As filed with the Securities and Exchange Commission on April 23, 1997
Registration No. 33-69760
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 4 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5 [X]
(Check appropriate box or boxes)
DELAFIELD FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 830-5220
BERNADETTE N. FINN
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Name and Address of Agent for Service)
Copy to: MICHAEL R. ROSELLA, ESQ.
Battle Fowler LLP 75 East 55th Street New York, New York 10022
It is proposed that this filing will become effective: (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on April 30, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
The Registrant has registered an indefinite number of its common stock, par
value $.001 per share, under the Securities Act of 1933 pursuant to Section
24(f) under the Investment Company Act of 1940, as amended, and Rule 24f-2
thereunder, and the Registrant filed a Rule 24f-2 Notice for its fiscal year
ended December 31, 1996 on Febuary 20, 1997.
<PAGE>
DELAFIELD FUND, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET -
Pursuant to Rule 404(c)
Part A
Item No. Prospectus Heading
1. Cover Page. . . . . . . . . ..Cover Page
2. Synopsis. . . . . . . . . . . Table of Fees and Expenses; Introduction
3. Condensed Financial
Information . . . . . . . . . Finacial Highlights
4. General Description
of Registrant . . . . . . . . . Introduction; Investment Objectives, Policies
and Risks; Investment Restrictions
5. Management of the Fund. . . .The Manager; General Information
5A. Management's Discussion
of Fund Performance . . . . .The Manager
6. Capital Stock and
Other Securities. . . . . . .Description of Common Stock; General
Information; Dividends, Distributions and Taxes
7. Purchase of Securities
Being Offered . . . . . . . . Distribution and Service Plan; Purchase of
Shares; Net Asset Value
8. Redemption or Repurchase. . . .Purchase of Shares; Redemption of Shares
9. Legal Proceedings . . . . . . .Not Applicable
<PAGE>
Part B Caption in Statement of
Item No. Additional Information
10. Cover Page. . . . . . . . . .Cover Page
11. Table of Contents . . . . . .Table of Contents
12. General Information
and History . . . . . . .. . .Not Applicable
13. Investment Objectives,
Policies and Risks. . . . . .Investment Objectives, Policies and Risks;
Investment Restrictions
14. Management of the Fund . . . .Manager
15. Control Persons and Principal
Holders of Securities . . . . .Manager
16. Investment Advisory
and Other Services. . . . . . .Manager; Distribution and Service Plan;
Custodian and Transfer Agent
17. Brokerage Allocation . . . . . Portfolio Transactions
18. Capital Stock and
Other Securities. . . . . . . Description of Common Stock
19. Purchase, Redemption and
Pricing of Securities Being
Offered . . . . . . . . . . . .Purchase of Shares; Redemption of Shares;
Net Asset Value
20. Tax Status. . . . . . . . . . .Not Applicable
21. Underwriters. . . . . . . . . .Not Applicable
22. Calculation of
Performance Data.. . . . . . . Performance
23. Financial Statements. . . . . .Independent Auditors' Report; Financial
Statements.
<PAGE>
================================================================================
DELAFIELD FUND, INC. FIFTH AVENUE, NEW YORK, NY 10020
(212) 830-5220
================================================================================
PROSPECTUS
May 1, 1997
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 May 1, 1997, 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.
- --------------------------------------------------------------------------------
<PAGE>
<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 .44%
Administration Fees .21% ______
Total Fund Operating Expenses - After Fee Waivers 1.29%
<S> <C> <C> <C> <C>
Example 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
You would pay the following on a $1,000
investment, assuming 5% annual return and
redemption at the end of each period: $13 $41 $71 $156
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, absent fee waivers. In addition, absent fee
waivers, Total Operating Expenses would have been 1.49%.
THE FIGURES REFLECTED IN THIS EXAMPLE SHOULD NOT BE CONSIDERED AS A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN ABOVE.
</TABLE>
FINANCIAL HIGHLIGHTS
The following financial highlights 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.
<TABLE>
<CAPTION>
Year Period from Year November 19, 1993
Ended October 1, 1995 to Ended (Inception) to
December 31, 1996 December 31, 1995 September 30, 1995 September 30, 1994
----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........ $ 12.26 $ 11.95 $ 10.82 $ 10.00
--------- ---------- ---------- ---------
Income from investment operations:
Net investment income................... .16 .05 .13 .07
Net realized and unrealized
gains (losses) on investments......... 3.07 .50 1.99 .82
--------- ---------- ---------- ----------
Total from investment operations............ 3.23 .55 2.12 .89
--------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income.... ( .16) ( .05) ( .13) ( .07)
Distributions from net
realized gains on investments......... ( 1.84) ( .18) ( .86) --
In excess of net realized gain.......... -- ( .01) -- --
--------- ---------- ---------- ----------
Total distributions......................... ( 2.00) ( .24) ( .99) ( .07)
--------- ---------- ---------- ----------
Net asset value, end of period.............. $ 13.49 $ 12.26 $ 11.95 $ 10.82
========= ========== ========== ==========
Total Return................................ 26.35% 4.62%(a) 20.05% 8.93%(a)
========= ========== ========== ==========
Ratios/Supplemental Data
Net assets, end of period (000)............. $ 61,279 $ 45,730 $ 42,316 $ 9,658
Ratios to average net assets:
Expenses................................ 1.29%(b)(d) 1.67%*(b)(d) 1.65%(b) 1.78%*(b)
Net investment income................... 1.18%(b) 1.57%*(b) 1.35%(b) 0.96%*(b)
Portfolio turnover rate..................... 75.54 20.49 70.36 42.84
Average commission rate paid (per share).... $ .0378(c) $ .0343(c) -- --
</TABLE>
* Annualized
(a) Not Annualized
(b) Net of investment management, administration and shareholder servicing fees
waived equivalent to .20%, .20%, .71% and 1.12%, respectively, of average
net assets.
(c) Required by regulations issued in 1995.
(d) Includes expenses paid indirectly, equivalent to .01% and .07%,
respectively, of average net assets.
<PAGE>
- --------------------------------------------------------------------------------
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
3
<PAGE>
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
4
<PAGE>
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 Rating Services, a division of the
McGraw-Hill Companies ("S&P") or
5
<PAGE>
Baa or lower by Moody's Investor Services, Inc. ("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
6
<PAGE>
security it does not own in anticipation that the 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
7
<PAGE>
sustain a loss. For further information on such 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 1940 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
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Management Division of Reich & Tang Asset 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. As of March 31, 1997, the Manager was
investment manager, adviser or supervisor with respect to assets aggregating in
excess of $9.6 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 Manager. Reich & Tang Asset Management,
Inc. (a wholly-owned subsidiary of NEICLP) is the sole 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. Reich & Tang Asset Management L.P. succeeded NEICLP as the Manager of
the Fund.
J. Dennis Delafield and Vincent Sellecchia of the Fund are 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 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 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.
On August 30, 1996, The New England Mutual Life Insurance Company ("The New
England") and Metropolitan Life Insurance Company ("MetLife") merged, with
MetLife being the continuing company. The Manager remains an indirect
wholly-owned subsidiary of NEICLP, but Reich & Tang Asset Management, Inc., its
sole general partner, is now an indirect subsidiary of MetLife. Also, MetLife
New England Holdings, Inc., a wholly-owned subsidiary of MetLife, owns 51% of
the outstanding limited partnership interest of NEICLP and may be deemed a
"controlling person" of the Manager. Reich & Tang, Inc. owns approximately 16%
of the outstanding partnership units of NEICLP.
MetLife is a mutual life insurance company with assets of $142.2 billion at
March 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. MetLife provides a wide range of insurance and
investment products and services to individuals and groups and is the leader
among United States life insurance companies in terms of total life insurance in
force, which exceeded $1.2 trillion at March 31, 1996 for MetLife and its
insurance affiliates. MetLife and its affiliates provide insurance or other
financial services to approximately 36 million people worldwide.
NEIC is a holding company offering a broad array of investment styles across a
wide range of asset
9
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categories through twelve subsidiaries, divisions and affiliates offering a wide
array of investment styles and products to institutional clients. Its business
units include, AEW Capital Management, L.P., Back Bay Advisors, L.P., Graystone
Partners, L.P., Harris Associates, L.P., Jurika & Voyles, L.P., Loomis, Sayles &
Co., L.P., MC Management, L.P., New England Funds, L.P., New England Funds
Management, L.P., Reich & Tang Asset Management L.P., Vaughan-Nelson,
Scarborough & McConnell L.P. and Westpeak Investment Advisors, L.P. These
affiliates in the aggregate are investment advisors or managers to 43 other
registered investment companies.
The merger between The New England and MetLife resulted in an "assignment" of
the Investment Management Contract relating to the Fund. Under the 1940 Act,
such an assignment caused the automatic termination of this agreement. On
November 28, 1995 the Board of Directors, including a majority of the directors
who are not interested persons (as defined in the 1940 Act) of the Fund or the
Manager, approved the Investment Management Contract effective August 30, 1996,
which has a term which extends to July 31, 1998 and may be continued in force
thereafter for successive twelve-month periods beginning each August 1, provided
that such continuance is specifically approved annually by majority vote of the
Fund's outstanding voting securities or by its Board of Directors, and in either
case by a majority of the directors who are not parties to the Investment
Management Contract or interested persons of any such party, by votes cast in
person at a meeting called for the purpose of voting on such matter.
The Investment Management Contract was approved by a majority of the
shareholders of the Fund on March 13, 1996 and contains the same terms and
conditions governing the Manager's investment management responsibilities as the
Fund's previous Investment Management Contract with the Manager, except as to
the date of execution and termination.
The merger and the change in control of the Manager has not had any impact upon
the Manager's performance of its responsibilities and obligations under the
Investment Management Contract.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund. 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 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.
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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 Rule 12b-1. The Fund's Board of Directors has adopted a
Distribution and Service Plan (the "Plan") and, pursuant to the Plan, the Fund
and Reich & Tang Distributors 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 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.
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<PAGE>
The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the management fee and past profits for the
following purposes: (i) to defray 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
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.
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, Reich & Tang Services
L.P. ("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.
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<PAGE>
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 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 Funds
ABA #101003621
DDA #890752-953-8
For Delafield Fund, Inc.
Account of (Investor's Name)
Fund Account # 819-
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 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:
Delafield Fund, Inc.
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 07101-3232
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.
13
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 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 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.
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<PAGE>
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. Any individual can contribute to an IRA equal
to the lesser of $2,000 annually ($2,250 in a spousal account) or 100% of earned
income; such investment must be made in cash. 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 $25,000 or, a married couple filing
a joint return with adjusted gross income above $40,000. Special rules apply in
the case of married individuals living together who file separate returns. The
minimum investment required to open an IRA is $250. Generally, there are
penalties for premature distributions from an IRA before the attainment of age
59 1/2, except in the case of the participant's death or disability and certain
other circumstances.
As a result of the enactment of the Small Business, Health Insurance and
Welfare Reform Acts of 1996 (the " `96 Act"), certain of the foregoing
provisions have been amended. Pertinent provisions of the `96 Act are described
below:
Generally. Five year averaging will not apply to distributions after
December 31, 1999. Ten year averaging has been preserved in very limited
circumstances.
IRAs. Beginning January 1, 1997, a non-working spouse may be eligible to
establish an IRA and contribute up to $2,000, provided the combined income of
both spouses is at least equal to the amount contributed by both spouses to
IRAs.
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
15
<PAGE>
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 that the Fund will pay any dividends or
realize any capital gains.
The Fund intends to continue 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
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<PAGE>
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 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.
The Fund may also from time to time include in advertisement the ranking of
those performance figures relative to such figures for groups of mutual funds
categorized by nationally recognized ranking agencies. The performance of the
Fund may also be compared to recognized indices, including, but not limited to,
the Standard & Poor's 500.
Shareholder Meetings
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is
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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 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 the custodian for the Fund's cash and securities. Reich & Tang
Services L.P., 600 Fifth Avenue, New York, New York 10020, is the transfer agent
and dividend agent for the shares of the Fund. The Fund's custodian and transfer
agent do 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 Rating Services, a division of the McGraw-Hill Companies
("S&P")
AAA: Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay
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<PAGE>
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.
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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TABLE OF CONTENTS
Table of Fees and Expenses.............................
Financial Highlights...................................
Introduction...........................................
Investment Objectives, Policies and Risks..............
Foreign Securities.................................. DELAFIELD
Convertible Securities.............................. FUND, INC.
Risks of Investing in Lower Rated Securities........
Warrants............................................
Short Sales.........................................
Restricted Securities...............................
Corporate Reorganizations........................... PROSPECTUS
Investment in Small, Unseasoned Companies........... May 1, 1997
Investment Restrictions................................
The Manager............................................
Description of Common Stock............................
Distribution and Service Plan..........................
Purchase of Shares.....................................
New Shareholders....................................
Present Shareholders................................
Electronic Funds Transfers (EFT), Pre-authorized
Credit and Direct Deposit Privilege..............
Redemption of Shares...................................
Systematic Withdrawal Plan..........................
Telephone Redemption Privilege......................
Retirement Plans.......................................
Exchange Privilege.....................................
Dividends, Distributions and Taxes.....................
Net Asset Value........................................
General Information ...................................
Performance.........................................
Shareholder Meetings................................
Custodian and Transfer Agent........................
Information for Shareholders .......................
Description of Ratings.................................
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>
- --------------------------------------------------------------------------------
DELAFIELD 600 Fifth Avenue, New York, NY 10020
FUND, INC. (212) 830-5220
===============================================================================
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
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 May 1, 1997 (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 of Contents
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Objectives,
Policies and Risks........................................ Manager................................................
Common Stock............................................ Expense Limitation.................................
Warrants................................................ Management of the Fund.................................
Foreign Securities...................................... Counsel and Auditors...................................
Corporate Reorganizations............................... Distribution and Service Plan..........................
Repurchase Agreements................................... The Glass-Steagall Act.................................
Risks of Investing in Lower............................ Description of Common Stock............................
Rated Securities..................................... Custodian Transfer Agent...............................
Other Matters........................................... Performance............................................
Investment Restrictions....................................... Net Asset Value........................................
Portfolio Transactions........................................ Description of Ratings.................................
Purchase of Shares and Redemption of Shares................... Independent Auditor's Report...........................
</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
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<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
Rating Services, a division of the McGraw-Hill Companies ("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, own 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 rate for the fiscal year ended December 31, 1995 and
December 31, 1996 was 20.49% and 75.54%, 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"). As
of March 31, 1997, the Manager was manager, adviser or supervisor with respect
to assets aggregating approximately $9.6 billion. The Manager acts as manager or
administrator of fifteen other investment companies and also advises pension
trust, 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.
New England Investment Companies, L.P. ("NEICLP") is the limited partner and
owner of a 99.5% interest in the Manager. Reich & Tang Asset Management, Inc. (a
wholly-owned subsidiary of NEICLP) is the sole 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. Reich & Tang Asset Management L.P. succeeded NEICLP as the Manager of
the Fund.
On August 30, 1996, The New England Mutual Life Insurance Company ("The New
England") and Metropolitan Life Insurance Company ("MetLife") merged, with
MetLife being the continuing company. The Manager remains an indirect
wholly-owned subsidiary of NEICLP, but Reich & Tang Asset Management, Inc., its
sole general partner, is now an indirect subsidiary of MetLife. Also, MetLife
New England Holdings, Inc., a wholly-owned subsidiary of MetLife, owns 51% of
the outstanding limited partnership interest of NEICLP and may be deemed a
"controlling person" of the Manager. Reich & Tang, Inc. owns approximately 16%
of the outstanding partnership units of NEICLP.
MetLife is a mutual life insurance company with assets of $142.2 billion at
March 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. MetLife provides a wide range of
5
<PAGE>
insurance and investment products and services to individuals and groups and is
the leader among United States life insurance companies in terms of total life
insurance in force, which exceeded $1.2 trillion at March 31, 1996 for MetLife
and its insurance affiliates. MetLife and its affiliates provide insurance or
other financial services to approximately 36 million people worldwide.
NEIC is a holding company offering a broad array of investment styles across a
wide range of asset categories through twelve subsidiaries, divisions and
affiliates offering a wide array of investment styles and products to
institutional clients. Its business units include, AEW Capital Management, L.P.,
Back Bay Advisors, L.P., Graystone Partners, L.P., Harris Associates, L.P.,
Jurika & Voyles, L.P., Loomis, Sayles & Co., L.P., MC Management, L.P., New
England Funds, L.P., New England Funds Management, L.P., Reich & Tang Asset
Management L.P., Vaughan-Nelson, Scarborough & McConnell L.P. and Westpeak
Investment Advisors, L.P. These affiliates in the aggregate are investment
advisors or managers to 43 other registered investment companies.
The merger between The New England and MetLife resulted in an "assignment" of
the Investment Management Contract relating to the Fund. Under the 1940 Act,
such an assignment caused the automatic termination of this agreement. On
November 28, 1995, the Board of Director, including a majority of the directors
who are not interested persons (as defined in the 1940 Act) of the Fund or the
Manager, approved the Investment Management Contract effective August 30, 1996,
which has a term which extends to July 31, 1998 and may be continued in force
thereafter for successive twelve-month periods beginning each August 1, provided
that such continuance is specifically approved annually by majority vote of the
Fund's outstanding voting securities or by its Board of Directors, and in either
case by a majority of the directors who are not parties to the Investment
Management Contract or interested persons of any such party, by votes cast in
person at a meeting called for the purpose of voting on such matter.
The Investment Management Contract was approved by a majority of the
shareholders of the Fund on March 13, 1996 and contains the same terms and
conditions governing the Manager's investment management responsibilities as the
Fund's previous Investment Management Contract with the Manager, except as to
the date of execution and termination.
The merger and the change in control of the Manager has not had any impact upon
the Manager's performance of its responsibilities and obligations under the
Investment Management Contract. New England Investment Companies, L.P.
("NEICLP") is the limited partner and owner of a 99.5% interest in 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.
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. For the
Fund's fiscal year ended December 31, 1996, the fee payable to the Manager under
the Investment Management Contract was $419,025. The Fund's net assets at the
close of business on December 31, 1996 totaled $61,279,432.
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.
6
<PAGE>
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. 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 irrevocable 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. For the Fund's
fiscal year ended December 31, 1996, the fee payable to the Manager under the
Administrative Services Contract was $109,994.
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 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. As a result of the recent passage of the National Securities Markets
Improvement Act of 1996, all state expense limitations have been eliminated at
this time.
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,* 61 - 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.
VINCENT SELLECCHIA, 45 - 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. 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.
7
<PAGE>
DR. W. GILES MELLON, 65 - Professor of Business Administration and Area Chairman
of Economics in the Graduate School of Management, Rutgers University with which
he has been associated since 1966. His address is Rutgers University Graduate
School of Management, 92 New Street, Newark, New Jersey 07102. Dr. Mellon is
also a Director of AEW Commercial Mortgage Securities Fund, Inc., California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Michigan Daily Tax Free
Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., North Carolina
Daily Municipal Income Fund, Inc., Reich & Tang Equity Fund, Inc., Short Term
Income Fund, Inc. and a Trustee of Florida Daily Municipal Income Fund,
Institutional Daily Income Fund and Pennsylvania Daily Municipal Income Fund.
ROBERT STRANIERE, 55 - Member of the New York State Assembly and a partner with
the Straniere Law Firm since 1981. His address is 182 Rose Avenue, Staten
Island, New York 10306. Mr. Straniere is also a Director of AEW Commercial
Mortgage Securities Fund, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Life Cycle Mutual 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 and Pennsylvania Daily Municipal Income Fund.
YUNG WONG, 57 - Director of Shaw Investment Management (U.K.) Limited from
October 1994 to October 1995, and formerly was a General Partner of Abacus
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 AEW Commercial Mortgage Securities Fund, Inc.,
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Michigan
Daily Tax Free Income Fund, Inc., 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 Eclipse Financial Asset Trust,
Florida Daily Municipal Income Fund, Institutional Daily Income Fund and
Pennsylvania Daily Municipal Income Fund.
BERNADETTE N. FINN, 49 - Vice President of the Mutual Funds division of the
Manager since September 1993. Ms. Finn was formerly Vice President and Assistant
Secretary of Reich & Tang, Inc. which she was associated with from September
1970 to September 1993. Ms. Finn is also Secretary of AEW Commercial Mortgage
Securities Fund, Inc., California Daily Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income
Fund, Inc., Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income
Fund, Inc., New 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 Delafield Fund, Inc., Institutional Daily Income
Fund, Reich & Tang Equity Fund, Inc. and Short Term Income Fund, Inc.
CYNTHIA L. JERAN, 41 - 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.
RICHARD DE SANCTIS, 40 - Vice President and Treasurer of the Manager since
September 1993. Mr. De Sanctis was formerly Controller of Reich & Tang, Inc.
from January 1991 to September 1993, 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 AEW Commercial
Mortgage Securities Fund, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily
Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc., and Tax
Exempt Proceeds Fund, Inc., and is Vice President and Treasurer of Cortland
Trust, 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 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.
8
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
<S> <C> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
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, $2,500 0 0 $51,500 (13 Funds)
Director
Robert Straniere, $2,500 0 0 $51,500 (13 Funds)
Director
Yung Wong, $2,500 0 0 $51,500 (13 Funds)
Director
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending December 31, 1996 (and, with respect to certain of the
funds in the Fund Complex, estimated to be paid during the fiscal year ending
December 31, 1996). 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.
</TABLE>
Counsel and Auditors
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Battle Fowler LLP, 75 East 55th Street, New York, New York 10022.
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 Rule 12b-1. The Fund's Board of Directors has adopted a
Distribution and Service Plan (the "Plan") and, pursuant to the Plan, the Fund
and 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 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
9
<PAGE>
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. For the Fund's fiscal year ended December 31, 1996, the
Fund paid a distribution fee of $24,339 for expenditures pursuant to the Plan.
During such time, the Fund accrued shareholder servicing fees of $130,945, of
which $106,606 was voluntarily and irrevocably waived, and the Manager made
payments from its own resources aggregating $2,802 of which $376 was spent on
sales personnel and related expenses of the Manager, $89 was spent on travel and
entertainment, $2,331 was spent on prospectus and application printing and $5
was spent on miscellaneous expenses.
In accordance with Rule 12b-1, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the Plan requires
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
The Plan provides that it 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 8, 1996 and shall continue in effect
until October 31, 1997. 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, will be re-registered in the
name of the customers at no cost to the Portfolio or its shareholders. In
addition,
10
<PAGE>
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 March 31, 1997 there were 5,433,968 shares of the Fund outstanding. As of
March 31, 1997, the amount of shares owned by all officers and directors of the
Fund, as a group, was 13.78% 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 March 31, 1997:
Nature of
Name and address % of Class Ownership
Charles Schwab and Co. 10.80% Record
101 Montgomery Street
San Francisco, CA 94104-4122
J. Dennis Delafield 9.90% Beneficial
c/o Delafeild Asset Management
600 Fifth Avenue
New York, NY 10020
NEIC Master Retirement Trust 5.05% Record
399 Boylston Street
Boston, MA 02116
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.
11
<PAGE>
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105 is custodian for its cash and securities. Reich & Tang Services L.P., 600
Fifth Avenue, New York, New York 10020, is transfer agent and dividend
disbursing agent for the shares of the Fund. The custodian and transfer agent
do 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
12
<PAGE>
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
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 Rating Services, a division of the McGraw-Hill Companies
("S&P'")
AAA: Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
- --------------------------------------------------------------------------------
* As described by the rating agencies.
14
<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.
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, 1996 and the related statement of operations for the year
then ended, the statements of changes in net assets for the year then ended and
the period from October 1, 1995 to December 31, 1995, and the selected financial
information for the periods indicated in the accompanying financial statements.
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, 1996 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, 1996, 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
February 10, 1997
<PAGE>
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN WITH INCOME*
<TABLE>
<CAPTION>
Indices
-------
S & P
Delafield Fund** 500
-------------- -----
<S> <C> <C>
Quarter ended December 31, 1996 7.5% 8.3%
Year ended December 31, 1996 26.4 23.0
Inception, November 19, 1993 to December 31, 1996 72.9 73.3
<CAPTION>
Annual Average Total Return with Income*
S & P
Delafield Fund** 500
-------------- -----
<S> <C> <C>
Three years ended December 31, 1996 19.3% 19.7%
Inception, November 19, 1993 to December 31, 1996 19.2 19.3
<CAPTION>
ASSET MIX
12/31/95 3/31/96 6/30/96 9/30/96 12/31/96
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Equities 74.0% 72.7% 73.9% 78.0% 72.1%
U.S. Government Obligations 6.6 11.4 14.8 14.3 13.0
Corporate Bonds 2.6 1.9 1.8 1.7 1.6
Cash Equivalents 16.8 14.0 9.5 6.0 13.3
-------- ------- ------- ------- --------
100% 100% 100% 100% 100%
<CAPTION>
TEN LARGEST HOLDINGS
% of Total
Company Portfolio
- ------- ---------
<S> <C>
BancTec, Inc. 4.9%
Federal-Mogul Corporation 3.6
Conseco Inc. 3.1
Allegheny Teledyne Inc. 2.9
Varian Associates Inc. 2.9
Zurich Reinsurance Centre Holdings, Inc. 2.8
Polaroid Corporation 2.5
Elsag Bailey Process Automation, N.V. 2.3
Great Lakes Chemical Corporation 2.3
AMETEK, Inc. 2.3
----
29.6%
----
</TABLE>
* The performance data quoted above represents past performance. The investment
return and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the orginal cost.
** Delafield Performance is stated after fees.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Comparison of change in value of $10,000 investment in the
Delafield Fund, Inc. and the S&P Index.
The Table below represents the omitted line graph which compares the 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
03/31/96 14,853.52 14,571.66
06/30/96 15,520.45 15,565.44
09/30/96 16,000.03 16,080.66
12/31/96 17,334.43 17,283.49
</TABLE>
The following table was embedded in the line graph represented above.
<TABLE>
<CAPTION>
Average Annual Return
-------------------------------------------
Since
One Year Five Year 11/19/1993
------------ ------------- ------------
<S> <C> <C> <C>
Delafield Fund, Inc. 26.35% N/A 19.20%
S&P 500 22.96% N/A 19.30%
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
Common Stocks (72.07%)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Banking (1.16%)
Mellon Bank Corporation 10,000 $ 710,000
---------------
Chemical (3.07%)
Freeport McMoRan, Inc. 15,000 481,875
Great Lakes Chemical Corporation 30,000 1,402,500
---------------
1,884,375
---------------
Consumer Products & Services (4.92%)
Bush Industries Inc. 50,000 962,500
O'Sullivan Industries Holdings* 38,000 532,000
Polaroid Corporation 35,000 1,522,500
---------------
3,017,000
---------------
Energy (2.46%)
ENSERCH Corporation 36,500 839,500
McDermott International, Inc. 40,000 665,000
---------------
1,504,500
---------------
Food and Beverage (1.88%)
Rykoff-Sexton Inc. 72,700 1,154,113
---------------
Industrial Products (17.64%)
AMETEK, Inc. 62,000 1,379,500
Atchison Casting Corporation* 39,200 705,600
Corning Inc. 10,000 462,500
Elsag Bailey Process Automation, N.V.* 75,000 1,406,250
Federal-Mogul Corporation 100,000 2,200,000
Greif Brothers Corporation Class A 11,500 324,875
Navistar International Corporation* 70,000 638,750
Sheldahl Inc.* 35,000 651,875
Stimsonite Corporation* 90,000 542,813
Varian Associates Inc. 35,000 1,780,625
Watts Industries Inc. Class A 30,000 716,250
----------------
10,809,038
----------------
Insurance (Life) (5.09%)
Conseco Inc. 30,000 1,912,500
Provident Companies Inc. 25,000 1,209,375
----------------
3,121,875
----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ --------
Common Stocks (Continued)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance (Property/Casualty) (4.64%)
Highlands Insurance Group* 25,000 $ 506,250
Home State Holdings Inc.* 120,000 900,000
Orion Capital Corporation 15,000 916,875
20th Century Industries 30,700 518,062
---------------
2,841,187
---------------
Insurance (Reinsurance) (4.22%)
Risk Capital Holding Inc.* 45,000 866,250
Zurich Reinsurance Centre Holdings, Inc. 55,000 1,718,750
---------------
2,585,000
---------------
Metals/Mining (3.86%)
Allegheny Teledyne Inc. 78,000 1,794,000
Armco Inc.* 138,000 569,250
---------------
2,363,250
---------------
Office Equipment (5.21%)
BancTec, Inc.* 145,000 2,990,625
Wang Laboratories, Inc.* 10,000 203,750
---------------
3,194,375
---------------
Real Estate (3.56%)
Atlantic Realty Trust 21,875 221,484
Kimco Realty Corporation 35,000 1,220,625
Ramco-Gershenson Properties Trust 43,750 738,281
---------------
2,180,390
---------------
Retail (5.64%)
The Limited, Inc. 52,214 959,432
Sunglass Hut International, Inc.* 165,000 1,196,250
Waban Inc.* 50,000 1,300,000
---------------
3,455,682
---------------
Textile/Apparel (4.50%)
Burlington Industries Inc.* 40,000 440,000
Delta Woodside Industries Inc. 210,000 1,338,750
Farah Inc.* 126,000 976,500
---------------
2,755,250
---------------
Miscellaneous (4.22%)
Florida East Coast Industries 13,000 1,135,875
Gilbert Associates, Inc. 74,700 1,045,800
White River Corporation* 7,400 403,300
---------------
2,584,975
---------------
Total Common Stocks (Cost $36,922,152) 44,161,010
---------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
Face Value
Amount (Note 1)
------ --------
Corporate Bonds (1.61%)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Products (0.35%)
AMETEK, Inc. 9.750% debentures, due 03/15/2004 200,000 $ 214,250
--------------
Insurance (Life) (0.22%)
PennCorp Financial Group 9.250%, due 12/15/2003 125,000 132,500
--------------
Miscellaneous (1.04%)
American Annuity Group Senior Notes, 9.500%, due 08/15/2001 600,000 637,500
--------------
Total Corporate Bond (Cost $925,178) 984,250
--------------
<CAPTION>
U.S. Government Obligations (13.04%)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Note, 5.500%, due 07/31/97 $8,000,000 7,992,504
--------------
Total U.S. Government Obligations (Cost $7,999,127) 7,992,504
--------------
<CAPTION>
Short-Term Investments (12.84%)
Repurchase Agreements (12.84%)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
J.P. Morgan Securities Inc., 6.65%, due 01/02/97
(Collateralized by $6,120,000
U.S. Treasury Note, 10.375%, due 11/15/12) $7,871,000 7,871,000
--------------
Total Short-Term Investments (Cost $7,871,000) 7,871,000
--------------
Total Investments (99.56%) (Cost $53,717,457+) 61,008,764
Cash and Other Assets, net of liabilities (0.44%) 270,668
--------------
Net Assets (100.00%), 4,542,193 shares outstanding (Note 3) $ 61,279,432
==============
Net asset value, offering and redemption price per share $ 13.49
==============
</TABLE>
* Non-income producing.
+ Aggregate cost for federal income tax purposes is $53,722,265. Aggregate
unrealized appreciation and depreciation, based on cost for Federal income
tax purposes, are $7,775,676 and $489,177, respectively.
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest....................................................................... $ 754,510
Dividends...................................................................... 532,168
--------------
Total income................................................................ 1,286,678
--------------
Expenses: (Note 2)
Investment management fee...................................................... 419,025
Administration fee............................................................. 109,994
Shareholder servicing fee...................................................... 130,945
Custodian expenses............................................................. 10,598
Shareholder servicing and related shareholder expenses......................... 41,605
Legal, compliance and filing fees.............................................. 12,583
Audit and accounting........................................................... 38,068
Directors' fees and expenses................................................... 6,924
Amortization of organization costs............................................. 8,718
Other.......................................................................... 1,584
--------------
Total expenses.............................................................. 780,044
Less:
Fees waived................................................................. ( 106,606)
Expenses paid indirectly.................................................... ( 3,314)
--------------
Net expenses................................................................ 670,124
--------------
Net investment income....................................................... 616,554
--------------
<CAPTION>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments............................................ 7,345,183
Net change in unrealized appreciation (depreciation) of investments................ 4,380,986
--------------
Net gain (loss) on investments............................................. 11,726,169
--------------
Increase (decrease) in net assets from operations.................................. $ 12,342,723
==============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Year Period from
Ended October 1, 1995 to
December 31, 1996 December 31, 1995
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income.................................................... $ 616,554 $ 170,368
Net realized gain on investments......................................... 7,345,183 630,148
Net change in unrealized appreciation (depreciation) .................... 4,380,986 1,216,404
------------- -------------
Increase (decrease) in net assets from operations...................... 12,342,723 2,016,920
Distributions from:
Net investment income.................................................... ( 616,554) ( 179,845)
Net realized gain on investments......................................... ( 7,293,283) ( 643,645)
In excess of net realized gain........................................... ( -- ) ( 51,900)
Return of capital........................................................ ( 516) ( 8,609)
Capital share transactions (Note 3)....................................... 11,117,028 2,280,846
------------- --------------
Total increase (decrease).............................................. 15,549,398 3,413,767
Net Assets:
Beginning of period...................................................... 45,730,034 42,316,267
------------- --------------
End of period............................................................ $ 61,279,432 $ 45,730,034
============= ==============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DELAFIELD FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
2. Investment Management Fees and Other Transactions with Affiliates
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.
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 year ended December 31, 1996, the Distributor voluntarily waived
shareholder servicing fees of $106,606.
Brokerage commissions paid during the period to the Distributor amounted to
$48,305.
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 caption "Shareholder servicing
and related shareholder expenses" are fees of $18,334 paid to Reich & Tang
Services L.P., an affiliate of the Manager as servicing agent for the Fund.
Included in the Statement of Operations under the captions "Custodian expenses"
and "Shareholder servicing and related shareholder expenses" are expense offsets
of $3,314.
3. Capital Stock
At December 31, 1996, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $53,992,933. Transactions in capital
stock were as follows:
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, 1996 December 31, 1995
------------------------- -------------------------
Shares Amount Shares Amount
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sold........................................ 486,042 $ 6,686,946 221,341 $ 2,650,363
Issued on reinvestment of dividends......... 584,374 7,889,402 71,878 881,282
Redeemed.................................... ( 259,075) ( 3,459,320) ( 103,911) ( 1,250,799)
--------- ---------- --------- ----------
Net increase (decrease)..................... 811,341 $11,117,028 189,308 $ 2,280,846
========= ========== ========= ==========
</TABLE>
4. Investment Transactions
Purchases and sales of investment securities, other than U.S. Government direct
and agency obligations and short-term investments, totaled $33,969,114 and
$35,368,125 respectively.
5. Selected Financial Information
.Reference is made to page 2 of the Prospectus for the Financial Highlights.
- --------------------------------------------------------------------------------
<PAGE>
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(A) Financial Statements
Included in Prospectus:
(1) Table of Fees and Expenses
(2) Selected Financial Information
Included in Statement of Additional Information:
(1) Independemt Auditor's Report dated February 10, 1997;
(2) Statement of Net Assets (audited);
(3) Statement of Operations (audited);
(4) Statement of Changes in Net Assets (audited); and
(5) Notes to Financial Statements (audited).
(B) Exhibits
* (1) Articles of Incorporation of the Registrant.
* (2) By-Laws of the Registrant.
(3) Not applicable.
* (4) Form of certificate for shares of Common Stock, par value $.001 per
share, of the Registrant.
(5) Form of Investment Management Contract between the Registrant
and Reich & Tang Asset Management L.P.
(6) Form of Distribution Agreement between the Registrant and
Reich & Tang Distributors L.P.
(7) Not applicable.
** (8) Form of Custody Agreement between the Registrant and Investors
Fiduciary Trust Company.
** (9) Form of Sub-Transfer Agency Agreement Between Registrant and
Investors Fiduciary Trust Company.
- ------------------------------
*Filed with Pre-Effective Amendment No. 1 on Form N-1A to Registration
Statement No. 33-69760 on November 15, 1993, and is incorporated by reference
herein.
**Filed with Post-Effective Amendment No. 2 on Form N-1A to Registration
Statement No. 33-69760 on January 31, 1995, and is incorporated by reference
herein.
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** (10) Opinion of Battle Fowler LLP as to the legality of the securities
being registered, including their consent to the filing thereof and
to the use of their name under the headings "Dividends,
Distributions and taxes" and "Counsel and Auditors" in the
Prospectus and as to certain federal tax matters.
(11) Consent of Independent Accountants.
(12) Not applicable.
(13) Written assurance of New England Investment Companies L.P. that its
purchase of shares of the registrant was for investment purposes
without any present intention of redeeming or reselling.
(14) Not applicable.
(15.1) Form of Distribution and Service Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940.
(15.2) Form of Distribution Agreement between the Registrant and Reich &
Tang Distributors L.P. filed herein as Exhibit 6.
(15.3) Form of Shareholder Servicing Agreement between the Registrant
and Reich & Tang Distributors L.P.
* (15.4) Form of Administrative Services Agreement between the
Registrant and Reich & Tang Asset Management L.P.
(16) Not Applicable.
(17) Financial Data Schedule (for EDGAR purposes only).
Item 25. Persons controlled by or Under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class as of March 31, 1997
--------------- --------------------
Common Stock 537
(par value $.001)
- ------------------------------
*Filed with Registration Statement on Form N-1A to Registration Statement No.
33-69760 on Spetember 27, 1993, and incorporated by reference herein.
**Filed with Pre-Effective Amendment No. 1 on Form N-1A to Registration
Statement No. 33-69760 on November 15, 1993, and is incorporated by reference
herein.
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Item 27. Indemnification.
Filed as Item 27 to Form N-1A Registration Statement No. 33-69760 on May
17, 1994 and incorporated herein by reference.
Item 28. Business and Other Connections of Investment Adviser.
The description of the Delafield Asset Management Division of the Reich &
Tang Asset Management L.P. under the caption "The Manager" in the Prospectus and
"Manager" in the Statement of Additional Information constituting parts A and B,
respectively, of the Registration Statement are incorporated herein by
reference.
New England Investment Companies, L.P. ("NEICLP"), is the limited partner
and owner of a 99.5% interest in 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 sole general partner of NEICLP. Reich & Tang Asset
Management L.P. succeeded NEICLP as the Manager of the Fund.
On August 30, 1996, The New England Mutual Life Insurance Company ("The
New England") and Metropolitan Life Insurance Company ("MetLife") merged, with
MetLife being the continuing company. The Manager remains an indirect
wholly-owned subsidiary of NEICLP, but Reich & Tang Asset Management, Inc., its
sole general partner, is now an indirect subsidiary of MetLife. Also, MetLife
New England Holdings, Inc., a wholly-owned subsidiary of MetLife, owns 55% of
the outstanding limited partnership interest of NEICLP and may be deemed a
"controlling person" of the Manager. Reich & Tang, Inc. owns approximately 16%
of the outstanding partnership units of NEICLP.
The Registrant's investment advisor, Reich & Tang Asset Management
L.P., is a registered investment advisor. Reich & Tang Asset Management L.P.'s
investment advisory clients include California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax
Free Income Fund, Inc., Florida Daily Municipal Income Fund, 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, North Carolina Daily Municipal
Income Fund, Inc., Short Term Income Fund, Inc. and Tax Exempt Proceeds Fund,
Inc., registered investment companies whose addresses are 600 Fifth Avenue, New
York, New York 10020, which invest principally in money market instruments;
Delafield Fund, Inc. and Reich & Tang Equity Fund, Inc., registered investment
companies whose addresses are 600 Fifth Avenue, New York, New York 10020, which
invest principally in equity securities. In addition, Reich & Tang Asset
Management L.P. is the sole general partner of Alpha Associates L.P., August
Associates, Reich & Tang Minutus L.P., Reich & Tang Minutus II L.P. Reich and
Tang Equity Partnerships L.P., and Tucek Partners L.P., private investment
partnerships organized as limited partnerships.
Peter S. Voss, President, Chief Executive Officer and a Director of
NEIC since October 1992, Chairman of the Board of NEIC since December 1992,
Group Executive Vice President, Bank of America, responsible for the global
asset management private banking businesses, from April 1992 to October 1992,
Executive Vice President of Security Pacific Bank, and Chief Executive Officer
of Security Pacific Hoare Govett Companies a wholly-owned subsidiary of Security
Pacific Corporation, from April 1988 to April 1992, Director of The New England
since March 1993, Chairman of
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<PAGE>
the Board of Directors of NEIC's subsidiaries other than Loomis, Sayles &
Company, L.P. ("Loomis") and Back Bay Advisors, L.P. ("Back Bay"), where he
serves as a Director, and Chairman of the Board of Trustees of all of the mutual
funds in the TNE Fund Group and the Zenith Funds. G. Neil Ryland, Executive Vice
President, Treasurer and Chief Financial Officer of NEIC since July 1993,
Executive Vice President and Chief Financial Officer of The Boston Company, a
diversified financial services company, from March 1989 until July 1993, from
September 1985 to December 1988, Mr. Ryland was employed by Kenner Parker Toys,
Inc. as Senior Vice President and Chief Financial Officer. Edward N. Wadsworth,
Executive Vice President, General Counsel, Clerk and Secretary of NEIC since
December 1989, Senior Vice President and Associate General Counsel of The New
England from 1984 until December 1992, and Secretary of Westpeak and Draycott
and the Treasurer of NEIC. Lorraine C. Hysler has been Secretary of Reich & Tang
Asset Management Inc. since July 1994, Assistant Secretary of NEIC since
September 1993, Vice President of the Mutual Funds Group of New England
Investment Companies, L.P. from September 1993 until July 1994, and Vice
President of Reich & Tang Mutual Funds since July 1994. Ms. Hysler joined Reich
& Tang, Inc. in May 1977 and served as Secretary from April 1987 until September
1993. Richard E. Smith, III has been a Director of Reich & Tang Asset Management
Inc. since July 1994, President and Chief Operating Officer of the Capital
Management Group of New England Investment Companies, L.P. from May 1994 until
July 1994, President and Chief Operating Officer of the Reich & Tang Capital
Management Group since July 1994, Executive Vice President and Director of Rhode
Island Hospital Trust from March 1993 to May 1994, President, Chief Executive
Officer and Director of USF&G Review Management Corp. from January 1988 until
September 1992. Steven W. Duff has been a Director of Reich & Tang Asset
Management Inc. since October 1994, President and Chief Executive Officer of
Reich & Tang Mutual Funds since August 1994, Senior Vice President of
NationsBank from June 1981 until August 1994, Mr. Duff is President and a
Director of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc.,Cortland Trust, Inc., Daily Tax Free Income Fund, Inc.,
Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income
Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc. and Short Term Income Fund, Inc., President and
Trustee of Florida Daily Municipal Income Fund, Pennsylvania Daily Municipal
Income Fund, President and Chief Executive Officer of Tax Exempt Proceeds Fund,
Inc., Executive Vice President of Reich & Tang Equity Fund, Inc. and Delafield
Fund, Inc. Bernadette N. Finn has been Vice President - Compliance of Reich &
Tang Asset Management Inc. since July 1994, Vice President of Mutual Funds
division of Reich & Tang Asset Management Inc. from September 1993 until July
1994, Vice President of Reich & Tang Mutual Funds since July 1994. Ms. Finn
joined Reich & Tang, Inc. in September 1970 and served as Vice President from
September 1982 until May 1987 and as Vice President and Assistant Secretary from
May 1987 until September 1993. Ms. Finn is also Secretary of AEW Commercial
Mortage Securities Fund, Inc., California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax
Free Income Fund, Inc., Florida Daily Municipal Income Fund, Michigan Daily Tax
Free Income Fund, Inc., New 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 Delafield Fund, Inc., Reich & Tang
Equity Fund, Inc. and Short Term Income Fund, Inc. Richard De Sanctis has been
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<PAGE>
Vice President and Treasurer of Reich & Tang Asset Management Inc. since
July 1994, Assistant Treasurer of NEIC since September 1993 and Treasurer of the
Mutual Funds Group of New England Investment Companies, L.P. from September 1993
until July 1994. Mr De Sanctis joined Reich & Tang, Inc. in December 1990 and
served as Controller of Reich & Tang, Inc., from January 1991 to September 1993.
Mr De Sanctis was Vice President and Treasurer of Cortland Financial Group, Inc.
and Vice President of Cortland Distributors, Inc. from 1989 to December 1990.
Mr. De Sanctis is also Treasurer of AEW Commercial Mortgage Securities Fund,
Inc., California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free
Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, 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., Tax Exempt Proceeds Fund,
Inc.x and Short Term Income Fund, Inc. and is Vice President and Treasurer of
Cortland Trust, Inc.
ITEM 29. Principal Underwriters.
(a) Reich & Tang Distributors L.P. is also distributor for California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund, Inc.,
New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income
Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily
Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund,
Inc. and Tax Exempt Proceeds Fund, Inc.
(b) The following are the directors and officers of Reich & Tang Asset
Management, Inc., the general partner of Reich & Tang Asset Management L.P.
Reich & Tang Distributors L.P. does not have any officers. The principal
business address of Messrs Voss, Ryland, and Wadsworth is 399 Boylston Street,
Boston, Massachusetts 02116. For all other persons, the principal businesss
address is 600 Fifth Avenue, New York, New York 10020.
Positions and Offices
With General Partner Positions and Offices
Name Of the Distributor With Registrant
Peter S. Voss President and Director None
G. Neal Ryland Director None
Edward N. Wadsworth Clerk None
Richard E. Smith III Director None
Steven W. Duff Director None
Bernadette N. Finn Vice President Vice President and
Secretary
Lorraine C. Hysler Secretary None
Richard De Sanctis Vice President Treasurer
and Treasurer
Richard I. Weiner Vice President None
(c) Not applicable.
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<PAGE>
Item 30. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and the Rules promulgated thereunder are
maintained in the physical possession of Registrant at 600 Fifth Avenue, New
York, New York 10020, the Registrant's Manager; and at Investors Fiduciary Trust
Company, 127 West 10th Street, Kansas City, Missouri, 64105, the Registrant's
custodian; and at Reich & Tang Services L.P., 600 Fifth Avenue, New York, New
York 10020, the Registrant's Transfer Agent and Dividend Disbursing Agent.
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) The Registrant undertakes to call a meeting of the stockholders for
purposes of voting upon the question of removal of a director or
directors, if requested to do so by the holders of at least 10% of
the Fund's outstanding shares, and the Registrant shall assist
in communications with other shareholders.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant certifies that it has
met all of the requirements for effectiveness of this Post-Effective Amendment
to the Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York, on the __th day of
April, 1997.
DELAFIELD FUND, INC.
By: /s/ Bernadette N. Finn
Bernadette N. Finn, Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.
SIGNATURE CAPACITY DATE
(l) Principal Executive
Officer:
/s/J. Dennis Delafield Chairman April __, 1997
J. Dennis Delafield and Director
(2) Principal Financial and
Accounting Officer:
/s/Richard De Sanctis Treasurer April __, 1997
Richard De Sanctis
(3) Majority of Directors:
J. Dennis Delafield Director April , 1997
W. Giles Mellon Director
Yung Wong Director
Robert Straniere Director
By: /s/Bernadette N. Finn April__, 1997
Bernadette N. Finn
Attorney-in-Fact*
*Filed as "Other Exhibit" with Registration Statement on Form N-1A to
Registration Statement No. 33-69760 on September 27, 1993, and incorporated by
reference herein.
INVESTMENT MANAGEMENT CONTRACT
DELAFIELD FUND
the "Fund"
New York, New York
, 1996
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10022
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and reinvesting our assets
in securities of the type, and in accordance with the limitations, specified in
our Articles of Incorporation, By-Laws and Registration Statement filed with the
Securities and Exchange Commission under the Investment Company Act of 1940 (the
"1940 Act") and the Securities Act of 1933, including the Prospectus forming a
part thereof (the "Registration Statement"), all as from time to time in effect,
and in such manner and to such extent as may from time to time be authorized by
our Board of Directors. We enclose copies of the documents listed above and will
furnish you such amendments thereto as may be made from time to time.
2.(a) We hereby employ you to manage the investment and reinvestment of
our assets as above specified, and, without limiting the generality of the
foregoing, to provide the investment management services specified below.
(b) Subject to the general control of our Board of Trustees, you will make
decisions with respect to all purchases and sales of the portfolio
securities. To carry out such decisions, you are hereby authorized, as our
agent and attorney-in-fact for our account and at our risk and in our name,
to place orders for the investment and reinvestment of our assets. In all
purchases, sales and other transactions in our portfolio securities you are
authorized to exercise full discretion and act for us in the same manner
and with the same force and effect as our Fund itself might or could do
with respect to such purchases, sales or other transactions, as well as
with respect to all other things necessary or incidental to the furtherance
or conduct of such purchases, sales or other transactions. In furtherance
of such and subject to applicable law and procedurs adopted by the Fund's
Board of Directors, you may (i) dirct portfolio brokerage to yourself (ii)
pay commisions to brokers other than yourself which are higher than
suchthat might be charged by another qualified broker to obtainbrokerage
and/or reasearch services considered by you to be useful or desirable for
your investment management of the portfolio and/or other advisory accounts
of yours and any investment advisor affiliated with you; and (iii) consider
the sales of shares of the Fund by brokers including yourself as a factor
in your selection of brokers for portfolio transactions.
<PAGE>
(c) You will report to our Board of Directors at each meeting thereof all
changes in our portfolio since your prior report, and will also keep us in
touch with important developments affecting our portfolio and, on your
initiative, will furnish us from time to time with such information as you
may believe appropriate for this purpose, whether concerning the individual
entities whose securities are included in our portfolio, the activities in
which such entities engage, Federal income tax policies applicable to our
investments, or the conditions prevailing in the money market or the
economy generally. You will also furnish us with such statistical and
analytical information with respect to our portfolio securities as you may
believe appropriate or as we may reasonably request. In making such
purchases and sales of our portfolio securities, you will comply with the
policies set from time to time by our Board of Directors as well as the
limitations imposed by our Articles of Incorporation and by the provisions
of the Internal Revenue Code and the 1940 Act relating to regulated
investment companies and the limitations contained in the Registration
Statement.
(d) It is understood that you will from time to time employ, subcontract
with or otherwise associate with yourself, entirely at your expense, such
persons as you believe to be particularly fitted to assist you in the
execution of your duties hereunder.
(e) You or your affiliates will also furnish us, at your own expense, such
investment advisory supervision and assistance as you may believe
appropriate or as we may reasonably request subject to the requirements of
any regulatory authority to which you may be subject. You and your
affiliates will also pay the expenses of promoting the sale of our shares
(other than the costs of preparing, printing and filing our registration
statement, printing copies of the prospectus contained therein and
complying with other applicable regulatory requirements), except to the
extent that we are permitted to bear such expenses under a plan adopted
pursuant to Rule 12b-1 under the 1940 Act or a similar rule.
3. We agree, subject to the limitations described below, to be responsible
for, and hereby assume the obligation for payment of, all our expenses,
including: (a) brokerage and commission expenses, (b) Federal, state or
local taxes, including issue and transfer taxes incurred by or levied on
us, (c) commitment fees and certain insurance premiums, (d) interest
charges on borrowings, (e) charges and expenses of our custodian, (f)
charges, expenses and payments relating to the issuance, redemption,
transfer and dividend disbursing functions for us, (g) recurring and
nonrecurring legal and accounting expenses, including those of the
bookkeeping agent, (h) telecommunications expenses, (i) the costs of
organizing and maintaining our
2
<PAGE>
existence as a trust, (j) compensation, including Directors' fees, of any
of our Directors, officers or employees who are not your officers or
officers of your affiliates, and costs of other personnel providing
clerical, accounting supervision and other office services to us as we may
request, (k) costs of shareholder's services including, charges and
expenses of persons providing confirmations of transactions in our shares,
periodic statements to shareholders, and recordkeeping and shareholders'
services, (l) costs of shareholders' reports, proxy solicitations, and
trust meetings, (m) fees and expenses of registering our shares under the
appropriate Federal securities laws and of qualifying such shares under
applicable state securities laws, including expenses attendant upon the
initial registration and qualification of such shares and attendant upon
renewals of, or amendments to, those registrations and qualifications, (n)
expenses of preparing, printing and delivering our prospectus to existing
shareholders and of printing shareholder application forms for shareholder
accounts, (o) payment of the fees and expenses provided for herein, under
the Administrative Services Agreement and pursuant to Shareholder Servicing
Agreement and Distribution Agreement, and (p) any other distribution or
promotional expenses contemplated by an effective plan adopted by us
pursuant to Rule 12b-1 under the Act. Our obligation for the foregoing
expenses is limited by your agreement to be responsible, while this
Agreement is in effect, for any amount by which our annual operating
expenses (excluding taxes, brokerage, interest and extraordinary expenses)
exceed the limits on investment company expenses prescribed by any state in
which our shares are qualified for sale.
4. We will expect of you, and you will give us the benefit of, your best
judgment and efforts in rendering these services to us, and we agree as an
inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
security holders by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by reason of
your reckless disregard of your obligations and duties hereunder.
5. In consideration of the foregoing we will pay you a fee at the annual
rate of .80% of the Fund's average daily net assets. Your fee will be
accrued by us daily, and will be payable on the last day of each calendar
month for services performed hereunder during that month or on such other
schedule as you shall request of us in writing. You may use any portion of
this fee for distribution of our shares, or for making servicing payments
to organizations whose customers or clients are our shareholders. You may
waive your right to any fee to which you are entitled hereunder, provided
such waiver is
3
<PAGE>
delivered to us in writing. Any reimbursement of our expenses, to which we
may become entitled pursuant to paragraph 3 hereof, will be paid to us at
the same time as we pay you.
6. This Agreement will become effective on the date hereof and shall continue in
effect until ____________ __, 1996 and thereafter for successive twelve-month
periods (computed from each ), provided that such continuation is specifically
approved at least annually by our Board of Directors or by a majority vote of
the holders of our outstanding voting securities, as defined in the 1940 Act and
the rules thereunder, and, in either case, by a majority of those of our
Directors who are neither party to this Agreement nor, other than by their
service as Directors of the trust, interested persons, as defined in the 1940
Act and the rules thereunder, of any such person who is party to this Agreement.
Upon the effectiveness of this Agreement, it shall supersede all previous
Agreements between us covering the subject matter hereof. This Agreement may be
terminated at any time, without the payment of any penalty, (i) by vote of a
majority of our outstanding voting securities, as defined in the 1940 Act and
the rules thereunder, or (ii) by a vote of a majority of our entire Board of
Directors, on sixty days' written notice to you, or (iii) by you on sixty days'
written notice to us.
7. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you and this agreement shall terminate
automatically in the event of any such transfer, assignment, sale,
hypothecation or pledge by you. The terms "transfer", "assignment" and
"sale" as used in this paragraph shall have the meanings ascribed thereto
by governing law and in applicable rules or regulations of the Securities
and Exchange Commission.
8. Except to the extent necessary to perform your obligations hereunder,
nothing herein shall be deemed to limit or restrict your right, or the
right of any of your employees or the officers and directors of Reich &
Tang Asset Management, Inc., your general partner, who may also be a
director, officer or employee of ours, or of a person affiliated with us,
as defined in the 1940 Act, to engage in any other business or to devote
time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render services
of any kind to any other corporation, firm, individual or association.
4
<PAGE>
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
DELAFIELD FUND
By:___________________________________
Name:
Title:
ACCEPTED: , 1996
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT, INC., as General Partner
By: ___________________________________
Name:
Title:
DISTRIBUTION AGREEMENT
DELAFIELD FUND
the "Fund"
600 Fifth Avenue
New York, New York 10020
________________, 1996
Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, New York 10020
Ladies and Gentlemen:
We hereby confirm our agreement with you as follows:
1. In consideration of the agreements on your part herein contained and of
the payment by us to you of a fee of $1 per year and on the terms and conditions
set forth herein we have agreed that you shall be, for the period of this
agreement, a distributor, as our agent, for the unsold portion of such number of
shares of our beneficial interests, $.001 par value per share, as may be
effectively registered from time to time under the Securities Act of 1933, as
amended (the "1933 Act"). This agreement is being entered into pursuant to the
Distribution and Service Plan (the "Plan") adopted by us in accordance with Rule
12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act").
2. We hereby agree that as of such time when our Board of Directors
reclassifies our shares of stock into a new class(es) subject to a distribution
fee pursuant to the Plan and in accordence with the applicable law, we will pay
you a fee up to 1% per annuam of our daily net assets for providng or arranging
for others to provide distibution assistance with respect to the applicable
class(es) of our shares. In addition, such fee will be used to pay the cost of
the preparation and printing of brochures and other promotional materials,
mailings to prospective shareholders, advertising and other promotional
activities, including salaries and/or commissions of sales personnel of yours
and other persons, in connection with the distribution of the applicable
class(es) of our shares.
3. We hereby agree that you will act as our agent, and hereby appoint you
our agent, to offer, and to solicit offers to subscribe to, the unsold balance
of shares of our beneficial interests as shall then be effectively registered
under the Act. All subscriptions for shares of our beneficial interest obtained
by you shall be directed to us for acceptance and shall not be binding on us
until accepted by us. You shall have no authority to make binding subscriptions
on our behalf. We reserve the right to sell shares of our beneficial interest
through other distributors or directly to investors through subscriptions
received by us at our principal office in New York, New York. The right given to
you under this agreement shall not apply to shares of our beneficial interest
issued in connection with (a) the merger or consolidation of any other
investment company with us, (b) our acquisition by purchase or otherwise of all
or substantially all of the assets or stock of any other investment company, or
(c) the reinvestment in shares of our beneficial
<PAGE>
interest by our shareholders of dividends or other distributions or any other
offering by us of securities to our shareholders.
4. You will use your best efforts to obtain subscriptions to shares of our
beneficial interest upon the terms and conditions contained herein and in our
Prospectus, as in effect from time to time. You will send to us promptly all
subscriptions placed with you. We shall furnish you from time to time, for use
in connection with the offering of shares of our beneficial interest, such other
information with respect to us and shares of our beneficial interest as you may
reasonably request. We shall supply you with such copies of our Registration
Statement and Prospectus, as in effect from time to time, as you may request.
Except as we may authorize in writing, you are not authorized to give any
information or to make any representation that is not contained in the
Registration Statement or Prospectus, as then in effect. You may use employees,
agents and other persons, at your cost and expense, to assist you in carrying
out your obligations hereunder, but no such employee, agent or other person
shall be deemed to be our agent or have any rights under this agreement. You may
sell our shares to or through qualified brokers, dealers and financial
institutions under selling and servicing agreements provided that no dealer,
financial institution or other person shall be appointed or authorized to act as
our agent without our written consent. You will arrange for organizations whose
customers or clients are shareholders of our Fund ("Participating
Organizations") to enter into agreements with you for the performance of
shareholder servicing and related administrative functions not performed by you
or the Transfer Agent. Pursuant to our Shareholder Servicing Agreement with you,
you may make payments to Participating Organizations for performing shareholder
servicing and related administrative functions with respect to the Class A
Shares. Such payments will be made only pursuant to written agreements approved
in form and substance by our Board of Directors to be entered into by you and
the Participating Organizations. It is recognized that we shall have no
obligation or liability to you or any Participating Organization for any such
payments under the agreements with Participating Organizations. Our obligation
is solely to make payments to you under the Shareholder Servicing Agreement and
to the Manager under the Investment Management Contract and the Administrative
Services Contract. All sales of our shares effected through you will be made in
compliance with all applicable federal securities laws and regulations and the
Constitution, rules and regulations of the National Association of Securities
Dealers, Inc. ("NASD").
2
<PAGE>
5. We reserve the right to suspend the offering of shares of our beneficial
interest at any time, in the absolute discretion of our Board of Directors, and
upon notice of such suspension you shall cease to offer shares of our beneficial
interests hereunder.
6. Both of us will cooperate with each other in taking such action as may
be necessary to qualify shares of our beneficial interest for sale under the
securities laws of such states as we may designate, provided, that you shall not
be required to register as a broker-dealer or file a consent to service of
process in any such state where you are not now so registered. Pursuant to the
Investment Management Contract in effect between us and the Manager, we will pay
all fees and expenses of registering shares of our beneficial interest under the
Act and of qualification of shares of our beneficial interests, and to the
extent necessary, our qualification under applicable state securities laws. You
will pay all expenses relating to your broker-dealer qualification.
7. We represent to you that our Registration Statement and Prospectus have
been carefully prepared to date in conformity with the requirements of the 1933
Act and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "SEC") thereunder. We represent and warrant to you, as
of the date hereof, that our Registration Statement and Prospectus contain all
statements required to be stated therein in accordance with the 1933 Act and the
1940 Act and the SEC's rules and regulations thereunder; that all statements of
fact contained therein are or will be true and correct at the time indicated or
the effective date as the case may be; and that neither our Registration
Statement nor our Prospectus, when they shall become effective or be authorized
for use, will include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of shares of our beneficial interest. We
will from time to time file such amendment or amendments to our Registration
Statement and Prospectus as, in the light of future development, shall, in the
opinion of our counsel, be necessary in order to have our Registration Statement
and Prospectus at all times contain all material facts required to be stated
therein or necessary to make any statements therein not misleading to a
purchaser of shares of our beneficial interest. If we shall not file such
amendment or amendments within fifteen days after our receipt of a written
request from you to do so, you may, at your option, terminate this agreement
immediately. We will not file any amendment to our Registration Statement or
Prospectus without giving you reasonable notice thereof in advance; provided,
however, that nothing in this agreement shall in any way limit our right to file
such amendments to our Registration Statement or Prospectus, of whatever
character, as we may deem advisable, such right being
3
<PAGE>
in all respects absolute and unconditional. We represent and warrant to you that
any amendment to our Registration Statement or Prospectus hereafter filed by us
will be carefully prepared in conformity within the requirements of the 1933 Act
and the 1940 Act and the SEC's rules and regulations thereunder and will, when
it becomes effective, contain all statements required to be stated therein in
accordance with the 1933 Act and the 1940 Act and the SEC's rules and
regulations thereunder; that all statements of fact contained therein will, when
the same shall become effective, be true and correct; and that no such
amendment, when it becomes effective, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of our
shares.
8. We agree to indemnify, defend and hold you, and any person who controls
you within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which you or any such controlling person
may incur, under the 1933 Act or the 1940 Act, or under common law or otherwise,
arising out of or based upon any alleged untrue statement of a material fact
contained in our Registration Statement or Prospectus in effect from time to
time or arising out of or based upon any alleged omission to state a material
fact required to be stated in either of them or necessary to make the statements
in either of them not misleading; provided, however, that in no event shall
anything herein contained be so construed as to protect you against any
liability to us or our security holders to which you would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties under this agreement. Our agreement to indemnify you and
any such controlling person is expressly conditioned upon our being notified of
any action brought against you or any such controlling person, such notification
to be given by letter or by telegram addressed to us at our principal office in
New York, New York, and sent to us by the person against whom such action is
brought within ten days after the summons or other first legal process shall
have been served. The failure so to notify us of any such action shall not
relieve us from any liability which we may have to the person against whom such
action is brought other than on account of our indemnity agreement contained in
this paragraph 8. We will be entitled to assume the defense of any suit brought
to enforce any such claim, and to retain counsel of good standing chosen by us
and approved by you. In the event we do elect to assume the defense of any such
suit and retain counsel of good standing approved by you, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case we do not
4
<PAGE>
elect to assume the defense of any such suit, or in case you, in good faith, do
not approve of counsel chosen by us, we will reimburse you or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by you or them. Our indemnification
agreement contained in this paragraph 7 and our representations and warranties
in this agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of you or any controlling person and shall
survive the sale of any shares of our beneficial interest made pursuant to
subscriptions obtained by you. This agreement of indemnity will inure
exclusively to your benefit, to the benefit of your successors and assigns, and
to the benefit of any of your controlling persons and their successors and
assigns. We agree promptly to notify you of the commencement of any litigation
or proceeding against us in connection with the issue and sale of any shares of
our beneficial interest.
8. You agree to indemnify, defend and hold us, our several officers and
directors, and any person who controls us within the meaning of Section 15 of
the 1933 Act, free and harmless from and against any and all claims, demands,
liabilities, and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which we, our officers or directors, or any such
controlling person may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement or Prospectus as in effect from time to time, or shall arise out of or
be based upon any alleged omission to state a material fact in connection with
such information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. Your agreement
to indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process shall
have been served. You shall have a right to control the defense of such action,
with counsel of your own choosing, satisfactory to us, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event you and we, our officers or directors or such controlling person shall
each have the right to participate in the defense or preparation of the defense
of any such action. The failure so to notify you of any such action shall not
5
<PAGE>
relieve you from any liability which you may have to us, to our officers or
directors, or to such controlling person other than on account of your indemnity
agreement contained in this paragraph 8.
10. We agree to advise you immediately:
a. of any request by the SEC for amendments to our Registration Statement
or Prospectus or for additional information,
b. of the issuance by the SEC of any stop order suspending the
effectiveness of our Registration Statement or Prospectus or the initiation of
any proceedings for that purpose,
c. of the happening of any material event which makes untrue any statement
made in our Registration Statement or Prospectus or which requires the making of
a change in either of them in order to make the statements therein not
misleading, and
d. of all action of the SEC with respect to any amendments to our
Registration Statement or Prospectus.
11. This agreement will become effective on the date hereof and will remain in
effect thereafter for successive twelve-month periods (computed from each
____________), provided that such continuation is specifically approved at least
annually by vote of our Board of Directors and of a majority of those of our
Directors who are not interested persons (as defined in the 1940 Act) and have
no direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan, cast in person at a meeting called for the
purpose of voting on this agreement. This agreement may be terminated at any
time, without the payment of any penalty, (i) by vote of a majority of our
entire Board of Directors, and by a vote of a majority of our Directors who are
not interested persons (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan, or (ii) by vote of a majority of our outstanding voting
securities, as defined in the Act, on sixty days' written notice to you, or
(iii) by you on sixty days' written notice to us.
12. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you and this Agreement shall terminate automatically
in the event of any such transfer, assignment, sale, hypothecation or pledge by
you. The terms "transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed thereto by governing law and in applicable
rules or regulations of the SEC thereunder.
13. Except to the extent necessary to perform your obligations hereunder,
nothing herein shall be deemed to limit or
6
<PAGE>
restrict your right, the right of any of your employees or the right of any
officers or directors of Reich & Tang Asset Management, Inc., your general
partner, who may also be a director, officer or employee of ours, or of a person
affiliated with us, as defined in the 1940 Act, to engage in any other business
or to devote time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render services of
any kind to another corporation, firm, individual or association.
If the foregoing is in accordance with your understanding, will you kindly
so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
DELAFIELD FUND
By:___________________________________
Accepted: ________________, 1996
REICH & TANG DISTRIBUTORS L.P.
By: REICH & TANG ASSET MANAGEMENT, INC.,
as General Partner
By: ___________________________________
EXHIBIT 11
McGLADREY & PULLEN L.L.P.
Certified Public Accountants & Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated February 10, 1997, on the
financial statements referred to therein in Post-Effective Amendment No. 4 to
the Registration Statement on Form N-1A, File No. 33-69760 of Delafield Fund,
Inc., as filed with the Securities and Exchange Commission.
We also consent to the reference to our Firm in the Prospectus under the
caption "Selected Financial Information" and in the Statement of Additional
Information under the caption "Counsel and Auditors."
/s/McGLADREY & PULLEN, LLP
McGladrey & Pullen, LLP
New York, New York
April 16, 1997
DELAFIELD FUND
Distribution and Service Plan Pursuant to Rule
12b-1 Under the Investment Company Act of 1940
This Distribution and Service Plan (the "Plan") is hereby amended to reflect
that Reich & Tang Asset Management, Inc. has succeeded as sole general partner
of Reich & Tang Distributors L.P. (the "Distributor") and Reich & Tang Asset
Management L.P. has succeeded as sole limited partner of the Distributor. The
Board of Directors of the Fund has approved unanimously this amendment to the
Plan and has authorized the Fund to re-execute the Distribution Agreement and
Shareholder Servicing Agreement with the Distributor to reflect the foregoing.
The Plan is hereby amended in its entirety as set forth herein and as authorized
under Section 9 of the previous Plan.
The Plan is adopted by Delafield Fund, Inc. (the "Fund") in accordance with
the provisions of Rule 12b-1 under the Investment Company Act of 1940 (the
"Act").
The Plan
1. The Fund and the Distributor, have entered into a Distribution Agreement, in
a form satisfactory to the Fund's Board of Directors, under which the
Distributor will act as distributor of the Fund's shares. Pursuant to the
Distribution Agreement, the Distributor, as agent of the Fund, will solicit
<PAGE>
orders for the purchase of the Fund's shares, provided that any
subscriptions and orders for the purchase of the Fund's shares will not be
binding on the Fund until accepted by the Fund as principal. In addition, the
Distribution Agreement provides that with respect to certain classes of stock of
the Fund, the Distributor will be paid a distribution fee for providing or
arranging for others to provide distribution assistance with respect to the
applicable class(es) of the Fund's shares and for advertising and promotional
materials and the cost thereof.
2. The Fund and the Distributor have entered into a Shareholder Servicing
Agreement in a form satisfactory to the Fund's Board of Directors, which
provides that the Distributor will be paid a service fee for providing or for
arranging for others to provide all personal shareholder servicing and related
maintenance of shareholder account functions not performed by us or our transfer
agent.
3. The Manager may make payments from time to time from its own resources,
which may include the management fees and administrative services fees received
by the Manager from the Fund and from other companies, and past profits for the
following purposes:
(i) to pay the costs of, and to compensate others, including
organizations whose customers or clients are Class A Fund Shareholders
("Participating Organizations"), for performing personal shareholder
servicing and related maintenance of shareholder account functions on
behalf of the Fund;
(ii) to compensate Participating Organizations for providing assistance
in distributing Fund's Shares; and
2
<PAGE>
(iii) to pay the cost of the preparation and printing of brochures and
other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including salaries and/or
commissions of sales personnel of the Distributor and other persons, in
connection with the distribution of the Fund's shares.
The Distributor may also make payments from time to time from its own
resources, which may include the service fee and past profits for the purpose
enumerated in (i) above and may use any distribution fees received with respect
to any class of shares of the Fund for the purposes mentioned in (ii) and (iii)
above. Further, the Distributor may 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 (1) the Manager for any fiscal year under
the Investment Management Contract or the Administrative Services Agreement in
effect for that year or otherwise or (2) to the Distributor under the
Shareholder Servicing Agreement in effect for that year or otherwise. The
Investment Management Contract will also require the Manager to reimburse the
Fund for any amounts by which the Fund's annual operating expenses, including
distribution expenses, exceed in the aggregate in any fiscal year the limits
prescribed by any state in which the Fund's shares are qualified for sale.
4. The Fund will pay for (i) telecommunications expenses, including the
cost of dedicated lines and CRT terminals, incurred by the Distributor and
Participating
3
Organizations in carrying out its obligations under the
Shareholder Servicing Agreement with respect to the Class A shares of the Fund
and (ii) preparing, printing and delivering the Fund's prospectus to existing
shareholders of the Fund and preparing and printing subscription application
forms for shareholder accounts.
5. Payments by the Distributor or Manager to Participating Organizations as set
forth herein are subject to compliance by them with the terms of written
agreements in a form satisfactory to the Fund's Board of Directors to be entered
into between the Distributor and the Participating Organizations.
6. The Fund and the Distributor will prepare and furnish to the Fund's Board of
Directors, at least quarterly, written reports setting forth all amounts
expended for servicing and distribution purposes by the Fund, the Distributor
and the Manager, pursuant to the Plan and identifying the servicing and
distribution activities for which such expenditures were made.
7. The Plan became effective upon approval by (i) a majority of the outstanding
voting securities of the Fund (as defined in the Act), and (ii) a majority of
the Board of Directors of the Fund, including a majority of the Directors who
are not interested persons (as defined in the Act) of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreement entered into in connection with the Plan, pursuant to a vote cast in
person at a meeting called for the purpose of voting on the approval of the
Plan.
4
<PAGE>
8. The Plan will remain in effect until ___________ __, 1995 unless earlier
terminated in accordance with its terms, and thereafter may continue in effect
for successive annual periods if approved each year in the manner described in
clause (ii) of paragraph 7 hereof.
9. The Plan may be amended at any time with the approval of the Board of
Directors of the Fund, provided that (i) any material amendments of the terms of
the Plan will be effective only upon approval as provided in clause (ii) of
paragraph 7 hereof, and (ii) any amendment which increases materially the amount
which may be spent by the Fund pursuant to the Plan will be effective only upon
the additional approval as provided in clause (i) of paragraph 7 hereof (with
each class of the Fund voting separately).
10. The Plan may be terminated without penalty at any time (i) by a vote of the
majority of the entire Board of Directors of the Fund and by a vote of a
majority of the Directors of the Fund who are not interested persons (as defined
in the Act) of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any agreement related to the Plan, or (ii) by a
vote of a majority of the outstanding voting securities of the Fund (with each
class of the Fund voting separately) (as defined in the Act).
5
SHAREHOLDER SERVICING
AGREEMENT
DELAFIELD FUND
(the "Fund")
600 Fifth Avenue
New York, New York 10020
, 1996
Reich & Tang Distributors L.P. ("Distributor")
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and Service Plan, as
amended, adopted by us in accordance with Rule 12b-1 (the 9"Plan") under the
Investment Company Act of 1940, as amended (the "Act"), to provide the services
listed below. You will perform, or arrange for others including organizations
whose customers or clients are shareholders of our corporation (the
"Participating Organizations") to perform, all personal shareholder servicing
and related maintenance of shareholder account functions ("Shareholder
Services") not performed by us or our transfer agent.
2. You will be responsible for the payment of all expenses incurred by you
in rendering the foregoing services, except that we will pay for (i)
telecommunications expenses, including the cost of dedicated lines and CRT
terminals, incurred by the Distributor and Participating Organizations in
rendering such services to the Class A Shareholders, and (ii) preparing,
printing and delivering our prospectus to existing shareholders and preparing
and printing subscription application forms for shareholder accounts.
3. You may make payments from time to time from your own resources,
including the fee payable hereunder and past profits to compensate Participating
Organizations, for providing Shareholder Servicesd. Payments to Participating
Organizations to compensate them for providing Shareholder Services are subject
to compliance by them
<PAGE>
with the terms of written agreements satisfactory to our Board of Directors to
be entered into between the Distributor and the Participating Organizations. The
Distributor will in its sole discretion determine the amount of any payments
made by the Distributor pursuant to this Agreement, provided, however, that no
such payment will increase the amount which we are required to pay either to the
Distributor under this Agreement or to the Manager under the Investment
Management Contract, the Administrative Services Agreement, or otherwise.
4. We will expect of you, and you will give us the benefit of, your best
judgment and efforts in rendering these services to us, and we agree as an
inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. In consideration of your performance, we will pay you a service fee as
defined by Article III, Section 26(b)(9) of the Rules of Fair Practice, as
amended, of the National Association of Securities Dealers, Inc. at the annual
rate of one quarter of one percent (0.25%) of the Fund's average daily net
assets to reimburse you for the cost you incur in providing the services
specified herein and to allow you to make payments to Prticipating Organizations
for providing such services. Your payment will be accrued by us daily, and will
be payable on the last day of each calendar month for services performed
hereunder during that month or on such other schedule as you shall request of us
in writing. You may waive your right to any fee to which you are entitled
hereunder, provided such waiver is delivered to us in writing.
6. This Agreement will become effective on the date hereof and thereafter for
successive twelve-month periods (computed from each ___________), provided that
such continuation is specifically approved at least annually by vote of our
Board of Directors and of a majority of those of our Directors who are not
interested persons (as defined in the Act) and have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan, cast in person at a meeting called for the purpose of voting on this
Agreement. This Agreement may be terminated at any time, without the payment of
any penalty, (i) by vote of a majority of our entire Board of Directors, and by
a vote of a majority of our Directors who are not interested persons (as defined
in the Act) and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan, or (ii) by vote
of a majority of the outstanding voting securities of the Fund's Class A Shares,
as defined in the Act, on sixty days' written notice to you, or (iii) by you on
sixty days' written notice to us.
2
<PAGE>
7. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you and this Agreement shall terminate automatically
in the event of any such transfer, assignment, sale, hypothecation or pledge by
you. The terms "transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed thereto by governing law and in applicable
rules or regulations of the Securities and Exchange Commission thereunder.
8. Except to the extent necessary to perform your obligations hereunder, nothing
herein shall be deemed to limit or restrict your right, the right of any of your
employees or the right of any officers or directors of Reich & Tang Asset
Management, Inc., your general partner, who may also be a director, officer or
employee of ours, or of a person affiliated with us, as defined in the Act, to
engage in any other business or to devote time and attention to the management
or other aspects of any other business, whether of a similar or dissimilar
nature, or to render services of any kind to another corporation, firm,
individual or association.
If the foregoing is in accordance with your understanding, will you kindly
so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
DELAFIELD FUND
By:
ACCEPTED: , 1996
REICH & TANG DISTRIBUTORS L.P.
By: REICH & TANG ASSET MANAGEMENT, INC.,
as General Partner
By:
3
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000912896
<NAME> Delafield Fund, Inc.
<S> <C>
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-30-1995
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 43858434
<INVESTMENTS-AT-VALUE> 46768755
<RECEIVABLES> 150106
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 29534
<TOTAL-ASSETS> 46948395
<PAYABLE-FOR-SECURITIES> 1068959
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 149402
<TOTAL-LIABILITIES> 1218361
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42876421
<SHARES-COMMON-STOCK> 3730852
<SHARES-COMMON-PRIOR> 3541544
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 8609
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 51900
<ACCUM-APPREC-OR-DEPREC> 2910320
<NET-ASSETS> 45730034
<DIVIDEND-INCOME> 128238
<INTEREST-INCOME> 215136
<OTHER-INCOME> 0
<EXPENSES-NET> 173006
<NET-INVESTMENT-INCOME> 170368
<REALIZED-GAINS-CURRENT> 630148
<APPREC-INCREASE-CURRENT> 1216404
<NET-CHANGE-FROM-OPS> 2016920
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 179845
<DISTRIBUTIONS-OF-GAINS> 643645
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 221341
<NUMBER-OF-SHARES-REDEEMED> 103911
<SHARES-REINVESTED> 71878
<NET-CHANGE-IN-ASSETS> 3413767
<ACCUMULATED-NII-PRIOR> 9338
<ACCUMULATED-GAINS-PRIOR> 8689
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 86832
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 202613
<AVERAGE-NET-ASSETS> 43535233
<PER-SHARE-NAV-BEGIN> 11.95
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> .50
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> .19
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.26
<EXPENSE-RATIO> 1.67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
