Plan.............................18
Taxable Securities..................................8 Description of Common Stock...............................19
Repurchase Agreements...........................8 Federal Income Taxes......................................20
New Jersey Risk Factors.............................8 New Jersey Income Taxes...................................21
Investment Restrictions.............................12 Custodian and Transfer Agent..............................21
Portfolio Transactions..............................13 Description of Ratings....................................23
How to Purchase and Redeem Shares...................13 Taxable Equivalent Yield Table............................24
Net Asset Value.....................................12 Financial Statements......................................25
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RISKS
As stated in the Prospectus, 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 income tax and, to the extent possible, the New Jersey gross
income tax (the "New Jersey Income Tax"), as is believed to be consistent with
preservation of capital, maintenance of liquidity and stability of 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 high quality debt obligations
issued by or on behalf of the State of New Jersey, 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
Participation Certificates (which, 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) in Municipal Obligations purchased from banks, insurance
companies or other financial institutions. Dividends paid by the Fund which are
"exempt-interest dividends" by virtue of being properly designated by the Fund
as derived from Municipal Obligations and Participation Certificates in
Municipal Obligations will be exempt from regular Federal income tax provided
the Fund complies with the Internal Revenue Code of 1986, as amended (the
"Code"). Although the Supreme Court has determined that Congress has the
authority to subject the interest on bonds such as the Municipal Obligations to
regular Federal income taxation, existing law excludes such interest from
regular Federal income tax. However, such interest, including "exempt-interest
dividends" may be subject to the Federal alternative minimum tax.
Securities, the interest income on which may be subject to the Federal
alternative minimum tax (including Participation Certificates in such
securities, together with securities), may be purchased by the Fund without
limit. Securities, the interest income on which is subject to regular Federal,
state and local income tax, will not exceed 20% of the value of the Fund's total
assets. (See "Federal Income Taxes" herein.) Exempt-interest dividends paid by
the Fund that are correctly identified by the Fund as derived from obligations
issued by or on behalf of the State of New Jersey or any New Jersey local
government, or their instrumentalities, authorities or districts ("New Jersey
Municipal Obligations") will be exempt from the New Jersey Income Tax.
Exempt-interest dividends correctly identified by the Fund as derived from
obligations of Puerto Rico and the Virgin Islands, as well as any other types of
obligations that New Jersey is prohibited from taxing under the Constitution,
the laws of the United States of America or the New Jersey Constitution
("Territorial Municipal Obligations"), also should be exempt from New Jersey
Income Tax provided the Fund complies with New Jersey laws. (See "New Jersey
Income Taxes" herein.) To the extent that suitable New Jersey 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 the New Jersey Income Tax. Except as a temporary defensive
measure during periods of adverse market conditions as determined by the
Manager, the Fund will invest at least 65% of its assets in New Jersey Municipal
Obligations, although the exact amount of the Fund's assets invested in such
securities will vary from time to time. The Fund seeks to maintain an investment
portfolio with a dollar-weighted average maturity of 90 days or less and to
value its investment portfolio at amortized cost and maintain a net asset value
at a $1.00 per share for 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 in Municipal Obligations, the Fund
reserves the right to invest up to 20% of the value of its total assets in
securities, the interest income on which is subject to regular Federal, state
and local income tax. The Fund will invest more than 25% of its assets in
Participation Certificates purchased from banks in industrial revenue bonds and
other New Jersey Municipal Obligations. In view of this "concentration" in bank
Participation Certificates in New Jersey Municipal Obligations, an investment in
Fund shares should be made with an understanding of the characteristics of the
banking industry and the risks which such an investment may entail. (See
"Variable Rate Demand Instruments and Participation Certificates" herein.) The
investment objectives of the Fund described in this paragraph may not be changed
unless approved by the holders of a majority of the outstanding shares of the
Fund that would be affected by such a change. As used herein, the term "majority
of the outstanding shares" of the Fund means, respectively, the vote of the
lesser of (i) 67% or more of the shares of the Fund present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy or (ii) more than 50% of the outstanding shares of the
Fund.
The Fund may only purchase 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)
2
<PAGE>
Municipal Obligations with remaining maturities of 397 days or less and rated in
the two highest short-term rating categories by any two nationally recognized
statistical rating organizations ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal Obligations (collectively, the "Requisite
NRSROs"); (ii) Municipal Obligations or Participation Certificates which are
subject to a Demand Feature or Guarnatee (as such terms are defined in rule 2a-7
of the 1940 Act) which have received a rating from an NRSRO or such guarantor
has received a rating from an NRSRO with respect to a class of debt obligations
(or any debt obligation within that class) that is comparable in priority and
security to the guarantee (unless the guarantor directly or indirectly,
controls, is controlled by or is under common control with an issuer of the
security subject to the guarantee); and the issuer of the Demand Feature or
Guarnatee, or another institution, has undertaken promptly to notify the holder
of the security in the event the Demand Feature or Guarnatee is substituted with
another Demand Feature or Guarnatee.; (iii) unrated Municipal Obligations
determined by the Fund's Board of Directors to be of comparable quality. In
addition, Municipal Obligations with remaining maturities of 397 days or less
but that at the time of issuance were long-term securities (i.e. with maturities
greater than 366 days) are deemed unrated and maybe 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) it has received a long-term rating from any NRSRO that is not
within the three highest 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 Municipal
Obligations or Participation Certificates. (See "Variable Rate Demand
Instruments and Participation Certificates" herein.) While there are several
organizations that currently qualify as NRSROs, two examples of NRSROs are
Standard & Poor's Rating Services, a division of The McGraw-Hill Companies
("S&P") and Moody's Investors Service, Inc. ("Moody's"). The two highest ratings
by S&P and Moody's are "AAA" and "AA" by S&P in the case of long-term bonds and
notes, or "Aaa" and "Aa" by Moody's in the case of bonds; "SP-1" and "SP-2" by
S&P or "MIG-1" and "MIG-2" by Moody's in the case of notes; "A-1" and "A-2" by
S&P 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 and "SP-1/AA" by S&P. Such instruments may produce a lower
yield than would be available from less highly rated instruments.
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 or less.
With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations or participating certificates in
Municipal Obligations issued by a single issuer. Provided, however, the Fund
shall not invest more than 5% of its total assets in Municipal Obligations or
Participation Certificates in Municipal Obligations issued by a single issuer,
unless such Municipal Obligations are First Tier Securities.
The Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Code. Therefore the Fund will be restricted in that at the close of
each quarter of the taxable year, at least 50% of the value of its total assets
must be represented by cash, government securities, investment company
securities and other securities limited in respect of any one issuer to not more
than 5% in value of the total assets of the Fund and to not more than 10% of the
outstanding voting securities of such issuer. In addition, at the close of each
quarter of its taxable year, not more than 25% in value of the Fund's total
assets may be invested in securities of one issuer other than government
securities. The limitations described in this paragraph regarding qualification
as a "regulated investment company" are not fundamental policies and may be
revised to the extent applicable Federal income tax requirements are revised.
(See "Federal Income Taxes" herein.)
DESCRIPTION OF MUNICIPAL OBLIGATIONS
As used in the Prospectus, "Municipal Obligations" include the following as well
as "Variable Rate Demand Instruments and Participation Certificates" herein.
(1) Municipal Bonds with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. Municipal Bonds are debt
obligations of states, cities, counties, municipalities and municipal
agencies (all of which are generally referred to as "municipalities") which
generally have a maturity at the time of issue of one year or more and
which are issued to raise Funds for various public purposes such as
construction of a wide range of public facilities, to refund outstanding
obligations and to obtain funds for institutions and facilities.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by
the issuer's pledge of its faith, credit and taxing power for the payment
3
<PAGE>
of principal and interest. Issuers of general obligation bonds include
states, counties, cities, towns and other governmental units. The principal
of and interest on revenue bonds are payable from the income of specific
projects or authorities and generally are not supported by the issuer's
general power to levy taxes. In some cases, revenues derived from specific
taxes are pledged to support payments on a revenue bond.
In addition, certain kinds of "private activity bonds" are issued by public
authorities to provide Funding for various privately operated industrial
facilities (hereinafter referred to as "industrial revenue bonds" or
"IRBs"). Interest on the IRBs is generally exempt, with certain exceptions,
from 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 the 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 stated herein and provide the demand feature which may be
exercised by the Fund at any time to provide liquidity. Shareholders should
note that the Fund may invest in IRBs acquired in transactions involving a
Participating Organization. In accordance with Investment Restriction 6
(herein), the Fund is permitted to invest up to 10% of the portfolio in
high quality, short-term Municipal Obligations (including IRBs) meeting the
definition of Eligible Securities at the time of acquisition that may not
be readily marketable or have a liquidity feature.
(2) Municipal Notes with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. The principal kinds of
Municipal Notes include tax anticipation notes, bond anticipation notes,
revenue anticipation notes and project notes. Notes sold in anticipation of
collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuing municipality or agency. Project notes
are issued by local agencies and are guaranteed by the United States
Department of Housing and Urban Development. Project notes are also secured
by the full faith and credit of the United States. The Fund's investments
may be concentrated in Municipal Notes of New Jersey issuers.
(3) Municipal Commercial Paper that is an Eligible Security at the time of
acquisition. Issues of Municipal Commercial Paper typically represent very
short-term, unsecured, negotiable promissory notes. These obligations are
often issued to meet seasonal working capital needs of municipalities or to
provide interim construction financing and are paid from general revenues
of municipalities or are refinanced with long-term debt. In most cases
Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions which may be called upon in the
event of default by the issuer of the commercial paper.
(4) Municipal Leases, which may take the form of a lease or an installment
purchase or conditional sale contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications
equipment and other capital assets. Municipal Leases frequently have
special risks not normally associated with general obligation or revenue
bonds. Leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass eventually to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt-issuance
limitations of many state constitutions and statutes are deemed to be
inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has
no obligation to make future payments under the lease or contract unless
money is appropriated for such purpose by the appropriate legislative body
on a yearly or other periodic basis. To reduce this risk, the Fund will
only purchase Municipal Leases subject to a non-appropriation clause where
the payment of principal and accrued interest is backed by an unconditional
irrevocable letter of credit, a guarantee, insurance or other comparable
undertaking of an approved financial institution. These types of municipal
leases may be considered illiquid and subject to the 10% limitation of
investments in illiquid securities set forth under "Investment
Restrictions" contained herein. The Board of Directors may adopt guidelines
and delegate to the Manager the daily function of determining and
monitoring the liquidity of municipal leases. In making such determination,
the Board and the Manager may consider such factors as the frequency of
trades for the obligation, the number of 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 income tax-exempt, and to the extent possible, New Jersey
income tax-exempt obligations issued by or on behalf of states and
municipal governments and their authorities, agencies, instrumentalities
4
<PAGE>
and political subdivisions, whose inclusion in the Fund would be consistent
with the Fund's "Investment Objectives, Policies and Risks" and permissible
under Rule 2a-7 under the 1940 Act.
Subsequent to this purchase by the Fund, a rated Municipal Obligation may cease
to be rated or its rating may be reduced such that the investment is no longer a
first tier security or is rated below the minimum required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall reassess promptly
whether the Municipal Obligation presents minimal credit risks and shall cause
the Fund to take such action as the Board of Directors determines is in the best
interest of the Fund and its shareholders. However, reassessment is not required
if the Municipal Obligation is disposed of or matures within five business days
of the Manager becoming aware of the new rating and provided further that the
Board of Directors is subsequently notified of the Manager's actions.
In addition, in the event that a security (1) is in default, (2) ceases to be an
Eligible Security, (3) there is a determination that it no longer presents
minimal credit risks, or an event of insolvency occurs with respect to the
issuer of a portfolio security or the provider of any Demand Feature or
Guarnatee the Fund will dispose of the Municipal Obligation absent a
determination by the Fund's Board of Directors that disposal of the Municipal
Obligation would not be in the best interests of the Fund. In the event that a
Municipal Obligation is disposed of such disposition 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
Municipal Obligation which immediately before default accounted for 1/2 of 1% or
more of the Fund's total assets, the Fund shall promptly notify the Securities
and Exchange Commission (the "SEC") of such fact and of the actions that the
Fund intends to take in response to the situation. Certain municipal obligations
issued by instrumentalities of the United States Government are not backed by
the full faith and credit of the United States Treasury but only by the
creditworthiness of the instrumentality. Where necessary to ensure that the
Municipal Obligations are Eligible Securities or where the obligations are not
freely transferable, the Fund will require that the obligation to pay the
principal and accrued interest be backed by an unconditional irrevocable bank
letter of credit, a guarantee, insurance or other comparable undertaking of an
approved financial institution that would qualify the investment as an Eligible
Security.
Variable Rate Demand Instruments and Participation Certificates
Variable rate demand instruments that the Fund will purchase are tax-exempt
Municipal Obligations that provide for a periodic adjustment in the interest
rate paid on the instrument and permit the holder to demand payment of the
unpaid principal balance plus accrued interest at specified intervals upon a
specified number of days' notice either from the issuer or by drawing on a bank
letter of credit, a guarantee or insurance issued with respect to such
instrument.
The variable rate demand instruments in which the Fund may invest are payable on
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. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily to up to 397 days and the adjustments
are based upon the "prime rate"* of a bank or other appropriate interest rate
adjustment index as provided in the respective instruments. A fund utilizing the
amortized cost method of valuation under Rule 2a-7 of the 1940 Act may only
purchase variable rate demand instruments which are eligible securities. If an
instrument is ever not deemed to be an Eligible Security, the Fund either will
sell it in the market or exercise the demand feature.
The variable rate demand instruments that the Fund may invest in include
Participation Certificates purchased by the Fund from banks, insurance companies
or other financial institutions in fixed or variable rate, tax-exempt Municipal
Obligations (expected to be concentrated in IRBs) owned by such institutions or
affiliated organizations. The Fund will not purchase Participation Certificates
in fixed rate tax-exempt Municipal Obligations without obtaining an opinion of
counsel that the Fund will be treated as the owner thereof for Federal income
tax purposes. A participation certificate gives the Fund an undivided interest
in the Municipal Obligation in the proportion that the Fund's participation
interest bears to the total principal amount of the Municipal Obligation and
provides the demand repurchase feature described below. Where the institution
issuing the participation does not meet the Fund's eligibility criteria, the
participation is backed by an irrevocable letter of credit or guaranty of a bank
(which may be the bank issuing the participation certificate, a bank issuing a
confirming letter of credit to that of the issuing bank, or a bank serving as
agency of the issuing bank with respect to the possible repurchase of the
certificate of participation) or insurance policy of an insurance company that
the Board of Directors of the Fund has determined meets the prescribed quality
standards for the Fund. The Fund has the right to sell the participation
certificate back to the institution and, where applicable, draw on the letter of
credit or insurance after no more than thirty days' notice
- --------------------------------------------------------------------------------
* Prime rate is generally the rate charged by a bank to its most creditworthy
customers for short-term loans. The prime rate of a particular bank may differ
from other banks and will be the rate announced by each bank on a particular
day. Changes in the prime rate may occur with great frequency and generally
become effective on the date announced.
- --------------------------------------------------------------------------------
5
<PAGE>
either at anytime 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 (1) upon a default under
the terms of the bond documents, (2) as needed to provide liquidity to the Fund
in order to make redemptions of Fund shares, or (3) to maintain a high quality
investment portfolio. The institutions issuing the Participation Certificates
will retain a service and letter of credit fee (where applicable) and a fee for
providing the demand repurchase feature, in an amount equal to the excess of the
interest paid on the instruments over the negotiated yield at which the
participations were purchased by the Fund. The total fees generally range from
5% to 15% of the applicable prime rate or other interest rate index. With
respect to insurance, the Fund will attempt to have the issuer of the
participation certificate bear the cost of the insurance, although the Fund
retains the option to purchase insurance if necessary, in which case the cost of
insurance will be an expense of the Fund subject to the expense limitation (see
"Expense Limitation" herein). The Manager has been instructed by the Fund's
Board of Directors to continually monitor the pricing, quality and liquidity of
the variable rate demand instruments held by the Fund, including the
Participation Certificates, on the basis of published financial information and
reports of the rating agencies and other bank analytical services to which the
Fund may subscribe. Although these instruments may be sold by the Fund, the Fund
intends to hold them until maturity, except under the circumstances stated above
(see "Federal Income Taxes" herein).
In view of the "concentration" of the Fund in bank Participation Certificates in
New Jersey 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 of change
affecting one of the securities would also affect the other securities
including, for example, securities the interest upon which is paid from revenues
of similar type projects, or securities the issuers of which are located in the
same state.
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 interests 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
increased so that the variable rate exceeded the fixed rate on the Municipal
Obligations, the Municipal Obligations could no longer be valued at par and may
cause the Fund to take corrective action, including the elimination of the
instruments from the portfolio. Because the adjustment of interest rates on the
variable rate demand instruments is made in relation to movements of the
applicable banks' "prime rates", or other interest rate adjustment index, the
variable rate demand instruments are not comparable to long-term fixed rate
securities. Accordingly, interest rates on the variable rate demand instruments
may be higher or lower than current market rates for fixed rate obligations of
comparable quality with similar maturities.
Because of the variable rate nature of the instruments, the Fund's yield will
decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined. On the
other hand, during periods where prevailing interest rates have increased, the
Fund's yield will increase and its shareholders will have reduced risk of
capital depreciation.
For purposes of determining whether a variable rate demand instrument held by
the Fund matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (1) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument of (2) the period remaining until the instrument's next interest rate
adjustment. The maturity of a variable rate demand instrument will be determined
in the same manner for purposes of computing the Fund's dollar-weighted average
portfolio maturity. If a variable rate demand instrument ceases to be an
Eligible Security, it will be sold in the market or through exercise of the
repurchase demand feature to the issuer.
When-Issued Securities
New issues of certain Municipal Obligations frequently are offered on a
when-issued basis. The payment obligation and the interest rate that will be
received on these Municipal Obligations are each fixed at the time the buyer
enters
6
<PAGE>
into the commitment although delivery and payment of the Municipal Obligations
normally take place within 45 days after the date of the Fund's commitment to
purchase. Although the Fund will only make commitments to purchase when-issued
Municipal Obligations with the intention of actually acquiring them, the Fund
may sell these securities before the settlement date if deemed advisable by the
Manager.
Municipal Obligations purchased on a when-issued basis and the securities held
in the Fund's portfolio are subject to changes in value (both generally changing
in the same way, that is, both experiencing appreciation when interest rates
decline and depreciation when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Purchasing Municipal Obligations on
a when-issued basis can involve a risk that the yields available in the market
when the delivery takes place may actually be higher or lower than those
obtained in the transaction itself. A separate account of the Fund consisting of
cash or liquid debt securities equal to the amount of the when-issued
commitments will be established at the Fund's custodian bank. For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market value. If the market or fair value of such
securities declines, additional cash or highly liquid securities will be placed
in the account daily so that the value of the account will equal the amount of
such commitments by the Fund. On the settlement date of the when-issued
securities, the Fund will meet its obligations from then-available cash flow,
sale of securities held in the separate account, sale of other securities or,
although it would not normally expect to do so, from sale of the when-issued
securities themselves (which may have a value greater or lesser than the Fund's
payment obligations). Sale of securities to meet such obligations may result in
the realization of capital gains or losses, which are not exempt from Federal
Income Tax.
Stand-by Commitments
When the Fund purchases Municipal Obligations it may also acquire stand-by
commitments from banks and other financial institutions with respect to such
Municipal Obligations. Under a stand-by commitment, a bank or broker-dealer
agrees to purchase at the Fund's option a specified Municipal Obligation at a
specified price with same day settlement. A stand-by commitment is the
equivalent of a "put" option acquired by the Fund with respect to a particular
Municipal Obligation held in its portfolio.
The amount payable to the Fund upon its exercise of a stand-by commitment
normally would be (1) the acquisition cost of the Municipal Obligation
(excluding any accrued interest that the Fund paid on the acquisition), less any
amortized market premium or plus an amortized market or original issue discount
during the period the Fund owned the security, plus (2) all interest accrued on
the security since the last interest payment date during the period the security
was owned by the Fund. Absent unusual circumstances relating to a change in
market value, the Fund would value the underlying Municipal Obligation at
amortized cost. Accordingly, the amount payable by a bank or dealer during the
time a stand-by commitment is exercisable would be substantially the same as the
market value of the underlying Municipal Obligation.
The Fund's right to exercise a stand-by commitment would be unconditional and
unqualified. A stand-by commitment would not be transferable by the Fund,
although it could sell the underlying Municipal Obligation to a third party at
any time.
The Fund expects that stand-by commitments generally will be available without
the payment of any direct or indirect consideration. However, if necessary and
advisable, the Fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Fund's portfolio would not exceed 1/2 of 1% of
the value of the Fund's total assets calculated immediately after each stand-by
commitment was acquired.
The Fund would enter into stand-by commitments only with banks and other
financial institutions that, in the Manager's opinion, present minimal credit
risks and, where the issuer of the Municipal Obligation does not meet the
eligibility criteria, only where the issuer of the stand-by commitment has
received a rating or if not rated, presents a minimal risk of default as
determined by the Board of Directors. The Fund's reliance upon the credit of
those banks the broker-dealers would be supported by the value of the underlying
Municipal Obligations held by the Fund that were subject to the commitment.
The Fund intends to acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The purpose of this practice is to permit the Fund to be fully
invested in securities the interest on which is exempt from Federal income taxes
while preserving the necessary liquidity to purchase securities on a when-issued
basis, to meet unusually large redemptions and to purchase at a later date
securities other than those subject to the stand-by commitment.
The acquisition of a stand-by commitment would not affect the valuation or
assumed maturity of the underlying Municipal Obligations which will continue to
be valued in accordance with the amortized cost method. Stand-by commitments
acquired by the Fund would be valued at zero in determining net asset value. In
those cases in which
7
<PAGE>
the Fund paid directly or indirectly for a stand-by commitment, its cost would
be reflected as unrealized depreciation for the period during which the
commitment is held by the Fund. Stand-by commitments would not affect the
dollar-weighted average maturity of the Fund's portfolio. The maturity of a
security subject to a stand-by commitment is longer than the stand-by repurchase
date.
The stand-by commitments that the Fund may enter into are subject to certain
risks, which include the ability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, the fact that the commitment
is not marketable by the Fund, and that the maturity of the underlying security
will generally be different from that of the commitment.
In addition, the Fund may apply to the Internal Revenue Service for a ruling, or
seek from its counsel an opinion, that interest on Municipal Obligations subject
to stand-by commitments will be exempt from Federal income taxation (see
"Federal Income Taxes" herein). In the absence of a favorable tax ruling or
opinion of counsel, the Fund will not engage in the purchase of securities
subject to stand-by commitments.
TAXABLE SECURITIES
Although the Fund will attempt to invest 100% of its net assets in 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 on which
is subject to regular Federal income tax, under any one or more of the following
circumstances: (a) pending investment of proceeds of sales of Fund shares or of
portfolio securities, (b) pending settlement of purchases of portfolio
securities and (c) to maintain liquidity for the purpose of meeting anticipated
redemptions. In addition, the Fund may temporarily invest more than 20% in such
taxable securities when, in the opinion of the Manager, it is advisable to do so
because of adverse market conditions affecting the market for Municipal
Obligations. The kinds of taxable securities in which the Fund may invest are
limited to the following short-term, fixed-income securities (maturing in 397
days or less from the time of purchase): (1) obligations of the United States
government or its agencies, instrumentalities or authorities; (2) commercial
paper meeting the definition of Eligible Securities at the time of acquisition;
(3) certificates of deposit of domestic banks with assets of $1 billion or more;
and (4) repurchase agreements with respect to any Municipal Obligations or other
securities which the Fund is permitted to own. (See "Federal Income Taxes"
herein.)
Repurchase Agreements
The Fund may invest in instruments subject to repurchase agreements with
securities dealers or member banks of the Federal Reserve System. Under the
terms of a typical repurchase agreement, the Fund would acquire an underlying
debt instrument for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase and the Fund to resell the
instrument at a fixed price and time, thereby determining the yield during the
Fund's holding period. This results in a fixed rate of return insulated from
market fluctuation during such period. A repurchase agreement is subject to the
risk that the seller may fail to repurchase the security. Repurchase agreements
may be deemed to be loans under the 1940 Act. All repurchase agreements entered
into by the Fund shall be fully collateralized at all times during the period of
the agreement in that the value of the underlying security shall be at least
equal to the amount of the loan, including the accrued interest thereon, and the
Fund or its custodian shall have possession of the collateral, which the Fund's
Board believes will give it a valid, perfected security interest in the
collateral. In the event of default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying securities are not owned
by the Fund but only constitute collateral for the seller's obligation to pay
the repurchase price. Therefore, the Fund may suffer time delays and incur costs
in connection with the disposition of the collateral. The Fund's Board believes
that the collateral underlying repurchase agreements may be more susceptible to
claims of the seller's creditors than would be the case with securities owned by
the Fund. It is expected that repurchase agreements will give rise to income
which will not qualify as tax-exempt income when distributed by the Fund. The
Fund will not invest in a repurchase agreement maturing in more than seven days
if any such investment together with illiquid securities held by the Fund exceed
10% of the Fund's net assets. (See Investment Restriction Number 6 herein.)
Repurchase agreements are subject to the same risks described herein for
stand-by commitments.
NEW JERSEY RISK FACTORS
This summary is included for the purpose of providing a general description of
the credit and financial condition of the State of New Jersey.
State Finance
New Jersey's principal manufacturing industries produce chemicals,
pharmaceuticals, electrical goods, machinery, instrumentation, plastics,
printing and publishing. Other economic activities include insurance, tourism,
petroleum refining and truck farming.
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After enjoying an extraordinary boom during the mid-1980's, New Jersey as well
as the rest of the Northeast slipped into a slowdown well before the national
recession which officially began in July 1990 (according to the National Bureau
of Economic Research). At the onset of that recession, New Jersey experienced
accelerated declines in its construction and manufacturing sectors and overall
increases in the rates of unemployment. In the wake of the continued expansion
of the national economy which began in late 1993, New Jersey's economy has
experienced a protracted recovery that in 1994 began to generate internal
momentum due to increases in employment and income levels. Unemployment in New
Jersey has continued to recede while home-building and retail sales have
continued to increase steadily from 1992 lows. New Jersey has benefited from the
national recovery. At the end of calendar year 1997, New Jersey's recovery was
in its sixth year and appears to be sustainable now that the national economy
has "soft landed." Reasons for cautious optimism in New Jersey include
increasing employment levels, a low jobless rate, and a higher-than-national
level of per capita personal income.
The largest part of the total financial operations of the State is accounted for
in the General Fund, which is the fund into which all State revenues not
otherwise restricted by statute are deposited and from which appropriations are
made. New Jersey's Constitution and budget and appropriations system require a
balanced budget. Pursuant to the State Constitution, no money may be drawn from
the State Treasury except for appropriations made by law. In addition, all
monies for the support of State purposes must be provided for in one general
appropriation law covering one and the same fiscal year. The State's current
Fiscal Year ends June 30th.
The budget for Fiscal Year 1998 became effective June 30, 1997. The Fiscal Year
1997 budget produced a Fund Balance in the General Fund of approximately $280.5
million at the end of Fiscal Year 1997.
The primary method for State financing of capital projects is through the sale
of the general obligation bonds of the State. These bonds are backed by the full
faith and credit of the State. State tax revenues and certain other fees are
pledged to meet the principal and interest payments required to fully pay the
debt. No general obligation debt can be issued by the State without prior voter
approval.
The State made appropriations for principal and interest payments for general
obligation bonds for Fiscal Years 1994, 1995, 1996 and 1997 in the amounts of
$119.9 million, $103.6 million, $466.3 million, and $446.9 million,
respectively. For Fiscal Year 1997, the State has made appropriations of $483.7
million for principal and interest payments for general obligation bonds. The
aggregate outstanding general obligation bonded indebtedness of the State as of
June 30, 1997 was $3.4 billion.
As of June 30,1997, S&P, Moody's and Fitch Investors Service, Inc. ("Fitch")
rate the State's long-term general obligation debt "AA+", "Aa1" and "AA+",
respectively. There is no assurance that such ratings will continue for any
given period of time or that either rating will not be suspended, lowered or
withdrawn entirely by S&P, Moody's or Fitch if, in the judgment of S&P, Moody's
or Fitch, circumstances so warrant. Any explanation of the significance of the
ratings may be obtained only from S&P, Moody's and Fitch.
Aside from its general obligation bonds, the State's "moral obligation" backs
certain obligations issued by the Higher Education Assistance Authority, the New
Jersey Housing and Mortgage Finance Agency and the South Jersey Port Corporation
(the "Corporation"). As of June 30, 1997, there was outstanding in excess of
$614.32 million of moral obligation bonded indebtedness issued by such entities,
for which the maximum annual debt service was over $67.50 million as of such
date. In addition, the State guarantees the payments of obligations of the New
Jersey Sports and Exposition Authority and has incurred other obligations on a
"subject to appropriation basis." The total of these obligations, including the
"moral obligation" debt is approximately $9.05 billion.
At any given time, there are various numbers of claims and cases pending against
the State, State Agencies and employees, seeking recovery of monetary damages
that are primarily paid out of the fund created pursuant to the Tort Claims Act.
The State does not formally estimate its reserves representing potential
exposure for these claims and cases. An independent study estimated an aggregate
potential exposure of $90.8 million for claims pending, as of June 30, 1997. It
is estimated that were a similar study made of claims currently pending, the
amount of such estimated exposure would be somewhat higher. The State is unable
to estimate its exposure for these claims. New Jersey is involved in a number of
lawsuits in which adverse decisions could materially affect revenue or
expenditures. Such cases include challenges to the State's funding mechanism for
school districts within the State, challenges to the method by which the State
shares with county governments the costs for care and housing of the
developmentally disabled, challenges to the State's methodology of setting
hospital rates and challenges to tax payments made to the State's Spill
Compensation Fund.
Municipal Finance
New Jersey's local finance system is regulated by various statutes designed to
assure that all local governments and their issuing authorities remain on a
sound financial basis. Regulatory and remedial statutes are enforced by the
Division of Local Government Services (the "Division") in the State Department
of Community Affairs.
Counties and Municipalities
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The Local Budget Law imposes specific budgetary procedures upon counties and
municipalities ("local units"). Every local unit must adopt an operating budget
which is balanced on a cash basis, and items of revenue and appropriation must
be independently audited by a registered municipal accountant. The Division
reviews all municipal and county annual budgets prior to adoption. The Director
is empowered to require changes for compliance with law as a condition of
approval; to disapprove budgets not in accordance with law; and to prepare the
budget of a local unit if the local unit is unwilling to prepare a budget in
accordance with law. This process insures that every municipality and county
annually adopts a budget balanced on a cash basis, within limitations on
appropriations or tax levies, respectively, and making adequate provision for
principal of and interest on indebtedness falling due in the fiscal year,
deferred charges and other statutory expenditure requirements.
The Local Government Cap Law (the "Cap Law") generally limits the year-to-year
increase of the total appropriations of any municipality and the tax levy of any
county to either 5% or an index rate determined annually by the Director,
whichever is less. However, where the index percentage rate exceeds 5%, the Cap
Law permits the governing body of any municipality or county to approve the use
of a higher percentage rate up to the index rate. Further, where the index
percentage rate is less than 5%, the Cap Law also permits the governing body of
any municipality or county to approve the use of a higher percentage rate up to
5%. Certain exceptions exist to the Cap Law's limitation on increases in
appropriations. The principal exceptions to these limitations are municipal and
county appropriations to pay debt service requirements; to comply with other
State or Federal mandates enacted after the effective date of the Cap Law;
amounts approved by referendum; and, in the case of municipalities only, to fund
the preceding year's cash deficit or to reserve for shortfalls in tax
collections. The Cap Law was re-enacted in 1990 with amendments and made a
permanent part of the Municipal Finance System.
State law also regulates the issuance of debt by local units. The Local Budget
Law limits the amount of tax anticipation notes that may be issued by local
units and requires the repayment of such notes within three months of the end of
the fiscal year (six months in the case of the counties) in which issued. No
local unit is permitted to issue bonds for the payment of current expenses.
Local units may not issue bonds to pay outstanding obligations, except for
refunding purposes, and then only with the approval of the Local Finance Board.
Local units may issue bond anticipation notes for temporary periods not
exceeding in the aggregate approximately ten years from the date of issue. The
debt that any local unit may authorize is limited to a percentage of its
equalized valuation basis, which is the three year average of the equalized
value of all taxable real property and improvements within the geographic
boundaries of the local unit. Authorized net capital debt is limited to 3.5% of
the equalized valuation basis in the case of municipalities and 2% of the
equalized valuation basis in the case of counties. The debt limit of a county or
municipality, with certain exceptions, may be exceeded only with the approval of
the Local Finance Board.
Chapter 75 of the Pamphlet Laws of 1991, signed into law on March 28, 1991,
requires certain municipalities and permits all other municipalities to adopt
the State fiscal year in place of the existing calendar fiscal year.
Municipalities that change fiscal years must adopt a six month transition budget
for January to June. Since expenditures would be expected to exceed revenues
primarily because state aid for the calendar year would not be received by the
municipality until after the end of the transition year budget, the Act
authorizes the issuance of Fiscal Year Adjustment Bonds to fund the one time
deficit for the six month transition budget. The Act provides that the deficit
in the six month transition budget may be funded initially with bond
anticipation notes based on the estimated deficit in the six month transition.
Notes issued in anticipation of Fiscal Year Adjustment Bonds, including
renewals, can only be issued for up to one year unless the Local Finance Board
permits the municipality to renew them for a further period. The Local Finance
Board must confirm the actual deficit experienced by the municipality. The
municipality then may issue Fiscal Year Adjustment Bonds to finance the deficit
on a permanent basis. The purpose of the Act is to assist municipalities that
are heavily dependent on state aid and that have had to issue tax anticipation
notes to fund operating cash flow deficits each year. While the Act does not
authorize counties to change their fiscal years, it does provide that counties
with cash flow deficits may issue Fiscal Year Adjustment Bonds as well.
School Districts
New Jersey's school districts operate under the same comprehensive review and
regulation as do its counties and municipalities. Certain exceptions and
differences are provided, but the State supervision of school finance closely
parallels that of local governments. The State Department of Education has been
empowered with the necessary and effective authority in extreme cases to take
over the operation of local school districts which cannot or will not correct
severe and complex educational deficiencies.
School Budgets
In each school district having a Board of School Estimate, the Board of School
Estimate examines the budget request and fixes the appropriation amounts for the
next year's operating budget after a public hearing. This board, whose
composition is fixed by statute, certifies the budget to the municipal governing
bodies and to the local board
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of education. If the local board of education disagrees, it must appeal to the
State Commissioner of Education (the "Commissioner") to request changes.
In each school district without a Board of School Estimate, the elected board of
education develops the budget proposal and, after public hearing, submits to the
voters of such district for approval. Previously authorized debt service is not
subject to referendum in the annual budget process. If approved, the budget goes
into effect. If defeated, the governing body of each municipality in the school
district has approximately 20 days to determine the amount necessary to be
appropriated for each item appearing in such budget. Should the governing body
fail to certify any amount determined by them to be necessary for any item
rejected at the election, the board of education of such district may appeal the
action to the Commissioner.
School District Bonds
School district bonds and temporary notes are issued in conformity with the
School Bond Law. Schools are subject to debt limits and to State regulation of
their borrowing. The debt limitation on school district bonds depends upon the
classification of the school district, but may be as high as 4% of the average
equalized valuation basis of the constituent municipality. In certain cases
involving school districts in cities with populations exceeding 100,000, the
debt limit is 8% of the average equalized valuation basis of the constituent
municipality, and in cities with population in excess of 80,000 the debt limit
is 6% of the aforesaid average equalized valuation.
School District Lease Purchase Financings
In 1982, school districts were given an alternative to the traditional method of
bond financing capital improvements pursuant to the Lease Purchase Law. The
Lease Purchase Law permits school districts to acquire a site and school
buildings through a lease purchase agreement with a private lessor corporation.
The lease purchase agreement does not require voter approval. The rent payments
attributable to the lease purchase agreement are subject to annual appropriation
by the school district and are required to be included in the annual current
expense budget of the school district. Furthermore, the rent payments
attributable to the lease purchase agreement do not constitute debt of the
school district and therefore do not impact on the school district's debt
limitation. Lease purchase agreements in excess of five years require the
approval of the Commissioner and the Local Finance Board.
Local Financing Authorities
The Local Authorities Fiscal Control Law provides for state supervision of the
fiscal operations and debt issuance practices of independent local authorities
and special taxing districts by the State Department of Community Affairs. The
Local Authorities Fiscal Control Law applies to all autonomous public bodies
created by counties or municipalities, which are empowered to issue bonds, to
impose facility or service charges, or to levy taxes in their districts. This
encompasses most autonomous local authorities (sewerage, municipal utilities,
parking, pollution control, improvement, etc.) and special taxing districts
(fire, water, sewer, street lighting, etc.).
Financial control responsibilities over local authorities and special districts
are assigned to the Local Finance Board and the Director of the Division of
Local Government Services. The Local Finance Board exercises approval power over
the creation of new authorities and special districts as well as their
dissolution. The Local Finance Board also reviews, conducts public hearings and
issues findings and recommendations on any proposed project financing of an
authority or district, and on any proposed financing agreement between a
municipality or county and an authority or special district.
The Director reviews and approves annual budgets of authorities and special
districts.
The Fund believes the information summarized above describes some of the more
significant aspects relating to the Fund. The sources of such information are
the official statements of issuers located in New Jersey as well as other
publicly available documents. While the Sponsors have not independently verified
this information, they have no reason to believe that such information is not
correct in all material respects.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions which
apply to all portfolios and which may not be changed unless approved by a
majority of the outstanding shares of each series of the Fund's shares that
would be affected by such a change. The Fund may not:
(1) Make portfolio investments other than as described under "Investment
Objectives, Policies and Risks" or any other form of Federal tax-exempt
investment which meets the Fund's high quality criteria, as determined by
the Board of Directors.
(2) Borrow Money. This restriction shall not apply to borrowing from banks for
temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests that might otherwise require the untimely disposition
of securities, in an amount up to 15% of the value of the Fund's total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing was made.
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While borrowings exceed 5% of the value of the Fund's total assets, the
Fund will not make any investments. Interest paid on borrowings will reduce
net income.
(3) Pledge, hypothecate, mortgage or otherwise encumber its assets, except in
an amount up to 15% of the value of its total assets and only to secure
borrowings for temporary or emergency purposes.
(4) Sell securities short or purchase securities on margin, or engage in the
purchase and sale of put, call, straddle or spread options or in writing
such options, except to the extent that securities subject to a demand
obligation and stand-by commitments may be purchased as set forth under
"Investment Objectives, Policies and Risks."
(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, but this
shall not prevent the Fund from investing in Municipal Obligations secured
by real estate or interests in real estate.
(8) Make loans to others, except through the purchase of portfolio investments,
including repurchase agreements, as described under "Investment Objectives,
Policies and Risks."
(9) Purchase more than 10% of all outstanding voting securities of any one
issuer or invest in companies for the purpose of exercising control.
(10) Invest more than 25% of its assets in the securities of "issuers" in any
single industry, provided that the Fund may invest more than 25% of its
assets in bank Participation Certificates and there shall be no limitation
on the purchase of those tax-exempt 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 based
only by the assets and revenues of the entity, the entity would be deemed
to be the sole issuer of the security. Similarly, in the case of an
industrial revenue bond, if that bond is backed only by the assets and
revenues of the non-governmental user, then such non-governmental user
would be deemed to be the sole issuer. If, however, in either case, the
creating government or some other entity, such as an insurance company or
other corporate obligor, guarantees a security or a bank issues a letter of
credit, such a guarantee or letter of credit would be considered a separate
security and would be treated as an issue of such government, other entity
or bank. Immediately after the acquisition of any securities subject to a
Demand Feature or Guarnatee (as such terms are defined in Rule 2a-7 under
the Investment Company act of 1940), with respect to 75% of the total
assets of the Fund, not more then 10% of the Fund's assets may be invested
in securities that are subject to a Guarnatee or Demand Feature from the
same institution. However, the Fund may only invest more than 10% of its
assets in securities subject to a Guarnatee or Demand Feature issued by a
non-controlled person.
(11) Invest in securities of other investment companies, except 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 any permitted borrowing.
If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of the Fund's assets will not constitute a
violation of such restriction.
PORTFOLIO TRANSACTIONS
The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its formation.
Any transaction for which the Fund pays a brokerage commission will be effected
at the best price and execution available. Purchases from underwriters of
portfolio securities include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price. The Fund purchases Participation
Certificates in variable rate Municipal Obligations with a demand feature from
banks or other financial institutions at a negotiated
12
<PAGE>
yield to the Fund based on the applicable interest rate adjustment index for the
security. The interest received by the Fund is net of fee charged by the issuing
institution for servicing the underlying obligation and issuing the
participation certificate, letter of credit, guarantee or insurance and
providing the demand repurchase feature.
Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed in the
best interest of shareholders of the Fund rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price. No preference in purchasing portfolio securities will
be given to banks or dealers that are Participating Organizations.
Investment decisions for the Fund will be made independently from those for any
other investment companies or accounts that may be or become managed by the
Manager or its affiliates. If, however, the Fund and other investment companies
or accounts managed by the Manager are simultaneously engaged in the purchase or
sale of the same security, the transactions may be averaged as to price and
allocated equitably to each account. In some cases, this policy might adversely
affect the price paid or received by the Fund or the size of the position
obtainable for the Fund. In addition, when purchases or sales of the same
security for the Fund and for other investment companies managed by the Manager
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantage available to large denomination purchasers or
sellers.
No portfolio transactions are executed with the Manager or its affiliates acting
as principal. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Manager or its affiliates.
HOW TO PURCHASE AND REDEEM SHARES
The material relating to the purchase and redemption of shares of each Class in
the respective Prospectuses is herein incorporated by reference.
NET ASSET VALUE
The Fund does not determine net asset value per share of each Class on the
following holidays: 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 (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued but excluding capital stock and surplus) by the total number of shares
outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated, 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 recordkeeping procedures. The
Fund has also established procedures to ensure compliance with the requirement
that portfolio securities are Eligible Securities (see "Investment Objectives,
Policies and Risks" herein).
YIELD QUOTATIONS
The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the 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 (which is obtained by dividing the net change in
the value of a hypothetical account having a balance of one share at the
beginning of the period by the value of such account at the beginning of the
period (expected to always be $1.00) is multiplied by (365/7) with the resulting
annualized figure carried to the nearest hundredth of one percent). For purposes
of the foregoing computation, the determination of
13
<PAGE>
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 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 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 herein,
computed by dividing that portion of the yield of the Fund (as computed pursuant
to the formulae previously discussed) which is tax-exempt by one minus a stated
income tax rate and adding the product to that portion, if any, of the yield of
the Fund that is not tax-exempt. The 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 taxable equivalent yield table which
shows the yield that an investor would need to receive from a taxable investment
in order to equal a tax-free yield from the Fund. See the "Taxable Equivalent
Yield Table" herein.
The Fund's Class A shares' yield for the seven-day period ending January 31,
1998 was 2.65% which is equivalent to an effective yield of 2.68%. The Fund's
Class B shares' yield for the seven-day period ending January 31, 1998 was 2.86%
which is equivalent to an effective yield of 2.90%.
MANAGER
The Investment Manager for the Fund is Reich & Tang Asset Management L.P., a
Delaware limited partnership with principal offices at 600 Fifth Avenue, New
York, New York 10020 (the "Manager"). As of January 31, 1998, the Manager was
investment manager, adviser or supervisor with respect to assets aggregating
approximately $11 billion. The Manager acts as manager or administrator of
fifteen other investment companies and also advises pension trusts, profit
sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") is 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"). Reich & Tang Asset Management, Inc. (a wholly-owned
subsidiary of NEICOP) is the sole general partner and owner of the remaining .5%
interest of the Manager. NEIC, a Massachusetts corporation, serves as the
managing general partner of NEICOP.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of NEICOP, and may be
deemed a "controlling person" of the Manager. Reich & Tang, Inc. owns directly
and indirectly approximately 13.7% of the outstanding partnership interests of
NEICOP.
MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. On August 30, 1996, The New England Mutual Life
Insurance Company ("The New England") and MetLife merged, with MetLife being the
continuing company. 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, which
exceeded $1.6 trillion at December 31, 1996 for MetLife and its insurance
affiliates. MetLife and its affiliates provide insurance or other financial
services to approximately 36 million people worldwide.
NEICOP is a holding company offering a broad array of investment styles across a
wide range of asset categories through thirteen subsidiaries, divisions and
affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the manager, include
AEW Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth
Management, Limited Partnership, Greystone Partners, L.P., Harris Associates,
L.P., Jurika & Voyles, L.P., Loomis, Sayles & Company, L.P., New England Funds,
L.P., New England Investment
14
<PAGE>
Associates, Inc., Snyder Capital Management, L.P., Vaughan, Nelson, Scarborough
& McCullough, L.P., and Westpeak Investment Advisors, L.P. These
affiliates in the aggregate are investment advisors or managers to 80 other
registered investment companies.
The recent restructuring of NEICLP did not result in a change in control of the
manager and has no impact upon the Manager's performance of its responsibilities
and obligations. The merger between The New England and MetLife resulted in an
"assignment" of the Investment Management Contract relating to the Fund. Under
the 1940 Act, such an assignment caused the automatic termination of this
agreement. On November 28, 1995, 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 a new Investment Management Contract effective
August 30, 1996, which has a term which extends to July 31, 1998, and may be
continued in force thereafter for successive twelve-month periods beginning each
August 1, provided that such continuance is specifically approved annually by
majority vote of the Fund's outstanding voting securities or by its Board of
Directors, and in either case by a majority of the directors who are not parties
to the Investment Management Contract or interested persons of any such party,
by votes cast in person at a meeting called for the purpose of voting on such
matter.
The Investment Management Contract was approved by a majority of the
shareholders of the Fund on July 12, 1996, and contains the same terms and
conditions governing the Manager's investment management responsibilities as the
Fund's previous Investment Management Contract with the Manager, except as to
the date of execution and termination.
The merger and the change in control of the Manager is not expected to have any
impact upon the Manager's performance of its responsibilities and obligations
under the new Investment Management Contract.
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
NEICOP, or employees of the Manager or its affiliates.
The Investment Management Contract is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or by the Manager on sixty days' written notice, and will automatically
terminate in the event of its assignment. The Investment Management Contract
provides that in the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or of reckless disregard of its
obligations thereunder, the Manager shall not be liable for any action or
failure to act in accordance with its duties thereunder.
Pursuant to the Administrative Service Contract with the Fund, the Manager
performs clerical, accounting, office service and related functions for the Fund
and provides the Fund with personnel to (i) supervise the performance of
accounting and related services by Investors Fiduciary Trust Company, the Fund's
bookkeeping or recordkeeping agent, (ii) prepare reports to and filings with
regulatory authorities and (iii) perform such other services as the Fund may
from time to time request of the Manager. The personnel rendering such services
may be employees of the Manager, of its affiliates or of other organizations.
For its services under the Administrative Services Contract, the Manager
receives from the Fund an annual fee equal to .21% of each Portfolio's average
daily net assets not in excess of $1.25 billion, plus .20% of such assets in
excess of $1.25 billion but not in excess of $1.5 billion, plus .19% of such
assets in excess of $1.5 billion. Pursuant to the Administrative Services
Contract, for the fiscal years ended October 31, 1995, 1996 and 1997, the
Manager received administrative fees in the amount of $236,815, $331,405 and
$400,463, respectively.
For its services under the Investment Management Contract, the Manager receives
from the Fund a fee equal to .30% per annum of the Fund's average daily net
assets for managing the Fund's investment portfolio and performing related
services. The fees are accrued daily and paid monthly. Any portion of the total
fees received by the Manager may be used by the Manager to provide shareholder
and administrative services (see "Distribution and Service Plan" herein).
For the Fund's fiscal year ended October 31, 1997, the fee payable to the
Manager under the Investment Management Contract was $572,090, none of which was
waived. The Fund's net assets at the close of business on October 31, 1997
totaled $217,844,166. For the Fund's fiscal year ended October 31, 1996, the fee
payable to the Manager under the Investment Management Contract was $475,005,
none of which was waived. The Fund's net assets at the close of business on
October 31, 1996 totaled $151,786,977. For the Fund's fiscal year ended October
31, 1995, the fee payable to the Manager under the Investment Management
Contract was $355,223, none of which was waived. The Fund's net assets at the
close of business on October 31, 1995 totaled $130,127,560. 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.
15
<PAGE>
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 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,
including taxes, brokerage fees and commissions, commitment fees, certain
insurance premiums, interest charges and expenses of the custodian, transfer
agent and dividend disbursing agent's fees, telecommunications expenses,
auditing and legal expenses, 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 payable to the Distributor under the Shareholder Servicing Agreement,
Administrative Services and the Distribution Agreement and all other costs borne
by the Fund pursuant to the Distribution and Service Plan. As a result of the
passage of the National Securities Markets Improvement Act of 1996, all state
expense limitations have been eliminated at this time.
The Fund may from time to time hire its own employees or contract to have
management services performed by third parties (including Participating
Organizations) as discussed herein, and the management of the Fund intends to do
so whenever it appears advantageous to the Fund. The Fund's expenses for
employees and for such services are among the expenses subject to the expense
limitation described above.
MANAGEMENT OF THE FUND
The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below. Mr. Steven W. 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. Unless otherwise specified,
the address of the following persons is 600 Fifth Avenue, New York, New York
10020.
Steven W. Duff, 44 - President and a Director of the Fund, has been President of
the Mutual Funds division of the Manager. Mr. Duff was formerly Director of
Mutual Fund Administration of NationsBank which he was associated with from 1981
to 1994. Mr. Duff is also President and a Director of California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust,
Inc., Daily Tax Free Income Fund, Inc., Michigan Daily Tax Free Income Fund,
Inc., New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal
Income Fund, Inc., Short Term Income Fund, Inc. and Virginia Daily Municipal
Income Fund, Inc.; President and Trustee of Florida Daily Municipal Income Fund,
Institutional Daily Income Fund and Pennsylvania Daily Municipal Income Fund;
President and Chief Executive Officer of Tax Exempt Proceeds Fund, Inc.,
Executive Vice President of Reich & Tang Equity Fund, Inc.
Dr. W. Giles Mellon, 67 - 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 of California Daily Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield
Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Reich & Tang Equity Fund, Inc., Short Term Income
Fund, Inc. and Virginia Daily Municipal Income Fund, Inc.; Trustee of Florida
Daily Municipal Income Fund, Institutional Daily Income Fund and Pennsylvania
Daily Municipal Income Fund.
Dr. Yung Wong, 59 - 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 (provider of telecommunications equipment) since January 1989, and
of TelWatch, Inc. (provider of network management software) since August 1989.
Dr. Wong is also a Director of California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Michigan Daily Tax Free Income Fund,
16
<PAGE>
Inc., North Carolina Daily Municipal Income Fund, Inc., Reich & Tang Equity
Fund, Inc., Short Term Income Fund, Inc., and Virginia Daily Municipal Income
Fund, Inc.; Trustee of Eclipse Financial Asset Trust, Florida Daily Municipal
Income Fund, Institutional Daily Income Fund, and Pennsylvania Daily Municipal
Income Fund.
Robert Straniere, 56 - Director of the Fund, has been a member of the New York
State Assembly and a partner with the Straniere & Straniere Law Firm since 1981.
His address is 182 Rose Avenue, Staten Island, New York 10306. Mr. Straniere is
also a Director of California Daily Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield
Fund, Inc., LifeCycle Funds, Inc., Michigan Daily Tax Free Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Reich & Tang Equity Fund,
Inc., Short Term Income Fund, Inc. and Virginia Daily Municipal Income Fund,
Inc.; Trustee of Florida Daily Municipal Income Fund, Institutional Daily Income
Fund and Pennsylvania Daily Municipal Income Fund.
Lesley M. Jones, 49 - 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
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida
Daily Municipal Income Fund, Institutional Daily Income Fund, Michigan Daily Tax
Free Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., 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.
Bernadette N. Finn, 50 - Secretary of the Fund, has been Vice President of the
Mutual Funds division of the Manager since September 1993. Ms. Finn was formerly
Vice President of Reich & Tang, Inc. which she was associated with from
September 1970 to September 1993. Ms. Finn is also Secretary of California Daily
Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Florida Daily Municipal
Income Fund, Michigan Daily Tax Free Income Fund, Inc., New York Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Tax Exempt Proceeds Fund, Inc. and
Virginia Daily Municipal Income Fund, Inc.; Vice President and Secretary of
Delafield Fund, Inc., Institutional Daily Income Fund, Reich & Tang Equity Fund,
Inc. and Short Term Income Fund, Inc.
Molly Flewharty, 47 - Vice President of the Fund, has been Vice President of the
Mutual Funds division of the Manager since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. which she was associated with from
December 1977 to September 1993. Ms. Flewharty is also Vice President of
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield
Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily Income
Fund, Michigan Daily Tax Free Income Fund, Inc., New York Daily Tax Free Income
Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily
Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund,
Inc., Tax Exempt Proceeds Fund, Inc. and Virginia Daily Municipal Income Fund,
Inc.
Dana E. Messina, 41 - Vice President of the Fund, has been Executive Vice
President of the Mutual Funds division of the Manager since January 1995 and was
Vice President from September 1993 to January 1995. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. which she was associated with from December
1980 to September 1993. Ms. Messina is also Vice President of California Daily
Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, Institutional Daily Income Fund, Michigan
Daily Tax Free Income Fund, Inc., New York Daily Tax Free Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal
Income Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc. Tax
Exempt Proceeds Fund, Inc. and Virginia Daily Municipal Income Fund, Inc.
Richard De Sanctis, 41 - Treasurer of the Fund, has been Vice President and
Treasurer of the Manager since September 1993. Mr. De Sanctis was formerly
controller of Reich & Tang, Inc., with which he has been associated since
January 1991. Mr. De Sanctis was formerly Vice President and Treasurer of
Cortland Financial Group, Inc. and Vice President of Cortland Distributors, Inc.
from 1989 to December 1990. He is also Treasurer of California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free
Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund,
Institutional Daily Income Fund, Michigan Daily Tax Free Income Fund, Inc., New
York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund,
Inc., Short Term Income Fund, Inc. and Tax Exempt Proceeds Fund, Inc., and
Virginia Daily Municipal Income Fund, Inc.; Vice President and Treasurer of
Cortland Trust, Inc.
17
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The Fund paid an aggregate remuneration of $6,000 to its directors with respect
to the period ended October 31, 1997, all of which consisted of aggregate
directors' fees paid to the three disinterested directors, pursuant to the terms
of the Investment Management Contract (see "Manager" herein). See compensation
table below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COMPENSATION TABLE
(1) (2) (3) (4) (5)
Name of Person, Aggregate Compensation Pension or Retirement Estimated Annual Total Compensation from
Position from Registrant for Benefits Accrued as Part Benefits upon Fund and Fund Complex Paid
Fiscal Year of Fund Expenses Retirement to Directors*
W. Giles Mellon, $2,000.00 $51,500 (13 Funds)
Director 0 0
Robert Straniere, $2,000.00 $51,500 (13 Funds)
Director 0 0
Yung Wong, $2,000.00 $51,500 (13 Funds)
Director 0 0
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending October 31, 1997 (and, with respect to certain of the
funds in the Fund Complex, estimated to be paid during the fiscal year ending
October 31, 1997). The parenthetical number represents the number of
investment companies (including the Fund) from which such person receives
compensation that are considered part of the same Fund complex as the Fund,
because, among other things, they have a common investment advisor.
Counsel and Auditors
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Battle Fowler LLP, 75 East 55th Street, New York, New York 10022.
Matters in connection with New Jersey law are passed upon by Sills Cummis
Zuckerman Radin Tischman Epstein & Gross, P.A., The Legal Center, One Riverfront
Plaza, Newark, New Jersey 07102.
McGladrey & Pullen LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, have been selected as auditors for the Fund.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the SEC has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Fund's Board of Directors have adopted a distribution and service plan (the
"Plan") and, pursuant to the Plan, the Fund and the Distributor have entered
into a Distribution Agreement and a Shareholder Servicing Agreement (with
respect to Class A shares only) with Reich & Tang Distributors, Inc., (the
"Distributor").
Class A shares will be offered to investors who desire certain additional
shareholder services from Participating Organizations that are compensated by
the Fund's Manager and Distributor for such services. For its services under the
Shareholder Servicing Agreement (with respect to Class A shares only), the
Distributor receives from the Fund a fee equal to .20% per annum of the Fund's
average daily net assets (the "Shareholder Servicing Fee"). The fee is accrued
daily and paid monthly and any portion of the fee may be deemed to be used by
the Distributor for purposes of distribution of the Fund's Class A shares only
and for payments to Participating Organizations with respect to servicing their
clients or customers who are Class A shareholders of the Fund. The Class B
shareholders will not receive the benefit of such services from Participating
Organizations and, therefore, will not be assessed a Shareholder Servicing Fee.
The following information applies to only Class A shares of the Fund. For the
Fund's fiscal year ended October 31, 1997, the amount payable to the Distributor
under the Distribution and Service Plan and the Shareholder Servicing Agreement
adopted thereunder pursuant to Rule 12b-1 under the 1940 Act, totaled $380,685,
none of which was waived by the Manager. During the same period, the Manager
made total payments under the Plan to or on behalf of Participating
Organizations of $789,346. The excess of such payments over the total payments
the Manager received from the Fund represents distribution expenses funded by
the Manager from its own resources including
18
<PAGE>
the management fee. Of the total amount paid pursuant to the plan, $11,728 was
utilized for compensation to sales personnel, $21,109 on Prospectus printing and
$3,873 on Miscellaneous expenses. For the Fund's fiscal year ended October 31,
1996, the amount payable to the Distributor under the Distribution and Service
Plan and the Shareholder Servicing Agreement adopted thereunder pursuant to Rule
12b-1 under the 1940 Act, totaled $303,547, of which $94,933 was voluntarily
waived by the Manager. During the same period, the Manager and Distributor made
total payments under the Plan to or on behalf of Participating Organizations of
$598,171. The excess of such payments over the total payments the Manager
received from the Fund represents distribution expenses funded by the Manager
from its own resources including the management fee. Of the total amount paid
pursuant to the plan, $16,266 was utilized for compensation to sales personnel,
$43,335 on Prospectus printing and $5,494 on Miscellaneous expenses. For the
Fund's fiscal year ended October 31, 1995, the amount payable to the Distributor
under the Distribution and Service Plan and the Shareholder Servicing Agreement
adopted thereunder pursuant to Rule 12b-1 under the 1940 Act, totaled $236,815,
of which $217,216 was voluntarily waived by the Manager. During the same period,
the Manager and Distributor made total payments under the Plan to or on behalf
of Participating Organizations of $440,986. The excess of such payments over the
total payments the Manager received from the Fund represents distribution
expenses funded by the Manager from its own resources including the management
fee. Of the total amount paid pursuant to the plan, $19,403 was utilized for
compensation to sales personnel, $13,495 on Prospectus printing and $3,717 on
Miscellaneous expenses.The excess of such payments over the total payments the
Manager and the Distributor received from the Fund under the Plan represents
distribution expenses funded by the Manager from its own resources including the
management fee.
Under the Distribution Agreement, the Distributor for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses including the cost of dedicated lines and CRT terminals, incurred by
the Participating Organizations and Manager in carrying out their obligations
under the Shareholder Servicing Agreement with respect of 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, brochures and other promotional materials and of
delivering the prospectuses and materials to prospective shareholders of the
Fund.
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 Manager has entered into
written agreements for performing shareholder servicing and related
administrative functions on behalf of the Class A shares of the Fund; (ii) to
compensate certain Participating Organizations for providing assistance in
distributing the Fund's shares; (iii) to pay the costs of printing and
distributing the Fund's prospectus to prospective investors; and (iv) to defray
the cost of the preparation and printing of brochures and other promotional
materials, mailings to prospective shareholders, advertising, and other
promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Shareholder Servicing Fee with respect to Class A shares
and past profits for the purposes enumerated in (i) above. The Distributor, in
its sole discretion, will determine the amount of such payments made pursuant to
the Plan, provided that such payments will not increase the amount which the
Fund is required to pay to the Manager and Distributor for any fiscal year under
either the Investment Management Contract in effect for that year or under the
Shareholder Servicing Agreement in effect for that year.
In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the Plan requires
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
The Plan provides that it may continue in effect for successive annual periods
provided it is approved by the Class A shareholders or by the Board of
Directors, including a majority of directors who are not interested persons of
the Fund and who have no direct or indirect interest in the operation of the
Plan or in the agreements related to the Plan. The Board of Directors initially
approved the Plan on October 19, 1990 and most recently approved the Plan on
July 17, 1997 to be effective until August 31, 1998. The Plan further provides
that it may not be amended to increase materially the costs which may be spent
by the Fund for distribution pursuant to the Plan without Class A shareholder
approval, and the other material amendments must be approved by the directors in
the manner described in the preceding sentence. The Plan may be terminated at
any time by a vote of a majority of the disinterested directors of the Fund or
the Fund's Class A shareholders.
19
<PAGE>
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund, which was incorporated on July 24,
1990 in Maryland, consists of twenty billion shares of stock having a par value
of one tenth of one cent ($.001) per share. The Fund's Board of Directors is
authorized to divide the shares into separate series of stock, one for each of
the portfolios that may be created. Each share of any series of shares when
issued will have equal dividend, distribution and liquidation rights within the
series for which it was issued and each fractional share has those rights in
proportion to the percentage that the fractional share represents of a whole
share. Shares of all series have identical voting rights, except where, by law,
certain matters must be approved by a majority of the shares of the unaffected
series. Shares will be voted in the aggregate. There are no conversion or
preemptive rights in connection with any shares of the Fund. All shares, when
issued in accordance with the terms of the offering, will be fully paid and
nonassessable. Shares are redeemable at net asset value, at the option of the
shareholder. Effective January 26, 1995, pursuant to the action of the Board of
Directors the Fund is subdivided into two classes of common stock, Class A and
Class B. Each share, regardless of class, will represent an interest in the same
portfolio of investments and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares will be assessed a service fee pursuant to the Rule 12b-1
Distribution and Service Plan of the Fund of .20% of the Class A shares' average
daily net assets; (iii) only the holders of the Class A shares would be entitled
to vote on matters pertaining to the Plan and any related agreements in
accordance with provisions of Rule 12b-1; and (iv) the exchange privilege will
permit 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. 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. On January 31, 1998, there were 225,032,805
Class A shares of the Fund outstanding, and 2,420,947 Class B shares of the Fund
outstanding. As of January 31, 1998, the amount of shares owned by all officers
and directors of the Fund, as a group, was less than 1% of the outstanding
shares of the Fund. Set forth below is certain information as to persons who
owned 5% or more of the Fund's outstanding shares as of January 31, 1998:
<TABLE>
<CAPTION>
<S> <C> <C>
Nature of
Name and address % of Class Ownership
Class A Shares
Reich & Tang Services, Inc. 71.02% Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, NY 10020
Investors Fiduciary Trust Company 16.65% Record
210 West 10th Street
Kansas City, MO 64105
Neuberger & Berman 9.55% Record
as Agent for Customers
11 Broadway
New York, NY 10004
Class B Shares
Lowell Millar 44.48% Beneficial
66 Fernwood Rd.
Summit, NJ 07901
James A. Coufos 26.07% Beneficial
1 Wentworth Drive
Summit, NJ 07901-3723
Donadio Irrevocable Trust 13.17% Beneficial
600 Fifth Avenue
New York, N.Y. 10020
Lowell Millar & Jennifer 11.97% Beneficial
66 Fernwood Rd.
Summit, NJ 07901
</TABLE>
20
<PAGE>
Under its Articles of Incorporation the Fund has the right to redeem for cash
shares of stock owned by any shareholder to the extent and at such times as the
Fund's Board of Directors determines to be necessary or appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes. In this regard, the
Fund may also exercise its right to reject purchase orders.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-Laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of shareholders entitled to cast not less than 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 directors(s) and communication
among shareholders, any registration of the Fund with the SEC or any state, or
as the Directors may consider necessary or desirable. Each Director serves until
the next meeting of the shareholders called for the purpose of considering the
election or re-election of such Director or of a successor to such Director, and
until the election and qualification of his or her successor, elected at such a
meeting, or until such Director sooner dies, resigns, retires or is removed by
the vote of the shareholders.
FEDERAL INCOME TAXES
The Fund has elected to qualify under the Code, as a "regulated investment
company" that distributes "exempt-interest dividends". The Fund intends to
continue to qualify for regulated investment company status so long as such
qualification is in the best interests of its shareholders. Such qualification
relieves the Fund of liability for Federal income taxes to the extent its
earnings are distributed in accordance with the applicable provisions of the
Code.
The Fund's policy is to distribute as dividends each year 100% and in no event
less than 90% of its tax-exempt interest income and other income, net of certain
deductions. Exempt-interest dividends, as defined in the Code, are dividends or
any part thereof (other than capital gain dividends) paid by the Fund that are
attributable to interest on obligations, the interest on which is exempt from
regular Federal income tax, and designated by the Fund as exempt-interest
dividends in a written notice mailed to the Fund's shareholders not later than
60 days after the close of its taxable year. The percentage of the total
dividends paid by the Fund during any taxable year that qualifies as
exempt-interest dividends will be the same for all shareholders receiving
dividends during the year.
Exempt-interest dividends are to be treated by the Fund's shareholders as items
of interest exempt from regular income tax. However, a shareholder is advised to
consult his tax advisors with respect to whether exempt-interest dividends
retain the exclusion under Section 103 of the Code if such shareholder would be
treated as a "substantial user" or "related person" under Section 147(a) of the
Code with respect to some or all of the "private activity" bonds (generally, a
bond issue in which more than 10% of the proceeds are used in a non-governmental
trade or business), 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 to be added to adjusted
gross income for purposes of computing the amount of Social Security benefits
includible in gross income. The amount of such interest received will have to be
disclosed on the shareholders' Federal income tax returns. Taxpayers 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
(other than qualified Section 501(c)(3) bonds) issued after August 7, 1986.
Thus, this provision will apply to the portion of the exempt-interest dividends
from the Fund's assets, that are attributable to such post-August 7, 1986
private activity bonds, if any of such bonds are acquired by the Fund.
Corporations are required to increase their alternative minimum taxable income
by 75% of the amount by which the adjusted current earnings (which will include
tax-exempt interest) of the corporation exceeds the alternative minimum taxable
income (determined without this item).
21
<PAGE>
In addition, in certain cases, Subchapter S corporations with accumulated
earnings and profits from Subchapter C years are subject to a minimum tax on
excess "passive investment income" which includes tax-exempt interest.
Although it is not intended, it is possible that the Fund may realize 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 will be taxable to shareholders as
ordinary income when they are distributed. Any net capital gains (the excess of
its net realized long-term capital gain over its net realized short-term capital
loss) will be distributed annually to the Fund's shareholders. The Fund will
have no tax liability with respect to distributed net capital gains and the
distributions will be taxable to shareholders as long-terms capital gains
regardless of how long the shareholders have held Fund shares. However, Fund
shareholders who at the time of such a net capital gain distribution have not
held their Fund shares for more than six months, and who subsequently dispose of
those shares at a loss, will be required to treat such loss as a long-term
capital loss to the extent of 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. However, capital gains dividends are
taxable at a maximum rate of 28% to non-corporate shareholders if the Fund's
holding period is more than 12 months, and 20% if the Fund's holding period is
more than 18 months. Corresponding maximum rate and holding period rules apply
with respect to capital gains distributed by the Fund without regard to the
length of time shares have been held by the holder.
The Fund intends to distribute at least 90% of its investment company taxable
income (taxable income subject to certain adjustments exclusive of the excess of
its net long-term capital gain over its net short-term capital loss) for each
taxable year. The Fund will be subject to Federal income tax on any
undistributed investment company taxable income. To the extent such income is
distributed it will be taxable to shareholders as ordinary income. Expenses paid
or incurred by the Fund will be allocated between tax-exempt and taxable income
in the same proportion as the amount of the Fund's tax-exempt income bears to
the total of such exempt income and its gross income (excluding from gross
income the excess of capital gains over capital losses). If the Fund does not
distribute at least 98% of its ordinary income and 98% of its capital gain net
income for a taxable year, the Fund will be subject to a 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 generally is required to withhold 31% of taxable
interest, dividend payments, and proceeds from the redemption of shares of the
Fund.
Dividends and distributions to shareholders will be treated in the same manner
for Federal income tax purposes whether received in cash or reinvested in
additional shares of the Fund.
With respect to the variable rate demand instruments, including Participation
Certificates therein, the Fund 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 thereof of the underlying Municipal Obligations
and the interest thereon the underlying Municipal Obligations will be exempt
from regular federal income taxes tax-exempt to the Fund to the same extent as
interest on the underlying Municipal Obligation. Counsel has pointed out that
the Internal Revenue Service has announced that it will not ordinarily issue
advance rulings on the question of ownership of securities or participation
interests therein subject to a put and, as a result, the Internal Revenue
Service could reach a conclusion different from that reached by counsel.
From time to time, proposals have been introduced before Congress to restrict or
eliminate the Federal income tax exemption for interest on Municipal
Obligations. If such a proposal were introduced and enacted in the future, the
ability of the Fund to pay exempt-interest dividends would be adversely affected
and the Fund would re-evaluate its investment objective and policies and
consider changes in the structure.
In South Carolina v. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require states to register bonds they issue and
may subject the interest on such bonds to Federal tax if not registered, and
that there is no constitutional prohibition against the Federal government's
taxing the interest earned on state or other municipal bonds. The Supreme Court
decision affirms the authority of the Federal government to regulate and control
bonds such as the Municipal Obligations and to tax 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.
NEW JERSEY 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.
22
<PAGE>
The Fund intends to be a "qualified investment fund" within the meaning of the
New Jersey gross income tax. The primary criteria for constituting a "qualified
investment fund" are that (1) such fund is an investment company registered with
the SEC which, for the calendar year in which the distribution is paid, has no
investments other than interest bearing obligations, obligations issued at a
discount, and cash and cash items, including receivables and financial options,
futures, forward contracts, or other similar financial instruments relating to
interest-bearing obligations, obligations issued at a discount or bond indexes
related thereto and (2) at the close of each quarter of the taxable year, such
fund has not less than 80% of the aggregate principal amount of all of its
investments, excluding financial options, futures, forward contracts, or other
similar financial instruments relating to interest-bearing obligations,
obligations issued at a discount or bond indexes related thereto to the extent
such instruments are authorized under the regulated investment company rules
under the Code, cash and cash items, which cash items shall include receivables,
in New Jersey Municipal Obligations, Territorial Municipal Obligations and
certain other specified securities. Additionally, a qualified investment fund
must comply with its reporting obligations under New Jersey law with respect to
qualified investment funds. In the opinion of Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A., special New Jersey tax counsel to the Fund,
assuming that the Fund constitutes a qualified investment fund, (a)
distributions paid by the Fund to a New Jersey resident individual shareholder
will not be subject to the New Jersey gross income tax to the extent that the
distributions are attributable to income received as interest on or gain from
New Jersey Municipal Obligations or Territorial Municipal Obligations, and (b)
gain from the sale of shares in the Fund by a New Jersey resident individual
shareholder will not be subject to the New Jersey gross income tax.
Shareholders are urged to consult their tax advisers with respect to the
treatment of distributions from the Fund and ownership of shares of the Fund in
their own States and localities.
CUSTODIAN AND TRANSFER AGENTS
Investors Fiduciary Trust Company, 801 Pennsylvania Street, Kansas City,
Missouri 64105 is custodian for its cash and securities. Reich & Tang Services,
Inc., 600 Fifth Avenue, New York, New York 10020 is the 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 the transfer agent
and dividend agent for the Vista Select shares of the Fund. The Fund's custodian
and transfer agents do not assist in, and are not responsible for, investment
decisions involving assets of the Fund.
23
<PAGE>
DESCRIPTION OF RATINGS*
Description of Moody's Investors Service, Inc.'s two highest municipal bond
ratings: Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the Fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Con.(***) - Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Description of Moody's Investors Service, Inc.'s two highest ratings of state
and municipal notes and other short-term loans:
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Symbols used will be as follows:
MIG-1 - Loans bearing this designation are of the best quality, enjoying strong
protection from established cash flows of Funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2 - Loans bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
Description of Standard & Poor's Rating Services two highest debt ratings:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
Plus (+) or Minus (-): The AA rating may be modified by the addition of a plus
or minus sign to show relative standing within the AA rating category.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk. 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.
24
<PAGE>
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD TABLE
=================================================================================================================
1. If Your Taxable Income Bracket Is . . .
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Single $25,351- -- $35,001- $40,001- $61,401- $75,001- $128,101- $278,451-
Return $35,000 -- $40,000 $61,400 $75,000 128,100 $278,450 and over
- -----------------------------------------------------------------------------------------------------------------
Joint $42,351- $50,001- $70,001- $80,001- $102,301- $150,001- $155,951- $278,451
Return $50,000 $70,000 $80,000 $102,300 $150,000 $155,950 $278,450 and over
=================================================================================================================
2. Then Your Combined Income Tax Bracket Is . . .
- --------------------------------------------------------------------------------------------------------------
Federal
Tax Rate 28.00% 28.00% 28.00% 28.00% 31.00% 31.00% 36.00% 39.60%
- ---------------------------------------------------------------------------------------------------------------
State
Tax Rate 1.75% 2.45% 3.50% 5.53% 5.53% 6.37% 6.37% 6.370
- --------------------------------------------------------------------------------------------------------------
Combined
Marginal
Tax Rate 29.26% 29.76% 30.52% 31.98% 34.81% 35.40% 40.08% 43.45%
==============================================================================================================
3. Now Compare Your Tax Free Income Yields With Taxable Income Yields
- --------------------------------------------------------------------------------------------------------------
Tax Equivalent Taxable Investment Yield
Exempt Requires to Match Tax Exempt Yield
Yield
- ---------------------------------------------------------------------------------------------------------------
2.00% 2.83% 2.85% 2.88% 2.94% 3.07% 3.10% 3.34% 3.54%
- ---------------------------------------------------------------------------------------------------------------
2.50% 3.53% 3.56% 3.60% 3.68% 3.84% 3.87% 4.17% 4.42%
- ---------------------------------------------------------------------------------------------------------------
3.00% 4.24% 4.27% 4.32% 4.41% 4.60% 4.64% 5.01% 5.30%
- ---------------------------------------------------------------------------------------------------------------
3.50% 4.95% 4.98% 5.04% 5.15% 5.37% 5.42% 5.84% 6.19%
- ---------------------------------------------------------------------------------------------------------------
4.00% 5.65% 5.70% 5.76% 5.88% 6.14% 6.19% 6.68% 7.07%
- ---------------------------------------------------------------------------------------------------------------
4.50% 6.36% 6.41% 6.48% 6.62% 6.90% 6.97% 7.51% 7.96%
- ---------------------------------------------------------------------------------------------------------------
5.00% 7.07% 7.12% 7.20% 7.35% 7.67% 7.74% 8.34% 8.84%
- ---------------------------------------------------------------------------------------------------------------
5.50% 7.77% 7.83% 7.92% 8.09% 8.44% 8.51% 9.18% 9.73%
- ---------------------------------------------------------------------------------------------------------------
6.00% 8.48% 8.54% 8.64% 8.82% 9.20% 9.29% 10.01% 10.61%
- ---------------------------------------------------------------------------------------------------------------
6.50% 9.19% 9.25% 9.36% 9.56% 9.97% 10.06% 10.85% 11.49%
- ---------------------------------------------------------------------------------------------------------------
7.00% 9.90% 9.97% 10.07% 10.29% 10.74% 10.84% 11.68% 12.38%
- ---------------------------------------------------------------------------------------------------------------
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.
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
INDEPENDENT AUDITOR'S REPORT
================================================================================
The Board of Directors and Shareholders
New Jersey Daily Municipal Income Fund, Inc.
We have audited the accompanying statement of net assets of New Jersey Daily
Municipal Income Fund, Inc. as of October 31, 1997, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial Highlights referred to
above present fairly, in all material respects, the financial position of New
Jersey Daily Municipal Income Fund, Inc. as of October 31, 1997, the results of
its operations, the changes in its net assets and the selected financial
information for the periods indicated, in conformity with generally accepted
accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
November 26, 1997
26
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS
OCTOBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Tax Exempt Investments (19.95%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,732,000 Berkeley Heights Township, NJ BAN (b) 11/07/97 3.65% $ 1,732,007
3,000,000 Board of Education, Pleasantville, NJ BAN 08/28/98 3.82 3,008,940 SP-1+
2,000,000 Clifton, NJ BAN (b) 03/12/98 3.68 2,001,838
2,315,000 Collingwood, NJ BAN (b) 01/04/98 3.78 2,315,569
7,500,000 County of Essex, NJ BAN 08/07/98 3.86 7,518,403 MIG-1
2,280,000 Fort Lee, NJ BAN (b) 05/22/98 3.85 2,283,598
4,000,000 Jersey City, NJ BAN 02/05/98 3.74 4,000,587 SP-1
2,000,000 Township of Montclair, NJ BAN (b) 01/23/98 3.55 2,001,713
3,000,000 Montgomery Township, County of Somerset, NJ BAN (b) 12/12/97 3.47 3,001,485
940,000 Montgomery Township, County of Somerset, NJ BAN (b) 04/23/98 3.95 941,055
5,000,000 Township of Bloomfield, County of Essex, NJ BAN (b) 06/03/98 3.85 5,002,767
1,932,550 Township of Hopewell, County of Mercer, NJ BAN (b) 08/24/98 3.85 1,935,906
1,750,000 Township of Nutley, County of Essex, NJ BAN (b) 07/31/98 3.81 1,751,864
2,053,000 Village Ridgefield Park, County of Bergen, NJ BAN (b) 09/24/98 3.90 2,058,261
3,900,000 Wall Township, NJ BAN (b) 06/25/98 3.80 3,909,628
----------- -----------
43,402,550 Total Other Tax Exempt Investments 43,463,621
----------- -----------
<CAPTION>
Other Variable Rate Demand Instruments (c) (55.83%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,900,000 Camden County Improvement Authority RB
(Parkview Redevelopment Housing Proj.) - Series 1996
LOC General Electric Capital Corporation 07/01/26 3.60% $ 4,900,000 A1+
8,430,000 Clipper New Jersey Housing and Mortgage
Finance Agency Home Buyer RB - Series 1996 10/01/21 3.64 8,430,000 VMIG-1
1,500,000 Glouchester County, NJ PCFA (Monsanto Company Project) 12/01/22 3.45 1,500,000 P1 A1
4,700,000 Mercer County, NJ
Improvement Authority Pooled Government Loan Program Bond
LOC Credit Suisse First Boston 11/01/98 3.35 4,700,000 VMIG-1 A1+
1,500,000 NJ EDA Natural Gas Facilities Refunding RB - Series 1997 A
AMBAC Insured 09/01/27 3.50 1,500,000 VMIG-1 A1+
3,200,000 New Jersey EDA
(400 International Drive Rockefeller Corporation) (b)
LOC Morgan Guaranty Trust Company 09/01/05 3.80 3,200,000
4,000,000 New Jersey EDA
(Pennwell Holdings LLC Project) - Series 1996 (b)
LOC First Union National Bank 12/01/16 3.55 4,000,000
700,000 New Jersey EDA Dock Facility Refunding RB
(Bayonne/IMTT-Bayonne Project)
LOC First National Bank of Chicago 12/01/27 3.85 700,000 VMIG-1
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
27
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS
OCTOBER 31, 1997
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Variable Rate Demand Instruments (c) (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,800,000 New Jersey EDA Dock Facility Refunding RB
(Bayonne/IMTT-Bayonne Project) - Series 1993B
LOC ABN AMRO Bank N.V. 12/01/27 3.80% $ 2,800,000 VMIG-1
1,895,000 New Jersey EDA Economic Growth Bonds - Series 1994A
LOC National Westminster Bank PLC 08/01/14 3.60 1,895,000 P1 A1+
10,000,000 New Jersey EDA First Mortgage RB - Series 1996B
(Wencharter Garden at Ward Homestead Project)
LOC Banque Paribas 04/01/06 3.35 10,000,000 VMIG-1 A2
3,000,000 New Jersey EDA IDRB (Kooltronic Incorporated Project) (b)
LOC First Union National Bank 12/01/08 3.55 3,000,000
950,000 New Jersey EDA Manufacturing Facility RB
(Commerce Center Project)
LOC Bank of America 08/01/17 3.80 950,000 A1
2,450,000 New Jersey EDA Manufacturing Facility RB
(Commerce Center Project)
LOC Bank of America 08/01/17 3.80 2,450,000 A1
3,000,000 New Jersey EDA PCRB
(Public Service Electric & Gas) - Series A
MBIA Insured 09/01/12 3.35 3,000,000 VMIG-1
2,000,000 New Jersey EDA School RB (Peddie School) - Series 1994B 02/01/19 3.45 2,000,000 A1
1,000,000 New Jersey EDA VRD RB Sewage Facility
LOC PNC Bank 07/01/01 3.80 1,000,000 P1 A1
1,000,000 New Jersey EDA VRRB (Peddie School) - Series 1996 02/01/26 3.45 1,000,000 A1
2,000,000 New Jersey EDA Water Facility
(Elizabethtown Water Co.)
AMBAC Insured 06/01/27 3.30 2,000,000 VMIG-1 A1+
5,000,000 New Jersey Economic Development Authority RB
(Hoffman LA Roche Inc. Project)
LOC Bayerische Landesbank Girozentrale 11/01/11 3.85 5,000,000 Aaa
2,600,000 New Jersey Sports & Exposition Authority SCB - Series C
MBIA Insured 09/01/24 3.40 2,600,000 VMIG-1 A1+
1,700,000 New Jersey State Dock Facility
(Bayonne/IMTT-Bayonne Project)
LOC Rabobank Nederland 12/01/27 3.80 1,700,000 VMIG-1
2,085,000 New Jersey State EDA (Block Drug Corporation) - Series A00
LOC Trust Co. Bank of Atlanta 06/01/99 3.70 2,085,000 P1
1,650,000 New Jersey State EDA (Block Drug Corporation) - Series B
LOC Trust Co. Bank of Atlanta 06/01/99 3.70 1,650,000 P1
3,250,000 New Jersey State EDA (Campus 130 Association)
LOC The Bank of New York 12/01/11 3.95 3,250,000 P1 A1
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
28
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Variable Rate Demand Instruments (c) (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,000,000 New Jersey State EDA (Church & Dwight Corp.) - Series 1991
LOC Bank of Nova Scotia 12/01/08 3.50% $ 1,000,000 P1
2,600,000 New Jersey State EDA (Curtiss-Wright Flight Systems)
LOC Bank of Nova Scotia 01/01/02 3.35 2,600,000 A1+
1,791,500 New Jersey State EDA (Hartz & Rex Associates)
LOC Citibank 01/01/12 3.78 1,791,500 Aa3
2,725,000 New Jersey State EDA Industrial & Economic Development
(FMC Corporation)
LOC Wachovia Bank & Trust Co., N.A. 06/01/22 3.65 2,725,000 P1 A2
2,890,000 New Jersey State EDA STPCO II
LOC Barclays Bank PLC 07/01/06 3.30 2,890,000 A1+
21,200,000 New Jersey State Turnpike Authority - Series D 01/01/18 3.25 21,200,000 VMIG-1 A1+
6,700,000 Port Authority of New York & New Jersey Special Obligation RB
(Versatile Structure) 08/01/28 4.25 6,700,000 VMIG-1 A1+
5,800,000 Port Authority of New York & New Jersey Special Obligation RB
(Versatile Structure) 04/01/24 4.10 5,800,000 VMIG-1 A1+
1,600,000 Union County, NJ PCFA (Exxon Project) - Series 1994 07/01/33 3.80 1,600,000 VMIG-1 A1+
------------ ------------
121,616,500 Total Other Variable Rate Demand Instruments 121,616,500
------------ ------------
<CAPTION>
Put Bonds (d) (3.17%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,500,000 New Jersey EDA Thermal Energy Facility RB (b) 11/13/97 3.85% $ 2,500,000
2,500,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Reynolds Metals Corporation)
LOC ABN AMRO Bank N.V. 09/01/98 3.80 2,500,000 VMIG-1 A1+
1,900,000 Puerto Rico Industrial Medical & Environmental PCRB
(Key Pharmaceuticals) 12/01/97 3.75 1,900,000 VMIG-1
------------ ------------
6,900,000 Total Put Bonds 6,900,000
------------ ------------
<CAPTION>
Tax Exempt Commercial Paper (d) (20.43%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,000,000 NJ EDA Exempt Facility RB
(Chambers Co-Generation Ltd. Partnership - 1991 Project)
LOC Credit Locale de France 01/12/98 3.55% $ 3,000,000 VMIG-1 A1+
1,000,000 NJ EDA Exempt Facility RB
(Chambers Co-Generation Ltd. Partnership - 1991 Project)
LOC Credit Locale de France 12/04/97 3.60 1,000,000 VMIG-1 A1+
2,700,000 NJ EDA Exempt Facility RB
(Logan 1992 Project)
LOC Union Bank of Switzerland 01/06/98 3.65 2,700,000 VMIG-1 A1+
8,000,000 NJ EDA Exempt Facility RB
(Keystone 1992 Project)
LOC Union Bank of Switzerland 02/11/98 3.60 8,000,000 VMIG-1 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
29
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Tax Exempt Commercial Paper (d) (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,000,000 NJ EDA Exempt Facility RB
(Keystone 1992 Project)
LOC Union Bank of Switzerland 11/19/97 3.65% $ 3,000,000 VMIG-1 A1+
1,500,000 NJ EDA Exempt Facility RB
(Keystone 1992 Project)
LOC Union Bank of Switzerland 12/01/97 3.60 1,500,000 VMIG-1 A1+
2,000,000 Puerto Rico Government Development Bank 11/03/97 3.55 2,000,000 A1+
3,000,000 Puerto Rico Government Development Bank 11/10/97 3.55 3,000,000 A1+
7,000,000 Puerto Rico Government Development Bank 11/03/97 3.40 7,000,000 A1+
3,306,000 Puerto Rico Government Development Bank 11/06/97 3.45 3,306,000 A1+
10,000,000 State of NJ TRAN 01/13/98 3.70 10,000,000 P1 A1+
------------ ------------
44,506,000 Total Tax Exempt Commercial Paper 44,506,000
------------ ------------
Total Investments (99.38%) (Cost $216,486,121+) 216,486,121
Cash and Other Assets, in Excess of Liabilities (0.62%) 1,358,045
------------
Net Assets (100.00%) $217,844,166
============
Net Assets Value, offering and redemption price per share:
Class A Shares, 217,544,652 Shares Outstanding (Note 3) $ 1.00
============
Class B Shares, 315,555 Shares Outstanding (Note 3) $ 1.00
============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
FOOTNOTES:
(a) Unless the variable rate demand instruments are assigned their own ratings,
the ratings noted are those of the bank whose letter of credit secures such
instruments. P1 and A1+ are the highest ratings assigned for tax exempt
commercial paper.
(b) Securities that are not rated which the Fund's Board of Directors has
determined to be of comparable quality to the rated securities in which the
Fund invests.
(c) Securities are payable on demand at par including accrued interest (usually
with seven days notice) and where applicable are unconditionally secured as
to principal and interest by a bank letter of credit. The interest rates
are adjustable and are based on bank prime rates or other interest rate
adjustment indices. The rate shown is the rate in effect at the date of
this statement.
(d) The maturity date indicated is the next put date.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
BAN = Bond Anticipation Note PCRB = Pollution Control Revenue Bond
EDA = Economic Development Authority RB = Revenue Bond
IDRB = Industrial Development Revenue Bond VRD = Variable Rate Demand
PCFA = Pollution Control Finance Authority VRRB = Variable Rate Revenue Bond
TRAN = Tax and Revenue Anticipation Note
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
30
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest................................................................................ $ 6,721,152
------------
Expenses: (Note 2)
Investment management fee............................................................... 572,090
Administration fee...................................................................... 400,463
Shareholder servicing fee (Class A)..................................................... 380,685
Custodian fee........................................................................... 26,391
Shareholder servicing and related shareholder expenses.................................. 131,217
Legal, compliance and filing fees....................................................... 42,837
Audit and accounting.................................................................... 71,660
Directors' fees......................................................................... 6,344
Other................................................................................... 9,646
------------
Total expenses........................................................................ 1,641,333
Less: Expenses paid indirectly (Note 2)............................................... ( 994)
------------
Net expenses.......................................................................... 1,640,339
------------
Net investment income....................................................................... 5,080,813
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments..................................................... -0-
------------
Increase in net assets from operations...................................................... $ 5,080,813
============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
31
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED OCTOBER 31, 1997 AND 1996
================================================================================
<TABLE>
<CAPTION>
1997 1996
--------------- -------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income......................................... $ 5,080,813 $ 4,197,955
Net realized gain (loss) on investments....................... -0- ( 13,169)
--------------- -------------
Increase in net assets from operations........................ 5,080,813 4,184,786
Dividends to shareholders from net investment income:
Class A................................................... ( 5,070,619)* ( 4,019,301)*
Class B................................................... ( 10,194)* ( 178,654)*
Capital share transactions (Note 3):
Class A................................................... 66,108,849 21,305,371
Class B................................................... ( 51,660) 367,215
-------------- -------------
Total increase (decrease)................................. 66,057,189 21,659,417
Net assets:
Beginning of year............................................. 151,786,977 130,127,560
--------------- -------------
End of year................................................... $ 217,844,166 $ 151,786,977
=============== =============
* Designated as exempt-interest dividends for federal income tax purposes.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
32
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Summary of Accounting Policies.
New Jersey Daily Municipal Income Fund, Inc. is a no-load, non-diversified,
open-end management investment company registered under the Investment Company
Act of 1940. The Fund is a short term, tax exempt money market fund. The Fund
has two classes of stock authorized, Class A and Class B. The Class A shares are
subject to a service fee pursuant to the Distribution and Service Plan. The
Class B shares are not subject to a service fee. Additionally, the Fund may
allocate among its classes certain expenses, to the extent allowable to specific
classes, including transfer agent fees, government registration fees, certain
printing and postage costs, and administrative and legal expenses. Class
specific expenses of the Fund were limited to distribution fees and transfer
agent expenses. In all other respects the Class A and Class B shares represent
the same interest in the income and assets of the Fund. Distribution for Class B
shares commenced on February 9, 1996 and all Fund shares outstanding before
February 9, 1996 were designated as Class A shares. The Fund's financial
statements are prepared in accordance with generally accepted accounting
principles for investment companies as follows:
a) Valuation of Securities -
Investments are valued at amortized cost. Under this valuation method, a
portfolio instrument is valued at cost and any discount or premium is
amortized on a constant basis to the maturity of the instrument. The
maturity of variable rate demand instruments is deemed to be the longer of
the period required before the Fund is entitled to receive payment of the
principal amount or the period remaining until the next interest rate
adjustment.
b) Federal Income Taxes -
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its tax exempt and taxable income to its shareholders. Therefore, no
provision for federal income tax is required.
c) Dividends and Distributions -
Dividends from investment income (excluding capital gains and losses, if
any, and amortization of market discount) are declared daily and paid
monthly. Distributions of net capital gains, if any, realized on sales of
investments are made after the close of the Fund's fiscal year, as declared
by the Fund's Board of Directors.
d) Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
e) General -
Securities transactions are recorded on a trade date basis. Interest income
is accrued as earned. Realized gains and losses from securities
transactions are recorded on the identified cost basis.
2. Investment Management Fees and Other Transactions with Affiliates.
Under the Investment Management Contract, the Fund pays an investment management
fee to Reich & Tang Asset Management L.P. (Manager), at the annual rate of .30%
of the Fund's average daily net assets.
Pursuant to an Administrative Services Agreement, the Fund pays to the Manager
an annual fee of .21% of the Fund's average daily net assets.
- --------------------------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
2.Investment Management Fees and Other Transactions with Affiliates. (Continued)
Pursuant to a Distribution Plan adopted under Securities and Exchange Commission
Rule 12b-1, the Fund and Reich & Tang Distributors L.P. (the Distributor) have
entered into a Distribution Agreement and a Shareholder Servicing Agreement,
only with respect to Class A shares of the Fund. For its services under the
Shareholder Servicing Agreement, the Distributor receives from the Fund with
respect only to the Class A shares, a fee equal to .20% of the Fund's average
daily net assets. There were no additional expenses borne by the Fund pursuant
to the Distribution Plan.
Included in the statement of operations under the captions "Shareholder
servicing and related shareholder expenses" are expense offsets of $994.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$1,000 per annum plus $250 per meeting attended.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $94,708 paid to Reich & Tang
Services L.P., an affiliate of the Manager as servicing agent for the Fund.
3.Capital Stock.
At October 31, 1997, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $217,860,207. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year Year
Class A Ended Ended
- ------- October 31, 1997 October 31, 1996
---------------- ----------------
<S> <C> <C>
Sold................................... 453,793,587 361,208,660
Issued on reinvestment of dividends.... 4,856,342 3,618,935
Redeemed............................... ( 392,541,080) ( 343,522,224)
------------- ------------
Net increase (decrease)................ 66,108,849 21,305,371
============= ============
<CAPTION>
Year February 9, 1996
Class B Ended (Commencement of Offering)
- ------- October 31, 1997 to October 31, 1996
---------------- -------------------
Sold................................... 22,635 31,823,128
Issued on reinvestment of dividends.... 10,117 1,413
Redeemed............................... ( 84,412) ( 31,457,326)
------------- ------------
Net increase (decrease)................ ( 51,660) 367,215
============= ============
</TABLE>
4. Sales of Securities.
Accumulated undistributed net realized losses at October 31, 1997 amounted to
$16,041. This amount represents tax basis capital losses which may be carried
forward to offset future capital gains. Such losses expire October 31, 1999
through October 31, 2004.
5. Concentration of Credit Risk.
The Fund invests primarily in obligations of political subdivisions of the State
of New Jersey and, is subject to the credit risk associated with the
non-performance of such issuers. Approximately 40% of these investments are
further secured, as to principal and interest, by letters of credit issued by
financial institutions. The Fund maintains a policy of monitoring its exposure
by reviewing the credit worthiness of the issuers, as well as that of the
financial institutions issuing the letters of credit, and by limiting the amount
of holdings with letters of credit from one financial institution.
6. Financial Highlights.
Reference is made to page 3 of the Prospectus for the financial Highlights
information
- --------------------------------------------------------------------------------
35
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits.
a) Financial Statements.
Included in Prospectus Part A:
(1) Table of Fees and Expenses
(2) Financial Highlights.
Included in Statement of Additional Information Part B:
(1) Independent Auditor's Report dated November 26, 1997.
(2) Statement of Net Assets at October 31, 1997 (audited).
(3) Statement of Operations as of October 31, 1997 (audited).
(4) Statement of Changes in Net Assets years ended October 31, 1997 and
1996 (audited).
(5) Notes to Financial Statements.
(b) Exhibits.
(1) Amended Articles of Incorporation of the Registrant (filed as Exhibit
1 to Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A and is incorporated herein by reference.)
(2) By-laws of the Registrant (filed as Exhibit 2 to the initial
Registration Statement on Form N-1A and is incorporated herein by
reference.)
(3) Not applicable.
(4) Form of certificate for shares of Common Stock, par value $.001 per
share, of the Registrant (filed as Exhibit 1 to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A and is
incorporated herein by reference).
(5) Investment Management Contract between the Registrant and Reich & Tang
Asset Management L.P. (filed as Exhibit 5 to Post Effective Amendment
No. 7 to the Registration Statement on Form N-1A and is incorporated
herein by reference.)
(6) Distribution Agreement between the Registrant and Reich & Tang
Distributors, Inc. filed herewith.
(7) Not applicable.
(8) Custody Agreement between the Registrant and Investors Fiduciary Trust
Company (filed as Exhibit 8 to Post-Effective Amendment No. 5 to
Registration Statement on Form N-1A and incorporated herein by
reference.)
(9) Not applicable.
C-1
<PAGE>
(10.1) Opinion of Messrs. Battle Fowler LLP, as to the legality of the
securities being registered, including their consent to the filing
thereof and to the use of their name under the heading "Federal Income
Taxes" in the Prospectus (filed as Exhibit 1 to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A and is
incorporated herein by reference).
(10.2) Opinion of Sills Cummis Zuckerman Radin Tischman Epstein & Gross,
P.A., as to New Jersey law, including their consent to the filing
thereof and to the use of their name under the heading "New Jersey
Income Taxes" in the Prospectus (filed as Exhibit 1 to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A and is
incorporated herein by reference).
(11) Consent of Independent Auditors.
(12) Not applicable.
(13) Written assurance of Reich & Tang, Inc. that its purchase of shares of
the Registrant was for investment purposes without any present
intention of redeeming or reselling (filed as Exhibit 1 to
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A and is incorporated herein by reference).
(14) Not applicable.
(15.1) Distribution and Service Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 filed herewith.
(15.2) Distribution Agreement between the Registrant and Reich & Tang
Distributors, Inc. filed as Exhibit 6 herein.
(15.3) Shareholder Servicing Agreement between the Registrant and Reich &
Tang Distributors, Inc. filed herewith.
(15.4) Administrative Services Contract between the Registrant and Reich &
Tang Asset Management L.P. (filed as Exhibit 15.4 to Post Effective
Amendment No. 7 to the Registration Statement on Form N-1A and is
incorporated herein by reference.)
(16) Powers of Attorney (filed as Exhibit 1 to Pre-Effective Amendment No.
1 to the Registration Statement on Form N-1A and is incorporated
herein by reference).
(17) Financial Data Schedule (for EDGAR filing only).
ITEM 25. Persons Controlled by or Under Common Control with Registrant.
None.
ITEM 26. Number of Holders of Securities.
Number of Record Holders
Title of Class as of January 31, 1998
Class A Common Stock
(par value $.001) 1,973
Class B Common Stock
(par value $.001) 15
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ITEM 27. Indemnification.
Registrant incorporates herein by reference to response to Item 27 of
Pre-Effective Amendment No. 1 of this Registration Statement filed with the
Commission on October 26, 1990.
ITEM 28. Business and Other Connections of Investment Adviser.
The description of Reich & Tang Asset Management L.P. under the caption
"Management of the Fund" in the Prospectus and in the Statement of Additional
Information constituting parts A and B, respectively, of the Registration
Statement are incorporated herein by reference.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") is
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"). Reich & Tang Asset Management, Inc. (a wholly-owned
subsidiary of NEICOP) is the sole general partner and owner of the remaining .5%
interest of the Manager. NEIC, a Massachusetts corporation, serves as the
managing general partner of NEICOP.
The Manager is a wholly-owned subsidiary of NEICOP, but Reich & Tang Asset
Management, Inc., its sole general partner, is an indirect subsidiary of
Metropolitan Life Insurance Company ("MetLife"). Also, MetLife directly and
indirectly owns approximately 47% of the outstanding partnership interests of
NEICOP, and may be deemed a "controlling person" of the Manager. Reich & Tang,
Inc. owns directly and indirectly approximately 13.7% of the outstanding
partnership interests of NEICOP.
The registrant's investment adviser, Reich & Tang Asset Management L.P. is
a registered investment adviser. Reich & Tang Asset Management L.P.'s investment
advisory clients include California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax
Free Income Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily
Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Short Term Income Fund, Inc., Tax
Exempt Proceeds Fund, Inc., and Virginia Daily Municipal Income Fund, Inc.,
registered investment companies whose addresses are 600 Fifth Avenue, New York,
New York 10020, which invest principally in money market instruments; Delafield
Fund, Inc. and Reich & Tang Equity Fund, Inc., are registered investment
companies whose address is 600 Fifth Avenue, New York, New York 10020, which
invests principally in equity securities. In addition, RTAMLP is the sole
general partner of Alpha Associates L.P., August Associates L.P., Reich & Tang
Minutus L.P., Reich & Tang Minututs II, L.P., Reich & Tang Equity Partnerships
L.P. and Tucek Partners L.P., private investment partnerships organized as
limited partnerships.
Peter S. Voss, President, Chief Executive Officer and a Director of NEIC
since October 1992, Chairman of the Board of NEIC since December 1992, Group
Executive Vice President, Bank of America, responsible for the global asset
management private banking businesses, from April 1992 to October 1992,
Executive Vice President of Security Pacific Bank, and Chief Executive Officer
of Security Pacific Hoare Govett Companies a wholly-owned subsidiary of Security
Pacific Corporation, from April 1988 to April 1992, Director of The New England
since March 1993, Chairman of the Board of Directors of NEIC's subsidiaries
other than Loomis, Sayles & Company, L.P. ("Loomis") and Back Bay Advisors,
L.P.. ("Back Bay"), where he serves as a Director, and Chairman of the Board of
Trustees of all of the mutual funds in the TNE Fund Group and the Zenith Funds.
G. Neal Ryland, Executive Vice President, Treasurer and Chief Financial Officer
NEIC since July 1993, Executive Vice President and Chief Financial Officer of
The Boston Company, a diversified financial services company, from March 1989
until July 1993, from September 1985 to December 1988, Mr. Ryland was employed
by Kenner Parker Toys, Inc. as Senior Vice President and Chief Financial
Officer. Edward N. Wadsworth, Executive Vice President, General Counsel,
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Clerk and Secretary of NEIC since December 1989, Senior Vice President and
Associate General Counsel of The New England from 1984 until December 1992, and
Secretary of Westpeak and Draycott and the Treasurer of NEIC. Lorraine C. Hysler
has been Secretary of RTAM since July 1994, Assistant Secretary of NEIC since
September 1993, Vice President of the Mutual Funds Group of NEICLP from
September 1993 until July 1994, and Vice President of Reich & Tang Mutual Funds
since July 1994. Ms. Hysler joined Reich & Tang, Inc. in May 1977 and served as
Secretary from April 1987 until September 1993. Richard E. Smith, III has been a
Director of RTAM since July 1994, President and Chief Operating Officer of the
Capital Management Group of NEICLP from May 1994 until July 1994, President and
Chief Operating Officer of the Reich & Tang Capital Management Group since July
1994, Executive Vice President and Director of Rhode Island Hospital Trust from
March 1993 to May 1994, President, Chief Executive Officer and Director of USF&G
Review Management Corp. from January 1988 until September 1992. Steven W. Duff
has been a Director of RTAM since October 1994, President and Chief Executive
Officer of Reich & Tang Mutual Funds since August 1994, Senior Vice President of
NationsBank from June 1981 until August 1994, Mr. Duff is President and a
Director of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc., Short Term Income Fund, Inc. and Virginia Daily Municipal Income Fund,
Inc. President and Trustee of Institutional Daily Municipal Income Fund,
Pennsylvania Daily Municipal Income Fund, President and Chief Executive Officer
of Tax Exempt Proceeds Fund, Inc., and Executive Vice President of Reich & Tang
Equity Fund, Inc. Bernadette N. Finn has been Vice President/Compliance of RTAM
since July 1994, Vice President of Mutual Funds Division of NEICLP from
September 1993 until July 1994, Vice President of Reich & Tang Mutual Funds
since July 1994. Ms. Finn joined Reich & Tang, Inc. in September 1970 and served
as Vice President from September 1982 until May 1987 and as Vice President and
Assistant Secretary from May 1987 until September 1993. Ms. Finn is also
Secretary of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Cortland Trust, Inc., Delafield Fund, Inc., Daily Tax
Free Income Fund, Inc., Institutional Daily Municipal Income Fund, Michigan
Daily Tax Free Income Funds, Inc., New Jersey Daily Municipal Income Fund, Inc.,
New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Tax Exempt Proceeds Fund,
Inc., and Virginia Daily Municipal Income Fund, Inc. a Vice President and
Secretary of Reich & Tang Equity Fund, Inc., and Short Term Income Fund, Inc.
Richard De Sanctis has been Treasurer of RTAM since July 1994, Assistant
Treasurer of NEIC since September 1993 and Treasurer of the Mutual Funds Group
of NEICLP from September 1993 until July 1994, Treasurer of the Reich & Tang
Mutual Funds since July 1994. Mr. De Sanctis joined Reich & Tang, Inc. in
December 1990 and served as Controller of Reich & Tang, Inc., from January 1991
to September 1993. Mr. De Sanctis was Vice President and Treasurer of Cortland
Financial Group, Inc. and Vice President of Cortland Distributors, Inc. from
1989 to December 1990. Mr. De Sanctis is also Treasurer of California Daily Tax
Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax
Free Income Fund, Inc., Delafield Fund, Inc., Institutional Daily Municipal
Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc.,Tax Exempt
Proceeds Fund, Inc. and Virginia Daily Municipal Income Fund, Inc., and is Vice
President and Treasurer of Cortland Trust, Inc. Mr. Weiner has been Vice
President of RTAM since July 1994, has been Vice President of NEIC since
September 1993, Vice President of the Capital Management Group of NEIC from
September 1993 until July 1994, Vice President of Reich & Tang Asset Management
L.P. Capital Management Group since July 1994. Mr. Weiner joined Reich & Tang,
Inc. in August 1970 and has served as a Vice President since September 1982.
C-4
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ITEM 29. Principal Underwriters.
(a) Reich & Tang Distributors, Inc. is also distributor for Connecticut
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax
Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal Income
Fund, Institutional Daily Income Fund, Michigan Daily Tax Free Income Fund,
Inc., New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal
Income Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity
Fund, Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and
Virginia Daily Municipal Income Fund, Inc.
(b) The following are the directors and officers of Reich & Tang
Distributors, Inc. The principal business address of Messrs. Voss, Ryland, and
Wadsworth is 399 Boylston Street, Boston, Massachusetts 02116. For all other
persons, the principal business address is 600 Fifth Avenue, New York, New York
10022.
Positions and Offices Positions and Offices
Name With the Distributor With Registrant
Richard E. Smith III President None
Steven W. Duff Director President and Director
Lorraine C. Hysler Secretary None
Richard I Weiner Vice President None
Richard De Sanctis Treasurer Treasurer
Robert F. Hoerle Managing Director None
Bernadette N. Finn Vice President Secretary
Peter Demarco Executive Vice President None
Peter S. Voss Director None
G. Neal Ryland Director None
Edward N. Wadsworth Executive Officer None
(c) Not applicable.
ITEM 30. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules promulgated thereunder
are maintained in the physical possession of the Registrant at 600 Fifth Avenue,
New York, New York 10020, the Registrants Manager, and at Investors Fiduciary
Trust Company, 801 Pennsylvania Street, Kansas City, Missouri 64105,
Registrant's custodian and transfer agent.
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertaking.
Not applicable.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has met all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, and State of New York, on the 27th day of February, 1998.
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
By: /s/ Bernadette N. Finn
Bernadette N. Finn
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Capacity Date
(1) Principal Executive Officer
/s/Steven Duff President and
Steven Duff Director February 27, 1997
(2) Principal Financial and
Accounting Officer
/s/ Richard De Sanctis
Richard De Sanctis Treasurer February 27, 1997
(3) Majority of Directors
W. Giles Mellon (Director)
Robert Straniere (Director)
Yung Wong (Director)
By: /s/ Bernadette N. Finn February 27, 1997
---------------------------
Bernadette N. Finn
Attorney-in-Fact*
* Powers of Attorney filed as an Exhibit with Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A dated October 26, 1990.
FORM OF DISTRIBUTION AGREEMENT
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
the "Fund"
600 Fifth Avenue
New York, New York 10020
_________________, 1998
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, New York 10020
Ladies and Gentlemen:
We hereby confirm our agreement with you as follows:
1. In consideration of the agreements on your part herein
contained and of the payment by us to you of a fee of $1 per year and on the
terms and conditions set forth herein, on behalf of our Fund, we have agreed
that you shall be, for the period of this agreement, a distributor, as our
agent, for the unsold portion of such number of shares of our common stock,
$.001 par value per share, as may be effectively registered from time to time
under the Securities Act of 1933, as amended (the "1933 Act"). This agreement is
being entered into pursuant to the Distribution and Service Plan (the "Plan")
adopted by us in accordance with Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act").
2. We hereby agree that you will act as our agent, and hereby
appoint you our agent, to offer, and to solicit offers to subscribe to, the
unsold balance of shares of our common stock as shall then be effectively
registered under the Act. All subscriptions for shares of our common stock
obtained by you shall be directed to us for acceptance and shall not be binding
on us until accepted by us. You shall have no authority to make binding
subscriptions on our behalf. We reserve the right to sell shares of our common
stock through other distributors or directly to investors through subscriptions
received by us at our principal office in New York, New York. The right given to
you under this agreement shall not apply to shares of our common stock issued in
connection with (a) the merger or consolidation of any other investment company
with us, (b) our acquisition by purchase or otherwise of all or substantially
all of the assets or stock of any other investment company, or (c) the
reinvestment in shares of our common stock by our stockholders of dividends or
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<PAGE>
other distributions or any other offering by us of securities to
our stockholders.
3. You will use your best efforts to obtain subscriptions to
shares of our common stock upon the terms and conditions contained herein and in
our Prospectus, as in effect from time to time. You will send to us promptly all
subscriptions placed with you. We shall furnish you from time to time, for use
in connection with the offering of shares of our common stock, such other
information with respect to us and shares of our common stock as you may
reasonably request. We shall supply you with such copies of our Registration
Statement and Prospectus, as in effect from time to time, as you may request.
Except as we may authorize in writing, you are not authorized to give any
information or to make any representation that is not contained in the
Registration Statement or Prospectus, as then in effect. You may use employees,
agents and other persons, at your cost and expense, to assist you in carrying
out your obligations hereunder, but no such employee, agent or other person
shall be deemed to be our agent or have any rights under this agreement. You may
sell our shares to or through qualified brokers, dealers and financial
institutions under selling and servicing agreements provided that no dealer,
financial institution or other person shall be appointed or authorized to act as
our agent without our written consent.
With respect to the Class A Shares of the Fund,
you will arrange for organizations whose customers or clients are shareholders
of our corporation ("Participating Organizations") to enter into agreements with
you for the performance of shareholder servicing and related administrative
functions not performed by you or the Transfer Agent. Pursuant to our
Shareholder Servicing Agreement with you with respect to the Class A Shares, you
may make payments to Participating Organizations for performing shareholder
servicing and related administrative functions with respect to the Class A
Shares. Such payments will be made only pursuant to written agreements approved
in form and substance by our Board of Directors to be entered into by you and
the Participating Organizations. It is recognized that we shall have no
obligation or liability to you or any Participating Organization for any such
payments under the agreements with Participating Organizations. Our obligation
is solely to make payments to you under the Shareholder Servicing Agreement
(with respect to the Class A Shares) and to the Manager under the Investment
Management Contract and the Administrative Services Contract. All sales of our
shares effected through you will be made in compliance with all applicable
federal securities laws and regulations and the Constitution, rules and
regulations of the National Association of Securities Dealers, Inc. ("NASD").
4. We reserve the right to suspend the offering of shares of
our common stock at any time, in the absolute
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<PAGE>
discretion of our Board of Directors, and upon notice of such suspension you
shall cease to offer shares of our common stock hereunder.
5. Both of us will cooperate with each other in taking such
action as may be necessary to qualify shares of our common stock for sale under
the securities laws of such states as we may designate, provided, that you shall
not be required to register as a broker-dealer or file a consent to service of
process in any such state where you are not now so registered. Pursuant to the
Investment Management Contract in effect between us and the Manager, we will pay
all fees and expenses of registering shares of our common stock under the Act
and of qualification of shares of our common stock, and to the extent necessary,
our qualification under applicable state securities laws. You will pay all
expenses relating to your broker-dealer qualification.
6. We represent to you that our Registration Statement and
Prospectus have been carefully prepared to date in conformity with the
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Securities and Exchange Commission (the "SEC") thereunder. We represent and
warrant to you, as of the date hereof, that our Registration Statement and
Prospectus contain all statements required to be stated therein in accordance
with the 1933 Act and the 1940 Act and the SEC's rules and regulations
thereunder; that all statements of fact contained therein are or will be true
and correct at the time indicated or the effective date as the case may be; and
that neither our Registration Statement nor our Prospectus, when they shall
become effective or be authorized for use, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of shares
of our common stock. We will from time to time file such amendment or amendments
to our Registration Statement and Prospectus as, in the light of future
development, shall, in the opinion of our counsel, be necessary in order to have
our Registration Statement and Prospectus at all times contain all material
facts required to be stated therein or necessary to make any statements therein
not misleading to a purchaser of shares of our common stock. If we shall not
file such amendment or amendments within fifteen days after our receipt of a
written request from you to do so, you may, at your option, terminate this
agreement immediately. We will not file any amendment to our Registration
Statement or Prospectus without giving you reasonable notice thereof in advance;
provided, however, that nothing in this agreement shall in any way limit our
right to file such amendments to our Registration Statement or Prospectus, of
whatever character, as we may deem advisable, such right being in all respects
absolute and unconditional. We represent and warrant to you that any amendment
to our Registration Statement or Prospectus hereafter
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<PAGE>
filed by us will be carefully prepared in conformity within the requirements of
the 1933 Act and the 1940 Act and the SEC's rules and regulations thereunder and
will, when it becomes effective, contain all statements required to be stated
therein in accordance with the 1933 Act and the 1940 Act and the SEC's rules and
regulations thereunder; that all statements of fact contained therein will, when
the same shall become effective, be true and correct; and that no such
amendment, when it becomes effective, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of our
shares.
7. We agree to indemnify, defend and hold you, and any person
who controls you within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which you or
any such controlling person may incur, under the 1933 Act or the 1940 Act, or
under common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in our Registration Statement or
Prospectus in effect from time to time or arising out of or based upon any
alleged omission to state a material fact required to be stated in either of
them or necessary to make the statements in either of them not misleading;
provided, however, that in no event shall anything herein contained be so
construed as to protect you against any liability to us or our security holders
to which you would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of your duties, or by reason of
your reckless disregard of your obligations and duties under this agreement. Our
agreement to indemnify you and any such controlling person is expressly
conditioned upon our being notified of any action brought against you or any
such controlling person, such notification to be given by letter or by telegram
addressed to us at our principal office in New York, New York, and sent to us by
the person against whom such action is brought within ten days after the summons
or other first legal process shall have been served. The failure so to notify us
of any such action shall not relieve us from any liability which we may have to
the person against whom such action is brought other than on account of our
indemnity agreement contained in this paragraph 7. We will be entitled to assume
the defense of any suit brought to enforce any such claim, and to retain counsel
of good standing chosen by us and approved by you. In the event we do elect to
assume the defense of any such suit and retain counsel of good standing approved
by you, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case we do
not elect to assume the defense of any such suit, or in case you, in good faith,
do not approve of counsel chosen by us, we will
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<PAGE>
reimburse you or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel retained by
you or them. Our indemnification agreement contained in this paragraph 7 and our
representations and warranties in this agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of you or any
controlling person and shall survive the sale of any shares of our common stock
made pursuant to subscriptions obtained by you. This agreement of indemnity will
inure exclusively to your benefit, to the benefit of your successors and
assigns, and to the benefit of any of your controlling persons and their
successors and assigns. We agree promptly to notify you of the commencement of
any litigation or proceeding against us in connection with the issue and sale of
any shares of our common stock.
8. You agree to indemnify, defend and hold us, our several
officers and directors, and any person who controls us within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any reasonable counsel fees
incurred in connection therewith) which we, our officers or directors, or any
such controlling person may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement or Prospectus as in effect from time to time, or shall arise out of or
be based upon any alleged omission to state a material fact in connection with
such information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. Your agreement
to indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process shall
have been served. You shall have a right to control the defense of such action,
with counsel of your own choosing, satisfactory to us, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event you and we, our officers or directors or such controlling person shall
each have the right to participate in the defense or preparation of the defense
of any such action. The failure so to notify you of any such action shall not
relieve you from any liability which you may have to us, to our officers
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<PAGE>
or directors, or to such controlling person other than on account of your
indemnity agreement contained in this paragraph 8.
9. We agree to advise you immediately:
a. of any request by the SEC for amendments to
our Registration Statement or Prospectus or for additional
information,
b. of the issuance by the SEC of any stop order
suspending the effectiveness of our Registration Statement or
Prospectus or the initiation of any proceedings for that purpose,
c. of the happening of any material event which
makes untrue any statement made in our Registration Statement or Prospectus or
which requires the making of a change in either of them in order to make the
statements therein not misleading, and
d. of all action of the SEC with respect to any
amendments to our Registration Statement or Prospectus.
10. This Agreement (which was re-executed on the date hereof) became
effective on ____________ and will remain in effect thereafter for successive
twelve-month periods (computed from each ____________), provided that such
continuation is specifically approved at least annually by vote of our Board of
Directors and of a majority of those of our directors who are not interested
persons (as defined in the 1940 Act) and have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan,
cast in person at a meeting called for the purpose of voting on this agreement.
This agreement may be terminated at any time, without the payment of any
penalty, (a) on sixty days' written notice to you, (i) by vote of a majority of
our entire Board of Directors, and by a vote of a majority of our Directors who
are not interested persons (as defined in the 1940 Act) and who have no direct
or indirect financial interest in the operation of the Plan or in any agreement
related to the Plan, or (ii) by vote of a majority of our outstanding voting
securities, as defined in the Act, or (b) by you on sixty days' written notice
to us.
11. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the SEC thereunder.
12. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees, officers
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<PAGE>
or directors, who may also be a director, officer or employee of ours, or of a
person affiliated with us, as defined in the 1940 Act, to engage in any other
business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to another corporation, firm, individual or association.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
NEW JERSEY DAILY MUNICIPAL INCOME
FUND, INC.
By_____________________________
Accepted: ________________, 1998
REICH & TANG DISTRIBUTORS, INC.
By: ____________________________
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NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
Form of Distribution and Service Plan Pursuant to Rule
12b-1 Under the Investment Company Act of 1940
The Distribution and Service Plan (the "Plan") is adopted by
New Jersey Daily Municipal Income Fund, Inc. (the "Fund") in accordance with the
provisions of Rule 12b-1 under the Investment Company Act of 1940 (the "Act").
The Plan
1. The Fund and Reich & Tang Distributors, Inc. (the
"Distributor"), have entered into a Distribution Agreement, in a form
satisfactory to the Fund's Board of Directors, under which the Distributor will
act as distributor of the Fund's shares. Pursuant to the Distribution Agreement,
the Distributor, as agent of the Fund, will solicit orders for the purchase of
the Fund's shares, provided that any subscriptions and orders for the purchase
of the Fund's shares will not be binding on the Fund until accepted by the Fund
as principal.
2. The Fund and the Distributor have entered into a
Shareholder Servicing Agreement with respect to the Class A Shares of the Fund,
in a form satisfactory to the Fund's Board of Directors, which provides that the
Distributor will be paid a service fee for providing or for arranging for others
to provide all personal shareholder servicing and related maintenance of
shareholder account functions not performed by us or our transfer agent.
<PAGE>
3. The Manager may make payments from time to time from its
own resources, which may include the management fees and administrative services
fees received by the Manager from the Fund and from other companies, and past
profits for the following purposes:
(i) to pay the costs of, and to compensate others, including
organizations whose customers or clients are Class A Fund Shareholders
("Participating Organizations"), for performing personal shareholder
servicing and related maintenance of shareholder account functions on
behalf of the Fund;
(ii) to compensate Participating Organizations for providing
assistance in distributing the Fund's Class A Shares; and
(iii) to pay the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including
salaries and/or commissions of sales personnel of the Distributor and
other persons, in connection with the distribution of the Fund's
shares.
The Distributor may also make payments from time to time from its own resources,
which may include the service fee and past profits for the purpose enumerated in
(i) above. Further, the Distributor may determine the amount of such payments
made pursuant to the Plan, provided that such payments will not
<PAGE>
increase the amount which the Fund is required to pay to (1) the Manager for any
fiscal year under the Investment Management Contract or the Administrative
Services Agreement in effect for that year or otherwise or (2) to the
Distributor under the Shareholder Servicing Agreement in effect for that year or
otherwise. The Investment Management Contract will also require the Manager to
reimburse the Fund for any amounts by which the Fund's annual operating
expenses, including distribution expenses, exceed in the aggregate in any fiscal
year the limits prescribed by any state in which the Fund's shares are qualified
for sale.
4. The Fund will pay for (i) telecommunications expenses,
including the cost of dedicated lines and CRT terminals, incurred by the
Distributor in carrying out its obligations under the Shareholder Servicing
Agreement with respect to the Class A Shares of the Fund and (ii) preparing,
printing and delivering the Fund's prospectus to existing shareholders of the
Fund and preparing and printing subscription application forms for shareholder
accounts.
5. Payments by the Distributor or Manager to Participating
Organizations as set forth herein are subject to compliance by them with the
terms of written agreements in a form satisfactory to the Fund's Board of
Directors to be entered into between the Distributor and the Participating
Organizations.
6. The Fund and the Distributor will prepare and furnish to
the Fund's Board of Directors, at least quarterly,
<PAGE>
written reports setting forth all amounts expended for servicing and
distribution purposes by the Fund, the Distributor and the Manager, pursuant to
the Plan and identifying the servicing and distribution activities for which
such expenditures were made.
7. The Plan became effective upon approval by (i) a majority
of the outstanding voting securities of the Fund (as defined in the Act), and
(ii) a majority of the Board of Directors of the Fund, including a majority of
the Directors who are not interested persons (as defined in the Act) of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreement entered into in connection with the Plan, pursuant to a
vote cast in person at a meeting called for the purpose of voting on the
approval of the Plan.
8. The Plan will remain in effect until ______________ unless
earlier terminated in accordance with its terms, and thereafter may continue in
effect for successive annual periods if approved each year in the manner
described in clause (ii) of paragraph 7 hereof.
9. The Plan may be amended at any time with the approval of
the Board of Directors of the Fund, provided that (i) any material amendments of
the terms of the Plan will be effective only upon approval as provided in clause
(ii) of paragraph 7 hereof, and (ii) any amendment which increases materially
the amount which may be spent by the Fund pursuant to the Plan will be effective
only upon the additional approval as provided
<PAGE>
in clause (i) of paragraph 7 hereof (with each class of the Fund
voting separately).
10. The Plan may be terminated without penalty at any time (i)
by a vote of the majority of the entire Board of Directors of the Fund and by a
vote of a majority of the Directors of the Fund who are not interested persons
(as defined in the Act) of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan,
or (ii) by a vote of a majority of the outstanding voting securities of the Fund
(with each class of the Fund voting separately) (as defined in the Act).
FORM OF SHAREHOLDER SERVICING AGREEMENT
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
CLASS A SHARES
(the "Fund")
600 Fifth Avenue
New York, New York 10020
____________________, 1998
Reich & Tang Distributors, Inc. ("Distributor")
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and
Service Plan, as amended, adopted by us in accordance with Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended (the "Act"), to
provide the services listed below on behalf of the Class A Shares. You will
perform, or arrange for others including organizations whose customers or
clients are shareholders of our corporation (the "Participating Organizations")
to perform, all personal shareholder servicing and related maintenance of
shareholder account functions ("Shareholder Services") not performed by us or
our transfer agent.
2. You will be responsible for the payment of all expenses
incurred by you in rendering the foregoing services, except that we will pay for
(i) telecommunications expenses, including the cost of dedicated lines and CRT
terminals, incurred by the Distributor and Participating Organizations in
rendering such services to the Class A Shareholders, and (ii) preparing,
printing and delivering our prospectus to existing shareholders and preparing
and printing subscription application forms for shareholder accounts.
3. You may make payments from time to time from your own
resources, including the fees payable hereunder and past profits to compensate
Participating Organizations for providing Shareholder Services to the Class A
Shareholders of the Fund. Payments to Participating Organizations to compensate
them for
1
<PAGE>
providing Shareholder Services are subject to compliance by them with the terms
of written agreements satisfactory to our Board of Directors to be entered into
between the Distributor and the Participating Organizations. The Distributor
will in its sole discretion determine the amount of any payments made by the
Distributor pursuant to this Agreement, provided, however, that no such payment
will increase the amount which we are required to pay either to the Distributor
under this Agreement or to the Manager under the Investment Management Contract,
the Administrative Services Agreement, or otherwise.
4. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. In consideration of your performance, the Fund will pay you
a service fee, as defined by Article III, Section 26(b)(9) of the Rules of Fair
Practice, as amended, of the National Association of Securities Dealers, Inc. at
the annual rate of two-tenths of one percent (0.20%) of the Fund's Class A
Share's average daily net assets. Your fee will be accrued by us daily, and will
be payable on the last day of each calendar month for services performed
hereunder during that month or on such other schedule as you shall request of us
in writing. You may waive your right to any fee to which you are entitled
hereunder, provided such waiver is delivered to us in writing.
6. This Agreement (which was re-executed on the date hereof) became
effective on ___________ and will remain in effect thereafter for successive
twelve-month periods (computed from each ___________), provided that such
continuation is specifically approved at least annually by vote of our Board of
Directors and of a majority of those of our directors who are not interested
persons (as defined in the Act) and have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan,
cast in person at a meeting called for the purpose of voting on this Agreement.
This Agreement may be terminated at any time, without the payment of any
penalty, (a) on sixty days' written notice to you, (i) by vote of a majority of
our entire Board of Directors, and by a vote of a majority of our Directors who
are not interested persons (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan, or (ii) by vote of a majority of the outstanding voting
securities of the Fund's Class A Shares, as defined in the Act, or (b) by you on
sixty days' written notice to us.
2
<PAGE>
7. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission
thereunder.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees, officers or directors, who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your under standing,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
NEW JERSEY DAILY MUNICIPAL INCOME
FUND, INC.
CLASS A SHARES
By:_______________________________
ACCEPTED: ___________________, 1998
REICH & TANG DISTRIBUTORS, INC.
By:____________________________
3
EXHIBIT 11
McGLADREY & PULLEN L.L.P.
Certified Public Accountants & Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated November 26, 1997, on the
financial statements referred to therein in Post-Effective Amendment No. 8 to
the Registration Statement on Form N-1A, File No. 33-36317 of New Jersey Daily
Municipal Income Fund, Inc., as filed with the Securities and Exchange
Commission.
We also consent to the reference to our Firm in the Prospectus under the
caption "Selected Financial Information" and in the Statement of Additional
Information under the caption "Counsel and Auditors."
/s/McGLADREY & PULLEN, LLP
McGladrey & Pullen, LLP
New York, New York
February 23, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000866782
<NAME> New Jersey Daily Tax Municipal Income Fund, Inc.
<SERIES>
<NUMBER> 1
<NAME> CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-30-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 216486121
<INVESTMENTS-AT-VALUE> 216486121
<RECEIVABLES> 1697312
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 285853
<TOTAL-ASSETS> 218469286
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 625120
<OTHER-ITEMS-LIABILITIES> 625120
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 217860207
<PAID-IN-CAPITAL-COMMON> 217860207
<SHARES-COMMON-STOCK> 151803018
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16041)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 217844166
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6721152
<OTHER-INCOME> 0
<EXPENSES-NET> 1640339
<NET-INVESTMENT-INCOME> 5080813
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5080813
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5080813
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 453816222
<NUMBER-OF-SHARES-REDEEMED> 392625492
<SHARES-REINVESTED> 4866459
<NET-CHANGE-IN-ASSETS> 66057189
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (16041)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 572090
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1641333
<AVERAGE-NET-ASSETS> 189657464
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000866782
<NAME> New Jersey Daily Tax Municipal Income Fund, Inc.
<SERIES>
<NUMBER> 2
<NAME> CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 216486121
<INVESTMENTS-AT-VALUE> 216486121
<RECEIVABLES> 1697312
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 285853
<TOTAL-ASSETS> 218469286
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 625120
<TOTAL-LIABILITIES> 625120
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 217860207
<SHARES-COMMON-STOCK> 217860207
<SHARES-COMMON-PRIOR> 151803018
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16041)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 217844166
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6721152
<OTHER-INCOME> 0
<EXPENSES-NET> 1640339
<NET-INVESTMENT-INCOME> 5080813
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5080813
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5080813
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 453816222
<NUMBER-OF-SHARES-REDEEMED> 392625492
<SHARES-REINVESTED> 4866459
<NET-CHANGE-IN-ASSETS> 66057189
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (16041)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 572090
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1641333
<AVERAGE-NET-ASSETS> 189657464
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
