RULE 497(c)
Registration No. 33-36317
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PROSPECTUS
NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
Chase Vista Select Class of Shares - distributed through Vista Fund
Distributors, Inc.
July 9, 1999
A money market fund whose investment objectives are to seek as high a level of
current income exempt from Federal income tax and, to the extent possible, from
New Jersey gross income tax, as is believed to be consistent with preservation
of capital, maintenance of liquidity and stability of principal.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
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TABLE OF CONTENTS
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2 Risk/Return Summary: Investments, Risks, 10 Shareholder Information
and Performance 19 Tax Consequences
5 Fee Table 19 Federal Income Taxes
6 Investment Objectives, Principal Investment 21 New Jersey Income Taxes
Strategies and Related Risks 22 Distribution Arrangements
9 Management, Organization and Capital Structure 24 Financial Highlights
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I.
RISK/RETURN SUMMARY:
INVESTMENTS, RISKS AND PERFORMANCE
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Investment Objectives
The Fund seeks as high a level of current income exempt from Federal income tax
and, to the extent possible, New Jersey gross income tax, as is believed to be
consistent with preservation of capital, maintenance of liquidity, and stability
of principal. There can be no assurance that the Fund will achieve its
investment objectives.
Principal Investment Strategies
The Fund intends to achieve its investment objectives by investing principally
in short-term, high quality, debt obligations of:
(i) New Jersey, and its political subdivision;
(ii) Puerto Rico and other United States Territories, and their political
subdivisions; and
(iii) other states.
These debt obligations are collectively referred to throughout this Prospectus
as Municipal Obligations.
The Fund is a money market fund and seeks to maintain an investment portfolio
with a dollar-weighted average maturity of 90 days or less, to value its
investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.
The Fund intends to concentrate (i.e. 25% or more of the Fund's total assets) in
New Jersey Municipal Obligations, including Participation Certificates therein.
Participation Certificates evidence ownership of an interest in the underlying
Municipal Obligations purchased from banks, insurance companies, or other
financial institutions.
Principal Risks
o Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund can each
decline in value.
o An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
o Because the Fund intends to concentrate in New Jersey Municipal Obligations,
including Participation Certificates therein, investors should also consider
the greater risk of the Portfolio's concentration versus the safety that
comes with a less concentrated investment portfolio.
o An investment in the Fund should be made with an understanding of the risks
that an investment in New Jersey Municipal Obligations may entail. Payment of
interest and preservation of capital are dependent upon the continuing
ability of New Jersey issuers and/or obligators of state, municipal and
public authority debt obligations to meet their payment obligations. Risk
factors affecting the State of New Jersey are described in "New Jersey Risk
Factors" in the Statement of Additional Information.
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Risk/Return Bar Chart and Table
The following bar chart and table may assist you in your decision to invest in
the Fund. The bar chart shows the change in the annual returns of the Fund over
the last 8 calendar years. The table shows the average annual total returns of
the Fund's Class A shares for the last one and five year periods. The table also
includes the Class A shares' average annual total return since inception. The
chart and table show returns for a Class that is not offered by this Prospectus.
The Class presented has substantially similar annual returns because the shares
are invested in the same portfolio of securities and the annual returns differ
only to the extent that the Classes do not have the same expenses. While
analyzing this information, please note that the Fund's past performance is not
an indicator of how the Fund will perform in the future. The current 7-day yield
for the Class A shares may be obtained by calling the Fund toll-free at
1-800-221-3079.
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NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.- Class A Shares (1),(2),(3),(4)
CALENDAR YEAR END % TOTAL RETURN
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1991 4.35%
1992 2.71%
1993 1.91%
1994 2.23%
1995 3.09%
1996 2.62%
1997 2.74%
1998 2.58%
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(1) The chart shows returns for the Class A shares of the Fund (which are not
offered by this Prospectus) since as of December 31, 1998, there were no
Chase Vista Select shares issued by the Fund. All Classes of the Fund will
have substantially similar annual returns because the shares are invested
in the same portfolio of securities and the annual returns differ only to
the extent that the Classes do not have the same expenses. If the expenses
of the Chase Vista Select shares are higher than the Class A shares, then
your returns may be lower.
(2) As of June 30, 1999, the Fund had a year-to-date return of 1.11%.
(3) The Fund's highest quarterly return was 1.13% for the quarter ended March
31, 1991; the lowest quarterly return was 0.43% for the quarter ended March
31, 1994.
(4) Participating Organizations may charge a fee to investors for purchasing
and redeeming shares. Therefore, the net return to such investors may be
less than if they had invested in the Fund directly.
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AVERAGE ANNUAL TOTAL RETURNS - NEW JERSEY DAILY MUNICIPAL
INCOME FUND, INC.
CLASS A
FOR THE PERIODS ENDED DECEMBER 31
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One Year 2.58%
Five Years 2.65%
Average Annual Total Return Since Inception 2.82%
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FEE TABLE
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This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
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Chase Vista Select Shares
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Management Fees 0.30%
Distribution and Service (12b-1) Fees 0.20%
Other Expenses* 0.34%
Administration Fees 0.21%
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Total Annual Fund Operating Expenses 0.84%
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* Estimated because there were no Chase Vista Select shares issued during the
fiscal year ended October 31, 1998.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other money market funds.
Assume that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. Also assume that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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1 year 3 years 5 years 10 years
Chase Vista Select Shares $86 $268 $466 $1,037
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II. INVESTMENT OBJECTIVES,
PRINCIPAL INVESTMENT STRATEGIES AND
RELATED RISKS
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INVESTMENT OBJECTIVES
The Fund is a short-term, tax-exempt money market fund whose investment
objectives are to seek as high a level of current income exempt from Federal
income tax and, to the extent possible, from New Jersey gross income tax,
consistent with preserving capital, maintaining liquidity and stabilizing
principal.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund that would be affected by such a change.
PRINCIPAL INVESTMENT STRATEGIES
GENERALLY
The Fund will invest primarily (i.e., at least 80%) in short-term, high quality,
debt obligations which include:
(i) New Jersey Municipal Obligations issued by or on behalf of the State of New
Jersey or any New Jersey local governments, or their instrumentalities,
authorities or districts;
(ii) Territorial Municipal Obligations issued by or on behalf of Puerto Rico and
the Virgin Islands or their instrumentalities, authorities, agencies and
political subdivisions; and
(iii) Municipal Obligations issued by or on behalf of other states, their
authorities, agencies, instrumentalities and political subdivisions.
The Fund will also invest in Participation Certificates in Municipal
Obligations. These instruments are purchased by the Fund from banks, insurance
companies or other financial institutions and in the opinion of Battle Fowler
LLP, counsel to the Fund, cause the Fund to be treated as the owner of the
underlying Municipal Obligations for Federal income tax purposes.
The Fund may invest more than 25% of its assets in Participation Certificates
and other New Jersey Municipal Obligations.
Although the Fund will attempt to invest 100% of its total assets in Municipal
Obligations and Participation Certificates, the Fund reserves the right to
invest up to 20% of its total assets in taxable securities whose interest income
is subject to regular Federal, state and local income tax. The kinds of taxable
securities in which the Fund may invest are limited to short-term, fixed income
securities as more fully described in "Taxable Securities" in the Statement of
Additional Information.
Included in the same 20% of total assets in taxable securities, the Fund may
also purchase securities and Participation Certificates whose interest income
may be subject to the Federal alternative minimum tax.
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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 New Jersey income tax.
The Fund will invest at least 65% of its total assets in New Jersey Municipal
Obligations, although the exact amount may vary from time to time. As a
temporary defensive measure the Fund may, from time to time, invest in
securities that are inconsistent with its principal investment strategies in an
attempt to respond to adverse market, economic, political or other conditions as
determined by the Fund's investment advisor. Such a temporary defensive position
may cause the Fund to not achieve its investment objectives.
With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations or Participation Certificates
issued by a single issuer. The Fund shall not invest more than 5% of its total
assets in Municipal Securities or Participation Certificates issued by a single
issuer unless the Municipal Obligations are of the highest quality.
With respect to 75% of its total assets, the Fund shall invest not more than 10%
of its total assets in Municipal Obligations or Participation Certificates
backed by a demand feature or guarantee from the same institution.
The Fund's investments may also include "when-issued" Municipal Obligations and
stand-by commitments.
The Fund's investment manager considers the following factors when buying and
selling securities for the portfolio: (i) availability of cash, (ii) redemption
requests, (iii) yield management, and (iv) credit management.
In order to maintain a share price of $1.00, the Fund must comply with certain
industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other requirements pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities which have or are deemed to have a remaining maturity
of 397 days or less. Also, the average maturity for all securities contained in
the Fund, on a dollar-weighted basis, will be 90 days or less.
The Fund will only invest in either securities that have been rated (or whose
issuers have been rated) in the highest short-term rating category by nationally
recognized statistical rating organizations, or are unrated securities but that
have been determined by the Fund's Board of Directors to be of comparable
quality.
Subsequent to its purchase by the Fund, the quality of an investment may cease
to be rated or its rating may be reduced below the minimum required for purchase
by
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the Fund. If this occurs, the Board of Directors of the Fund shall reassess the
security's credit risks and shall take such action as it determines is in the
best interest of the Fund and its shareholders. Reassessment is not required,
however, if the security is disposed of or matures within five business days of
the Manager becoming aware of the new rating and provided further that the Board
of Directors is subsequently notified of the Manager's actions.
For a more detailed description of (i) the securities that the Fund will invest
in, (ii) fundamental investment restrictions, and (iii) industry regulations
governing credit quality and maturity, please refer to the Statement of
Additional Information.
RISKS
The Fund complies with industry-standard requirements on the quality, maturity
and diversification of its investments which are designed to help maintain a
$1.00 share price. A significant change in interest rates or a default on the
Fund's investments could cause its share price (and the value of your
investment) to change.
By investing in liquid, short-term, high quality investments that have high
quality credit support from banks, insurance companies or other financial
institutions (i.e. Participation Certificates and other variable rate demand
instruments), the Fund's management believes that it can protect the Fund
against credit risks that may exist on long-term New Jersey Municipal
Obligations. The Fund may still be exposed to the credit risk of the institution
providing the investment. Changes in the credit quality of the provider could
affect the value of the security and your investment in the Fund.
Because of the Fund's concentration in investments in New Jersey Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of New Jersey and its political subdivisions.
The primary purpose of investing in a portfolio of New Jersey Municipal
Obligations is the special tax treatment accorded New Jersey resident individual
investors. Payment of interest and preservation of principal, however, 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.
Because the Fund may concentrate in Participation Certificates that may be
secured by bank letters of credit or guarantees, an investment in the Fund
should be made with an understanding of the characteristics of the banking
industry and the risks which such an investment may entail. These
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characteristics and risks include extensive governmental regulations, changes in
the availability and cost of capital funds, and general economic conditions (see
"Variable Rate Demand Instruments and Participation Certificates" in the
Statement of Additional Information). These factors may limit both the amounts
and types of loans and other financial commitments that may be made and the
interest rates and fees that may be charged. The profitability of this industry
is largely dependent upon the availability and cost of capital funds for the
purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an important part in the
operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations under a letter of credit.
As the Year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Fund's investment advisor is in the process of working with
the Fund's service providers to prepare for the Year 2000. Based on information
currently available, the investment advisor does not expect that the Fund will
incur material costs to be Year 2000 compliant. Although the investment advisor
does not anticipate that the Year 2000 issue will have a material impact on the
Fund's ability to provide service at current levels, there can be no assurance
that steps taken in preparation for the Year 2000 will be sufficient to avoid an
adverse impact on the Fund. The Year 2000 problem may also adversely affect
issuers of the securities contained in the Fund, to varying degrees based upon
various factors, and thus may have a corresponding adverse effect on the Fund's
performance. The investment advisor is unable to predict what effect, if any,
the Year 2000 problem will have on such issuers.
III.
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
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The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of May 31, 1999, the Manager was the investment
manager, adviser or supervisor with respect to assets aggregating in excess of
$13.4 billion. The Manager has been an investment adviser since 1970 and
currently is manager of eighteen other registered investment companies. The
Manager also advises pension trusts, profit-sharing trusts and endowments.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the
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Board of Directors of the Fund. Pursuant to the Investment Management Contract,
the Fund pays the Manager a fee equal to .30% per annum of the Fund's average
daily net assets for managing the Fund's investment portfolio and performing
related services.
Pursuant to the Administrative Services Contract, the Manager performs clerical,
accounting supervision and office service functions for the Fund. The Manager
provides the Fund with the personnel to perform all other clerical and
accounting type functions not performed by the Manager. For its services under
the Administrative Services Contract, the Fund pays the Manager a fee equal to
.21% per annum of the Fund's average daily net assets.
The Manager, at its discretion, may voluntarily waive all or a portion of the
investment management fee and the administrative services fee. Any portion of
the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares.
In addition, Reich & Tang Distributors Inc., the Distributor, receives a
servicing fee equal to .20% per annum of the average daily net assets of the
Chase Vista Select shares of the Fund under the Shareholder Servicing Agreement.
The fees are accrued daily and paid monthly. Investment management fees and
operating expenses, which are attributable to all Classes of shares of the Fund,
will be allocated daily to each Class of shares based on the percentage of
shares outstanding for each Class at the end of the day.
IV. SHAREHOLDER INFORMATION
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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, Vista Fund Distributors, Inc. ("VFD"), and from dealers with whom
VFD has entered into agreements for this purpose.
PRICING OF FUND SHARES
The net asset value of each Class of the Fund's shares is determined as of 12
noon, New York City time, on each Fund Business Day. Fund Business Day means
weekdays (Monday through Friday) except days on which the New York Stock
Exchange is closed for trading. The net asset value of a Class is computed by
dividing the value of the Fund's net assets for such Class (i.e., the value of
its securities and other assets less its liabilities, including expenses payable
or accrued, but excluding capital stock and surplus) by the total number of
shares outstanding for such Class. The Fund intends to maintain a stable net
asset value at $1.00 per share although there can be no assurance that this will
be achieved.
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The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the Investment Company Act of 1940 (the
"1940 Act"). Amortized cost valuation involves valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium. If fluctuating interest rates cause the market value of the Fund's
portfolio to deviate more than 1/2 of 1% from the value determined on the basis
of amortized cost, the Board of Directors will consider whether any action
should be initiated. Although the amortized cost method provides certainty in
valuation, it may result in periods during which the value of an instrument is
higher or lower than the price an investment company would receive if the
instrument were sold.
Shares are issued as of the first determination of the Fund's net asset value
per share for each Class made after acceptance of the investor's purchase order.
In order to maximize earnings on its portfolio, the Fund normally has its assets
as fully invested as is practicable. Many securities in which the Fund invests
require the immediate settlement in funds of Federal Reserve member banks on
deposit at a Federal Reserve Bank (commonly known as "Federal Funds"). Fund
shares begin accruing income on the day the shares are issued to an investor.
The Fund reserves the right to reject any purchase order for its shares.
Certificates for Fund shares will not be issued to an investor.
PURCHASE OF CHASE VISTA SELECT SHARES
The Fund does not accept a purchase order until an investor's payment has been
converted into Federal Funds and is received by the Fund's transfer agent.
Orders accompanied by Federal Funds and received after 12 noon, New York City
time, on a Fund Business Day will result in the issuance of shares on the
following Fund Business Day.
Only Chase Vista Select shares are offered through this Prospectus. Investors
may invest in Chase Vista Select shares through VFD or through dealers with whom
VFD has entered into agreements for this purpose as described herein. Certain
Participating Organizations described below 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 Chase Vista Select shareholder. The minimum initial
investment in the Chase Vista Select shares is $2,500. Initial investments may
be made in any amount in excess of the applicable minimums. The minimum amount
for subsequent investments is $100.
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INVESTMENTS THROUGH PARTICIPATING ORGANIZATIONS - PURCHASE OF CHASE VISTA SELECT
SHARES
Investors may, if they wish, invest in the Fund through the Participating
Organizations, such as VFD, with which they have accounts. "Participating
Organizations" are securities brokers, banks and financial institutions or other
industry professionals or organizations which have entered into shareholder
servicing agreements with the Distributor with respect to investment of their
customer accounts in the Fund. When instructed by its customer to purchase or
redeem Fund shares, the Participating Organization, on behalf of the customer,
transmits to the Fund's transfer agent a purchase or redemption order, and in
the case of a purchase order, payment for the shares being purchased.
Participating Organizations may confirm to their customers who are shareholders
in the Fund ("Participating Investors") each purchase and redemption of Fund
shares for the customers' accounts. Also, Participating Organizations may send
periodic account statements to the Participating Investors showing (i) the total
number of Fund shares owned as of the statement closing date, (ii) purchases and
redemptions of Fund shares during the period covered by the statement, and (iii)
the income earned by Fund shares during the statement period (including
dividends paid in cash or reinvested in additional Fund shares). Participant
Investors whose Participating Organizations have not undertaken to provide such
statements will receive them from the Fund directly.
Participating Organizations may charge Participant Investors a fee in connection
with their use of specialized purchase and redemption procedures. In addition,
Participating Organizations offering purchase and redemption procedures similar
to those offered to shareholders who invest in the Fund directly, may impose
charges, limitations, minimums and restrictions in addition to or different from
those applicable to shareholders who invest in the Fund directly. Accordingly,
the net yield to investors who invest through Participating Organizations may be
less than by investing in the Fund directly. A Participant Investor should read
this Prospectus in conjunction with the materials provided by the Participating
Organization describing the procedures under which Fund shares may be purchased
and redeemed through the Participating Organization.
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. Class B shareholders will
not receive the benefit of the servicing functions performed by a Participating
Organization. Class B shares may also be offered to investors who purchase their
shares through Participating Organizations who, as fiduciaries, may not be
legally permitted to receive compensation from the Distributor or the
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Manager. The Manager pays the expenses incurred in the distribution of Class B
shares. Participating Organizations whose clients become Class B shareholders
will not receive compensation from the Manager or Distributor for the servicing
they may provide to their clients.
In the case of qualified Participating Organizations, orders received by the
Fund's transfer agent before 12 noon, New York City time, on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day only if the Federal Funds required in connection with the orders are
received by the Fund's transfer agent before 4:00 p.m., New York City time, on
that day. Orders for which Federal Funds are received after 4:00 p.m., New York
City time, will result in share issuance the following Fund Business Day.
Participating Organizations are responsible for instituting procedures to insure
that purchase orders by their respective clients are processed expeditiously.
INITIAL DIRECT PURCHASE OF CHASE VISTA SELECT SHARES
Investors may obtain a current prospectus and the order form necessary to open
an account by telephoning the Chase Vista Service Center at 1-800-34-VISTA.
Mail. To purchase shares of the "Chase Vista Select shares" send a check made
payable to "Chase Vista Select Shares of 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
Fund Account #
SS#/Tax ID#
The investor should then promptly complete and mail the subscription order form.
Investors planning to wire funds should instruct their bank so the wire transfer
can be accomplished before 12 noon, New York City
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time, on that same day. There may be a charge by the investor's bank for
transmitting the money by bank wire, and there also may be a charge for use of
Federal Funds. The Fund does not charge investors in the Fund for its receipt of
wire transfers. Payment in the form of a "bank wire" received prior to 12 noon,
New York City time, on a Fund Business Day will be treated as a Federal Funds
payment received on that day.
SUBSEQUENT PURCHASES OF CHASE VISTA SELECT SHARES
Subsequent purchases can be made either by bank wire or by mailing a check to:
Chase Vista Funds Service Center
P.O. Box 419392
Kansas City, Missouri 64141-6392
There is a $100 minimum for each subsequent purchase. All payments should
clearly indicate the shareholder's account number. Provided that the information
on the subscription order form on file with the Fund is still applicable, a
shareholder may re-open an account without filing a new subscription order form
at any time during the year the shareholder's account is closed or during the
following calendar year.
REDEMPTION OF SHARES
A redemption is effected immediately following, and at a price determined in
accordance with, the next determination of net asset value per share of each
Class upon receipt by the Fund's transfer agent of the redemption order (and any
supporting documentation that it may require). Normally, payment for redeemed
shares is made on the same Fund Business Day after the redemption is effected,
provided the redemption request is received prior to 12 noon, New York City
time. However, redemption payments will not be effected unless the check
(including a certified or cashier's check) used for investment has been cleared
for payment by the investor's bank, which can take up to 15 days after
investment. Shares redeemed are not entitled to participate in dividends
declared on the day a redemption becomes effective.
A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee.
When a signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature. It should be signed and guaranteed by
an eligible guarantor institution which includes a domestic bank, a domestic
savings and loan institution, a domestic credit union, a member bank of the
Federal Reserve system or a member firm of a national securities exchange,
pursuant to the Fund's transfer agent's standards and procedures.
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WRITTEN REQUESTS
Shareholders may make a redemption in any amount by sending a written request to
the Fund addressed to:
Chase Vista Funds Service Center
P.O. Box 419392
Kansas City, Missouri 64141-6392
All previously issued certificates submitted for redemption must be endorsed by
the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with signature guaranteed.
Normally the redemption proceeds are paid by check and mailed to the shareholder
of record.
CHECKS
By making the appropriate election on their subscription order form,
shareholders may request a supply of checks that may be used to effect
redemptions from the Class of shares of the Fund in which they invest. The
checks, which will be issued in the shareholder's name, are drawn on a special
account maintained by the Fund with the Fund's agent bank. Checks may be drawn
in any amount of $500 or more. When a check is presented to the Fund's agent
bank, it instructs the Fund's transfer agent to redeem a sufficient number of
full and fractional shares in the shareholder's account to cover the amount of
the check. The use of a check to make a withdrawal enables a shareholder in the
Fund to receive dividends on the shares to be redeemed up to the Fund Business
Day on which the check clears. Checks provided by the Fund may not be certified.
Fund shares purchased by check may not be redeemed by check until the check has
cleared, which can take up to 15 days following the date of purchase.
There is no charge to the shareholder for checks provided by the Fund. The Fund
reserves the right to impose a charge or impose a different minimum check amount
in the future, if the Board of Directors determines that doing so is in the best
interests of the Fund and its shareholders. Shareholders electing the checking
option are subject to the procedures, rules and regulations of the Fund's agent
bank governing checking accounts. Checks drawn on a jointly owned account may,
at the shareholder's election, require only one signature. Checks in amounts
exceeding the value of the shareholder's account at the time the check is
presented for payment will not be honored. Since the dollar value of the account
changes daily, the total value of the account may not be determined in advance
and the account may not be entirely redeemed by check. In addition, the Fund
reserves the right to charge the shareholder's account a fee up to $20 for
checks not honored as a result of an insufficient account value, a check deemed
not negotiable because it has been held longer than six months, an unsigned
check and/or a post-dated check. The Fund reserves the right to terminate or
modify the check redemption procedure at any time or to impose additional fees
following notification to the Fund's shareholders.
Corporations and other entities electing the checking option are required to
furnish a certified
15
<PAGE>
resolution or other evidence of authorization in accordance with the Fund's
normal practices. Individuals and joint tenants are not required to furnish any
supporting documentation. Appropriate authorization forms will be sent by the
Fund or its agents to corporations and other shareholders who select this
option. As soon as the authorization forms are filed in good order with the
Fund's agent bank, it will provide the shareholder with a supply of checks.
TELEPHONE
The Fund accepts telephone requests for redemption from shareholders who elect
this option on their subscription order form. The proceeds of a telephone
redemption may be sent to the shareholders at their addresses or to their bank
accounts, both as set forth in the subscription order form or in a subsequent
written authorization. However, all telephone redemption instructions in excess
of $25,000 will be wired directly to such previously designated bank account.
The Fund may accept telephone redemption instructions from any person with
respect to accounts of shareholders who elect this service and thus such
shareholders risk possible loss of principal and interest in the event of a
telephone redemption not authorized by them. To provide evidence of telephone
instructions, for Chase Vista Select shares, the transfer agent will record
telephone conversations with shareholders. The Fund will employ reasonable
procedures to confirm that telephone redemption instructions are genuine, and
will require that shareholders electing such option provide a form of personal
identification. Failure by the Fund to employ such reasonable procedures may
cause the Fund to be liable for the losses incurred by investors due to
unauthorized or fraudulent telephone instructions.
A shareholder making a telephone withdrawal should call the Fund at
1-800-34-VISTA, and state: (i) the name of the shareholder appearing on the
Funds records, (ii) the shareholders account number with the Fund, (iii) the
amount to be withdrawn, (iv) whether such amount is to be forwarded to the
shareholders designated bank account or address, and (v) the name of the person
requesting the redemption. Usually the proceeds are sent to the designated bank
account or address on the same Fund Business Day the redemption is effected,
provided the redemption request is received before 12 noon, New York City time.
Proceeds are sent the next Fund Business Day if the redemption request is
received after 12 noon, New York City time. The Fund reserves the right to
terminate or modify the telephone redemption service in whole or in part at any
time and will notify shareholders accordingly.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by check. Unless other instructions are given
in proper
16
<PAGE>
form to the Fund's transfer agent, a check for the proceeds of a redemption will
be sent to the shareholders' address of record. If a shareholder elects to
redeem all the shares of the Fund he owns, all dividends accrued to the date of
such redemption will be paid to the shareholder along with the proceeds of the
redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted. Additional exceptions
include any period during which an emergency (as determined by the SEC) exists
as a result of which disposal by the Fund of its portfolio securities is not
reasonably practicable or as a result of which it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or for such other
period as the SEC may by order permit for the protection of the shareholders of
the Fund.
The Fund has reserved the right to redeem the shares of any shareholder if the
net asset value of all the remaining shares in the shareholders or his
Participating Organizations account after a withdrawal is less than $500.
Written notice of a proposed mandatory redemption will be given at least 30 days
in advance to any shareholder whose account is to be redeemed. For Participant
Investor accounts, notice of a proposed mandatory redemption will be given only
to the appropriate Participating Organization. The Participating Organization
will be responsible for notifying the Participant Investor of the proposed
mandatory redemption. During the notice period, a shareholder or Participating
Organization who receives such a notice may avoid mandatory redemption by
purchasing sufficient additional shares (without regard to the normal $100
requirement for an initial investment) to increase his total net asset value to
the minimum amount.
SPECIFIED AMOUNT AUTOMATIC WITHDRAWAL PLAN
Shareholders who own $10,000 or more shares of the Fund may elect to withdraw
shares and receive payment from the Fund of a specified amount of $100 or more
automatically on a monthly or quarterly basis in an amount approved and
confirmed by the Manager. In order to make a payment, a number of shares equal
in aggregate net asset value to the payment amount are redeemed at their net
asset value so that the designated payment is received on approximately the
first or fifteenth day of the month following the end of the selected payment
period. To the extent that the redemptions to make plan payments exceed the
number of shares purchased through reinvestment of dividends and distributions,
the redemptions reduce the number of shares purchased on original investment,
and may ultimately liquidate a shareholders investment.
17
<PAGE>
The election to receive automatic withdrawal payments may be made at the time of
the original subscription by so indicating on the subscription order form. The
election may also be made, changed or terminated at any later time by the
participant. Because the withdrawal plan involves the redemption of Fund shares,
such withdrawals may constitute taxable events to the shareholder. However, the
Fund does not expect that there will be any realizable capital gains.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends equal to all its net investment income (excluding
long-term capital gains and losses, if any, and amortization of market discount)
on each Fund Business Day and pays dividends monthly. There is no fixed dividend
rate. In computing these dividends, interest earned and expenses are accrued
daily.
Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year.
All dividends and distributions of capital gains are automatically invested, at
no charge, in additional Fund shares of the same Class of shares immediately
upon payment thereof unless a shareholder has elected by written notice to the
Fund to receive either of such distributions in cash.
Because Chase Vista Select shares bear a service fee under the Fund's 12b-1
Plan, the net income of and the dividends payable to the Chase Vista Select
shares will be lower than that payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of the Fund will, however, be declared
and paid on the same days at the same times and, except as noted with respect to
the service fees payable under the Plan, will be determined in the same manner
and paid in the same amounts.
EXCHANGE PRIVILEGE
Shareholders of the Chase Vista Select shares may exchange their shares at
relative net asset value for Vista shares of the Chase Vista U.S. Government
Money Market Fund, the Chase Vista 100% U.S. Treasury Securities Money Market
Fund, the Chase Vista Treasury Plus Money Market Fund, the Chase Vista Federal
Money Market Fund, the Chase Vista Prime Money Market Fund, the Chase Vista Cash
Management Fund, the Chase Vista Tax Free Money Market Fund, the Chase Vista New
York Tax Free Money Market Fund, the Chase Vista California Tax Free Money
Market Fund, and the Chase Vista Select shares of any Reich & Tang Asset
Management L.P. sponsored fund. Shareholders may also exchange at relative net
asset value plus any applicable sales charges, the Chase Vista Select shares of
the Fund for the shares of the non-money market Chase Vista Funds, in accordance
with the terms of the then-current prospectus of the fund being acquired.
Shareholders should read the prospectus of the Chase Vista Fund into which
shares are being exchanged carefully prior to any exchange and should retain it
for future reference. With respect to
18
<PAGE>
exchanges into a fund that charges a front-end sales charge, such sales charge
will not be applicable if the shareholder previously acquired his Chase Vista
Select shares by exchange from such fund. Under the exchange privilege, Chase
Vista Select shares may be exchanged for shares of other funds only if those
funds are registered in the states where the exchange may legally be made. In
addition, the account registration for the Chase Vista Funds into which Chase
Vista Select shares are being exchanged must be identical to that of the account
registration for the Fund from which shares are being redeemed. Any such
exchange may create a gain or loss to be recognized for Federal income tax
purposes. Normally, shares of the fund to be acquired are purchased on the
redemption date, but such purchase may be delayed by either Fund up to five
business days if the Fund determined that it would be disadvantaged by an
immediate transfer of the proceeds. (This privilege may be amended or terminated
at any time following 60 day's written notice.) Arrangements have been made for
the acceptance of instructions by telephone to exchange shares if certain
pre-authorizations or indemnifications are accepted and on file. Further
information is available from the Transfer Agent.
TAX CONSEQUENCES
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"). 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 governments, 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 other types of
obligations that New Jersey is prohibited from taxing under the Constitution,
the laws of the United States of America or the laws of New Jersey ("Territorial
Municipal Obligations") also should be exempt from the New Jersey gross income
tax provided the Fund complies with New Jersey law.
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
19
<PAGE>
Municipal Obligations and properly designated by the Fund not later than 60 days
after the close of its taxable year 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. The
Fund does not expect to realize long-term capital gains, and thus does not
contemplate distributing "capital gain dividends" or having undistributed
capital gain income within the meaning of the Code. The Fund will inform
shareholders of the amount and nature of its income and gains in a written
notice mailed to shareholders not later than 60 days after the close of the
Funds taxable year. For Social Security recipients, interest on tax-exempt
bonds, including "exempt interest dividends" paid by the Fund, is to be added to
adjusted gross income 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 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 tax item). In
certain cases Subchapter S corporations with accumulated earnings and profits
from Subchapter C years will be subject to a tax on "passive investment income",
including tax-exempt interest. 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 an interest in the underlying Municipal Obligations and that the
interest thereon will be exempt from regular Federal income taxes to the Fund to
the same extent as the interest on the underlying Municipal Obligations. Counsel
has pointed out that the Internal Revenue Service has announced it will not
ordinarily issue advance rulings on the question of the ownership of securities
or participation interests therein subject to a put and could reach a conclusion
different from that reached by counsel.
20
<PAGE>
In South Carolina v. Baker, the United States Supreme Court held that the
Federal government may constitutionally require states to register bonds they
issue and may subject the interest on such bonds to Federal tax if not
registered. The Court further held that there is no constitutional prohibition
against the Federal governments taxing the interest earned on state or other
municipal bonds. The Supreme Court decision affirms the authority of the Federal
government to regulate and control bonds such as the Municipal Obligations and
to tax the interest on such bonds in the future. The decision does not, however,
affect the current exemption from taxation of the interest earned on the
Municipal Obligations in accordance with Section 103 of the Code.
The Fund may invest a portion of its assets in securities that generate income
that is not exempt from Federal or state income tax. Income exempt from Federal
income tax may be subject to state and local income tax. Capital gains
distributed by the Fund may be taxable.
NEW JERSEY INCOME TAXES
The following is based upon the advice of Sills Cummis Radin Tischman Epstein &
Gross, P.A., special tax counsel to the Fund. 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 (i) 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 (ii) 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 Radin Tischman Epstein & Gross, P.A., assuming that the Fund
constitutes a qualified investment fund and that
21
<PAGE>
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.
Although the Fund intends to maintain a $1.00 per share net asset value, the
redemption of shares may result in the investors receipt of more or less than he
paid for his shares and, thus, in a taxable gain or loss to the investor.
However, if the Fund is a New Jersey qualified investment fund, any such gains
received by a New Jersey resident individual shareholder should not be subject
to the New Jersey gross income tax.
An exchange pursuant to the exchange privilege is treated for Federal income tax
purposes as a sale on which a shareholder may realize a taxable gain or loss.
V. DISTRIBUTION ARRANGEMENTS
RULE 12B-1 FEES
Investors do not pay a sales charge to purchase shares of the Fund. However, the
Fund pays fees in connection with the distribution of shares and for services
provided to the Chase Vista Select shareholders. The Fund pays these fees from
its assets on an ongoing basis and therefore, over time, the payment of these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
The Fund's Board of Directors has adopted a Rule 12b-1 distribution and service
plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Chase Vista
Select shares of the Fund).
Under the Distribution Agreement, the Distributor serves as distributor of the
Funds shares. For nominal consideration (i.e., $1.00) and as agent for the Fund,
the Distributor solicits orders for the purchase of the Funds' shares, provided
that any orders will not be binding on the Fund until accepted by the Fund as
principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect to the Chase Vista Select shares, a service fee equal to .20% per annum
of the Chase Vista Select shares' average daily net assets (the "Shareholder
Servicing Fee") for providing
22
<PAGE>
personal shareholder services and for the maintenance of shareholder accounts.
The fee is accrued daily and paid monthly. Any portion of the fee may be deemed
to be used by the Distributor for payments to Participating Organizations with
respect to their provision of such services to their clients or customers who
are shareholders of the Chase Vista Select shares of the Fund. The Class B
shareholders will not receive the benefit of such services from Participating
Organizations and, therefore, will not be assessed a Shareholder Servicing Fee.
The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the management fee and past profits for the
following purposes: (i) to defray costs, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing on behalf of the Chase Vista
Select shares of the Fund, (ii) to compensate certain Participating
Organizations for providing assistance in distributing the Chase Vista Select
shares of the Fund, and (iii) to pay the costs of printing and distributing the
Fund's Prospectus to prospective investors, and to defray the cost of the
preparation and printing of brochures and other promotional materials, mailings
to prospective shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Fund's Chase Vista Select shares. The Distributor may
also make payments from time to time from its own resources, which may include
the Shareholding Servicing Fee (with respect to Chase Vista Select shares) and
past profits, for the purposes enumerated in (i) above. The Distributor will
determine the amount of such payments made pursuant to the Plan, provided that
such payments will not increase the amount which the Fund is required to pay to
the Manager and Distributor for any fiscal year under either the Investment
Management Contract in effect for that year or under the Shareholder Servicing
Agreement in effect for that year.
23
<PAGE>
IV. FINANCIAL HIGHLIGHTS
This financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The highlights reflect an investment
made in the Class A shares since there were no Chase Vista Select shares issued
during the periods covered by this table. The total returns in the table
represent the rate that an investor would have earned on an investment in the
Fund (assuming reinvestment of all dividends and distributions). This
information, except for the six months ended April 30, 1999, has been audited by
McGladrey and Pullen, LLP, whose report, along with the Fund's financial
statements, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
<S> <C>
Six Months Ended
April 30, 1999
CLASS A (unaudited)
- ------- ----------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $1.00
------
Income from investment operations:
Net investment income....... 0.011
Less distributions:
Dividends from net investment income ( 0.011)
Net asset value, end of period... $1.00
======
Total Return..................... 2.27%*
Ratios/Supplemental Data
Net assets, end of period (000).. $156,490
Ratios to average net assets:
Expenses....................... 0.85%*+
Net investment income.......... 2.24%*
Management, shareholder servicing
and administration fees waived. 0.00%
* Annualized
+ Includes expense offsets
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Year Ended
<S> <C> <C> <C> <C> <C>
CLASS A October 31,
- ------- --------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------- ------- --------
Income from investment operations:
Net investment income....... 0.026 0.027 0.027 0.030 0.020
Less distributions:
Dividends from net investment income ( 0.026) ( 0.027) ( 0.027) ( 0.030) ( 0.020)
------ ------ ------ ------ ------
Net asset value, end of period... $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== =======
Total Return..................... 2.65% 2.70% 2.69% 3.08% 2.03%
Ratios/Supplemental Data
Net assets, end of period (000).. $166,234 $217,529 $151,421 $130,128 $105,929
Ratios to average net assets:
Expenses....................... 0.84%+ 0.86%+ 0.78%+ 0.72% 0.66%
Net investment income.......... 2.60% 2.66% 2.65% 3.02% 2.02%
Management, shareholder servicing
and administration fees waived. 0.00% 0.00% 0.06% 0.18% 0.26%
* Annualized
+ Includes expense offsets
</TABLE>
25
<PAGE>
A Statement of Additional Information (SAI) dated July 9, 1999, and the Fund's
Annual and Semi-Annual Reports include additional information about the Fund and
its investments and are incorporated by reference into this Prospectus. You may
obtain the SAI, the Annual and Semi-Annual Reports and other material
incorporated by reference without charge by calling the Fund at 1-800-221-3079.
To request other information, call your financial intermediary or the Fund.
A current SAI has been filed with the Securities and Exchange Commission. You
may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
Chase Vista Funds Fulfillment Center
393 Manley Street
Bridgewater, MA 02379-1039
811-6152
PSMM7-9-399
<PAGE>
[logo: CHASE VISTA FUNDS (SM)]
New Account Application
Chase Vista Money Market Funds
(Vista Shares)
Please complete and mail to:
Chase Vista Funds Service Center, P.O. Box 419392,
Kansas City, MO 64141-6392
1. Account Registration
- --------------------------------------------------------------------------------
Please Print name clearly and exactly as account is to be registered
FOR INDIVIDUAL:
Note: To establish an account beneficiary, check TOD box below and designate
beneficiaries in the space provided, or include on a separate page:
_
[_] TOD___________________________________________________________
________________________ ___ _________________
[________________________] [___] [_________________]
First Name M.I. Last Name
_ _ _ _ _ _ _ _ _
[_] [_] [_] -[_] [_] -[_] [_] [_] [_]
Social Security Number
FOR JOINT ACCOUNT:
In the case of joint registration, this account will be registered joint tenants
with rights of survivorship and not tenants in common, unless otherwise stated
by the investor.
Note: To establish an account beneficiary, check TOD box below and designate
beneficiaries in the space provided, or include on a separate page:
_
[_] TOD___________________________________________________________
________________________ ___ _________________
[________________________] [___] [_________________]
First Name M.I. Last Name
_ _ _ _ _ _ _ _ _
[_] [_] [_] -[_] [_] -[_] [_] [_] [_]
Social Security Number
________________________ ___ _________________
[________________________] [___] [_________________]
First Name M.I. Last Name
_ _ _ _ _ _ _ _ _
[_] [_] [_] -[_] [_] -[_] [_] [_] [_]
Social Security Number
[logo CHASE] APP2-8-199
<PAGE>
[logo: CHASE VISTA FUNDS (SM)] New Account Application
Chase Vista Money Market Funds
(Vista Shares)
FOR A MINOR:
________________________ ___ _________________
[________________________] [___] [_________________]
Custodian First Name M.I. Last Name
Custodian for
________________________ ___ _________________
[________________________] [___] [_________________]
Minor's First Name M.I Last Name
_ _ _ _ _ _ _ _ _
[_] [_] [_] -[_] [_] -[_] [_] [_] [_]
Minor's Social Security Number
__________________________
Under the [__________________________] Uniform Gifts/Transfers to Minors Act.
Name of State
FOR TRUST, CORPORATION, PARTNERSHIP OR OTHER LEGAL ENTITY:
The Registered owner is a:
_ _
[_] Corporation [_] Trust
_ _
[_] Partnership [_] Non-Profit or Charitable Organization
_
[_] Other______________________________________
____________________________________________________________________________
[____________________________________________________________________________]
Name of Entity (If a Trust, include date of agreement and type)
____________________________________________________________________________
[____________________________________________________________________________]
____________________________________________________________________________
[____________________________________________________________________________]
Authorized Individual
_ _ _ _ _ _ _ _ _ _ __________________________
[_] [_] [_] -[_] [_] -[_] [_] [_] [_] [_] [__________________________]
Tax I.D. Number Title
2. Mailing Address
- --------------------------------------------------------------------------------
________________________________________ ________________
[________________________________________] [________________]
Street Apt. No.
_______________________________ _______ ________________
[_______________________________] [_______] [________________]
City State Zip
_________________________ _________________________
[(_______)_________________] [(_______)_________________]
Daytime Phone Number Evening Phone Number
____________________________________________________________
[____________________________________________________________]
Country
<PAGE>
3. Initial Investment
$2,500 minimum initial investment per fund/account or $250 initial investment
with a $200 systematic monthly purchase
- --------------------------------------------------------------------------------
A. Please indicate the name of the Fund you wish to invest in and make your
check payable to the Fund(s).
Chase Vista Fund Name (Fund Number) Amount
_ ___________________________
[_] California Tax Free Money Market Fund (99) [$__________________________]
_ ___________________________
[_] Cash Management Money Market Fund (223) [$__________________________]
_ ___________________________
[_] Federal Money Market Fund (353) [$__________________________]
_ ___________________________
[_] New York Tax Free Money Market Fund (3) [$__________________________]
_ ___________________________
[_] Prime Money Market Fund (283) [$__________________________]
_ ___________________________
[_] Select Shares of Connecticut Daily [$__________________________]
Tax Free Income Fund (140)
_ ___________________________
[_] Select Shares of New Jersey Daily [$__________________________]
Municipal Income Fund (141)
_ ___________________________
[_] Tax Free Money Market Fund (2) [$__________________________]
_ ___________________________
[_] Treasury Plus Money Market Fund (678) [$__________________________]
_ ___________________________
[_] U.S. Government Money Market Fund (220) [$__________________________]
_ ___________________________
[_] 100% U.S. Treasury Securities [$__________________________]
Money Market Fund (677)
B. Please have your representative fill in this information if he/she opened
your account. This will avoid a duplicate order.
______________________________________ __________________________________
[______________________________________] [__________________________________]
Trade Date Confirm Number
____________________________________________________________________________
[____________________________________________________________________________]
Account Number
P
l
e
a
s
e
t
e
a
r
h
e
r
e
<PAGE>
4. For Dealer Use Only
When opening your account through a representative, have him/her complete
this section
- --------------------------------------------------------------------------------
We guarantee the signature and legal capacity of the applicant.
____________________________________________________________________________
[____________________________________________________________________________]
Dealer/Company Name
__________________________________ ______________________________________
[__________________________________] [______________________________________]
Dealer Number Branch and Region Number (if applicable)
____________________________________________________________________________
[____________________________________________________________________________]
Address
__________________________________ ______________________________________
[__________________________________] [______________________________________]
Representative Name Rep. #
____________________________________________________________________________
[(_______)___________________________________________________________________]
Daytime Phone Number
____________________________________________________________________________
[____________________________________________________________________________]
Authorized Signature
5. Distributions
Please indicate how you would like to receive distributions (check only one)
- --------------------------------------------------------------------------------
_
1. [_] Dividends reinvested in additional shares
_
2. [_] Dividends automatically deposited to your registered bank account
(Please complete Section 7)
_
3. [_] Dividends mailed to your address in Section 2
6. Telephone Privileges
You will be able to execute telephone transactions by calling 1-800-34-VISTA
(800-348-4782) 24 hours a day for automated service, 8:30 am - 7 pm EST to
speak with a service representative
- --------------------------------------------------------------------------------
You will automatically receive:
[X] Yes [ ] No Telephone Purchases -- Your purchase will be deducted from the
account you designate in Section 7 -- $100 minimum.
[X] Yes [ ] No Telephone Exchanges -- Into established Chase Vista Fund(s)
-- $100 minimum. Into new Chase Vista Fund(s) --
$2,500 minimum.
[X] Yes [ ] No Telephon
check amount $25,000.
<PAGE>
-------------------------
staple voided check h |
e |
r |
e |
7. Bank Account Designation
This section must be completed to permit certain options chosen in
Sections 5, 6, 8 and 9
- --------------------------------------------------------------------------------
Account name must match the name in Section 1. A blank/voided check is required
for account and bank routing information.
____________________________________________________________________________
[____________________________________________________________________________]
Name of Bank Branch
____________________________________________________________________________
[____________________________________________________________________________]
Bank Address City/State/Zip
____________________________________________________________________________
[____________________________________________________________________________]
Type of Account (Checking/Savings)
____________________________________________________________________________
[____________________________________________________________________________]
Account Number
_
[_] Please check this Box to confirm voided check is attached.
8. Systematic Investment Plan
Amounts (minimum $100) will be automatically drawn on your bank account and
invested in your Chase Vista Fund account
- --------------------------------------------------------------------------------
Authorization Form
Invest automatically the amount of $_________________ on or about the
___________ day. Purchases will be made monthly unless you wish to elect
quarterly by checking this box [_]. If the day you selected for your automatic
purchase falls on a holiday or a weekend, the purchase could be delayed. Funds
will be drawn from (check one):
1. [_] my/our bank account indicated in Section 7.
2. [_] my/our Chase Vista Fund Money Market Account and invested in another
Chase Vista Fund, subject to applicable sales charges.
_ _
Fund Name: _______________________________Class of Shares: [_] A [_] B
Your first automatic monthly investment will occur no sooner than two weeks
after the receipt of your application.
<PAGE>
9. Systematic Redemption Plan
This is a convenient way to receive payments from your fund account. This
Plan is subject to minimum account balances, minimum monthly or quarterly
redemptions, and any applicable sales charges dependent upon the class of
shares you own.
- --------------------------------------------------------------------------------
Please make payments of $_______________ prior to the first day of every:
[_] month or [_] quarter beginning with the month of _________________.
Your Application must be received in good order at least two weeks prior to
first actual redemption date.
Check One: [_] Redemption proceeds automatically deposited to the account you
designate in Section 7, or
[_] Issue check on the 25th of the month and make check
payable to:
____________________________________________________________________________
[____________________________________________________________________________]
Individual or Company Name
____________________________________________________________________________
[____________________________________________________________________________]
Street Address City/State/Zip
10. Checkwriting Authorization & Signature
- --------------------------------------------------------------------------------
_
[_] Check here if you would like checkwriting privileges. ($500 minimum per
check.) Only one signature will be required on joint accounts.
Checkwriting drafts will be issued 15 days after account is funded by check, 7
days if funded by Automated Clearing House Purchase.
11. Acknowledgment, Certification & Signatures
This section must be signed in order to open a Chase Vista Fund account
- --------------------------------------------------------------------------------
Under the penalties of perjury, the undersigned certifies that (1) he/she is a
citizen of [_] the United States or [_] (state country) ______________________,
(2) the Social Security Number or Taxpayer Identification Number shown in
Section 1 is correct, and (3) he/she is not subject to backup withholding either
because he/she has not been notified that he/she is subject to backup
withholding as a result of a failure to report all dividends, or the Internal
Revenue Service has notified him/her that he/she is no longer subject to backup
withholding. (If the undersigned is subject to backup withholding, cross out the
words after (3) above.)
By signing this Application, the undersigned (1) appoints his/her broker-dealer
or shareholder servicing agent, and/or authorized sub-agent, as his/her agent
for all transactions on his/her behalf with any Chase Vista Fund; (2) certifies
that he/she has received, reviewed and accepts this Application (including the
services described herein) and the current prospectus(es) of the Chase Vista
Fund(s) in which he/she is investing and accepts the related statement(s) of
additional information; and (3) agrees that all statements in this Application
apply to shares of any Chase Vista Fund or Chase Vista Select Shares of other
funds into which his/her shares are transferred.
Subject to the terms and conditions herein and in the applicable Fund's
prospectus and statement of additional information, the undersigned releases
and agrees to hold harmless the Chase Vista Funds and its agents and/or
sub-agents against any claim, liability, loss, damage, and expense for any act
or failure to
<PAGE>
act in connection with Fund shares, any related investment account, privileges
or services, and oral and written instructions relating thereto. Shareholders
should be aware that Chase and its affiliates may exchange among themselves
certain information about the shareholder and his account.
The undersigned certifies that he/she (1) was not offered any advice or
recommendation on investing in any Fund by any commercial bank; and (2)
understands that (i) no investment account established with respect to the Chase
Vista Funds is a deposit account and neither such account nor Fund shares are
FDIC insured or insured by the Federal Reserve Board or any other agency; (ii)
Fund shares are not obligations of, endorsed by, nor guaranteed by, Chase or any
commercial bank; and (iii) the undersigned must make his/her own investment
decisions and assume all risk of loss -- including possible loss of principal --
resulting from decisions to purchase, exchange or sell shares of any Fund(s).
The Internal Revenue Service does not require your consent to any provision of
this document other than the certifications required to avoid backup
withholding.
_ _
Check One: [_] U.S. Citizen [_] Resident Alien
_
[_] Non-Resident Alien; Country of Tax Residency ___________________
Individual or Custodial Accounts
_____________________________________________________________ _____________
[_____________________________________________________________] [_____________]
Signature of Individual or Custodian Date
_____________________________________________________________ _____________
[_____________________________________________________________] [_____________]
Signature of Joint Tenant (if any) Date
Corporations, Partnerships, Trusts, etc.
_____________________________________________________________ _____________
[_____________________________________________________________] [_____________]
Signature of Corporate Officer, General Partner, Trustee, etc. Date
_____________________________________________________________ _____________
[_____________________________________________________________] [_____________]
Signature of Corporate Officer, General Partner, Trustee, etc. Date
- --------------------------------------------------------------------------------
Please Complete the Following Sections if You Are an Institutional Investor Only
- --------------------------------------------------------------------------------
12. Person(s) Authorized To Conduct Transactions
- --------------------------------------------------------------------------------
The following persons ("Authorized Person(s)") are currently officers, trustees,
general partners, or other authorized agents of the Shareholder. Any _____* of
the Authorized Person(s) is, by lawful and appropriate action of the
Shareholder, a person entitled to give instructions regarding purchases and
redemptions or to make inquiries, regarding your Account.
_____________________________________ _____________________ _____________
[_____________________________________] [_____________________] [_____________]
Name/Title Signature Date
_____________________________________ _____________________ _____________
[_____________________________________] [_____________________] [_____________]
Name/Title Signature Date
_____________________________________ _____________________ _____________
[_____________________________________] [_____________________] [_____________]
Name/Title Signature Date
_____________________________________ _____________________ _____________
[_____________________________________] [_____________________] [_____________]
Name/Title Signature Date
<PAGE>
DST Systems, Inc. ("DST") may, without inquiry, act upon the instructions
(whether verbal, written, or provided by wire, telecommunication, or any other
process) of any person claiming to be an Authorized Person. Neither DST nor any
entity on behalf of which DST is acting shall be liable for any claims or
expenses (including legal fees) or for any losses, resulting from actions taken
upon any instructions believed to be genuine. DST may continue to rely on the
instructions made by any person claiming to be an Authorized Person until it is
informed through an amended Application that the person is no longer an
Authorized Person and it has a reasonable period (not to exceed one week) to
process the amended Application. Provisions of this Application shall be equally
applicable to any successor of DST.
*If this space is left blank, any one Authorized Person is authorized to give
instructions and make inquiries. Verbal instructions will be accepted from any
one Authorized Person. Written instructions will require signatures of the
number of Authorized Persons indicated in this space.
13. Certificate of Authority
- --------------------------------------------------------------------------------
Institutional Investors must complete one of the following two Certificates of
Authority.
A. FOR CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
(With a Board of Directors or Board of Trustees).
I, ____________________________________, Secretary of the above-named
Shareholder, do hereby certify that a meeting on _______________, at which a
quorum was present throughout, the Board of Directors (Board of Trustees) of the
shareholder duly adopted a resolution which is in full force and effect and in
accordance with the Shareholder's charter and by-laws, which resolution did the
following: (1) empowered the officer/trustee executing this Application to do
so, on behalf of the Shareholder; (2) empowered the above-named Authorized
Person(s) to effect securities transactions for the Shareholder on the terms
described above; (3) authorized the Secretary to certify, from time to time, the
names and titles of the officers of the Shareholder and to notify DST when
changes in officers occur; and (4) authorized the Secretary to certify that such
a resolution has been duly adopted and will remain in full force and effect
until DST receives a duly enacted amendment to the Certification form.
Witness my hand and seal on behalf of the Shareholder this _______ day
of ___________________, 19_____
Secretary_________________________________________
The undersigned officer (other than the Secretary) hereby certifies that the
foregoing instrument has been signed by the Secretary of the Shareholder.
____________________________________________________________________________
[____________________________________________________________________________]
Certifying Officer of the Corporation or Unincorporated Association
B. PARTNERSHIPS AND TRUSTS (Even if you are the sole trustee)
The undersigned certify that they are all the general partners/trustees of the
Shareholder and that they have done the following under the authority of the
Shareholder's partnership agreement/trust instrument: (1) empowered the general
partner/trustee executing this Application to do so on behalf of the
shareholder; (2) empowered the above-named Authorized Person(s) to effect
securities transactions for the Shareholder on the terms described above; and
(3) authorized the Secretary to certify, from time to time, the names of the
general partners/trustees of the shareholder and to notify DST when changes in
general partners/trustees occur. This authorization will remain in full force
and effect until DST receives a further duly executed certification. If there
are not enough spaces here for all the necessary signatures, complete a separate
certificate containing the language of Certificate B and attach it to the
Application.
____________________________________________________________________________
[____________________________________________________________________________]
____________________________________________________________________________
[____________________________________________________________________________]
____________________________________________________________________________
[____________________________________________________________________________]
____________________________________________________________________________
[____________________________________________________________________________]
<PAGE>
- --------------------------------------------------------------------------------
NEW JERSEY
DAILY MUNICIPAL 600 Fifth Avenue, New York, NY 10020
INCOME FUND, INC. (212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
July 9, 1999
RELATING TO THE NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
Prospectus Dated March 1, 1999
AND THE
CHASE VISTA SELECT CLASS OF SHARES OF THE NEW JERSEY DAILY MUNICIPAL
INCOME FUND, INC.
PROSPECTUS DATED JULY 9, 1999
This Statement of Additional Information (SAI) is not a Prospectus. The SAI
expands upon and supplements the information contained in the current
Prospectuses of New Jersey Daily Municipal Income Fund, Inc. and Chase Vista
Select shares of New Jersey Daily Municipal Income Fund, Inc. (each, the
"Fund"), dated March 1, 1999, and July 9, 1999 respectively, and should be read
in conjunction with each of the Fund's Prospectuses.
A Prospectus may be obtained from any Participating Organization or by writing
or calling the Fund toll-free at (800) 221-3079. The Financial Statements of the
Fund have been incorporated by reference into the SAI from the Fund's Annual and
Semi-Annual Reports. The Annual and Semi-Annual Reports are available, without
charge, upon request by calling the toll-free number provided. The material
relating to Purchase, Redemption and Pricing of Shares has been incorporated by
reference to the Prospectuses for each Class.
If you wish to invest in Chase Vista Select shares of the New Jersey Daily
Municipal Income Fund, Inc. you should obtain a separate prospectus by writing
to Chase Vista Service Center, P.O. Box 419392, Kansas City, Missouri 64141-6392
or by calling (800) 34-VISTA.
This Statement of Additional Information is incorporated by reference into the
respective Prospectus in its entirety.
<TABLE>
<CAPTION>
Table of Contents
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund History..........................................2 Capital Stock and Other Securities........................21
Description of the Fund and Its Investments and Purchase, Redemption and Pricing of Shares................21
Risks...............................................2 Taxation of the Fund......................................22
Management of the Fund................................14 Underwriters..............................................24
Control Persons and Principal Holders of Calculation of Performance Data...........................25
Securities..........................................16 Financial Statements......................................25
Investment Advisory and Other Services................16 Description of Ratings....................................26
Brokerage Allocation and Other Practices..............20 Corporate Taxable Equivalent Yield Table..................27
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
I. FUND HISTORY
The Fund was incorporated on July 24, 1990 in the state of Maryland.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The Fund is an open-end, management investment company that is a short-term,
tax-exempt money market fund. The Fund's investment objectives are to seek a
high level of current income exempt from regular Federal tax and New Jersey
gross income tax consistent with preserving capital, maintaining liquidity and
stabilizing principal. No assurance can be given that these objectives will be
achieved.
The following discussion expands upon the description of the Fund's investment
objectives and policies in the Prospectus.
The Fund's assets will be invested primarily in (i) high quality debt
obligations issued by or on behalf of the State of New 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 (ii) Participation Certificates (which, in the opinion of Battle Fowler
LLP, counsel to the Fund, cause the Fund to be treated as the owner of the
underlying Municipal Obligations for Federal income tax purposes) in Municipal
Obligations purchased from banks, insurance companies or other financial
institutions ("Participation Certificates"). Dividends paid by the Fund are
"exempt-interest dividends" by virtue of being properly designated by the Fund
as derived from Municipal Obligations and Participation Certificates. They will
be exempt from regular Federal income tax provided the Fund qualifies as a
regulated investment company under Subchapter M of the Code and 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 regular Federal income taxation, existing law excludes such
interest from regular Federal income tax. However, such interest, including
"exempt-interest dividends" may be subject to the Federal alternative minimum
tax.
Securities, the interest income on which may be subject to the Federal
alternative minimum tax (including Participation Certificates), may be purchased
by the Fund without limit. Securities, the interest income on which is subject
to regular Federal, state and local income tax, will not exceed 20% of the value
of the Fund's total assets. (See "Federal Income Taxes" herein.) Exempt-interest
dividends paid by the Fund that are correctly identified by the Fund as derived
from obligations issued by or on behalf of the State of New Jersey or any New
Jersey local governments, 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
New Jersey gross income tax provided the Fund complies with applicable 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 these will be designated by the
Fund as derived from interest income which will be, in the opinion of bond
counsel to the issuer at the date of issuance, exempt from regular Federal
Income Tax but will be subject to the New Jersey gross 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 $1.00 per share of each Class. There can be no
assurance that this value will be maintained.
The Fund may hold uninvested cash reserves pending investment. The Fund's
investments may include "when-issued" Municipal Obligations, stand-by
commitments and taxable repurchase agreements. Although the Fund will attempt to
invest 100% of its assets in Municipal Obligations and in Participation
Certificates, the Fund reserves the right to invest up to 20% of the value of
its total assets in securities, the interest income on which is subject to
regular Federal, state and local income tax. The Fund will invest more than 25%
of its assets in Participation Certificates purchased from banks in industrial
revenue bonds and other New 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
2
<PAGE>
characteristics of the banking industry and the risks which such an
investment may entail. (See "Variable Rate Demand Instruments and Participation
Certificates" herein.) The investment objectives of the Fund described in the
preceding paragraphs of this section may not be changed unless approved by the
holders of a majority of the outstanding shares of the Fund that would be
affected by such a change. As used herein, the term "majority of the outstanding
shares" of the Fund means, respectively, the vote of the lesser of (i) 67% or
more of the shares of the Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented by proxy,
or (ii) more than 50% of the outstanding shares of the Fund.
The Fund may only purchase United States dollar-denominated securities that have
been determined by the Fund's Board of Directors to present minimal credit risks
and that are Eligible Securities at the time of acquisition. The term Eligible
Securities means: (i) securities which have or are deemed to have remaining
maturities of 397 days or less and rated in the two highest short-term rating
categories by any two nationally recognized statistical rating organizations
("NRSROs") or in such categories by the only NRSRO that has rated the Municipal
Obligations (collectively, the "Requisite NRSROs"); or (ii) unrated securities
determined by the Fund's Board of Directors to be of comparable quality. In
addition, securities which have or are deemed to have remaining maturities of
397 days or less but that at the time of issuance were long-term securities
(i.e. with maturities greater than 366 days) are deemed unrated and may be
purchased if such had received a long-term rating from the Requisite NRSROs in
one of the three highest rating categories. Provided, however, that such may not
be purchased if it (i) does not satisfy the rating requirements set forth in the
preceding sentence and (ii) has received a long-term rating from any NRSRO that
is not within the three highest long-term rating categories. A determination of
comparability by the Board of Directors is made on the basis of its credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support of the
securities. While there are several organizations that currently qualify as
NRSROs, two examples of NRSROs are Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies, ("S&P") and Moody's Investors Service, Inc.
("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in the
case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in the
case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's in
the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "VMIG-1" by Moody's or "SP-1/AA" by S&P.
Such instruments may produce a lower yield than would be available from less
highly rated instruments.
Subsequent to its purchase by the Fund, a rated security may cease to be rated
or its rating may be reduced below the minimum required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall promptly reassess
whether the security presents minimal credit risks and shall cause the Fund to
take such action as the Board of Directors determines is in the best interest of
the Fund and its shareholders. However, reassessment is not required if the
security is disposed of or matures within five business days of the Manager
becoming aware of the new rating and provided further that the Board of
Directors is subsequently notified of the Manager's actions.
In addition, in the event that a security (i) is in default, (ii) ceases to be
an Eligible Security under Rule 2a-7 of the Investment Company Act of 1940 (the
"1940 Act") or (iii) is determined to no longer present minimal credit risks, or
an event of insolvency occurs with respect to the issues of a portfolio security
or the provider of any Demand Feature or Guarantee, the Fund will dispose of the
security absent a determination by the Fund's Board of Directors that disposal
of the security would not be in the best interests of the Fund. Disposal of the
security shall occur as soon as practicable consistent with achieving an orderly
disposition by sale, exercise of any demand feature or otherwise. In the event
of a default with respect to a security which immediately before default
accounted for 1/2 of 1% or more of the Fund's total assets, the Fund shall
promptly notify the SEC of such fact and of the actions that the Fund intends to
take in response to the situation.
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations or Participation Certificates
issued by a single issuer. However, the Fund shall not invest more
3
<PAGE>
than 5% of its total assets in Municipal Obligations or Participation
Certificates issued by a single issuer, unless the Municipal Obligations are of
the highest quality.
The Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Code. The Fund will be restricted in that at the close of each quarter
of the taxable year, at least 50% of the value of its total assets must be
represented by cash, government securities, regulated investment company
securities and other securities which is limited in respect of any one issuer to
not more than 5% in value of the total assets of the Fund and to not more than
10% of the outstanding voting securities of such issuer. In addition, at the
close of each quarter of its taxable year, not more than 25% in value of the
Fund's total assets may be invested in securities of one issuer other than
Government securities or regulated investment company securities. The
limitations described in this paragraph regarding qualification as a "regulated
investment company" are not fundamental policies and may be revised to the
extent applicable Federal income tax requirements are revised. (See "Federal
Income Taxes" herein.)
DESCRIPTION OF MUNICIPAL OBLIGATIONS
As used herein, "Municipal Obligations" include the following as well as
"Variable Rate Demand Instruments" and "Participation Certificates".
1. Municipal Bonds with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. Municipal Bonds are debt
obligations of states, cities, counties, municipalities and municipal
agencies (all of which are generally referred to as "municipalities"). They
generally have a maturity at the time of issue of one year or more and are
issued to raise funds for various public purposes such as construction of a
wide range of public facilities, to refund outstanding obligations and to
obtain funds for institutions and facilities.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by
the issuer's pledge of its faith, credit and taxing power for the payment
of principal and interest. Issuers of general obligation bonds include
states, counties, cities, towns and other governmental units. The principal
of, and interest on revenue bonds are payable from the income of specific
projects or authorities and generally are not supported by the issuer's
general power to levy taxes. In some cases, revenues derived from specific
taxes are pledged to support payments on a revenue bond.
In addition, certain kinds of "private activity bonds" are issued by public
authorities to provide funding for various privately operated industrial
facilities (hereinafter referred to as "industrial revenue bonds" or
"IRBs"). Interest on IRBs is generally exempt, with certain exceptions,
from regular Federal income tax pursuant to Section 103(a) of the Code,
provided the issuer and corporate obligor thereof continue to meet certain
conditions. (See "Federal Income Taxes" herein.) IRBs are, in most cases,
revenue bonds and do not generally constitute the pledge of the credit of
the issuer of such bonds. The payment of the principal and interest on IRBs
usually depends solely on the ability of the user of the facilities
financed by the bonds or other guarantor to meet its financial obligations
and, in certain instances, the pledge of real and personal property as
security for payment. If there is no established secondary market for the
IRBs, the IRBs or the Participation Certificates in IRBs purchased by the
Fund will be supported by letters of credit, guarantees or insurance that
meet the definition of Eligible Securities at the time of acquisition and
provide the demand feature which may be exercised by the Fund at any time
to provide liquidity. Shareholders should note that the Fund may invest in
IRBs acquired in transactions involving a Participating Organization. In
accordance with Investment Restriction 6 herein, the Fund is permitted to
invest up to 10% of the portfolio in high quality, short-term Municipal
Obligations (including IRBs) meeting the definition of Eligible Securities
at the time of acquisition that may not be readily marketable or have a
liquidity feature.
2. Municipal Notes with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. The principal kinds of
Municipal Notes include tax anticipation notes, bond anticipation notes,
revenue anticipation notes and project notes. Notes sold in anticipation of
collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuing municipality or agency. Project notes
are issued by local agencies and are guaranteed by the United States
Department of Housing and Urban Development. Project notes are also secured
by the full faith and credit of the United States. The Fund's investments
may be concentrated in Municipal Notes of 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
4
<PAGE>
interim construction financing. They are paid from general revenues of
municipalities or are refinanced with long-term debt. In most cases
Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions which may be called upon in the
event of default by the issuer of the commercial paper.
4. Municipal Leases, which may take the form of a lease or an installment
purchase or conditional sale contract, issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications
equipment and other capital assets. Municipal Leases frequently have
special risks not normally associated with general obligation or revenue
bonds. Leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass eventually to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt-issuance
limitations of many state constitutions and statutes are deemed to be
inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses. These clauses provide that the governmental
issuer has no obligation to make future payments under the lease or
contract unless money is appropriated for such purpose by the appropriate
legislative body on a yearly or other periodic basis. To reduce this risk,
the Fund will only purchase Municipal Leases subject to a non-appropriation
clause where the payment of principal and accrued interest is backed by an
unconditional irrevocable letter of credit, a guarantee, insurance or other
comparable undertaking of an approved financial institution. These types of
Municipal Leases may be considered illiquid and subject to the 10%
limitation of investments in illiquid securities set forth under
"Investment Restrictions" contained herein. The Board of Directors may
adopt guidelines and delegate to the Manager the daily function of
determining and monitoring the liquidity of Municipal Leases. In making
such determination, the Board and the Manager may consider such factors as
the frequency of trades for the obligation, the number of dealers willing
to purchase or sell the obligations and the number of other potential
buyers and the nature of the marketplace for the obligations, including the
time needed to dispose of the obligations and the method of soliciting
offers. If the Board determines that any Municipal Leases are illiquid,
such lease will be subject to the 10% limitation on investments in illiquid
securities.
5. Any other Federal tax-exempt, and to the extent possible, New Jersey gross
income tax-exempt obligations issued by or on behalf of states and
municipal governments and their authorities, agencies, instrumentalities
and political subdivisions whose inclusion in the Fund would be consistent
with the Fund's investment objectives, policies and risks described herein
and permissible under Rule 2a-7 under the 1940 Act.
Subsequent to its purchase by the Fund, a rated Municipal Obligation may cease
to be rated or its rating may be reduced below the minimum required for purchase
by the Fund. If this occurs, the Board of Directors of the Fund shall promptly
reassess whether the Municipal Obligation presents minimal credit risks and
shall cause the Fund to take such action as the Board of Directors determines is
in the best interest of the Fund and its shareholders. However, reassessment is
not required if the Municipal Obligation is disposed of or matures within five
business days of the Manager becoming aware of the new rating and provided
further that the Board of Directors is subsequently notified of the Manager's
actions.
In addition, in the event that a Municipal Obligation (i) is in default, (ii)
ceases to be an Eligible Security under Rule 2a-7 of the 1940 Act or (iii) is
determined to no longer present minimal credit risks, or an event of insolvency
occurs with respect to the issues of a portfolio security or the provider of any
Demand Feature or Guarantee, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Fund. Disposal of the security shall
occur as soon as practicable consistent with achieving an orderly disposition by
sale, exercise of any demand feature or otherwise. In the event of a default
with respect to a security which immediately before default accounted for 1/2 of
1% or more of the Fund's total assets, the Fund shall promptly notify the SEC of
such fact and of the actions that the Fund intends to take in response to the
situation.
VARIABLE RATE DEMAND INSTRUMENTS AND PARTICIPATION CERTIFICATES
Variable rate demand instruments that the Fund will purchase are tax-exempt
Municipal Obligations. They provide for a periodic adjustment in the interest
rate paid on the instrument and permit the holder to demand payment of the
unpaid principal balance plus accrued interest at specified intervals upon a
specified number of days notice either from the issuer or by drawing on a bank
letter of credit, a guarantee or insurance issued with respect to such
instrument.
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The variable rate demand instruments in which the Fund may invest are payable on
demand on not more than thirty calendar days' notice and may be exercised at any
time or at specified intervals not exceeding 397 days depending upon the terms
of the instrument. Variable rate demand instruments that can not be disposed of
properly within seven days in the ordinary course of business are illiquid
securities. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily to up to 397 days. The adjustments
are based upon the "prime rate"* of a bank or other appropriate interest rate
adjustment index as provided in the respective instruments. The Fund decides
which variable rate demand instruments it will purchase in accordance with
procedures prescribed by its Board of Directors to minimize credit risks. A fund
utilizing the amortized cost method of valuation under Rule 2a-7 of the 1940 Act
may purchase variable rate demand instruments only if (i) the instrument is
subject to an unconditional demand feature, exercisable by the Fund in the event
of a default in the payment of principal or interest on the underlying
securities, that is an Eligible Security or (ii) the instrument is not subject
to an unconditional demand feature but does qualify as an Eligible Security and
has a long-term rating by the Requisite NRSROs in one of the two highest rating
categories, or if unrated, is determined to be of comparable quality by the
Fund's Board of Directors. The Fund's Board of Directors may determine that an
unrated variable rate demand instrument meets the Fund's high quality criteria
if it is backed by a letter of credit or guarantee or is insured by an insurer
that meets the quality criteria for the Fund stated herein or on the basis of a
credit evaluation of the underlying obligor. If an instrument is ever not deemed
to be an Eligible Security, the Fund either will sell it in the market or
exercise the demand feature.
The variable rate demand instruments that the Fund may invest in include
Participation Certificates purchased by the Fund from banks, insurance companies
or other financial institutions in fixed or variable rate, tax-exempt Municipal
Obligations (expected to be concentrated in IRBs) owned by such institutions or
affiliated organizations. The Fund will not purchase Participation Certificates
in fixed rate tax-exempt Municipal Obligations without obtaining an opinion of
counsel that the Fund will be treated as the owner thereof for Federal income
tax purposes. A Participation Certificate gives the Fund an undivided interest
in the Municipal Obligation in the proportion that the Fund's participation
interest bears to the total principal amount of the Municipal Obligation and
provides the demand repurchase feature described below. Where the institution
issuing the participation does not meet the Fund's eligibility criteria, the
participation is backed by an irrevocable letter of credit or guaranty of a bank
(which may be the bank issuing the Participation Certificate, a bank issuing a
confirming letter of credit to that of the issuing bank, or a bank serving as
agent of the issuing bank with respect to the possible repurchase of the
certificate of participation) or insurance policy of an insurance company that
the Board of Directors of the Fund has determined meets the prescribed quality
standards for the Fund. The Fund has the right to sell the Participation
Certificate back to the institution. Where applicable, the Fund can draw on the
letter of credit or insurance after no more than 30 days notice either at any
time or at specified intervals not exceeding 397 days (depending on the terms of
the participation), for all or any part of the full principal amount of the
Fund's participation interest in the security plus accrued interest. The Fund
intends to exercise the demand only (i) upon a default under the terms of the
bond documents, (ii) as needed to provide liquidity to the Fund in order to make
redemptions of Fund shares or (iii) to maintain a high quality investment
portfolio. The institutions issuing the Participation Certificates will retain a
service and letter of credit fee (where applicable) and a fee for providing the
demand repurchase feature, in an amount equal to the excess of the interest paid
on the instruments over the negotiated yield at which the participations were
purchased by the Fund. The total fees generally range from 5% to 15% of the
applicable prime rate* or other interest rate index. With respect to insurance,
the Fund will attempt to have the issuer of the Participation Certificate bear
the cost of the insurance. However, the Fund retains the option to purchase
insurance if necessary, in which case the cost of insurance will be an expense
of the Fund subject to the expense limitation (see "Expense Limitation" herein).
The Manager has been instructed by the Fund's Board of Directors to continually
monitor the pricing, quality and liquidity of the variable rate demand
instruments held by the Fund, including the Participation Certificates, on the
basis of published financial information and reports of the rating agencies and
other bank analytical services to which the Fund may subscribe. Although these
instruments may be sold by the Fund, the Fund intends to hold them until
maturity, except under the circumstances stated above (see "Federal Income
Taxes" herein).
In view of the "concentration" of the Fund in Participation Certificates in New
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
- --------
* The prime rate is generally the rate charged by a bank to its most
creditworthy customers for short-term loans. The prime rate of a particular bank
may differ from other banks and will be the rate announced by each bank on a
particular day. Changes in the prime rate may occur with great frequency and
generally become effective on the date announced.
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may entail. Banks are subject to extensive governmental regulations which may
limit both the amounts and types of loans and other financial commitments which
may be made and interest rates and fees which may be charged. The profitability
of this industry is largely dependent upon the availability and cost of capital
funds for the purpose of financing lending operations under prevailing money
market conditions. Also, general economic conditions play an important part in
the operations of this industry and exposure to credit losses arising from
possible financial difficulties of borrowers might affect a bank's ability to
meet its obligations under a letter of credit. The Fund may invest 25% or more
of the net assets of any portfolio in securities that are related in such a way
that an economic, business or political development or change affecting one of
the securities would also affect the other securities. This includes, for
example, securities the interest upon which is paid from revenues of similar
type projects, or securities the issuers of which are located in the same state.
While the value of the underlying variable rate demand instruments may change
with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The portfolio may contain variable maximum rates set by state law,
which limit the degree to which interest on such variable rate demand
instruments may fluctuate; to the extent state law contains such limits,
increases or decreases in value may be somewhat greater than would be the case
without such limits. Additionally, the portfolio may contain variable rate
demand Participation Certificates in fixed rate Municipal Obligations. The fixed
rate of interest on these Municipal Obligations will be a ceiling on the
variable rate of the Participation Certificate. In the event that interest rates
increase so that the variable rate exceeds the fixed rate on the Municipal
Obligations, the Municipal Obligations can no longer be valued at par and may
cause the Fund to take corrective action, including the elimination of the
instruments from the portfolio. Because the adjustment of interest rates on the
variable rate demand instruments is made in relation to movements of the
applicable banks' "prime rates", or other interest rate adjustment index, the
variable rate demand instruments are not comparable to long-term fixed rate
securities. Accordingly, interest rates on the variable rate demand instruments
may be higher or lower than current market rates for fixed rate obligations of
comparable quality with similar maturities.
Because of the variable rate nature of the instruments, the Fund's yield will
decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined. On the
other hand, during periods where prevailing interest rates have increased, the
Fund's yield will increase and its shareholders will have reduced risk of
capital depreciation.
For purposes of determining whether a variable rate demand instrument held by
the Fund matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (i) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (ii) the period remaining until the instrument's next interest
rate adjustment. The maturity of a variable rate demand instrument will be
determined in the same manner for purposes of computing the Fund's
dollar-weighted average portfolio maturity. If a variable rate demand instrument
ceases to be an Eligible Security it will be sold in the market or through
exercise of the repurchase demand feature to the issuer.
WHEN-ISSUED SECURITIES
New issues of certain Municipal Obligations frequently are offered on a
when-issued basis. The payment obligation and the interest rate received on
these Municipal Obligations are each fixed at the time the buyer enters into the
commitment although delivery and payment of the Municipal Obligations normally
take place within 45 days after the date of the Fund's commitment to purchase.
Although the Fund only makes commitments to purchase when-issued Municipal
Obligations with the intention of actually acquiring them, the Fund may sell
these securities before the settlement date if deemed advisable by the Manager.
Municipal Obligations purchased on a when-issued basis and the securities held
in the Fund's portfolio are subject to changes in value (both generally changing
in the same way; that is, both experiencing appreciation when interest rates
decline and depreciation when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Purchasing Municipal Obligations on
a when-issued basis can involve a risk that the yields available in the market
when the delivery takes place may actually be higher or lower than those
obtained in the transaction itself. A separate account of the Fund consisting of
cash or liquid debt securities equal to the amount of the when-issued
commitments will be established at the Fund's custodian bank. For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market value. If the market or fair value of such
securities declines, additional cash or highly liquid securities will be placed
in the
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account daily so that the value of the account will equal the amount of such
commitments by the Fund. On the settlement date of the when-issued securities,
the Fund will meet its obligations from then-available cash flow, sale of
securities held in the separate account, sale of other securities or, although
it will not normally expect to do so, from sale of the when-issued securities
themselves (which may have a value greater or lesser than the Fund's payment
obligations). Sale of securities to meet such obligations may result in the
realization of capital gains or losses, which are not exempt from Federal income
tax.
STAND-BY COMMITMENTS
When the Fund purchases Municipal Obligations, it may also acquire stand-by
commitments from banks and other financial institutions. Under a stand-by
commitment, a bank or broker-dealer agrees to purchase at the Fund's option a
specified Municipal Obligation at a specified price with same day settlement. A
stand-by commitment is the equivalent of a "put" option acquired by the Fund
with respect to a particular Municipal Obligation held in its portfolio.
The amount payable to the Fund upon its exercise of a stand-by commitment
normally will be (i) the acquisition cost of the Municipal Obligation (excluding
any accrued interest that the Fund paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the security, plus (ii) all interest accrued on the
security since the last interest payment date during the period the security was
owned by the Fund. Absent unusual circumstances relating to a change in market
value, the Fund will value the underlying Municipal Obligation at amortized
cost. Accordingly, the amount payable by a bank or dealer during the time a
stand-by commitment is exercisable will be substantially the same as the market
value of the underlying Municipal Obligation.
The Fund's right to exercise a stand-by commitment will be unconditional and
unqualified. A stand-by commitment will not be transferable by the Fund,
although it can sell the underlying Municipal Obligation to a third party at any
time.
The Fund expects stand-by commitments to generally be available without the
payment of any direct or indirect consideration. However, if necessary and
advisable, the Fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Fund's portfolio will not exceed 1/2 of 1% of
the value of the Fund's total assets calculated immediately after the
acquisition of each stand-by commitment.
The Fund will enter into stand-by commitments only with banks and other
financial institutions that, in the Manager's opinion, present minimal credit
risks. If the issuer of the Municipal Obligation does not meet the eligibility
criteria, the issuer of the stand-by commitment will have received a rating
which meets the eligibility criteria or, if not rated, will present a minimal
risk of default as determined by the Board of Directors. The Fund's reliance
upon the credit of these banks and broker-dealers will be supported by the value
of the underlying Municipal Obligations held by the Fund that were subject to
the commitment.
The Fund intends to acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The purpose of this practice is to permit the Fund to be fully
invested in securities the interest on which is exempt from Federal income tax
while preserving the necessary liquidity to purchase securities on a when-issued
basis, to meet unusually large redemptions and to purchase at a later date
securities other than those subject to the stand-by commitment. The acquisition
of a stand-by commitment will not affect the valuation or assumed maturity of
the underlying Municipal Obligations which will continue to be valued in
accordance with the amortized cost method. Stand-by commitments acquired by the
Fund will be valued at zero in determining net asset value. In those cases in
which the Fund pays directly or indirectly for a stand-by commitment, its cost
will be reflected as unrealized depreciation for the period during which the
commitment is held by the Fund. Stand-by commitments will not affect the
dollar-weighted average maturity of the Fund's portfolio. The maturity of a
security subject to a stand-by commitment is longer than the stand-by repurchase
date.
The stand-by commitments the Fund may enter into are subject to certain risks.
These include the ability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, the fact that the commitment
is not marketable by the Fund, and that the maturity of the underlying security
will generally be different from that of the commitment.
In addition, the Fund may apply to the Internal Revenue Service for a ruling, or
seek from its counsel an opinion, that interest on Municipal Obligations subject
to stand-by commitments will be exempt from Federal
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income taxation (see "Federal Income Taxes" herein). In the absence of a
favorable tax ruling or opinion of counsel, the Fund will not engage in the
purchase of securities subject to stand-by commitments.
TAXABLE SECURITIES
Although the Fund will attempt to invest 100% of its net assets in tax-exempt
Municipal Obligations, the Fund may invest up to 20% of the value of its total
assets in securities of the kind described below. The interest income from such
securities is subject to regular Federal or New Jersey state income tax, under
any one or more of the following circumstances: (i) pending investment of
proceeds of sales of Fund shares or of portfolio securities, (ii) pending
settlement of purchases of portfolio securities, and (iii) to maintain liquidity
for the purpose of meeting anticipated redemptions. In addition, the Fund may
temporarily invest more than 20% in such taxable securities when, in the opinion
of the Manager, it is advisable to do so because of adverse market conditions
affecting the market for Municipal Obligations. The kinds of taxable securities
in which the Fund may invest are limited to the following short-term,
fixed-income securities (maturing in 397 days or less from the time of
purchase): (i) obligations of the United States Government or its agencies,
instrumentalities or authorities, (ii) commercial paper meeting the definition
of Eligible Securities at the time of acquisition, (iii) certificates of deposit
of domestic banks with assets of $1 billion or more, and (iv) repurchase
agreements with respect to any Municipal Obligations or other securities which
the Fund is permitted to own. (See "Federal Income Taxes" herein.)
REPURCHASE AGREEMENTS
The Fund may invest in instruments subject to repurchase agreements with
securities dealers or member banks of the Federal Reserve System. Under the
terms of a typical repurchase agreement, the Fund will acquire an underlying
debt instrument for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase and the Fund to resell the
instrument at a fixed price and time, thereby determining the yield during the
Fund's holding period. This results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement is subject to the
risk that the seller may fail to repurchase the security. Repurchase agreements
may be deemed to be loans under the 1940 Act. All repurchase agreements entered
into by the Fund shall be fully collateralized at all times during the period of
the agreement in that the value of the underlying security shall be at least
equal to the amount of the loan, including the accrued interest thereon.
Additionally, the Fund or its custodian shall have possession of the collateral,
which the Fund's Board believes will give it a valid, perfected security
interest in the collateral. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Fund but only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, the Fund may suffer
time delays and incur costs in connection with the disposition of the
collateral. The Fund's Board believes that the collateral underlying repurchase
agreements may be more susceptible to claims of the seller's creditors than will
be the case with securities owned by the Fund. It is expected that repurchase
agreements will give rise to income which will not qualify as tax-exempt income
when distributed by the Fund. The Fund will not invest in a repurchase agreement
maturing in more than seven days if any such investment, together with illiquid
securities held by the Fund, exceeds 10% of the Fund's total net assets. (See
Investment Restriction Number 6 herein.) Repurchase agreements are subject to
the same risks described herein for stand-by commitments.
NEW 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 economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural areas
with selective commercial agriculture.
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
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, and
will continue to benefit, from national growth. At the end of calendar year
1998, New Jersey's recovery was in its seventh year and appears to be
sustainable now that the national economy
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has "soft landed." It is expected that the employment and income growth that has
and is taking place will lead to further growth in consumer outlays. Reasons for
continued optimism in New Jersey include increasing employment levels, a low
jobless rate, and a higher-than-national level of per capita personal income.
While growth in the State is likely to be slower than the nation, the advantages
of location that have served New Jersey well for many years will still be there.
Structural changes that have been going on for years can be expected to
continue, with job creation concentrated most heavily in the service industries.
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 1999 became effective June 30, 1998. The Fiscal Year
1998 budget produced a Fund Balance in the General Fund of approximately $228.2
million at the end of Fiscal Year 1998.
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 1996, 1997, 1998 and 1999 in the amounts of
$466.3 million, $446.9 million, $483.7 million and $501.1 million, respectively.
For Fiscal Year 2000, the State has made appropriations of $518.7 million for
principal and interest payments for general obligation bonds. The aggregate
outstanding general obligation bonded indebtedness of the State as of June 30,
1998 was $3.6 billion.
The State's Master Lease Program is used primarily to finance various
departmental equipment needs at tax-exempt rates by issuing Certificates of
Participation. Beginning in Fiscal Year 1996 the State modified the Master Lease
Program and began using a line of credit as the preferred method of financing
various departmental equipment needs. As of June 30, 1998, outstanding
Certificates of Participation totaled $103.4 million and the States' outstanding
balance on its line of credit totaled $25.4 million.
As of February 9, 1999, S&P, Moody's and Fitch IBCA, Inc. ("Fitch") rate the
State's long-term general obligation debt "AA+", "Aa1" and "AA+", respectively.
The State's Certificates of Participation are rated AA- by S&P and A1 by
Moody's. 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, 1998, there was outstanding in excess of
$658.08 million of moral obligation bonded indebtedness issued by such entities,
for which the maximum annual debt service was over $81.57 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." As of June 30, 1998, the total of these
obligations, including the "moral obligation" debt was approximately $9.2
billion.
At any given time, there are various numbers of claims and cases pending against
the University of Medicine and Dentistry and it's employees, seeking recovery of
monetary damages that are primarily paid out of the Self Insurance Reserve Fund
created pursuant to the Tort Claims Act. An independent study estimated an
aggregate potential exposure of $90.8 million for claims pending, as of December
31, 1997. In addition, at any given time, there are various numbers of contract
and other claims against the University of Medicine and Dentistry seeking
recovery of monetary damages or other relief which, if granted, would require
the expenditure of funds. 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
claims that the State failed to properly conduct remediation and health screens
concerning chromium contamination, challenges to constitutionality of annual
A-901 hazardous and solid waste licensure renewal fees collected by the State,
challenges to the State's funding mechanism for school districts within the
State, challenges to the State's use of assessments made against certain
property and
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casualty insurers, challenges to the State's Medical reimbursement procedures,
and challenges to the State's highway and tunnel development funding mechanisms.
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
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 makes 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
11
<PAGE>
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 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.
12
<PAGE>
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. They may not be changed unless approved by a majority
of the outstanding shares "of each series of the Fund's shares that would be
affected by such a change." The term "majority of the outstanding shares" of the
Fund means the vote of the lesser of (i) 67% or more of the shares of the Fund
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund. The Fund may not:
1. Make portfolio investments other than as described under "Description of
the Fund and Its Investments and Risks". Any other form of Federal
tax-exempt investment must meet the Fund's high quality criteria, as
determined by the Board of Directors, and be consistent with the Fund's
objectives and policies.
2. Borrow money. This restriction shall not apply to borrowings from banks for
temporary or emergency (not leveraging) purposes. This includes the meeting
of redemption requests that might otherwise require the untimely
disposition of securities, in an amount up to 15% of the value of the
Fund's total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the borrowing
was made. While borrowings exceed 5% of the value of the Fund's total
assets, the Fund will not make any investments. Interest paid on borrowings
will reduce net income.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except in
an amount up to 15% of the value of its total assets and only to secure
borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin, or engage in the
purchase and sale of put, call, straddle or spread options or in writing
such options. However, securities subject to a demand obligation and
stand-by commitments may be purchased as set forth under "Description of
the Fund and Its Investments and Risks" herein.
5. Underwrite the securities of other issuers, except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933 in disposing of a
portfolio security.
6. Purchase securities subject to restrictions on disposition under the
Securities Act of 1933 ("restricted securities"), except the Fund may
purchase variable rate demand instruments which contain a demand feature.
The Fund will not invest in a repurchase agreement maturing in more than
seven days if any such investment, together with securities that are not
readily marketable held by the Fund, exceeds 10% of the Fund's net assets.
7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests. This shall
not prevent the Fund from investing in Municipal Obligations secured by
real estate or interests in real estate.
8. Make loans to others, except through the purchase of portfolio investments,
including repurchase agreements, as described under "Description of the
Fund and Its Investments and Risks" herein.
9. Purchase more than 10% of all outstanding voting securities of any one
issuer or invest in companies for the purpose of exercising control.
10. Invest more than 25% of its assets in the securities of "issuers" in any
single industry. The Fund may invest more than 25% of its assets in
Participation Certificates and there shall be no limitation on the purchase
of those Municipal Obligations and other obligations issued or guaranteed
by the United States Government, its agencies or instrumentalities. When
the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating
the issuing entity and a security is backed only by the assets and revenues
of the entity, the entity will be deemed to be the sole issuer of the
security. Similarly, in the case of an industrial revenue bond, if that
bond is backed only by the assets and revenues of the non-government user,
then such non-government user will be deemed to be the sole issuer. If,
however, in either case, the creating government or some other entity, such
as an insurance company or other corporate obligor, guarantees a security
or a bank issues a letter of credit, such a guarantee or letter of credit
will be considered a separate security and will be treated as an issue of
such government, other entity or bank. Immediately after the acquisition of
any securities subject to a Demand Feature or Guarantee (as such terms are
13
<PAGE>
defined in Rule 2a-7 of the 1940 Act), with respect to 75% of the total
assets of the Fund, not more than 10% of the Fund's assets may be invested
in securities that are subject to a Guarantee or Demand Feature from the
same institution. However, the Fund may only invest more than 10% of its
assets in securities subject to a Guarantee or Demand Feature issued by a
Non-Controlled Person (as such term is defined in Rule 2a-7 of the 1940
Act).
11. Invest in securities of other investment companies. The Fund may purchase
unit investment trust securities where such unit trusts meet the investment
objectives of the Fund and then only up to 5% of the Fund's net assets,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets.
12. Issue senior securities, except insofar as the Fund may be deemed to have
issued a senior security in connection with a permitted borrowing.
If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of the Fund's assets will not constitute a
violation of such restriction.
III. MANAGEMENT OF THE FUND
The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, employs the Manager to serve as investment manager
of the Fund. The Manager provides persons satisfactory to the Fund's Board of
Directors to serve as officers of the Fund. Such officers, as well as certain
other employees and directors of the Fund, may be directors or officers of Reich
& Tang Asset Management, Inc., the sole general partner of the Manager or
employees of the Manager or its affiliates. Due to the services performed by the
Manager, the Fund currently has no employees and its officers are not required
to devote their full-time to the affairs of the Fund.
The directors and officers of the Fund and their principal occupations during
the past five years are set forth below. Unless otherwise specified, the address
of each of the following persons is 600 Fifth Avenue, New York, New York 10020.
Mr. Duff may be deemed an "interested person" of the Fund, as defined in the
1940 Act, on the basis of his affiliation with Reich & Tang Asset Management
L.P.
STEVEN W. DUFF, 45 - President and Director of the Fund, has been President of
the Mutual Funds Division of the Manager since September 1994. Mr. Duff was
formerly Director of Mutual Fund Administration at NationsBank with which he was
associated from June 1981 to August 1994. Mr. Duff is also President and a
Director /Trustee of 14 other funds in the Reich & Tang Fund Complex, Director
of Pax World Money Market Fund, Inc., Executive Vice President of Reich & Tang
Equity Fund, Inc., and President and Chief Executive Officer of Tax Exempt
Proceeds Fund, Inc.
DR. W. GILES MELLON, 68 - Director of the Fund, is Professor of Business
Administration and Area Chairman of Economics in the Graduate School of
Management, Rutgers University with which he has been associated since 1966. His
address is Rutgers University Graduate School of Management, 92 New Street,
Newark, New Jersey 07102. Dr. Mellon is also a Director/Trustee of 15 other
funds in the Reich & Tang Fund Complex.
ROBERT STRANIERE, 57 - 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/Trustee of 15 other funds in the Reich & Tang Fund Complex and
Director of Life Cycle Mutual Funds, Inc.
DR. YUNG WONG, 60 - Director of the Fund, was Director of Shaw Investment
Management (UK) Limited from 1994 to October 1995 and formerly General Partner
of Abacus Partners Limited Partnership (a general partner of a venture capital
investment firm) from 1984 to 1994. His address is 29 Alden Road, Greenwich,
Connecticut 06831. Dr. Wong has been a Director of Republic Telecom Systems
Corporation (a provider of telecommunications equipment) since January 1989 and
of TelWatch, Inc. (a provider of network management software) since August 1989.
Dr. Wong is also a Director/Trustee of 15 other funds in the Reich & Tang Fund
Complex and a Trustee of Eclipse Financial Asset Trust.
MOLLY FLEWHARTY, 48 - Vice President of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. with which she was associated from
December 1977 to September 1993. Ms. Flewharty is also Vice President of 18
other funds in the Reich & Tang Fund Complex.
14
<PAGE>
LESLEY M. JONES, 50 - Vice President of the Fund, has been Senior Vice President
of the Mutual Funds Division of the Manager since September 1993. Ms. Jones was
formerly Senior Vice President of Reich & Tang, Inc. with which she was
associated from April 1973 to September 1993. Ms. Jones is also a Vice President
of 14 other funds in the Reich & Tang Fund Complex.
DANA E. MESSINA, 42 - Vice President of the Fund, has been Executive Vice
President of the Mutual Funds Division of the Manager since January 1995 and was
Vice President from September 1993 to January 1995. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. with which she was associated from December
1980 to September 1993. Ms. Messina is also Vice President of 15 other funds in
the Reich & Tang Fund Complex.
BERNADETTE N. FINN, 51 - Secretary of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Finn was formerly
Vice President and Assistant Secretary of Reich & Tang, Inc. with which she was
associated from September 1970 to September 1993. Ms. Finn is also Secretary of
13 other funds in the Reich & Tang Fund Complex, and a Vice President and
Secretary of 5 funds in the Reich & Tang Fund Complex.
RICHARD DE SANCTIS, 42 - Treasurer of the Fund, has been Assistant Treasurer of
NEIC since September 1993. Mr. De Sanctis was formerly Controller of Reich &
Tang, Inc., from January 1991 to September 1993 and Vice President and Treasurer
of Cortland Financial Group, Inc. and Vice President of Cortland Distributors,
Inc. from 1989 to December 1990. Mr. De Sanctis is also Treasurer of 17 other
funds in the Reich & Tang Fund Complex and is Vice President and Treasurer of
Cortland Trust, Inc.
ROSANNE HOLTZER, 34 - Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly Manager of Fund Accounting for the Manager with which she was
associated from June 1986. Ms. Holtzer is also Assistant Treasurer of 18 other
funds in the Reich & Tang Fund Complex.
The Fund paid an aggregate remuneration of $6,000 to its directors with respect
to the period ended October 31, 1998, all of which consisted of directors' fees
paid to the three disinterested directors, pursuant to the terms of the
Investment Management Contract (see "Manager" herein).
Directors of the Fund not affiliated with the Manager receive from the Fund an
annual retainer of $1,000 and a fee of $250 for each Board of Directors meeting
attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Directors who are affiliated with the Manager do
not receive compensation from the Fund.
(See "Compensation Table".)
<TABLE>
<CAPTION>
Compensation Table
Aggregate Compensation Pension or Retirement Estimated Annual Total Compensation From
Name of Person, From the Fund Benefits Accrued as Part Benefits Upon Retirement Fund and Fund Complex Paid
Position of Fund Expenses to Directors*
<S> <C> <C> <C> <C> <C>
Dr. W. Giles Mellon, $2,000 0 0 $57,500 (16 Funds)
Director
Robert Straniere, $2,000 0 0 $57,500 (16 Funds
Director
Dr. Yung Wong, $2,000 0 0 $57,500 (16 Funds)
Director
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex
for the fiscal year ending October 31, 1998. The total number of Funds in
the same Fund complex from which the directors receive compensation is
listed in parenthesis. A fund is considered to be in the same complex if,
among other things, it shares a common investment adviser with the Fund.
15
<PAGE>
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On June 30, 1999 there were 147,820,553 Class A shares of the Fund outstanding,
3,325,066 Class B shares outstanding, and no Chase Vista Select shares
outstanding. As of June 30, 1999,the amount of shares owned by all officers and
directors of the Fund, as a group, was less than 1% of the outstanding shares.
Set forth below is certain information as to persons who owned 5% or more of the
Fund's outstanding shares as of June 30, 1999:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME AND ADDRESS % OF CLASS NATURE OF OWNERSHIP
CLASS A SHARES
Reich & Tang Services, Inc. 58.63% Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, NY 10020
Investors Fiduciary Trust Company 21.34% Record
210 West 10th Street
Kansas City, MO 64105
Neuberger & Berman 13.74% Record
As Agent for Customers
55 Water Street #27Floor
New York, NY 10041-0001
CLASS B SHARES
Lowell Millar 37.15% Beneficial
66 Fernwood Rd.
Summit, NJ 07901
Lowell & Jennifer Millar 13.13% Beneficial
66 Fernwood Rd.
Summit, NJ 07901
Donadio Irrevocable Trust 9.93% Beneficial
600 Fifth Avenue
New York, NY 10020
Mrs. Mildred W Dorland 9.27% Beneficial
31 Hunters Circle
Lebannon, NJ 08833-4396
Martin A. Chooljian 8.47% Beneficial
63 Winfield Road
Princeton, NJ 08540-2431
Mr. Paul R. Sloan 5.86% Beneficial
19 Greenview Way
Upper Montclair, NJ 07043-2531
CHASE VISTA SELECT SHARES
None
</TABLE>
V. INVESTMENT ADVISORY AND OTHER SERVICES
The Investment Manager for the Fund is Reich & Tang Asset Management L.P., a
Delaware limited partnership with principal offices at 600 Fifth Avenue, New
York, New York 10020. The Manager was, as of May 31, 1999, investment manager,
adviser, or supervisor with respect to assets aggregating in excess of $13.4
billion. In addition to the Fund, the Manager acts as investment manager and
administrator of eighteen other investment companies and also advises pension
trusts, profit-sharing trusts and endowments.
16
<PAGE>
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager due to a restructuring by New England Investment
Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998, Nvest
Companies, L.P. ("Nvest Companies") due to a change in name of NEICOP, replaced
NEICOP as the limited partner and owner of a 99.5% interest in the Manager.
Reich & Tang Asset Management, Inc. (an indirect wholly-owned subsidiary of
Nvest Companies) is the sole general partner and owner of the remaining 0.5%
interest of the Manager. Nvest Corporation, a Massachusetts Corporation
(formerly known as New England Investment Companies, Inc.), serves as the
managing general partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
MetLife is a mutual life insurance company and is the second largest life
insurance company in the United States in terms of total assets. MetLife
provides a wide range of insurance and investment products and services to
individuals and groups and is the leader among United States life insurance
companies in terms of total life insurance in force. MetLife and its affiliates
provide insurance or other financial services to approximately 36 million people
worldwide.
Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through more than seventeen
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, L.P., Greystone Partners, L.P., Harris Associates,
L.P., Jurika & Voyles, L.P., Kobrick Funds, LLC, Loomis, Sayles & Company, L.P.,
New England Funds, L.P., Nvest Advisor Services, L.P., Nvest Associates, Inc.,
Nvest Retirement Services, Nvest Services Company, Snyder Capital Management,
L.P., Vaughan, Nelson, Scarborough & McCullough, L.P., and Westpeak Investment
Advisors, L.P. These affiliates in the aggregate are investment advisors or
managers of more than 80 other registered investment companies.
The recent name change did not result in a change of control of the Manager and
has no impact upon the Manager's performance of its responsibilities and
obligations.
On July 17, 1998, the Board of Directors, including a majority of the directors
who are not interested persons (as defined in the 1940 Act) of the Fund or the
Manager, approved the annual continuance of the Investment Management Contract
and extended the term to July 31, 1999. It is continued in force thereafter for
successive twelve-month periods beginning each August 1, provided that such
majority vote of the Fund's outstanding voting securities or by a majority of
the directors who are not parties to the Investment Management Contract or
interested persons of any such party, by votes cast in person at a meeting
called for the purpose of voting on such matter.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund.
The Manager provides persons satisfactory to the Board of Directors of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of NEIC, the
sole general partner of the Manager, or employees of the Manager or its
affiliates.
The Investment Management Contract is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or by the Manager on sixty days written notice, and will automatically terminate
in the event of its assignment. The Investment Management Contract provides that
in the absence of willful misfeasance, bad faith or gross negligence on the part
of the Manager, or of reckless disregard of its obligations thereunder, the
Manager shall not be liable for any action or failure to act in accordance with
its duties thereunder.
Under the Investment Management Contract, the Manager receives from the Fund a
fee (the "Management Fee") equal to .30% per annum of the Fund's average daily
net assets. The fees are accrued daily and paid monthly. The Manager, at its
discretion, may voluntarily waive all or a portion of the Management Fee.
17
<PAGE>
Pursuant to the Administrative Services Contract with the Fund, the Manager also
performs clerical, accounting supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of accounting related services by Investors Fiduciary Trust Company,
the Fund's bookkeeping or recordkeeping agent, (ii) prepare reports to and
filings with regulatory authorities, and (iii) perform such other services as
the Fund may from time to time request of the Manager. The personnel rendering
such services may be employees of the Manager, of its affiliates or of other
organizations. For its services under the Administrative Services Contract, the
Manager receives from the Fund a fee (the "Administrative Services Fee") equal
to .21% per annum of the Fund's average daily net assets. For the Funds' fiscal
years ended October 31, 1998, October 31, 1997 and October 31, 1996, the Manager
received a fee of $506,649, $400,463, and $331,405.
For the Fund's fiscal years ended October 31, 1998, October 31, 1997 and October
31, 1996, the fee paid to the Manager under the Investment Management Contract
was $723,784, $572,090, and $475,005, respectively, of which $0, $0 and $0 was
voluntarily waived. The Fund's net assets at the close of business on October
31, 1998 totaled $168,512,272. The Manager at its discretion 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. There can be no assurance that such fees will
be waived in the future (see "Distribution and Service Plan" herein).
Investment management fees and operating expenses which are attributable to all
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 and Chase Vista
Select shareholders pursuant to the Plan shall be compensated by the Distributor
from its own resources which includes the shareholder servicing fee and past
profits, and the Manager from its own resources which includes the Management
Fee and past profits. Expenses incurred in the distribution of Class B shares
and the servicing of Class B shares shall be paid by the Manager.
EXPENSE LIMITATION
The Manager has agreed, pursuant to the Investment Management Contract, (see
"Distribution and Service Plan" herein) to reimburse the Fund for its expenses
(exclusive of interest, taxes, brokerage and extraordinary expenses) which in
any year exceed the limits on investment company expenses prescribed by any
state in which the Fund's shares are qualified for sale. For the purpose of this
obligation to reimburse expenses, the Fund's annual expenses are estimated and
accrued daily, and any appropriate estimated payments are made to it on a
monthly basis. Subject to the obligations of the Manager to reimburse the Fund
for its excess expenses as described above, the Fund has, under the Investment
Management Contract, confirmed its obligation for payment of all its other
expenses. This includes all operating expenses, taxes, brokerage fees and
commissions, commitment fees, certain insurance premiums, interest charges and
expenses of the custodian, transfer agent and dividend disbursing agent's fees,
telecommunications expenses, auditing and legal expenses, bookkeeping agent
fees, costs of forming the corporation and maintaining corporate existence,
compensation of directors, officers and employees of the Fund and costs of other
personnel performing services for the Fund who are not officers of the Manager
or its affiliates, costs of investor services, shareholders' reports and
corporate meetings, SEC registration fees and expenses, state securities laws
registration fees and expenses, expenses of preparing and printing the Fund's
prospectus for delivery to existing shareholders and of printing application
forms for shareholder accounts, and the fees and reimbursements payable to the
Manager under the Investment Management Contract and the Distributor under the
Shareholder Servicing Agreement.
The Fund may from time to time hire its own employees or contract to have
management services performed by third parties (including Participating
Organizations) as discussed herein. The management of the Fund intends to do so
whenever it appears advantageous to the Fund. The Fund's expenses for employees
and for such services are among the expenses subject to the expense limitation
described above.
DISTRIBUTION AND SERVICE PLAN
The Fund's distributor is Reich & Tang Distributors, Inc., a Delaware
corporation with principal officers at 600 Fifth Avenue, New York, New York
10020. Pursuant to Rule 12b-1 under the 1940 Act, the SEC requires that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Fund's Board of Directors has adopted a distribution and service plan (the
"Plan") and, pursuant to the Plan, the Fund has entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Class A and
Chase Vista Select shares) with Reich & Tang Distributors, Inc., (the
"Distributor"), as distributor of the Fund's shares.
18
<PAGE>
The Class A and Chase Vista Select shares will be offered to investors who
desire certain additional shareholder services from Participating Organizations.
These Participating Organizations are compensated by the Fund's Manager and
Distributor for such services. For its services under the Shareholder Servicing
Agreement (with respect to the Class A and Chase Vista Select shares), the
Distributor receives from the Fund a fee equal to .20% per annum of the Fund's
average daily net assets of the Class A and Chase Vista Select shares of the
Fund (the "Shareholder Servicing Fee"). The fee is accrued daily and paid
monthly and any portion of the fee may be deemed to be used by the Distributor
for purposes of distribution of the Fund's Class A and Chase Vista Select shares
and for payments to Participating Organizations with respect to servicing their
clients or customers who are Class A and Chase Vista Select shareholders of the
Fund. The Class B shareholders will not receive the benefit of such services
from Participating Organizations and, therefore, will not be assessed a
Shareholder Servicing Fee.
The following information applies only to the Class A shares of the Fund. For
the Fund's fiscal year ended October 31, 1998, the amount payable to the
Distributor under the Distribution Plan and Shareholder Servicing Agreement
adopted thereunder pursuant to Rule 12b-1 under the 1940 Act, totaled $478,895,
none of which was voluntarily waived. During the same period, the Manager made
total payments under the plan to or on behalf of Participating Organizations of
$1,000,600. For the Fund's fiscal year ended October 31, 1997, the amount
payable to the Distributor under the Distribution Plan and Shareholder Servicing
Agreement adopted thereunder pursuant to Rule 12b-1 under the 1940 Act totaled
$380,685, none of which was voluntarily waived. During the same period, the
Manager made total payments under the plan to or on behalf of Participating
Organizations of $789,346. For the Fund's fiscal year ended October 31, 1996,
the amount payable to the Distributor under the Distribution Plan and
Shareholder Servicing Agreement adopted thereunder pursuant to Rule 12b-1 under
the 1940 Act totaled $303,547, of which $94,933 was voluntarily waived. During
the same period, the Manager 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 Distributor received from the Fund under the Plan represents
distribution and servicing expenses funded by the Manager from its own resources
including the management fee. For the fiscal year ended October 31, 1998, 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). Data for the Chase Vista
Select shares is not available since there were no Chase Vista Select shares
issued as of October 31, 1998.
Under the Distribution Agreement, the Distributor, for nominal consideration
(i.e., $1.00) and as agent for the Fund, will solicit orders for the purchase of
the Fund's shares, provided that any subscriptions and orders will not be
binding on the Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that, the Distributor
will pay for (i) telecommunications expenses, including the cost of dedicated
lines and CRT terminals, incurred by the Participating Organizations and
Distributor in carrying out their obligations under the Shareholder Servicing
Agreement with respect to the Class A and Chase Vista Select shares and (ii)
preparing, printing and delivering the Fund's prospectus to existing
shareholders of the Fund and preparing and printing subscription application
forms for shareholder accounts.
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 and Chase Vista Select shares
of the Fund, (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Fund's shares, and (iii) to pay the
costs of printing and distributing the Fund's Prospectus to prospective
investors, and to defray the cost of the preparation and printing of brochures
and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
shares. The Distributor may also make payments from time to time from its own
resources, which may include the Shareholder Servicing Fee and past profits for
the purpose enumerated in (i) above. The Distributor determines the amount of
such payments made pursuant to the Plan, provided that such payments will not
increase the amount which the Fund is required to pay to the Manager or the
Distributor for any fiscal year under the Investment Management Contract or the
Shareholder Servicing Agreement in effect for that year.
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In accordance with Rule 12b-1, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the Plan requires
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
The Plan provides that it will remain in effect until July 31, 1998. Thereafter
it may continue in effect for successive annual periods commencing August 1,
provided it is approved by the shareholders or by the Board of Directors. This
includes a majority of directors who are not interested persons of the Fund and
who have no direct or indirect interest in the operation of the Plan or in the
agreements related to the Plan. The Plan further provides that it may not be
amended to increase materially the costs which may be spent by the Fund for
distribution pursuant to the Plan without 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 shareholders.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania Avenue, Kansas City,
Missouri 64105, is custodian for the Fund's cash and securities. Reich & Tang
Services, Inc., an affiliate of the Fund's Manager, located at 600 Fifth Avenue,
New York, NY 10020, is transfer agent and dividend agent for the shares of the
Fund. The custodian and transfer agents do not assist in, and are not
responsible for, investment decisions involving assets of the Fund.
COUNSEL AND AUDITORS
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Battle Fowler LLP, 75 East 55th Street, New York, New York 10022.
Matters in connection with New Jersey law are passed upon by Sills Cummis 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.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its formation.
Any transaction for which the Fund pays a brokerage commission will be effected
at the best price and execution available. Thus, the Fund will select a broker
for such a transaction based upon which broker can effect the trade at the best
price and execution available. Purchases from underwriters of portfolio
securities include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price. The Fund purchases Participation
Certificates in variable rate Municipal Obligations with a demand feature from
banks or other financial institutions at a negotiated yield to the Fund based on
the applicable interest rate adjustment index for the security. The interest
received by the Fund is net of a fee charged by the issuing institution for
servicing the underlying obligation and issuing the Participation Certificate,
letter of credit, guarantee or insurance and providing the demand repurchase
feature.
Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed in the
best interest of shareholders of the Fund rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price. No preference in purchasing portfolio securities will
be given to banks or dealers that are Participating Organizations.
Investment decisions for the Fund are made independently from those for any
other investment companies or accounts that may be or become managed by the
Manager or its affiliates. If, however, the Fund and other investment companies
or accounts managed by the Manager are simultaneously engaged in the purchase or
sale of the same security, the transactions may be averaged as to price and
allocated equitably to each account. In some cases, this policy might adversely
affect the price paid or received by the Fund or the size of the position
obtainable for the Fund. In addition, when purchases or sales of the same
security for
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the Fund and for other investment companies managed by the Manager occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantage available to large denomination purchasers or
sellers.
No portfolio transactions are executed with the Manager or its affiliates acting
as principal. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Manager or its affiliates.
VII. CAPITAL STOCK AND OTHER SECURITIES
The authorized capital stock of the Fund consists of twenty billion shares of
stock having a par value of one tenth of one cent ($.001) per share. The Fund's
Board of Directors is authorized to divide the shares into separate series of
stock, one for each of the portfolios that may be created. Each share of any
series of shares when issued has equal dividend, distribution and liquidation
rights within the series for which it was issued and each fractional share has
those rights in proportion to the percentage that the fractional share
represents of a whole share. Shares of all series have identical voting rights,
except where, by law, certain matters must be approved by a majority of the
shares of the unaffected series. Shares will be voted in the aggregate. There
are no conversion or preemptive rights in connection with any shares of the
Fund. All shares, when issued in accordance with the terms of the offering, will
be fully paid and nonassessable. Shares are redeemable at net asset value, at
the option of the shareholder. The Fund is subdivided into three classes of
common stock, Class A, Class B and Chase Vista Select. Each share, regardless of
class, represents an interest in the same portfolio of investments and has
identical voting, dividend, liquidation and other rights, preferences, powers,
restrictions, limitations, qualifications, designations and terms and
conditions, except: (i) the Class A, Class B and Chase Vista Select shares have
different class designations, (ii) only the Class A and Chase Vista Select
shares are assessed a service fee pursuant to the Rule 12b-1 Distribution and
Service Plan of the Fund of .20% of each Class' shares' average daily net
assets, (iii) only the holders of the Class A and Chase Vista Select shares are
entitled to vote on matters pertaining to the Plan and any related agreements in
accordance with provisions of Rule 12b-1, and (iv) the exchange privilege
permits stockholders to exchange their shares only for shares of the same class
of an investment company that participates on an exchange privilege program with
the Fund. Payments that are made under the Plan will be calculated and charged
daily to the appropriate class prior to determining daily net asset value per
share and dividends/distributions.
Under its amended Articles of Incorporation, the Fund has the right to redeem
for cash shares of stock owned by any shareholder to the extent and at such
times as the Fund's Board of Directors determines to be necessary or appropriate
to prevent an undue concentration of stock ownership which would cause the Fund
to become a "personal holding company" for Federal income tax purposes. In this
regard, the Fund may also exercise its right to reject purchase orders.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so. In
that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. Unless specifically requested by an
investor, the Fund will not issue certificates evidencing Fund shares.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
or special meetings only (i) for the election (or re-election) of directors,
(ii) for approval of the revised investment advisory contracts with respect to a
particular class or series of stock, (iii) for approval of the Fund's
distribution agreement with respect to a particular class or series of stock,
and (iv) upon the written request of shareholders entitled to cast not less than
25% of all the votes entitled to be cast at such meeting. Annual and other
meetings may be required with respect to such additional matters relating to the
Fund as may be required by the 1940 Act, including the removal of Fund
director(s) and communication among shareholders, any registration of the Fund
with the SEC or any state, or as the directors may consider necessary or
desirable. Each director serves until his successor is elected or qualified or
until such director sooner dies, resigns, retires or is removed by the vote of
the shareholders.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
The material relating the purchase, redemption and pricing of Fund shares for
each class of shares is located in the Shareholder Information section of each
Prospectus and is hereby incorporated by reference.
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NET ASSET VALUE
The Fund does not determine net asset value per share of each Class on any day
in which the New York Stock Exchange is closed for trading. Those days include:
New Year's Day, Martin Luther King Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The net asset value of the Fund's shares is determined as of 12 noon, New York
City time, on each Fund Business Day. The net asset value of a Class is computed
by dividing the value of the Fund's net assets for such Class (i.e., the value
of its securities and other assets less its liabilities, including expenses
payable or accrued but excluding capital stock and surplus) by the total number
of shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. If fluctuating interest
rates cause the market value of the Fund's portfolio to deviate more than 1/2 of
1% from the value determined on the basis of amortized cost, the Board of
Directors will consider whether any action should be initiated, as described in
the following paragraph. Although the amortized cost method provides certainty
in valuation, it may result in periods during which the value of an instrument
is higher or lower than the price an investment company would receive if the
instrument were sold.
The Fund's Board of Directors has established procedures to stabilize the Fund's
net asset value at $1.00 per share of each Class. These procedures include a
review of the extent of any deviation of net asset value per share, based on
available market rates, from the Fund's $1.00 amortized cost per share of each
Class. Should that deviation exceed 1/2 of 1%, the Board will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redemption of shares in
kind, selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument with a
remaining maturity greater than 397 days, will limit portfolio investments,
including repurchase agreements, to those United States dollar-denominated
instruments that the Fund's Board of Directors determines present minimal credit
risks, and will comply with certain reporting and record keeping procedures. The
Fund has also established procedures to ensure compliance with the requirement
that portfolio securities are Eligible Securities. (See "Description of the Fund
and its Investments and Risks" herein.)
IX. TAXATION OF THE FUND
FEDERAL INCOME TAXES
The Fund has elected to qualify under the Code as a "regulated investment
company" that distributes "exempt-interest dividends". 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, 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 excludable from their gross income under Section 103(a) of the Code.
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 will be treated as a "substantial user" or "related
person" under Section 147(a) of the Code with respect to some or all of the
"private activity" bonds, if any, held by the Fund. If a shareholder receives an
exempt-interest dividend with respect to any share and such share has been held
for six months or less, then any loss on the sale or exchange of such share will
be disallowed to the extent of the amount of such exempt-interest dividend. The
Code provides that interest on indebtedness incurred, or continued, to
purchase or carry certain tax-exempt securities, such as shares of the Fund, is
not deductible. Therefore, among other consequences, a certain proportion of
interest on indebtedness incurred, or continued, to purchase or carry securities
on margin may not be deductible during the period an
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investor holds shares of the Fund. For Social Security recipients, interest on
tax-exempt bonds, including exempt-interest dividends paid by the Fund, is added
to adjusted gross income for purposes of computing the amount of social security
benefits includible in gross income. The amount of tax-exempt interest received,
including exempt-interest dividends will have to be disclosed on the
shareholders' Federal income tax returns. Taxpayers are required to include as
an item of tax preference for purposes of the Federal alternative minimum tax
all tax-exempt interest on "private activity" bonds (generally, a bond issue in
which more than 10% of the proceeds are used in a non-governmental trade or
business, other than Section 501(c)(3) bonds) issued after August 7, 1986. Thus,
this provision will apply to the portion of the exempt-interest dividends from
the Fund's assets that are attributable to such post-August 7, 1986 less any
deductions (not allowable in a computing Federal Income Tax) which would have
been allowable if such interest were includable in gross income private activity
bonds, if any of such bonds are acquired by the Fund. Corporations are required
to increase their alternative minimum taxable income for purposes of calculating
their alternative minimum tax liability by 75% of the amount by which the
adjusted current earnings (which will include tax-exempt interest) of the
corporation exceeds the alternative minimum taxable income (determined without
this item). In addition, in certain cases, Subchapter S corporations with
accumulated earnings and profits from Subchapter C years are subject to a
minimum tax on excess "passive investment income" which includes tax-exempt
interest.
Although not intended, it is possible that the Fund may realize short-term or
long-term capital gains or losses from its portfolio transactions. The Fund may
also realize short-term or long-term capital gains upon the maturity or
disposition of securities acquired at discounts resulting from market
fluctuations. Short-term capital gains are taxable to shareholders as ordinary
income when they are distributed. Any net capital gains (the excess of net
realized long-term capital gain over net realized short-term capital loss) will
be distributed annually to the Fund's shareholders. The Fund will have no tax
liability with respect to distributed net capital gains and the distributions
will be taxable to shareholders as long-term capital gains regardless of how
long the shareholders have held Fund shares. However, Fund shareholders who at
the time of such a net capital gain distribution have not held their Fund shares
for more than 6 months, and who subsequently dispose of those shares at a loss,
are required to treat such loss as a long-term capital loss to the extent of the
net capital gain distribution. Distributions of net capital gain will be
designated as a "capital gain dividend" in a written notice mailed to the Fund's
shareholders not later than 60 days after the close of the Fund's taxable year.
Capital gains realized by corporations are generally taxed at the same rate as
ordinary income. Generally, capital gains are taxable at a maximum rate of 20%
to non-corporate shareholders who have a holding period of more than 12 months.
Corresponding maximum rate 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
net long-term capital gain over 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 is generally required to withhold 31% of taxable
interest, dividend payments, and proceeds from the redemption of shares of the
Fund.
Dividends and distributions to shareholders are treated in the same manner for
Federal income tax purposes whether received in cash or reinvested in additional
shares of the Fund.
With respect to the variable rate demand instruments, including Participation
Certificates therein, the Fund has obtained and is relying on the opinion of
Battle Fowler LLP, counsel to the Fund, that it will be treated for Federal
income tax purposes as the owner of an interest in the underlying Municipal
Obligations and the interest thereon will be exempt from regular Federal income
taxes to the Fund 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 can reach a conclusion different from
that reached by counsel.
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From time to time, proposals have been introduced before Congress to restrict or
eliminate the Federal income tax exemption for interest on Municipal
Obligations. If such a proposal is introduced and enacted in the future, the
ability of the Fund to pay exempt-interest dividends will be adversely affected
and the Fund will reevaluate its investment objective and policies and consider
changes in the structure.
In South Carolina v. Baker, the United States Supreme Court held that the
Federal government may constitutionally require states to register bonds they
issue and may subject the interest on such bonds to Federal tax if not
registered, and that there is no constitutional prohibition against the Federal
government's taxing the interest earned on state or other municipal bonds. The
Supreme Court decision affirms the authority of the Federal government to
regulate and control bonds such as Municipal Obligations and to tax the interest
on such bonds in the future. The decision does not, however, affect the current
exemption from regular income taxation of the interest earned on the Municipal
Obligations in accordance with Section 103 of the Code.
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: (i) 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 (ii) 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 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 is not be
subject to 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.
X. UNDERWRITERS
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a sales charge. The Distributor does not receive an
underwriting commission. In effecting sales of Fund shares under the
Distribution Agreement, the Distributor, for nominal consideration (i.e., $1.00)
and as agent for the Fund, solicits orders for the purchase of the Fund's
shares, provided that any subscriptions and orders are not binding on the Fund
until accepted by the Fund as principal.
The Glass-Steagall Act and other applicable laws and regulations prohibit banks
and other depository institutions from engaging in the business of underwriting,
selling or distributing most types of securities. In the opinion of the Manager,
however, based on the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing other services for
investment companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of Directors will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution will result in loss to
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shareholders or change in the Fund's net asset value. In addition, state
securities laws on this issue may differ from the interpretations of Federal law
expressed herein and banks and financial institutions may be required to
register ad dealers pursuant to state law.
XI. CALCULATION OF PERFORMANCE DATA
The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the SEC. Under that method, the Fund's yield figure,
which is based on a chosen seven-day period, is computed as follows: the Fund's
return for the seven-day period is obtained by dividing the net change in the
value of a hypothetical account having a balance of one share at the beginning
of the period by the value of such account at the beginning of the period
(expected to always be $1.00). This is multiplied by (365/7) with the resulting
annualized figure carried to the nearest hundredth of one percent. For purposes
of the foregoing computation, the determination of the net change in account
value during the seven-day period reflects (i) dividends declared on the
original share and on any additional shares, including the value of any
additional shares purchased with dividends paid on the original share, and (ii)
fees charged to all shareholder accounts. Realized capital gains or losses and
unrealized appreciation or depreciation of the Fund's portfolio securities are
not included in the computation. Therefore, annualized yields may be different
from effective yields quoted for the same period.
The Fund's "effective yield" for each Class is obtained by adjusting its
"current yield" to give effect to the compounding nature of the Fund's
portfolio, as follows: the unannualized base period return is compounded and
brought out to the nearest one hundredth of one percent by adding one to the
base period return, raising the sum to a power equal to 365 divided by 7, and
subtracting one from the result, i.e., effective yield = [(base period return +
1)365/7] - 1.
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day. The Fund's yield for any given period is not an indication, or
representation by the Fund, of future yields or rates of return on the Fund's
shares, and may not provide a basis for comparison with bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors who
purchase the Fund's shares directly may realize a higher yield than Participant
Investors because they will not be subject to any fees or charges that may be
imposed by Participating Organizations.
The Fund may from time to time advertise its tax equivalent current yield. The
tax equivalent yield for each Class is computed based upon a 30-day (or one
month) period ended on the date of the most recent balance sheet included in
this Statement of Additional Information. It is computed by dividing that
portion of the yield of the Fund (as computed pursuant to the formulae
previously discussed) which is tax exempt by one minus a stated income tax rate
and adding the quotient to that portion, if any, of the yield of the Fund that
is not tax exempt. The tax equivalent yield for the Fund may also fluctuate
daily and does not provide a basis for determining future yields.
The Fund may from time to time advertise a tax equivalent effective yield table
which shows the yield that an investor needs to receive from a taxable
investment in order to equal a tax-free yield from the Fund. This is calculated
by dividing that portion of the Fund's effective yield that is tax-exempt by 1
minus a stated income tax rate and adding the quotient to that portion, if any,
of the Fund's effective yield that is not tax-exempt. See "Taxable Equivalent
Yield Table" herein.
The Fund's Class A shares' yield for the seven day period ended June 30, 1999
was 2.80%, which is equivalent to an effective yield of 2.84%. The Fund's Class
B shares' yield for the seven day period ended June 30, 1999 was 3.00%, which is
equivalent to an effective yield of 3.04%. The Fund's Class A shares' yield for
the seven day period ended December 31, 1998 was 2.88%, which is equivalent to
an effective yield of 2.92%. The Fund's Class B shares' yield for the seven day
period ended December 31, 1998 was 3.08%, which is equivalent to an effective
yield of 3.13%. There is no seven day yield available for the Chase Vista Select
shares since these shares were not yet in existence prior to July 9,1999.
XII. FINANCIAL STATEMENTS
The interim unaudited financial statements for the Fund for the six months ended
April 30, 1999 and the audited financial statements for the fiscal year ended
October 31, 1998 and the report therein of McGladrey & Pullen, LLP, are herein
incorporated by reference to the Fund's Semi-Annual and Annual Reports,
respectively. The Semi-Annual and Annual Reports are available upon request and
without charge.
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DESCRIPTION OF RATINGS*
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S TWO HIGHEST MUNICIPAL BOND
RATINGS:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
CON. ( c ) Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by (i) earnings of projects under construction, (ii) earnings of
projects unseasoned in operating experience, (iii) rentals which begin when
facilities are completed, or (iv) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S TWO HIGHEST RATINGS OF STATE
AND MUNICIPAL NOTES AND OTHER SHORT-TERM LOANS:
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Symbols used will be as follows:
MIG-1: Loans bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2: Loans bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
DESCRIPTION OF STANDARD & POOR'S RATING SERVICES TWO HIGHEST DEBT RATINGS:
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only to a small degree.
PLUS ( + ) OR MINUS ( - ): The AA rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.
PROVISIONAL RATINGS: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Standard & Poor's does not provide ratings for state and municipal notes.
DESCRIPTION OF STANDARD & POOR'S RATING SERVICES TWO HIGHEST COMMERCIAL PAPER
RATINGS:
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
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.
26
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
INDIVIDUAL TAXABLE EQUIVALENT YIELD TABLE
(BASED ON TAX RATES EFFECTIVE UNTIL DECEMBER 31, 1999)
- --------------------------------------------------------------------------------
1. If Your Taxable Income Bracket Is . . .
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single $0- $20,001 - $25,751 - -- $35,001- $40,001- $62,451- $75,001- $130,251- $283,150
Return $20,000 $25,750 $35,000 -- $40,000 $62,450 $75,000 $130,250 $283,150 and over
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- -------------------------------------------
Joint $0- $20,001- $43,051 - $50,001 - $70,001- $80,001- $104,051- $150,001- $158,551- $283,150
Return $20,000 $43,050 $50,000 $70,000 $80,000 $104,050 $150,000 $158,550 $283,150 and over
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- -------------------------------------------
2. Then Your Combined Income Tax Bracket Is . . .
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- -------------------------------------------
Federal
Tax Rate 15.00% 15.00% 28.00% 28.00% 28.00% 28.00% 31.00% 31.00% 36.00% 39.60%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- -------------------------------------------
State
Tax Rate 1.40% 1.75% 1.75% 2.45% 3.50% 5.53% 5.53% 6.37% 6.37% 6.37%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- -------------------------------------------
Combined
Marginal
Tax Rate 16.19% 16.49% 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 Exempt Equivalent Taxable Investment Yield
Yield Requires to Match Tax Exempt Yield
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
2.00% 2.39% 2.39% 2.83% 2.85% 2.88% 2.94% 3.07% 3.10% 3.34% 3.54%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
2.50% 2.98% 2.99% 3.53% 3.56% 3.60% 3.68% 3.84% 3.87% 4.17% 4.42%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
3.00% 3.58% 3.59% 4.24% 4.27% 4.32% 4.41% 4.60% 4.64% 5.01% 5.30%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
3.50% 4.18% 4.19% 4.95% 4.98% 5.04% 5.15% 5.37% 5.42% 5.84% 6.19%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
4.00% 4.77% 4.79% 5.65% 5.70% 5.76% 5.88% 6.14% 6.19% 6.68% 7.07%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
4.50% 5.37% 5.39% 6.36% 6.41% 6.48% 6.62% 6.90% 6.97% 7.51% 7.96%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
5.00% 5.97% 5.99% 7.07% 7.12% 7.20% 7.35% 7.67% 7.74% 8.34% 8.84%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
5.50% 6.56% 6.59% 7.77% 7.83% 7.92% 8.09% 8.44% 8.51% 9.18% 9.73%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
6.00% 7.16% 7.18% 8.48% 8.54% 8.64% 8.82% 9.20% 9.29% 10.01% 10.61%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
6.50% 7.76% 7.78% 9.19% 9.25% 9.36% 9.56% 9.97% 10.06% 10.85% 11.49%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
7.00% 8.35% 8.38% 9.90% 9.97% 10.07% 10.29% 10.74% 10.84% 11.68% 12.38%
- --------------- ----------- ----------- ------------ ----------- ----------- ----------- ----------------------- -------------------
</TABLE>
To use this chart, find the applicable level of taxable income based on your tax
filing status in section one. Then read down to section two to determine your
combined tax bracket and, in section three, to see the equivalent taxable yields
for each of the tax free income yields given.
- --------------------------------------------------------------------------------
27
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CORPORATE TAXABLE EQUIVALENT YIELD TABLE
(BASED ON TAX RATES EFFECTIVE UNTIL DECEMBER 31, 1999)
- --------------------------------------------------------------------------------
1. If Your Taxable Income Bracket Is . . .
- ----------------- ------------ ------------ ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate $0- $50,001- $75,001- $100,001- $335,001- $10,000,001- $15,000,001- $18,333,334-
Return $50,000 $75,000 $100,000 $335,000 $10,000,000 $15,000,000 $18,333,333 and over
- ----------------------------------------------------------------------------------------------------------------------------------
2. Then Your Combined Income Tax Bracket Is . . .
- -----------------------------------------------------------------------------------------------------------------------------------
Federal
Tax Rate 15.00% 25.00% 34.00% 39.00% 34.00% 35.00% 38.00% 35.00%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
State
Tax Rate 7.25% 7.25% 7.25% 7.25% 7.25% 7.25% 7.25% 7.25%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
Combined
Marginal 21.16% 30.44% 38.79% 43.42% 38.79% 39.71% 42.50% 39.71%
Tax Rate
- -----------------------------------------------------------------------------------------------------------------------------------
3. Now Compare Your Tax Free Income Yields With Taxable Income Yields
- -----------------------------------------------------------------------------------------------------------------------------------
Tax Exempt Equivalent Taxable Investment Yield
Yield Requires to Match Tax Exempt Yield
- ----------------- -----------------------------------------------------------------------------------------------------------------
2.00% 2.54% 2.88% 3.27% 3.53% 3.27% 3.32% 3.48% 3.32%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
2.50% 3.17% 3.59% 4.08% 4.42% 4.08% 4.15% 4.35% 4.15%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
3.00% 3.81% 4.31% 4.90% 5.30% 4.90% 4.98% 5.22% 4.98%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
3.50% 4.44% 5.03% 5.72% 6.19% 5.72% 5.81% 6.09% 5.81%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
4.00% 5.07% 5.75% 6.53% 7.07% 6.53% 6.63% 6.96% 6.63%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
4.50% 5.71% 6.47% 7.35% 7.95% 7.35% 7.46% 7.83% 7.46%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
5.00% 6.34% 7.19% 8.17% 8.84% 8.17% 8.29% 8.69% 8.29%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
5.50% 6.98% 7.91% 8.98% 9.72% 8.98% 9.12% 9.56% 9.12%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
6.00% 7.61% 8.63% 9.80% 10.60% 9.80% 9.95% 10.43% 9.95%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
6.50% 8.24% 8.34% 10.62% 11.49% 10.62% 10.78% 11.30% 10.78%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
7.00% 8.88% 10.06% 11.44% 12.37% 11.44% 11.61% 12.17% 11.61%
- ----------------- ------------ ------------ ------------ -------------- ------------- -------------- --------------- --------------
</TABLE>
To use this chart, find the applicable level of taxable income based on your tax
filing status in section one. Then read down to section two to determine your
combined tax bracket and, in section three, to see the equivalent taxable yields
for each of the tax free income yields given.
28
