RULE 497(b)
Registration No. 33-69760
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Reich & Tang Equity Fund, Inc.
Reich & Tang Government Securities Trust
Delafield Fund, Inc.
(collectively the "Funds" and individually the "Fund")
600 Fifth Avenue, New York, NY 10020
(212) 830-5200
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SUPPLEMENT DATED OCTOBER 12, 1995
Reich & Tang Asset Management L.P., the Fund's investment advisor, is a
wholly-owned subsidiary of New England Investment Companies, L.P. ("NEIC"). New
England Mutual Life Insurance Company ("The New England") owns NEIC's sole
general partner and a majority of the limited partnership interest in NEIC. The
New England and Metropolitan Life Insurance Company ("MetLife") have entered
into an agreement to merge, with MetLife to be the survivor of the merger. The
merger is conditioned upon, among other things, approval by the policyholders of
The New England and MetLife and receipt of certain regulatory approvals. The
merger is not expected to occur until after December 31, 1995.
The merger of The New England into MetLife will constitute an "assignment" of
the existing investment advisory agreement relating to the Fund. Under the
Investment Company Act of 1940, such an "assignment" will result in the
automatic termination of the investment advisory agreement, effective at the
time of the merger. Prior to the merger, shareholders of the Fund will be asked
to approve a new investment advisory agreement, intended to take effect at the
time of the merger. The new agreement will be substantially similar to the
existing agreement. A proxy statement describing the new agreement will be sent
to shareholders of the Fund prior to their being asked to vote on the new
agreement.
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RULE 497(b)
Registration No. 33-69760
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DELAFIELD FUND, INC. 600 FIFTH AVENUE, NEW YORK, NY 10020
(212) 830-5220
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PROSPECTUS
February 1, 1996
Delafield Fund, Inc. (the "Fund") is an open-end, diversified management
investment company. The Fund's investment objectives are to seek long-term
preservation of capital (sufficient growth to outpace inflation over an extended
period of time) and growth of capital. The Fund will seek to achieve these
objectives by investing primarily in the equity securities of domestic companies
which, based on the research of the Delafield Asset Management Division of Reich
& Tang Asset Management L.P. (the "Manager"), are considered to be undervalued
or to represent special situations that the Manager believes can increase in
value regardless of general economic trends or the condition of the stock market
generally. There can be no assurance that the Fund will achieve its objectives.
The Delafield Asset Management Division of Reich & Tang Asset Management L.P.
acts as Manager of the Fund and Reich & Tang Distributors L.P. acts as
Distributor of the Fund's shares. Reich & Tang Asset Management L.P. is a
registered investment adviser. Reich & Tang Distributors L.P. is a registered
broker-dealer and member of the National Association of Securities Dealers, Inc.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
dated February 1, 1996, containing additional and more detailed information
about the Fund (the "Statement of Additional Information"), has been filed with
the Securities and Exchange Commission and is hereby incorporated by reference
into this Prospectus. It is available without charge and can be obtained by
either writing or calling the Fund at the address or telephone number set forth
above.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
This Prospectus should be read and retained by investors for future reference.
________________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
________________________________________________________________________________
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<TABLE>
<CAPTION>
TABLE OF FEES AND EXPENSES
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .80%
12b-1 Fees - After Fee Waiver .05%
Other Expenses .82%
Administration Fees .21% _____
Total Fund Operating Expenses - After Fee Waivers 1.67%
Example 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following on a $1,000
investment, assuming 5% annual return and
redemption at the end of each period: $17 $53 $91 $198
The foregoing table is to assist you in understanding the various costs and
expenses that an investor in the Fund will bear directly or indirectly. For a
further discussion of these fees, see "The Manager" and "Distribution and
Service Plan" herein. The Manager and the Distributor may, at their discretion,
waive all or a portion of their fees. The maximum 12b-1 Fees would have been
.25% of average daily net assets, respectively, absent fee waivers. In addition,
absent fee waivers, Other Expenses and Total Operating Expenses would have been
1.87%.
THE FIGURES REFLECTED IN THIS EXAMPLE SHOULD NOT BE CONSIDERED AS A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESSER THAN THOSE SHOWN ABOVE.
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SELECTED FINANCIAL INFORMATION
The following selected financial information of Delafield Fund, Inc. has been
audited by McGladrey & Pullen LLP, Independent Certified Public Accountants,
whose report thereon appears in the Statement of Additional Information.
<S> <C> <C> <C>
October 1, 1995 Year November 19, 1993
to Ended (Inception) to
December 31, 1995 September 30, 1995 September 30, 1994
----------------- ------------------ ------------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period....... $ 11.95 $ 10.82 $ 10.00
--------------- --------------- ---------------
Income from investment operations:
Net investment income.................... .05 .13 .07
Net realized and unrealized
gains (losses) on investments.......... .50 1.99 .82
-------------- -------------- --------------
Total from investment operations........... .55 2.12 .89
Less distributions: -------------- -------------- --------------
Dividends from net investment income..... ( .05) ( .13) ( .07)
Distributions from net realized gains
on investments......................... ( .18) ( .86) -0-
In excess of net realized gains ( .01) ( -- ) ( --)
-------------- --------------- ---------------
Total distributions........................ ( .24) ( .99) ( .07)
-------------- -------------- ---------------
Net asset value, end of period............. $ 12.26 $ 11.95 $ 10.82
============== ============== ==============
Total Return............................... 4.62%+ 20.05% 8.93%+
============== ============== ==============
Ratios/Supplemental Data...................
Net assets, end of period (000)............ $ 45,730 $ 42,316 $ 9,658
Ratios to average net assets:
Expenses................................ 1.67%*++ 1.65%++ 1.78%*++
Net investment income................... 1.57%*++ 1.35%++ 0.96%*++
Portfolio turnover rate..................... 20.49 70.36 42.84
Average commission rate paid (per share)** $ .0226 $ -- $ --
* Annualized.
+ Not Annualized.
++ Net of investment management, administration and shareholder servicing fees
waived equivalent to .20%, .71% and 1.12%, respectively, of average net
assets.
** Required by regulations issued in 1995.
</TABLE>
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INTRODUCTION
Delafield Fund, Inc. (the "Fund") is a diversified, open end management
investment company organized as a Maryland corporation on October 12, 1993, that
seeks to provide its investors with long term preservation of capital
(sufficient growth to outpace inflation over an extended period of time) and
growth of capital. The Fund seeks to achieve its objectives by investing
principally in the equity securities of domestic companies which, based on the
research of the Delafield Asset Management Division of Reich & Tang Asset
Management L.P. (the "Manager") are considered to be undervalued or to represent
special situations (i.e., companies undergoing change that might cause their
market value to grow at a rate faster than the market generally). There can be
no assurance that the Fund will achieve its objectives. This is a summary of the
Fund's fundamental investment policies which are set forth in full under
"Investment Objectives, Policies and Risks" herein and in the Statement of
Additional Information and may not be changed without approval of a majority of
the Fund's outstanding shares.
The Fund's shares are distributed through Reich & Tang Distributors L.P. (the
"Distributors"), with whom the Fund has entered into a Distribution Agreement
and a Shareholder Servicing Agreement pursuant to the Fund's plan adopted under
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). (See "Distribution and Service Plan").
On any day on which the New York Stock Exchange, Inc. is open for trading ("Fund
Business Day"), investors may initiate purchases and redemptions of shares of
the Fund's common stock at their net asset value, which will be determined
daily. (See "Purchase of Shares" "Redemption of Shares" and "Net Asset Value"
herein.) The minimum initial investment is $5,000, except that the minimum
initial investment for an Individual Retirement Account is $250. There is no
minimum for subsequent investments. The Fund currently intends to pay dividends,
if any, semi-annually. Net capital gains, if any, will be distributed at least
annually, and in no event later than within 60 days after the end of the Fund's
fiscal year. All dividends and distributions of capital gains are automatically
invested in additional shares of the Fund unless a shareholder has elected by
written notice to the Fund to receive either of such distributions in cash. (See
"Dividends, Distributions and Taxes" herein).
The Fund intends to invest principally in the equity securities of domestic
companies. Investment in the Fund should be made with an understanding of the
risks which an investment in equity securities may entail. In particular, common
stocks represent residual ownership interest in the issuer and are entitled to
the income and increase in the value of the assets and business of the entity
after all its obligations, including preferred stock dividends, are satisfied.
Common stocks fluctuate in price in response to many factors including
historical and prospective earnings of the issuer, the value of its assets,
general economic conditions, interest rates, and investor perceptions of market
liquidity. See "Investment Objectives, Policies and Risks" herein and the
Statement of Additional Information for a discussion of the special risk factors
affecting equity securities and the other investment policies of the Fund,
including investments in lower rated debt securities.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The investment objectives of the Fund are to seek long-term preservation of
capital (sufficient growth to outpace inflation over an extended period of time)
and growth of capital. The Fund will seek to achieve these objectives by
investing primarily in the equity securities of domestic companies which, based
on the research of the Delafield Asset Management Division of Reich & Tang Asset
Management L.P. (the "Manager"), are considered to be undervalued or to
represent special situations (i.e., companies undergoing change that might cause
their market value to grow at a rate faster than the market generally). The
Fund's investment objectives are fundamental policies and may not be changed
without shareholder approval.
There obviously can be no assurance that the Fund's investment objectives will
be achieved. The nature of the Fund's investment objectives and
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policies may involve a somewhat greater degree of short-term risk than would be
present under other investment approaches.
The Fund will under normal circumstances have substantially all of its assets
(i.e., more than 65%) invested in a diversified portfolio of equity securities,
including common stocks, securities convertible into common stocks or rights or
warrants to subscribe for or purchase common stocks. For a discussion of the
risks of investing in convertible securities, see "Convertible Securities" and
"Risks of Investing in Lower Rated Securities" below.
The Fund at times may also invest less than 35% of its total assets in debt
securities and preferred stocks offering a significant opportunity for price
appreciation. For a discussion of the risks of investing in these securities,
see "Risks of Investing in Lower Rated Securities" below.
The Fund may take a defensive position when the Manager has determined that
adverse business or financial conditions warrant such a defensive position and
invest temporarily without limit in rated or unrated debt securities or
preferred stocks or in money market instruments. Money market instruments for
this purpose include obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities (including such obligations subject to
repurchase agreements), commercial paper rated in the highest grade by any
nationally recognized rating agency, and certificates of deposit and bankers'
acceptances issued by domestic banks having total assets in excess of one
billion dollars. A repurchase agreement is an instrument under which an investor
(e.g., the Fund) purchases a U.S. Government security from a vendor, with an
agreement by the vendor to repurchase the security at the same price, plus
interest at a specified rate. Repurchase agreements may be entered into with
member banks of the Federal Reserve System or "primary dealers" (as designated
by the Federal Reserve Bank of New York) in U.S. Government securities.
Repurchase agreements usually have a short duration, often less than one week.
In the event that a vendor defaulted on its repurchase obligation, the Fund
might suffer a loss to the extent that the proceeds from the sale of the
collateral were less than the repurchase price. If the vendor becomes bankrupt,
the Fund might be delayed, or may incur costs or possible losses of principal
and income, in selling the collateral.
Within this basic framework, the policy of the Fund will emphasize flexibility
in arranging its portfolio to seek the desired results. The Fund's investment
philosophy is that of investment in equity securities of companies which, based
on fundamental research, the management of the Fund believes to be undervalued.
The Manager believes that the philosophy of the management of the portfolio
companies is very important and, therefore, intends to invest in companies that
are managed for the benefit of their shareholders and not by managements that
believe that the most important measure of a company's success is its size. In
addition, companies generating free cash flow, which is defined as earnings,
depreciation, and deferred income tax in excess of need for capital expenditures
and dividends, will be considered attractive because such funds can be used to
pay down debt, retire shares, acquire other businesses or increase the dividend.
Investment securities will be assessed upon their earning power, stated asset
value and off the balance sheet values, such as natural resources and timber
properties. Critical factors that will be considered in the selection of
securities will include the values of individual securities relative to other
investment alternatives, trends in the determinants of corporate profits,
corporate cash flow, balance sheet changes, management capability and practices,
and the economic and political outlook. Although the balance sheet of a company
is important to the Manager's analysis, the Fund may invest in financially
troubled companies if the Manager has reason to believe that the underlying
assets are worth far more than the market price of the shares. Generally
speaking, disposal of a security will be based upon factors such as (i)
increases in the valuation of the security which the Fund believes reflect
earnings growth too far in advance, (ii) changes in the relative opportunities
offered by various securities, and (iii) actual or potential deterioration of
the issuers' earning power
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which the Fund believes may adversely affect the price of its securities.
Portfolio turnover will be influenced by sound investment practices, the Fund's
investment objective, and the need of funds for the redemption of the Fund's
shares.
The Fund will not seek to realize profits by anticipating short-term market
movements and intends to purchase securities for long-term capital appreciation
under ordinary circumstances. The rate of portfolio turnover will not be a
limiting factor when the investment adviser deems changes to be appropriate. In
addition, in order to qualify as a regulated investment company, less than 30%
of the Fund's gross income must be derived from the sale or other disposition of
stock, securities or certain other investments held for less than 3 months.
Although increased portfolio turnover may increase the likelihood of additional
capital gains for the Fund, the Fund expects to satisfy the 30% income test.
The Fund's investment policies indicated below (unlike its investment objective)
are not fundamental and may be changed by the Fund's Board of Directors without
shareholder approval.
Foreign Securities
Although the Fund will invest primarily in domestic securities, both listed and
unlisted, and has no present intention of investing any significant portion of
its assets in foreign securities, it reserves the right to invest in foreign
securities if purchase thereof at the time of purchase would not cause more than
15% of the value of the Fund's total assets to be invested in foreign
securities. Investments in foreign securities involve certain risk
considerations which are not typically associated with investments in domestic
securities. These considerations include changes in exchange rates and exchange
control regulation, political and social instability, expropriation, less liquid
markets and less available information than is generally the case in the United
States, less government supervision of exchanges and brokers and issuers, lack
of uniform accounting and auditing standards, foreign withholding taxes and
greater price volatility. See "Foreign Securities" in the Statement of
Additional Information.
Convertible Securities
The Fund may invest in convertible securities which may include corporate notes
or preferred stock but are ordinarily a long-term debt obligation of the issuer
convertible at a stated exchange rate into common stock of the issuer. As with
all debt securities, the market value of convertible securities tends to decline
as interest rates increase and, conversely, to increase as interest rates
decline. Convertible securities generally offer lower interest or dividend
yields than non-convertible securities of similar quality. However, when the
market price of the common stock underlying a convertible security exceeds the
conversion price, the price of the convertible security tends to reflect the
value of the underlying common stock. As the market price of the underlying
common stock declines, the convertible security tends to trade increasingly on a
yield basis, and thus may not depreciate to the same extent as the underlying
common stock. Convertible securities rank senior to common stocks on an issuer's
capital structure and are consequently of higher quality and entail less risk
than the issuer's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed income security.
The Fund may invest in convertible securities when it appears to the Manager
that it may not be prudent to be fully invested in common stocks. In evaluating
a convertible security, the Manager places primary emphasis on the
attractiveness of the underlying common stock and the potential for capital
appreciation through conversion. See "Convertible Securities" in the Statement
of Additional Information.
Risks of Investing in Lower Rated Securities
The Fund may purchase convertible securities, debt securities, or preferred
stock considered by the Manager to be consistent with the Fund's investment
objectives regardless of whether or not the security is rated. Lower rated
securities (BBB or lower by Standard & Poor's Corporation ("S&P") or Baa or
lower by Moody's Investor Services, Inc.
5
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("Moody's") and comparable unrated securities, collectively commonly known as
"junk bonds", have special risks associated with them. The market for these
securities may not be as liquid as the market for higher rated securities, which
may result in depressed prices for the Fund upon the disposal of such lower
rated securities. There is no established secondary market for many of these
securities. The Manager cannot anticipate whether these securities could be sold
other than to institutional investors. There is frequently no secondary market
for the resale of those debt obligations that are in default. The limited market
for these securities may affect the amount actually realized by the Fund upon
such sale. Such sale may result in a loss to the Fund. There are certain risks
involved in applying credit ratings as a method of evaluating lower rated
securities. For example, while credit rating agencies evaluate the safety of
principal and interest payments, they do not evaluate the market risk of the
securities and the securities may decrease in value as a result of credit
developments. See "Description of Ratings" herein for a definition of the
various ratings assigned by S&P and Moody's.
These lower rated securities tend to offer higher yields than higher rated
securities with the same maturities because the creditworthiness of the obligors
of lower rated securities may not have been as strong as that of other issuers.
Since there is a general perception that there are greater risks associated with
the lower rated securities, if any, in the Fund, the yields and prices of such
securities tend to fluctuate more with changes in the perceived quality of the
credit of their obligors. In addition, the market value of these lower rated
securities may fluctuate more than the market value of higher rated securities
since lower rated securities tend to reflect short-term market developments to a
greater extent than higher rated securities, which fluctuate primarily in
response to the general level of interest rates, assuming that there has been no
change in the fundamental credit quality of such securities. These lower rated
securities are also more sensitive to adverse economic changes and events
affecting specific issuers than are higher rated securities. Periods of economic
uncertainty can be expected to result in increased market price volatility of
the lower rated securities. These lower rated securities may also be directly
and adversely affected by variables such as interest rates, unemployment rates,
inflation rates and real growth in the economy and may be more susceptible to
variables such as adverse publicity and negative investor perception than more
highly rated securities, particularly in a limited secondary market. Lower rated
securities generally involve greater risks of loss of income and principal than
higher rated securities. The obligors of lower rated securities possess less
creditworthy characteristics than the obligors of higher rated securities, as is
evidenced by those securities that have experienced a downgrading in rating or
that are in default. The evaluation of the price of such securities is highly
speculative and volatile. As such, these evaluations are very sensitive to the
latest available public information relating to developments concerning such
securities. See "Risks of Investing in Lower Rated Securities" in the Statement
of Additional Information.
Warrants
The Fund may invest in warrants which entitle the holder to buy equity
securities at a specific price for a specific period of time. In the event the
underlying security does not sufficiently appreciate in value during the period
when the warrant may be exercised so as to provide an attractive investment for
the Fund, the warrant will expire and the Fund will suffer a loss on the price
it paid for the warrant. The Fund will not, however, purchase any warrant if, as
a result of such purchase, 5% or more of the Fund's total assets would be
invested in warrants. Included within that amount, but not to exceed 2% of the
value of the Fund's total assets, may be warrants which are not listed on the
New York or American Stock Exchange. Warrants acquired by the Fund in units or
attached to securities may be deemed to be without value. See "Warrants" in the
Statement of Additional Information.
Short Sales
The Fund may make short sales of securities. A short sale is a transaction in
which the Fund sells a security it does not own in anticipation that the
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market price of that security will decline. The Fund expects to make short sales
both to obtain capital gains from anticipated declines in securities and as a
form of hedging to offset potential declines in long positions in the same or
similar securities. The short sale of a security is considered a speculative
investment technique. When the Fund makes a short sale, it must borrow the
security sold short and deliver it to the broker-dealer through which it made
the short sale in order to satisfy its obligation to deliver the security upon
conclusion of the sale. The Fund may have to pay a fee to borrow particular
securities and is often obligated to pay over any payments received on such
borrowed securities. The Fund's obligation to replace the borrowed security will
be secured by collateral deposited with the broker-dealer, usually cash, U.S.
Government securities or other liquid high grade debt obligations. The Fund will
also be required to deposit in a segregated account established and maintained
with the Fund's Custodian, liquid assets such as cash, U.S. Government
securities or other liquid high grade debt obligations, to the extent, if any,
necessary so that the value of both collateral deposits in the aggregate is at
all times equal to the greater of the price at which the security is sold short
or 100% of the current market value of the security sold short. Depending on
arrangements made with the broker-dealer from which it borrowed the security
regarding payment over of any payments received by the Fund on such security,
the Fund may not receive any payments (including interest) on its collateral
deposited with such broker-dealer. If the price of the security sold short
increases between the time of the short sale and the time the Fund replaces the
borrowed security, the Fund will incur a loss, and, conversely, if the price
declines, the Fund will realize a capital gain; provided, however, any gain will
be decreased, and any loss increased, by the transaction costs described above.
Although the Fund's gain is limited to the price at which it sold the security
short, its potential loss is theoretically unlimited. The market value of the
securities sold short of any one issuer will not exceed either 5% of the Fund's
total assets or 5% of such issuer's voting securities. The Fund will not make a
short sale, if, after giving effect to such sale, the market value of all
securities sold short exceeds 20% of the value of its assets or the Fund's
aggregate short sales "against the box" without respect to such limitations. In
this type of short sale, at the time of the sale, the Fund owns or has the
immediate and unconditional right to acquire at no additional cost the security.
Restricted Securities
The Fund may invest in restricted securities and in other assets having no ready
market if such purchases at the time thereof would not cause more than 15% of
the value of the Fund's net assets to be invested in all such restricted or not
readily marketable assets. Restricted securities may be sold only in privately
negotiated transactions, in a public offering with respect to which a
registration statement is in effect under the Securities Act of 1933 or pursuant
to Rule 144 promulgated under such Act. Where registration is required, the Fund
may be obligated to pay all or part of the registration expense, and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If during such a period adverse market conditions were
to develop, the Fund might obtain a less favorable price than the price that
prevailed when it decided to sell. Restricted securities will be valued in such
manner as the Board of Directors of the Fund in good faith deems appropriate to
reflect their fair market value.
Corporate Reorganizations
The Fund may invest in securities for which a tender or exchange offer has been
made or announced and in securities of companies for which a merger,
consolidation, liquidation or similar reorganization proposal has been announced
if, in the judgment of the Manager, there is a reasonable prospect of capital
appreciation significantly greater than the added portfolio turnover expenses
inherent in the short term nature of such transactions. The principal risk is
that such offers or proposals may not be consummated within the time and under
the terms contemplated at the time of the investment, in which case, unless such
offers or proposals are replaced by equivalent or increased offers or proposals
which are consummated, the Fund may sustain a loss. For further information on
such
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investments, see "Corporate Reorganizations" in the Statement of Additional
Information.
Investment in Small, Unseasoned Companies
The Fund may invest up to 5% of its total assets in small, less well known
companies, which (including predecessors) have operated less than three years.
The securities of such companies may have limited liquidity. The Fund will not
invest more than 5% of its total assets in securities of issuers which together
with their predecessors have a record of less than three years of continuous
operations.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions which may not be changed
without the approval of the Fund's shareholders. Briefly, these restrictions
provide that the Fund may not:
1. Purchase the securities of any one issuer, other than the U.S. Government
or any of its agencies or instrumentalities, if immediately after such
purchase more than 5% of the value of its total assets would be invested in
such issuer or the Fund would own more than 10% of the outstanding voting
securities of such issuer, except that up to 25% of the value of the Fund's
total assets may be invested without regard to such 5% and 10% limitations;
2. Invest more than 25% of the value of its total assets in any particular
industry;
3. Purchase securities on margin, but it may obtain such short-term credits
from banks as may be necessary for the clearance of purchases and sales of
securities;
4. Make loans of its assets to any person, except for the purchase of debt
securities and repurchase agreements as discussed under "Investment
Objectives, Policies and Risks" herein;
5. Borrow money except for (i) the short-term credits from banks referred to
in paragraph 3 above and (ii) borrowings from banks for temporary or
emergency purposes, including the meeting of redemption requests which
might require the untimely disposition of securities. Borrowing in the
aggregate may not exceed 15%, and borrowing for purposes other than meeting
redemptions may not exceed 5%, of the value of the Fund's total assets
(including the amount borrowed) less liabilities (not including the amount
borrowed) at the time the borrowing is made. Outstanding borrowings in
excess of 5% of the value of the Fund's total assets will be repaid before
any subsequent investments are made;
6. Mortgage, pledge or hypothecate any of its assets, except as may be
necessary in connection with permissible borrowings mentioned in paragraph
5 above;
7. Purchase the securities of other investment companies, except (i) 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 and (ii) further except as permitted
by Section 12(d) of the Act; and
8. Act as an underwriter of securities of other issuers, except that the Fund
may acquire restricted or not readily marketable securities under
circumstances where, if such securities were sold, the Fund might be deemed
to be an underwriter for purposes of the Securities Act of 1933. The Fund
will not, however, invest more than 15% of the value of its net assets in
restricted securities and not readily marketable securities.
If a percentage restriction is adhered to at the time an investment is made, a
later change in percentage resulting from changes in the value of the Fund's
portfolio securities will not be considered a violation of the Fund's policies
or restrictions.
THE MANAGER
The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, has employed the Delafield Asset Management
Division of Reich & Tang Asset
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Management L.P. (the "Manager") to serve as investment manager of the Fund. The
Manager provides persons satisfactory to the Fund's Board of Directors to serve
as officers of the Fund. Such officers, as well as certain other employees and
directors of the Fund, may be directors or officers of Reich & Tang Asset
Management, Inc., the sole general partner of the Manager or employees of the
Manager or its affiliates. Due to the services performed by the Manager, the
Fund currently has no employees and its officers are not required to devote
full-time to the affairs of the Fund. The Statement of Additional Information
contains general background information regarding each director and principal
officer of the Fund.
The Manager is a Delaware limited partnership with its principal office at 600
Fifth Avenue, New York, New York 10020. The Manager was at December 31, 1995, an
investment manager, adviser or supervisor with respect to assets aggregating in
excess of $8.2 billion. The Manager acts as manager or administrator of 15 other
registered investment companies and also advises pension trusts, profit-sharing
trusts and endowments. New England Investment Companies, L.P. ("NEICLP") is the
limited partner and owner of a 99.5% interest in the newly created limited
partnership, Reich & Tang Asset Management L.P., the Manager. Reich & Tang Asset
Management, Inc. (a wholly-owned subsidiary of NEICLP) is the general partner
and owner of the remaining .5% interest of the Manager.
New England Investment Companies, Inc. ("NEIC"), a Massachusetts corporation,
serves as the sole general partner of NEICLP. The New England Mutual Life
Insurance Company ("The New England") owns approximately 67.3% of the total
partnership units outstanding of NEICLP, and Reich & Tang, Inc., owns
approximately 22.8% of the outstanding partnership units of NEICLP. In addition,
NEIC is a wholly-owned subsidiary of The New England, which may be deemed a
"controlling person" of the Manager. NEIC is a holding company offering a broad
array of investment styles across a wide range of asset categories through ten
investment adviser/management affiliates and two distribution subsidiaries which
include, in addition to the Manager, Loomis, Sayles & Company, L.P.; Copley Real
Estate Advisors, Inc.; Back Bay Advisors, L.P.; Marlborough Capital Advisors,
L.P.; Westpeak Investment Advisors, L.P.; Draycott Partners, Ltd.; TNE
Investment Services, L.P.; New England Investment Associates, Inc.; Harris
Associates, and an affiliate, Capital Growth Management Limited Partnership.
These affiliates in the aggregate are investment advisers or managers to 42
other registered investment companies.
J. Dennis Delafield and Vincent Sellecchia of the Fund will be primarily
responsible for the day-to-day management of the Fund's portfolio. Mr. Delafield
is Chairman, Chief Executive Officer and Director of the Fund and is Managing
Director of the Reich & Tang Capital Management Group, a division of the
Manager, with which he has been associated since September 1993. From December
1991 to September 1993, Mr. Delafield, acting as an investment adviser, was a
Managing Director of Reich & Tang L.P. and an officer of Reich & Tang, Inc.; and
from October 1979 to December 1991, was President and Director of Delafield
Asset Management, Inc. Mr. Sellecchia is President of the Fund and Vice
President of the Reich & Tang Capital Management Group, a division of the
Manager, with which he has been associated since September 1993. From December
1991 to September 1993, Mr. Sellecchia, acting as an investment adviser, was
Vice President of Reich & Tang L.P. and an officer of Reich & Tang, Inc.; and
from October 1980 to December 1991 was Vice President, Director of Investment
Analysis for Delafield Asset Management, Inc. The Fund's Annual Report contains
information regarding the Fund's performance and will be provided, without
charge, upon request.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund. Under the Investment Management Contract, the Manager receives from
the Fund a fee equal to .80% per annum of the Fund's average daily net assets
for managing the Fund's investment portfolio and performing related services.
The fee received
9
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by the Manager under the Investment Management Contract is higher than the fee
paid by most investment companies. The Manager, at its discretion, may
voluntarily waive all or a portion of the management fee.
Pursuant to an Administrative Services Contract for the Fund, the Manager
performs clerical, accounting supervision and office service functions for the
Fund and provides the Fund with personnel to (i) supervise the performance of
bookkeeping and related services by Investors Fiduciary Trust Company, the
Fund's bookkeeping agent, (ii) prepare reports to and filings with regulatory
authorities, and (iii) perform such other services as the Fund may from time to
time request of the Manager. The personnel rendering such services may be
employees of the Manager or its affiliates. The Manager, at its discretion, may
voluntarily waive all or a portion of the administrative services fee. For its
services under the Administrative Services Contract, the Manager receives a fee
equal to .21% per annum of the Fund's average daily net assets. Any portion of
the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares. See "Distribution and Service
Plan" herein.
In addition, Reich & Tang Distributors L.P., the Distributor, can receive a
servicing fee up to .25% per annum of the average daily net assets of the shares
of the Fund under the Shareholder Servicing Agreement. The fees are accrued
daily and paid monthly.
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on October 12, 1993. The authorized
capital stock of the Fund consists of twenty billion shares of common stock
having a par value of one-tenth of one cent ($.001) per share. The Fund
currently has only one portfolio. The Fund's Articles of Incorporation provide
for the creation of separate classes of the Fund's outstanding common stock.
Except as noted below, each share when issued has equal dividend, distribution
and liquidation rights within the series for which it was issued, and each
fractional share has rights in proportion to the percentage it represents of a
whole share. Shares of all series have identical voting rights, except where, by
law, certain matters must be approved by a majority of the shares of the
affected series. 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 non-assessable. Shares of the Fund are
redeemable at net asset value, at the option of the shareholders.
Under its Articles of Incorporation the Fund has the right to redeem, for cash,
shares of common stock owned by any shareholder to the extent that, and at such
times as, the Fund's Board of Directors determines to be necessary or
appropriate to prevent any 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
directors can elect 100% of the directors if the holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. The Fund's By-Laws provide the
holders of one-third of the outstanding shares of the Fund present at a meeting
in person or by proxy will constitute a quorum for the transaction of business
at all meetings.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission has required that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Fund's Board of Directors has adopted a
Distribution and Service Plan (the "Plan") and, pursuant to the Plan, the Fund
and Reich & Tang Distributors L.P. (the "Distributor") have entered into a
Distribution Agreement and a Shareholder Servicing Agreement.
Reich & Tang Asset Management, Inc. serves as the sole general partner for both
Reich & Tang
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Asset Management L.P. and Reich & Tang Distributors L.P. and Reich & Tang Asset
Management L.P. serves as the sole limited partner of the Distributor.
Under the Distribution Agreement, the Distributor serves as distributor of the
Fund's shares and, for nominal consideration and as agent for the Fund, will
solicit 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 is permitted to
receive payments from the Fund (i) to permit it to make payments to
participating organizations, with which it has written agreements and whose
clients or customers are shareholders of the Fund (each a "Participating
Organization"), for providing personal shareholder services and for the
maintenance of shareholder accounts and (ii) to reimburse it for its costs in
the provision of these services by it to Fund shareholders up to .25% per annum
of the Fund's average daily net assets (the "Shareholder Servicing Fee").
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund will pay for preparation, 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 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. In addition to the use of the Shareholder
Servicing Fee, the Distributor may also make payments from time to time from its
own resources and past profits, for the purposes enumerated above. The Manager
and Distributor may make payments to Participating Organizations for providing
certain of such services up to a maximum of (on an annualized basis) .30% of the
average daily net asset value of the Fund serviced through the Participating
Organization. Moreover, 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.
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. However, in the opinion of the
Manager based on the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing other services for
investment companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of Directors will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution 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.
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<PAGE>
PURCHASE OF SHARES
Shares of the Fund that are purchased through broker-dealers are offered at a
price based on the current net asset value of such shares which is next computed
upon receipt of the purchase order by the broker-dealer.
The minimum for an initial investment is $5,000, except that the minimum initial
investment for an Individual Retirement Account is $250. There is no minimum for
subsequent investments. All purchase payments will be invested in full and
fractional shares. The Fund or the Distributor is authorized to reject any
purchase order.
For each shareholder of record, the Fund's transfer agent, Investors Fiduciary
Trust Company ("Transfer Agent"), as the shareholder's agent, establishes an
open account to which all shares purchased are credited, together with any
dividends and capital gain distributions which are paid in additional shares.
See "Dividends, Distributions and Taxes" herein. Although most shareholders
elect not to receive stock certificates, certificates for full shares can be
obtained on specific written request to the Transfer Agent. No certificates are
issued for fractional shares.
If an investor purchases or redeems shares of the Fund through an investment
dealer, bank or other institution, that institution may impose charges for its
services; these charges would reduce the investor's yield or return. An investor
may purchase or redeem shares of the Fund directly from the Fund's Distributor
or its Transfer Agent without any such charges.
New Shareholders
Mail
To purchase shares of the Fund send a check made payable to "Delafield Fund,
Inc." and a completed subscription order form to the Fund at the following
address:
Delafield Fund, Inc.
Reich & Tang Mutual Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
Checks are accepted subject to collection at full face value in United States
currency.
Bank Wire
To purchase shares of the Fund using the wire system for transmittal of money
among banks, an investor should first telephone the Fund at 212-830-5220 (within
New York State) or at 800-221-3079 (outside New York State) to obtain a new
account number. The investor should then instruct a member commercial bank to
wire funds to:
Investors Fiduciary Trust Company
Reich & Tang Mutual Funds
ABA #101003621
DDA #890752-953-8
For Delafield Fund, Inc.
Account of (Investor's Name)__________
Fund Account #0259-___________________
SS#/Tax ID#___________________________
Then promptly complete and mail the subscription order form. There may be a
charge by your bank for transmitting the money by bank wire. The Fund does not
charge investors in the Fund for the receipt of wire transfers. If you are
planning to wire funds, it is suggested that you instruct your bank early in the
day so the wire transfer can be accomplished the same day. Payment in the form
of a "bank wire" received prior to 4 p.m., New York City time, on a Fund
Business Day will be treated as a Federal Funds payment received on that day.
Personal Delivery
Deliver a check made payable to "Delafield Fund, Inc.", along with a completed
subscription order form to:
Reich & Tang Mutual Funds
600 Fifth Avenue - 9th Floor
New York, New York 10020
Present Shareholders
Subsequent purchases can be made by personal delivery or bank wire, as indicated
above, or by mailing a check made payable to "Delafield Fund, Inc." at:
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<PAGE>
Delafield Fund, Inc.
Mutual Funds Group
P.O. Box 16815
Newark, New Jersey 07101-6815
The shareholder's account number should be clearly indicated.
Certain Participating Organizations may utilize the FundSERV mutual funds
clearinghouse system to purchase and redeem shares.
Electronic Funds Transfers (EFT), Pre-authorized Credit and
Direct Deposit Privilege
You may purchase shares of the Fund (minimum of $100) by having salary, dividend
payments, interest payments or any other payments designated by you, or by
having federal salary, social security, or certain veteran's, military or other
payments from the federal government, automatically deposited into your Fund
account. You can also have money debited from your checking account. To enroll
in any one of these programs, you must file with the Fund a completed EFT
Application, Pre-authorized Credit Application, or a Direct Deposit Sign-Up Form
for each type of payment that you desire to include in the Privilege. The
appropriate form may be obtained from your broker or the Fund. You may elect at
any time to terminate your participation by notifying in writing the appropriate
depositing entity and/or federal agency. Death or legal incapacity will
automatically terminate your participation in the Privilege. Further, the Fund
may terminate your participation upon 30 days' notice to you.
REDEMPTION OF SHARES
Shareholders may make a redemption in any amount by sending a written request to
the Fund, accompanied by any certificate that may have been issued to the
shareholder, addressed to:
Delafield Fund, Inc.
Reich & Tang Mutual Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
Upon receipt by the Fund of a redemption request in proper form, shares of the
Fund will be redeemed at their next determined net asset value. See "Net Asset
Value" herein.
The request must specify the name of the Fund, the dollar amount or number of
shares to be redeemed, and the account number. The request must be signed in
exactly the same way the account is registered (if there is more than one owner
of the shares, all must sign) and, if any certificates are included in the
request, presentation of such certificates properly endorsed. In all cases, all
the signatures on a redemption request and/or certificates must be signature
guaranteed by an eligible guarantor institution which includes a domestic bank,
a domestic savings and loan institution, a domestic credit union, a member bank
of the Federal Reserve System or a member firm of a national securities
exchange; pursuant to the Fund's Transfer Agent's standards and procedures
(guarantees by notaries public are not acceptable). Further documentation, such
as copies of corporate resolutions and instruments of authority may be requested
from corporations, administrators, executors, personal representatives, trustees
or custodians to evidence the authority of the person or entity making the
redemption request.
Checks for redemption proceeds normally will be mailed within seven days, but
will not be mailed until all checks (including a certified or cashier's check)
in payment for the purchase of the shares to be redeemed have been cleared,
which could take up to 15 days after investment. Unless other instructions are
given in proper form, a check for the proceeds of a redemption will be sent to
the shareholder's address of record and generally will be mailed within seven
days after receipt of the request.
The Fund may suspend the right of redemption and postpone the date of payment
for more than seven days during any period when (i) trading on the New York
Stock Exchange is restricted or the Exchange is closed, other than customary
weekend and holiday closings, (ii) the Securities and Exchange Commission has by
order permitted such suspension or (iii) an emergency, as defined by rules of
the Securities and Exchange Commission, exists making disposal of portfolio
investments or
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<PAGE>
determination of the value of the net assets of the Fund not reasonably
practicable.
The proceeds of a redemption may be more or less than the amount invested and,
therefore, a redemption may result in a gain or loss for Federal income tax
purposes. To minimize expenses, the Fund reserves the right to redeem upon not
less than 45 days notice all shares of the Fund in an account (other than an
Individual Retirement Account) which has a value below $500 caused by reason of
a redemption by a shareholder of shares of the Fund; provided, however, a
shareholder's shares may not be redeemed if written objection to the redemption
is received by the Fund within 30 days after the date on which notice of the
redemption is received by the shareholder. Shareholders will be allowed to make
additional investments prior to the date fixed for redemption to avoid
liquidation of the account. In lieu of the right to redeem all shares, the Fund
may impose a monthly service charge of $10 on such accounts.
Systematic Withdrawal Plan
Any shareholder who owns shares of the Fund with an aggregate value of $10,000
or more may establish a Systematic Withdrawal Plan under which he offers to sell
to the Fund at net asset value the number of full and fractional shares which
will produce the monthly or quarterly payments specified (minimum $50 per
payment). Depending on the amounts withdrawn, systematic withdrawals may deplete
the investor's principal. Investors contemplating participation in this plan
should consult their tax advisers.
Shareholders wishing to utilize this plan may do so by completing an application
which may be obtained by writing or calling the Fund. No additional charge to
the shareholder is made for this service.
Telephone Redemption Privilege
The Fund accepts telephone requests for redemption from shareholders who elect
this option. Telephone requests for redemption may not exceed the sum of $25,000
per request per day. The proceeds of a telephone redemption will be sent to the
shareholder at his address or to his bank account as set forth in the
subscription order form or in a subsequent signature guaranteed written
authorization. The Fund may accept telephone redemption instructions from any
person with respect to accounts of shareholders who elect this service, and thus
shareholders risk possible loss of dividends in the event of a telephone
redemption not authorized by them. The Fund will employ reasonable procedures to
confirm that telephone redemption instructions are genuine, and will require
that shareholders electing such option provide a form of personal
identification. The failure by the Fund to employ such reasonable procedures may
cause the Fund to be liable for any losses incurred by investors due to
telephone redemptions based upon unauthorized or fraudulent instructions. The
telephone redemption option may be modified or discontinued at any time upon 60
days written notice to shareholders.
RETIREMENT PLANS
The Fund has available a form of individual retirement account ("IRA") for
investment in the Fund's shares. Individuals earning compensation, including
earnings from self-employment, generally may make IRA contributions of up to
$2,000 annually. However, the deductibility of an individual's IRA contribution
may be reduced or eliminated if the individual or, in the case of a married
individual, either the individual or the individual's spouse, is an active
participant in an employer-sponsored retirement plan. Thus, in the case of an
active participant, the deduction will not be available for an individual with
adjusted gross income above $35,000, a married couple filing a joint return with
adjusted gross income above $50,000 and a married individual filing separately
with adjusted gross income above $10,000. In addition, an individual with a
non-working spouse may establish a separate IRA for the spouse and annually
contribute a total of up to $2,250 to the two IRAs, provided that no more than
$2,000 may be contributed to the IRA of either spouse. The minimum investment
required to open an IRA is $250.
Withdrawals from an IRA, other than that portion, if any, of the withdrawal
considered to be a return of
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<PAGE>
the investor's non-deductible IRA contribution, are taxed as ordinary income
when received. Such withdrawals may be made without penalty after the
participant reaches age 59 1/2, and must commence shortly after age 70 1/2.
Withdrawals before age 59 1/2 or the failure to commence withdrawals on a timely
basis after age 70 1/2 may involve the payment of certain penalties.
Fund shares may also be a suitable investment for assets of other types of
qualified pension or profit-sharing plans, including cash or deferred or salary
reduction "Section 401(k) plans" which give participants the right to defer
portions of their compensation for investment on a tax-deferred basis until
distributions are made from the plans.
Persons desiring information concerning investments by IRAs and other retirement
plans should write or telephone the Fund.
EXCHANGE PRIVILEGE
Shareholders of the Fund are entitled to exchange some or all of their shares in
the Fund for Class B shares of either the Daily Tax Free Income Fund, Inc. or
the Short Term Income Fund, Inc. (U.S. Government Portfolio), each of which are
other investment companies which retain Reich & Tang Asset Management L.P. as
investment adviser or manager. 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. The Fund will provide
shareholders with 60 days written notice prior to any modification or
discontinuance of the exchange privilege. An exchange of shares in the Fund
pursuant to the exchange privilege is, in effect, a redemption of Fund shares
(at net asset value) followed by the purchase of shares of the investment
company into which the exchange is made (at net asset value) and may result in a
shareholder realizing a taxable gain or loss for Federal income tax purposes.
There is no charge for the exchange privilege or limitation as to frequency of
exchanges. The minimum amount for an exchange is $1,000, except that
shareholders who are establishing a new account with an investment company
through the exchange privilege must insure that a sufficient number of shares
are exchanged to meet the minimum initial investment required for the investment
company into which the exchange is being made. The exchange privilege is
available to shareholders resident in any state in which shares of the
investment company being acquired may legally be sold. Before making an
exchange, the investor should review the current prospectus of the investment
company into which the exchange is being made. Prospectuses may be obtained by
contacting the Distributor at the address or telephone number listed on the
cover of this Prospectus.
Instructions for exchange may be made in writing to the Transfer Agent at the
appropriate address listed herein or, for shareholders who have elected that
option, by telephone. The Fund reserves the right to reject any exchange
request.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each dividend and capital gains distribution, if any, declared by the Fund on
its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of common stock of the Fund having an aggregate net
asset value as of the payment date of such dividend or distribution equal to the
cash amount of such dividend or distribution. Election to receive dividends and
distributions in cash or shares is made at the time shares are subscribed for
and may be changed by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution. If the shareholder makes
no election the Fund will make the distribution in shares. There is no sales or
other charge in connection with the reinvestment of dividends and capital gains
distributions.
While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by the Fund of income and capital gains
from investments. Dividends will normally be paid semi-annually. Capital gains
distributions, if any, will be made at least annually, and in no event later
than 60 days after the end of the Fund's fiscal year. There is no fixed dividend
rate, and there can be no assurance
15
<PAGE>
that the Fund will pay any dividends or realize any capital gains.
The Fund intends to qualify for and elect special treatment applicable to a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended. To qualify as a regulated investment company, the Fund must meet
certain complex tests concerning its investments and distributions. For each
year the Fund qualifies as a regulated investment company, the Fund will not be
subject to federal income tax on income distributed to its shareholders in the
form of dividends or capital gain distributions. Additionally, the Fund will not
be subject to a federal excise tax if the Fund distributes at least 98% of its
ordinary income and 98% of its capital gain income to its shareholders.
Dividends out of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income and are
eligible, in the case of corporate shareholders, for the dividends-received
deduction to the extent that the Fund's income is derived from qualifying
dividends received by the Fund from domestic corporations. A corporation's
dividends-received deduction will be disallowed unless the corporation holds
shares in the Fund at least 46 days. Furthermore, a corporation's
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of the Fund is financed with indebtedness.
The excess of net long-term capital gains over the net short-term capital losses
realized and distributed by the Fund to its shareholders as capital gains
distributions are taxable to the shareholders as long-term capital gains,
irrespective of the length of time a shareholder may have held his stock. Such
long-term capital gains distributions are not eligible for the
dividends-received deduction referred to above. If a shareholder held shares six
months or less and during that period received a distribution taxable to such
shareholder as long-term capital gain, any loss realized on the sale of such
shares during such six-month period would be a long-term capital loss to the
extent of such distribution.
Any dividend or distribution received by a shareholder on shares of the Fund
shortly after the purchase of such shares by such shareholder will have the
effect of reducing the net asset value of such shares by the amount of such
dividend or distribution. Furthermore, such dividend or distribution, although
in effect a return of capital, is subject to applicable taxes to the extent that
the investor is subject to such taxes regardless of the length of time the
investor may have held the stock.
The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemptions) paid
to shareholders who have not complied with IRS regulations. In connection with
this withholding requirement, a shareholder will be asked to certify on his
application that the social security or tax identification number provided is
correct and that the shareholder is not subject to 31% backup withholding for
previous underreporting to the IRS.
NET ASSET VALUE
The Fund determines the net asset value per share of the Fund as of 4:00 p.m.,
New York City time, by dividing the value of the Fund's net assets (i.e., the
value of its securities and other assets less its liabilities, including
expenses payable or accrued but excluding capital stock and surplus) by the
number of shares outstanding at the time the determination is made. The Fund
determines its net asset value on each Fund Business Day. Fund Business Day for
this purpose means weekdays (Monday through Friday) except customary national
business holidays and Good Friday. Purchases and redemptions will be effected at
the time of determination of net asset value next following the receipt of any
purchase or redemption order in proper form. See "Purchase of Shares" and
"Redemption of Shares" herein.
Portfolio securities for which market quotations are readily available are
valued at market value. All other investment assets of the Fund are valued in
such manner as the Board of Directors of the Fund in good faith deems
appropriate to reflect their fair value.
GENERAL INFORMATION
Performance
From time to time the Fund may distribute sales literature or publish
advertisements containing "total
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<PAGE>
return" quotations for the Fund. The Manager may also include general language
in such advertisements or information furnished to present or prospective
shareholders regarding the Manager's investment performance. Such sales
literature or advertisements will disclose the Fund's average annual compounded
total return for the Fund's last one year period, five year period and the
period since the Fund's inception, and may include total return information for
other periods. The Fund's total return for each period is computed, through use
of a formula prescribed by the Securities and Exchange Commission, by finding
the average annual compounded rates of return over the period that would equate
an assumed initial amount invested to the value of the investment at the end of
the period. For purposes of computing total return, income dividends and capital
gains distributions paid on shares of the Fund are assumed to have been
reinvested when received.
Shareholder Meetings
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-Laws of the Fund provide for annual
meetings only (a) for the election of directors as required by the 1940 Act, (b)
for approval of revised investment advisory agreements with respect to a
particular class or series of stock, (c) for approval of revisions to the Fund's
distribution plan as required in the 1940 Act with respect to particular class
or series of stock, and (d) upon the written request of holders of shares
entitled to cast not less than 10% of all the votes entitled to be cast as 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, any
registration of the Fund with the Securities and Exchange Commission or any
state, or as the Directors may consider necessary or desirable. Each Director
serves until the next meeting of shareholders called for the purpose of
considering the election or re-election of such Director or of a successor to
such Director, and until the election and qualification of his or her successor,
elected at such meeting, or until such Director sooner dies, resigns, retires or
is removed by the vote of the shareholders.
Custodian and Transfer Agent
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, is the custodian for the Fund's cash and securities, and is the transfer
agent and dividend agent for the shares of the Fund. The Fund's transfer agent
and custodian does not assist in, and is not responsible for investment
decisions involving assets of the Fund.
Information for Shareholders
All shareholder inquiries should be directed to Delafield Fund, Inc., 600 Fifth
Avenue, New York, New York 10020 (telephone: 212-830-5220 or outside New York
State 800-221-3079).
The Fund will send to all its shareholders semi-annual unaudited and annual
audited reports, including a list of investment securities held.
For further information with respect to the Fund and the shares offered hereby,
reference is made to the Fund's Registration Statement filed with the Securities
and Exchange Commission, including the exhibits thereto. The Registration
Statement and the exhibits thereto may be examined at the Securities and
Exchange Commission and copies thereof may be obtained upon payment of certain
duplicating fees.
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DESCRIPTION OF RATINGS
Investor Services, Inc. ("Moody's")
Aaa: Bonds which are rated Aaa are judged to be 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 fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Unrated: Where no rating has been assigned or where a rating has been suspended
or withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1) An application for rating was not received or accepted.
2) The issue or issuer belongs to a group of securities that are not rated as
a matter of policy.
3) There is a lack of essential data pertaining to the issue or issuer.
4) The issue was privately placed, in which case the rating is not published
in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa-1,
A-1, Baa-1 and B-1.
Standard & Poor's Corporation ("S&P")
AAA: Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
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<PAGE>
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in the highest rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of this obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, they are
outweighed by large uncertainties of major risk exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no interest is being
paid.
D: Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
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<PAGE>
TABLE OF CONTENTS
Table of Fees and Expenses.............................2
Selected Financial Information.........................2
Introduction...........................................3
Investment Objectives, Policies and Risks..............3 DELAFIELD
Foreign Securities..................................5 FUND, INC.
Convertible Securities..............................5
Risks on Investing in Lower Rated Securities........5
Warrants............................................6
Short Sales.........................................6
Restricted Securities...............................7
Corporate Reorganizations...........................7
Investments in Small, Unseasoned Companies..........8 PROSPECTUS
Investment Restrictions................................8 February 1, 1996
The Manager............................................8
Description of Common Stock............................10
Distribution and Service Plan..........................10
Purchase of Shares.....................................12
New Shareholders....................................12
Present Shareholders................................12
Electronic Funds Transfers (EFT), Pre-authorized
Credit and Direct Deposit Privilege..............13
Redemption of Shares...................................13
Systematic Withdrawal Plan..........................14
Telephone Redemption Privilege......................14
Retirement Plans.......................................14
Exchange Privilege.....................................15
Dividends and Distributions and Taxes..................15
Net Asset Value........................................16
General Information ...................................16
Performance.........................................16
Shareholder Meetings................................17
Custodian and Transfer Agent........................17
Information for Shareholders .......................17
Description of Ratings.................................18
No dealer, salesman or other person has been authorized to give any information
or to make any representation other than those contained in this Prospectus, and
if given or made, such information and representation may not be relied upon as
authorized by the Fund, its Manager, Distributor or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of any offer
to buy any of the securities offered hereby in any state to any person to whom
it is unlawful to make such offer in such state.
<PAGE>
RULE 497(b)
Registration No. 33-69760
================================================================================
DELAFIELD 600 Fifth Avenue, New York, NY 10020
FUND, INC. (212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1996
Delafield Fund, Inc. (the "Fund") is an open-end, diversified management
investment company. The Fund's investment objectives are to seek long-term
preservation of capital (sufficient growth to outpace inflation over an extended
period of time) and growth of capital.
This Statement of Additional Information is not a prospectus and is only
authorized for distribution when preceded or accompanied by the Fund's
prospectus dated February 1, 1996 (the "Prospectus"). This Statement of
Additional Information contains additional and more detailed information than
that set forth in the Prospectus and should be read in conjunction with the
Prospectus, additional copies of which may be obtained without charge by either
writing or telephoning the Fund at the address or telephone number set forth
above.
<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C> <C>
Investment Objectives, Manager................................................5
Policies and Risk.....................................2 Expense Limitation...................................6
Common Stock........................................2 Management of the Fund.................................7
Warrants............................................2 Compensation Table...................................9
Foreign Securities..................................2 Counsel and Auditors.................................9
Corporate Reorganizations...........................2 Distribution and Service Plan..........................9
Repurchase Agreements...............................3 The Glass-Steagall Act.................................10
Risks of Investing in Lower Description of Common Stock............................11
Rated Securities.................................3 Custodian and Transfer Agent...........................11
Other Matters.......................................4 Performance............................................12
Investment Restrictions..................................4 Net Asset Value........................................12
Portfolio Transactions...................................4 Description fo Ratings.................................14
Purchase of Shares and Redemption of Shares..............5 Financial Statements...................................17
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
As stated in the Prospectus, the Fund is an open-end, diversified management
investment company. The Fund's investment objectives are to seek long-term
preservation of capital (sufficient growth to outpace inflation over an extended
period of time) and growth of capital. The Fund will seek to achieve these
objectives by investing primarily in the equity securities of domestic companies
which, based on the research of the Delafield Asset Management Division of Reich
& Tang Asset Management L.P. (the "Manager"), are considered to be undervalued
or to represent special situations (i.e., companies undergoing change that might
cause their market value to grow at a rate faster than the market generally).
Common Stock
The Fund intends to invest principally in the equity securities of domestic
companies. Investment in the Fund should be made with an understanding of the
risks that an investment in equity securities may entail. In particular, common
stocks represent the residual ownership interest in the issuer and are entitled
to the income and increase in the value of the assets and business of the entity
after all of the issuer's obligations, including preferred stock dividends, are
satisfied. Common stocks fluctuate in price in response to many factors
including historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, and investor perceptions of
market liquidity.
Warrants
The Fund may invest in warrants which entitle the holder to buy equity
securities at a specific price for a specific period of time. Warrants may be
considered more speculative than certain other types of investment in that they
do not entitle a holder to dividends or voting rights with respect to the
securities which may be purchased nor do they represent any rights in the assets
of the issuing company. Also, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to the expiration date.
Foreign Securities
Investments may be made in both domestic and foreign companies. While the Fund
has no present intention to invest any significant portion of its assets in
foreign securities, it reserves the right to invest not more than 15% of the
value of its total assets (at the time of purchase and after giving effect
thereto) in the securities of foreign issuers and obligors.
Investments in foreign companies involve certain considerations which are not
typically associated with investing in domestic companies. An investment may be
affected by changes in currency rates and in exchange control regulations. There
may be less publicly available information about a foreign company than about a
domestic company. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic companies. Foreign stock markets have substantially less
volume than the New York Stock Exchange and securities of some foreign companies
may be less liquid and more volatile than securities of comparable domestic
companies. There is generally less government regulation of stock exchanges,
brokers and listed companies in foreign countries than in the United States. In
addition, with respect to certain foreign countries, there is a possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments which could affect investments in those countries.
Individual foreign economies may differ favorably or unfavorably from the United
States' economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
Corporate Reorganizations
The Fund may invest in securities for which a tender or exchange offer has been
made or announced and in securities of companies for which a merger,
consolidation, liquidation or reorganization proposal has been announced if, in
the judgment of the Manager, there is reasonable prospect of capital
appreciation significantly greater than the brokerage and other transaction
expenses involved. The primary risk of such investments is that if the
contemplated transaction is abandoned, revised, delayed or becomes subject to
unanticipated uncertainties, the market price of the securities may decline
below the purchase price paid by the Fund.
In general, securities which are the subject of such an offer or proposal sell
at a premium to their historic market price immediately prior to the
announcement of the offer or proposal. However, the increased market price of
such securities may also discount what the stated or appraised value of the
security would be if the contemplated transaction were approved or consummated.
Such investments may be advantageous when the discount significantly overstates
the risk of the contingencies involved; significantly undervalues the
2
<PAGE>
securities, assets or cash to be received by shareholders of the prospective
portfolio company as a result of the contemplated transaction; or fails
adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of such contingencies requires unusually broad knowledge and experience on the
part of the Manager which must appraise not only the value of the issuer and its
component businesses as well as the assets or securities to be received as a
result of the contemplated transaction, but also the financial resources and
business motivation of the offerer as well as the dynamics of the business
climate when the offer or proposal is in process.
In making such investments, the Fund will not violate any of its diversification
requirements or investment restrictions (see below, "Investment Restrictions")
including the requirement that, except for the investment of up to 25% of its
total assets in any one company or industry, not more than 5% of its total
assets may be invested in the securities of any one issuer. Since such
investments are ordinarily short-term in nature, they will tend to increase the
turnover ratio of the Fund thereby increasing its brokerage and other
transaction expenses as well as make it more difficult for the Fund to meet the
tests for favorable tax treatment as a "Regulated Investment Company" specified
by the Internal Revenue Code (see the Prospectus, "Dividends, Distributions and
Taxes"). The Manager intends to select investments of the type described which,
in its view, have a reasonable prospect of capital appreciation which is
significant in relation to both the risk involved and the potential of available
alternate investments as well as monitor the effect of such investments on the
tax qualification tests of the Internal Revenue Code.
Repurchase Agreements
When the Fund enters into a repurchase agreement, the Fund requires the
continual maintenance of collateral (to be held by the Fund's custodian in a
segregated account) in an amount equal to, or in excess of, the vendor's
repurchase agreement commitment. The underlying securities are ordinarily U.S.
Treasury or other government obligations or high quality money market
instruments. In the event that a vendor defaults on its repurchase obligation,
the Fund might suffer a loss to the extent that the proceeds from the sale of
the collateral are less than the repurchase price. If the vendor becomes
bankrupt, the Fund might be delayed, or may incur costs or possible losses of
principal and income, in selling the collateral. Repurchase agreements may be
entered into with member banks of the Federal Reserve System or "primary
dealers" (as designated by the Federal Reserve Bank of New York) in U.S.
Government securities.
Risks of Investing in Lower Rated Securities
The Fund may invest less than 35% of its total assets in lower rated securities
(Baa by Moody's Investor Services, Inc. ("Moody's") or BBB by Standard & Poor's
Corporation ("S&P") and comparable unrated securities, collectively commonly
known as "junk bonds") to the extent described in the Prospectus. No minimum
rating standard is required by the Fund. These lower rated securities are
considered speculative and, while generally providing greater income than
investments in higher rated securities, will involve greater risk of principal
and income (including the possibility of default or bankruptcy of the issuers of
such securities) and may involve greater volatility of price (especially during
periods of economic uncertainty or change) than securities in the higher rating
categories and because yields vary over time, no specific level of income can
ever be assured. These lower rated securities generally tend to reflect economic
changes (and the outlook for economic growth) short-term corporate and industry
developments and the market's perception of their credit quality (especially
during times of adverse publicity) to a greater extent than higher rated
securities which react primarily to fluctuations in the general level of
interest rates (although these lower rated securities are also affected by
changes in interest rates). In the past, economic downturns or an increase in
interest rates have, under certain circumstances, caused a higher incidence of
default by the issuers of these securities and may do so in the future,
especially in the case of highly leveraged issuers. The prices for these
securities may be affected by legislative and regulatory developments. For
example, federal rules require that savings and loan associations gradually
reduce their holdings of securities. An effect of such legislation may be to
depress the prices of outstanding lower rated securities. In addition,
investment in these lower rated securities may involve greater liquidity and
valuation risks than those for investment grade securities. To the extent there
is no established secondary market for these securities, there could be thin
trading of such securities which could adversely impact the Board of Directors'
ability to accurately value such securities and the Fund's assets. Furthermore,
the liquidity of these lower rated securities may be affected by the market's
perception of their credit quality. Therefore, the Manager's judgment may at
times play a greater role in valuing these securities than in the case of
investment grade securities, and it also may be more difficult during times of
certain adverse market conditions to dispose of these lower rated securities to
meet redemption requests or to respond to changes in the market.
3
<PAGE>
While the Manager may refer to ratings issued by established credit rating
agencies, it is not the Fund's policy to rely exclusively on ratings issued by
these rating agencies, but rather to supplement such ratings with the Manager's
own independent and ongoing review of credit quality. To the extent the Fund
invests in these lower rated securities, the achievement of its investment
objectives may be more dependent on the Manager's own credit analysis than in
the case of a fund investing in investment grade securities.
Other Matters
In addition, for purposes of complying with the securities regulations of
certain states, the Fund has adopted the following additional investment
restrictions, which may be changed by the Fund's Board of Directors without
shareholder approval. The Fund may not purchase or retain the securities of any
issuer if the officers or directors of the Fund or Reich & Tang Asset
Management, Inc., the general partner of the Manager, owning beneficially more
than 1/2 of 1% of the securities of an issuer together own beneficially more
than 5% of that issuer.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions which are in addition
to those described in the Prospectus. Under the following restrictions, which
may not be changed without the approval of a majority of the Fund's
shareholders, the Fund may not:
1) Purchase or otherwise acquire interests in real estate, real estate
mortgage loans or interests in oil, gas or other mineral exploration or
development programs;
2) Invest in puts, calls, straddles, spreads or combination thereof;
3) Purchase or acquire commodities or commodity contracts;
4) Issue senior securities, except insofar as the Fund may be deemed to have
issued a senior security in connection with any permitted borrowing; 5)
Participate on a joint or a joint and several basis in any securities
trading account; and 6) Invest in companies for the purpose of exercising
control.
PORTFOLIO TRANSACTIONS
The Manager makes the Fund's portfolio decisions and determines the broker to be
used in each specific transaction with the objective of negotiating a
combination of the most favorable commission and the best price obtainable on
each transaction (generally defined as best execution). When consistent with the
objective of obtaining best execution, brokerage may be directed to persons or
firms supplying investment information to the Manager or portfolio transactions
may be effected by the Manager. Neither the Fund nor the Manager has entered
into agreements or understandings with any brokers regarding the placement of
securities transactions because of research services they provide. To the extent
that such persons or firms supply investment information to the Manager for use
in rendering investment advice to the Fund, such information may be supplied at
no cost to the Manager and, therefore, may have the effect of reducing the
expenses of the Manager in rendering advise to the Fund. While it is impossible
to place an actual dollar value on such investment information, its receipt by
the Manager probably does not reduce the overall expenses of the Manager to any
material extent. Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking best execution,
the Manager may consider sales of shares of the Fund as a factor in the
selection of brokers to execute portfolio transactions for the Fund.
The investment information provided to the Manager is of the type described in
Section 28(e) of the Securities Exchange Act of 1934 and is designed to augment
the Manager's own internal research and investment strategy capabilities.
Research services furnished by brokers through which the Fund effects securities
transactions are used by the Manager in carrying out its investment management
responsibilities with respect to all its clients' accounts. There may be
occasions where the transaction cost charged by a broker may be greater than
that which another broker may charge if the Manager determines in good faith
that the amount of such transaction cost is reasonable in relation to the value
of brokerage and research services provided by the executing broker.
The Fund may deal in some instances in securities which are not listed on a
national securities exchange but are traded in the over-the-counter market. It
may also purchase listed securities through the third market. Where transactions
are executed in the over-the-counter market or the third market, the Fund will
seek to
4
<PAGE>
deal with the primary market makers; but when necessary in order to obtain best
execution, it will utilize the services of others. In all cases the Fund will
attempt to negotiate best execution.
The Distributor may from time to time effect transactions in the Fund's
portfolio securities. In such instances, the placement of orders with the
Distributor would be consistent with the Fund's objective of obtaining best
execution. With respect to orders placed with the Distributor for execution on a
national securities exchange, commissions received must conform to Section
17(e)(2)(A) of the Investment Company Act of 1940 (the "1940 Act"), as amended,
and Rule 17e-1 thereunder, which permit an affiliated person of a registered
investment company (such as the Fund) to receive brokerage commissions from such
registered investment company provided that such commissions are reasonable and
fair compared to commissions received by other brokers in connection with
comparable transactions involving similar securities during a comparable period
of time. In addition, pursuant to Section 11(a) of the Securities Exchange Act
of 1934, the Distributor is restricted as to the nature and extent of the
brokerage services it may perform for the Fund. The Securities and Exchange
Commission has adopted rules under Section 11(a) which permit a distributor to a
registered investment company to receive compensation for effecting, on a
national securities exchange, transactions in portfolio securities of such
investment company, including causing such transactions to be transmitted,
executed, cleared and settled and arranging for unaffiliated brokers to execute
such transactions. To the extent permitted by such rules, the Distributor may
receive compensation relating to transactions in portfolio securities of the
Fund provided that the Fund enters into a written agreement, as required by such
rules, with the Distributor authorizing it to retain compensation for such
services. Transactions in portfolio securities placed with the Distributor which
are executed on a national securities exchange must be effected in accordance
with procedures adopted by the Board of Directors of the Fund pursuant to Rule
17e-1.
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.
The portfolio turnover rates for the fiscal year ended September 30, 1995 and
December 31, 1995 were 70.36% and 20.49%, respectively.
PURCHASE OF SHARES AND REDEMPTION OF SHARES
The material relating to the purchase and redemption of shares in the Prospectus
is herein incorporated by reference.
MANAGER
The investment manager for the Fund is the Delafield Asset Management Division
of Reich & Tang Asset Management L.P., a Delaware limited partnership with
principal offices at 600 Fifth Avenue, New York, New York 10020 ("Manager"). The
Manager was at December 31, 1995 manager, adviser or supervisor with respect to
assets aggregating approximately $8.2 billion. The Manager acts as manager or
administrator of fifteen other investment companies and also advises pension
trust, profit sharing trusts and endowments. New England Investment Companies,
L.P. ("NEICLP"), is the limited partner and owner of a 99.5% interest in the
newly created limited partnership, Reich & Tang Asset Management L.P., the
Manager. Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of
NEICLP) is the general partner and owner of the remaining .5% interest of the
Manager. Reich & Tang Asset Management L.P. has succeeded NEICLP as the Manager
of the Fund.
In addition to the Fund, Reich & Tang Asset Management L.P.'s advisory clients
include, among others, California Daily Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income
Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily Income
Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., 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. and Tax Exempt Proceeds Fund, Inc. Reich & Tang Asset
Management L.P. also advises pension trusts, profit sharing trusts and
endowments.
The Manager provides persons satisfactory to the Board of Directors of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of Reich &
Tang Asset Management, Inc., the sole general partner of the Manager or
employees of the Manager or its affiliates.
5
<PAGE>
The Investment Management Contract was approved by the Board of Directors,
including a majority of the directors who are not interested persons (as defined
in the 1940 Act), of the Fund or the Manager, effectiveNovember 19, 1993 and the
Investment Management Contract was approved by a majority of the Fund's
shareholders at the meeting held October 15, 1993.
The Investment Management Contract has a term which extends to October 31, 1996,
and may be continued in force thereafter for successive twelve-month periods
beginning each November 1st, provided that such continuance is specifically
approved annually by majority vote of the Fund's outstanding voting securities
or by its Board of Directors, and in either case by a majority of the directors
who are not parties to the Investment Management Contract or interested persons
of any such party, by votes cast in person at a meeting called for the purpose
of voting on such matter.
The Investment Management Contract is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or by the Manager on sixty days' written notice, and will automatically
terminate in the event of its assignment. The Investment Management Contract
provides that in the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or of reckless disregard of its
obligations thereunder, the Manager shall not be liable for any action or
failure to act in accordance with its duties thereunder.
Under the Investment Management Contract, the Manager receives from the Fund a
fee equal to .80% per annum of the Fund's average daily net assets. The fee
received by the Manager under the Investment Management Contract is higher than
the fee paid by most investment companies. The fees are accrued daily and paid
monthly. Any portion of the total fees received by the Manager may be used by
the Manager to provide shareholder services. (See Distribution and Service Plan"
herein.) For the Fund's fiscal year ended September 30, 1994, the fee payable to
the Manager under the Investment Management Contract was $44,507 of which
$38,417 was voluntarily and irrevocably waived. The Fund's net assets at the
close of business on September 30, 1994 totaled $9,658,135. For the Fund's
fiscal years ended September 30, 1995 and December 31, 1995, the fees payable to
the Manager under the Investment Management Contract were $104,515 of which
$33,474 was voluntarily and irrevocably waived and $86,832, none of which was
waived. The Fund's net assets at the close of business on September 30, 1995 and
December 31, 1995, totaled $42,316,267 and $45,730,034, respectively.
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 bookkeeping and related services by Investors Fiduciary Trust
Company, the Fund's bookkeeping or recordkeeping agent, (ii) prepare reports to
and filings with regulatory authorities, and (iii) perform such other services
as the Fund may from time to time request of the Manager. The personnel
rendering such services may be employees of the Manager, of its affiliates or of
other organizations. The Manager, at its discretion, may voluntarily waive all
or a portion of the administrative services fee and the operating expense
reimbursement. 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. For the Fund's fiscal year ended September 30, 1994,
the fee payable to the Manager under the Administrative Services Contract was
$11,126 of which $9,641 was voluntarily and irrevocably waived. For the Fund's
fiscal years ended September 30, 1995 and December 31, 1995, the fees payable to
the Manager under the Administrative Services Contract were $26,129, all of
which was voluntarily and irrevocably waived and $22,088, none of which was
waived.
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 and the administrative services fee for purposes of shareholder
and administrative services and distribution of the Fund's shares. There can be
no assurance that such fees will be waived in the future (see "Distribution and
Service Plan" herein).
Expense Limitation
The Manager has agreed, pursuant to the Investment Management Contract, to
reimburse the Fund for its expenses (exclusive of interest, taxes, brokerage,
and extraordinary expenses) which, in any year, exceed the limits on investment
company expenses prescribed by any state in which the Fund's shares are
qualified for sale. For the purpose of this obligation to reimburse expenses,
the Fund's annual expenses are estimated and accrued daily, and any appropriate
estimated payments are made to it on a monthly basis. Subject to the obligations
of the Manager to reimburse the Fund for its excess expenses as described above,
the Fund has, under the Investment Management Contract, confirmed its obligation
for payment of all its other expenses, including taxes, brokerage fees and
commissions, commitment fees, certain insurance premiums, interest charges and
expenses of the custodian, transfer agent and dividend disbursing agent's fees,
telecommunications expenses, auditing and legal expenses, bookkeeping
6
<PAGE>
agent fees, costs of forming the corporation and maintaining corporate
existence, compensation of directors, officers and employees of the Fund and
costs of other personnel performing services for the Fund who are not officers
of the general partner of the Manager or its affiliates, costs of investor
services, shareholder reports and corporate meetings, Securities and Exchange
Commission registration fees and expenses, state securities laws registration
fees and expenses, expenses of preparing and printing the Fund's prospectus for
delivery to existing shareholders and of printing application forms for
shareholder accounts and the fees payable to the Manager under the Investment
Management Contract and the Administrative Services 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 defined under "Distribution and Service Plan") as discussed
herein, and the management of the Fund intends to do so whenever it appears
advantageous to the Fund. The Fund's expenses for employees and for such
services are among the expenses subject to the expense limitation described
above.
MANAGEMENT OF THE FUND
The directors and officers of the Fund, and their principal occupations for the
past five years, are listed below. The address of each such person, unless
otherwise indicated, is 600 Fifth Avenue, New York, New York 10020. Directors
deemed to be "interested persons" of the Fund for the purposes of the 1940 Act
are indicated by an asterisk.
J. DENNIS DELAFIELD,* 59 - Chairman, Chief Executive Officer and a Director of
the Fund, is Managing Director of the Delafield Asset Management Division of the
Manager, with which he has been associated since September 1993. From December
1991 to September 1993, Mr. Delafield, acting as an investment adviser, was a
Managing Director of Reich & Tang L.P. and an officer of Reich & Tang, Inc.; and
from October 1979 to December 1991, was President and Director of Delafield
Asset Management, Inc.
W. GILES MELLON, 64 - Director of the Fund, is a Professor of Business
Administration and Area Chairman of Finance in the Graduate School of Business
Administration, Rutgers University with which he has been associated since 1966.
His address is 92 New Street, Newark, New Jersey 07102. Dr. Mellon is also
Director of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Reich & Tang Equity Fund, Inc. and
Short Term Income Fund, Inc. and a Trustee of Florida Daily Municipal Income
Fund, Institutional Daily Income Fund, Pennsylvania Daily Municipal Income Fund
and Reich & Tang Government Securities Trust.
ROBERT STRANIERE, 54 - Director of the Fund, is a member of the New York State
Assembly and a partner in the Straniere Law Firm since 1981. His address is 182
Rose Avenue, Staten Island, New York 10306. Mr. Straniere is also a Director of
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income Fund, Inc., LifeCycle Funds, Inc. Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Reich & Tang Equity Fund, Inc.
and Short Term Income Fund, Inc. and a Trustee of Florida Daily Municipal Income
Fund, Institutional Daily Income Fund, Pennsylvania Daily Municipal Income Fund
and Reich & Tang Government Securities Trust.
YUNG WONG, 56 - Director of the Fund, was Director of Shaw Investment Management
(UK) Limited from 1994 to October 1995 and formerly a 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 of Republic Telecom Systems Corporation (a
provider of telecommunications equipment) since January 1989 and of TelWatch,
Inc. (a provider of network management software) since August 1989. Dr. Wong is
also a Director of California Daily Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Reich & Tang Equity Fund, Inc.
and Short Term Income Fund, Inc. and a Trustee of Florida Daily Municipal Income
Fund, Institutional Daily Income Fund, Pennsylvania Daily Municipal Income Fund
and Reich & Tang Government Securities Trust.
VINCENT SELLECCHIA, 43 - President of the Fund, is Vice President of the
Delafield Asset Management Division of the Manager, with which he has been
associated since September 1993. From December 1991 to September 1993, Mr.
Sellecchia, acting as an investment adviser, was Vice President of Reich & Tang
L.P.
7
<PAGE>
and an officer of Reich & Tang, Inc.; and from October 1980 to December 1991,
was Vice President, Director of Investment Analysis for Delafield Asset
Management, Inc.
BERNADETTE N. FINN, 48 - Vice President and Secretary of the Fund, is Vice
President of the Mutual Funds Division of the Manager since September 1993. Ms.
Finn was formerly Vice President and Assistant Secretary of Reich & Tang, Inc.
with which she was associated with from September 1970 to September 1993. Ms.
Finn is also Secretary of California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax
Free Income Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily
Income Fund, Michigan Daily Tax Free Income Funds, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund and Tax Exempt Proceeds Fund, Inc., a Vice President and Secretary of Reich
& Tang Equity Fund, Inc., Reich & Tang Government Securities Trust and Short
Term Income Fund, Inc.
MOLLY FLEWHARTY, 44 - Vice President of the Fund, is Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. with which she was associated with
from December 1977 to September 1993. Ms. Flewharty is also a Vice President of
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., 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 and Short Term Income Fund, Inc.
CYNTHIA L. JERAN, 40 - Vice President of the Fund, is an associate of the
Delafield Asset Management Division of the Manager, with which she has been
affiliated since September 1993. From December 1991 to September 1993, Ms. Jeran
was an associate of the Delafield Asset Management division of the Manager's
predecessor, and from April 1981 through December 1991 was an associate of
Delafield Asset Management, Inc.
LESLEY M. JONES, 47 - Vice President of the Fund, is Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Jones was
formerly Senior Vice President of Reich & Tang, Inc. which she was associated
with from April 1973 to September 1993. Ms. Jones is also a Vice President of
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income Fund, Inc., 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 and Short Term Income Fund, Inc.
DANA E. MESSINA, 39 - Vice President of the Fund, is Executive Vice President of
the Mutual Funds Division of the Manager since January 1995 and was Vice
President from September 1993 to January 1995. Ms. Messina was formerly Vice
President of Reich & Tang, Inc. with which she was associated with from December
1980 to September 1993. Ms. Messina is also Vice President of California Daily
Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Florida Daily Municipal
Income Fund, Institutional Daily Income Fund, Michigan Daily Tax Free Income
Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax
Free Income Fund, Inc., 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. and Tax Exempt
Proceeds Fund, Inc.
RICHARD DE SANCTIS, 39 - Treasurer of the Fund, is Vice President and Treasurer
of the Manager. Mr. De Sanctis was formerly Controller of Reich & Tang, Inc.
from January 1991 to September 1993 and Vice President and Treasurer of Cortland
Financial Group, Inc. and Vice President of Cortland Distributors, Inc. from
1989 to December 1990. Mr. De Sanctis is also Treasurer of California Daily Tax
Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax
Free Income Fund, Inc., Florida Daily Municipal Income Fund, 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. and Tax Exempt Proceeds Fund, Inc.
Directors of the Fund not affiliated with Reich & Tang Asset Management L.P.
receive from the Fund an annual retainer of $1,500 and a fee of $250 for each
Board of Directors meeting attended and are reimbursed
8
<PAGE>
for all out-of-pocket expenses relating to attendance at such meetings.
Directors who are affiliated with Reich & Tang Asset Management L.P. do not
receive compensation from the Fund. See Compensation Table below.
<TABLE>
<CAPTION>
COMPENSATION TABLE
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C>
Aggregate Compensation Pension or Retirement Total Compensation from
Name of Person, from Registrant for Benefits Accrued as Estimated Annual Fund and Fund Complex
Position Fiscal Year Part of Fund Expenses Benefits upon Retirement Paid to Directors*
W. Giles Mellon, $2500 0 0 $51,500 (14 Funds)
Director
Robert Straniere, $2500 0 0 $51,500 (14 Funds)
Director
Yung Wong, $2500 0 0 $51,500 (14 Funds)
Director
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending September 30, 1995 (and, with respect to certain of
the funds in the Fund Complex, estimated to be paid during the fiscal year
ending September 30, 1995). The parenthetical number represents the number of
investment companies (including the Fund) from which such person receives
compensation that are considered part of the same Fund complex as the Fund,
because, among other things, they have a common investment advisor.
** The Aggregate Compensation from Registrant for the fiscal year ending
December 31, 1995 was $875 for each Director. The total compensation paid to
such persons by the Fund and Fund Complex for the fiscal year ending December
31, 1995 was $18,125.
</TABLE>
Counsel and Auditors
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Messrs. Battle Fowler LLP, 75 East 55th Street, New York, New
York 10022.
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, have been selected as auditors for the Fund.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission has required that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Fund's Board of Directors has adopted a
Distribution and Service Plan (the "Plan") and, pursuant to the Plan, the Fund
and the Manager have entered into a Distribution Agreement and a Shareholder
Servicing Agreement with Reich & Tang Distributors L.P. (the "Distributor") as
distributor of the Fund's shares.
Reich & Tang Asset Management, Inc. serves as the sole general partner for both
Reich & Tang Asset Management L.P. and Reich & Tang Distributors L.P., and Reich
& Tang Asset Management L.P. serves as the sole limited partner of the
Distributor.
Under the Plan, the Fund and the Distributor will enter into a Shareholder
Servicing Agreement, with respect to the Fund's shares. For its services under
the Shareholder Servicing Agreement, the Distributor is permitted to receive
payments from the Fund (i) to permit it to make payments to participating
organizations with which it has written agreements and whose clients or
customers are Fund shareholders (each a "Participating Organization"), for
providing personal shareholder services and for maintenance of shareholder
accounts and (ii) to reimburse it for costs in the provision of these services
by it to Fund shareholders up to .25% per annum of the Fund's average daily net
assets (the "Shareholder Servicing Fee").
Under the Distribution Agreement, the Distributor, for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any orders will not be binding on the Fund until
acceptance 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 Fund's shares and (ii) preparing, printing and
9
<PAGE>
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 in addition to the use of the Shareholder Servicing Fee,
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 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 shareholders, including the
salaries and/or commissions of sales personnel in connection with the
distribution of the Fund's shares. The Distributor may also make payments from
time to time from its own resources, which may include the Shareholder Servicing
Fee and past profits for the purpose enumerated in (i) above. The Distributor
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 the Investment
Management Contract, the Administrative Services Contract or the Shareholder
Servicing Agreement in effect for that year.
For the Fund's fiscal year ended September 30, 1994, the Fund accrued
shareholder servicing fees of $13,908, all of which was voluntarily, permanently
and irrevocably waived. During such period, the Manager made payments from its
own resources aggregating $2,667 of which $425 was spent on sales personnel and
related expenses of the Manager, $287 was spent on travel and entertainment,
$1,805 was spent on prospectus and application printing and $150 was spent on
miscellaneous expenses. For the Fund's fiscal year ended September 30, 1995, the
Fund accrued shareholder servicing fees of $32,661, all of which was
voluntarily, permanently and irrevocably waived. During such period, the Manager
made payments from its own resources aggregating $13,646 of which $2,065 was
spent on sales personnel and related expenses of the Manager, $1,374 was spent
on travel and entertainment, $9,831 was spent on prospectus and application
printing and $376 was spent on miscellaneous expenses. For the Fund's fiscal
year ended December 31, 1995, the Fund paid a distribution fee of $ 5,553 for
expenditures pursuant to the Plan. During such time, the Fund accrued
shareholder servicing fees of $27,135, of which $21,582 was voluntarily,
permanently and irrevocably waived, and the Manager made payments from its own
resources aggregating $1,913 of which $1,348 was spent on sales personnel and
related expenses of the Manager, $311 was spent on travel and entertainment, $7
was spent on prospectus and application printing and $247 was spent on
miscellaneous expenses.
In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the Plan requires
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
The Plan provides that it may continue in effect for successive annual periods
provided it is approved by the Fund's shareholders or by the Board of Directors,
including a majority of directors who are not interested persons of the Fund and
who have no direct or indirect interest in the operation of the Plan, or
agreements related to the Plan. The Plan was approved by a majority of its
shareholders on November 16, 1993. The continuance of the Plan was most recently
approved by the Board of Directors on July 7, 1995 and shall continue in effect
until October 31, 1996. The Plan further provides that it may be spent by the
Fund for distribution pursuant to the Plan without shareholder approval, and the
other material amendments must be approved by the directors in the manner
described in the preceding sentence. The Plan may be terminated at any time by a
vote of a majority of the disinterested directors of the Fund or the Fund's
shareholders.
THE GLASS-STEAGALL ACT
The Glass-Steagall Act limits the ability of a depository institution to become
an underwriter or distributor of securities. However, it is the Fund's position
that banks are not prohibited from acting in other capacities for investment
companies, such as providing administrative and shareholder account maintenance
services and receiving compensation from the Distributor for providing such
services. However, this is an unsettled area of the law and if a determination
contrary to the Fund's position is made by a bank regulatory agency or court
concerning shareholder servicing and administration payments to banks from the
Distributor, any such payments will be terminated and any shares registered in
the banks' names, for their underlying customers,
10
<PAGE>
will be re-registered in the name of the customers at no cost to the Portfolio
or its shareholders. In addition, state securities laws on this issue may differ
from the interpretation of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund, which was incorporated on October 12,
1993 in Maryland, consists of twenty billion shares of stock having a par value
of one-tenth of one cent ($.001) per share. The Fund's Board of Directors is
authorized to divide the shares into separate series of stock, one for each of
the portfolios that may be created. Each share of any series of shares when
issued will have equal dividend, distribution and liquidation rights within the
series for which it was issued and each fractional share has those rights in
proportion to the percentage that the fractional share represents of a whole
share. Shares of all series have identical voting rights, except where, by law,
certain matters must be approved by a majority of the shares of the unaffected
series. Shares will be voted in the aggregate. There are no conversion or
preemptive rights in connection with any shares of the Fund. All shares, when
issued in accordance with the terms of the offering, will be fully paid and
nonassessable. Shares are redeemable at net asset value, at the option of the
shareholder.
On December 31, 1995 there were 3,730,852 shares of the Fund outstanding. As of
December 31, 1995, the amount of shares owned by all officers and directors of
the Fund, as a group, was 13.8% of the outstanding shares. Set forth below is
certain information as to persons who owned 5% or more of the Fund's outstanding
shares as of December 31, 1995:
Nature of
Name and address % of Class Ownership
NEIC Master Retirement Trust 6.64% Record
399 Boylston Street
Boston, MA 02116
IRA of J. Dennis Delafield 5.08% Beneficial
c/o Delafeild Asset Management
600 Fifth Avenue
New York, NY 10020
Under its Articles of Incorporation the Fund has the right to redeem for cash
shares of stock owned by any shareholder to the extent and at such times as the
Fund's Board of Directors determines to be necessary or appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes. In this regard, the
Fund may also exercise its right to reject purchase orders.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. 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 directors as required by the 1940 Act, (b)
for approval of revised investment advisory agreements, with respect to a
particular class or series of stock, (c) for approval of revisions to the Fund's
distribution plan as required by the 1940 Act with respect to a particular class
or series of stock, and (d) upon the written request of holders of shares
entitled to cast not less than 10% 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, any
registration of the Fund with the Securities and Exchange Commission or any
state, or as the Directors may consider necessary or desirable. Each Director
serves until the next meeting of shareholders called for the purpose of
considering the election or re-election of such Director or of a successor to
such Director, and until the election and qualification of his or her successor,
elected at such meeting, or until such Director sooner dies, resigns, retires or
is removed by the vote of the shareholders.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105 is custodian for its cash and securities, and is transfer agent and
dividend disbursing agent for the shares of the Fund. The
11
<PAGE>
transfer agent and custodian does not assist in, and is not responsible for,
investment decisions involving assets of the Fund.
PERFORMANCE
The Fund may from time to time include its yield, total return, and average
annual total return in advertisements or information furnished to present or
prospective shareholders. The Manager may also include performance information
in such advertisements or information furnished to current or prospective
shareholders regarding Mr. Delafield's personal investment performance since
1969 when he began managing investments for clients with similar objectives as
the Fund's and before Mr. Delafield joined the Manager's predecessor, Reich &
Tang L.P., in 1991. The Fund may also from time to time include in
advertisements the ranking of those performance figures relative to such figures
for groups of mutual funds categorized by the Lipper Analytical Services, Inc.,
CDA Investment Technologies, Inc., Morningstar Inc., Wiesenberger Investment
Company Service, Barron's, Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Personal Investor, Bank Rate Monitor, and The Wall
Street Journal as having the same investment objectives. The performance of the
Fund may also be compared to the Europe, Australia and Far East Index, an
unmanaged standard foreign securities index monitored by Capital International,
S.A. and to the Standard & Poor's 500 Stock Index and the Dow Jones Industrial
Average, both of which are recognized indices of domestic stocks' performance.
Average annual total return is a measure of the average annual compounded rate
of return of $1,000 invested at the maximum public offering price over a
specified period, which assumes that any dividends or capital gains
distributions are automatically reinvested in the Fund rather than paid to the
investor in cash. Total return is calculated with the same assumptions and shows
the aggregate return on an investment over a specified period.
The formula for total return used by the Fund includes three steps: (1) adding
to the total number of shares purchased by the hypothetical investment in the
portfolio of $1,000 (assuming the investment is made at a public offering price)
all additional shares that would have been purchased if all dividends and
distributions paid or distributed during the period had been automatically
reinvested; (2) calculating the value of the hypothetical initial investment as
of the end of the period by multiplying the total number of shares owned at the
end of the period by the net asset value per share on the last trading day of
the period; and (3) dividing this account value for the hypothetical investor by
the amount of the initial investment and annualizing the result for periods of
less than one year.
The Fund computes yield by annualizing net investment income per share for a
recent 30-day period and dividing that amount by a Fund share's maximum public
offering price (reduced by any undeclared earned income expected to be paid
shortly as a dividend) on the last trading day of that period. The Fund's yield
will vary from time to time depending upon market conditions, the composition of
the Fund and operating expenses of the Fund.
Total return and yield may be stated with or without giving effect to any
expense limitations in effect for the Fund.
NET ASSET VALUE
The Fund does not determine its net asset value per share on the following
holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
For purposes of determining the Fund's net asset value per share, readily
marketable portfolio securities listed on the New York Stock Exchange are
valued, except as indicated below, at the last sale price reflected on the
consolidated tape at the close of the New York Stock Exchange on the business
day as of which such value is being determined. If there has been no sale on
such day, the securities are valued at the mean of the closing bid and asked
prices on such day. If no bid or asked prices are quoted on such day, then the
security is valued by such method as the Board of Directors shall determine in
good faith to reflect its fair market value. Readily marketable securities not
listed on the New York Stock Exchange but listed on other national securities
exchanges or admitted to trading on the National Association of Securities
Dealers Automated Quotations, Inc. ("NASDAQ") National List are valued in like
manner. Portfolio securities traded on more than one national securities
exchange are valued at the last sale price on the business day as of which such
value is being determined as reflected on the tape at the close of the exchange
representing the principal market for such securities.
12
<PAGE>
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Manager to be
over-the-counter but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the Board of
Directors deems appropriate to reflect their fair market value.
The Fund's Board of Directors has determined that U.S. Government obligations
and other debt instruments having sixty days or less remaining until maturity
are stated at amortized cost. All other investment assets, including restricted
and not readily marketable securities, are valued under procedures established
by and under the general supervision and responsibility of the Fund's Board of
Directors designed to reflect in good faith the fair value of such securities.
13
<PAGE>
DESCRIPTION OF RATINGS*
Moody's Investors Service, Inc. ("Moody's")
Aaa: Bonds which are rated Aaa are judged to be 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 fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Unrated: Where no rating has been assigned or where a rating has been suspended
or withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1) An application for rating was not received or accepted.
2) The issue or issuer belongs to a group of securities that are not rated as a
matter of policy.
3) There is a lack of essential data pertaining to the issue or issuer.
4) The issue was privately placed, in which case the rating is not published in
Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa-1,
A-1, Baa-1 and B-1.
Standard & Poor's Corporation ("S&P'")
AAA: Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
- -------------
* As described by the rating agencies.
14
<PAGE>
A: Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in the highest rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of this obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, they are
outweighed by large uncertainties of major risk exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no interest is being
paid.
D: Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
15
<PAGE>
- -------------------------------------------------------------------------------
DELAFIELD FUND, INC.
INDEPENDENT AUDITOR'S REPORT
===============================================================================
The Board of Directors and Shareholders
Delafield Fund, Inc.
We have audited the accompanying statement of net assets of Delafield Fund, Inc.
as of December 31, 1995 and the related statement of operations for the period
from October 1, 1995 to December 31, 1995, the statements of changes in net
assets for the period from October 1, 1995 to December 31, 1995 and the year
ended September 30, 1995, and the selected financial information for the period
from October 1, 1995 to December 31, 1995, the year ended September 30, 1995,
and the period from November 19, 1993 (inception) to September 30, 1994. These
financial statements and selected financial information are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and selected financial information 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 selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of Delafield Fund, Inc. as of December 31, 1995, the results of its
operations, the changes in its net assets and the selected financial information
for the periods indicated, in conformity with generally accepted accounting
principles.
/s/ McGladrey & Pullen,LLP
New York, New York
January 19, 1996
- -------------------------------------------------------------------------------
16
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
The chart below represents the omitted graph.
Comparison of change in value of $10,000 investment in the
Delafield Fund, Inc. and the S&P Index.
<TABLE>
<CAPTION>
INCEPTION S & P 500 DELAFIELD
- --------- --------- ---------
<C> <C> <C>
11/19/93 10,000.00 10,000.00
12/31/93 10,112.00 10,170.00
03/31/94 9,728.76 10,060.16
06/30/94 9,769.62 10,360.96
09/30/94 10,247.35 10,892.48
12/31/94 10,245.30 10,738.90
03/31/95 11,243.19 11,805.27
06/30/95 12,316.92 12,349.49
09/30/95 13,296.11 13,075.64
12/31/95 14,096.54 13,679.74
</TABLE>
- -------------------------------------------------------------------------------
17
<PAGE>
- -------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ------
Common Stocks (73.96%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Banking (2.85%)
California Federal Bank, Federal Savings Bank* 14,600 $ 229,950
Mellon Bank Corporation 20,000 1,075,000
--------------
1,304,950
--------------
Consumer Products and Services (6.10%)
Bush Industries 45,000 883,125
Hilton Hotels Corporation 10,000 615,000
O' Sullivan Industries Holdings* 87,600 580,350
Polaroid Corporation 15,000 710,625
--------------
2,789,100
--------------
Energy (8.11%)
Getty Petroleum 8,000 108,000
J Ray McDermott S.A.* 15,000 268,125
McDermott International, Inc. 60,000 1,320,000
Oryx Energy Co.* 27,000 361,125
Louisiana Land & Exploration Company 25,000 1,071,875
Union Texas Petroleum Holdings 30,000 581,250
--------------
3,710,375
--------------
Food and Beverage (0.96%)
Rykoff-Sexton Inc. 25,000 437,500
--------------
Industrial Products (13.47%)
AMETEK, Inc. 62,000 1,162,500
Corning Incorporated 30,000 960,000
Federal Mogul Corporation 40,000 785,000
Harsco Corporation 18,000 1,046,250
Sheldahl, Inc.* 30,000 543,750
Stimsonite Corporation* 73,000 693,500
Sundstrand Corp. 6,000 422,250
Zemex Corporation* 54,540 545,400
--------------
6,158,650
--------------
Industrial Services (1.90%)
Univar Corp. 80,000 870,000
--------------
Insurance (Life) (7.29%)
Life Partners Group 135,000 1,839,375
PennCorp Financial Group, Inc. 14,000 411,250
Provident Companies 24,000 813,000
Security-Connecticut Corp. 10,000 271,250
--------------
3,334,875
--------------
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
18
<PAGE>
- -------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ------
Common Stocks (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance (Property/Casualty) (4.53%)
Allmerica Financial Corp. 20,000 $ 540,000
Citizens Corporation 25,000 465,625
Guaranty National Corporation 15,000 230,625
Home State Holdings Inc.* 90,000 835,317
---------------
2,071,567
---------------
Insurance (Reinsurance) (3.66%)
Risk Capital Holding Incorporated* 30,000 701,250
Zurich Reinsurance Centre Holdings, Inc. 32,000 972,000
---------------
1,673,250
---------------
Office Equipment (2.59%)
BancTec, Inc.* 46,000 851,000
Wang Laboratories, Inc.* 20,000 332,500
---------------
1,183,500
---------------
Pharmaceutical (1.54%)
West Co Incorporated 30,000 705,000
---------------
Real Estate (2.54%)
Catellus Development Corp.* 65,000 390,000
Kimco Realty Corp. 4,500 122,625
RPS Realty Corp. 140,000 647,500
---------------
1,160,125
---------------
Retail (7.77%)
Dress Barn, Inc.* 55,000 543,125
The Limited, Inc. 110,000 1,911,250
Waban Inc.* 10,000 187,500
Woolworth Corporation* 70,000 910,000
---------------
3,551,875
---------------
Textile/Apparel (6.26%)
Farah Manufacturing* 116,000 551,000
Fruit of the Loom, Inc.* 69,000 1,681,875
Haggar Corp. 35,000 630,000
---------------
2,862,875
---------------
Miscellaneous (4.39%)
ARI Network* 40,000 110,000
Florida East Coast Industries 8,000 546,000
Gilbert Associates, Inc. 50,800 635,000
London American Growth* 650,000 715,000
---------------
2,006,000
---------------
Total Common Stocks (Cost $30,983,491) 33,819,642
---------------
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
19
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Value
Amount (Note 1)
------ ------
Corporate Bonds (2.60%)
- -----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous (1.84%)
<S> <C> <C>
American Annuity Group, 11.125%, due 02/01/2003 $ 205,000 $ 222,425
American Annuity Group Senior Notes, 9.500%, due 8/15/2001 600,000 621,000
--------------
843,425
--------------
Industrial Products (0.48%)
AMETEK, Inc. 9.750%
debentures, due 03/15/2004 200,000 219,500
--------------
Insurance (Life) (0.28%)
PennCorp Financial Group 9.250%, due 12/15/2003 125,000 128,125
--------------
Total Corporate Bonds (Cost $1,140,275) 1,191,050
--------------
<CAPTION>
U.S. Government Obligations (6.59%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Note, 5.500%, due 07/31/97 $3,000,000 $ 3,014,063
--------------
Total U.S. Government Obligations (Cost $2,990,668) 3,014,063
--------------
Short-Term Investments (19.12%)
Repurchase Agreements (19.12%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
J.P. Morgan Securities Inc., 5.80%, due 01/02/96
(Collateralized by $8,605,000
U.S. Treasury Note, 5.875%, due 08/15/98) $8,744,000 $ 8,744,000
--------------
Total Short-Term Investments (Cost $8,744,000) 8,744,000
--------------
Total Investments (102.27%) (Cost $43,858,434+) 46,768,755
Liabilities in excess of cash and other assets (-2.27%) ( 1,038,721)
--------------
Net Assets (100.00%), 3,730,852 shares outstanding (Note 3) $ 45,730,034
==============
Net asset value, offering and redemption price per share $ 12.26
==============
* Non-income producing.
+ Aggregate cost for federal income tax purposes is $43,915,142. Aggregate
unrealized appreciation and depreciation, based on cost for Federal income
tax purposes, are $3,540,719 and $687,106 respectively.
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
20
<PAGE>
- -------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF OPERATIONS
PERIOD FROM OCTOBER 1, 1995 TO DECEMBER 31, 1995
===============================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
Income:
<S> <C>
Interest....................................................................... $ 215,136
Dividends...................................................................... 128,238
---------------
Total income............................................................. 343,374
---------------
Expenses: (Note 2)
Investment management fee...................................................... 86,832
Administration fee............................................................. 22,088
Distribution fee............................................................... 27,135
Custodian expenses............................................................. 4,665
Shareholder servicing and related shareholder expenses......................... 20,086
Legal, compliance and filing fees.............................................. 7,763
Audit and accounting........................................................... 27,945
Directors' fees and expenses................................................... 2,625
Amortization of organization costs............................................. 2,192
Other.......................................................................... 1,282
---------------
Total expenses........................................................... 202,613
Less:
Fees waived.............................................................. ( 21,582)
Expenses paid indirectly................................................. ( 8,025)
---------------
Net expenses............................................................. 173,006
---------------
Net investment income.................................................... 170,368
---------------
</TABLE>
<TABLE>
<CAPTION>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments............................................ 630,148
Net change in unrealized appreciation (depreciation) of investments................ 1,216,404
---------------
Net gain (loss) on investments...................................... 1,846,552
---------------
Increase (decrease) in net assets from operations.................................. $ 2,016,920
===============
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
21
<PAGE>
- -------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
===============================================================================
<TABLE>
<CAPTION>
Period from
October 1, 1995 to Year Ended
December 31, 1995 September 30, 1995
----------------- ------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
<S> <C> <C>
Net investment income.....................................................$ 170,368 $ 176,620
Net realized gain on investments.......................................... 630,148 1,109,109
Net change in unrealized appreciation (depreciation) ..................... 1,216,404 1,256,131
-------------- ----------------
Increase (decrease) in net assets from operations....................... 2,016,920 2,541,860
Distributions from:
Net investment income.....................................................( 179,845) ( 167,085)
Net realized gain on investments..........................................( 643,645) ( 1,213,983)
In excess of net realized gain............................................( 51,900) --
Return of capital.........................................................( 8,609) --
Capital share transactions (Note 3)....................................... 2,280,846 31,497,340
-------------- ----------------
Total increase (decrease)............................................... 3,413,767 32,658,132
Net Assets:
Beginning of period....................................................... 42,316,267 9,658,135
-------------- ----------------
End of period.............................................................$ 45,730,034 $ 42,316,267*
================ ================
* Undistributed net investment income at September 30, 1995 was $9,337.
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
22
<PAGE>
- -------------------------------------------------------------------------------
DELAFIELD FUND, INC.
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. Summary of Accounting Policies
Delafield Fund, Inc. is a no-load, diversified, open-end management investment
company registered under the Investment Company Act of 1940. The investment
objectives of the Fund are to seek long-term preservation of capital and growth
of capital by investing primarily in equity securities of domestic companies.
Effective October 1, 1995 the Fund changed its fiscal year end to December 31.
Its financial statements are prepared in accordance with generally accepted
accounting principles for investment companies as follows:
a) Valuation of Securities -
Securities traded on a national securities exchange or admitted to trading
on the National Association of Securities Dealers Inc. Automated Quotations
National List are valued at the last reported sales price on the last
business day of the fiscal period. Common stocks for which no sale was
reported on that date and over-the-counter securities, are valued at the
mean between the last reported bid and asked prices. United States
Government obligations and other debt instruments having sixty days or less
remaining until maturity are stated at amortized cost. Debt instruments
having a remaining maturity of more than sixty days are valued at the
highest bid price obtained from a dealer maintaining an active market in
that security or on the basis of prices obtained from a pricing service
approved as reliable by the Board of Directors. All other investment
assets, including restricted and not readily marketable securities, are
valued in such manner as the Board of Directors in good faith deems
appropriate to reflect their fair market value.
b) Federal Income Taxes -
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income to its shareholders. Therefore, no provision for
federal income tax is required.
c) Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
d) General -
Securities transactions are recorded on the trade date basis. Interest
income is accrued as earned and dividend income is recorded on the
ex-dividend date. Realized gains and losses from securities transactions
are recorded on the identified cost basis. Dividends and capital gain
distributions to shareholders, which are determined in accordance with
income tax regulations, are recorded on the ex-dividend date. It is the
Fund's policy to take possession of securities as collateral under
repurchase agreements and to determine on a daily basis that the value of
such securities plus accrued interest are sufficient to cover the value of
the repurchase agreements.
2. Investment Management Fees and Other Transactions with Affiliates
Under the Investment Management Contract, the Fund pays an investment management
fee to Reich & Tang Asset Management, L.P. (the "Manager") equal to .80% of the
Fund's average daily net assets. The Manager is required to reimburse the Fund
for its expenses (exclusive of interest, taxes, brokerage, and extraordinary
expenses) to the
- -------------------------------------------------------------------------------
23
<PAGE>
- -------------------------------------------------------------------------------
DELAFIELD FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
2. Investment Management Fees and Other Transactions with Affiliates (Continued)
extent that such expenses, including the management fee, for any fiscal year
exceed 2 1/2% of the first $30 million of its average net assets, 2% of the next
$70 million of its average net assets and 1 1/2% of its average net assets in
excess of $100 million. No such reimbursement was required for the period ended
December 31, 1995.
Pursuant to an Administrative Services Agreement, the Fund pays to the Manager
an annual fee of .21% of the Fund's average daily net assets. Prior to December
1, 1995, the administration fee was .20%.
The Manager is a wholly-owned subsidiary of New England Investment Companies,
L.P. ("NEIC"). On August 16, 1995, New England Mutual Life Insurance Company
("The New England"), the owner of NEIC's general partner and a majority owner of
the limited partnership interest in NEIC, entered into an agreement to merge
with Metropolitan Life Insurance Company ("MetLife"), with MetLife to be the
survivor of the merger. The merger is subject to several conditions, including
the required approval, by shareholders of the Fund of a proposed new investment
advisory agreement, intended to take effect at the time of the merger. The new
agreement will be substantially similar to the existing agreement.
Pursuant to a Distribution Plan adopted under Securities Exchange Commission
Rule 12b-1, the Fund and Reich & Tang Distributors L.P. (the Distributor) have
entered into a Distribution Agreement and a Shareholder Servicing Agreement. For
its services under the Shareholder Servicing Agreement, the Distributor receives
from the Fund an annual fee equal to .25% of the Fund's average daily net
assets. There were no additional expenses borne by the Fund pursuant to the
Distribution Plan.
During the period ended December 31, 1995, the Distributor voluntarily waived
shareholder servicing fees of $21,582.
Brokerage commissions paid during the period to the Distributor amounted to
$16,863.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$1,500 per annum plus $250 per meeting attended.
Included in the Statement of Operations under the captions "Custodian expenses"
and "Shareholder servicing and related shareholder expenses" are expense offsets
of $8,025.
3. Capital Stock
At December 31, 1995, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $42,876,421. Transactions in capital
stock were as follows:
<TABLE>
<CAPTION>
Period Ended Year Ended
December 31, 1995 September 30, 1995
------------------------------ ----------------------------
Shares Amount Shares Amount
----------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Sold........................................ 221,341 2,650,363 2,620,590 31,143,565
Issued on reinvestment of dividends......... 71,878 881,282 117,889 1,380,528
Redeemed.................................... ( 103,911) ( 1,250,799) ( 89,769) ( 1,026,753)
----------- ------------- --------- -----------
Net increase (decrease)..................... 189,308 $ 2,280,846 2,648,710 $ 31,497,340
=========== ============= ========= ===========
</TABLE>
- -------------------------------------------------------------------------------
24
<PAGE>
- -------------------------------------------------------------------------------
DELAFIELD FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
4. Investment Transactions
Purchases and sales of investment securities, other than U.S. Government direct
and agency obligations and short-term investments, totaled $13,689,030 and
$6,522,765 respectively.
5. Selected Financial Information
Reference is made to page 2 of the Prospectus for Selected Financial
Information.
- -------------------------------------------------------------------------------
25
