As filed with the Securities and Exchange Commission on March 29, 2000
Registration No. 33-48014
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 11 [X]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 12
[X]
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
(Exact Name of Registrant as Specified in Charter)
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue, New York, New York 10020
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 830-5200
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Bernadette N. Finn
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Name and Address of Agent for Service)
Copy to: MICHAEL R. ROSELLA, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
(212) 856-6858
It is proposed that this filing will become effective: (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (Date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a) (2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
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PENNSYLVANIA 600 FIFTH AVENUE
DAILY MUNICIPAL NEW YORK, N.Y. 10020
INCOME FUND (212) 830-5220
Class A Shares; Class B Shares
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PROSPECTUS
March 29, 2000
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
Pennsylvania 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.
TABLE OF CONTENTS
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2 Risk/Return Summary: Investments, Risks 8 Management, Organization and Capital Structure
and Performance
8 Shareholder Information
4 Fee Table
16 Distribution Arrangements
6 Investment Objectives, Principal Investment
Strategies and Related Risks 18 Financial Highlights
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I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE
Investment Objectives
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The Fund seeks as high a level of current income exempt from Federal income
tax and, to the extent possible from Pennsylvania 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
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The Fund intends to achieve its investment objectives by investing
principally in short-term, high quality, debt obligations of:
(i) The Commonwealth of Pennsylvania, and its political subdivisions,
(ii) Puerto Rico and other United States Territories, and their political
subdivisions, and
(iii) Other states.
These debt obligations are collectively referred to throughout this
Prospectus as Municipal Obligations.
The Fund is a money market fund and seeks to maintain an investment
portfolio with a dollar-weighted average maturity of 90 days or less, to value
its investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.
The Fund intends to concentrate (i.e. 25% or more of the Fund's total
assets) in Pennsylvania Municipal Obligations. A large number of these
Pennsylvania Municipal Obligations may be held in Participation Certificates.
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 The amount of income the Fund generates will vary with changes in
prevailing interest rates.
o Because the Fund intends to concentrate in Pennsylvania 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 risk
which an investment in Pennsylvania Municipal Obligations may entail.
Payment of interest and preservation of capital are dependent upon the
continuing ability of Pennsylvania issuers and/or obligors of state,
municipal and public authority debt obligations to meet their payment
obligations. Risk factors affecting the State of Pennsylvania are described
in "Pennsylvania Risk Factors" in the Statement of Additional Information.
o Because the Fund reserves the right to invest up to 20% of its total assets
in taxable securities, investors should understand that some of the income
generated by the Fund may be subject to regular Federal, state and local
income tax and Federal alternative minimum tax.
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Risk/Return Bar Chart and Table
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The following bar chart and table may assist you in deciding whether to
invest in the Fund. The bar chart shows the change in the annual total returns
of the Fund's Class A shares over the last 7 calendar years. The table shows the
average annual total returns for the Fund's Class A and Class B shares for the
last one year, five year and since inception periods. 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 of the Fund's
classes may be obtained by calling the Fund toll-free at 1-800-221-3079.
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===============================================================================
Pennsylvania Daily Municipal Income Fund - Class A Shares (1),(2)
[GRAPHIC OMITTED]
Calendar Year % Total Return
1993 2.25%
1994 2.56%
1995 3.50%
1996 2.97%
1997 3.06%
1998 2.91%
1999 2.63%
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(1) The Fund's highest quarterly return was 0.91% for the quarter ended June
30, 1995; the lowest quarterly return was 0.51% for the quarter ended March
31, 1994.
(2) Participating Organizations may charge a fee to investors for purchasing
and redeeming shares. Therefore, the net return to such investors may be
less than if they had invested in the Fund directly.
Average Annual Total Returns - Pennsylvania Daily Municipal Income Fund
Class A Class B
For the period ended December 31, 1999
One Year 2.63% 2.88%
Five Years 3.01% N/A
Average Annual Total Return
Since Inception 2.84% 3.15%
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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
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(expenses that are deducted from Fund assets)
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Class A Class B
Management Fees................................ 0.40% 0.40%
Distribution and Service (12b-1) Fees.......... 0.25% 0.00%
Other Expenses................................. 1.04% 1.04%
Administration Fees.......................... 0.21% 0.21%
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Total Annual Fund Operating Expenses........... 1.69% 1.44%
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The Manager has voluntarily waived all of the Management Fee and Administration
Fee and reimbursed a portion of the Fund's operating expenses with respect to
both Class A and B Shares during the past year. After such waivers, the
Management Fee, with respect to both Class A and B shares, was 0%. The
Administration Fee, with respect to both Class A and B shares, was 0% and Other
Expenses were 0.45%. The actual Total Annual Fund Operating Expenses for Class A
were 0.70% and for Class B were 0.45%. This fee waiver arrangement and
reimbursement may be terminated at any time at the option of the Manager.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other money market funds.
Assume that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. Also assume that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
Class A: $172 $533 $918 $1998
Class B: $147 $456 $787 $1724
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II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objectives
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The Fund is a short-term, tax-exempt money market fund whose investment
objectives are to seek as high a level of current income exempt from Federal
income tax and, to the extent possible, from Pennsylvania income taxes,
consistent with preserving capital, maintaining liquidity and stabilizing
principal.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund that would be affected by such a change.
Principal Investment Strategies
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Generally
The Fund will invest primarily (i.e., at least 80%) in short-term, high
quality, debt obligations which include:
(i) Pennsylvania Municipal Obligations issued by or on behalf of the
Commonwealth of Pennsylvania or any Pennsylvania 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. Participation Certificates represent the Fund's interest in a
Municipal Obligation that is held by another entity (i.e. banks, insurance
companies or other financial institutions). Instead of purchasing a Municipal
Obligation directly, the Fund purchases and holds an undivided interest in a
Municipal Obligation that is held by a third party. The Fund's interest in the
underlying Municipal Obligation is proportionate to the Fund's participation
interest. Ownership of the Participation Certificates 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 Pennsylvania 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.
The Fund may also purchase securities and participation certificates whose
interest income may be subject to the Federal alternative minimum tax. However,
these investments are included in the same 20%of total assets that maybe
invested in taxable securities.
To the extent suitable Pennsylvania 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 Pennsylvania income tax.
The Fund will invest at least 65% of its total assets in Pennsylvania
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 Manager. Such a temporary defensive position may cause the
Fund to not achieve its investment objectives.
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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 securities which have been rated (or whose
issuers have been rated) in the highest short-term rating category by nationally
recognized statistical rating organizations or are unrated securities which have
been determined by the Fund's Board of Trustees to be of comparable quality.
Subsequent to its purchase by the Fund, the quality of an investment may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. If this occurs, the Board of Trustees 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 investment adviser becoming aware of the new rating and
provided further that the Board of Trustees is subsequently notified of the
Manager's actions.
For a more detailed description of (i) the securities that the Fund will
invest in, (ii) fundamental investment restrictions, and (iii) industry
regulations governing credit quality and maturity, please refer to the Statement
of Additional Information.
Risks
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The Fund complies with industry-standard requirements on the quality,
maturity and diversification of its investments which are designed to help
maintain a $1.00 share price. A significant change in interest rates or a
default on the Fund's investments could cause its share price (and the value of
your investment) to change.
By investing in liquid, short-term, high quality investments that have high
quality credit support from banks, insurance companies or other financial
institutions (i.e. Participation Certificates and other variable rate demand
instruments), the Fund's management believes that it can protect the Fund
against credit risks that may exist on long-term Pennsylvania 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 Pennsylvania Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of Pennsylvania and its political subdivisions.
The primary purpose of investing in a portfolio of Pennsylvania Municipal
Obligations is the special tax treatment accorded Pennsylvania resident
individual investors. Payment of interest and preservation of principal,
however, are dependent upon the continuing ability of the Pennsylvania 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
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investment portfolio and should compare yields available on portfolios of
Pennsylvania 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. This includes
extensive governmental regulations, changes in the availability and cost of
capital funds, and general economic conditions (see "Variable Rate Demand
Instruments and Participation Certificates" in the Statement of Additional
Information) which may limit both the amounts and types of loans and other
financial commitments which may be made and interest rates and fees which may be
charged. The profitability of this industry is largely dependent upon the
availability and cost of capital funds for the purpose of financing lending
operations under prevailing money market conditions. Also, general economic
conditions play an important part in the operations of this industry and
exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations under a letter
of credit.
III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of February 29, 2000, the Manager was the
investment manager, adviser or supervisor with respect to assets aggregating in
excess of $15.1 billion. The Manager has been an investment adviser since 1970
and currently is manager of eighteen other registered investment companies and
also advises pension trusts, profit-sharing trusts and endowments.
Pursuant to the Investment Management Contract, the Manager manages the
Fund's portfolio of securities and makes decisions with respect to the purchase
and sale of investments, subject to the general control of the Board of Trustees
of the Fund. Pursuant to the Investment Management Contract, the Fund pays the
Manager a fee equal to .40% per annum of the Fund's average daily net assets for
managing the Fund's investment portfolio and performing related services.
Pursuant to the Administrative Services Contract, the Manager performs clerical,
accounting supervision and office service functions for the Fund. The Manager
provides the Fund with the personnel to perform all other clerical and
accounting type functions not performed by the Manager. For its services under
the Administrative Services Contract, the Fund pays the Manager a fee equal to
.21% per annum of the Fund's average daily net assets.
The Manager, at its discretion, may voluntarily waive all or a portion of
the investment management and the administrative services fee. Any portion of
the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares.
In addition, Reich & Tang Distributors Inc., the Distributor, receives a
servicing fee equal to .25% per annum of the average daily net assets of the
Class A shares of the Fund under the Shareholder Servicing Agreement. The fees
are accrued daily and paid monthly. Investment management fees and operating
expenses, which are attributable to all Classes of Fund shares, will be
allocated daily to each Class based on the percentage of shares outstanding for
each Class at the end of the day.
IV. SHAREHOLDER INFORMATION
The Fund sells and redeems its shares on a continuing basis at net asset
value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from Participating Organizations
(see "Investments Through Participating Organizations - Purchase of Class A
Shares" for a definition of Participating Organizations) and from investors
directly.
Pricing of Fund Shares
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The net asset value of each Class of the Fund's shares is determined as of
12 noon, New York City time, on each Fund Business Day. Fund Business Day means
weekdays (Monday through Friday) except days on which the New York Stock
Exchange is closed for trading (i.e. national holidays). The net asset
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value of a Class is computed by dividing the value of the Fund's net assets for
such Class (i.e., the value of its securities and other assets less its
liabilities, including expenses payable or accrued, but excluding capital stock
and surplus) by the total number of shares outstanding for such Class. The Fund
intends to maintain a stable net asset value at $1.00 per share although there
can be no assurance that this will be achieved.
The Fund's portfolio securities are valued at their amortized cost in
compliance with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost
valuation involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium. If fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Trustees will consider whether any action should be initiated. Although
the amortized cost method provides certainty in valuation, it may result in
periods during which the value of an instrument is higher or lower than the
price an investment company would receive if the instrument were sold.
Shares are issued as of the first determination of the Fund's net asset
value per share for each Class made after acceptance of the investor's purchase
order. In order to maximize earnings on its portfolio, the Fund normally has its
assets as fully invested as is practicable. Many securities in which the Fund
invests require the immediate settlement in funds of Federal Reserve member
banks on deposit at a Federal Reserve Bank (commonly known as "Federal Funds").
Fund shares begin accruing income on the day the shares are issued to an
investor. The Fund reserves the right to reject any purchase order for its
shares. Certificates for Fund shares will not be issued to an investor.
Purchase of Fund Shares
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The Fund does not accept a purchase order until an investor's payment has
been converted into Federal Funds and is received by the Fund's transfer agent.
Orders accompanied by Federal Funds and received after 12 noon, New York City
time, on a Fund Business Day will result in the issuance of shares on the
following Fund Business Day.
Investors may, if they wish, invest in the Fund through Participating
Organizations with which they have accounts. All other investors, and investors
who have accounts with Participating Organizations but do not wish to invest in
the Fund through them, may invest in the Fund directly as Class B shareholders.
Class B shareholders do not receive the benefit of the servicing functions
performed by a Participating Organization. Class B shares may also be offered to
investors who purchase their shares through Participating Organizations who,
because they may not be legally permitted to receive such as fiduciaries, do not
receive compensation from the Fund's distributor or the Manager.
The minimum initial investment in the Fund for both Classes of shares is
(i) $1,000 for purchases through Participating Organizations - this may be
satisfied by initial investments aggregating $1,000 by a Participating
Organization on behalf of their customers whose initial investments are less
than $1,000, (ii) $1,000 for securities brokers, financial institutions and
other industry professionals that are not Participating Organizations, and (iii)
$5,000 for all other investors. Initial investments may be made in any amount in
excess of the applicable minimums. The minimum amount for subsequent investments
is $100 unless the investor is a client of a Participating Organization whose
clients have made aggregate subsequent investments of $100.
Each shareholder, except certain Participant Investors, will receive a
personalized monthly statement from the Fund listing (i) the total number of
Fund shares owned as of the statement closing date, (ii) purchases and
redemptions of Fund shares, and (iii) the dividends paid on Fund shares
(including dividends paid in cash or reinvested in additional Fund shares).
Investments Through Participating
Organizations - Purchase of Class A Shares
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Investors purchasing shares through a Participating Organization become
Class A shareholders and are referred to as Participant Investors. Participating
Organizations are securities brokers, banks and financial institutions or other
industry professionals or organizations that have entered into shareholder
servicing agreements with
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the Fund's distributor with respect to investment of their customer accounts in
the Fund. When instructed by a Participant Investor to purchase or redeem Fund
shares, the Participating Organization, on behalf of the Participant Investor,
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 Participant Investors each
purchase and redemption of Fund shares for their accounts. Also, Participating
Organizations may send periodic account statements to the Participant Investors
showing (i) the total number of Fund shares owned as of the statement closing
date, (ii) purchases and redemptions of Fund shares during the period covered by
the statement, and (iii) the income earned by Fund shares during the statement
period (including dividends paid in cash or reinvested in additional Fund
shares). Participant Investors whose Participating Organizations have not
undertaken to provide such statements will receive them from the Fund directly.
Participating Organizations may charge Participant Investors a fee in
connection with their use of specialized purchase and redemption procedures. In
addition, Participating Organizations offering purchase and redemption
procedures similar to those offered to shareholders who invest in the Fund
directly, may impose charges, limitations, minimums and restrictions in addition
to or different from those applicable to shareholders who invest in the Fund
directly. Accordingly, the net yield to investors who invest through
Participating Organizations may be less than the net yield that could be
achieved by investing in the Fund directly. A Participant Investor should read
this Prospectus in conjunction with the materials provided by the Participating
Organization describing the procedures under which Fund shares may be purchased
and redeemed through the Participating Organization.
In the case of qualified Participating Organizations, orders received by
the Fund's transfer agent before 12 noon, New York City time, on a Fund Business
Day, without accompanying Federal Funds, will result in the issuance of shares
on that day only if the Federal Funds required in connection with the orders are
received by the Fund's transfer agent before 4:00 p.m., New York City time, on
that day. Orders for which Federal Funds are received after 4:00 p.m., New York
City time, will result in share issuance the following Fund Business Day.
Participating Organizations are responsible for instituting procedures to insure
that purchase orders by their respective clients are processed expeditiously.
Initial Direct Purchases of Class B Shares
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Investors who wish to invest in the Fund directly may obtain a current
Prospectus and the subscription order form necessary to open an account by
telephoning the Fund at the following numbers:
Within New York 212-830-5280
Outside New York (TOLL FREE) 800-221-3079
Mail
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Investors may send a check made payable to "Pennsylvania Daily Municipal
Income Fund" along with a completed subscription order form to:
Pennsylvania Daily Municipal Income Fund
Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member of the Federal Reserve System
will normally be converted into Federal Funds within two business days after
receipt of the check. Checks drawn on a non-member bank may take substantially
longer to convert into Federal Funds. An investor's purchase order will not be
accepted until the Fund receives Federal Funds.
Bank Wire
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To purchase shares of the Fund using the wire system for transmittal of
money among banks, investors should first obtain a new account number by
telephoning the Fund at 212-830-5280 (within New York) or at 1-800-221-3079
(outside New York) and then instruct a member commercial bank to wire money
immediately to:
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State Street Kansas City
ABA # 101003621
Reich & Tang Funds
DDA # 890752-954-6
For Pennsylvania Daily Municipal
Income Fund
Account of (Investor's Name)__________________
Account #_____________________________________
SS#/Tax ID# __________________________________
The investor should then promptly complete and mail the subscription order
form.
Investors planning to wire funds should instruct their bank so the wire
transfer can be accomplished before 12 noon, New York City time, on the same
day. There may be a charge by the investor's bank for transmitting the money by
bank wire, and there also may be a charge for use of Federal Funds. The Fund
does not charge investors for its receipt of wire transfers. Wired payments
received prior to 12 noon, New York City time, on a Fund Business Day, will be
treated as a Federal Funds payment received on that day.
Personal Delivery
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Deliver a check made payable to "Pennsylvania Daily Municipal Income Fund",
along with a completed subscription order form to:
Reich & Tang Mutual Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
Electronic Funds Transfers (EFT),
Pre-authorized Credit and Direct
Deposit Privilege
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You may purchase shares of the Fund (minimum of $100) by having salary,
dividend payments, interest payments or any other payments designated by you,
including Federal salary, social security, or certain veteran's, military or
other payments from the Federal government, automatically deposited into your
Fund account. You can also have money debited from your checking account. To
enroll in any one of these programs, you must file either a completed EFT
Application, Pre-authorized Credit Application, or a Direct Deposit Sign-Up
Form. The appropriate form may be obtained from your broker or the Fund. You may
elect at any time to terminate your participation by notifying in writing the
appropriate depositing entity and/or Federal agency. Death or legal incapacity
will automatically terminate your participation in these programs. Further, the
Fund may terminate your participation upon 30 days' notice to you.
Subsequent Purchases of Shares
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Subsequent purchases can be made by bank wire, as indicated above, or by
mailing a check to:
Pennsylvania Daily Municipal Income Fund
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 07101-3232
There is a $100 minimum for subsequent purchases of shares. All payments
should clearly indicate the shareholder's account number.
A shareholder may reopen an account without filing a new subscription order
form at any time during the year in which the shareholder's account is closed or
during the following calendar year, provided that the information on the
subscription form on file with the Fund is still applicable.
Redemption of Shares
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A redemption is effected immediately following, and at a price determined
in accordance with, the next determination of net asset value per share of each
Class upon receipt by the Fund's transfer agent of the redemption order (and any
supporting documentation that it may require). Normally, payment for redeemed
shares is made on the same Fund Business Day after the redemption is effected,
provided the redemption request is received prior to 12 noon, New York City
time. However, redemption payments will not be paid out unless the check
(including a certified or cashier's check) used for investment has been cleared
for payment by the investor's bank, which can take up to 15 days after
investment. Shares redeemed are not entitled to participate in dividends
declared on the day a redemption becomes effective.
A shareholder's original subscription order form permits the shareholder
to redeem by written request
-11-
<PAGE>
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
transfer agent's standards and procedures.
Written Requests
- ----------------
Shareholders may make a redemption in any amount by sending a written
request to the Fund addressed to:
Pennsylvania Daily Municipal Income Fund
c/o Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020
All previously issued certificates submitted for redemption must be endorsed
by the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with signature guaranteed.
Normally the redemption proceeds are paid by check and mailed to the
shareholder of record.
Checks
- ------
By making the appropriate election on their subscription order forms,
shareholders may request a supply of checks that may be used to effect
redemptions from the Class of shares in which they invest. The checks, which
will be issued in the shareholder's name, are drawn on a special account with
the Fund's agent bank. Checks may be drawn in any amount of $250 or more. When a
check is presented to the Fund's agent bank, it instructs the Fund's transfer
agent to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. The use of a check to
make a withdrawal enables a shareholder 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.
Shareholders are not charged for checks provided by the Fund. The Fund
reserves the right to impose a charge or impose a different minimum check amount
in the future, if the Board of Directors determines that doing so is in the best
interests of the Fund and its shareholders.
Shareholders electing the checking option are subject to the procedures,
rules and regulations of the Fund's agent bank governing checking accounts.
Checks drawn on a jointly owned account may, at the shareholder's election,
require only one signature. Checks in amounts exceeding the value of the
shareholder's account at the time the check is presented for payment will not be
honored. Since the dollar value of the account changes daily, the total value of
the account may not be determined in advance and the account may not be entirely
redeemed by check. In addition, the Fund reserves the right to charge the
shareholder's account a fee up to $20 for checks not honored as a result of an
insufficient account value, a check deemed not negotiable because it has been
held longer than six months, an unsigned check and/or a post-dated check. The
Fund reserves the right to terminate or modify the check redemption procedure at
any time or to impose additional fees following notification to the Fund's
shareholders.
Corporations and other entities electing the checking option are required to
furnish a certified resolution or other evidence of authorization in accordance
with the Fund's normal practices. Individuals and joint tenants are not required
to furnish any supporting documentation. Appropriate authorization forms will be
sent by the Fund or its agents to corporations and other shareholders who select
this option. As soon as the authorization forms are filed in good order with the
Fund's agent bank, the Fund will provide the shareholder with a supply of
checks.
Telephone
- ---------
-12-
<PAGE>
The Fund accepts telephone redemption requests from shareholders who elect
this option on their subscription order form. The proceeds of a telephone
redemption may be sent to shareholders at their addresses or, if in excess of
$1,000, to their bank accounts, both as set forth in the subscription order form
or in a subsequent written authorization. The Fund may accept telephone
redemption instructions from any person with respect to accounts of shareholders
who elect this service. Thus, such shareholders risk possible loss of principal
and interest in the event of a telephone redemption not authorized by them. The
Fund will employ reasonable procedures to confirm that telephone redemption
instructions are genuine and will require that shareholders electing such option
provide a form of personal identification. Failure by the Fund to employ such
reasonable procedures may cause the Fund to be liable for the losses incurred by
investors due to unauthorized or fraudulent telephone redemptions.
A shareholder making a telephone withdrawal should call the Fund at
212-830-5220 (outside New York at 800-221-3079) and state: (i) the name of the
shareholder appearing on the Fund's records, (ii) the shareholder's account
number, (iii) the amount to be withdrawn, (iv) whether such amount is to be
forwarded to the shareholder's designated bank account or address, and (v) the
name of the person requesting the redemption. Usually the proceeds are sent to
the designated bank account or address on the same Fund Business Day the
redemption is effected, provided the redemption request is received before 12
noon, New York City time. Proceeds are sent the next Fund Business Day if the
redemption request is received after 12 noon, New York City time. The Fund
reserves the right to terminate or modify the telephone redemption service in
whole or in part at any time and will notify shareholders accordingly.
Generally
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by check. Unless other instructions are given
in proper form to the Fund's transfer agent, a check for the proceeds of a
redemption will be sent to the shareholder's address of record. If a shareholder
elects to redeem all of his shares, all dividends accrued to the date of such
redemption will be paid to the shareholder along with the proceeds of the
redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted. Additional exceptions
include any period during which an emergency (as determined by the SEC) exists
as a result of which disposal by the Fund of its portfolio securities is not
reasonably practicable or as a result of which it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or for such other
period as the SEC may by order permit for the protection of the shareholders of
the Fund.
The Fund has reserved the right to redeem the shares of any shareholder if
the net asset value of all the remaining shares in the shareholder's or his
Participating Organization's account after a withdrawal is less than $500.
Written notice of a proposed mandatory redemption will be given at least 30 days
in advance to any shareholder whose account is to be redeemed or the Fund may
impose a monthly service charge of $10 on such accounts. For Participant
Investor accounts, notice of a proposed mandatory redemption will be made to the
appropriate Participating Organization only. The Participating Organization will
be responsible for notifying Participant Investors of a proposed mandatory
redemption. Shareholders may avoid mandatory redemption by purchasing sufficient
additional shares to increase their total net asset value to the minimum amount
during the notice period.
Specified Amount Automatic
Withdrawal Plan
- --------------------------------------------------------------------------------
Shareholders may elect to withdraw shares and receive payment from the
Fund of a specified amount of $50 or more automatically on a monthly or
quarterly basis. The monthly or quarterly withdrawal payments of the specified
amount are made by the Fund on the 23rd day of the month. Whenever such 23rd day
of a month is not a Fund Business Day, the payment date is the
-13-
<PAGE>
Fund Business Day preceding the 23rd day of the month. In order to make a
payment, a number of shares equal in aggregate net asset value to the payment
amount are redeemed at their net asset value on the Fund Business Day
immediately preceding the date of payment. To the extent that these redemptions
exceed the number of shares purchased through reinvestment of dividends and
distributions, the total number of shares owned by a shareholder will be reduced
and may ultimately liquidate a shareholder's investment.
An election to receive automatic withdrawal payments may be made on the
original subscription order form. The election may also be made, changed or
terminated at any later time by sending a signature guaranteed written request
to the transfer agent. Because the withdrawal plan involves the redemption of
Fund shares, such withdrawals may constitute taxable events to the shareholder.
However, the Fund does not expect that there will be any realized capital gains.
Dividends and Distributions
- --------------------------------------------------------------------------------
The Fund declares dividends equal to all its net investment income
(excluding net capital gains, 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 (the excess of net long-term capital gains over
net short-term capital gains), if any, are distributed at least annually and in
no event later than 60 days after the end of the Fund's fiscal year.
All dividends and distributions of capital gains are automatically
invested, at no charge, in additional Fund shares of the same Class of shares
immediately upon payment thereof unless a shareholder has elected by written
notice to the Fund to receive either of such distributions in cash.
Because Class A shares bear a service fee under the Fund's 12b-1 Plan, the
net income of and the dividends payable to the Class A shares will be lower than
the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of the Fund will, however, be declared
and paid on the same days at the same times and, except as noted with respect to
the service fees payable under the Plan, will be determined in the same manner
and paid in the same amounts.
Exchange Privilege
- --------------------------------------------------------------------------------
Shareholders of the Fund are entitled to exchange some or all of their
Class of shares in the Fund for shares of the same Class of certain other
investment companies which retain Reich & Tang Asset Management L.P. as
investment adviser and which participate in the exchange privilege program with
the Fund. If only one Class of shares is available in a particular exchange
fund, the shareholders of the Fund are entitled to exchange their shares for the
shares available in that exchange fund. Currently the exchange privilege program
has been established between the Fund and California Daily Tax Free Income Fund,
Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily
Tax Free Income Fund, Inc., Florida Daily Municipal Income Fund, Georgia Daily
Municipal Income Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc.,
Short Term Income Fund, Inc. and Virginia Daily Municipal Income Fund, Inc. In
the future, the exchange privilege program may be extended to other investment
companies which retain Reich & Tang Asset Management L.P. as investment adviser
or manager.
There is no charge for the exchange privilege or limitation as to
frequency of exchange. The minimum amount for an exchange is $1,000. However,
shareholders who are establishing a new account with an investment company
through the exchange privilege must ensure that a sufficient number of shares
are exchanged to meet the minimum initial investment required for the investment
company into which the exchange is being made. Each Class of shares is exchanged
at its respective net asset value.
The exchange privilege provides shareholders of the Fund with a convenient
method to shift their investment among different investment companies when they
feel such a shift is desirable. The exchange privilege is available to
shareholders resident in any state in which shares of the investment company
being acquired may legally be
-14-
<PAGE>
sold. Shares of the same Class may be exchanged only between investment company
accounts registered in identical names. Before making an exchange, an investor
should review the current prospectus of the investment company into which the
exchange is to be made. An exchange is a taxable event.
Instructions for exchanges may be made by sending a signature guaranteed
written request to:
Pennsylvania Daily Municipal Income Fund
c/o Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020
or, for shareholders who have elected that option, by telephoning the Fund at
212-830-5220 (within New York) or 1-800-221-3079 (outside New York). The Fund
reserves the right to reject any exchange request and may modify or terminate
the exchange privilege at any time.
Tax Consequences
- --------------------------------------------------------------------------------
Federal Income Taxes
The purchase of Fund shares will be the purchase of an asset. Dividends paid
by the Fund that are designated by the Fund and derived from Municipal
Obligations and Participation Certificates, will be exempt from regular Federal
income tax, provided the Fund complies with Section 852(b)(5) of the Internal
Revenue Code, but may be subject to Federal alternative minimum tax. These
dividends are referred to as exempt interest dividends. Income exempt from
Federal income tax may be subject to state and local income tax.
The Fund may invest a portion of its assets in taxable securities the
interest income on which is subject to Federal, state and local income tax.
Dividends paid from net investment income, if any, and distributions of any
realized short-term capital gains (from tax-exempt or taxable obligations) are
taxable to shareholders as ordinary income, whether received in cash or
reinvested in additional shares of the Fund.
For Social Security recipients, interest on tax-exempt bonds, including
exempt interest dividends paid by the Fund, is to be added to adjusted gross
income to determine the amount of Social Security benefits includible in gross
income.
Interest on certain private activity bonds will constitute an item of tax
preference subject to the individual alternative minimum tax. Corporations will
be required to include in alternative minimum taxable income 75% of the amount
by which their adjusted current earnings (including tax-exempt interest) exceed
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 tax-exempt interest.
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.
The Fund will inform shareholders of the amount and nature of its income and
gains in a written notice mailed to shareholders not later than 60 days after
the close of the Fund's taxable year.
The sale, exchange or redemption of shares will generally be the taxable
disposition of an asset that may result in a taxable gain or loss for the
shareholder if the shareholder receives more or less than it paid for its
shares. An exchange pursuant to the exchange privilege is treated as a sale on
which the shareholder may realize a taxable gain or loss.
With respect to variable rate demand instruments, including Participation
Certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner of an interest in the underlying Municipal Obligations and that the
interest thereon will be exempt from regular Federal income taxes to the Fund to
the same extent as the interest on the underlying Municipal Obligations. Battle
Fowler LLP has pointed out that the Internal Revenue Service has announced it
will not ordinarily issue advance rulings on the question of the ownership of
securities or participation interests therein subject to a put and could reach a
conclusion different from that reached by counsel.
The United States Supreme Court has held that there is no constitutional
prohibition against the Federal government's taxing the interest earned on state
or other municipal bonds. The decision does not,
-15-
<PAGE>
however, affect the current exemption from taxation of the interest earned on
the Municipal Obligations.
Pennsylvania Taxes
The following is based upon the advice of Dechert Price & Rhoads, special
Pennsylvania counsel to the Fund.
Distributions of Interest Income:
The proportion of interest income representing interest income from
Pennsylvania Municipal Obligations or Territorial Obligations distributed to
shareholders of the Fund is not taxable under the Pennsylvania Personal Income
Tax or under the Corporate Net Income Tax, nor will such interest be taxable
under the Philadelphia School District Investment Income Tax imposed on
Philadelphia resident individuals. The proportion of interest income
representing interest on Municipal Obligations will be taxable under each of
these taxes.
Distributions of Gain:
Distributions attributable to short or long term capital gain upon the sale
by the Fund of Pennsylvania Municipal Obligations, Municipal Obligations, and
Territorial Obligations will be subject to tax under the Pennsylvania Personal
Income Tax, the Pennsylvania corporate net Income Tax, and the Philadelphia
school District Income Tax, except that distributions attributable to long-term
capital gain will not be subject to the Philadelphia School district net Income
Tax.
Gain from the sale or redemption of shares in the Fund will be subject to
the Pennsylvania Personal Income Tax and the Pennsylvania corporate Net Income
Tax, but only gain from the redemption or sale of shares held for six months or
less will be subject to the Philadelphia school district net Income Tax.
The foregoing is a general, abbreviated summary of certain provisions of
Pennsylvania statutes and administrative interpretations presently in effect
governing the taxation of shareholders of the Fund. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Fund transactions. Shareholders are advised to
consult with their own tax advisers for more detailed information concerning
Pennsylvania tax matters.
V. DISTRIBUTION ARRANGEMENTS
Rule 12b-1 Fees
- --------------------------------------------------------------------------------
Investors do not pay a sales charge to purchase shares of the Fund.
However, the Fund pays fees in connection with the distribution of shares and
for services provided to the Class A shareholders. The Fund pays these fees from
its assets on an ongoing basis and therefore, over time, the payment of these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
The Fund's Board of Trustees has adopted a Rule 12b-1 distribution and
service plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Class A
shares of the Fund only).
Under the Distribution Agreement, the Distributor serves as distributor of
the Fund's shares. For nominal consideration (i.e., $1.00) and as agent for the
Fund, the Distributor solicits orders for the purchase of the Fund's shares,
provided that any orders will not be binding on the Fund until accepted by the
Fund as principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect only to the Class A shares, a service fee equal to .25% per annum of the
Class A shares' average daily net assets (the "Shareholder Servicing Fee") for
providing personal shareholder services and for the maintenance of shareholder
accounts. The fee is accrued daily and paid monthly. Any portion of the fee may
be deemed to be used by the Distributor for payments to Participating
Organizations with respect to their provision of such services to their clients
or customers who are shareholders of the Class A shares of the Fund. The Class B
shareholders will not receive the benefit of such services from Participating
Organizations and, therefore, will not be assessed a Shareholder Servicing Fee.
The Plan and the Shareholder Servicing Agreement provide that, in addition
to the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses including the cost of
the
-16-
<PAGE>
dedicated lines and CRT terminals, incurred by Distributor and Participating
Organizations in carrying out their obligations under the Shareholder Servicing
Agreement with respect to Class A shares, and (ii) preparing, printing and
delivering the Fund's prospectus to existing shareholders of the Fund and
preparing and printing subscription application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from
its own resources, which may include the management fee and past profits for the
following purposes: (i) to defray costs, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing on behalf of the Class A shares
of the Fund; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Class A shares of the Fund; and (iii)
to pay the costs of printing and distributing the Fund's prospectus to
prospective investors, and to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
Class A shares. The Distributor may also make payments from time to time from
its own resources, which may include the Shareholding Servicing Fee (with
respect to Class A shares) and past profits, for the purposes enumerated in (i)
above. The Distributor will determine the amount of such payments made pursuant
to the Plan, provided that such payments will not increase the amount which the
Fund is required to pay to the Manager and Distributor for any fiscal year under
either the Investment Management Contract in effect for that year or under the
Shareholder Servicing Agreement in effect for that year.
-17-
<PAGE>
VI. FINANCIAL HIGHLIGHTS
This financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, for the fiscal year
ended November 30, 1999, and by other auditors for the fiscal years prior to
November 30, 1999.
<TABLE>
<CAPTION>
Year Ended
November 30,
-----------------------------------------------------------------
Class A
------- 1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income...................... 0.026 0.029 0.030 0.030 0.034
Less distributions:
Dividends from net investment income....... ( 0.026) ( 0.029) ( 0.030) ( 0.030) ( 0.034)
-------- -------- -------- -------- --------
Net asset value, end of year................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return................................... 2.60% 2.95% 3.05% 3.01% 3.50%
Ratios/Supplemental Data
Net assets, end of year (000).................. $ 16,342 $ 12,873 $ 43,064 $ 36,335 $ 40,980
Ratios to average net assets:
Expenses................................... 0.70% 0.70% 0.70% 0.68% 0.59%
Net investment income...................... 2.57% 2.91% 3.00% 2.97% 3.44%
Management, administration fees
and shareholder servicing fees waived.... 0.61% 0.59% 0.49% 0.49% 0.61%
Expenses reimbursed........................ 0.38% 0.59% -- -- --
Expense offsets............................ -- -- -- 0.01% --
* Annualized
</TABLE>
-18-
<PAGE>
VI. FINANCIAL HIGHLIGHTS (Continued)
This financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, for the fiscal year
ended November 30, 1999, and by other auditors for the fiscal years prior to
November 30, 1999.
<TABLE>
<CAPTION>
Year
Ended October 10, 1996
November 30, (Commencement of
Class B --------------------------------------------- Offering) to
------- 1999 1998 1997 November 30, 1996
--------- --------- ---------- -----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- ---------
Income from investment operations:
Net investment income.......................... 0.028 0.032 0.033 0.005
Less distributions:
Dividends from net investment income........... ( 0.028) ( 0.032) ( 0.033) ( 0.005)
-------- -------- -------- --------
Net asset value, end of period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= =========
Total Return...................................... 2.85% 3.26% 3.31% 3.25%*
Ratios/Supplemental Data
Net assets, end of period (000)................... $ 1,572 $ 933 $ 392 $ 5
Ratios to average net assets:
Expenses........................................ 0.45% 0.45% 0.45% 0.42%*
Net investment income........................... 2.78% 3.13% 3.28% 3.21%*
Management and administration fees waived....... 0.61% 0.59% 0.49% 0.27%*
Expense reimbursed.............................. 0.38% 0.59% -- --
Expense offsets................................. -- -- -- 0.01%*
* Annualized
</TABLE>
-19-
<PAGE>
A Statement of Additional Information (SAI) dated March 29, 2000, 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 and the Annual and Semi-Annual Reports and other material
incorporated by reference without charge by calling the Fund at 1-800-221-3079.
To request other information, please call your financial intermediary or the
Fund.
====================================
PENNSYLVANIA
DAILY
MUNICIPAL
INCOME
FUND
PROSPECTUS
March 29, 2000
====================================
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. Copies of the information may be obtained, after paying a
duplicating fee, by sending an electronic request to [email protected]. These
materials can also be reviewed and copied at the Commission's Public Reference
Room in Washington D.C. Information on the operation of the Public Reference
Room may be obtained by calling the Commission at 1-800-SEC-0330. In addition,
copies of these materials may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009.
811-6681
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, NY 10020
(212) 830-5220
PA300P
<PAGE>
PENNSYLVANIA
DAILY MUNICIPAL 600 Fifth Avenue, New York, NY 10020
INCOME FUND (212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
March 29, 2000
RELATING TO THE PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
PROSPECTUS DATED MARCH 29, 2000
This Statement of Additional Information (SAI) is not a Prospectus. The SAI
expands upon and supplements the information contained in the current Prospectus
of Pennsylvania Daily Municipal Income Fund ( the "Fund"), dated March 29, 2000
and should be read in conjunction with the Fund's Prospectus.
A Prospectus may be obtained from any Participating Organization or by writing
or calling the Fund toll-free at 1-(800) 221-3079. The audited Financial
Statements of the Fund have been incorporated by reference to the Fund's Annual
Report. The Annual Report is available, without charge, upon request by calling
the toll-free number provided. The material relating to purchase, redemption and
pricing of shares has been incorporated by reference into the Prospectus.
This Statement of Additional Information is incorporated by reference into the
respective Prospectus in its entirety.
Table of Contents
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund History.......................................... 2 Purchase, Redemption
and Pricing of Shares..............................20
Description of the Fund and its Investments and
Risks............................................... 2 Taxation of the Fund....................................21
Management of the Fund................................12 Underwriters............................................22
Control Persons and Principal Holders of Calculation of Performance Data.........................23
Securities..........................................14
Financial Statements....................................23
Investment Advisory and Other Services................15 Description of Ratings..................................24
Brokerage Allocation and Other Practices..............19 Corporate Taxable Equivalent Yield Table................25
Capital Stock and Other Securities....................19 Personal Taxable Equivalent Yield Table.................26
</TABLE>
<PAGE>
I. FUND HISTORY
The Fund was established as a Massachusetts Business Trust under the laws of
Massachusetts by an Agreement and Declaration of Trust dated July 30, 1992.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The Fund is an open-end, management investment company that is a short-term,
tax-exempt money market fund. The Fund's investment objectives are to seek as
high a level of current income, exempt from regular Federal income tax and to
the extent possible from Pennsylvania income tax, as is believed to be
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
strategies in the Prospectus.
The Fund's assets will be invested primarily in (i) high quality debt
obligations issued by or on behalf of the Commonwealth of Pennsylvania, other
states, territories and possessions of the United States and their authorities,
agencies, instrumentalities and political subdivisions, the interest on which
is, in the opinion of bond counsel to the issuer at the date of issuance,
currently exempt from regular Federal income taxation ("Municipal Obligations")
and in (ii) Participation Certificates in Municipal Obligations purchased from
banks, insurance companies or other financial institutions (which, in the
opinion of Battle Fowler LLP, counsel to the Fund, cause the Fund to be treated
as the owner of an interest the underlying Municipal Obligations for Federal
income tax purposes).
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 Pennsylvania Municipal Obligations. In view of this
"concentration" in bank Participation Certificates in Pennsylvania Municipal
Obligations, an investment in Fund shares should be made with an understanding
of the characteristics of the banking industry and the risks which such an
investment may entail. (See "Variable Rate Demand Instruments and Participation
Certificates" herein.) The investment objectives of the Fund described in the
preceding paragraphs of this section may not be changed unless approved by the
holders of a majority of the outstanding shares of the Fund that would be
affected by such a change. As used herein, the term "majority of the outstanding
shares" of the Fund means, respectively, the vote of the lesser of (i) 67% or
more of the shares of the Fund present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented by proxy,
or (ii) more than 50% of the outstanding shares of the Fund.
The Fund may only purchase United States dollar-denominated securities
determined by the Fund's Board of Trustees 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 Trustees 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 has 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 Trustees 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.
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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.
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 Trustees 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 Trustees 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 Trustees 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 Trustees 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.
The Fund has elected and intends to continue to qualify as a "regulated
investment company" under the Code. The Fund will be restricted in that at the
close of each quarter of the taxable year, at least 50% of the value of its
total assets must be represented by cash, government securities, regulated
investment company securities and other securities. In satisfying this test, the
Fund can include securities of any one issuer only if such securities do not
exceed 5% in value of the total assets of the Fund and 10% of the outstanding
voting securities of such issuer. In addition, at the close of each quarter of
its taxable year, not more than 25% in value of the Fund's total assets may be
invested in securities of one issuer other than Government securities. The
limitations described in this paragraph regarding qualification as a "regulated
investment company" are not fundamental policies and may be revised to the
extent applicable Federal income tax requirements are revised. (See "Federal
Income Taxes" herein.)
Description Of Municipal Obligations
As used 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.
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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 Pennsylvania issuers.
3. Municipal Commercial Paper that is an Eligible Security at the time of
acquisition. Issues of Municipal Commercial Paper typically represent very
short-term, unsecured, negotiable promissory notes. These obligations are often
issued to meet seasonal working capital needs of municipalities or to provide
interim construction financing. They are paid from general revenues of
municipalities or are refinanced with long-term debt. In most cases Municipal
Commercial Paper is backed by letters of credit, lending agreements, note
repurchase agreements or other credit facility agreements offered by banks or
other institutions which may be called upon in the event of default by the
issuer of the commercial paper.
4. Municipal Leases, which may take the form of a lease or an installment
purchase or conditional sale contract, issued by state and local governments and
authorities to acquire a wide variety of equipment and facilities such as fire
and sanitation vehicles, telecommunications equipment and other capital assets.
Municipal Leases frequently have special risks not normally associated with
general obligation or revenue bonds. Leases and installment purchase or
conditional sale contracts (which normally provide for title to the leased asset
to pass eventually to the governmental issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses. These clauses provide that the governmental issuer
has no obligation to make future payments under the lease or contract unless
money is appropriated for such purpose by the appropriate legislative body on a
yearly or other periodic basis. To reduce this risk, the Fund will only purchase
Municipal Leases subject to a non-appropriation clause where the payment of
principal and accrued interest is backed by an unconditional irrevocable letter
of credit, a guarantee, insurance or other comparable undertaking of an approved
financial institution. These types of Municipal Leases may be considered
illiquid and subject to the 10% limitation of investments in illiquid securities
set forth under "Investment Restrictions" contained herein. The Board of
Trustees 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, Pennsylvania
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 will be consistent with the Fund's
"Description of the Fund and its Investments and Risks" and permissible under
Rule 2a-7 under the 1940 Act.
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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<PAGE>
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 Trustees 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 Trustees. The Fund's Board of Trustees 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 Trustees 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 the 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 Trustees 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 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).
Because the Fund may concentrate in Participation Certificates in Pennsylvania
Municipal Obligations, which may be secured by bank letters of credit or
guarantees, an investment in the Fund should be made with an understanding of
the characteristics of the banking industry and the risks which such an
investment may entail. Banks are subject to extensive governmental regulations
which may limit both the amounts and types of loans and other financial
commitments which may be made and interest rates and fees which may be charged.
The profitability of this industry is largely dependent upon the availability
and cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the
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* The prime rate is generally the rate charged by a bank to its most
creditworthy customers for Short-Term loans. The prime rate of a particular
bank may differ from other banks and will be the rate announced by each
bank on a particular day. Changes in the prime rate may occur with great
frequency and generally become effective on the date announced.
<PAGE>
operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations under a letter of credit. The Fund may invest 25% or more of the net
assets of any portfolio in securities that are related in such a way that an
economic, business or political development or change affecting one of the
securities would also affect the other securities. This includes, for example,
securities the interest upon which is paid from revenues of similar type
projects, or securities the issuers of which are located in the same state.
While the value of the underlying variable rate demand instruments may change
with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The portfolio may contain variable maximum rates set by state law,
which limit the degree to which interest on such variable rate demand
instruments may fluctuate; to the extent state law contains such limits,
increases or decreases in value may be somewhat greater than would be the case
without such limits. Additionally, the portfolio may contain variable rate
demand Participation Certificates in fixed rate Municipal Obligations. The fixed
rate of interest on these Municipal Obligations will be a ceiling on the
variable rate of the Participation Certificate. In the event that interest rates
increase so that the variable rate exceeds the fixed rate on the Municipal
Obligations, the Municipal Obligations can no longer be valued at par and may
cause the Fund to take corrective action, including the elimination of the
instruments from the portfolio. Because the adjustment of interest rates on the
variable rate demand instruments is made in relation to movements of the
applicable banks' "prime rates", or other interest rate adjustment index, the
variable rate demand instruments are not comparable to long-term fixed rate
securities. Accordingly, interest rates on the variable rate demand instruments
may be higher or lower than current market rates for fixed rate obligations of
comparable quality with similar maturities.
Because of the variable rate nature of the instruments, the Fund's yield will
decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined. On the
other hand, during periods where prevailing interest rates have increased, the
Fund's yield will increase and its shareholders will have reduced risk of
capital depreciation.
For purposes of determining whether a variable rate demand instrument held by
the Fund matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (i) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (ii) the period remaining until the instrument's next interest
rate adjustment. The maturity of a variable rate demand instrument will be
determined in the same manner for purposes of computing the Fund's
dollar-weighted average portfolio maturity. If a variable rate demand instrument
ceases to be an Eligible Security it will be sold in the market or through
exercise of the repurchase demand feature to the issuer.
When-Issued Securities
New issues of certain Municipal Obligations frequently are offered on a
when-issued basis. The payment obligation and the interest rate that will be
received on these Municipal Obligations are each fixed at the time the buyer
enters into the commitment although delivery and payment of the Municipal
Obligations normally take place within 45 days after the date of the Fund's
commitment to purchase. Although the Fund will only make commitments to purchase
when-issued Municipal Obligations with the intention of actually acquiring them,
the Fund may sell these securities before the settlement date if deemed
advisable by the Manager.
Municipal Obligations purchased on a when-issued basis and the securities held
in the Fund's portfolio are subject to changes in value (both generally changing
in the same way; that is, both experiencing appreciation when interest rates
decline and depreciation when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Purchasing Municipal Obligations on
a when-issued basis can involve a risk that the yields available in the market
when the delivery takes place may actually be higher or lower than those
obtained in the transaction itself. A separate account of the Fund consisting of
cash or liquid debt securities equal to the amount of the when-issued
commitments will be established at the Fund's custodian bank. For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market value. If the market or fair value of such
securities declines, additional cash or highly liquid securities will be placed
in the account daily so that the value of the account will equal the amount of
such commitments by the Fund. On the settlement date of the when-issued
securities, the Fund will meet its obligations from then-available cash flow,
sale of securities held in the separate account, sale of other securities or,
although it would not normally expect to do so, from sale of the when-issued
securities themselves (which may have
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<PAGE>
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 Trustees. The Fund's reliance upon
the credit of these banks and broker-dealers will be supported by the value of
the underlying Municipal Obligations held by the Fund that were subject to the
commitment.
The Fund intends to acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The purpose of this practice is to permit the Fund to be fully
invested in securities, the interest on which is exempt from Federal income tax,
while preserving the necessary liquidity to purchase securities on a when-issued
basis, to meet unusually large redemptions and to purchase at a later date
securities other than those subject to the stand-by commitment. The acquisition
of a stand-by commitment will not affect the valuation or assumed maturity of
the underlying Municipal Obligations which will continue to be valued in
accordance with the amortized cost method. Stand-by commitments acquired by the
Fund will be valued at zero in determining net asset value. In those cases in
which the Fund pays directly or indirectly for a stand-by commitment, its cost
will be reflected as unrealized depreciation for the period during which the
commitment is held by the Fund. Stand-by commitments will not affect the
dollar-weighted average maturity of the Fund's portfolio. The maturity of a
security subject to a stand-by commitment is longer than the stand-by repurchase
date.
The stand-by commitments the Fund may enter into are subject to certain risks.
These include the ability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, the fact that the commitment
is not marketable by the Fund, and that the maturity of the underlying security
will generally be different from that of the commitment.
In addition, the Fund may apply to the Internal Revenue Service for a ruling, or
seek from its counsel an opinion, that interest on Municipal Obligations subject
to stand-by commitments will be exempt from Federal income taxation (see
"Federal Income Taxes" herein). In the absence of a favorable tax ruling or
opinion of counsel, the Fund will not engage in the purchase of securities
subject to stand-by commitments.
Taxable Securities
Although the Fund will attempt to invest 100% of its net assets in tax-exempt
Municipal Obligations, the Fund may invest up to 20% of the value of its net
assets in securities of the kind described below, the interest income on which
is subject to regular Federal income tax, under any one or more of the following
circumstances: (a) pending
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investment of proceeds of sales of Fund shares or of portfolio securities, (b)
pending settlement of purchases of portfolio securities and (c) to maintain
liquidity for the purpose of meeting anticipated redemptions. In addition, the
Fund may temporarily invest more than 20% in such taxable securities when, in
the opinion of the Manager, it is advisable to do so because of adverse market
conditions affecting the market for Municipal Obligations. The kinds of taxable
securities in which the Fund may invest are limited to the following short-term,
fixed-income securities (maturing in 397 days or less from the time of
purchase): (1) obligations of the United States Government or its agencies,
instrumentalities or authorities; (2) commercial paper meeting the definition of
Eligible Securities at the time of acquisition; (3) certificates of deposit of
domestic banks with assets of $1 billion or more; and (4) repurchase agreements
with respect to any Municipal Obligations or other securities which the Fund is
permitted to own.
Repurchase Agreements
The Fund may invest in instruments subject to repurchase agreements with
securities dealers or member banks of the Federal Reserve System. Under the
terms of a typical repurchase agreement, the Fund will acquire an underlying
debt instrument for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase and the Fund to resell the
instrument at a fixed price and time, thereby determining the yield during the
Fund's holding period. This results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement is subject to the
risk that the seller may fail to repurchase the security. Repurchase agreements
may be deemed to be loans under the 1940 Act. All repurchase agreements entered
into by the Fund shall be fully collateralized at all times during the period of
the agreement in that the value of the underlying security shall be at least
equal to the amount of the loan, including the accrued interest thereon.
Additionally, the Fund or its custodian shall have possession of the collateral,
which the Fund's Board believes will give it a valid, perfected security
interest in the collateral. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Fund but only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, the Fund may suffer
time delays and incur costs in connection with the disposition of the
collateral. The Fund's Board believes that the collateral underlying repurchase
agreements may be more susceptible to claims of the seller's creditors than
would be the case with securities owned by the Fund. It is expected that
repurchase agreements will give rise to income which will not qualify as
tax-exempt income when distributed by the Fund. The Fund will not invest in a
repurchase agreement maturing in more than seven days if any such investment,
together with illiquid securities held by the Fund, exceeds 10% of the Fund's
total net assets. (See Investment Restriction Number 6 herein.) Repurchase
agreements are subject to the same risks described herein for stand-by
commitments.
Pennsylvania Risk Factors
Prospective investors should consider the financial difficulties and pressures
which the Commonwealth of Pennsylvania and certain of its municipal subdivisions
have undergone. Both the Commonwealth and the City of Philadelphia have
historically experienced significant revenue shortfalls. There can be no
assurance that the Commonwealth will not experience further declines in economic
conditions or that portions of the Municipal Obligations purchased by the Fund
will not be affected by such declines. Without intending to be complete, the
following briefly summarizes some of these difficulties and the current
financial situation, as well as some of the complex factors affecting the
financial situation in the Commonwealth. It is derived from sources that are
generally available to investors and is based in part on information obtained
from various agencies in Pennsylvania. No independent verification has been made
of the following information.
State Economy
Pennsylvania has been historically identified as a heavy industry state although
that reputation has changed recently as the industrial composition of the
Commonwealth diversified when the coal, steel and railroad industries began to
decline. The major new sources of growth in Pennsylvania are in the service
sector, including trade, medical and the health services, education and
financial institutions. Pennsylvania's agricultural industries are also an
important component of the Commonwealth's economic structure, accounting for
more than $4.2 billion in crop and livestock products annually while
agribusiness and food related industries support $39 billion in economic
activity annually.
Non-manufacturing employment in Pennsylvania has increased in recent years to
82% of total employment in 1997. Consequently, manufacturing employment
constitutes a diminished share of total employment within the Commonwealth.
Manufacturing, contributing 18% of 1997 non-agricultural employment, has
fallen behind both the services sector and the trade sector as the largest
single source of employment within the Commonwealth. In 1998, the services
sector accounted for 31.1% of all non-agricultural employment while the trade
sector accounted for 23.4%.
Pennsylvania's annual average unemployment rate was below the national average
from 1986 until 1990. Slower economic growth caused the unemployment rate in the
Commonwealth to rise to 6.9% in 1991 and 7.5% in 1992.
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The resumption of faster economic growth resulted in a decrease in the
Commonwealth's unemployment rate to 7.1% in 1993. For 1994 through 1997,
Pennsylvania's annual average unemployment rate was below the Middle Atlantic
Region's average, but slightly higher than that of the United States. As of
February 2000, the seasonally adjusted unemployment rate for both the
Commonwealth and the United States was 4.1%.
State Budget
The Commonwealth operates under an annual budget which is formulated and
submitted for legislative approval by the Governor each February. The
Pennsylvania Constitution requires that the Governor's budget proposal consist
of three parts: (i) a balanced operating budget setting forth proposed
expenditures and estimated revenues from all sources and, if estimated revenues
and available surplus are less than proposed expenditures, recommending specific
additional sources of revenue sufficient to pay the deficiency; (ii) a capital
budget setting forth proposed expenditures to be financed from the proceeds of
obligations of the Commonwealth or its agencies or from operating funds; and
(iii) a financial plan for not less than the succeeding five fiscal years, which
includes for each year projected operating expenditures and estimated revenues
and projected expenditures for capital projects. The General Assembly may add,
change or delete any items in the budget prepared by the Governor, but the
Governor retains veto power over the individual appropriations passed by the
legislature. The Commonwealth's fiscal year begins on July 1 and ends on June
30.
All funds received by the Commonwealth are subject to appropriation in specific
amounts by the General Assembly or by executive authorization by the Governor.
Total appropriations enacted by the General Assembly may not exceed the ensuing
year's estimated revenues, plus (less) the unappropriated fund balance (deficit)
of the preceding year, except for constitutionally authorized debt service
payments. Appropriations from the principal operating funds of the Commonwealth
(the General Fund, the Motor License Fund and the State Lottery Fund) are
generally made for one fiscal year and are returned to the unappropriated
surplus of the fund if not spent or encumbered by the end of the fiscal year.
The constitution specifies that a surplus of operating funds at the end of a
fiscal year must be appropriated for the ensuing year.
Pennsylvania uses the "fund" method of accounting for receipts and
disbursements. For purposes of government accounting, a "fund" is an independent
fiscal and accounting entity with a self balancing set of accounts, recording
cash and/or other resources together with all related liabilities and equities.
In the Commonwealth, over 150 funds have been established by legislative
enactment or in certain cases by administrative action for the purpose of
recording the receipt and disbursement of moneys received by the Commonwealth.
Annual budgets are adopted each fiscal year for the principal operating funds of
the Commonwealth and several other special revenue funds. Expenditures and
encumbrances against these funds may only be made pursuant to appropriation
measures enacted by the General Assembly and approved by the Governor. The
General Fund, the Commonwealth's largest fund, receives all tax revenues,
non-tax revenues and federal grants and entitlements that are not specified by
law to be deposited elsewhere. The majority of the Commonwealth's operating and
administrative expenses are payable from the General Fund. Debt service on all
bond indebtedness of the Commonwealth, except that issued for highway purposes
or for the benefit of other special revenue funds, is payable from the General
Fund.
Financial information for the principal operating funds of the Commonwealth are
maintained on a budgetary basis of accounting, which is used for the purpose of
insuring compliance with the enacted operating budget. The Commonwealth also
prepares annual financial statements in accordance with generally accepted
accounting principles ("GAAP"). Budgetary basis financial reports are based on a
modified cash basis of accounting as opposed to a modified accrual basis of
accounting prescribed by GAAP. Financial information is adjusted at fiscal year
end to reflect appropriate accruals for financial reporting in conformity with
GAAP.
Recent Financial Results
The fiscal years 1994 through 1998 were years of recovery for Pennsylvania from
the recession in 1990 and 1991. The recovery fiscal years were characterized by
modest economic growth and low inflation rates in the Commonwealth. These
economic conditions, combined with several years of tax reductions following the
various tax rate increases and tax base expansions enacted in fiscal 1991 for
the General Fund, produced modest increases in Pennsylvania's tax revenues
during the period. Tax revenues from fiscal 1994 through 1998 rose at an annual
average rate of 4.2%. Total revenues and other income sources increased during
this period by an average annual rate of 5.0%. Expenditures and other uses
during the fiscal 1994 through 1998 period rose at a 5.0% annual rate, led by
annual average increases of 11.8% for protection of persons and property program
costs. Commonwealth revenues for the 1998 fiscal year were above estimate and
exceeded fiscal year expenditures and encumbrances. Fiscal 1998 was the seventh
consecutive fiscal year the Commonwealth reported an increase in the fiscal
year-end unappropriated balance.
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Fiscal 1998 Budget
The budget for fiscal 1998 was enacted in May 1997. Commonwealth revenues for
the fiscal year totaled $18,123.2 million before reserves for tax refunds. That
represented an increase over fiscal 1997 Commonwealth revenues of 3.9 percent.
Fiscal 1998 estimates for Commonwealth revenues were based on an economic
forecast for national economic growth to slow through the end of calendar year
1997.
The rate of anticipated growth of Commonwealth revenues was affected by the
enactment of tax reductions and tax revenue dedications effective for the 1998
fiscal year.
Major funding increases provided by the fiscal 1998 budget included; (i) $166
million of appropriations for elementary and secondary education plus an
estimated $51 million in reduced employer retirement contributions payable by
local school districts due to a reduction in the contribution rate; (ii) $42
million for higher education institutions plus $16 million for student
scholarships; (iii) $70 million for higher caseload, utilization, and cost of
nursing home care; (iv) $60 million for economic development assistance through
programs providing incentive grants and loans; and (v) $38 million for
corrections including $17 million for operating costs for new and expanded
facilities. The balance of the increase was spread over many other departments
and program operations.
Reserves established during fiscal 1998 for tax refunds totaled $910 million,
representing a $370 million (68.4%) increase over tax refund reserves for fiscal
1997. Expenditures from all fiscal 1998 appropriations totaled $17,229.8 million
(excluding pooled financing expenditures and net of current year lapses),
representing a 4.5% increase of fiscal 1997 appropriation expenditures.
Fiscal 1999 Budget
In April 1998, the General Fund budget for fiscal 1999 was enacted. Revenue
estimates in the proposed budget were developed using a national economic
forecast with a projected real gross domestic product growth annual rate below 2
percent, and were originally projected to be $18,456.6 million. In November
1998, due to the passage of tax legislation, the estimate was reduced by $1.1
million.
The 1999 official revenue is 3.0% over actual fiscal 1998 revenues. The adjusted
estimate, taking into account enacted tax changes, shows a 1.66% increase over
actual revenues for fiscal 1998. The forecasts are based on assumptions that
consumer spending will slow, especially in the area of motor vehicles, housing
and other durable goods, as will business spending on fixed investments. Also,
the economic difficulties being experienced in Asia and Latin America are
expected to reduce foreign demand for domestic goods. The 1999 tax reduction is
projected to amount to $241.0 million. The budget also includes major increases
in expenditure for education, higher education, the correctional system,
long-term care medical assistance costs, cost of living increases for state and
school district employees, and bond funding for equipment loans for volunteer
fire and rescue companies.
Fiscal 2000 Budget
The budget for fiscal 2000 was enacted in May 1999 at which time the official
revenue estimate for the 2000 fiscal year was established at $18,718.5 million.
That estimate is based on an economic forecast for real gross domestic product
to grow at a 1.4 percent rate from the second quarter of 1999 to the second
quarter of 2000. The 1.4 percent rate is based on expectations that the growth
of real gross domestic product is expected to be restrained by a slowing of the
rate of consumer spending to a level consistent with the personal income gains
and by smaller gains in business investment in response to falling capacity
utilization and profits. Slowing economic growth is expected to cause the
state's unemployment rate to rise and closely parallel the national rate. Other
trends for the Pennsylvania economy are expected to maintain their close
association with national economic trends.
The fiscal 2000 budget includes estimated spending of $19,103.8 million and
estimated revenue (net of estimated tax refunds and enacted tax changes) of
$18,718.5. Funds to cover the $342.1 million difference between estimated
revenues and projected spending will be obtained from a draw down of the
projected fiscal 1999 year-end balance.
Appropriations enacted for fiscal 2000 are 3.8 percent ($743.5 million) above
appropriations enacted for fiscal 1999 (including supplemental appropriations).
Major increases in expenditures budgeted for fiscal 2000 include: (i)
corrections, (ii) special education and (iii) medical assistance.
Proposed Fiscal 2001 Budget
On February 8, 2000, the Governor submitted the Commonwealth's fiscal year 2000
and 2001 budget to the General Assembly. The General Fund budget is $19.7
billion, representing an increase of $399 million or 2.19% over fiscal year
1999-2000. Tax reductions and rebates totaling an estimated $643 million are
proposed to stimulate the job market, and monies are proposed to be dedicated to
the business community to attract high technology jobs to the Commonwealth. $6.1
billion in support has been recommended for local school districts, representing
an increase, an additional $13.2 million has been recommended for the state
system of higher education and $16.8 for the four state-related universities.
Law enforcement increases are proposed, as are increases for health insurance,
medical assistance and welfare needs-based programs. $1.229 billion has been
recommended for state highways and bridge maintenance, and an overall increase
in support has been recommended for public libraries.
Debt Limits and Outstanding Debt
The Constitution of Pennsylvania permits the issuance of the following types of
debt: (i) debt to suppress insurrection or rehabilitate areas affected by
disaster; (ii) electorate approved debt; (iii) debt for capital projects subject
to an aggregate outstanding debt limit of 1.75 times the annual average tax
revenues of the preceding five fiscal years; and (iv) tax anticipation notes
payable in the fiscal year of issuance.
Under the Pennsylvania Fiscal Code, the Auditor General is required to certify
to the Governor and the General Assembly certain information regarding the
Commonwealth's indebtedness. According to the March 1, 1999 Auditor General
certificate, the average annual tax revenues deposited in all funds in the five
fiscal years ended March 1, 1999 was approximately $20.4 billion, outstanding
net debt totaled $4.1 billion at February 28, 1999, and
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therefore, the net debt limitation as of February 28, 1999 was $31.6 billion. At
March 1, 1999, the amount of debt authorized by law to be issued, but not yet
incurred, was $22.1 billion.
Debt Ratings
All outstanding general obligation bonds of the Commonwealth are rated "AA-" by
S&P and "Aa3" by Moody's.
City of Philadelphia
The City of Philadelphia (the "City" or "Philadelphia") is the largest city in
the Commonwealth, with an estimated population of 1,585,577 according to the
1990 Census. Philadelphia experienced a series of general fund deficits for
fiscal years 1988 through 1992 which culminated in serious financial
difficulties for the City. In its 1992 Comprehensive Annual Financial Report,
Philadelphia reported a cumulative general fund deficit of $71.4 million for
fiscal 1992.
In June 1991, the Pennsylvania legislature established the Pennsylvania
Intergovernmental Corporation Authority ("PICA"), a five-member board to assist
Philadelphia in remedying fiscal emergencies. PICA is designed to provide
assistance through the issuance of funding debt and to make factual findings and
recommendations to Philadelphia concerning its budgetary and fiscal affairs. The
legislation empowered PICA to issue notes and bonds on behalf of Philadelphia,
and also authorized Philadelphia to levy a one-percent sales tax the proceeds of
which would be used to pay off the bonds. In return for PICA'a fiscal
assistance, Philadelphia is required, among other things, to establish five-year
financial plans that include balanced annual budgets. Under the legislation, if
Philadelphia does not comply with such requirements, PICA may withhold bond
revenues and certain state funding. At this time, the City is operating under
the Sixth Five-Year Plan approved by PICA on May 20, 1997. The adopted General
Fund budget for fiscal year 1998, including prior adjustments, was balanced for
the sixth consecutive year without a deficit elimination grant from PICA. The
financial assistance has included the refunding of certain city general
obligation bonds, funding of capital projects and the liquidation of the City's
Cumulative General Fund balance deficit as of June 30, 1992 of $244.9 million.
No further PICA bonds are to be issued by PICA for the purpose of financing a
capital project or deficit as the authority for such bond sales expired on
December 31, 1994, PICA's authority to issue debt for the purpose of financing a
cash flow deficit expired on December 31, 1996. Its ability to refund existing
outstanding debt is unrestricted. PICA had $1,054.3 million in Special Tax
Revenue Bonds outstanding as of April 15, 1999.
The audited General Fund balance of the City as of June 30, 1998 showed a
fund balance in the General Fund of $169.2 million, an increase of $40.4 million
over the fiscal year 1997 fund balance.
S&P's rating on Philadelphia's general obligation bonds is "BBB-." Moody's
rating is currently "Baa."
Litigation
The Commonwealth is a party to numerous lawsuits in which an adverse final
decision could materially affect the Commonwealth's governmental operations and
consequently its ability to pay debt service on its obligations. The
Commonwealth also faces tort claims made possible by the limited waiver of
sovereign immunity effected by Act 152, approved September 28, 1978, as amended.
Under Act 152, damages from any loss are limited to $250,000 per person and $1
million for each accident.
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 Trustees, and be consistent with the Fund's objectives and policies.
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2. Borrow money. This restriction shall not apply to borrowings from banks for
temporary or emergency (not leveraging) purposes. This includes the meeting of
redemption requests that might otherwise require the untimely disposition of
securities, in an amount up to 15% of the value of the Fund's total assets
(including the amount borrowed) valued at market less liabilities (not including
the amount borrowed) at the time the borrowing was made. While borrowings exceed
5% of the value of the Fund's total assets, the Fund will not make any
investments. Interest paid on borrowings will reduce net income.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except in an
amount up to 15% of the value of its total assets and only to secure borrowings
for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin, or engage in the
purchase and sale of put, call, straddle or spread options or in writing such
options. However, securities subject to a demand obligation and stand-by
commitments may be purchased as set forth under "Description of the Fund and its
Investments and Risks" herein.
5. Underwrite the securities of other issuers, except insofar as the Fund may be
deemed an underwriter under the Securities Act of 1933 in disposing of a
portfolio security.
6. Purchase securities subject to restrictions on disposition under the
Securities Act of 1933 ("restricted securities"), except the Fund may purchase
variable rate demand instruments which contain a demand feature. The Fund will
not invest in a repurchase agreement maturing in more than seven days if any
such investment together with securities that are not readily marketable held by
the Fund exceed 10% of the Fund's net assets.
7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests. This shall not
prevent the Fund from investing in Municipal Obligations secured by real estate
or interests in real estate.
8. Make loans to others, except through the purchase of portfolio investments,
including repurchase agreements, as described under " Description of the Fund
and its Investments and Risks" herein.
9. Purchase more than 10% of all outstanding voting securities of any one issuer
or invest in companies for the purpose of exercising control.
10. Invest more than 25% of its assets in the securities of "issuers" in any
single industry. The Fund may invest more than 25% of its assets in
Participation Certificates and there shall be no limitation on the purchase of
those Municipal Obligations and other obligations issued or guaranteed by the
United States Government, its agencies or instrumentalities. When the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separate from those of the government creating the issuing entity and a
security is backed only by the assets and revenues of the entity, the entity
will be deemed to be the sole issuer of the security. Similarly, in the case of
an industrial revenue bond, if that bond is backed only by the assets and
revenues of the non-government user, then such non-government user will be
deemed to be the sole issuer. If, however, in either case, the creating
government or some other entity, such as an insurance company or other corporate
obligor, guarantees a security or a bank issues a letter of credit, such a
guarantee or letter of credit will be considered a separate security and would
be treated as an issue of such government, other entity or bank. Immediately
after the acquisition of any securities subject to a Demand Feature or Guarantee
(as such terms are defined in Rule 2a-7 of the 1940 Act), with respect to 75% of
the total assets of the Fund, not more than 10% of the Fund's assets may be
invested in securities that are subject to a Guarantee or Demand Feature from
the same institution. However, the Fund may only invest more than 10% of its
assets in securities subject to a Guarantee or Demand Feature issued by a
Non-Controlled Person (as such term is defined in Rule 2a-7 of the 1940 Act).
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 Trustees, 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
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the Fund's Board of Trustees to serve as officers of the Fund. Such officers, as
well as certain other employees and Trustees 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 Trustees 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, 46 - President and Trustee of the Fund, has been President of
the Mutual Funds Division of the Manager since September 1994. Mr. Duff is also
President and a Director/Trustee of 13 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., President of Back Bay Funds, Inc., and
President and Chief Executive Officer of Tax Exempt Proceeds Fund, Inc.
Dr. W. Giles Mellon, 69 - Trustee of the Fund, is Professor of Business
Administration in the Graduate School of Management, Rutgers University which he
has been associated with since 1966. His address is Rutgers University Graduate
School of Management, 92 New Street, Newark, New Jersey 07102. Dr. Mellon is
also a Director/Trustee of 15 other funds in the Reich & Tang Fund Complex.
Robert Straniere, 59 - Trustee of the Fund, has been a member of the New York
State Assembly and a partner with the Straniere Law Firm since 1981. His address
is 182 Rose Avenue, Staten Island, New York 10306. Mr. Straniere is also a
Director/Trustee of 15 other funds in the Reich & Tang Fund Complex.
Dr. Yung Wong, 61 - 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 is a Director/Trustee of 15 other funds in the Reich
& Tang Fund Complex . Dr. Wong is also a Trustee of Eclipse Financial Asset
Trust.
Molly Flewharty, 49 - Vice President of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Flewharty is also
Vice President of 18 other funds in the Reich & Tang Fund Complex.
Lesley M. Jones, 51 - Vice President of the Fund, has been Senior Vice President
of the Mutual Funds Division of the Manager since September 1993. Ms. Jones is
also a Vice President of 14 other funds in the Reich & Tang Fund Complex.
Dana E. Messina, 43 - 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 is also Vice
President of 15 other funds in the Reich & Tang Fund Complex.
Bernadette N. Finn, 52 - Secretary of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Finn is also
Secretary of 13 other funds, and a Vice President and Secretary of 5 additional
funds in the Reich & Tang Fund Complex.
Richard DeSanctis, 43 - Treasurer of the Fund, has been Treasurer of the Manager
since September 1993. Mr. De Sanctis is also Treasurer of 17 other funds in the
Reich & Tang Fund Complex, and is Vice President and Treasurer of Cortland
Trust, Inc.
Rosanne Holtzer, 35 - Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly Manager of Fund Accounting for the Manager with which she was
associated with from June 1986. Ms. Holtzer is also Assistant Treasurer of 18
other funds in the Reich & Tang Fund Complex.
The Fund paid an aggregate remuneration of $6,000 to its Trustees with respect
to the period ended November 30, 1999, all of which consisted of Trustees' fees
paid to the three disinterested Trustees, pursuant to the terms of the
Investment Management Contract (see "Manager" herein).
Trustees 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 Trustees meeting
attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Trustees who are affiliated with the Manager do not
receive compensation from the Fund. See Compensation Table.
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Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Total Compensation
Name of Person, Aggregate Compensation Pension or Retirement Estimated Annual From Fund and Fund
Position From the Fund Benefits Accrued as Benefits Upon Complex Paid to
Part of Fund Expenses Retirement Trustees*
Dr. W. Giles Mellon, $2,000 0 0 $59,500 (16 Funds)
Trustee
Robert Straniere, $2,000 0 0 $59,500 (16 Funds)
Trustee
Dr. Yung Wong, $2,000 0 0 $59,500 (16 Funds)
Trustee
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex
for the fiscal year ending November 30, 1999. The parenthetical number
represents the number of investment companies (including the Fund) from
which such person receives compensation that are considered part of the
same Fund complex as the Fund, because, among other things, they have a
common investment adviser.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On February 29, 2000 there were 12,128,974 shares of Class A common stock
outstanding and 1,658,102 shares of Class B common stock outstanding. As of
February 29, 2000, the amount of shares owned by all officers and Trustees of
the Fund as a group were less than 1% of the outstanding shares of the Fund. Set
forth below is certain information as to persons who owned 5% or more of the
Fund's outstanding shares as of February 29, 2000:
Name and Address % of Class Nature of Ownership
CLASS A
PNC Securities Corp. 28.24% Record
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Attn: Sandy Mudd
Lewco Securities 7.06% Record
34 Exchange Place - 4th Floor
Jersey City, NJ 07311
Cumberland Brokerage Corp. 5.07% Record
614 Landis Avenue
Vineland, NJ 08360
Lewco Securities 5.01% Record
34 Exchange Place - 4th Floor
Jersey City, NJ 07311
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Name and Address % of Class Nature of Ownership
CLASS B
Lewco Securities 37.02% Record
34 Exchange Place - 4th Floor
Jersey City, NJ 07311
Lewco Securities 24.38% Record
34 Exchange Place - 4th Floor
Jersey City, NJ 07311
Lewco Securities 10.50% Record
34 Exchange Place - 4th Floor
Jersey City, NJ 07311
Morgan Stanley Dean Witter 9.99% Record
1251 Avenue of the Americas
New York, NY 10020
Lewco Securities 9.05% Record
34 Exchange Place - 4th Floor
Jersey City, NJ 07311
Lewco Securities 8.16% Record
34 Exchange Place - 4th Floor
Jersey City, NJ 07311
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 February 29, 2000, investment
manager, adviser, or supervisor with respect to assets aggregating in excess of
$15.1 billion. In addition to the Fund, the Manager acts as investment manager
and administrator of fifteen other investment companies and also advises pension
trusts, profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
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
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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 advisers 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 8, 1999, the Board of Trustees, including a majority of the trustees who
are not interested persons (as defined in the 1940 Act) of the Fund or the
Manager, approved the continuance of the Investment Management Contract and
extended the term to July 31, 2000. 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 trustees 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 Trustees of
the Fund.
The Manager provides persons satisfactory to the Board of Trustees of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and trustees of the Fund, may be trustees 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 Trustees,
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 equal to .40% per annum of the Fund's average daily net assets. The fees are
accrued daily and paid monthly. The Manager, at its discretion, may voluntarily
waive all or a portion of the management fee.
Pursuant to the Administrative Services Contract with the Fund, the Manager also
performs clerical, accounting supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of accounting related services by Investors Fiduciary Trust Company,
the Fund's bookkeeping or recordkeeping agent, (ii) prepare reports to and
filings with regulatory authorities and (iii) perform such other services as the
Fund may from time to time request of the Manager. The personnel rendering such
services may be employees of the Manager, of its affiliates or of other
organizations. For its services under the Administrative Services Contract, the
Manager receives from the Fund a fee equal to .21% per annum of the Fund's
average daily net assets, not in excess of $1.25 billion, plus .20% of such
assets in excess of $1.25 billion but not in excess of $1.5 billion, plus .19%
of such assets in excess of $1.5 billion. For the Funds' fiscal years ended
November 30, 1999, November 30, 1998 and November 30, 1997, the Manager received
a fee of $33,656, $31,548 and $89,693 of which $33,656, $31,305 and $85,422 was
voluntarily waived.
For the Fund's fiscal years ended November 30, 1999, November 30, 1998 and
November 30, 1997, the fee paid to the Manager under the Investment Management
Contract was $64,106 , $60,092 and $170,844, respectively of which $64,106 ,
$57,905 and $124,396 was voluntarily waived. The Fund's net assets at the close
of business on November 30, 1999 totaled $17,913,998. The Manager may waive its
rights to any portion of the management fee and may use any portion of the
Management fee for purposes of shareholder and administrative services and
distribution of the Fund's shares.
The Manager at its discretion may waive its rights to any portion of the
Management fee or the administrative services fee and may use any portion of the
Management fee for purposes of shareholder and administrative
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services and distribution of the Fund's shares. There can be no assurance that
such fees will be waived in the future (see "Distribution and Service Plan"
herein).
Investment management fees and operating expenses which are attributable to both
Classes of the Fund will be allocated daily to each Class based on the
percentage of outstanding shares at the end of the day. Additional shareholder
services provided by Participating Organizations to Class A shareholders
pursuant to the Plan shall be compensated by the Distributor from its
shareholder servicing fee, the Manager from its management fee and the Fund
itself. Expenses incurred in the distribution of Class B shares and the
servicing of Class B shares shall be paid by the Manager.
Expense Limitation
The Manager has agreed, pursuant to the Investment Management Contract (See
"Distribution and Service Plan" herein), to reimburse the Fund for its expenses
(exclusive of interest, taxes, brokerage and extraordinary expenses) which in
any year exceed the limits on investment company expenses prescribed by any
state in which the Fund's shares are qualified for sale. For the purpose of this
obligation to reimburse expenses, the Fund's annual expenses are estimated and
accrued daily, and any appropriate estimated payments are made to it on a
monthly basis. Subject to the obligations of the Manager to reimburse the Fund
for its excess expenses as described above, the Fund has, under the Investment
Management Contract, confirmed its obligation for payment of all its other
expenses. This includes all operating expenses, taxes, brokerage fees and
commissions, commitment fees, certain insurance premiums, interest charges and
expenses of the custodian, transfer agent and dividend disbursing agent's fees,
telecommunications expenses, auditing and legal expenses, bookkeeping agent
fees, costs of forming the corporation and maintaining corporate existence,
compensation of Trustees, officers and employees of the Fund and costs of other
personnel performing services for the Fund who are not officers of the Manager
or its affiliates, costs of investor services, shareholders' reports and
corporate meetings, SEC registration fees and expenses, state securities laws
registration fees and expenses, expenses of preparing and printing the Fund's
prospectus for delivery to existing shareholders and of printing application
forms for shareholder accounts, and the fees and reimbursements payable to the
Manager under the Investment Management Contract and the Distributor under the
Shareholder Servicing Agreement.
The Fund may from time to time hire its own employees or contract to have
management services performed by third parties (including Participating
Organizations) as discussed herein. The management of the Fund intends to do so
whenever it appears advantageous to the Fund. The Fund's expenses for employees
and for such services are among the expenses subject to the expense limitation
described above.
Distribution And Service Plan
The Fund's distributor is Reich & Tang Distributors, Inc., a Delaware
corporation with principal officers at 600 Fifth Avenue, New York, New York
10020. Pursuant to Rule 12b-1 under the 1940 Act, the SEC has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Fund's Board of Trustees has adopted a distribution and service plan (the
"Plan") and, pursuant to the Plan, the Fund has entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to Class A shares
only) with Reich & Tang Distributors, Inc., (the "Distributor"), as distributor
of the Fund's shares.
The Class A shares will be offered to investors who desire certain additional
shareholder services from Participating Organizations that are compensated by
the Fund's Manager and Distributor for such services. For its services under the
Shareholder Servicing Agreement (with respect to the Class A shares only), the
Distributor receives from the Fund a fee equal to .25% per annum of the Fund's
average daily net assets of the Class A 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 shares and for payments to Participating Organizations
with respect to servicing their clients or customers who are Class A
shareholders of the Fund. The Class B shareholders will not receive the benefit
of such services from Participating Organizations and, therefore, will not be
assessed a Shareholder Servicing Fee.
The following information applies only to the Class A shares of the Fund. For
the Fund's fiscal year ended November 30, 1999, the amount payable to the
Distributor under the Distribution Plan and Shareholder Servicing Agreement
totaled $37,232, none of which was voluntarily waived. During the same period,
the Manager and Distributor made total payments under the Plan to or on behalf
of Participating Organizations of $64,986. The excess of such payments over the
total payments the Distributor received by the Fund under the Plan represents
distribution and servicing expenses funded by the Manager from its own resources
including the management fee. Of the total amount paid pursuant to the Plan,
$3,860 was utilized for compensation to sales personnel, $2,268 on prospectus
printing and $156 on miscellaneous expenses. For the fiscal year ended November
30, 1999, the total amount spent
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pursuant to the Plan for Class A shares was 0.48% of the average daily net
assets of the Fund, of which 0.25% of the average daily net assets was paid by
the Fund to the Distributor, pursuant to the Shareholder Servicing Agreement.
For the Fund's fiscal year ended November 30, 1998, the amount payable to the
Distributor under the Distribution Plan and Shareholder Servicing Agreement
totaled $35,316, none of which was voluntarily waived. During the same period,
the Manager and Distributor made total payments under the Plan to or on behalf
of Participating Organizations of $60,372. The excess of such payments over the
total payments the Distributor received by the Fund under the Plan represents
distribution and servicing expenses funded by the Manager from its own resources
including the management fee. Of the total amount paid pursuant to the Plan,
$2,432 was utilized for compensation to sales personnel, $2,470 on prospectus
printing and $848 on miscellaneous expenses. For the Fund's fiscal year ended
November 30, 1997, the Fund paid a distribution fee of $106,492 for expenditures
pursuant to the Plan. During such period, the Manager made payments pursuant to
the Plan from its own resources aggregating $149,853, of which $145,066 was
spent on broker assistant payments, $3,974 was spent on sales personnel and
related expenses of the Manager, $630 was spent on travel and entertainment,
$115 was spent on prospectus and application printing and $67 was spent on
miscellaneous expenses. For the Fund's fiscal year ended November 30, 1997, the
amount payable by the Fund for shareholder servicing fees was $106,492, of which
none was waived.
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, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses, including the cost of dedicated lines and CRT terminals, incurred by
the Participating Organizations and Distributor in carrying out their
obligations under the Shareholder Servicing Agreement with respect to the Class
A shares and (ii) preparing, printing and delivering the Fund's prospectus to
existing shareholders of the Fund and preparing and printing subscription
application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the management fee, and past profits for the
following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements for performing shareholder servicing and related
administrative functions on behalf of the Class A 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 with respect to Class A shares
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.
In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Trustees. In addition, the Plan requires the
Fund and the Distributor to prepare, at least quarterly, written reports setting
forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
The Plan provides that it may continue in effect for successive annual periods
commencing August 1, provided it is approved by the Class A shareholders or by
the Board of Trustees, including a majority of trustees who are not interested
persons of the Fund and who have no direct or indirect interest in the operation
of the Plan or in the agreements related to the Plan. The Board of Trustees
approved the continuance of the Plan through July 31, 2000 at the Board of
Trustees meeting held on July 8, 1999. 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 trustees 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 trustees of the Fund or the Fund's Class A
shareholders.
Custodian And Transfer Agent
State Street Kansas City, 801 Pennsylvania, Kansas City, Missouri 64105, is
custodian for the Fund's cash and securities. Reich & Tang Services, Inc., an
affiliate of the Fund's Manager, located at 600 Fifth Avenue, New York,
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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 Independent Accountants
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 Massachusetts and Pennsylvania law are passed upon by
Dechert Price & Rhoads, 477 Madison Avenue, New York, New York 10022.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, independent certified public accountants, have been selected as
independent accountants 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 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 Fund has an unlimited authorized number of shares of beneficial interest.
These shares are entitled to one vote per share with proportional voting for
fractional shares. 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 two classes of common stock, Class A and Class B. 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 and Class B shares have different class
designations; (ii) only the Class A shares are assessed a service fee pursuant
to the Rule 12b-1 Distribution and Service Plan of the Fund of .25% of the Class
A shares' average daily net assets; and (iii) only the holders of the Class A
shares will be entitled to vote on matters pertaining to the Plan and any
related agreements in accordance with provisions of Rule 12b-1. 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 made under the Plan are calculated and charged
daily to the appropriate class prior to determining daily net asset value per
share and dividends/distributions.
Under its Declaration of Trust the Fund has the right to redeem for cash shares
of beneficial interest owned by any shareholder to the extent and at such times
as the Fund's Board of Trustees determines to be necessary or
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appropriate to prevent an undue concentration of share 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
trustees can elect 100% of the Trustees 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 Trustees. 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
meetings only (a) for the election of trustees, (b) for approval of the revised
investment advisory contracts with respect to a particular class or series of
beneficial interest, (c) for approval of revisions to the Fund's distribution
agreement with respect to a particular class or series of beneficial interest,
and (d) upon the written request of shareholders entitled to cast not less than
25% of all the votes entitled to be cast at such meeting. Annual and other
meetings may be required with respect to such additional matters relating to the
Fund as may be required by the 1940 Act, including the removal of Fund
trustee(s) and communication among shareholders, any registration of the Fund
with the SEC or any state, or as the trustee may consider necessary or
desirable. For example, procedures for calling a shareholder's meeting for the
removal of trustees of the Fund, similar to those set forth in Section 16(c) of
the 1940 Act, are available to shareholders of the Fund. A meeting for such
purpose can be called by the holders of at least 10% of the Fund's outstanding
shares of beneficial interest. The Fund will aid shareholder communications with
other shareholders as required under Section 16(c) of the 1940 Act. Each trustee
serves until the next meeting of the shareholders called for the purpose of
considering the election or reelection of such trustee or of a successor to such
trustee, and until the election and qualification of this or her successor,
elected at such a meeting, or until such trustee sooner dies, resigns, retires
or is removed by the vote of 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.
Net Asset Value
The Fund does not determine net asset value per share of each Class on any day
in which the New York Stock Exchange is closed for trading. Those days include:
New Year's Day, Martin Luther King Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The net asset value of the Fund's shares is determined as of 12 noon, New York
City time, on each Fund Business Day. The net asset value of a Class is computed
by dividing the value of the Fund's net assets for such Class (i.e., the value
of its securities and other assets less its liabilities, including expenses
payable or accrued but excluding capital stock and surplus) by the total number
of shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. If fluctuating interest
rates cause the market value of the Fund's portfolio to deviate more than 1/2 of
1% from the value determined on the basis of amortized cost, the Board of
Trustees will consider whether any action should be initiated, as described in
the following paragraph. Although the amortized cost method provides certainty
in valuation, it may result in periods during which the value of an instrument
is higher or lower than the price an investment company would receive if the
instrument were sold.
The Fund's Board of Trustees has established procedures to stabilize the Fund's
net asset value at $1.00 per share of each Class. These procedures include a
review of the extent of any deviation of net asset value per share, based on
available market rates, from the Fund's $1.00 amortized cost per share of each
Class. Should that deviation exceed 1/2 of 1%, the Board will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redemption of shares in
kind, selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument with a
remaining maturity greater than 397 days, will limit portfolio investments,
including repurchase agreements, to those United States dollar-denominated
instruments that the Fund's Board of Trustees determines present minimal credit
risks, and will comply with certain reporting and record keeping procedures. The
Fund has also established procedures to ensure compliance with the requirement
that portfolio securities are Eligible Securities. (See "Description of the Fund
and its Investments and Risks" herein.)
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IX. TAXATION OF THE FUND
Federal Income Taxes
The Fund has elected to qualify as a regulated investment company under the
Internal Revenue Code. The Fund intends to qualify for regulated investment
company status as long as it is in the best interest of its shareholders. Such
qualification relieves the Fund of any liability for Federal income taxes to the
extent its earnings are distributed to its shareholders in accordance with the
Code. If the Fund fails to qualify as a regulated investment company, the Fund
will be taxed on all its earnings and its shareholders will also be taxed on any
distributions from the Fund.
The purchase of Fund shares will be the purchase of an asset. Dividends paid by
the Fund that are designated by the Fund and derived from Municipal Obligations
and Participation Certificates, will be exempt from regular Federal income tax,
provided the Fund complies with Section 852(b)(5) of the Internal Revenue Code,
but may be subject to Federal alternative minimum tax. These dividends are
referred to as exempt interest dividends. Income exempt from Federal income tax
may be subject to state and local income tax.
The Fund may invest a portion of its assets in taxable securities the interest
income on which is subject to Federal, state and local income tax. Dividends
paid from net investment income, if any, and distributions of any realized
short-term capital gains (from tax-exempt or taxable obligations) are taxable to
shareholders as ordinary income, whether received in cash or reinvested in
additional shares of the Fund.
For Social Security recipients, interest on tax-exempt bonds, including exempt
interest dividends paid by the Fund, is to be added to adjusted gross income to
determine the amount of Social Security benefits includible in gross income.
Interest on certain private activity bonds will constitute an item of tax
preference subject to the individual alternative minimum tax. Corporations will
be required to include in alternative minimum taxable income 75% of the amount
by which their adjusted current earnings (including tax-exempt interest) exceed
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 tax-exempt interest.
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. The Fund will inform shareholders of the amount and nature
of its income and gains in a written notice mailed to shareholders not later
than 60 days after the close of the Fund's taxable year.
The sale, exchange or redemption of shares will generally be the taxable
disposition of an asset that may result in a taxable gain or loss for the
shareholder if the shareholder receives more or less than it paid for its
shares. An exchange pursuant to the exchange privilege is treated as a sale on
which the shareholder may realize a taxable gain or loss.
With respect to variable rate demand instruments, including Participation
Certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner of an interest in the underlying Municipal Obligations and that the
interest thereon will be exempt from regular Federal income taxes to the Fund to
the same extent as the interest on the underlying Municipal Obligations. Battle
Fowler LLP has pointed out that the Internal Revenue Service has announced it
will not ordinarily issue advance rulings on the question of the ownership of
securities or participation interests therein subject to a put and could reach a
conclusion different from that reached by counsel.
The United States Supreme Court has held that there is no constitutional
prohibition against the Federal government's taxing the interest earned on state
or other municipal bonds. The decision does not, however, affect the current
exemption from taxation of the interest earned on the Municipal Obligations.
Pennsylvania Taxes
The following is based upon the advice of Dechert Price & Rhoads, special
Pennsylvania counsel to the Fund.
Distributions of Interest Income:
The proportion of interest income representing interest income from Pennsylvania
Municipal Obligations or Territorial Obligations distributed to shareholders of
the Fund is not taxable under the Pennsylvania Personal Income Tax or under the
Corporate Net Income Tax, nor will such interest be taxable under the
Philadelphia School District Investment Income Tax imposed on Philadelphia
resident individuals. The proportion of interest income representing interest on
Municipal Obligations will be taxable under each of these taxes.
Distributions of Gain:
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Distributions attributable to short or long term capital gain upon the sale by
the Fund of Pennsylvania Municipal Obligations,
Municipal Obligations, and Territorial Obligations will be subject to tax under
the Pennsylvania Personal Income Tax, the Pennsylvania corporate net Income Tax,
and the Philadelphia school District Income Tax, except that distributions
attributable to long-term capital gain will not be subject to the Philadelphia
School district net Income Tax.
Gain from the sale or redemption of shares in the Fund will be subject to the
Pennsylvania Personal Income Tax and the Pennsylvania corporate Net Income Tax,
but only gain from the redemption or sale of shares held for six months or less
will be subject to the Philadelphia school district net Income Tax.
The foregoing is a general, abbreviated summary of certain of the provisions of
Pennsylvania statutes and administrative interpretations presently in effect
governing the taxation of shareholders of the Fund. These provisions are subject
to change by legislative or administrative action, and any such change may be
retroactive with respect to Fund transactions. Shareholders are advised to
consult with their own tax advisers for more detailed information concerning
Pennsylvania tax matters.
X. UNDERWRITERS
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a sales charge. The Distributor does not receive an
underwriting commission. In effecting sales of Fund shares under the
Distribution Agreement, the Distributor, for nominal consideration (i.e., $1.00)
and as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
The Glass-Steagall Act and other applicable laws and regulations prohibit banks
and other depository institutions from engaging in the business of underwriting,
selling or distributing most types of securities. In the opinion of the Manager,
however, based on the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing other services for
investment companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of Trustees will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution would result in loss to shareholders or change
in the Fund's net asset value. In addition, state securities laws on this issue
may differ from the interpretations of Federal law expressed herein and banks
and financial institutions may be required to register as 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
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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 November 30,
1999 was 3.04% which is equivalent to an effective yield of 3.08%. The Fund's
Class B shares' yield for the seven day period ended November 30, 1999 was 3.29%
which is equivalent to an effective yield of 3.34%.
XII. FINANCIAL STATEMENTS
The audited financial statements for the fiscal year ended November 30, 1999 and
the report therein of PricewaterhouseCoopers LLP are herein incorporated by
reference to the Fund's Annual Report. The Annual Reports is available upon
request and without charge.
-23-
<PAGE>
DESCRIPTION OF RATINGS*
Description of Moody's Investors Service, Inc.'s Two Highest Municipal Bond
Ratings:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Con. ( c ): Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by (i) earnings of projects under construction, (ii) earnings of
projects unseasoned in operating experience, (iii) rentals which begin when
facilities are completed, or (iv) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Description of Moody's Investors Service, Inc.'s Two Highest Ratings of State
and Municipal Notes and Other Short-Term Loans:
Moody's ratings for state and municipal notes and other short-term loans are
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Symbols used are as follows:
MIG-1: Loans bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2: Loans bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
Description of Standard & Poor's Rating Services Two Highest Debt Ratings:
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only to a small degree.
Plus ( + ) or Minus ( - ): The AA rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.
Provisional Ratings: The letter "p" indicates the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Standard & Poor's does not provide ratings for state and municipal notes.
Description of Standard & Poor's Rating Services Two Highest Commercial Paper
Ratings:
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Description of Moody's Investors Service, Inc.'s Two Highest Commercial Paper
Ratings:
Moody's employs the following designations, both judged to be investment grade,
to indicate the relative repayment capacity of rated issues: Prime-1, highest
quality; Prime-2, higher quality.
________________________
* As described by the rating agencies.
-24-
<PAGE>
CORPORATE TAXABLE EQUIVALENT YIELD TABLE
(Based on Tax Rates Effective Until December 31, 2000)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
1. If Your Corporate Taxable Income Bracket Is . . .
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- --------------- --------------
Corporate $0- $50,001- $75,001- $100,001- $335,001- $10,000,001- $15,000,001- $18,333,334-
Return 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 and over
- -----------------------------------------------------------------------------------------------------------------------------------
2. Then Your Combined Income Tax Bracket Is . . .
- -----------------------------------------------------------------------------------------------------------------------------------
Federal
Tax Rate 15.00% 25.00% 34.00% 39.00% 34.00% 35.00% 38.00% 35.00%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- --------------- --------------
State
Tax Rate 9.99% 9.99% 9.99% 9.99% 9.99% 9.99% 9.99% 9.99%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- --------------- --------------
Combined
Marginal
Tax Rate 23.49% 32.49% 40.59% 45.09% 40.59% 41.49% 44.19% 41.49%
- -----------------------------------------------------------------------------------------------------------------------------------
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% 2.61% 2.96% 3.37% 3.64% 3.37% 3.42% 3.58% 3.42%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- -------------- ---------------
2.50% 3.27% 3.70% 4.21% 4.55% 4.21% 4.27% 4.48% 4.27%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- -------------- ---------------
3.00% 3.92% 4.44% 5.05% 5.46% 5.05% 5.13% 5.38% 5.13%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- -------------- ---------------
3.50% 4.57% 5.18% 5.89% 6.37% 5.89% 5.98% 6.27% 5.98%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- -------------- ---------------
4.00% 5.23% 5.93% 6.73% 7.29% 6.73% 6.84% 7.17% 6.84%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- -------------- ---------------
4.50% 5.88% 6.67% 7.57% 8.20% 7.57% 7.69% 8.06% 7.69%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- -------------- ---------------
5.00% 6.54% 7.41% 8.42% 9.11% 8.42% 8.55% 8.96% 8.55%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- -------------- ---------------
5.50% 7.19% 8.15% 9.26% 10.02% 9.26% 9.40% 9.86% 9.40%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- -------------- ---------------
6.00% 7.84% 8.89% 10.10% 10.93% 10.10% 10.26% 10.75% 10.26%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- -------------- ---------------
6.50% 8.50% 9.63% 10.94% 11.84% 10.94% 11.11% 11.65% 11.11%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- -------------- ---------------
7.00% 9.15% 10.37% 11.78% 12.75% 11.78% 11.96% 12.54% 11.96%
- ---------------- ------------ ------------- ------------ ------------- -------------- -------------- -------------- ---------------
</TABLE>
To use this chart, find the applicable level of taxable income based on your tax
filing status in section one. Then read down to section two to determine your
combined tax bracket and, in section three, to see the equivalent taxable yields
for each of the tax free income yields given.
-25-
<PAGE>
PERSONAL TAXABLE EQUIVALENT YIELD TABLE
(Based on Tax Rates Effective Until December 31, 2000)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
1. If Your Taxable Income Bracket Is . . .
Single $0- $26,251- $63,551- $132,601- $288,351
Return 26,250 63,550 132,600 288,350 and over
- ------------------------- ---------------------- ------------------- --------------------- -------------------- ------------------
Joint $0- $43,851- $105,951- $161,451- $288,351
Return 43,850 105,950 161,450 288,350 and over
- ----------------------------------------------------------------------------------------------------------------------------------
2. Then Your Combined Income Tax Bracket Is . . .
- ----------------------------------------------------------------------------------------------------------------------------------
Federal
Tax Rate 15.00% 28.00% 31.00% 36.00% 39.60%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
State
Tax Rate 2.80% 2.80% 2.80% 2.80% 2.80%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
Combined
Tax Rate 17.38% 30.02% 32.93% 37.79% 41.29%
- ----------------------------------------------------------------------------------------------------------------------------------
3. Now Compare Your Tax Free Income Yields With Taxable Income Yields
- ----------------------------------------------------------------------------------------------------------------------------------
Tax Exempt Equivalent Taxable Investment Yield
Yield Required to Match Tax Exempt Yield
- ------------------------- --------------------------------------------------------------------------------------------------------
2.00% 2.42% 2.86% 2.98% 3.22% 3.41%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
2.50% 3.03% 3.57% 3.73% 4.02% 4.26%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
3.00% 3.63% 4.29% 4.47% 4.82% 5.11%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
3.50% 4.24% 5.00% 5.22% 5.63% 5.96%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
4.00% 4.84% 5.72% 5.96% 6.43% 6.81%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
4.50% 5.45% 6.43% 6.71% 7.23% 7.66%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
5.00% 6.05% 7.14% 7.46% 8.04% 8.52%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
5.50% 6.66% 7.86% 8.20% 8.84% 9.37%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
6.00% 7.26% 8.57% 8.95% 9.65% 10.22%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
6.50% 7.87% 9.29% 9.69% 10.45% 11.07%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
7.00% 8.47% 10.00% 10.44% 11.25% 11.92%
- ------------------------- -------------------- --------------------- --------------------- -------------------- ------------------
</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.
-26-
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits.
(a) Declaration of Trust of the Registrant. (originally filed as Exhibit #1
to Pre-Effective Amendment No. 1 on November 13, 1992 and re-filed
herewith for EDGAR purposes only.)
(b) By-Laws of the Registrant. (originally filed as Exhibit #2 to
Pre-Effective Amendment No. 1 on November 13, 1992 and re-filed herewith
for EDGAR purposes only.)
(c) Not applicable.
(d) Form of Investment Management Contract between the Registrant and Reich &
Tang Asset Management L.P. (filed with Post-Effective Amendment No. 8 on
March 27, 1998 and incorporated herein by reference.)
(e) Form of Distribution Agreement between the Registrant and Reich & Tang
Distributors, Inc. (filed with Post-Effective Amendment No. 8 on March
27, 1998 and incorporated herein by reference.)
(f) Not applicable.
(g) Custody Agreement between the Registrant and Investors Fiduciary Trust
Company. (originally filed as Exhibit #8 to Post-Effective Amendment No.
3 on March 29, 1995 and re-filed herewith for EDGAR purposes only.)
(h) Administrative Services Contract between Registrant and Reich & Tang
Asset Management L.P. (filed with Post-Effective Amendment No. 5 on March
29, 1996 and incorporated herein by reference.)
(i.1) Consent of Messrs. Battle Fowler LLP to the use of their name under the
heading "Federal Income Taxes" in the Prospectus and in the Statement of
Additional Information, and under "Counsel and Auditors" in the Statement
of Additional Information as to certain federal tax matters. (originally
filed as Exhibit #10.1 to Pre-Effective Amendment No. 1 on November 13,
1992 and re-filed herewith for EDGAR purposes only.)
(i.2) Opinion of Dechert, Price & Rhoads as to the legality of the securities
being registered, and as to Pennsylvania Law, including their consent to
the filing thereof and to the use of their name under the heading
"Pennsylvania Income Taxes" in the Prospectus. (originally filed as
Exhibit #10.2 to Pre-Effective Amendment No. 1 on November 13, 1992 and
re-filed herewith for EDGAR purposes only.)
(j) Consent of Independent Accountants.
(j.1) Consent of McGladrey & Pullen, LLP.
(k) Audited Financial Statements, for fiscal year ended November 30, 1999
(filed with Annual Report) and incorporated herein by reference.
(l) Written assurance of Reich & Tang, L.P. that its purchase of shares of
the registrant was for investment purposes without any present intention
of redeeming or reselling. (originally filed as Exhibit #13 to
Pre-Effective Amendment No. 1 on November 13, 1992 and re-filed herewith
for EDGAR purposes only.)
(m.1) Distribution and Service Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940. (filed with Post-Effective Amendment No. 8 on March
27, 1998 and incorporated herein by reference.)
(m.2) Shareholder Servicing Agreement between the Registrant and Reich & Tang
Distributors, Inc. (filed with Post-Effective Amendment No. 8 on March
27, 1998 and incorporated herein by reference.)
(m.3) Distribution Agreement between the Registrant and Reich & Tang
Distributors, Inc. (filed herein as Exhibit e.)
(n) Not applicable.
(o) Rule 18f-3 Plan for Multi-Class (filed on November 5, 1997 with
Post-Effective Amendment No. 2 to Virginia Daily Municipal Income Fund,
Inc. (file no. 33-90538) Registration Statement and incorporated herein
by reference.
(p) Code of Ethics is not applicable to this Money Market Fund.
C-1
<PAGE>
Item 24. Persons controlled by or Under Common Control with the Fund.
None.
Item 25. Indemnification.
Registrant incorporates herein by reference to Item 27 of the
Registration Statement filed with the Commission on December 18, 1990.
Item 26. Business and Other Connections of Investment Adviser.
The description of Reich & Tang Asset Management L.P. ("RTAMLP") under the
caption "Management, Organization and Capital Structure" in the Prospectus and
"Investment Advisory and Other Services" and "Management of the Fund" in the
Statement of Additional Information constituting parts A and B, respectively, of
this Post-Effective Amendment to the Registration Statement are incorporated
herein by reference.
Registrant's investment advisor, RTAMLP, is a registered investment advisor.
Nvest Companies, L.P. (Nvest) is the limited partner and owner of a 99.5%
interest in RTAMLP. Reich & Tang Asset Management, Inc. ("RTAM")(an indirect
wholly-owned subsidiary of Nvest) is the sole general partner and owner of the
remaining .05% interest in RTAMLP. RTAMLP's investment advisory clients include
more than twenty-one registered investment companies which invest in money
market instruments, equity securities and debt securities. In addition, RTAMLP
is the sole general partner of ten investment partnerships organized as limited
partnerships.
Peter S. Voss, President, has been Chief Executive Officer and a Director of
Nvest Corporation (formerly New England Investment Companies, Inc.) since
October 1992, Chairman of the Board of Nvest Corporation since December 1992,
Director of The New England since March 1993, Chairman of the Board of Directors
of NEIC's subsidiaries other than Loomis, Sayles & Company, L.P. ("Loomis") and
Back Bay Advisors, L.P. ("Back Bay"), where he serves as a Director, and
Chairman of the Board of Trustees of all of the mutual funds in the TNE Fund
Group and the Zenith Funds. G. Neil Ryland, Executive Vice President, Treasurer
and Chief Financial Officer Nvest Corporation since July 1993. Edward N.
Wadsworth, Executive Vice President, General Counsel, Clerk and Secretary of
Nvest Corporation since December 1989, and Secretary of Westpeak and Draycott
and the Treasurer of Nvest Corporation. Lorraine C. Hysler has been Secretary of
RTAM since July 1994, Assistant Secretary of NEIC since September 1993, and Vice
President of Reich & Tang Mutual Funds since July 1994. Richard E. Smith, III
has been a Director of RTAM since July 1994, and President and Director of RTAM
since July 1994, President and Chief Operating Officer of the Reich & Tang
Capital Management Group since July 1994. Steven W. Duff has been a Director of
RTAM since October 1994, and President and Chief Executive Officer of Reich &
Tang Mutual Funds since August 1994. Mr. Duff is President and a
Director/Trustee of 14 funds in the Reich & Tang Fund Complex, President of Back
Bay Funds, Inc., Director of Pax World Money Market Fund, Inc., President and
Chief Executive Officer of Tax Exempt Proceeds Fund, Inc., and Executive Vice
President of Reich & Tang Equity Fund, Inc. Bernadette N. Finn has been Vice
President/Compliance of RTAM since July 1994, and Vice President of Reich & Tang
Mutual Funds since July 1994. Ms. Finn is also Secretary of 14 funds in the
Reich & Tang Complex and a Vice President and Secretary of 5 funds in the Reich
& Tang Fund Complex. Richard DeSanctis has been Treasurer of RTAM since July
1994, Assistant Treasurer of NEIC since September 1993, Treasurer of the Reich &
Tang Mutual Funds since July 1994. Mr. DeSanctis is also Treasurer of 18 funds
in the Reich & Tang Fund Complex and is Vice President and Treasurer of Cortland
Trust, Inc. Richard I. Weiner has been Vice President of RTAM since July 1994,
Vice President of NEIC since September 1993, and Vice President of Reich & Tang
Asset Management L.P. Capital Management Group since July 1994. Mr. Weiner has
served as a Vice President of Reich & Tang, Inc. since September 1982. Rosanne
Holtzer has been Vice President of the Mutual Funds division of the Manager
since December 1997. Ms. Holtzer was formerly Manager of Fund Accounting for the
Manager with which she was associated with from June 1986. In addition she is
also Assistant Treasurer of 19 funds in the Reich & Tang Fund Complex.
C-2
<PAGE>
Item 27. Principal Underwriters.
(a) Reich & Tang Distributors, Inc., the Registrant's Distributor, is also
distributor for Back Bay Funds, Inc., California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust,
Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida
Daily Municipal Income Fund, Georgia Daily Municipal Income Fund,
Institutional Daily Income Fund, New Jersey Daily Municipal Income Fund,
Inc., New York Daily Tax Free Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Pax World Money Market Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc.,
Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Virginia
Daily Municipal Income Fund, Inc.
(b) The following are the directors and officers of Reich & Tang Distributors
Inc. The principal business address of Messrs. Voss, Ryland, and
Wadsworth is 399 Boylston Street, Boston, Massachusetts 02116. For all
other persons the principal address is 600 Fifth Avenue, New York, New
York 10020.
Positions and Offices Positions and Offices
Name with the Distributor with the Registrant
---- ----------------------- ---------------------
Peter S. Voss Director None
G. Neal Ryland Director None
Edward N. Wadsworth Executive Officer None
Richard E. Smith III President None
Steven W. Duff Director President
Bernadette N. Finn Vice President Secretary
Lorraine C. Hysler Secretary None
Richard De Sanctis Treasurer Treasurer
Richard I. Weiner Vice President None
(c) Not applicable.
Item 28. Location of Accounts and Records.
Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained in the physical possession of Registrant at 600 Fifth
Avenue, New York, New York 10020, the Registrant's Manager; and at Investors
Fiduciary Trust Company, 801 Pennsylvania Street, Kansas City, Missouri, 64105,
the Registrant's custodian; and at Reich & Tang Services L.P., 600 Fifth Avenue,
New York, New York 10020, the Registrant's Transfer Agent and Dividend
Disbursing Agent.
Item 29. Management Services.
Not applicable
Item 30. Undertakings.
Not applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Post-Effective Amendment
to its Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York, on the 29th day of
March , 2000.
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
By:/s/Steven W. Duff
-------------------------
Steven W. Duff
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
(1) Principal Executive Officer
/s/Steven W. Duff
-----------------------
Steven W. Duff President and Trustee 3/29/00
(2) Principal Financial and
Accounting Officer
/s/Richard De Sanctis
Richard De Sanctis Treasurer 3/29/00
(3) Majority of Directors
W. Giles Mellon (Trustee)
Robert Straniere (Trustee)
Yung Wong (Trustee)
By: /s/Bernadette N. Finn
---------------------------
Bernadette N. Finn
Attorney-in-Fact* 3/29/00
* Powers of Attorney of Messrs. Strainiere, Wong and Mellon. (originally
filed as Exhibit #16 to Pre-Effective Amendment No. 1 on November 13,
1992 and re-filed herewith for EDGAR purposes only.)
Powers of Attorney of Steven W. Duff. (originally filed as Exhibit #8 to
Post-Effective Amendment No. 3 on March 29, 1995 and re-filed herewith
for EDGAR purposes only.)
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
----------------------------------------
DECLARATION OF TRUST
JULY 30, 1992
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I - Name and Definitions
Section 1.1 Name....................................................2
Section 1.2 Definitions.............................................2
ARTICLE II - Trustees
Section 2.1 General Powers..........................................5
Section 2.2 Investments.............................................6
Section 2.3 Legal Title.............................................9
Section 2.4 Issuance and Repurchase
of Shares.............................................10
Section 2.5 Delegation: Committees..................................11
Section 2.6 Collection and Payment..................................11
Section 2.7 Expenses................................................11
Section 2.8 Manner of Acting; By-Laws...............................12
Section 2.9 Miscellaneous Powers....................................13
Section 2.10 Principal Transactions..................................14
Section 2.11 Number of Trustees......................................14
Section 2.12 Election and Term.......................................15
Section 2.13 Resignation and Removal.................................15
Section 2.14 Vacancies...............................................16
Section 2.15 Delegation of Power to Other
Trustees..............................................17
ARTICLE III - Contracts
Section 3.1 Distribution Contract...................................18
Section 3.2 Advisory or Managment Contract..........................18
Section 3.3 Affiliations of Trustees or
Officers, Etc........................................19
Section 3.4 Compliance with 1940 Act................................20
ARTICLE IV - Limitations of Liability of Shareholders,
Trustees and Others
Section 4.1 No Personal Liability of Shareholders,
Trustees, Etc. .......................................21
Section 4.2 Non-Liability of Trustees, Etc. ........................22
Section 4.3 Manadatory Indemnification..............................22
Section 4.4 No Bond Required of Trustees ...........................26
Section 4.5 No Duty of Investigation; Notice in
Trust Instruments, Etc. .............................26
Section 4.6 Reliance on Experts, Etc. ..............................27
-i-
<PAGE>
ARTICLE V - Shares of Beneficial Interest
Section 5.1 Beneficial interest ....................................28
Section 5.2 Rights of Shareholders ................................28
Section 5.3 Trust Only ............................................29
Section 5.4 Issuance of Shares ....................................29
Section 5.5 Register of Shares ....................................30
Section 5.6 Transfer of Shares ....................................31
Section 5.7 Notices; Reports ......................................32
Section 5.8 Treasury Shares ........................................32
Section 5.9 Voting Powers ..........................................33
Section 5.10 Meetings of Shareholders ..............................34
Section 5.11 Series Designation ....................................34
Section 5.12 Class Designation ......................................39
Section 5.13 Assent to Declaration of Trust ........................41
ARTICLE VI - Redemption and Renurchase of Shares
Section 6.1 Redemption of Shares ..................................42
Section 6.2 Price ..................................................42
Section 6.3 Payment ................................................43
Section 6.4 Effect of Suspension of
Determination of Net Asset
Value ..............................................43
Section 6.5 Repurchase by Agreement ................................44
Section 6.6 Redemption of Shareholder's
Interest ............................................44
Section 6.7 Reductions in Number of
Outstanding Shares Pursuant
to Net Asset Value Formula ..........................45
Section 6.8 Suspension of Right of
Redemption ..........................................45
ARTICLE VII - Determination of Net Asset Value, Net
Income and Distributions
Section 7.1 Net Asset Value ........................................46
Section 7.2 Distributions to Shareholders ..........................47
Section 7.3 Determination of Net Income; Constant Net
Asset Value; Reduction of Outstanding
Shares ...............................................49
Section 7.4 Allocation Between Principal
and Income ...........................................51
Section 7.5 Power to Modify Foregoing
Procedures ...........................................51
-ii-
<PAGE>
ARTICLE VIII - Duration, Termination of Trust;
Amendment; Mergers, Etc
Section 8.1 Duration ..............................................52
Section 8.2 Termination of Trust ..................................52
Section 8.3 Amendment Procedure ...................................54
Section 8.4 Merger, consolidation and Sale of Assets................56
Section 8.5 Incorporation .........................................57
ARTICLE IX - Renorts to Shareholders
ARTICLE X - Miscellaneous
Section 10.1 Filing ................................................58
Section 10.2 Governing Law ..........................................59
Section 10.3 Counterparts ..........................................59
Section 10.4 Reliance by Third Parties ..............................59
Section 10.5 Provisions in Conflict with Law
or Regulations ......................................60
-iii-
<PAGE>
DECLARATION OF TRUST
OF
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
DATED July 30, 1992
DECLARATION OF TRUST made July 30, 1992;
WHEREAS, the Trustees desire to establish a trust for the investment
and reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of the holders, from time to time, of the shares of
beneficial interest issued hereunder and subject to the provisions hereof.
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
---- --- -----------
Section I.I. Name. The name of the trust created hereby, until and
unless changed by the Trustees as provided in Section 8.3 (a) hereof, is the
"Pennsylvania Daily Municipal Income Fund" and its principal place of business
shall be 100 Park Avenue, New York, New York.
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "By-laws" means the By-laws referred to in Section 2.8 hereof, as
from time to time amended.
(b) The terms "Commission" and "Interested Person. " have the meanings
given them in the 1940 Act. Except as otherwise defined by the Trustees in
conjunction with the establishment of any series of Shares, the term "vote of a
maioritv of the Shares outstanding and entitled to vote" shall have the same
meaning as the term "vote of a ma-iority of the outstanding voting securities"
given it in the 1940 Act.
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(c) "Custodian" means any Person other than the Trust who has custody
of any Trust Property as required by 17(f) of the 1940 Act, but does not include
a system for the central handling of securities described in said 17(f).
(d) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration". "hereof" and
"hereunder" shall be deemed to refer to this Declaration rather than exclusively
to the article or section in which such words appear.
(e) "Distributor" means the party, other than the Trust, to the
contract described in Section 3.1 hereof.
(f) "His" shall include the feminine and neuter, as well as the
masculine, genders.
(g) "Municipal Bonds" means obligations issued by or on behalf of
states, territories and of the United States and the District of Columbia and
their political subdivisions, agencies and instrumentalities, the interest from
which is exempt from Federal income tax.
(h) The "1940 Act" means the Investment Company Act of 1940, as
amended from time to time.
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(i) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
(j) "Shareholder" means a record owner of Outstanding Shares.
(k) "Shares" means the equal proportionate units of interest into
which the beneficial interest in the Trust shall be divided from time to time,
including the Shares of any and all series and classes which may be established
by the Trustees, and includes fractions of Shares as well as whole Shares.
"Outstanding" Shares means those Shares shown from time to time on the books of
the Trust or its Transfer Agent as then issued and outstanding, but shall not
include Shares which have been redeemed or repurchased by the Trust and which
are at the time held in the Treasury of the Trust.
(1) "Transfer Agent" means any Person other than the Trust who
maintains the Shareholder records of the Trust, such as the list of
Shareholders, the number of Shares credited to each account, and the like.
(m) The "Trust" means the Pennsylvania Daily Municipal Income Fund.
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(n) The "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(o) The "Trustees" means the Person who has signed this Declaration,
so long as he shall continue in office in accordance with the terms hereof, and
all other Persons who may from time to time be duly elected, qualified and
serving as Trustees in accordance with the provisions of Article II hereof, and
reference herein to a Trustee or the Trustees shall refer to such Person or
Persons in this capacity or their capacities as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1 General Powers. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the
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United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they may
deem necessary, proper or desirable in order to promote the interests of the
Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be executed
without order of or resort to any court.
Section 2.2 investments. The Trustees shall have the power:
(a) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest in, securities,
including common and preferred stocks; warrants; bonds; debentures; bills; time
notes and all other
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evidences of indebtedness; negotiable or non-negotiable instruments; government
securities, including securities of any state, municipality or other political
subdivision, or any governmental or quasi-governmental agency or
instrumentality; and money market instruments including bank certificates of
deposit, finance paper, commercial paper, bankers' acceptances and all kinds of
repurchase agreements, of any corporation, company, trust, association, firm or
other business organization however established, and of any country, state,
municipality or other political subdivisions, or any governmental or
quasi-governmental agency or instrumentality.
(c) To acquire (by purchase, subscription or otherwise), to hold, to
trade in and deal in, to acquire or write any rights or options to purchase or
sell, to sell or otherwise dispose of, to lend, and to pledge any such
securities and repurchase agreements.
(d) To exercise all rights, powers and privileges of ownership or
interest in all securities and repurchase agreements included in the Trust
Property, including the right to vote thereon and otherwise act with respect
thereto and to do all acts for the preservation, protection, improvements and
enhancement in value of all such securities and repurchase agreements.
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(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash, and any interest therein.
(f) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of any obligation or engagement of any other Person
and to lend Trust Property.
(g) To aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included in the
Trust Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest; to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) To enter into a plan of distribution and any related agreements
whereby the Trust may finance directly or indirectly any activity which is
primarily intended to result in the sale of Shares.
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(i) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
Section 2.3 Legal Title. Legal title to all the Trust Property,
including the property of any series of the Trust, shall be vested in the
Trustees as joint tenants except that the Trustees shall have power to cause
legal title to any Trust Property to be held by or in the name of one or more of
the Trustees, or in the name of the Trust, or in the name of any
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other Person as nominee, on such terms as the Trustees may determine, provided
that the interest of the Trust therein is deemed appropriately protected. The
right, title and interest of the Trustees in the Trust Property and the
property of each series of the Trust shall vest automatically in each Person
who may hereafter become a Trustee. Upon the termination of the term of office,
resignation, removal or death of a Trustee he shall automatically cease to have
any right, title or interest in any of the Trust Property or the property of
any series of the Trust, and the right, title and interest of such Trustee in
all such property shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective whether or not conveying
documents have been executed and delivered.
Section 2.4 issuance and Repurchase of Shares. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VI and VII and Section 5.11 hereof, to
apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the particular series of the
Trust with respect to which such Shares are issued, whether capital or surplus
or otherwise, to the full extent now or hereafter permitted by the laws of the
Commonwealth of Massachusetts governing business corporations.
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Section 2.5. Delegation.' Committees. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient, to the same extent as such
delegation is permitted by the 1940 Act.
Section 2.6. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property interest securing any
obligations, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
Section 2.7. Expenses. The Trustees shall have the power to incur and
pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to pay
reasonable compensation from the funds of the Trust to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and Trustees.
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Section 2.8. Manner of Acting; By-Laws. Except as otherwise provided
herein or in the By-Laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of the entire number
of Trustees then in office. The Trustees may adopt By-laws not consistent with
this Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such By-laws to the extent such power is not reserved to the
Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
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Section 2.9 Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing. Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) to the extent permitted by law, indemnify any person with whom
the Trust has dealings, including the Investment Adviser, Distributor, Transfer
Agent and selected dealers, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations
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of others; (h) determine and change the fiscal year of the Trust and the method
by which its accounts shall be kept; and (i) adopt a seal for the Trust, but the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
Section 2.10. Principal Transactions. Except in transactions not
permitted by the 1940 Act or rules and regulations adopted by the Commission,
the Trustees may, on behalf of the Trust, buy any securities from or sell any
securities to, or lend any assets of the Trust to, any Trustee or officer of the
Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with the Investment Adviser, Distributor or
Transfer Agent or with any Interested Person of such Person; and the Trust may
employ any such Person, or firm or company in which such Person is an Interested
Person, as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
Section 2.11. Number of Trustees. The number of Trustees shall
initially be one (1), and thereafter shall be such number as shall be fixed from
time to time by a written instrument signed by .a majority of the Trustees,
provided, however, that the number of Trustees shall in no event be less than
one (1) nor more than fifteen (15).
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Section 2.12. Election and Term. Except for the Trustees named herein,
designated by such Trustees prior to the issuance of Shares, or appointed to
fill vacancies pursuant to Section 2.14 hereof, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders called for that purpose. Except in the event of resignation or
removal pursuant to Section 2.13 hereof, each Trustee shall hold office until
the next such meeting of Shareholders and until his successor is duly elected
and qualified.
Section 2.13. Resignation and Removal. Any Trustee may resign his
trust (without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than one) with cause, by
the action of two- thirds of the remaining Trustees. Any Trustee may be removed
at any meeting of Shareholders by vote of two-thirds of the Outstanding Shares.
The Trustees shall promptly call a meeting of the Shareholders for the purpose
of voting upon the question of removal of any such Trustee or Trustees when
requested in writing so to do by the holders of not less than ten percent of
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the Outstanding Shares and, in that connection, the Trustees will assist
shareholder communications to the extent provided for in Section 16(c) under the
1940 Act. Upon the resignation or removal of a Trustee, or his otherwise ceasing
to be a Trustee, he shall execute and deliver such documents as the remaining
Trustees shall require for the purpose of conveying to the Trust or the
remaining Trustees any Trust Property or property of any series of the Trust
held in the name of the resigning or removed Trustee. Upon the incapacity or
death of any Trustee, his legal representative shall execute and deliver on his
behalf such documents as the remaining Trustee shall require as provided in the
preceding sentence.
Section 2.14. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing vacancy, including a vacancy existing by
reason of an increase in the number of Trustees. Subject to the provisions of
Section 16 (a) of the 1940 Act, the remaining Trustees shall fill such vacancy
by the appointment of such other person as they in their discretion shall see
fit, made by a written instrument signed by a majority of the Trustees then in
office. Any such appointment shall not become effective, however, until the
person named in the written
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instrument of appointment shall have accepted in writing such appointment and
agreed in writing to be bound by the terms of the Declaration. An appointment
of a Trustee may be made in anticipation of a vacancy to occur at a later date
by reason of retirement, resignation or increase in the number of Trustees,
provided that such appointment shall not become effective prior to such
retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.14, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by the Declaration. A written
instrument certifying the existence of such vacancy signed by a majority of the
Trustees in office shall be conclusive evidence of the existence of such
vacancy.
Section 2.15. Delegation of Power to Other Trustees. Any Trustee may,
by power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall less than two (2) Trustees personally exercise the powers granted to
the Trustees under this Declaration, except as herein otherwise expressly
provided.
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ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of the Shares at a
price based on the net asset value of a Share, whereby the Trustees may either
agree to sell the Shares to the other party to the contract or appoint such
other party their sales agent for the Shares, and in either case on such terms
and conditions as may be prescribed in the By-laws, if any, and such further
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Article III or of the By-laws; and such
contract may also provide for the repurchase of the Shares by such other party
as agent of the Trustees.
Section 3.2. Advisory or Management Contract. The Trustees may in
their discretion from time to time enter into an investment advisory or
management contract or separate contracts with respect to one or more series of
the Trust whereby the other party to such contract shall undertake to furnish to
the Trust such management, investment advisory, statistical and research
facilities and services and such other facilities and services, if any, and all
upon such terms and conditions as the Trustees
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may in their discretion determine, including the grant of authority to such
other party to determine what securities shall be purchased or sold by the Trust
and what portion of its assets shall be uninvested, which authority shall
include the power to make changes in the Trust's investments.
The Trustees may also employ, or authorize the Trust's investment
adviser to employ, one or more sub-advisers from time to time to perform such of
the acts and services of the investment adviser and upon such terms and
conditions as may be agreed upon between the investment adviser and such
sub-advisers and approved by the Trustees. Any reference in this Declaration to
the investment adviser shall be deemed to include such sub- advisers unless the
context otherwise requires.
Section 3,3. Affiliations of Trustees or Officers, Etc. The fact that:
(i) any of the Shareholders, Trustees or officers
of the Trust is a shareholder, director, officer, partner,
trustee, employee, manager, adviser or distributor of or for
any partnership, corporation, trust, association or other
organization or of or for any parent or affiliate of any
organization, with which a contract of the character
described in Sections 3.1 or 3.2 aboye or for services as
Custodian, Transfer Agent or disbursing agent or for related
services may have been or may hereafter be made, or that any
such
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organization, or any parent or affiliate thereof is a
Shareholder of or has an interest in the Trust, or that
(ii) any partnership, corporation, trust,
association or other organization with which a contract or
the character described in Sections 3.1 or 3.2 above or for
services as Custodian, Transfer Agent or disbursing agent or
for related services may have been or may hereafter be made
also has any one or more of such contracts with one or more
other partnerships, corporations, trusts, associations or
other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to this Trust or its
Shareholders.
Section 3.4. Compliance with 1940 Act. Any contract entered into
pursuant to Sections 3.1 or 3.2 shall be consistent with and subject to the
requirements of Section 15 of the Investment Company Act Of 1940 (including any
amendment thereof or other applicable Act of Congress hereafter enacted) with
respect to its continuance in effect, its termination and the method of
authorization and approval of such contract or renewal thereof.
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ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders Trustees. Etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust is made
a party to any suit or proceeding to enforce any such liability of the Trust, he
shall not, on account thereof, be held to any personal liability. The Trust
shall indemnify and hold each Shareholder harmless from and against all claims
and liabilities, to which such Shareholder may become subject by reason of his
being or having been a Shareholder, and shall reimburse such Shareholder for all
legal and other expenses reasonably incurred by him in connection with any such
claim or liability, provided that any such expenses shall be paid solely out of
the funds and property of the series
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of the Trust with respect to which such Shareholder's Shares are issued. The
rights accruing to a Shareholder under this Section 4.1 shall not exclude any
other right to which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
Section 4.2. Non-Liability of Trustees. Etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its Shareholders,
or to any Shareholder, Trustee, officer, employee, agent or service provider
thereof for any action or failure to act by him or any other such Trustee,
officer, employee, agent or service provider (including without limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his own bad faith, willful misfeasance, gross negligence or
reckless disregard of the duties involved in the conduct of his office. The term
"service provider" as used in this Section 4.2 shall include any investment
adviser, principal underwriter or other person with whom the Trust has an
agreement for provision of services.
Section 4.3. Mandatory indemnification.
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
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(i) every person who is, or has been, a Trus-tee
or officer of the Trust shall be indemnified by the Trust to
the fullest extent permitted by law against all liability
and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue
of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal, or other, including appeals),
actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the
Shareholders by reason of a final adjudication by the court
or other body before which the proceeding was brought that
he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in
the conduct of his office,
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(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good faith
in the reasonable belief that his action
was in the best interest of the Trust;
(iii) in the event of a settlement or other
disposition not involving a final adjudication as provided in
paragraph (b) (i) resulting in a payment by a Trustee or
officer, unless there has been a determination that such
Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office:
(A) by the court or other body approving the
settlement or other disposition;
(B) based upon a review of readily available facts
(as opposed to a full trial-type inquiry) by (x) vote a
majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then
in office act on the matter) or (y) written opinion of
independent legal counsel,
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall
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inure to the benefit of the heirs, executors, administrators and assigns of such
a person. Nothing contained herein shall affect any rights to indemnification to
which personnel of the Trust other than Trustees and officers may be entitled by
contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any
claim, action, suit or proceeding of the character described in paragraph (a) of
the Section 4.3 may be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled to indemnification
under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond
or some other appropriate security provided by the
recipient, or the Trust shall be insured against losses
arising out of any such advances; or
(ii) a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the
Disinterested Trustees act on the matter) or an independent
legal counsel in a written opinion shall determine, based
upon a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe
that the recipient ultimately will be found entitled to
indemnification.
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As used in this Section 4.3, a "Disinterested
Trustee" is one who is not (A) an "Interested Person"
of the Trust (including anyone who has been exempted
from being an "Interested Person" by any rule,
regulation or order of the Commission), or (B) involved
in the claim, action, suit or proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust Instruments.
Etc. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking, and every other act or thing whatsoever executed in connection with
the Trust shall be conclusively presumed to have been executed or done by the
executors thereof only in their capacity as Trustees under this Declaration or
in their capacity as officers, employees or agents of the Trust. Every written
obligation,
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contract, instrument, certificate, Share, other security of the
Trust or undertaking made or issued by the Trustees may recite that the same is
executed or made by them not individually, but as Trustees under the
Declaration, and that the obligations of the Trust under any such instrument are
not binding upon any of the Trustees or Shareholders individually, but bind only
the estate of the Trust or series, as applicable, and may contain any former
recital which they or he may deem appropriate, but the omission of such recital
shall not operate to bind the Trustees individually. The Trustees shall at all
times maintain insurance for the protection of the Trust Property, its
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgement shall deem advisable.
Section 4.6. Reliance on Experts. Etc. Each Trustee and officer or employee
of the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel, or upon reports made to the Trust by any of
its officers or employees or by the Investment Adviser, Distributor, Transfer
Agent, selected dealers, accountants, appraisers or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of
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the Trust, regardless of whether such counsel or expert may also be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest of
$.01 per value per Share. All Shares shall be of one class, except as provided
in Section 5.11 and Section 5.12 hereof. The number of Shares of beneficial
interest authorized hereunder is unlimited. All Shares issued hereunder
including, without limitation, Shares issued in connection with a dividend in
Shares or a split of Shares, shall be fully paid and non-assessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust
Property and the property of each Series of the Trust of every description and
the right to conduct any business hereinbefore described are vested exclusively
in the Trustees, and the Shareholders shall have no interest therein other than
the beneficial interest conferred by their Shares, and they shall have no right
to call for any partition or division of any property, profits, rights or
interests of the Trust nor can they be called upon to share or assume any losses
of the Trust or suffer an assessment of any kind by virtue of their ownership of
Shares. The Shares shall be personal property giving only the
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rights in this Declaration specifically set forth.
The Shares shall not entitle the holder of preference, preemptive, appraisal,
conversion or exchange rights, except as the Trustees may determine with respect
to any series of Shares.
Section 5.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their discretion may,
from time to time without vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times and on such terms as the Trustees may deem
best, and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities) and
businesses, in connection with any issuance of Shares, the
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Trustees may issue fractional Shares and Shares held in the treasury, and Shares
may be issued in separate series as provided in Section 5.11 hereof. The Trustee
may from time to time divide or combine the Shares into a greater or lesser
number without thereby changing the proportionate beneficial interests in the
Trust or any series. Contributions to the Trust may be accepted for, and Shares
shall be redeemed as, whole Shares and/or l/l,000ths of a Share or integral
multiple thereof.
Section 5.5. Register of Shares. A register shall be kept at the principal
office of the Trust or an office of the Transfer Agent which shall contain the
names and addresses of the Shareholders and the number of Shares held by them
respectively and a record of all transfers thereof. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein or in the
By-laws provided, until he has given his address to the Transfer Agent or such
other officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of share
certificates and promulgate appropriate rules and regulations as to their use.
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Section 5.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any Person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation
of law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
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Section 5.7. Notices.' Reports. Any and ail notices to which any
Shareholder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage pre-paid, addressed to any Shareholder of
record at his last known address as recorded on the register of the Trust. A
notice of a meeting, an annual report and any other communication to
Shareholders need not be sent to a Shareholder (i) if an annual report and a
proxy statement for two consecutive shareholder meetings have been mailed to
such Shareholder's address and have been returned as undeliverable, (ii) if all,
and at least two, checks (if sent by first class mail) in payment of dividends
on Shares during a twelve-month period have been mailed to such Shareholder's
address and have been returned as undeliverable or (iii) in any other case in
which a proxy statement concerning a meeting of security holders is not required
to be given pursuant to the Commission's proxy rules as from time to time in
effect under the Securities Exchange Act of 1934. However, delivery of such
proxy statements, annual reports and other communications shall resume if and
when such Shareholder delivers or cause to be delivered to the Trust written
notice setting forth such Shareholder's then current address.
Section 5.8. Treasury Shares. Shares held in the treasury shall, until
reissued pursuant to Section 5.4, not
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confer any voting rights on the Trustees, nor shall such Shares be entitled to
any dividends or other distributions declared with respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.12; (ii) for the
removal of Trustees as provided in Section 2.13; (iii) with respect to any
investment advisory or management contract entered into pursuant to Section 3.2;
(iv) with respect to termination of the Trust as provided in Section 8.2; (v)
with respect to any amendment of this Declaration to the extent and as provided
in Section 8.3; (vi) with respect to any merger, consolidation or sale of assets
as provided in Section 8.4; (vii) with respect to incorporation of the Trust to
the extent and as provided in Section 8.5; (viii) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders;
(ix) with respect to any plan adopted pursuant to Rule 12b-l (or any successor
rule) under the 1940 Act; and (x) with respect to such additional matters
relating to the Trust as may be required by this Declaration, the By-laws or any
registration of the Trust as an investment company under the 1940 Act with the
Commission (or any successor agency) or as the Trustees may consider necessary
or desirable. Each whole Share shall be entitled to
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one vote as to any matter on which it is entitled to vote and each fractional
share shall be entitled to a proportionate fractional vote, except that the
Trustees may, in conjunction with the establishment of any series of Shares,
establish conditions under which the several series shall have separate voting
rights or, if a series would not, in the sole judgment of the Trustees, be
materially affected by a proposal, no voting rights. There shall be no
cumulative voting in the election of Trustees. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration or the By-laws to be taken by Shareholders.
The By-laws may include further provisions for Shareholders' votes and meetings
and related matters.
Section 5.10. Meetings of Shareholders. Meetings of Shareholders may
be called at any time by the President, and shall be called by the President and
Secretary at the request in writing, or by resolution, of a majority of
Trustees, or at the written request of the holder or holders of ten percent
(10%) or more of the total number of Shares then issued and outstanding of the
Trust entitled to vote at such meeting. Any such request shall state the purpose
of the proposed meeting.
Section 5.11. Series Designation. The Trustees, in their discretion,
may authorize one division of Shares into two or more series, and the different
series shall be established and
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designated and the variations in the relative rights and preferences as between
the different series shall be fixed and determined, by the Trustees; provided,
that all Shares shall be identical except that there may be variations so fixed
and determined between different series as to investment objective, purchase
price, right of redemption, special and relative rights as to dividends and on
liquidation, conversion rights, and conditions under which the several series
shall have separate voting rights. All references to Shares in this Declaration
shall be deemed to be Shares of any or all series as the context may require.
If the Trustee shall divide the Shares of the Trust into two or more
series, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust shall apply equally to
each series of the Trust except as the context requires otherwise.
(b) The number of authorized Shares and the number of Shares of each
series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury
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shares (of the same or some other series), reissue for such consideration and on
such terms as they may determine, or cancel any Shares of any series acquired by
the Trust at their discretion from time to time.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. In the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular series, the Trustees shall allocate them among any
one or more of the series established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon all persons for all purposes.
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(d) The assets belonging to each particular series shall be charged
with the liabilities of the Trust in respect of that series and all expenses,
costs, charges and reserves attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable and no series
shall be liable to any person except for its allocated share. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon all persons for all purposes. The Trustees shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items are capital; and each such determination and allocation
shall be conclusive and binding upon all persons. The assets of a particular
series of the Trust shall, under no circumstances, be charged with liabilities
attributable to any other series of the Trust. All persons extending credit to,
or contracting with or having any claim against a particular series of the Trust
shall look only to the assets of that particular series for payment of such
credit, contract or claim. No Shareholder or former Shareholder of any series
shall have any claim on or right to any assets allocated or belonging to any
other series.
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(e) Each Share of a series of the Trust shall represent a beneficial
interest in the net assets of such series. Each holder of Shares of a series
shall be entitled to receive his pro rata share of distributions of income and
capital gains made with respect to such series. Upon redemption of his Shares or
indemnification for liabilities incurred by reason of his being or having been a
Shareholder of a series, such Shareholder shall be paid solely out of the funds
and property of such series of the Trust. Upon liquidation or termination of a
series of the Trust, Shareholders of such series shall be entitled to receive a
pro rata share of the net assets of such series. A Shareholder of a particular
series of the Trust shall not be entitled to participate in a derivative or
class action on behalf of any other series or the Shareholders of any other
series of the Trust.
(f) Notwithstanding any other provision hereof, on any matter
submitted to a vote of Shareholders of the Trust, all Shares then entitled to
vote shall be voted by individual series, except that (i) when required by the
1940 Act, Shares shall be voted in the aggregate and not by individual series,
and (ii) when the Trustees have determined that the matter affects only the
interests of Shareholders of a limited number of series, then only the
Shareholders of such series shall be entitled to vote thereon.
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The establishment and designation of any series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
Section 5.12. Class Designation. The Trustees, in their discretion,
may authorize the division of the Shares of the Trust, or, if any series be
established, the Shares of any series, into two or more classes, and the
different classes shall be established and designated, and the variations in the
relative rights and preferences as between the different classes shall be fixed
and determined, by the Trustees? provided, that all Shares of the Trust or of
any series shall be identical to all other shares of the Trust or the same
series, as the case may be, except that there may be variations between
different classes as to allocation of expenses, right of redemption, special and
relative rights as to dividends and on liquidation, conversion rights, and
conditions under which the several classes shall hav separate voting rights. All
references to Shares in this
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Declaration shall be deemed to be Shares of any or all classes as the
context may require. If the Trustees shall divide the Shares of the Trust or any
series into two or more classes, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust, or any series of the
Trust, shall apply equally to each class of Shares of the Trust or of any series
of the Trust, except as the context requires otherwise.
(b) The number of Shares of each class that may be issued shall be
unlimited. The Trustees may classify or reclassify any unissued Shares of the
Trust or of any series or any Shares previously issued and reacquired of the
Trust or of any series into one or more classes that may be established and
designated from time to time. The Trustees may hold as treasury Shares (of the
same or some other class), reissue for such consideration and on such terms as
they may determine, or cancel any Shares of any class reacquired by the Trust at
their discretion from time to time.
(c)
Liabilities, expenses, costs, charges and reserves related to the distribution
of, and other identified expenses that should properly be allocated to, the
Shares of a particular
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class may be charged to and borne solely by such class and the bearing of
expenses solely by a class of Shares may be appropriately reflected (in a manner
determined by the Trustees) and cause differences in the net asset value
attributable to, and the dividend, redemption and liquidation rights of, the
Shares of different classes. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and binding upon the
Shareholders of all classes for all purpose.
(d) The establishment and designation of any class of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such class, or as otherwise provided in such instrument. The
Trustees may, by an instrument executed by a majority of their number, abolish
any class and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment to this
Declaration.
Section 5.13. Assent to Declaration of Trust. Every Shareholder, by
virtue of having become a shareholder, shall be held to have expressly assented
and agreed to the terms hereof and to have become a party hereto.
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ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed or repurchased Shares may be resold by the Trust.
The Trust shall redeem the Shares at the price determined as
hereinafter set forth, upon the appropriately verified written application of
the record holder thereof (or upon such other form of request as the Trustees
may determine) at such office or agency as may be designated from time to time
for that purpose by the Trustees. The Trustees may from time to time specify
additional conditions, not inconsistent with the 1940 Act, regarding the
redemption of Shares in the Trust's then effective registration statement or
prospectus under the ' Securities Act of 1933.
Section 6.2. Price. Shares will be redeemed at their net asset value
determined as set forth in Section 7.1 hereof as of such time as the Trustees
shall have theretofore prescribed by resolution, in the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Section 7.1 hereof after
receipt of such application.
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Section 6.3. Payment. Payment for such Shares shall be made in cash or
in property out of the assets of the relevant series of the Trust to the
Shareholder of record at such time and in the manner, not inconsistent with the
1940 Act or other applicable laws, as may be specified from time to time in the
Trust's then effective registration statement or prospectus under the Securities
Act of 1933, subject to the provisions of Section 6.4 hereof.
Section 6-4. Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of
the determination of net asset value, the rights of Shareholders (including
those who shall have applied for redemption pursuant to Section 6.1 hereof but
who shall not yet have received payment) to have Shares redeemed and paid for by
the Trust shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any certificates on deposit.
The redemption price of Shares for which redemption applications have not been
revoked shall be the net asset value of such Shares next determined as set forth
in Section 7.1 after the termination of such suspension, and payment
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shall be made within seven (7) days after the date upon which the application
was made plus the period after such application during which the determination
of net asset value was suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per Share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
Section 6.6. Redemption of Shareholder's Interest. The Trust shall
have the right at any time without prior notice to the Shareholder to redeem
Shares of any Shareholder for their then current net asset value per Share if at
such time the Shareholder owns Shares having an aggregate net asset value of
less than an amount set from time to time by the Trustees subject to such terms
and conditions as the Trustees may approve, and subject to the Trust's giving
general notice to all Shareholders of its intention to avail itself of such
right, either by publication in the Trust's prospectus, if any, or by such other
means as the Trustees may determine.
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Section 6.7. Reductions in Number of Ovtstandincr Shares Pursuant to
Net Asset value Formula. The Trust may reduce the number of outstanding Shares
pursuant to the provisions of Section 7.3.
Section 6.8. Suspension of Right of Redemption. The Trust may declare
a suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closing, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
(iv) during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the right of
redemption or postponement of the date of payment or redemption; provided that
applicable rules and regulations of the Commission shall govern as to whether
the conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify but not later than the close
of business on the business day next following the declaration of suspension,
and thereafter there shall be no right of redemption or payment on redemption
until the Trust shall declare the suspension at an end, except
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that the suspension shall terminate in any event on the first day on which said
stock exchange shall have reopened or the period specified in (ii) or (iii)
shall have expired (as to which, in the absence of an official ruling by the
Commission, the determination of the Trust shall be conclusive). in the case of
a suspension of the right of redemption, a Shareholder may either withdraw his
request for redemption or receive payment based on the net asset value existing
after the termination of the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The value of the assets of any series of
the Trust shall be determined by appraisal of the securities allocated to such
series, such appraisal to be on the basis of the amortized cost of such
securities in the case of money market securities or market value in the case of
other securities, or, consistent with the rules and regulations of the
Commission, by such other method as shall be deemed to reflect the fair value
thereof, determined in good faith by or under the direction of the Trustees.
From the total value of said assets, there shall be deducted all indebtedness,
interest, taxes, payable or accrued, including estimated taxes on unrealized
book profits, expenses and management charges accrued to the appraisal date, net
income determined and declared as a
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distribution and all other items in the nature of liabilities attributable to
the Trust or such series or class thereof which shall be deemed appropriate. The
net asset value of a Share shall be determined by dividing the net asset value
of the class, or, or if no class has been established, of the series, or, if no
series has been established, of the Trust, by the number of Shares of that
class, or series, or of the Trust, as applicable, outstanding. The net asset
value of the Trust or any class or series of the Trust shall be determined
pursuant to the procedure and methods prescribed or approved by the Trustees in
their discretion and as set forth in the most recent Registration Statement of
the Trust as filed with the Securities and Exchange Commission pursuant to the
requirements of the Securities Act of 1933, as amended, the Investment Company
Act of 1940, as amended, and the Rules thereunder. The net asset value of the
Shares shall be determined at least once on each business day, as of the close
of trading on the New York Stock Exchange or as of 'such other time or times as
the Trustees shall determine. The power and duty to make the daily calculations
may be delegated by the Trustees to the Investment Adviser, the Custodian, the
Transfer Agent or such other Person as the Trustees by resolution may determine.
The Trustees may suspend the daily determination of net asset value to the
extent permitted by the 1940 Act.
Section 7.2. Distributions to Shareholders. The Trustees shall from
time to time distribute ratably among the
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Shareholders of a series such proportion of the net profits, surplus (including
paid-in surplus), capital, or assets of such series held by the Trustees as they
may deem proper. Such distributions may bemade in cash or property (including
without limitation any type of obligations of such series or any assets
thereof), and the Trustees may distribute ratably among the Shareholders
additional Shares of such series issuable hereunder in such manner, at such
times, and on such terms as the Trustees may deem proper. Such distributions may
be among the Shareholders of record at the time of declaring a distribution or
among the Shareholders of record at such other date or time or dates or times as
the Trustees shall determine. The Trustees may in their discretion determine
that, solely for the purposes of such distributions. Outstanding Shares shall
exclude Shares for which orders have been placed subsequent to a specified time
on the date the distribution is declared or on the next preceding day if the
distribution is declared as of a day on which New York banks are not open for
business, all as described in the then effective registration statement or
prospectus under the Securities Act of 1933. Pursuant to a standing resolution,
the Trustees may declare distributions on a daily or other periodic basis. The
Trustees may always retain from the net profits such amount as they may deem
necessary to pay the debts or expenses of the series or to meet obligations of
the series, or as they may deem desirable to use in the conduct of its affairs
or to retain for future requirements or extensions of the business. The
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Trustees may adopt and offer to Shareholders such dividend reinvestment plans,
cash dividend payout plans or related plans as the Trustees shall deem
appropriate.
Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or the series to avoid or reduce liability for taxes.
Section 7.3. Determination of Net Incomer Constant Net Asset Value;
Reduction of Outstanding Shares. Subject to Section 5.11 and Section 5.12
hereof, the net income of any series of the Trust shall be determined in such
manner as the Trustees shall provide by resolution. Expenses of the series,
including the advisory or management fee, shall be accrued each day. Such net
income may be determined by or under the direction of the Trustees as of the
close of trading on the New York Stock Exchange on each day on which such market
is open or as of such other time or times as the Trustees shall determine, and,
except as provided herein, all the net income of the series, so determined, may
be declared as a dividend on the Outstanding Shares of such series. If, for any
reason, the net income of the
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series determined a-t any time is a negative amount, the Trustees shall have
the power (i) to offset each Shareholder's pro rata share of such negative
amount from the accrued dividend account of such Shareholder, or (ii) to reduce
the number of Outstanding Shares of the series by reducing the number of Shares
in the account of such Shareholder by that number of full and factional Shares
which represents the amount of such excess negative net income, or (iii) to
cause to be recorded on the books of the series an asset account in the amount
of such negative income, which account may be reduced by the amount, provided
that the same shall thereupon become the property of the series and shall not
be paid to any Shareholder, of dividends declared thereafter upon the
Outstanding Shares on the day such negative net income is experienced, until
such asset account is reduced to zero,' or (iv) to combine the methods
described in clauses (i), (ii) and (iii) of this sentence, in order to cause
the net asset value per Share of the series to remain at a constant amount per
Outstanding Share immediately after each such determination and declaration.
The Trustees shall also have the power to fail to declare a dividend out of net
income for the purpose of causing the net asset value per Share of the series
to be increased to a constant amount. The Trustees shall not be required to
adopt, but may at any time adopt, discontinue or amend the practice of
maintaining the net asset value per Share of a series at a
constant amount.
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Section 7.4. Allocation Between Principal and Income The Trustees
shall have full discretion to determine whether any cash or property received
shall be treated as income or as principal and whether any item of expense shall
be charged to the income or the principal account, and their determination made
in good faith shall be conclusive upon the Shareholders. In the case of stock
dividends received, the Trustees shall have full discretion to determine, in the
light of the particular circumstances, how much if any of the value thereof
shall be treated as income, the balance, if any, to be treated as principal.
Section 7.5. Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the series' Shares or net income, or the declaration
and payment of dividends and distributions as they may deem necessary or
desirable, without limiting the generality of the foregoing, the Trustees may
establish several series of Shares in accordance with Section 5.11, and declare
dividends thereon in such manner as they shall determine.
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ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust or the series of the Trust shall
continue without limitation of time but subject to the provisions of this
Article VIII.
Section 8.2. Termination of Trust or Series of thg Trust, (a) The
Trust or any series of the Trust may be terminated by the affirmative vote of
the holders of not less than two-thirds of the Shares outstanding and entitled
to vote, at any meeting of the Shareholders or by an instrument in writing,
without a meeting, signed by a majority of the Trustees and consented to by the
holders of not less than two-thirds of such Shares, or by such other vote as may
be established by the Trustees with respect to any series of Shares. Upon the
termination of the Trust or any series of the Trust,
(i) The Trust or the series of the Trust shall
carry on no business except for the purpose of winding up its
affairs.
(ii) The Trustees shall proceed to wind up the
affairs of the Trust or the series of the Trust and all of
the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust or the
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series of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust or
the series of the Trust, collect its assets, sell, convey,
assign, exchange, transfer or otherwise dispose of all or
any part of the remaining Trust Property or property of the
series of the Trust to one or more persons at public or
private sale for consideration which may consist in whole or
in part of cash, securities or other property of any kind,
discharge or pay its liabilities, and do all other acts
appropriate to liquidate its business; provided that any
sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all the Trust Property
or property of the series of the Trust shall require
Shareholder approval in accordance with Section 8.4 hereof.
(iii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such
releases, indemnities and refunding agreements as they deem
necessary for their protection, the Trustees may distribute
the remaining Trust Property or property of the series of
the Trust, in cash or in kind or partly each, among the
Shareholders according to their respective rights.
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(b) After termination of the Trust or any series of the Trust and
distribution to the Shareholders as herein provided, a majority of the Trustees
shall execute and lodge among the records of the Trust or the series of the
Trust an instrument in writing setting forth the fact of such termination, and
the Trustees shall thereupon be discharged from ail further liabilities and
duties hereunder, and the rights and interests of all Shareholders shall
thereupon cease.
Section 8.3. Amendment Procedure, (a) This Declaration may be amended
by a vote of the holders of a majority of the Shares outstanding and entitled to
vote or by any instrument in writing, without a meeting, signed by a majority of
the Trustees and consented to by the holders of a majority of the Shares
outstanding and entitled to vote. The Trustees may also amend this Declaration
without the vote or consent of Shareholders to change the name of the Trust, to
supply any omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, to make any other changes in the Declaration
which do not materially adversely affect the rights of Shareholders hereunder,
or if they deem it necessary to conform this Declaration to the requirements of
applicable federal laws or regulations or the requirements of the regulated
investment company provisions of the Internal Revenue Code (including those
provisions of such Code relating to the retention of the exemption from federal
income tax with respect
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to dividends paid by the Trust out of interest income received on Municipal
Bonds), but the Trustees shall not be liable for failing to do so.
(b) No amendment may be made under this Section 8.3 which would change
any rights with respect to any Shares of the Trust by reducing the amount
payable thereon upon liquidation of the Trust or by diminishing or eliminating
any voting rights pertaining thereto, except with the vote or consent of the
holders of two-thirds of the Shares outstanding and entitled to vote, or by such
other vote as may be established by the Trustees with respect to any series of
Shares. Nothing contained in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Trust or to permit assessments
upon Shareholders.
(c) A certificate signed by a majority of the Trustees setting forth
an amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of
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1933, as amended, covering the first public offering of securities of the Trust
shall become effective, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
Section 8.4. Merger. Consolidation and Sale of Assets. The Trust may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for the purpose by the affirmative vote of the holders of two-thirds of the
Shares outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting, consented to by the holders of two-thirds of the
Shares or by such other vote as may be established by the Trustees with respect
to any series of Shares; provided, however, that if such merger, consolidation,
sale, lease or exchange is recommended by the Trustees, the vote or written
consent of the holders of a majority of the Shares outstanding and entitled to
vote, or such other vote or written consent as may be established by the
Trustees with respect to any series of Shares, shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have
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been accomplished under and pursuant to the statutes of the Commonwealth of
Massachusetts.
Section 8.5. Incorporation. With the approval of the holders of a
majority of the Shares outstanding and entitled to vote, or by such other vote
as may be established by the Trustees with respect to any series of Shares, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction or any other trust, partnership,
association or other organization to take over all of the Trust Property or to
carry on any business in which the Trust shall directly or indirectly have any
interest, and to sell, convey and transfer the Trust Property to any such
corporation, trust, association or organization in exchange for the Shares or
securities thereof or otherwise, and to lend money to, subscribe for the Shares
or securities of, and enter into any contracts with any such corporation, trust,
partnership, ' association or organization, or any corporation, partnership,
trust, association or organization in which the Trust holds or is about to
acquire shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of shareholders for
the Trustees to organize or assist in organizing
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one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to such organizations or entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semiannually submit to the Shareholders a
written financial report, which may be included in the Trust's prospectus, of
the transactions of the Trust, including financial statements which shall at
least annually be certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
Section 10.1. Filing. This Declaration and any amendment hereto shall
be filed in the office of the Secretary of the Commonwealth of Massachusetts and
in such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Each amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee slating that such action was duly taken in a manner
provided herein, and unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment
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shall be effec-tive upon its filing. A restated Declaration, integrating into a
single instrument all of the provisions of the Declaration which are then in
effect and operative, may be executed from time to time by a majority of the
Trustees and shall, upon filing with the Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may hereafter be referred to in lieu of the original Declaration and the various
amendments thereto.
Section 10.2. Governing Law. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said State.
Section 10.3. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 10.4. Reliance bv Third Parties. Any certificate executed by
an individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
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Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (e) the form of any By-laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.
Section 10.5. Provisions in Conflict with Law or Regulations, (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such
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invalidity or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provisions in any other
jurisdiction or any other provision of this Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
30th day of July, 1992.
s\s Nancy J. Cox
-------------------
Nancy J. Cox, as Trustee
and not individually
Residence:
45 Garden Street
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THE COMMONWEALTH OF MASSACHUSETTS
County of Suffolk , 1992
Then personally appeared the above-named Nancy J. Cox who
acknowledged the foregoing instrument to be her free act and
deed, before me
s\s Particia M. Luke
Notary Public
My commission expires:
PATRICIA M. LUKE. Notary Public
My commission expires July 9, 1993
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BY-LAWS
OF
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
July 30, 1992
<PAGE>
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS 1
ARTICLE II - OFFICES 1
Section 1. Resident Agent 1
Section 2. Offices 1
ARTICLE III - SHAREHOLDERS 2
Section 1. Meetings 2
Section 2. Notice of Meetings 2
Section 3. Record Date for Meetings
and Other Purposes 2
Section 4. Proxies 3
Section 5. Action without Meeting 4
ARTICLE IV - TRUSTEES 4
Section 1. Meetings of the Trustees 4
Section 2. Quorum and Manner of Acting 6
ARTICLE V - COMMITTEES 6
Section 1. Executive and Other Committees 6
Section 2. Meetings, Quorum and Manner of Acting 7
ARTICLE VI - OFFICERS 8
Section 1. General Provisions 8
Section 2. Term of Office and Qualifications 8
Section 3. Removal 9
Section 4. Powers and Duties of the President 9
Section 5. Powers and Duties of Vice Presidents 9
Section 6. Powers and Duties of the Treasurer 10
Section 7. Powers and Duties of the Secretary 10
Section 8. Powers and Duties of Assistant
Treasurers 11
Section 9. Powers and Duties of Assistant
Secretaries 11
Section 10. Compensation of Officers and Trustees
and Members of the Advisory Board 11
ARTICLE VII - FISCAL YEAR 12
ARTICLE VIII - SEAL 12
ARTICLE IX - WAIVERS OF NOTICE 12
<PAGE>
TABLE OF CONTENTS (continued)
ARTICLE X - CUSTODY OF SECURITIES 13
Section 1. Employment of a Custodian 13
Section 2. Action Upon Termination of
Custodian Agreement 13
Section 3. Provisions of Custodian Agreement 14
Section 4. Central Certificate System 15
Section 5. Acceptance of Receipts in Lieu of
Certificates 15
ARTICLE XI - AMENDMENTS 16
ARTICLE XII - INSPECTION OF BOOKS 16
ARTICLE XIII - MISCELLANEOUS 16
<PAGE>
BY-LAWS
OF
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
ARTICLE I
DEFINITIONS
Any terms defined in the Declaration of Trust of Pennsylvania
Daily Municipal Income Fund dated July 30, 1992, as amended from time to time,
shall have the same meaning when used
herein.
ARTICLE II
OFFICES
Section 1. Resident Agent. The Trust shall maintain a
resident agent in the Commonwealth of Massachusetts, which agent shall initially
be CT Corporation System, 2 Oliver Street, Boston, Massachusetts 02109. The
Trustees may designate a successor resident agent, provided, however, that such
appointment shall not become effective until written notice thereof is delivered
to the office of the Secretary of the Commonwealth
Section 2. Offices. The Trust may have its principal
office and other offices in such places within as well as without the
Commonwealth as the Trustees may from time to time determine.
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ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders shall be
held as provided in the Declaration of Trust at such place within or without the
Commonwealth of Massachusetts as the Trustees shall designate. The holders of a
majority of outstanding Shares present in person or by proxy shall constitute a
quorum at any meeting of the Shareholders.
Section 2. Notice of Meetings. Notice of all meetings
of the Shareholders, stating the time, place and purposes of the meeting, shall
be given by the Trustees by mail to each Shareholder at his address as recorded
on the register of the Trust mailed at least ten (10) days and not more than
sixty (60) days before the meeting. Only the business stated in the notice of
the meeting shall be considered at such meeting. Any adjourned meeting may be
held as adjourned without further notice. No notice need be given to any
Shareholder who shall have failed to inform the Trust of his current address or
if a written waiver of notice, executed before or after the meeting by the
Shareholder or his attorney thereunto authorized, is filed with the records of
the meeting.
Section 3. Record Date for Meetings and Other
Purposes. For the purpose of determining the Shareholders who are entitled to
notice of and to vote at any meeting, or to participate in any distribution, or
for the purpose of any other
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action, the Trustees may from time to time close the transfer books for such
period, not exceeding thirty (30) days, as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date not more than
sixty (60) days prior to the date of any meeting of Shareholders or distribution
or other action as a record date for the determinations of the persons to be
treated as Shareholders of record for such purposes, except for dividend
payments which shall be governed by the Declaration.
Section 4. Proxies. At any meeting of Shareholders,
any holder of Shares entitled to vote thereat may vote by proxy, provided that
no proxy shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote
shall be taken. Proxies may be solicited in the name of one or more Trustees or
one or more of the officers of the Trust. Only Shareholders of record shall be
entitled to vote. Each whole share shall be entitled to one vote as to any
matter on which it is entitled by the Declaration to vote, and each fractional
Share shall be entitled to a proportionate fractional vote. When any Share is
held jointly by several persons, any one of them may vote at any meeting in
person or by proxy in respect of such Share, but if more than one of them shall
be present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote
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shall not be received in respect of such Share. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. If the holder of any such Share is a minor or
legally incompetent, and subject to guardianship or the legal control of any
other person as regards the charge or management of such Share, he may vote by
his guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy.
Section 5. Action Without Meeting. Any action which
may be taken by Shareholders may be taken without a meeting if a majority of
Shareholders entitled to vote on the matter (or such larger proportion thereof
as shall be reguired by law, the Declaration or these By-Laws for approval of
such matter) consent to the action in writing and the written consents are filed
with the records of the meetings of Shareholders. Such consents shall be treated
for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may
in their discretion provide for regular or stated meetings of the Trustees.
Notice of regular or stated meetings need not be
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given. Meetings of the Trustees other than regular or stated meetings shall be
held whenever called by the President, or by any one of the Trustees, at the
time being in office. Notice of the time and place of each meeting other than
regular or stated meetings shall be given by the Secretary or an Assistant
Secretary or by the officer or Trustee calling the meeting and shall be mailed
to each Trustee at least two days before the meeting, or shall be faxed,
telegraphed, cabled, or wirelessed to each Trustee at his business address, or
personally delivered to him at least one day before the meeting. Such notice
may, however, be waived by any Trustee. Notice of a meeting need not be given to
any Trustee if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting, or to any Trustee who attends
the meeting without protesting prior thereto or at its commencement the lack of
notice to him. A notice or waiver of notice need not specify the purpose of any
meeting. The Trustees may meet by means of a telephone conference circuit or
similar communications equipment by means of which all persons participating in
the meeting shall be deemed to have been held at a place designated by the
Trustees at the meeting. Participation in a telephone conference meeting shall
constitute presence in person at such meeting. Any action required or permitted
to be taken at any meeting of the Trustees may be taken by the Trustees without
a meeting if all the Trustees consent to the action in writing and the written
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consents are filed with the records of the Trustees' meetings. Such consents
shall be treated as a vote for all purposes.
Section 2. Quorum and Manner of Acting. A majority of
the Trustees shall be present in person at any regular or special meeting of the
Trustees in order to constitute a quorum for the transaction of business at such
meeting and (except as otherwise required by law, the Declaration or these
By-Laws) the act of a majority of the Trustees present at any such meeting, at
which a quorum is present, shall be the act of the Trustees. In the absence of a
quorum, a majority of the Trustees present may adjourn the meeting from time to
time until a quorum shall be present. Notice of an adjourned meeting need not be
given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The
Trustees by vote of a majority of all the Trustees may elect from their own
number an Executive Committee to consist of not less than three (3) to hold
office at the pleasure of the Trustees, which shall have the power to conduct
the current and ordinary business of the Trust while the Trustees are not in
session, including the purchase and sale of securities and the designation of
securities to be delivered upon redemption of Shares of the Trust, and such
other powers of the Trustees as the Trustees may, from time to time, delegate to
them except those powers which by
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law, -the Declaration or -these By-Laws they are prohibited from delegating. The
Trustees may also elect from their own number other Committees from time to
time, the number composing such Committees, the powers conferred upon the same
(subject to the same limitations as with respect to the Executive Committee) and
the term of membership on such Committees to be determined by the Trustees. The
Trustees may designate a chairman of any such Committee. In the absence of such
designation, the Committee may elect its own Chairman.
Section 2. Meetings. Quorum and Manner of Acting. The
Trustees may (1) provide for stated meetings of any Committee, (2) specify the
manner of calling and notice required for special meetings of any Committee, (3)
specify the number of members of a Committee required to constitute a quorum and
the number of members of a Committee required to exercise specified powers
delegated to such Committee, (4) authorize the making of decisions to exercise
specified powers by written assent of the requisite number of members of a
Committee without a meeting, and (5) authorize the members of a Committee to
meet by means of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its
meetings and records of decisions taken without a meeting and cause them to be
recorded in a book designated for that purpose and kept in the Office of the
Trust.
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ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the
Trust shall be a President, a Treasurer and a Secretary, who shall be elected by
the Trustees. The Trustees may elect or appoint such other officers or agents as
the business of the Trust may require, including one or more Executive Vice
Presidents, one or more Vice Presidents, one or more Assistant Secretaries, and
one or more Assistant Treasurers. The Trustees may delegate to any officer or
Committee the power to appoint any subordinate officers or agents.
Section 2. Term of Office and Qualifications. Except as
otherwise provided by law, the Declaration or these By-Laws, the President, the
Treasurer and the Secretary shall each hold office until his successor shall
have been duly elected and qualified, and all other officers shall hold office
at the pleasure of the Trustees. The Secretary and Treasurer may be the same
person. A Vice President and the Treasurer or Assistant Treasurer or a Vice
President and the Secretary or Assistant Secretary may be the same person, but
the offices of Vice President and Secretary and Treasurer shall not be held by
the same person. The President shall hold no other office. Except as above
provided, any two offices may be held by the same person. Any officer may be,
but none need be, a Trustee or Shareholder.
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<PAGE>
Section 3. Removal. The Trustees, at any regular or special
meeting of the Trustees, may remove any officer without cause, by a vote of a
majority of the Trustees then in office. Any officer or agent appointed by an
officer or Committee may be removed with or without cause by such appointing
officer or Committee.
Section 4. Powers and Duties of the President. The President
may call meetings of the Trustees and of any Committee thereof when he deems it
necessary and shall preside at all meetings of the Shareholders. Subject to the
control of the Trustees and to the control of any Committees of the Trustees,
within their respective spheres, as provided by the Trustees, he shall at all
times exercise a general supervision and direction over the affairs of the
Trust. He shall have the power to employ attorneys and counsel for the Trust and
to employ such subordinate officers, agents, clerks and employees as he may find
necessary to transact the business of the Trust. He shall also have the power to
grant, issue, execute or sign such powers of attorney, proxies or other
documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust. The President shall have such other powers and duties as
from time to time may be conferred upon or assigned to him by the Trustees.
Section 5. Powers and Duties of Vice Presidents. In
the absence or disability of the President, any Vice President designated by the
Trustees shall perform all the duties and may
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exercise any of the powers of the President, subject to the control of the
Trustees. Each Vice President shall perform such other duties as may be assigned
to him from time to time by the Trustees and the President.
Section 6. Powers and Duties of the Treasurer. The Treasurer
shall be the principal financial and accounting officer of the Trust. He shall
deliver all funds of the Trust which may come into his hands to such Custodian
as the Trustees may employ pursuant to Article X of these By-Laws. He shall in
general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Trustees.
Section 7. Powers and Duties of the Secretary. The
Secretary shall keep the minutes of all meetings of the Trustees and of the
Shareholders in proper books provided for that purpose; he shall have custody of
the seal of the Trust; he shall have charge of the Share transfer books, lists
and records unless the same are in the charge of the Transfer Agent. He shall
attend to the giving and serving of all notices by the Trust in accordance with
the provisions of these By-Laws and as required by law; and subject to these
By-Laws, he shall in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Trustees.
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Section 8. Powers and Duties of Assistant Treasurers.
in the absence or disability of the Treasurer, any Assistant Treasurer
designated by the Trustees shall perform all the duties, and may exercise any of
the powers, of the Treasurer. Each Assistant Treasurer shall perform such other
duties as from time to time may be assigned to him by the Trustees.
Section 9. Powers and Duties of Assistant Secretaries. In the
absence or disability of the Secretary, any Assistant Secretary designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Secretary. Each Assistant Secretary shall perform such other duties as
from time to time may be assigned to him by the Trustees.
Section 10. Compensation of Officers and Trustees and Members
of the Advisory Board. Subject to any applicable provisions of the Declaration,
the compensation of the officers and Trustees and members of any Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.
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<PAGE>
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of
January in each year and shall end on the 31st day of December in each year,
provided, however, that the Trustees may from time to time change the fiscal
year.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and
shall have such inscription thereon as the Trustees may from time to time
prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the
Declaration or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been faxed for the purposes of these By-Laws upon confirmation of facsimile
transmission to a number designated for that purpose by the intended recipient.
A notice shall be deemed to have been telegraphed, cabled or wirelessed for the
purposes of these By- Laws when it has been delivered to a representative of any
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telegraph, cable or wireless company with instructions that it be telegraphed,
cabled or wirelessed.
ARTICLE X
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall place
and at all times maintain in the custody of a Custodian (including any
sub-custodian for the Custodian, which may be a foreign bank which meets
applicable requirements of law) all trusts, securities and similar investments
included in the Trust Property. The Custodian (and any sub-custodian) shall be a
bank having not less than $2,000,000 aggregate capital, surplus and undivided
profits and shall be appointed from time to time by the Trustees, who shall fix
its remuneration.
Section 2. Action Upon Termination of Custodian Agreement.
Upon termination of a Custodian Agreement or inability of the Custodian to
continue to serve, the Trustees shall promptly appoint a successor custodian,
but in the event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Trustees shall call as promptly as
possible a special meeting of the Shareholders to determine whether the Trust
shall function without a custodian or shall be liquidated. If so directed by
vote of the holders of a majority of the outstanding voting securities, the
Custodian
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shall deliver and pay over all Trust property held by it as specified in such
vote.
Section 3. Provisions of Custodian Agreement. The
following provisions shall apply to the employment of a Custodian and to any
contract entered into with the Custodian so employed:
The Trustees shall cause to be delivered to the Custodian all
securities included in the Trust Property or to which the
Trust may become entitled, and shall order the same to be
delivered by the Custodian only in completion of a sale,
exchange, transfer, pledge, loan of portfolio securities to
another person, or other disposition thereof, all as the
Trustees may generally or from time to time require or
approve or to a successor Custodian; and the Trustees shall
cause all trusts included in the Trust Property or to which
it may become entitled to be paid to the Custodian, and shall
order the same disbursed only for investment against delivery
of the securities acquired, or the return of cash held as
collateral for loans of portfolio securities, or in payment
of expenses, including management compensation, and
liabilities of the Trust, including distributions to
shareholders, or to a successor Custodian.
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Section 4. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
Custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged' by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
Section 5. Acceptance of Receipts in Lieu of
Certificates. Subject to such rules, regulations and orders as the Commission
may adopt, the Trustees may direct the Custodian to accept written receipts or
other written evidences indicating purchases of securities held in book-entry
form in the Federal Reserve System in accordance with regulations promulgated by
the Board of Governors of the Federal Reserve System and the local Federal
Reserve Banks in lieu of receipt of certificates representing such securities.
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ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended
or repealed, or new By-Laws may be adopted by (a) vote of a majority of the
Shares outstanding and entitled to vote or (b) the Trustees, provided, however,
that no By-Law may be amended, adopted or repealed by the Trustees if such
amendment, adoption or repeal requires, pursuant to law, the Declaration or
these By- Laws, a vote of the Shareholders.
ARTICLE XII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to
what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be open to
the inspection of the shareholders; and no shareholder shall have any right of
inspecting any account or book or document of the Trust except as conferred by
laws or authorized by the Trustees or by resolution of the shareholders.
ARTICLE XIII
MISCELLANEOUS
(A) Except as hereinafter provided, no officer or
Trustee of the Trust and no partner, officer, director or
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shareholder of the investment Adviser of the Trust or of the Distributor of the
Trust, and no Investment Adviser or Distributor of the Trust, shall take long or
short positions in the securities issued by the Trust.
(1) The foregoing provisions shall not prevent the
Distributor from purchasing Shares from the Trust if such
purchases are limited (except for reasonable allowances for
clerical errors, delays and errors of transmission and
cancellation of orders) to purchases for the purpose of
filling orders for such Shares received by the Distributor,
and provided that orders to purchase from the Trust are
entered with the Trust or the Custodian promptly upon receipt
by the Distributor of purchase orders for such Shares, unless
the Distributor is otherwise instructed by its customer.
(2) The foregoing provision shall not prevent the
Distributor from purchasing Shares of the Trust as agent for the
account of the Trust.
(3) The foregoing provision shall not prevent the
purchase from the Trust or from the Distributor of Shares issued
by the Trust, by any officer, or Trustee of the Trust or by any
partner, officer, director or shareholder of the Investment
Adviser of the Trust or of the Distributor of the Trust at the
price available to the
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<PAGE>
public generally at the moment of such purchase, or as described
in the then currently effective Prospectus of the Trust.
(4) The foregoing shall not prevent the Distributor, or
any affiliate thereof, of the Trust from purchasing Shares prior
to the effectiveness of the first registration statement relating
to the Shares under the Securities Act of 1933.
(B) The Trust shall not lend assets of the Trust to any officer or
Trustee of the Trust, or to any partner, officer, director or shareholder of, or
person financially interested in, the investment Adviser of the Trust, or the
Distributor of the Trust, or to the Investment Adviser of the Trust or to the
Distributor of the Trust.
(C) The Trust shall not impose any restrictions upon the transfer
of the Shares of the Trust except as provided in the Declaration, but this
requirement shall not prevent the charging of customary transfer agent fees.
(D) The Trust shall not permit any officer or Trustee of the
Trust, or any partner, officer or director of the Investment Adviser or
Distributor of the Trust to deal for or on behalf of the Trust with himself as
principal or agent, or with any partnership, association or corporation in
which he has a financial interest; provided that the foregoing provisions shall
not prevent (a) officers and Trustees of the Trust or partners,
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officers or directors of the Investment Adviser or Distributor of the Trust from
buying, holding or selling shares in the Trust, or from being partners, officers
or directors or otherwise financially interested in the Investment Adviser or
Distributor of the Trust; (b) purchases or sales of securities or other property
by the Trust from or to an affiliated person or to the Investment Adviser or
Distributor of the Trust if such transaction is exempt from the applicable
provisions of the 1940 Act,' (c) purchases of investments for the portfolio of
the Trust or sales of investments owned by the Trust through a security dealer
who is, or one or more of whose partners, shareholders, officers or directors
is, an officer or Trustee of the Trust, or a partner, officer or director of the
Investment Adviser or Distributor of the Trust, if such transactions are handled
in the capacity of broker only and commissions charged do not exceed customary
brokerage charges for such services; (d) employment of legal counsel, registrar.
Transfer Agent, dividend disbursing agent or Custodian who is, or has a partner,
shareholder, officer, or director who is, an officer or Trustee of the Trust, or
a partner, officer or director of the Investment Adviser or Distributor of the
Trust, if only customary fees are charged for services to the Trust; (e) sharing
statistical research, legal and management expenses and office hire and expenses
with any other investment company in which an officer or Trustee of the
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Trust, or a partner, officer or director of the Investment Adviser or
Distributor of the Trust, is an officer or director or otherwise financially
interested.
END OF BY-LAWS
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CUSTODY AGREEMENT
THIS AGREEMENT made the 1st day of April , 1994, by and between INVESTORS
FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of the state
of Missouri, having its trust office located at 127 West 10th Street, Kansas
City, Missouri 64105 ("Custodian"), and [The Funds listed in Exhibit A] , a
_______________ corporation, having its principal office and place of business
at 600 Fifth Avenue; New York, New York 10020 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of Fund's investment portfolio; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian as
custodian of the securities and monies at any time owned by the Fund.
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to Custodian:
1. That it is a corporation or trust (as specified above) duly
organized and existing and in good standing under the laws of its
state of organization, and that it is registered under the
Investment Company Act of 1940 (the "1940 Act"); and
2. That it has the requisite power and authority under applicable
law, its articles of incorporation and its bylaws to enter into
this Agreement; that it has taken all requisite action necessary
to appoint Custodian as custodian for the Fund; that this
Agreement has been duly executed and delivered by Fund; and that
this Agreement constitutes a legal, valid and binding obligation
of Fund, enforceable in accordance with its terms.
<PAGE>
B. Custodian hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and in
good standing under the laws of the State of Missouri; and
2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; that this Agreement has been duly executed and
delivered by Custodian; and that this Agreement constitutes a
legal, valid and binding obligation of Custodian, enforceable in
accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Except as permitted by the 1940 Act, Fund will deliver or cause to be
delivered to Custodian on the effective date of this Agreement, or as
soon thereafter as practicable, and from time to time thereafter, all
portfolio securities acquired by it and monies then owned by it or
from time to time coming into its possession during the time this
Agreement shall continue in effect. Custodian shall have no
responsibility or liability whatsoever for or on account of securities
or monies not so delivered.
B. Delivery of Accounts and Records
Fund shall turn over or cause to be turned over to Custodian all of
the Fund's relevant accounts and records previously maintained.
Custodian shall be entitled to rely conclusively on the completeness
and correctness of the accounts and records turned over to it, and
Fund shall indemnify and hold Custodian harmless of and from any and
all expenses, damages and losses whatsoever arising out of or in
connection with any error, omission, inaccuracy or other deficiency of
such accounts and records or in the failure of Fund to provide, or to
provide in a timely manner, any accounts, records or information
needed by the Custodian to perform its functions hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets of Fund
delivered to it from time to time segregated in a separate account,
and if Fund
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<PAGE>
is comprised of more than one portfolio of investment securities (each
a "Portfolio") Custodian shall keep the assets of each Portfolio
segregated in a separate account. Custodian will not deliver, assign,
pledge or hypothecate any such assets to any person except as
permitted by the provisions of this Agreement or any agreement
executed by it according to the terms of Section 3.S. of this
Agreement. Upon delivery of any such assets to a subcustodian pursuant
to Section 3.S. of this Agreement, Custo-dian will create and maintain
records identifying those assets which have been delivered to the
subcustodian as belonging to the Fund, by Portfolio if applicable. The
Custodian is responsible for the safekeeping of the securities and
monies of Fund only until they have been transmitted to and received
by other persons as permitted under the terms of this Agreement,
except for securities and monies transmitted to subcustodians
appointed under Section 3.S. of this Agreement, for which Custodian
remains responsible to the extent provided in Section 3.S. hereof.
Custodian may participate directly or indirectly through a
subcustodian in the Depository Trust Company (DTC), Treasury/Federal
Reserve Book Entry System (Fed System), Participant Trust Company
(PTC) or other depository approved by the Fund (as such entities are
defined at 17 CFR Section 270.17f-4(b)) (each a "Depository" and
collectively, the "Depositories").
D. Registration of Securities
The Custodian shall at all times hold registered securities of the
Fund in the name of the Custodian, the Fund, or a nominee of either of
them, unless specifically directed by instructions to hold such
registered securities in so-called "street name," provided that, in
any event, all such securities and other assets shall be held in an
account of the Custodian containing only assets of the Fund, or only
assets held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the Custodian at
all time shall indicate the Fund or other customer for which such
securities and other assets are held in such account and the
respective interests therein. If,
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<PAGE>
however, the Fund directs the
Custodian to maintain securities in "street name", notwithstanding
anything contained herein to the contrary, the Custodian shall be
obligated only to utilize its best efforts to timely collect income
due the Fund on such securities and to notify the Fund of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers. All securities, and the
ownership thereof by Fund, which are held by Custodian hereunder,
however, shall at all times be identifiable on the records of the
Custodian. The Fund agrees to hold Custodian and its nominee harmless
for any liability as a shareholder of record of securities held in
custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other securities or
cash issued or paid in connection with any reorganization,
recapitalization, merger, consolidation, split-up of shares, change of
par value, conversion or otherwise, and will deposit any such
securities in accordance with the terms of any reorganization or
protective plan. Without instructions, Custodian is authorized to
exchange securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par value of
the stock is changed, and, upon receiving payment therefor, to
surrender bonds or other securities held by it at maturity or when
advised of earlier call for redemption, except that Custodian shall
receive instructions prior to surrendering any convertible security.
F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of securities
shall be made by it, deliver to Custodian instructions which shall
specify with respect to each such purchase:
1. If applicable, the name of the Portfolio making such purchase;
2. The name of the issuer and description of the security;
4
<PAGE>
3. The number of shares and the principal amount purchased, and accrued
interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes and
other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase; and
8. The name of the person from whom or the broker or dealer through whom
the purchase was made.
9. Whether the security is to be received in certificated form or via a
specified Depository.
In accordance with such instructions, Custodian will pay for out of
monies held for the account of Fund, but only insofar as such monies
are available for such purpose, and receive the portfolio securities
so purchased by or for the account of Fund, except that Custodian may
in its sole discretion advance funds to the Fund which may result in
an overdraft because the monies held by the Custodian on behalf of the
Fund are insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, such payment shall
be made by the Custodian only upon receipt of securities: (a) by the
Custodian; (b) by a clearing corporation of a national exchange of
which the Custodian is a member; or (c) by a Depository.
Notwithstanding the foregoing, (i) in the case of a repurchase
agreement, the Custodian may release funds to a Depository prior to
the receipt of advice from the Depository that the securities
underlying such repurchase agreement have been transferred by
book-entry into the account maintained with such Depository by the
Custodian, on behalf of its customers, provided that the Custodian's
instructions to the Depository require that the Depository make
payment of such funds only upon transfer by book-entry of the
securities underlying the repurchase agreement in such account; (ii)
in the case of time deposits, call account deposits, currency deposits
and other deposits, foreign
5
<PAGE>
exchange transactions, futures contracts or options, the Custodian may
make payment therefor before receipt of an advice or confirmation
evidencing said deposit or entry into such transaction; and (iii) in
the case of the purchase of securities, the settlement of which occurs
outside of the United States of America, the Custodian may make, or
cause a subcustodian appointed pursuant to Section 3.S.2. of this
Agreement to make, payment therefor in accordance with generally
accepted local custom and market practice.
G. Sales and Deliveries of Investments of the Fund - Other than Options
and Futures
Fund will, on each business day on which a sale of investment
securities (other than options and futures) of Fund has been made,
deliver to Custodian instructions specifying with respect to each such
sale:
1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the securities;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by Fund upon such sale; and
9. The name and address of the broker or dealer through whom or person
to whom the sale was made. 1.
In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of Fund to the broker or other person specified in the instructions
relating to such sale. Except as otherwise instructed by Fund, such
delivery shall be made upon receipt of payment therefor: (a) in such
form as is satisfactory to the
6
<PAGE>
Custodian; (b) credit to the account of the Custodian with a clearing
corporation of a national securities exchange of which the Custodian
is a member; or (c) credit to the account of the Custodian, on behalf
of its customers, with a Depository. Notwithstanding the foregoing:
(i) in the case of securities held in physical form, such securities
shall be delivered in accordance with "street delivery custom" to a
broker or its clearing agent; or (ii) in the case of the sale of
securities, the settlement of which occurs outside of the United
States of America, the Custodian may make, or cause a subcustodian
appointed pursuant to Section 3.S.2. of this Agreement to make,
payment therefor in accordance with generally accepted local custom
and market practice.
H. Purchases or Sales of Options and Futures
Fund will, on each business day on which a purchase or sale of the
following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:
1. If applicable, the name of the Portfolio making such purchase or
sale;
2. Security Options
A. The underlying security;
B. The price at which purchased or sold;
C. The expiration date;
D. The number of contracts;
E. The exercise price;
F. Whether the transaction is an opening, exercising, expiring
or closing transaction;
G. Whether the transaction involves a put or call;
H. Whether the option is written or purchased;
I. Market on which option traded; and
J. Name and address of the broker or dealer through whom the
sale or purchase was made.
7
<PAGE>
3. Options on Indices
A. The index;
B. The price at which purchased or sold;
C. The exercise price;
D. The premium;
E. The multiple;
F. The expiration date;
G. Whether the transaction is an opening, exercising, expiring
or closing transaction;
H. Whether the transaction involves a put or call;
I. Whether the option is written or purchased; and
J. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions.
4. Security Index Futures Contracts
A. The last trading date specified in the contract and, when
available, the closing level, thereof;
B. The index level on the date the contract is entered into;
C. The multiple;
D. Any margin requirements;
E. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of
Custodian, Fund shall deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement which shall be incorporated by reference into this
Custody Agreement); and
F. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions. 1.
8
<PAGE>
5. Options on Index Future Contracts
A. The underlying index future contract;
B. The premium;
C. The expiration date;
D. The number of options;
E. The exercise price;
F. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
G. Whether the transaction involves a put or call;
H. Whether the option is written or purchased; and
I. The market on which the option is traded.
I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of Fund, and subject to
such additional terms and conditions as Custodian may require:
1. Upon receipt of instructions, Custodian will release or cause to
be released securities held in custody to the pledgee designated
in such instructions by way of pledge or hypothecation to secure
any loan incurred by Fund; provided, however, that the securities
shall be released only upon payment to Custodian of the monies
borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, further securities
may be released or caused to be released for that purpose upon
receipt of instructions. Upon receipt of instructions, Custodian
will pay, but only from funds available for such purpose, any
such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing such loan.
2. Upon receipt of instructions, Custodian will release securities
held in custody to the borrower designated in such instructions;
provided, however, that the securities will be released only upon
deposit with Custodian of full cash collateral as specified in
such instructions, and
9
<PAGE>
that Fund will retain the right to any dividends, interest or
distribution on such loaned securities. Upon receipt of
instructions and the loaned securities, Custodian will release
the cash collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with securities or other property of Fund
except as may be otherwise provided in this Agreement or directed from
time to time by the Fund in writing.
K. Deposit Accounts
Custodian will open and maintain one or more special purpose deposit
accounts in the name of Custodian ("Accounts"), subject only to draft
or order by Custodian upon receipt of instructions. All monies
received by Custodian from or for the account of Fund shall be
deposited in said Accounts. Barring events not in the control of the
Custodian such as strikes, lockouts or labor disputes, riots, war or
equipment or transmission failure or damage, fire, flood, earthquake
or other natural disaster, action or inaction of governmental
authority or other causes beyond its control, at 9:00 a.m., Kansas
City time, on the second business day after deposit of any check into
an Account, Custodian agrees to make Fed Funds available to the Fund
in the amount of the check. Deposits made by Federal Reserve wire will
be available to the Fund immediately and ACH wires will be available
to the Fund on the next business day. Income earned on the portfolio
securities will be credited to the Fund based on the schedule attached
as Exhibit A. The Custodian will be entitled to reverse any credited
amounts where credits have been made and monies are not finally
collected. If monies are collected after such reversal, the Custodian
will credit the Fund in that amount. Custodian may open and maintain
Accounts in its own banking department, or in such other banks or
trust companies as may be designated by it or by Fund in writing, all
such Accounts, however, to be in the name of Custodian and subject
only to its
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<PAGE>
draft or order. Funds received and held for the account of different
Portfolios shall be maintained in separate Accounts established for
each Portfolio.
L. Income and other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the account of Fund
all income and other payments which become due and payable on or
after the effective date of this Agreement with respect to the
securities deposited under this Agreement, and credit the account
of Fund in accordance with the schedule attached hereto as
Exhibit A. If, for any reason, the Fund is credited with income
that is not subsequently collected, Custodian may reverse that
credited amount.
2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
a. the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for
payment of:
1. all coupons and other income items requiring
presentation; and
2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the Custodian has actual knowledge, or
should reasonably be expected to have knowledge; and
b. the endorsement for collection, in the name of Fund, of all
checks, drafts or other negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfaction against
the costs and expenses
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<PAGE>
of such suit or other actions. Custodian will receive, claim and
collect all stock dividends, rights and other similar items and will
deal with the same pursuant to instructions. Unless prior instructions
have been received to the contrary, Custodian will, without further
instructions, sell any rights held for the account of Fund on the last
trade date prior to the date of expiration of such rights.
M. Payment of Dividends and other Distributions
On the declaration of any dividend or other distribution on the shares
of capital stock of Fund ("Fund Shares") by the Board of Directors of
Fund, Fund shall deliver to Custodian instructions with respect
thereto. On the date specified in such instructions for the payment of
such dividend or other distribution, Custodian will pay out of the
monies held for the account of Fund, insofar as the same shall be
available for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be necessary to pay the
amount per share payable in cash on Fund Shares issued and outstanding
on the record date established by such resolution.
N. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund, Fund or
its agent shall advise Custodian of the aggregate dollar amount to be
paid for such shares and shall confirm such advice in writing. Upon
receipt of such advice, Custodian shall charge such aggregate dollar
amount to the account of Fund and either deposit the same in the
account maintained for the purpose of paying for the repurchase or
redemption of Fund Shares or deliver the same in accordance with such
advice. Custodian shall not have any duty or responsibility to
determine that Fund Shares have been removed from the proper
shareholder account or accounts or that the proper number of Fund
Shares have been cancelled and removed from the shareholder records.
O. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will deposit or
cause to be deposited with Custodian the amount received for such
shares.
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Custodian shall not have any duty or responsibility to determine that
Fund Shares purchased from Fund have been added to the proper
shareholder account or accounts or that the proper number of such
shares have been added to the shareholder records.
P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or mailed to
Fund all proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements affecting or
relating to securities held by Custodian for Fund and will, upon
receipt of instructions, execute and deliver or cause its nominee to
execute and deliver or mail or have delivered or mailed such proxies
or other authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by Custodian,
neither it nor its nominee will exercise any power inherent in any
such securities, including any power to vote the same, or execute any
proxy, power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver with respect
thereto, or take any other similar action.
Q. Disbursements
Custodian will pay or cause to be paid, insofar as funds are available
for the purpose, bills, statements and other obligations of Fund
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by Fund,
interest charges, dividend disbursements, taxes, management fees,
custodian fees, legal fees, auditors' fees, transfer agents' fees,
brokerage commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting forth the
name of the person to whom payment is to be made, the amount of the
payment, and the purpose of the payment.
R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund a detailed
statement of the amounts received or paid and of securities received
or delivered for
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<PAGE>
the account of Fund during each business day. Custodian will, from
time to time, upon request by Fund, render a detailed statement of the
securities and monies held for Fund under this Agreement, and
Custodian will maintain such books and records as are necessary to
enable it to do so. Custodian will permit such persons as are
authorized by Fund, including Fund's independent public accountants,
reasonable access to such records or will provide reasonable
confirmation of the contents of such records, and if demanded,
Custodian will permit federal and state regulatory agencies to examine
the securities, books and records. Upon the written instruc-tions of
Fund or as demanded by federal or state regulatory agencies, Custodian
will instruct any subcustodian to permit such persons as are
authorized by Fund, including Fund's independent public accountants,
reasonable access to such records or to provide reasonable
confirmation of the contents of such records, and to permit such
agencies to examine the books, records and securities held by such
subcustodian which relate to Fund.
S. Appointment of Subcustodians
1. Notwithstanding any other provisions of this Agreement, all or
any of the monies or securities of Fund may be held in
Custodian's own custody or in the custody of one or more other
banks or trust companies acting subcustodians as may be selected
by Custodian. Any such subcustodian selected by the Custodian
must have the qualifications required for a custodian under the
1940 Act, as amended. It is understood that Custodian initially
intends to appoint United Missouri Bank, N.A. (UMB) and United
Missouri Trust Company of New York (UMTCNY) as subcustodians.
Custodian shall be responsible to the Fund for any loss, damage
or expense suffered or incurred by the Fund resulting from the
actions or omissions of UMB, UMTCNY and any other subcustodians
selected and appointed by Custodian (except subcustodians
appointed at the request of Fund and as provided in Subsection 2
below) to the same extent Custodian
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<PAGE>
would be responsible to the Fund under Section 5. of this
Agreement if it committed the act or omission itself. Upon
request of the Fund, Custodian shall be willing to contract with
other subcustodians reasonably acceptable to the Custodian for
purposes of (i) effecting third-party repurchase transactions
with banks, brokers, dealers, or other entities through the use
of a common custodian or subcustodian, or (ii) providing
depository and clearing agency services with respect to certain
variable rate demand note securities, or (iii) for other
reasonable purposes specified by Fund; provided, however, that
the Custodian shall be responsible to the Fund for any loss,
damage or expense suffered or incurred by the Fund resulting from
the actions or omissions of any such subcustodian only to the
same extent such subcustodian is responsible to the Custodian.
The Fund shall be entitled to review the Custodian's contracts
with any such subcustodians appointed at the request of Fund.
Custodian shall be responsible to the Fund for any loss, damage
or expense suffered or incurred by the Fund resulting from the
actions or omissions of any Depository only to the same extent
such Depository is responsible to Custodian.
2. Notwithstanding any other provisions of this Agreement, Fund's
foreign securities (as defined in Rule 17f-5(c)(1) under the 1940
Act) and Fund's cash or cash equivalents, in amounts deemed by
the Fund to be reasonably necessary to effect Fund's foreign
securities transactions, may be held in the custody of one or
more banks or trust companies acting as subcustodians, and
thereafter, pursuant to a written contract or contracts as
approved by Fund's Board of Directors, may be transferred to
accounts maintained by any such subcustodian with eligible
foreign custodians, as defined in Rule 17f-5(c)(2). Custodian
shall be responsible to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from the actions or
15
<PAGE>
omissions of any foreign subcustodians or a domestic subcustodian
contracting with such foreign subcustodians only to the same
extent such domestic subcustodian is responsible to the
Custodian.
T. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records maintained
by Custodian pursuant to this Agreement are the property of Fund, and
will be made available to Fund for inspection or reproduction within a
reasonable period of time, upon demand. Custodian will assist Fund's
independent auditors, or upon approval of Fund, or upon demand, any
regulatory body, in any requested review of Fund's accounts and
records but shall be reimbursed by Fund for all expenses and employee
time invested in any such review outside of routine and normal
periodic reviews. Upon receipt from Fund of the necessary information
or instructions, Custodian will supply information from the books and
records it maintains for Fund that Fund needs for tax returns,
questionnaires, periodic reports to shareholders and such other
reports and information requests as Fund and Custodian shall agree
upon from time to time.
U. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no procedure
approved or directed by Fund or its accountants or other advisors
conflicts with or violates any requirements of its prospectus,
articles of incorporation, bylaws, any applicable law, rule or
regulation, or any order, decree or agreement by which Fund may be
bound. Fund will be responsible to notify Custodian of any changes in
statutes, regulations, rules, requirements or policies which might
necessitate changes in Custodian's responsibilities or procedures.
V. Overdrafts
If Custodian shall in its sole discretion advance funds to the account
of the Fund which results in an overdraft in any Account because the
monies held therein by Custodian on behalf of the Fund are
insufficient to pay the total
16
<PAGE>
amount payable upon a purchase of securities as specified in Fund's
instructions or for some other reason, the amount of the overdraft
shall be payable by the Fund to Custodian upon demand together with
the overdraft charge set forth on the then-current Fee Schedule from
the date advanced until the date of payment. Fund hereby grants
Custodian a lien on and security interest in the assets of the Fund to
secure the full amount of any outstanding overdraft and related
overdraft charges.
W. Exercise of Rights; Tender Offers
Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to the agent of such issuer or trustee, for the
purpose of exercise or sale, provided that the new securities, cash or
other assets, if any, are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that
the consideration for such securities is to be paid or delivered to
the Custodian or the tendered securities are to be returned to the
Custodian.
4. INSTRUCTIONS.
A. The term "instructions", as used herein, means written (including
telecopied or telexed) or oral instructions which Custodian reasonably
believes were given by a designated representative of Fund. Fund shall
deliver to Custodian, prior to delivery of any assets to Custodian and
thereafter from time to time as changes therein are necessary, written
instructions naming one or more designated representatives to give
instructions in the name and on behalf of Fund, which instructions may
be received and accepted by Custodian as conclusive evidence of the
authority of any designated representative to act for Fund and may be
considered to be in full force and effect (and Custodian will be
fully), protected in acting in reliance thereon) until receipt by
Custodian of notice to the contrary. Unless such written instructions
delegating authority to any person to give instructions specifically
limit such authority to specific matters or require that the approval
of anyone else will first have been
17
<PAGE>
obtained, Custodian will be under no obligation to inquire into the
right of such person, acting alone, to give any instructions
whatsoever which Custodian may receive from such person. If Fund fails
to provide Custodian any such instructions naming designated
representatives, any instructions received by Custodian from a person
reasonably believed to be an appropriate representative of Fund shall
constitute valid and proper instructions hereunder.
B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such
oral instruction. At Custodian's sole discretion, Custodian may record
on tape, or otherwise, any oral instruction whether given in person or
via telephone, each such recording identifying the parties, the date
and the time of the beginning and ending of such oral instruction.
5. LIMITATION OF LIABILITY OF CUSTODIAN
A. Custodian shall at all times use reasonable care and due diligence and
act in good faith in performing its duties under this Agreement.
Custodian shall not be responsible for, and the Fund shall indemnify
and hold Custodian harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability which may be asserted against Custodian, incurred by
Custodian or for which Custodian may be held to be liable, arising out
of or attributable to:
1. All actions taken by Custodian pursuant to this Agreement or any
instructions provided to it hereunder, provided that Custodian
has acted in good faith and with due diligence and reasonable
care; and
2. The Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to pay
or reimburse Custodian under this indemnification provision), the
Fund's negligence or willful misconduct, or the failure of any
representation or warranty of the Fund hereunder to be and remain
true and correct in all respects at all times.
18
<PAGE>
B. Custodian may request and obtain at the expense of Fund the advice and
opinion of counsel for Fund or of its own counsel with respect to
questions or matters of law, and it shall be without liability to Fund
for any action taken or omitted by it in good faith, in conformity
with such advice or opinion. If Custodian reasonably believes that it
could not prudently act according to the instructions of the Fund or
the Fund's accountants or counsel, it may in its discretion, with
notice to the Fund, not act according to such instructions.
C. Custodian may rely upon the advice and statements of Fund, Fund's
accountants and officers or other authorized individuals, and other
persons believed by it in good faith to be expert in matters upon
which they are consulted, and Custodian shall not be liable for any
actions taken, in good faith, upon such advice and statements.
D. If Fund requests Custodian in any capacity to take any action which
involves the payment of money by Custodian, or which might make it or
its nominee liable for payment of monies or in any other way,
Custodian shall be indemnified and held harmless by Fund against any
liability on account of such action; provided, however, that nothing
herein shall obligate Custodian to take any such action except in its
sole discretion.
E. Custodian shall be protected in acting as custodian hereunder upon any
instruc-tions, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed and shall be entitled to receive upon request as
conclusive proof of any fact or matter required to be ascertained from
Fund hereunder a certificate signed by an officer or designated
representative of Fund.
F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased by or for
Fund, the legality of the purchase of any securities or foreign
currency positions or evidence of ownership required by Fund to
be received by
19
<PAGE>
Custodian, or the propriety of the decision to purchase or amount
paid therefor;
2. The legality of the sale of any securities or foreign currency
positions by or for Fund, or the propriety of the amount for
which the same are sold;
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the repurchase or redemption of any Fund Shares,
or the propriety of the amount to be paid therefor; or
5. The legality of the declaration of any dividend by Fund, or the
legality of the issue of any Fund Shares in payment of any stock
dividend.
G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the payment
of money to be received by it on behalf of Fund until Custodian
actually receives such money; provided, however, that it shall advise
Fund promptly if it fails to receive any such money in the ordinary
course of business and shall cooperate with Fund toward the end that
such money shall be received.
H. Except as provided in Section 3.S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.
I. Custodian shall not be responsible or liable for the failure or delay
in performance of its obligations under this Agreement, or those of
any entity for which it is responsible hereunder, arising out of or
caused, directly or indirectly, by circumstances beyond the affected
entity's reasonable control, including, without limitation: any
interruption, loss or malfunction of any utility, transportation,
computer (hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance,
20
<PAGE>
terrorism, vandalism, explosions, labor disputes,
freezes, floods, fires, tornados, acts of God or public enemy,
revolutions, or insurrection.
J. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS
AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE
OTHER PARTY, FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY
ACT OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF
ADVISED OF THIS POSSIBILITY THEREOF.
6. COMPENSATION. In consideration for its services hereunder, Fund will pay to
Custodian such compensation as shall be set forth in a separate fee
schedule to be agreed to by Fund and Custodian from time to time. A copy of
the initial fee schedule is attached hereto and incorporated herein by
reference. Custodian shall also be entitled to receive, and Fund agrees to
pay to Custodian, on demand, reimbursement for Custodian's cash
disbursements and reasonable out-of-pocket costs and expenses, including
attorney's fees, incurred by Custodian in connection with the performance
of services hereunder. Custodian may charge such compensation against
monies held by it for the account of Fund. Custodian will also be entitled
to charge against any monies held by it for the account of Fund the amount
of any loss, damage, liability, advance, overdraft or expense for which it
shall be entitled to reimbursement from Fund, including but not limited to
fees and expenses due to Custodian for other services provided to the Fund
by Custodian. Custodian will be entitled to reimbursement by the Fund for
the losses, damages, liabilities, advances, overdrafts and expenses of
subcustodians only to the extent that (i) Custodian would have been
entitled to reimbursement hereunder if it had incurred the same itself
directly, and (ii) Custodian is obligated to reimburse the subcustodian
therefor.
7. TERM AND TERMINATION. The initial term of this Agreement shall be for a
period of _____. Thereafter, either party to this Agreement may terminate
the same by notice in writing, delivered or mailed, postage prepaid, to the
other party hereto and received not less than ninety (90) days prior to the
date upon which such termination will take effect. Upon termination of this
Agreement, Fund will pay
21
<PAGE>
Custodian its fees and compensation due hereunder and its reimbursable
disbursements, costs and expenses paid or incurred to such date and Fund
shall designate a successor custodian by notice in writing to Custodian by
the termination date. In the event no written order designating a successor
custodian has been delivered to Custodian on or before the date when such
termination becomes effective, then Custodian may, at its option, deliver
the securities, funds and properties of Fund to a bank or trust company at
the selection of Custodian, and meeting the qualifications for custodian
set forth in the 1940 Act and having not less than Two Million Dollars
($2,000,000) aggregate capital, surplus and undivided profits, as shown by
its last published report, or apply to a court of competent jurisdiction
for the appointment of a successor custodian or other proper relief, or
take any other lawful action under the circumstances; provided, however,
that Fund shall reimburse Custodian for its costs and expenses, including
reasonable attorney's fees, incurred in connection therewith. Custodian
will, upon termination of this Agreement and payment of all sums due to
Custodian from Fund hereunder or otherwise, deliver to the successor
custodian so specified or appointed, or as specified by the court, at
Custodian's office, all securities then held by Custodian hereunder, duly
endorsed and in form for transfer, and all funds and other properties of
Fund deposited with or held by Custodian hereunder, and Custodian will
co-operate in effecting changes in book-entries at all Depositories. Upon
delivery to a successor custodian or as specified by the court, Custodian
will have no further obligations or liabilities under this Agreement.
Thereafter such successor will be the successor custodian under this
Agreement and will be entitled to reasonable compensation for its services.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to appoint a successor custodian, the Custodian shall
be entitled to compensation as provided in the then-current fee schedule
hereunder for its services during such period as the Custodian retains
possession of such securities, funds and other properties, and the
provisions of this Agreement relating to the duties and obligations of the
Custodian shall remain in full force and effect.
22
<PAGE>
8. NOTICES. Notices, requests, instructions and other writings addressed to
Fund at __________________, or at such other address as Fund may have
designated to Custodian in writing, will be deemed to have been properly
given to Fund hereunder; and notices, requests, instructions and other
writings addressed to Custodian at its offices at 127 West 10th Street,
Kansas City, Missouri 64105, Attention: Custody Department, or to such
other address as it may have designated to Fund in writing, will be deemed
to have been properly given to Custodian hereunder.
9. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio:
A. Each Portfolio shall be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered by this
Agreement, every reference herein to the Fund shall be deemed to
relate solely to the particular Portfolio to which such transaction
relates. Under no circumstances shall the rights, obligations or
remedies with respect to a particular Portfolio constitute a right,
obligation or remedy applicable to any other Portfolio. The use of
this single document to memorialize the separate agreement of each
Portfolio is understood to be for clerical convenience only and shall
not constitute any basis for joining the Portfolios for any reason.
B. Additional Portfolios may be added to this Agreement, provided that
Custodian consents to such addition. Rates or charges for each
additional Portfolio shall be as agreed upon by Custodian and Fund in
writing.
10. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of Missouri, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
23
<PAGE>
C. The representations and warranties and the indemnifications extended
hereunder are intended to and shall continue after and survive the
expiration, termination or cancellation of this Agreement. 1.
D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by each party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed as
a continuing or permanent waiver of any such terms, conditions, rights
or privileges, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred. No
waiver, release or discharge of any party's rights hereunder shall be
effective unless contained in a written instrument signed by the party
sought to be charged.
F. The captions in the Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
H. If any part, term or provision of this Agreement is determined by the
courts or any regulatory authority to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held
to be illegal or invalid.
I. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party.
24
<PAGE>
J. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
Custodian and Fund.
K. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by either party hereunder shall not
affect any rights or obligations of the other party hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ Allen A. Straun
Title: EVP
FUND
By: /s/ Bernadette N. Finn
Title: Secretary
25
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
INVESTORS FIDUCIARY TRUST COMPANY
AVAILABILITY SCHEDULE BY TRANSACTION TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSACTION DTC PHYSICAL FED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE
- ---- ----------- ---------- ----------- ---------- ----------- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
Calls Put As Received C or F* As Received C or F*
- ------------------------------------------------------------------------------------------------------------------------------------
Maturities As Received C or F* Mat. Date C or F* Mat. Date F
- ------------------------------------------------------------------------------------------------------------------------------------
Tender Reorgs. As Received C As Received C N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends Paydate C Paydate C N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Floating Rate Int. Paydate C Paydate C N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Floating Rate Int. N/A As Rate Received C N/A
(No Rate)
- ------------------------------------------------------------------------------------------------------------------------------------
Mtg. Backed P&I Paydate C Paydate + 1 Bus. Day C Paydate F
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Int. Paydate C Paydate C Paydate F
- ------------------------------------------------------------------------------------------------------------------------------------
Euroclear N/A C Paydate C
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Legend
C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
* Availability based on how received.
26
<PAGE>
EXHIBIT A
Name of Fund
California Daily Tax Free Income Fund, Inc.*
Connecticut Daily Tax Free Income Fund, Inc.*
Cortland Trust, Inc.*
Daily Tax Free Income Fund, Inc.*
Delafield Fund, Inc.*
Florida Daily Municipal Income Fund+
Institutional Daily Income Fund+
Michigan Daily Tax Free Income Fund, Inc.*
New Jersey Daily Municipal Income Fund, Inc.*
New York Daily Tax Free Income Fund, Inc.*
North Carolina Daily Municipal Income Fund, Inc.*
Pennsylvania Daily Municipal Income Fund+
Reich & Tang Equity Fund, Inc.*
Reich & Tang Government Securities Trust+
Short Term Income Fund, Inc.*
Tax Exempt Proceeds Fund, Inc.*
* Maryland Corporation
+ Massachusetts Business Trust
Dated: August 30, 1994
CONSENT OF MESSRS. BATTLE FOWLER
We consent to the reference to our Firm under the heading "Federal
Income Taxes" and "Investment Objectives and Policies" in Pre-Effective
Amendement No. 1 to the Registration Statement on Form N-1A of Pennsylvania
Daily Municipal Income Fund as filed with the Securities and Exchange Commission
on November 13, 1992
s/s Battle Fowler
BATTLE FOWLER
New York, New York
November 13, 1992
<TABLE>
<CAPTION>
<S> <C> <C>
4000 BELL ATLANTIC TOWER LAW OFFICES OF 1500 K STREET, N.W.
1717 ARCH STREET DECHERT PRICE & RHOADS WASHINGTON, DC 20005-1208
PHILADELPHIA, PA 19103-2793 (202) 626-3300
(215) 994-4000
477 MADISON AVENUE
NEW YORK NY 10022-5891
214 CARNEGIE CENTER TEN POST OFFICE SQUARE * SOUTH
PRINCETON, NJ 08540-6237 BOSTON, MA 02109-4603
(609) 520-3200 TELEPHONE: (212) 326-3500 (617) 728-7100
TELEX: 645612 BARDEP NY
FAX: (212) 308-2041 52 BEDFORD SQUARE
TWENTY NORTH MARKET SQUARE LONDON WCIB 3EX, ENGLAND
HARRISBURG, PA 17101-1603 (071) 631-3383
(717) 237-2000
65 AVENUE LOUISE, BOX NO. 4
1050 BRUSSELS, BELGIUM
(02) 535-5411
</TABLE>
November 13, 1992
Pennsylvania Daily Municipal Income Fund
100 Park Avenue
New York, NY 10017
Gentlemen:
We have acted as special Massachusetts counsel to
Pennsylvania Daily Municipal Income Fund, a Massachusetts business trust (the
"Trust"), in connection with the organization of the Trust and the issuance of
its shares of beneficial interest (the "Shares").
As Massachusetts counsel for the Trust, we are familiar
with its Declaration of Trust and Bylaws. We have examined the
Prospectus and Statement of Additional Information, included in the Trust's
Registration Statement on Form N-IA, substantially in the form in which it is
to become effective, and have examined and relied upon such corporate records
of the Trust and other documents and certificates as to factual matters as we
have deemed necessary to render the opinion expressed herein. We have assumed
without independent verification the authenticity of all
documents submitted to us, the conformity with originals of all
documents submitted to us as copies and the genuineness of all
signatures.
Based on such examination, we are of the opinion and so
advise you that:
1. The Trust is duly organized and validly existing as
a Massachusetts business trust in good standing
under the laws of the Commonwealth of Massachusetts.
2. The Shares of the Trust to be offered for sale
pursuant to the Registration Statement are duly
authorized and, when sold, issued and paid for as
<PAGE>
Pennsylvania Daily Municipal Income Fund
November 13, 1992
Page 2
contemplated by the Trust's Registration
Statement, will have been validly and legally
issued and will be fully paid and nonassessable.
This letter expresses our opinion as to the
Massachusetts General Laws governing matters such as due organization and the
authorization and issuance of shares of beneficial interest of the Trust, but
it does not extend to the securities or "Blue Sky" laws of Massachusetts, to
federal securities laws or to other laws.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and the references to us, in our capacity as special
Pennsylvania counsel to the Trust, under the caption "Pennsylvania Income
Taxes" in the Prospectus and Statement of Additional Information and under the
heading "Counsel and Auditors" in the Statement of Additional Information
Very truly yours,
s/s Dechert Price & Rhoads
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
4000 BELL ATLANTIC TOWER LAW OFFICES OF 1500 K STREET, N.W.
1717 ARCH STREET DECHERT PRICE & RHOADS WASHINGTON, DC 20005-1208
PHILADELPHIA, PA 19103-2793 (202) 626-3300
(215) 994-4000
477 MADISON AVENUE
NEW YORK NY 10022-5891
214 CARNEGIE CENTER TEN POST OFFICE SQUARE * SOUTH
PRINCETON, NJ 08540-6237 BOSTON, MA 02109-4603
(609) 520-3200 TELEPHONE: (212) 326-3500 (617) 728-7100
TELEX: 645612 BARDEP NY
FAX: (212) 308-2041 52 BEDFORD SQUARE
TWENTY NORTH MARKET SQUARE LONDON WCIB 3EX, ENGLAND
HARRISBURG, PA 17101-1603 (071) 631-3383
(717) 237-2000
65 AVENUE LOUISE, BOX NO. 4
1050 BRUSSELS, BELGIUM
(02) 535-5411
</TABLE>
November 13, 1992
Pennsylvania Daily Municipal Income Fund
c/o Reich & Tang, L.P.
100 Park Avenue
New York, New York 10017
Re: Pennsylvania Taxation
Dear Sirs:
In conjunction with the proposed public offering of shares of beneficial
interest ("Shares") of the Pennsylvania Daily Municipal income Fund (the "Fund")
you have requested that we provide an opinion concerning the Pennsylvania state
taxation of holders of Shares of the Fund. For purposes of rendering this
opinion, we have examined and relied upon the information about the Fund
contained in the draft Registration Statement for the Fund provided to us (the
"Registration Statement"). In addition, we have received, as of the date hereof,
a ruling letter from the Commonwealth of Pennsylvania with respect to the status
of distributions from the Fund to holders of Shares of the Fund subject to the
Pennsylvania Personal income Tax.
The proceeds of the sale of Shares will be invested primarily in
interest-bearing obligations issued by or on behalf of the Commonwealth of
Pennsylvania, its agencies and instrumentalities, or political subdivisions
thereof ("Pennsylvania Bonds") or issued by other states of the United States or
their political subdivisions. Distributions of interest received by the Fund
from Pennsylvania Bonds and other obligations will be made to the holders of
Shares. In the opinion of bond counsel to each issuer, the interest on all
Pennsylvania Bonds in the Fund is exempt from federal income tax under existing
law.
The Fund is organized as a Massachusetts common law business trust, but for
federal income tax purposes will be treated as a "regulated investment company"
subject to Subchapter M of the Internal Revenue Code of 1986, as amended to date
(the
<PAGE>
Pennsylvania Daily Municipal Income Fund
November 13, 1992
Page 2
"Code"). Accordingly, for federal income tax purposes, interest income earned on
the Bonds which would be exempt under section 103 of the Code to holders of the
Bonds will be treated as "exempt interest dividends" when distributed by the
Fund to holders of Shares of the Fund, and therefore will be exempt from federal
income tax to such holders.
Various personal property taxes are in effect in Pennsylvania. These
include the County Personal Property Tax, as in effect in many counties. Act of
June 17, 1913, P.L. 597; the City of Pittsburgh Personal Property Tax, Chapter
261, Pittsburgh Code of Ordinances, as authorized by Act of March 7, 1901, P.L.
20; the First Class A School District (Pittsburgh School District) Personal
Property Tax, Act of June 20, 1947, P.L. 733. Each of these personal property
taxes provides that the value of shares of any regulated investment company, as
defined under the provisions of the current Internal Revenue Code, shall be
determined by multiplying the actual value of such shares by a fraction, the
numerator which shall be the total value of so much of the personal property
owned by the regulated investment company as would be taxable if owned by a
resident of Pennsylvania, and the denominator of which is the total value of all
personal property owned by the regulated investment company. The Pennsylvania
Bonds are exempt from each of the above personal property taxes. Therefore, to
the extent that the value of Shares of the Fund is represented by Pennsylvania
Bonds, such portion of the value of such Shares is exempt from each of the above
personal property taxes.
Pennsylvania imposes a Personal Income Tax on eight defined classes of
income. Tax Reform Code of 1971, Act of August 31, 1971, P.L. 372, as amended.
Article III. Generally, distributions by regulated investment companies are
treated as "dividends" subject to Pennsylvania Personal Income Tax to the extent
of the earnings and profits of the distributing investment company, regardless
of whether the earnings and profits were generated by the receipt of income
which would be tax exempt if received directly by a resident of Pennsylvania.
Distributions by a business trust are expressly included in definition of
dividends. See Penna. Reg. 101.1, 103.15. Notwithstanding the above position of
the Pennsylvania Department of Revenue, the Department has also taken the
position that certain regulated investment companies organized as common law
business trusts will be treated as trusts for purposes of the Pennsylvania
Personal Income Tax.
<PAGE>
Pennsylvania Daily Municipal Income Fund
November 13, 1992
Page 3
To qualify for such treatment, the Fund may not vary its investments except
to (i) eliminate unsafe investments and investments not consistent with the
preservation of the Fund's capital or tax status of the Fund's investments, (ii)
reinvest the earnings from securities in like securities or (iii) defray
administrative expenses. The Fund has received a ruling from the Pennsylvania
Department of Revenue as of the date hereof to the effect that the activities of
the Fund will be in compliance with these restrictions, and as long as the Fund
abides by the restrictions, it will be treated as a trust for Pennsylvania
personal income tax purposes. So long as the Fund is so treated, interest income
from and net gains from sales of Pennsylvania Bonds will retain their character
when distributed to holders of Shares of the Fund.
Therefore, the proportion of interest income earned by the Fund which
represents interest income on Pennsylvania Bonds will be exempt when received by
the Fund and distributed to holders of Shares in the Fund, as will interest on
all bonds and other obligations which by federal statute are exempt from state
and local income taxes. In addition, the disposition by the Fund of a
Pennsylvania Bond (whether by sale, exchange, redemption or payment at
maturity), will not constitute a taxable event to a holder of Shares of the Fund
under the Pennsylvania Personal Income Tax. Further, although there is no
published authority on the subject it is our opinion that a holder of Shares of
the Fund will not have a taxable event under the Pennsylvania Personal Income
Tax upon the redemption or sale of his Shares to the extent that the Fund is
then comprised of Pennsylvania Bonds.
The Pennsylvania Corporate Net Income Tax is imposed by Article IV of the
Tax Reform Code of 1971, P.L. 372, as amended. The taxable income of a
corporation subject to the Corporate Net Income Tax is determined in accordance
with federal principles, with certain exceptions. In the case of income
consisting of interest received from Pennsylvania Bonds, including "exempt
interest dividends," such income is excluded under the Corporate Net Income Tax
to the same extent as excluded under federal law.
Finally, the Philadelphia School District imposes a tax on unearned income,
including dividends, of Philadelphia resident individuals. Philadelphia School
District Investment Net Income Tax, Section 19-1804, Philadelphia Code of
Ordinances, as authorized by Act of November 16, 1967, P.L. 500. While no formal
regulation or ruling specifically covers the Fund, we have
<PAGE>
Pennsylvania Daily Municipal Income Fund
November 13, 1992
Page 4
been advised by the administrators of School District of Philadelphia taxes that
it is the position of the School District that it will not impose the
Philadelphia School District investment Net income Tax on income exempted from
Pennsylvania Personal Income Tax on the basis described above. Therefore, it is
our opinion that distributions representing interest from Pennsylvania Bonds and
distributed to residents of Philadelphia will not be subject to Philadelphia
School District Investment Net Income Tax, nor will gains from the sale of such
obligations, or Shares of the Fund be subject to the Philadelphia School
District Investment Net Income Tax. The School District tax has no application
to gain on the disposition of property held by the taxpayer for over six months.
The above opinion is based upon current law, regulations and informal
administrative interpretations of the various taxing authorities of the
Commonwealth of Pennsylvania. There can be no assurance that such laws and
administrative interpretations will not be changed, and may be changed
retroactively. Moreover, such opinion is expressly conditioned upon the
operation of the Fund in accordance with the restrictions alluded to earlier in
the opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (No. 33-48014) relating to the Shares referred to above,
and to the reference our firm as special Pennsylvania tax counsel in said
Registration Statement and in the related Prospectus.
Very truly yours,
s/s Dechert Price & Rhoads
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated December 23, 1999, relating to the
financial statements and financial highlights which appear in the November 30,
1999 Annual Report to Shareholders of Pennsylvania Daily Municipal Income Fund
which is also incorporated by reference into the Registration Statement. We also
consent to the references to us under the headings "Financial Highlights",
"Financial Statements", and "Counsel and Independent Accountants" in such
Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
March 28, 2000
Exhibit j.2
McGLADREY & PULLEN L.L.P.
Certified Public Accountants & Consultants
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated December 28, 1998, on the financial
statements referred to therein, in Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A, File No. 33-48014, of Pennsylvania Daily
Municipal Income Fund as filed with the Securities and Exchange Commission.
McGladrey & Pullen, LLP
New York, New York
March 23. 2000
<PAGE>
INDEPENDENT AUDITOR'S REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
We have audited the accompanying statement of changes in net assets for the year
ended November 30, 1998 and the financial highlights for each of the four years
in the period ended November 30, 1998 of Pennsylvania Daily Municipal Income
Fund. This financial statement and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statement and financial highlights referred to
above present fairly, in all material respects, the changes in its net assets
and the financial highlights of Pennsylvania Daily Municipal Income Fund Back
Bay Funds, Inc .for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
December 28, 1998
November 10, 1992
Board of Trustees of Pennsylvania
Daily Municipal Income Fund
Gentlemen:
We hereby subscribe for 100,000 shares of beneficial interst, $.01 par
value per share, of Pennsylvania Daily Municipal Income Fund, a Massachusetts
business trust (the "Trust"), at $1.00 per share for an aggregate purchase price
of $100,000. Our payment in full is confirmed.
We hereby represent and agree that we are purchasing these share of
beneficial interest for investment purposes, for our own account and risk and
not with a view to any sale, division or other distribution thereof within the
meaning of the Securities Act of 1933 as amended, nor with any present intention
of distribution or selling such shares. We further agree that if any of such
shares are redeemed during the period that the deferred organizational expenses
of the Trust are being amortized, we will reimburse the Trust the then
unamortized organizational expenses in the same ratio as the number of shares
redeemed bears to the number of such shares held at the time of redemption.
Very truly yours,
REICH & TANG L.P.
By: REICH & TANG, INC.,
General Partner
By: s/s Richard DeSanctis
---------------------
Controller
Confirmed and Accepted:
PENNSYLVANIA DAILY MUNICIPAL
INCOME FUND
By: s/s Bernadette N. Finn
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appointes Dana E. Messina and Bernadette N. Finn, and each of them, with full
power of substitituion, as his true and lawful attorney and agent to execute in
his name and on his behalf, in any and all capacities, the Registration
Statement on Form N-1A, and any and all amendments thereto (including
pre-effective amendments) filed by Pennsylvania Daily Municipal Income Fund (the
"Fund") with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended, and
any and all other insturments which such attorney and agent deems necessary or
advisable to enable the Fund to comply with the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, the rules, regulations
and requirements of the Securities and Exchange Commission, and the securities
or Blue Sky laws of any state or other jurisdiction; and the undersigned hereby
ratifies and confirms as his own act and deed any and all that such attorney and
agent shall do or cause to be done by virtue hereof.
s/s W. Giles Mellon
---------------
Dr. W. Giles Mellon
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appointes Dana E. Messina and Bernadette N. Finn, and each of them, with full
power of substitituion, as his true and lawful attorney and agent to execute in
his name and on his behalf, in any and all capacities, the Registration
Statement on Form N-1A, and any and all amendments thereto (including
pre-effective amendments) filed by Pennsylvania Daily Municipal Income Fund (the
"Fund") with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended, and
any and all other insturments which such attorney and agent deems necessary or
advisable to enable the Fund to comply with the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, the rules, regulations
and requirements of the Securities and Exchange Commission, and the securities
or Blue Sky laws of any state or other jurisdiction; and the undersigned hereby
ratifies and confirms as his own act and deed any and all that such attorney and
agent shall do or cause to be done by virtue hereof.
s/s Robert Straniere
-----------------
Robert Straniere
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appointes Dana E. Messina and Bernadette N. Finn, and each of them, with full
power of substitituion, as his true and lawful attorney and agent to execute in
his name and on his behalf, in any and all capacities, the Registration
Statement on Form N-1A, and any and all amendments thereto (including
pre-effective amendments) filed by Pennsylvania Daily Municipal Income Fund (the
"Fund") with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended, and
any and all other insturments which such attorney and agent deems necessary or
advisable to enable the Fund to comply with the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, the rules, regulations
and requirements of the Securities and Exchange Commission, and the securities
or Blue Sky laws of any state or other jurisdiction; and the undersigned hereby
ratifies and confirms as his own act and deed any and all that such attorney and
agent shall do or cause to be done by virtue hereof.
s/s Yung Wong
-------------
Dr. Yung Wong
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Steven W. Duff whose signature
appears below, constitutes and appointes Dana E. Messina and Bernadette N. Finn,
and each of them, with full power of substitituion, as his true and lawful
attorney and agent to execute in his name and on his behalf, in any and all
capacities, the Registration Statement on Form N-1A, and any and all amendments
thereto (including pre-effective amendments) filed by Pennsylvania Daily
Municipal Income Fund (the "Fund") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other insturments which such attorney
and agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
s/s Steven W. Duff
------------------
Steven W. Duff
Director
