As filed with the Securities and Exchange Commission on July 29, 1999
Registration No. 33-74470
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. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 [X]
(Check appropriate box or boxes)
INSTITUTIONAL DAILY INCOME FUND
(Exact Name of Registrant as Specified in Charter)
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 830-5200
BERNADETTE N. FINN
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Name and Address of Agent for Service)
Copy to:MICHAEL R. ROSELLA, ESQ.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective: (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
INSTITUTIONAL DAILY INCOME FUND 600 FIFTH AVENUE
Class A Shares; Class B Shares NEW YORK, N.Y. 10020
(212) 830-5220
PROSPECTUS
August 3, 1999
The investment objective of the U.S. Treasury Portfolio and the Money Market
Portfolio is to seek as high a level of current income to the extent
consistent with the preservation of capital and the maintenance of liquidity.
The investment objective of the Municipal Portfolio is to seek as high a level
of tax exempt current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
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TABLE OF CONTENTS
2 Risk/Return Summary: Investments, Risks 11 Management, Organization and Capital Structure
and Performance 11 Shareholder Information
6 Risk/Return Summary: Fee Table 17 Tax Consequences
7 Investment Objectives, Principal Investment 18 Distribution Arrangements
Strategies and Related Risks 20 Financial Highlights
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I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
Investment Objectives
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The Fund is composed of three portfolios - the U.S. Treasury Portfolio, the
Money Market Portfolio, and the Municipal Portfolio (each a "Portfolio" and
collectively, the "Portfolios").
The investment objective of the U.S. Treasury Portfolio and the Money Market
Portfolio is to seek as high a level of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
The investment objective of the Municipal Portfolio is to seek as high a
level of tax exempt current income to the extent consistent with the
preservation of capital and the maintenance of liquidity.
There is no assurance that the Portfolios will achieve their investment
objectives.
Principal Investment Strategies
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The Fund intends to achieve its investment objectives through three separate
portfolios. Each Portfolio is a money market portfolio that invests in high
quality and short-term debt instruments. The Fund seeks to maintain investment
portfolios with a dollar-weighted average maturity of 90 days or less, to value
its investment portfolio at amortized cost and maintain a net asset value of
$1.00 per share.
Each Portfolio's strategy is as follows:
The U.S. Treasury Portfolio
The U.S. Treasury Portfolio seeks to achieve its objective principally by
investing in obligations backed by the full faith and credit of the Untied
States government with maturities of 397 days or less and repurchase agreements
which are collateralized by such obligations calling for resale in 397 days or
less.
The Money Market Portfolio
The Money Market Portfolio seeks to achieve its objective by investing
principally in short-term money market obligations with maturities of 397 days
or less, including bank certificates of deposit, time deposits, bankers'
acceptances, high quality commercial paper, securities issued or guaranteed by
the United States Government, state agencies or instrumentalities, and
repurchase agreements calling for resale in 397 days or less backed by the
foregoing securities.
The Municipal Portfolio
This Portfolio seeks to achieve its objective principally by investing in
obligations issued by states, territories and possessions of the Untied States
and its political subdivisions, public authorities and other entities authorized
to issue debt, the interest on which is exempt from regular Federal income tax.
The Municipal Portfolio has not yet been activated and is not yet offered for
sale or distribution.
Principal Risks
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Risks Common to all Portfolios:
o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund. The value
of the Fund's shares and the securities held by the Fund can each decline
in value.
o An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
Risks of Investing in the U.S. Treasury Portfolio:
o The U.S. Treasury Portfolio's investment policy of only investing in U.S.
Treasury obligations and other obligations that are issued or guaranteed by
the United States Government, while minimizing risk of loss, may produce a
lower yield than a policy of investing in other types of instruments. The
yield and total return of the U.S. Treasury Portfolio is likely to be lower
than that of the Money Market Portfolio.
Risks of Investing in the Money Market Portfolio:
o The Money Market Portfolio may contain securities issued by foreign
governments, or any of their political subdivisions, agencies or
instrumentalities, and by foreign branches of domestic banks, foreign
subsidiaries of domestic banks, domestic and foreign branches of foreign
banks, and commercial paper issued by foreign issuers and may be subject to
additional investment risks when compared with those
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incurred by a fund which invests only in domestic issuers.
Risks of Investing in the Municipal Portfolio:
o The Municipal Portfolio may contain municipal debt obligations. The value
of these municipal obligations may be affected by uncertainties on the
municipal debt market related to taxation. In addition, the payment of
interest and preservation of capital are dependent upon the continuing
ability of issuers and/or obligors of state, municipal and public authority
debt obligations to meet these payment obligations
Risk/Return Bar Chart And Table
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The following bar charts and tables may assist in your decision to invest
in a portfolio of the Fund. The bar charts show the change in the annual total
returns of the Class A shares of the U.S. Treasury and the Money Market
Portfolios over the last four calendar years. The tables show the average annual
returns of these two portfolios for the last one year period and since the
inception of each Class of each of the Portfolios. A bar chart and table for the
Municipal Portfolio will be provided once the Municipal Portfolio has been
existence for a full calendar year. While analyzing this information, please
note that the Portfolios' past performance is not an indication of how the Fund
will perform in the future. The current 7-day yield for the U.S. Treasury and
the Money Market Portfolios may be obtained by calling the Fund toll-free at
1-800-221-3079.
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Institutional Daily Income Fund U.S.Treasury Portfolio - Class A Shares(1)(2)(3)
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[GRAPHIC OMITTED]
Calendar Year End % Total Return
- ----------------- ---------------
1996 5.10%
1997 5.17%
1998 5.07%
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(1) As of June 30, 1999, the Fund's U.S. Treasury Portfolio had a year-to-date
return of 2.16%.
(2) The Fund's U.S. Treasury Portfolio's highest quarterly return was 1.31% for
the quarter ended December 31, 1997; the lowest quarterly return was 1.07%
for the quarter ended March 31, 1999.
(3) Investors purchasing or redeeming shares through a Participating
Organization may be charged a fee in connection with such service and,
therefore, the net return to such investors may be less than the net return
by investing in the Fund directly.
Average Annual Total Returns - U. S. Treasury Portfolio
Class A Class B
For the periods ended December 31, 1998
One Year 5.07% 5.33%
Average Annual Total Returns Since Inception * 5.10% 5.38%
* Inception date of Class A shares - November 29, 1995; inception date of
Class B shares - November 18, 1996.
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Institutional Daily Income Fund Money Market Portfolio - Class A Shares(1)(2)(3)
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[GRAPHIC OMITTED]
Calendar Year End % Total Return
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1996 5.16%
1997 5.33%
1998 5.28%
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(1) As of June 30, 1999, the Fund's Money Market Portfolio had a year-to-date
return of 2.30%.
(2) The Fund's Money Market Portfolio's highest quarterly return was 1.40% for
the quarter ended September 30, 1995; the lowest quarterly return was 1.14%
for the quarter ended June 30, 1999.
(3) Investors purchasing or redeeming shares through a Participating
Organization may be charged a fee in connection with such service and,
therefore, the net return to such investors may be less than the net return
by investing in the Fund directly.
Average Annual Total Returns - Money Market Portfolio
Class A Class B
For the periods ended December 31, 1998
One Year 5.28% 5.54%
Average Annual Total Returns Since Inception* 5.35% 5.53%
* Inception date of Class A shares - April 6, 1995; inception date of Class B
shares - April 14, 1994
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FEE TABLE
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This table describes the fees and expenses that you may pay if you buy and hold
shares in any of the Fund's Portfolios.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
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Money U.S.
Market Treasury Municipal
Portfolio Portfolio Portfolio **
Class A Class B Class A Class B Class A Class B
------------ --------- ---------- --------- --------- -----------
Management Fees*..................... .12% .12% .12% .12% .12% .12%
Distribution and Service (12b-1) Fees .25% None .25% None .25% None
Other Expenses...................... .13% .13% .12% .12% .13% .13%
Administration Fees*............... .05% .05% .05% .05% .05% .05%
Total Fund Operating Expenses .50% .25% .49% .24% .50% .25%
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* The Manager voluntarily waived a portion of the Investment Management Fees and
Administration Fees with respect to both Class A and B shares for the Money
Market Portfolio and U.S. Treasury Portfolio. After such waivers, the Investment
Management Fees and Administration Fees (with respect to both Class A and Class
B shares of both Portfolios) were as follows:
Investment management Fees - .10%
Administration Fees - .02%
Actual Total Fund Operating Expenses - .45% (for Class A shares);
.20% (for Class B shares)
The Adviser or the Administrator, at their option, may terminate this fee waiver
arrangement at any time.
Example
This Example is intended to help you compare the cost of investing in any of the
Fund's portfolios with the cost of investing in other money market funds.
The Example assumes that you invest $10,000 in any of the portfolios of the Fund
for the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Portfolio's operating expenses remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
1 Year 3 Years 5 Years 10 Years
U.S. Treasury Portfolio Class A: 50 157 274 616
Class B: 25 77 135 306
Money Market Portfolio Class A: 51 160 280 628
Class B: 26 80 141 318
Municipal Portfolio** Class A: 51 160 280 628
Class B: 26 80 141 318
** At this time, the Municipal Portfolio of the Fund has not yet been activated
by the Manager and expenses shown are at levels anticipated for the current
fiscal year.
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II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objectives
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The Fund is a money market fund, which seeks to achieve the following
investment objectives through its three portfolios.
The investment objective of the U.S. Treasury Portfolio and the Money
Market Portfolio is to seek as high a level of current income to the extent
consistent with the preservation of capital and the maintenance of liquidity.
The investment objective of the Municipal Portfolio is to seek as high a
level of tax exempt current income to the extent consistent with the
preservation of capital and the maintenance of liquidity.
There can be no assurance that the Fund will achieve its investment
objectives.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund.
Principal Investment Strategies
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Generally
In order to maintain a share price of $1.00, the Fund must comply with
certain industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other regulations pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities which have, or are deemed to have, a remaining
maturity of 397 days or less. Also, the average maturity for all securities
contained in each individual portfolio of the Fund, on a dollar-weighted basis,
will be 90 days or less.
The Fund will only invest in either securities which have been rated (or
whose issuers have been rated) in the highest short-term rating category by
nationally recognized statistical rating organizations, or are unrated
securities but which have been determined by the Fund's Board of Trustees to be
of comparable quality.
Subsequent to its purchase by the Fund, the quality of an investment may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. If this occurs, the Board of Trustees of the Fund shall
reassess the security's credit risks and shall take such action as the Board of
Trustees determines is in the best interest of the Fund and its shareholders.
Reassessment is not required, however, if the security is disposed of or matures
within five business days of the Manager becoming aware of the new rating and
provided further that the Board of Trustees is subsequently notified of the
Manager's actions.
Each portfolio of the Fund shall invest not more than 5% of its total assets
in securities issued by a single issuer.
The Fund's investment manager considers the following factors when buying
and selling securities for each of the Portfolios: (i) availability of cash,
(ii) redemption requests, (iii) yield management, and (iv) credit management.
U.S. Treasury Portfolio
The U.S. Treasury Portfolio is intended to attain the Fund's investment
objective through investments limited to obligations issued or guaranteed by the
United States Government including repurchase agreements covering those types of
obligations. The Fund will enter into repurchase agreements for inclusion in the
U.S. Treasury Portfolio only if the instruments serving as collateral for the
agreements are eligible for inclusion in the U.S. Treasury Portfolio.
The Portfolio's investments may include the following securities:
(i) United States Treasury Obligations: Obligations issued by the full faith
and credit of the United States. U.S. Treasury obligations include bills,
notes and bonds, which principally differ only in their interest rates,
maturities and time of issuance.
(ii) Other United States Government Obligations: Marketable securities and
instruments issued or guaranteed by the full faith and credit of the United
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States Government. Such obligations that are guaranteed by the full faith
and credit of the United States Government include obligations of the
Federal Housing Administration, the Export-Import Bank of the United
States, the Small Business Administration, the Government National Mortgage
Association, the General Services Administration and the Maritime
Administration.
(iii)Repurchase Agreements: The U.S. Treasury Portfolio may enter into
repurchase agreements which are collateralized by obligations issued or
guaranteed by the U.S. Government. A repurchase agreement arises when a
buyer purchases a security and simultaneously agrees wth the vendor to
resell the security to the vendor at an agreed upon time and price.
The investment policies of the U.S. Treasury Portfolio may produce a lower
yield than a policy of investing in other types of instruments. The yield of the
U.S. Treasury Portfolio is likely to be lower than the yield of the Money Market
Portfolio.
Money Market Portfolio
The Money Market Portfolio intends to attain the Fund's investment objective
through investments in the following securities.
(i) United States Government Securities: The Money Market Portfolio may
purchase short-term obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities. These obligations include
issues of the United States Treasury, such as bills, certificates of
indebtedness, notes and bonds, and issues of agencies and instrumentalities
established under the authority of an act of Congress. Some of these
securities are supported by the full faith and credit of the United States
Treasury, others are supported by the right of the issuer to borrow from
the Treasury, and still others are supported only by the credit of the
agency or instrumentality.
(ii) Domestic and Foreign Bank Obligations: The Money Market Portfolio may
purchase securities issued by foreign governments, or any of their
political subdivisions or agencies or instrumentalities, certificates of
deposit are certificates representing the obligation of a bank to repay
funds deposited with it for a specified period of time. Time deposits are
non-negotiable deposits maintained in a bank for a specified period of time
(in no event longer than seven days) at a stated interest rate. Time
deposits purchased by the Fund will not benefit from insurance from the
Federal Deposit Insurance Corporation. Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft drawn on it
by a customer.
The Money Market Portfolio limits its investments in obligations of
domestic banks, foreign branches of domestic banks and foreign subsidiaries
of domestic banks to banks having total assets in excess of one billion
dollars or the equivalent in other currencies. The Money Market Portfolio
limits its investments in obligations of domestic and foreign branches of
foreign banks to dollar denominated obligations of such banks which at the
time of investment have more than $5 billion, or the equivalent in other
currencies, in total assets assets and which meet the quality criteria
discussed above under "Principal Investment Strategies - Generally."
The Money Market Portfolio generally limits investments in bank instruments
to (a) those which are fully insured as to principal by the FDIC or (b)
those issued by banks which at the date of their latest pubic reporting
have total assets in excess of $1.5 billion. However, the total assets of a
bank will not be the sole factor determining the Money Market Portfolio's
investment decisions and the Money Market Portfolio may invest in bank
instruments issued by institutions which the board of Trustees believes
present minimal credit risks.
The Money Market Portfolio may purchase U.S. dollar-denominated obligations
issued by foreign branches of domestic banks or foreign branches of foreign
banks ("Eurodollar" obligations) and domestic branches of foreign banks
("Yankee dollar" obligations). The Money Market Portfolio will limit its
aggregate investments in foreign bank obligations, including Eurodollar
obligations and Yankee dollar obligations, to 25% of its total assets at
the time of purchase, provided that there is no limitation on the Money
Market Portfolio investments in (a) Eurodollar obligations, if the domestic
parent of the foreign branch issuing the obligations is unconditionally
liable in the event that the foreign branch fails to pay on the Eurodollar
obligation for any reason; and (b) Yankee dollar obligations, if the U.S.
branch of the foreign bank is subject to the same regulation as U.S. banks.
Eurodollar, Yankee dollar and other foreign bank obligations include time
deposits, which are non-negotiable deposits maintained in a bank for a
specified period of time at a stated interest rate. The Money Market
Portfolio will limit its purchases of time deposits to those which mature
in seven days or less, and will limit its purchases of time deposits
maturing in two to seven days to 10% of such Fund's total assets at the
time of purchase.
Eurodollar and other foreign obligations involve special investment risks,
including the possibility that liquidity could be impaired because of
future political and economic developments, that the obligations may be
less marketable than comparable domestic obligations of domestic issuers,
that a foreign jurisdiction might impose withholding taxes on interest
income payable on those obligations, that deposits may be seized or
nationalized, that foreign governmental restrictions such as exchange
controls may be adopted which might adversely affect the payment of
principal of and interest on those obligations, that the selection of
foreign obligations may be more difficult because there may be less
information publicly available concerning foreign issuers, that there may
be difficulties in enforcing a judgment against a foreign issuer or that
the accounting, auditing and financial reporting standards, practices and
requirements applicable to foreign issuers may differ from those applicable
to domestic issuers. In addition, foreign banks are not subject to
examination by United States Government agencies or instrumentalities.
(iii) Variable Amount Master Demand Notes: The Money Market Portfolio may
purchase variable amount master demand notes. These instruments are
unsecured demand notes that permit investment of fluctuating amounts of
money at variable rates of interest pursuant to arrangements with issuers
who meet the quality criteria discussed above under "Principal Investment
Strategies Generally." The interest rate on a variable amount master
demand note is periodically redetermined according to a prescribed
formula. Although there is no secondary market in master demand notes, the
payee may demand payment of the principal and interest upon notice not
exceeding five business or seven calendar days.
(iv) Commercial Paper and Certain Debt Obligations: The Money Market Portfolio
may purchase commercial paper or similar debt obligations. Commercial
paper is generally considered to be short term unsecured debt of
corporations.
(v) Repurchase Agreements: The Money Market Portfolio may enter into
repurchase agreements provided that the instruments serving as collateral
for the agreements are eligible for inclusion in the Money Market
Portfolio. A repurchase agreement arises when a buyer purchases a security
and simultaneously agrees with the vendor to
[/R]
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resell the security to the vendor at an agreed upon time and price.
Municipal Portfolio
(i) Municipal Securities: The Municipal Portfolio may purchase municipal
securities, including debt obligations issued to obtain funds for various
public purposes (i.e., the construction of a wide range of public
facilities), the refunding of outstanding obligations, the obtaining of
funds for general operating expenses and lending such funds to other public
institutions and facilities. The Portfolio may also invest in certain types
of private activity bonds or industrial development bonds, issued by or on
behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated
facilities. Such obligations are considered to be Municipal Securities
provided that the interest paid thereon generally qualifies as exempt from
regular federal income tax in the opinion of bond counsel. Interest on
certain Municipal Securities may give rise to federal alternative minimum
tax liability and may have other collateral federal income tax
consequences.
(ii) Repurchase Agreements: The Municipal Portfolio may enter into repurchase
agreements provided that the instruments serving as collateral for the
agreements are eligible for inclusion in the Municipal Portfolio. A
repurchase agreement arises when a buyer purchases a security and
simultaneously agrees with the vendor to resell the security to the vendor
at an agreed upon time and price.
For a more detailed description of (i) the securities that the Fund will invest
in, (ii) fundamental investment restrictions, and (iii) industry regulations
governing credit quality and maturity, please refer to the Statement of
Additional Information.
Risks
- --------------------------------------------------------------------------------
The Fund complies with industry-standard requirements on the quality,
maturity and diversification of its investments which are designed to help
maintain a $1.00 share price. A significant change in interest rates or a
default on the Fund's investments could cause its share price (and the value of
your investment) to change.
Since the Money Market Portfolio may contain securities issued by foreign
governments, or any of their political subdivisions, agencies or
instrumentalities, and by foreign branches of domestic banks, foreign
subsidiaries of domestic banks, domestic and foreign branches of foreign banks,
and commercial paper issued by foreign issuers, the Money Market Portfolio may
be subject to additional investment risks when compared with those incurred by a
fund which invests only in domestic issuers. Foreign securities markets
generally are not as developed or efficient as those in the United States.
Securities of some foreign issuers are less liquid and more volatile than
securities of comparable United States issuers. Similarly, volume in most
foreign securities markets are less than in the United States. The issuers of
some of these securities may be subject to less stringent or different
regulation than are United States issuers. In addition, there may be less
publicly available information about a non-United States issuer, and non-United
States issuers generally are not subject to uniform accounting and financial
reporting standards and requirements. Additional risks associated with foreign
investments might include adverse political and economic developments, seizure
or nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect the payment of principal and interest on the
foreign securities. Furthermore, some of these foreign securities may be subject
to stamp, withholding or other excise taxes levied by foreign governments, which
have the effect of increasing the cost of such securities and reducing the
realized gain or increasing the realized loss on such securities at the time of
sale.
Since the Municipal Portfolio may contain municipal debt obligations,. the
value of these municipal obligations may be affected by uncertainties on the
municipal debt market related to taxation. In addition, the payment of interest
and preservation of capital are dependent upon the continuing ability of issuers
and/or obligors of state, municipal and public authority debt obligations to
meet these payment obligations.
As the Year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Manager is in the process of working with the Fund's service
providers to prepare for the Year 2000. Based on information currently
available, the Manager does not expect that the Fund will incur material costs
to be Year 2000 compliant. Although the Manager does not anticipate that the
Year 2000 issue will have a material impact on the Fund's ability to provide
service at current levels, there can be no assurance that steps taken in
preparation for the Year 2000 will be sufficient to avoid an adverse impact on
the Fund. The Year 2000 problem may also adversely affect issuers of the
securities contained in the Portfolios, to varying degrees based upon various
factors, and thus may have a corresponding adverse affect on a Portfolio's
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performance. The Manager is unable to predict what affect, if any, the Year 2000
problem will have on such issuers. At this time, it is generally believed that
municipal issuers and foreign issuers may be more vulnerable to Year 2000 issues
or problems than will other issuers.
III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of June 30, 1999, the Manager was the investment
manager, adviser or supervisor with respect to assets aggregating in excess of
$13.6 billion. The Manager has been an investment adviser since 1970 and
currently is manager of eighteen other registered investment companies. The
Manager also advises pension trusts, profit-sharing trusts and endowments.
Pursuant to the Investment Management Contract for each Portfolio, the
Manager manages each Portfolio's securities and makes the decisions with respect
to the purchase and sale of investments, subject to the general control of the
Board of Trustees of the Fund. Under the Investment Management Contract each of
the Portfolios pay an annual management fee of .12%. The Manager, at its
discretion may voluntarily waive all or a portion of the Management Fee.
Pursuant to the Administrative Services Contract for each Portfolio, the
Manager performs clerical, accounting supervision and office service functions
for the Fund. The Manager provides the Fund with personnel to perform all of the
clerical and accounting type functions not performed by the Manager. 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 an annual fee of .05% of each Portfolio's average
daily net assets. Any portion of the total fees received by the Manager and its
past profits may be used to provide shareholder services and for distribution of
Fund shares.
In addition, Reich & Tang Distributors, Inc. (the "Distributor"), receives a
fee equal to .25% per annum of the average daily net assets of the Class A
shares of each Portfolio under the Shareholder Servicing Agreement. The fees are
accrued daily and paid monthly.
Investment management fees and operating expenses, which are attributable to
both Classes of each Portfolio, will be allocated daily to each Class share
based on the percentage of outstanding shares at the end of the day.
IV. SHAREHOLDER INFORMATION
The Fund sells and redeems its shares on a continuing basis at their net
asset value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from Participating Organizations
and from investors directly.
Pricing of Fund Shares
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The net asset value of each Class of each portfolio of the Fund's shares is
determined as of 2:30 p.m., New York City time, on each Fund Business Day. Fund
Business Day means weekdays (Monday through Friday) except days on which the New
York Stock Exchange is closed for trading. The net asset value of a Class is
computed by dividing the value of the Fund's net assets for such Class (i.e.,
the value of its securities and other assets less its liabilities, including
expenses payable or accrued, but excluding capital stock and surplus) by the
total number of shares outstanding for such Class. The Fund intends to maintain
a stable net asset value at $1.00 per share although there can be no assurance
that this will be achieved.
The Fund's portfolio securities are valued at their amortized cost in
compliance with the provisions of Rule 2a-7 under the Investment Company Act of
1940 (the "1940 Act"). Amortized cost valuation involves valuing an instrument
at its cost and thereafter assuming a constant amortization to maturity of any
discount or premium. If fluctuating interest rates cause the market value of the
securities in a portfolio to deviate more than 1/2 of 1% from the value
determined on the basis of amortized cost, the
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Board of Trustees will consider whether any action should be initiated. Although
the amortized cost method provides certainty in valuation, it may result in
periods during which the value of an instrument is higher or lower than the
price an investment company would receive if the instrument were sold.
Shares will be issued as of the first determination of the Fund's net asset
value per share made upon receipt of the investor's purchase order at the net
asset value per share next determined after receipt of the purchase order.
Except as described below in the case of certain Participating Organizations
(see "Investment Through Participating Organizations" herein), an investor's
funds will not be invested by the Fund during the period before the Fund's
receipt of Federal Funds and its issuance of Fund shares.
The Fund reserves the right to reject any subscription to its shares.
Shares are issued as of 2:30 p.m., New York City time, on any Fund Business
Day, as defined herein, on which an order for the shares and accompanying
Federal Funds are received by the Fund's transfer agent before 2:30 p.m. Orders
accompanied by Federal Funds and received after 2:30 p.m. on a Fund Business Day
will not result in share issuance until the following Fund Business Day. Fund
shares begin accruing income on the day the shares are issued to an investor.
Subscribing to the Fund
- --------------------------------------------------------------------------------
At the time of initial investment in the Fund, investors must elect on their
subscription order form the Class of shares of the Portfolio in which they wish
to invest. Subject to the Portfolios' initial investment minimums, investors may
divide their investment in the Fund between the Portfolios in any manner they
choose by submitting a separate subscription order form for each Portfolio.
Investors who purchase shares of the Portfolios from a Participating
Organization that is compensated for its services by the Manager and the
Distributor may purchase Class A shares of the Portfolios.
Subject to the suggested minimum balance of $250,000 for an existing
account, shareholders in the Fund may transfer all or a portion of their shares
from one open Portfolio account to another open Portfolio account at any time.
Any transfer into a Portfolio in which the shareholder does not have an open
account must satisfy the Portfolio's initial investment minimum of $1,000,000.
Shareholders will have a separate account with the Fund for each Portfolio in
which they invest. Certificates for Fund shares will not be issued to an
investor.
Purchase of Fund Shares
- --------------------------------------------------------------------------------
Investors purchasing shares through a Participating Organization with which
they have an account become Class A shareholders. All other investors, and
investors who have accounts with Participating Organizations but do not wish to
invest in the Fund through them, may invest in the Fund directly as Class B
shareholders of the Fund. Class B shareholders do not receive the benefit of the
servicing functions performed by a Participating Organization. Class B shares
may also be offered to investors who purchase their shares through Participating
Organizations who, because they may not be legally permitted to receive such as
fiduciaries, do not receive compensation from the Distributor or the Manager.
The minimum initial investment in the Fund for all classes of shares in
each Portfolio is $1,000,000. The minimum amount for subsequent investments is
$10,000.
The Fund will provide each shareholder with a personalized monthly statement
listing (i) the total number of Fund shares owned as of the statement closing
date, (ii) purchases and redemptions of Fund shares, and (iii) the dividends
paid on Fund shares (including dividends paid in cash or reinvested in
additional Fund shares).
Investments Through Participating
Organizations--Purchase of Class A Shares
- --------------------------------------------------------------------------------
Participant Investors may, if they wish, invest in the Fund through the
Participating Organizations with which they have accounts. "Participating
Organizations" are securities brokers, banks and financial institutions or other
industry professionals or organizations which have entered into shareholder
servicing agreements with the Distributor with respect to investment of their
11
<PAGE>
customer accounts in the Fund. When instructed by its customer to purchase or
redeem Fund shares, the Participating Organization, on behalf of the customer,
transmits to the Fund's transfer agent a purchase or redemption order, and in
the case of a purchase order, payment for the shares being purchased.
Participating Organizations may confirm to their customers who are
shareholders in the Fund ("Participant Investors") each purchase and redemption
of Fund shares for the customers' accounts. Also, Participating Organizations
may send periodic account statements to their customers showing (i) the total
number of Fund shares owned by each customer as of the statement closing date,
(ii) purchases and redemptions of Fund shares by each customer during the period
covered by the statement, and (iii) the income earned by Fund shares of each
customer during the statement period (including dividends paid in cash or
reinvested in additional Fund shares). Participant Investors whose Participating
Organizations have not undertaken to provide such statements will receive them
from the Fund directly.
Participating Organizations may charge Participant Investors a fee in
connection with their use of specialized purchase and redemption procedures. In
addition, Participating Organizations offering purchase and redemption
procedures similar to those offered to shareholders who invest in the Fund
directly, may impose charges, limitations, minimums and restrictions in addition
to or different from those applicable to shareholders who invest in the Fund
directly. Accordingly, the net yield to investors who invest through
Participating Organizations may be less than by investing in the Fund directly.
A Participant Investor should read this Prospectus in conjunction with the
materials provided by the Participating Organization describing the procedures
under which Fund shares may be purchased and redeemed through the Participating
Organization.
In the case of qualified Participating Organizations, orders received by the
Fund's transfer agent before 2:30 p.m., New York City time, on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day only if the Federal Funds required in connection with the orders are
received by the Fund's transfer agent before 2:30 p.m., New York City time, on
that day. Orders for which Federal Funds are received after 2:30 p.m., New York
City time, will result in share issuance the following Fund Business Day.
Participating Organizations are responsible for instituting procedures to insure
that purchase orders by their respective clients are processed expeditiously.
Initial Direct Purchases of Class B Shares
- --------------------------------------------------------------------------------
Investors who wish to invest in the Fund directly may obtain a current
prospectus and the subscription order form necessary to open an account by
telephoning the Fund at the following numbers:
Within New York 212-830-5220
Outside New York (TOLL FREE) 800-221-3079
Mail
Investors may send a check made payable to "Institutional Daily Income Fund"
along with a completed subscription order form to:
Institutional Daily Income Fund
Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member of the Federal Reserve System
will normally be converted into Federal Funds within two business days after
receipt of the check. Checks drawn on a non-member bank may take substantially
longer to convert into Federal Funds. An investor's purchase order will not be
accepted until the Fund receives Federal Funds.
Bank Wire
To purchase shares of the Fund using the wire system for transmittal of
money among banks, investors should first obtain a new account number by
telephoning the Fund at 212-830-5220 (within New York) or at 800-221-3079
(outside
12
<PAGE>
New York) and then instruct a member commercial bank to wire money immediately
to:
For U.S. Treasury Portfolio:
Investors Fiduciary Trust Company
ABA # 101003621
Reich & Tang Funds
DDA # 890752-9546
For Institutional Daily Income Fund
U.S. Treasury Portfolio
Account of (Investor's Name)
Account #
For Money Market Portfolio:
Investors Fiduciary Trust Company
ABA # 101003621
Reich & Tang Funds
DDA # 890752-9546
For Institutional Daily Income Fund
Money Market Portfolio
Account of (Investor's Name)
Account #
For Municipal Portfolio:
Investors Fiduciary Trust Company
ABA # 101003621
Reich & Tang Funds
DDA # 890752-9546
For Institutional Daily Income Fund
Municipal Portfolio
Account of (Investor's Name)
Account #
The investor should then promptly complete and mail the subscription order
form.
Investors planning to wire funds should instruct their bank so the wire
transfer can be accomplished on the same day. There may be a charge by the
investor's bank for transmitting the money by bank wire, and there also may be a
charge for use of Federal Funds. The Fund does not charge investors in the Fund
for its receipt of wire transfers. Payment in the form of a "bank wire" received
prior to 2:30 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 "Institutional Daily Income Fund" along with
a completed subscription order form to:
Reich & Tang Mutual Funds
600 Fifth Avenue-8th Floor
New York, New York 10020]
Subsequent Purchases of Shares
- --------------------------------------------------------------------------------
Subsequent purchases can be made by bank wire, as indicated above, or by
mailing a check to:
Institutional Daily Income Fund
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 07101-3232
There is a $10,000 minimum for subsequent purchases of shares. All payments
should clearly indicate the shareholder's account number.
Provided that the information on the subscription form on file with the Fund
is still applicable, a shareholder may reopen an account without filing a new
subscription order form at any time during the year the shareholder's account is
closed or during the following calendar year.
Redemption of Shares
- --------------------------------------------------------------------------------
A redemption is effected immediately following, and at a price determined in
accordance with, the next determination of net asset value per share of each
Class of each Portfolio following receipt by the Fund's transfer agent of the
redemption order (and any supporting documentation which it may require).
Normally, payment for redeemed shares is made on the same Fund Business Day
after the redemption is effected, provided the redemption request is received
prior to 2:30 p.m., New York City time. However, redemption payments will not be
effected unless the check (including a certified or cashier's check) used for
investment has been cleared for payment by the investor's bank, which could take
up to 15 days after investment. Shares redeemed are not entitled to participate
in
13
<PAGE>
dividends declared on the day a redemption becomes effective.
A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee.
When a signature guarantee is called for, the shareholder should have
"Signature Guaranteed" stamped under his signature. It should be signed and
guaranteed by an eligible guarantor institution which includes a domestic bank,
a domestic savings and loan institution, a domestic credit union, a member bank
of the Federal Reserve system or a member firm of a national securities
exchange, pursuant to the Fund's transfer agent's standards and procedures.
Written Requests
Shareholders may make a redemption in any amount by sending a written
request to the Fund addressed to:
Institutional Daily Income Fund
c/o Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020
All previously issued certificates submitted for redemption must be endorsed
by the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with signature guaranteed.
Normally the redemption proceeds are paid by check and mailed to the
shareholder of record.
Telephone
The Fund accepts telephone requests for redemption from shareholders who
elect this option on their subscription order form. The proceeds of a telephone
redemption will be sent to the shareholder at its address or, to its 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 such shareholders risk possible loss of
principal and interest in the event of a telephone redemption not authorized by
them. Telephone requests to wire redemption proceeds must be for amounts in
excess of $10,000. The Fund will employ reasonable procedures to confirm that
telephone redemption instructions are genuine, and will require that
shareholders electing such option provide a form of personal identification. The
failure by the Fund to employ such reasonable procedures may cause the Fund to
be liable for the losses incurred by investors due to telephone redemptions
based upon unauthorized or fraudulent instructions.
A shareholder making a telephone withdrawal should call the Fund at
212-830-5220; outside New York at 800-221-3079, and state: (i) the name of the
shareholder appearing on the Fund's records, (ii) the shareholder's account
number with the Fund, (iii) the amount to be withdrawn, and (iv) the name of the
person requesting the redemption. Usually the proceeds are sent to the
designated bank account or address on the same Fund Business Day the redemption
is effected, provided the redemption request is received before 2:30 p.m., New
York City time and on the next Fund Business Day if the redemption request is
received after 2:30 p.m., New York City time. The Fund may modify or discontinue
the telephone redemption option at any time upon 60 days written notice to
shareholders.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by check. Unless other instructions are given
in proper form to the Fund's transfer agent, a check for the proceeds of a
redemption will be sent to the shareholders' address of record. If a shareholder
elects to redeem all the shares of the Fund he owns, all dividends accrued to
the date of such redemption will be paid to the shareholder along with the
proceeds of the redemption.
14
<PAGE>
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted. Any period during which
an emergency (as determined by the SEC) exists as a result of which disposal by
the Fund of its portfolio securities is not reasonably practicable or as a
result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or for such other period as the SEC may
by order permit for the protection of the shareholders of the Fund.
The Fund has reserved the right to redeem the shares of any shareholder if
the net asset value of all the remaining shares in the shareholder's or his
Participating Organization's account after a withdrawal is less than $250,000.
Written notice of a proposed mandatory redemption will be given at least 30 days
in advance to any shareholder whose account is to be redeemed or the Fund may
impose a monthly service charge of $10 on such accounts. For Participant
Investor accounts, notice of a proposed mandatory redemption will be given only
to the appropriate Participating Organization. The Participating Organization
will be responsible for notifying the Participant Investor of the proposed
mandatory redemption. During the notice period a shareholder or Participating
Organization who receives such a notice may avoid mandatory redemption by
purchasing sufficient additional shares to increase his total net asset value to
the minimum amount. Shareholders who purchase shares under these circumstances
are not subject to the normal $10,000 minimum for subsequent purchases.
Dividends and Distributions
- --------------------------------------------------------------------------------
The Fund declares dividends equal to all its net investment income
(excluding capital gains and losses, if any, and amortization of market
discount) on each Fund Business Day and pays dividends monthly. There is no
fixed dividend rate. In computing these dividends, interest earned and expenses
are accrued daily.
Distributions of long-term capital gains, if any, are paid by the U.S.
Treasury and Money Market Portfolios at least once a year and, at the
shareholder's option, are paid in cash or reinvested in additional shares of the
Portfolio from which they were paid having an aggregate net asset value equal to
the cash amount.
All dividends and distributions of capital gains are automatically invested,
at no charge, in additional Fund shares of the same Class of shares immediately
upon payment thereof unless a shareholder has elected by written notice to the
Fund to receive either of such distributions in cash.
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. Except as described herein, each Portfolio's net investment
income (including net realized short-term capital gains, if any) will be
declared as a dividend on each Fund Business Day. The Fund declares dividends
for Saturdays, Sundays and holidays on the previous Fund Business Day. The Fund
pays dividends monthly after the close of business on the last calendar day of
each month or after the close of business on the previous Fund Business Day if
the last calendar day of each month is not a Fund Business Day. 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.
15
<PAGE>
Because Class A shares bear the service fee under the Fund's 12b-1 Plan, the
net income of and the dividends payable to the Class A shares will be lower than
the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of each portfolio of the Fund will,
however, be declared and paid on the same days at the same times and, except as
noted with respect to the service fees payable under the Plan, will be
determined in the same manner and paid in the same amounts.
Exchange Privilege
- --------------------------------------------------------------------------------
An investor may, without cost, exchange shares from the same Class of one
Portfolio of the Fund into the same Class of any other Portfolio of the Fund,
subject to the $1,000,000 minimum initial investment requirement per Portfolio,
the availability of such shares and the maintenance of the suggested minimum
balance of $250,000. Shares are exchanged on the basis of relative net asset
value per share. Exchanges are in effect redemptions from one Portfolio and
purchases of another Portfolio and therefore the Portfolio's purchase and
redemption procedures and requirements are applicable to exchanges.
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 Reich & Tang Distributors, Inc. 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
and will notify shareholders accordingly.
Tax Consequences
- --------------------------------------------------------------------------------
The purchase of shares in the Fund will be the purchase of an asset and the
shareholder's basis for its shares in the Fund will be its cost of the shares,
including any fees or expenses. The sale of shares in the Fund will be the
taxable disposition of an asset, with gain or loss recognized in an amount equal
to the difference between the shareholder's tax basis for the shares and the
proceeds received on the sale. The exchange of shares of one Portfolio for
shares of another Portfolio, if available, will also be treated as a taxable
disposition of the shares exchanged, on which gain or loss will be recognized.
In either case, loss recognition may be affected by the loss disallowance rules
of the Code.
The Fund intends to continue to qualify for special treatment applicable to
a regulated investment company under the Internal Revenue Code of 1986, as
amended, for each Portfolio. To qualify as a regulated investment company, each
Portfolio must meet certain complex tests concerning its investments and
distributions. For each year a Portfolio qualifies as a regulated investment
company, the Portfolio will not be subject to Federal income tax on income
distributed to its shareholders in the form of dividends or capital gains
distributions. Additionally, each Portfolio will not be subject to a Federal
excise tax if the Portfolio distributes at least 98% of its ordinary income and
98% of its capital gain income to its shareholders. Dividends of net ordinary
income and distributions of net short-term capital gains are taxable to the
recipient shareholders as ordinary income but will not be eligible, in the case
of corporate shareholders, for the dividend-received deduction.
Dividends and distributions are treated in the same manner for federal
income tax purposes whether the shareholders receive cash or additional shares.
The Fund expects that distributions, as a result of its investment objectives,
will consist primarily of ordinary income. A shareholder who elects to reinvest
in additional shares will be treated for tax purposes as if it had received and
reinvested the cash dividend.
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 regarding the
supplying of their taxpayer identification number and the reporting of income.
In connection with
16
<PAGE>
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.
Distributions from the U.S. Treasury Portfolio that are derived from
interest on certain obligations of the United States Government and agencies
thereof may be exempt from state and local taxes in certain states. Investors
should consult their own tax advisors regarding specific questions as to
Federal, state or local taxes.
V. DISTRIBUTION ARRANGEMENTS
Rule 12b-1 Fees
- --------------------------------------------------------------------------------
Investors do not pay a sales charge to purchase shares of the Fund.
However, the Fund pays fees in connection with the distribution of shares and
for services provided to the Class A shareholders only. The Fund pays these fees
from its assets on an ongoing basis and therefore, over time, the payment of
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
The Fund's Board of Trustees has adopted a Rule 12b-1 distribution and
service plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Class A
shares of the Fund only).
Under the Distribution Agreement, the Distributor serves as distributor of
the Fund's shares and, for nominal consideration (i.e., $1.00) and as agent for
the Fund, will solicit orders for the purchase of the Fund's shares, provided
that any orders will not be binding on the Fund until accepted by the Fund as
principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect only to the Class A shares, a service fee equal to .25% per annum of
each Portfolio's Class A shares' average daily net assets (the "Shareholder
Servicing Fee") for providing personal shareholder services and for the
maintenance of shareholder accounts. This fee is accrued daily and paid monthly
and any portion of the fee may be deemed to be used by the Distributor for
payments to Participating Organizations with respect to their provision of such
services to their clients or customers who are shareholders of the Class A
shares of each Portfolio. The Class B shareholders will not receive the benefit
of such services from Participating Organizations and, therefore, will not be
assessed a Shareholder Servicing Fee.
The Plan and the Shareholder Servicing Agreements provide that the Fund will
pay for (i) telecommunications expenses, including the cost of dedicated lines
and CRT terminals, incurred by the Distributor and Participating Organizations
in carrying out their obligations under the Shareholder Servicing Agreement with
respect to Class A shares, and (ii) preparing, printing and delivering the
Fund's prospectus to existing shareholders of the Fund and preparing and
printing subscription application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from
its own resources, which may include the management fee and past profits for the
following purposes: (i) to defray costs, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing on behalf of the Class A shares
of the Fund; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Class A shares of the Fund; and (iii)
to pay the costs of printing and distributing the Fund's Prospectus to
prospective investors, and to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
Class A shares.
The Plan also provides that the Distributor may make payments from time to
time from its own resources, which may include the Shareholder Servicing Fee
(with respect to Class A shares) and past profits, for the purposes enumerated
in (i) in the preceding paragraph. The Distributor will determine the amount of
such payments made
17
<PAGE>
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.
18
<PAGE>
VI. FINANCIAL HIGHLIGHTS
This financial highlights table is intended to help you understand the financial
performance of both classes of the U.S. Treasury Portfolio and the Money Market
Portfolio for the past 5 years or shorter period depending on the inception date
of the Portfolio. Certain information reflects financial results for a single
Portfolio share. There are no financial highlights available for the Municipal
Portfolio since this Portfolio is not yet offered for sale. The total returns in
the table represent the rate that an investor would have earned on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McGladrey and Pullen, LLP, whose report, along
with the Fund's financial statements, is included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
U.S. Treasury Portfolio
--------------------------------------------------------------------------------
For the Year Ended March 31, November 29, 1995
CLASS A ---------------------------------------------- (Commencement of Operations) to
- ------- 1999 1998 1997 March 31, 1996
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Income from investment operations:
Net investment income....................... 0.048 0.051 0.049 0.017
Less distributions:
Dividends from net investment income........ ( 0.048) ( 0.051) ( 0.049) ( 0.017)
-------- -------- -------- --------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.0
======== ======== ======== ========
Total Return.................................. 4.86% 5.24% 5.00% 5.18%*
Ratios/Supplemental Data:
Net assets, end of period (000)............... $ 721,197 $ 467,372 $ 310,290 $ 291,747
Ratios to average net assets:
Expenses (net of fees waived)+.............. 0.45% 0.42% 0.42% 0.43%*
Net investment income....................... 4.71% 5.12% 4.89% 5.07%*
Expenses paid indirectly.................... 0.00% 0.00% 0.01% 0.00%
Management and administration fees waive.... 0.04% 0.07% 0.05% 0.08%*
<CAPTION>
U.S. Treasury Portfolio
---------------------------------------------------------------------------
For the Year Ended November 18, 1996
CLASS B ------------------------------------ (Commencement of Sales) to
- ------- 1999 1998 March 31, 1997
--------- --------- --------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C>
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00
-------- ------- --------
Income from investment operations:
Net investment income....................... 0.050 0.054 0.019
Less distributions:
Dividends from net investment income........ ( 0.050) ( 0.054) ( 0.019)
-------- ------- --------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00
======== ======= ========
Total Return.................................. 5.12% 5.50% 5.27%*
Ratios/Supplemental Data:
Net assets, end of period (000)............... $ 79,793 $ 6,833 $ 7,799
Ratios to average net assets:
Expenses (net of fees waived)+.............. 0.20% 0.17% 0.17%*
Net investment income....................... 4.73% 5.37% 5.14%*
Expenses paid indirectly.................... 0.00% 0.00% 0.01%*
Management and administration fees waived... 0.04% 0.07% 0.05%*
* Annualized
+ Includes expenses paid indirectly.
</TABLE>
19
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
This financial highlights table is intended to help you understand the financial
performance of both classes of the U.S. Treasury Portfolio and the Money Market
Portfolio for the past 5 years or shorter period depending on the inception date
of the Portfolio. Certain information reflects financial results for a single
Portfolio share. There are no financial highlights available for the Municipal
Portfolio since this Portfolio is not yet offered for sale. The total returns in
the table represent the rate that an investor would have earned on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McGladrey and Pullen, LLP, whose report, along
with the Fund's financial statements, is included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
Money Market Portfolio
----------------------------------------------------------------------------
For the Year Ended March 31, April 6, 1995
CLASS A ---------------------------------------------- (Commencement of Sales) to
- ------- 1999 1998 1997 March 31, 1996
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- -------- --------
Income from investment operations:
Net investment income........................ 0.050 0.053 0.050 0.054
Less distributions:
Dividends from net investment income......... ( 0.050) ( 0.053) ( 0.050) ( 0.054)
------- ------- -------- --------
Net asset value, end of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== ========
Total Return................................... 5.12% 5.38% 5.16% 5.58%*
Ratios/Supplemental Data:
Net assets, end of period (000)................ $ 282,258 $ 108,657 $ 38,220 $ 5
Ratios to average net assets:
Expenses (net of fees waived and reimbursed)+ 0.45% 0.45% 0.42% 0.41%*
Net investment income........................ 4.93% 5.25% 5.07% 5.46%*
Expenses paid indirectly..................... 0.00% 0.00% 0.01% 0.04%*
Management and administration fees waived.... 0.05% 0.07% 0.09% 0.13%*
Expenses reimbursed.......................... 0.00% 0.00% 0.00% 0.03%*
<CAPTION>
Money Market Portfolio
-------------------------------------------------------------------------------
For the Year Ended March 31, April 6, 1994
CLASS B -------------------------------------------------- (Commencement of Sales) to
- ------- 1999 1998 1997 1996 March 31, 1995
-------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from investment operations:
Net investment income........................ 0.053 0.055 0.053 0.057 0.045
Less distributions:
Dividends from net investment income......... ( 0.053) ( 0.055) ( 0.053) ( 0.057) ( 0.045)
------- ------- ------- ------- -------
Net asset value, end of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return................................... 5.38% 5.64% 5.42% 5.85% 5.16%*
Ratios/Supplemental Data:
Net assets, end of period (000)................ $ 221,119 $ 227,893 $ 158,525 $ 127,282 $ 35,857
Ratios to average net assets:
Expenses (net of fees waived and reimbursed)+ 0.20% 0.20% 0.17% 0.16% 0.02%*
Net investment income........................ 5.27% 5.50% 5.29% 5.64% 5.14%*
Expenses paid indirectly..................... 0.00% 0.00% 0.01% 0.04% 0.00%*
Management and administration fees waived 0.05% 0.07% 0.09% 0.13% 0.13%*
Expenses reimbursed.......................... 0.00% 0.00% 0.00% 0.03% 0.25%*
* Annualized
+ Includes expenses paid indirectly.
</TABLE>
20
<PAGE>
A Statement of Additional Information (SAI) dated August 3, 1999, and the Fund's
Annual and Semi-Annual Reports include additional information about the Fund and
its investments and are incorporated by reference into this prospectus. You may
obtain the SAI, the Annual and Semi-Annual Reports and material incorporated by
reference without charge by calling the Fund at 1-800-221-3079. To request other
information, please call your financial intermediary or the Fund.
======================================================
INSTITUTIONAL
DAILY INCOME
FUND
PROSPECTUS
August 3, 1999
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, NY 10020
(212) 830-5220
======================================================
A current SAI has been filed with the Securities and Exchange Commission. You
may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C.
20549-6009.
811-8312
IDIF899P
<PAGE>
INSTITUTIONAL DAILY INCOME FUND 600 FIFTH AVENUE
NEW YORK, N.Y. 10020
(212) 830-5220
Pinnacle Class of Shares - Distributed through Mutual Securities, Inc.
PROSPECTUS
August 3, 1999
The investment objective of the U.S. Treasury Portfolio and the Money Market
Portfolio is to seek as high a level of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
The investment objective of the Municipal Portfolio is to seek as high a level
of tax exempt current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
<TABLE>
<CAPTION>
<S><C> <C> <C>
TABLE OF CONTENTS
2 Risk/Return Summary: Investments, Risks 11 Management, Organization and Capital Structure
and Performance 11 Shareholder Information
6 Risk/Return Summary: Fee Table 17 Tax Consequences
7 Investment Objectives, Principal Investment 17 Distribution Arrangements
Strategies and Related Risks 19 Financial Highlights
</TABLE>
<PAGE>
I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
Investment Objectives
- --------------------------------------------------------------------------------
The Fund is composed of three portfolios - the U.S. Treasury Portfolio, the
Money Market Portfolio, and the Municipal Portfolio (each a "Portfolio" and
collectively, the "Portfolios").
The investment objective of the U.S. Treasury Portfolio and the Money Market
Portfolio is to seek as high a level of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
The investment objective of the Municipal Portfolio is to seek as high a
level of tax exempt current income to the extent consistent with the
preservation of capital and the maintenance of liquidity.
There is no assurance that the Portfolios will achieve their investment
objectives.
Principal Investment Strategies
- --------------------------------------------------------------------------------
The Fund intends to achieve its investment objectives through three separate
portfolios. Each Portfolio is a money market portfolio that invests in high
quality and short-term debt instruments. The Fund seeks to maintain investment
portfolios with a dollar-weighted average maturity of 90 days or less, to value
its investment portfolio at amortized cost and maintain a net asset value of
$1.00 per share.
Each Portfolio's strategy is as follows:
The U.S. Treasury Portfolio
The U.S. Treasury Portfolio seeks to achieve its objective principally by
investing in obligations backed by the full faith and credit of the Untied
States government with maturities of 397 days or less and repurchase agreements
which are collateralized by such obligations calling for resale in 397 days or
less.
The Money Market Portfolio
The Money Market Portfolio seeks to achieve its objective by investing
principally in short-term money market obligations with maturities of 397 days
or less, including bank certificates of deposit, time deposits, bankers'
acceptances, high quality commercial paper, securities issued or guaranteed by
the United States Government, state agencies or instrumentalities, and
repurchase agreements calling for resale in 397 days or less backed by the
foregoing securities.
The Municipal Portfolio
This Portfolio seeks to achieve its objective principally by investing in
obligations issued by states, territories and possessions of the Untied States
and its political subdivisions, public authorities and other entities authorized
to issue debt, the interest on which is exempt from regular Federal income tax.
The Municipal Portfolio has not yet been activated and is not yet offered for
sale or distribution.
Principal Risks
- --------------------------------------------------------------------------------
Risks Common to all Portfolios:
o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund. The value
of the Fund's shares and the securities held by the Fund can each decline
in value.
o An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
Risks of Investing in the U.S. Treasury Portfolio:
o The U.S. Treasury Portfolio's investment policy of only investing in U.S.
Treasury obligations and other obligations that are issued or guaranteed by
the United States Government, while minimizing risk of loss, may produce a
lower yield than a policy of investing in other types of instruments. The
yield and total return of the U.S. Treasury Portfolio is likely to be lower
than that of the Money Market Portfolio.
Risks of Investing in the Money Market Portfolio:
o The Money Market Portfolio may contain securities issued by foreign
governments, or any of their political subdivisions, agencies or
instrumentalities, and by foreign branches of domestic banks, foreign
subsidiaries of domestic banks, domestic and foreign branches of foreign
banks, and commercial paper issued by foreign issuers and may be subject to
additional investment risks when compared with those incurred by a fund
which invests only in domestic issuers.
2
Risks of Investing in the Municipal Portfolio:
o The Municipal Portfolio may contain municipal debt obligations. The value
of these municipal obligations may be affected by uncertainties on the
municipal debt market related to taxation. In addition, the payment of
interest and preservation of capital are dependent upon the continuing
ability of issuers and/or obligors of state, municipal and public authority
debt obligations to meet these payment obligations
<PAGE>
Risk/Return Bar Chart And Table
- --------------------------------------------------------------------------------
The following bar charts and tables may assist in your decision to invest
in a portfolio of the Fund. The bar charts show the change in the annual total
returns of the Class B shares of the U.S. Treasury and the Money Market
Portfolios over the last two calendar years for the U.S. Treasury Portfolio and
over the last four calendar years for the Money Market Portfolio. The tables
show the average annual returns of these two portfolios for the last one year
period and since the inception of each Class of each of the Portfolios. The
charts and tables show returns for a Class that is not offered by this
Prospectus since as of December 31, 1998, there were no Pinnacle Shares offered
by the Fund. The Class presented has substantially similar annual returns
because the shares are invested in the same portfolio of securities. The returns
may differ only to the extent that the Classes do not have the same expenses. A
bar chart and table for the Municipal Portfolio will be provided once the
Municipal Portfolio has been in existence for a full calendar year. While
analyzing this information, please note that the Portfolios' past performance is
not an indication of how the Fund will perform in the future. The current 7-day
yield for the U.S. Treasury and the Money Market Portfolios may be obtained by
calling the Fund toll-free at 1-800-221-3079.
3
<PAGE>
Institutional Daily Income Fund U.S.Treasury Portfolio - Class B
Shares (1)(2)(3)(4)
================================================================================
[GRAPHIC OMITTED]
Calendar Year End % Total Return
- ----------------- ---------------
1997 5.43%
1998 5.33%
================================================================================
(1) The chart shows returns for the Class B shares of the Fund (which are not
offered by this Prospectus) since as of December 31, 1998, there were no
Pinnacle shares issued by the Fund. All Classes of the Fund will have
substantially similar annual returns because the shares are invested in the
same portfolio of security. These returns will differ only to the extent
that the Classes do not have the same expenses. If the expenses of the
Pinnacle shares are higher than the Class B shares, then your returns may
be even lower.
(2) As of June 30, 1999, the Fund's U.S. Treasury Portfolio had a year-to-date
return of 2.28%.
(3) The Fund's U.S. Treasury Portfolio's highest quarterly return was 1.38% for
the quarter ended September 30, 1998; the lowest quarterly return was 1.13%
for the quarter ended March 31, 1999.
(4) Investors purchasing or redeeming shares through a Participating
Organization may be charged a fee in connection with such service and,
therefore, the net return to such investors may be less than the net return
by investing in the Fund directly.
Average Annual Total Returns - U. S. Treasury Portfolio
Class B
For the periods ended December 31, 1998
One Year 5.33%
Average Annual Total Returns Since Inception * 5.38%
* Inception date of Class B shares - November 18, 1996.
4
<PAGE>
Institutional Daily Income Fund Money Market Portfolio - Class B
Shares(1)(2)(3)(4)
================================================================================
[GRAPHIC OMITTED]
Calendar Year End % Total Return
- ----------------- ---------------
1995 5.97%
1996 5.43%
1997 5.59%
1998 5.54%
================================================================================
(1) The chart shows returns for the Class B shares of the Fund (which are not
offered by this Prospectus) since as of December 31, 1998, there were no
Pinnacle shares issued by the Fund. All Classes of the Fund will have
substantially similar annual returns because the shares are invested in the
same portfolio of security. These returns will differ only to the extent
that the Classes do not have the same expenses. If the expenses of the
Pinnacle shares are higher than the Class B shares, then your returns may
be even lower.
(2) As of June 30, 1998, the Fund's Money Market Portfolio had a year-to-date
return of 2.43%.
(3) The Fund's Money Market Portfolio's highest quarterly return was 1.49% for
the quarter ended June 30, 1995; the lowest quarterly return was 1.16% for
the quarter ended September 30, 1994.
(4) Investors purchasing or redeeming shares through a Participating
Organization may be charged a fee in connection with such service and,
therefore, the net return to such investors may be less than the net return
by investing in the Fund directly.
Average Annual Total Returns - Money Market Portfolio
Class B
For the periods ended December 31, 1998
One Year 5.54%
Average Annual Total Returns Since Inception* 5.53%
* Inception date of Class B shares - April 14, 1994
5
<PAGE>
FEE TABLE
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares in any of the Fund's portfolios.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Class B Shares
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money U.S.
Market Treasury Municipal
Portfolio Portfolio Portfolio**
Management Fees*.................... .12% .12% .12%
Distribution and Service (12b-1) Fees None None None
Other Expenses*..................... .13% .12% .13%
Administration Fees............... .05% .05% .05%
Total Fund Operating Expenses....... .25% .24% .25%
</TABLE>
* Estimated because there were no Pinnacle shares issued during the fiscal year
ended March 31, 1998. The Manager may voluntarily waive a portion of the
Investment Management Fees or the Fund may receive reimbursements of certain
Other Expenses for the Money Market Portfolio and U.S. Treasury Portfolio. The
Adviser, at its option, may terminate this fee waiver arrangement at any time.
Example
This Example is intended to help you compare the cost of investing in any of the
Fund's portfolios with the cost of investing in other money market funds.
The Example assumes that you invest $10,000 in any of the portfolios of the Fund
for the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Portfolio's operating expenses remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
Pinnacle Shares
1 Year 3 Years 5 Years 10 Years
------ ------- -------- --------
U.S. Treasury Portfolio: 25 77 135 306
Money Market Portfolio: 26 80 141 318
Municipal Portfolio **: 26 80 141 318
** At this time, the Municipal Portfolio of the Fund has not yet been
activated by the Manager and expenses shown are at levels anticipated for the
current fiscal year.
6
<PAGE>
II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objectives
- --------------------------------------------------------------------------------
The Fund is a money market fund, which seeks to achieve the following
investment objectives through its three portfolios.
The investment objective of the U.S. Treasury Portfolio and the Money
Market Portfolio is to seek as high a level of current income to the extent
consistent with the preservation of capital and the maintenance of liquidity.
The investment objective of the Municipal Portfolio is to seek as high a
level of tax exempt current income to the extent consistent with the
preservation of capital and the maintenance of liquidity.
There can be no assurance that the Fund will achieve its investment
objectives.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund.
Principal Investment Strategies
- --------------------------------------------------------------------------------
Generally
In order to maintain a share price of $1.00, the Fund must comply with
certain industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other regulations pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities which have, or are deemed to have, a remaining
maturity of 397 days or less. Also, the average maturity for all securities
contained in each individual portfolio of the Fund, on a dollar-weighted basis,
will be 90 days or less.
The Fund will only invest in either securities which have been rated (or
whose issuers have been rated) in the highest short-term rating category by
nationally recognized statistical rating organizations, or are unrated
securities but which have been determined by the Fund's Board of Trustees to be
of comparable quality.
Subsequent to its purchase by the Fund, the quality of an investment may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. If this occurs, the Board of Trustees of the Fund shall
reassess the security's credit risks and shall take such action as the Board of
Trustees determines is in the best interest of the Fund and its shareholders.
Reassessment is not required, however, if the security is disposed of or matures
within five business days of the Manager becoming aware of the new rating and
provided further that the Board of Trustees is subsequently notified of the
Manager's actions.
Each portfolio of the Fund shall invest not more than 5% of its total assets
in securities issued by a single issuer.
The Fund's investment manager considers the following factors when buying
and selling securities for each of the Portfolios: (i) availability of cash,
(ii) redemption requests, (iii) yield management, and (iv) credit management.
U.S. Treasury Portfolio
The U.S. Treasury Portfolio is intended to attain the Fund's investment
objective through investments limited to obligations issued or guaranteed by the
United States Government including repurchase agreements covering those types of
obligations. The Fund will enter into repurchase agreements for inclusion in the
U.S. Treasury Portfolio only if the instruments serving as collateral for the
agreements are eligible for inclusion in the U.S. Treasury Portfolio.
The Portfolio's investments may include the following securities:
(i) United States Treasury Obligations: Obligations issued by the full faith
and credit of the United States. U.S. Treasury obligations include bills,
notes and bonds, which principally differ only in their interest rates,
maturities and time of issuance.
(ii) Other United States Government Obligations: Marketable securities and
instruments issued or guaranteed by the full faith and credit of the United
States Government. Such obligations that are guaranteed by the full faith
and credit of the United States Government include obligations of the
Federal Housing Administration, the Export-Import Bank of the United
States, the Small Business
7
<PAGE>
Administration, the Government National Mortgage Association, the General
Services Administration and the Maritime Administration.
(iii)Repurchase Agreements: The U.S. Treasury Portfolio may enter into
repurchase agreements which are collateralized by obligations issued or
guaranteed by the U.S. Government. A repurchase agreement arises when a
buyer purchases a security and simultaneously agrees wth the vendor to
resell the security to the vendor at an agreed upon time and price.
The investment policies of the U.S. Treasury Portfolio may produce a lower
yield than a policy of investing in other types of instruments. The yield of the
U.S. Treasury Portfolio is likely to be lower than the yield of the Money Market
Portfolio.
Money Market Portfolio
The Money Market Portfolio intends to attain the Fund's investment objective
through investments in the following securities.
(i) United States Government Securities: The Money Market Portfolio may
purchase short-term obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities. These obligations include
issues of the United States Treasury, such as bills, certificates of
indebtedness, notes and bonds, and issues of agencies and instrumentalities
established under the authority of an act of Congress. Some of these
securities are supported by the full faith and credit of the United States
Treasury, others are supported by the right of the issuer to borrow from
the Treasury, and still others are supported only by the credit of the
agency or instrumentality.
(ii) Domestic and Foreign Bank Obligations: The Money Market Portfolio may
purchase securities issued by foreign governments, or any of their
political subdivisions or agencies or instrumentalities, certificates of
deposit are certificates representing the obligation of a bank to repay
funds deposited with it for a specified period of time. Time deposits are
non-negotiable deposits maintained in a bank for a specified period of time
(in no event longer than seven days) at a stated interest rate. Time
deposits purchased by the Fund will not benefit from insurance from the
Federal Deposit Insurance Corporation. Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft drawn on it
by a customer.
The Money Market Portfolio limits its investments in obligations of
domestic banks, foreign branches of domestic banks and foreign subsidiaries
of domestic banks to banks having total assets in excess of one billion
dollars or the equivalent in other currencies. The Money Market Portfolio
limits its investments in obligations of domestic and foreign branches of
foreign banks to dollar denominated obligations of such banks which at the
time of investment have more than $5 billion, or the equivalent in other
currencies, in total assets assets and which meet the quality criteria
discussed above under "Principal Investment Strategies - Generally."
The Money Market Portfolio generally limits investments in bank instruments
to (a) those which are fully insured as to principal by the FDIC or (b)
those issued by banks which at the date of their latest pubic reporting
have total assets in excess of $1.5 billion. However, the total assets of a
bank will not be the sole factor determining the Money Market Portfolio's
investment decisions and the Money Market Portfolio may invest in bank
instruments issued by institutions which the board of Trustees believes
present minimal credit risks.
The Money Market Portfolio may purchase U.S. dollar-denominated obligations
issued by foreign branches of domestic banks or foreign branches of foreign
banks ("Eurodollar" obligations) and domestic branches of foreign banks
("Yankee dollar" obligations). The Money Market Portfolio will limit its
aggregate investments in foreign bank obligations, including Eurodollar
obligations and Yankee dollar obligations, to 25% of its total assets at
the time of purchase, provided that there is no limitation on the Money
Market Portfolio investments in (a) Eurodollar obligations, if the domestic
parent of the foreign branch issuing the obligations is unconditionally
liable in the event that the foreign branch fails to pay on the Eurodollar
obligation for any reason; and (b) Yankee dollar obligations, if the U.S.
branch of the foreign bank is subject to the same regulation as U.S. banks.
Eurodollar, Yankee dollar and other foreign bank obligations include time
deposits, which are non-negotiable deposits maintained in a bank for a
specified period of time at a stated interest rate. The Money Market
Portfolio will limit its purchases of time deposits to those which mature
in seven days or less, and will limit its purchases of time deposits
maturing in two to seven days to 10% of such Fund's total assets at the
time of purchase.
Eurodollar and other foreign obligations involve special investment risks,
including the possibility that liquidity could be impaired because of
future political and economic developments, that the obligations may be
less marketable than comparable domestic obligations of domestic issuers,
that a foreign jurisdiction might impose withholding taxes on interest
income payable on those obligations, that deposits may be seized or
nationalized, that foreign governmental restrictions such as exchange
controls may be adopted which might adversely affect the payment of
principal of and interest on those obligations, that the selection of
foreign obligations may be more difficult because there may be less
information publicly available concerning foreign issuers, that there may
be difficulties in enforcing a judgment against a foreign issuer or that
the accounting, auditing and financial reporting standards, practices and
requirements applicable to foreign issuers may differ from those applicable
to domestic issuers. In addition, foreign banks are not subject to
examination by United States Government agencies or instrumentalities.
(iii) Variable Amount Master Demand Notes: The Money Market Portfolio may
purchase variable amount master demand notes. These instruments are
unsecured demand notes that permit investment of fluctuating amounts of
money at variable rates of interest pursuant to arrangements with issuers
who meet the quality criteria discussed above under "Principal Investment
Strategies Generally." The interest rate on a variable amount master
demand note is periodically redetermined according to a prescribed
formula. Although there is no secondary market in master demand notes, the
payee may demand payment of the principal and interest upon notice not
exceeding five business or seven calendar days.
(iv) Commercial Paper and Certain Debt Obligations: The Money Market Portfolio
may purchase commercial paper or similar debt obligations. Commercial
paper is generally considered to be short term unsecured debt of
corporations.
(v) Repurchase Agreements: The Money Market Portfolio may enter into
repurchase agreements provided that the instruments serving as collateral
for the agreements are eligible for inclusion in the Money Market
Portfolio. A repurchase agreement arises when a buyer purchases a security
and simultaneously agrees with the vendor to
8
<PAGE>
resell the security to the vendor at an agreed upon time and price.
Municipal Portfolio
(i) Municipal Securities: The Municipal Portfolio may purchase municipal
securities, including debt obligations issued to obtain funds for various
public purposes (i.e., the construction of a wide range of public
facilities), the refunding of outstanding obligations, the obtaining of
funds for general operating expenses and lending such funds to other public
institutions and facilities. The Portfolio may also invest in certain types
of private activity bonds or industrial development bonds, issued by or on
behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated
facilities. Such obligations are considered to be Municipal Securities
provided that the interest paid thereon generally qualifies as exempt from
regular federal income tax in the opinion of bond counsel. Interest on
certain Municipal Securities may give rise to federal alternative minimum
tax liability and may have other collateral federal income tax
consequences.
(ii) Repurchase Agreements: The Municipal Portfolio may enter into repurchase
agreements provided that the instruments serving as collateral for the
agreements are eligible for inclusion in the Municipal Portfolio. A
repurchase agreement arises when a buyer purchases a security and
simultaneously agrees with the vendor to resell the security to the vendor
at an agreed upon time and price.
For a more detailed description of (i) the securities that the Fund will invest
in, (ii) fundamental investment restrictions, and (iii) industry regulations
governing credit quality and maturity, please refer to the Statement of
Additional Information.
Risks
- --------------------------------------------------------------------------------
The Fund complies with industry-standard requirements on the quality,
maturity and diversification of its investments which are designed to help
maintain a $1.00 share price. A significant change in interest rates or a
default on the Fund's investments could cause its share price (and the value of
your investment) to change.
Since the Money Market Portfolio may contain securities issued by foreign
governments, or any of their political subdivisions, agencies or
instrumentalities, and by foreign branches of domestic banks, foreign
subsidiaries of domestic banks, domestic and foreign branches of foreign banks,
and commercial paper issued by foreign issuers, the Money Market Portfolio may
be subject to additional investment risks when compared with those incurred by a
fund which invests only in domestic issuers. Foreign securities markets
generally are not as developed or efficient as those in the United States.
Securities of some foreign issuers are less liquid and more volatile than
securities of comparable United States issuers. Similarly, volume in most
foreign securities markets are less than in the United States. The issuers of
some of these securities may be subject to less stringent or different
regulation than are United States issuers. In addition, there may be less
publicly available information about a non-United States issuer, and non-United
States issuers generally are not subject to uniform accounting and financial
reporting standards and requirements. Additional risks associated with foreign
investments might include adverse political and economic developments, seizure
or nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect the payment of principal and interest on the
foreign securities. Furthermore, some of these foreign securities may be subject
to stamp, withholding or other excise taxes levied by foreign governments, which
have the effect of increasing the cost of such securities and reducing the
realized gain or increasing the realized loss on such securities at the time of
sale.
Since the Municipal Portfolio may contain municipal debt obligations,. the
value of these municipal obligations may be affected by uncertainties on the
municipal debt market related to taxation. In addition, the payment of interest
and preservation of capital are dependent upon the continuing ability of issuers
and/or obligors of state, municipal and public authority debt obligations to
meet these payment obligations.
As the Year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Manager is in the process of working with the Fund's service
providers to prepare for the Year 2000. Based on information currently
available, the Manager does not expect that the Fund will incur material costs
to be Year 2000 compliant. Although the Manager does not anticipate that the
Year 2000 issue will have a material impact on the Fund's ability to provide
service at current levels, there can be no assurance that steps taken in
preparation for the Year 2000 will be sufficient to avoid an adverse impact on
the Fund. The Year 2000 problem may also adversely affect issuers of the
securities contained in the Portfolios, to varying degrees based upon various
factors, and thus may have a corresponding adverse affect on a Portfolio's
performance. The Manager is unable to predict what affect, if any, the Year 2000
problem will have on such issuers. At this time, it is generally believed that
municipal issuers and foreign issuers
9
<PAGE>
may be more vulnerable to Year 2000 issues or problems than will other issuers.
III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of June 30, 1999, the Manager was the investment
manager, adviser or supervisor with respect to assets aggregating in excess of
$13.6 billion. The Manager has been an investment adviser since 1970 and
currently is manager of eighteen other registered investment companies. The
Manager also advises pension trusts, profit-sharing trusts and endowments.
Pursuant to the Investment Management Contract for each Portfolio, the
Manager manages each Portfolio's securities and makes the decisions with respect
to the purchase and sale of investments, subject to the general control of the
Board of Trustees of the Fund. Under the Investment Management Contract each of
the Portfolios pay an annual management fee of .12%. The Manager, at its
discretion may voluntarily waive all or a portion of the Management Fee.
Pursuant to the Administrative Services Contract for each Portfolio, the
Manager performs clerical, accounting supervision and office service functions
for the Fund. The Manager provides the Fund with personnel to perform all of the
clerical and accounting type functions not performed by the Manager. 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 an annual fee of .05% of each Portfolio's average
daily net assets. Any portion of the total fees received by the Manager and its
past profits may be used to provide shareholder services and for distribution of
Fund shares.
In addition, Reich & Tang Distributors, Inc. (the "Distributor"), receives
a fee equal to .25% per annum of the average daily net assets of the Class A
shares of each Portfolio under the Shareholder Servicing Agreement. The fees are
accrued daily and paid monthly.
Investment management fees and operating expenses, which are attributable to
both Classes of each Portfolio, will be allocated daily to each Class share
based on the percentage of outstanding shares at the end of the day.
IV. SHAREHOLDER INFORMATION
The Fund sells and redeems its shares on a continuing basis at their net
asset value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from Participating Organizations,
Mutual Securities, Inc. ("MSI") and from dealers with whom MSI has entered into
agreements for these purposes.
Pricing of Fund Shares
- --------------------------------------------------------------------------------
The net asset value of each Class of each portfolio of the Fund's shares is
determined as of 2:30 p.m., New York City time, on each Fund Business Day. Fund
Business Day means weekdays (Monday through Friday) except days on which the New
York Stock Exchange is closed for trading. The net asset value of a Class is
computed by dividing the value of the Fund's net assets for such Class (i.e.,
the value of its securities and other assets less its liabilities, including
expenses payable or accrued, but excluding capital stock and surplus) by the
total number of shares outstanding for such Class. The Fund intends to maintain
a stable net asset value at $1.00 per share although there can be no assurance
that this will be achieved.
The Fund's portfolio securities are valued at their amortized cost in
compliance with the provisions of Rule 2a-7 under the Investment Company Act of
1940 (the "1940 Act"). Amortized cost valuation involves valuing an instrument
at its cost and thereafter assuming a constant amortization to maturity of any
discount or premium. If fluctuating interest rates cause the market value of the
securities in a portfolio to deviate more than 1/2 of 1% from the value
determined on the basis of amortized cost, the Board of Trustees will consider
whether any action should be initiated. Although the amortized cost
10
<PAGE>
method provides certainty in valuation, it may result in periods during which
the value of an instrument is higher or lower than the price an investment
company would receive if the instrument were sold.
Shares will be issued as of the first determination of the Fund's net asset
value per share made upon receipt of the investor's purchase order at the net
asset value per share next determined after receipt of the purchase order.
Except as described below in the case of certain Participating Organizations
(see "Investment Through Participating Organizations" herein), an investor's
funds will not be invested by the Fund during the period before the Fund's
receipt of Federal Funds and its issuance of Fund shares. The Fund reserves the
right to reject any subscription to its shares.
Shares are issued as of 2:30 p.m., New York City time, on any Fund Business
Day, as defined herein, on which an order for the shares and accompanying
Federal Funds are received by the Fund's transfer agent before 2:30 p.m. Orders
accompanied by Federal Funds and received after 2:30 p.m. on a Fund Business Day
will not result in share issuance until the following Fund Business Day. Fund
shares begin accruing income on the day the shares are issued to an investor.
Subscribing to the Fund
- --------------------------------------------------------------------------------
At the time of initial investment in the Fund, investors must elect on their
subscription order form the Class of shares of the Portfolio in which they wish
to invest. Subject to the Portfolios' initial investment minimums, investors may
divide their investment in the Fund between the Portfolios in any manner they
choose by submitting a separate subscription order form for each Portfolio.
Investors who purchase shares of the Portfolios from a Participating
Organization that is compensated for its services by the Manager and the
Distributor may purchase Class A shares of the Portfolios.
Subject to the suggested minimum balance of $250,000 for an existing
account, shareholders in the Fund may transfer all or a portion of their shares
from one open Portfolio account to another open Portfolio account at any time.
Any transfer into a Portfolio in which the shareholder does not have an open
account must satisfy the Portfolio's initial investment minimum of $1,000,000.
Shareholders will have a separate account with the Fund for each Portfolio in
which they invest. Certificates for Fund shares will not be issued to an
investor.
Purchase of Pinnacle Shares
- --------------------------------------------------------------------------------
Only Pinnacle shares are offered through this Prospectus. Investors may
invest in Pinnacle shares through MSI and through dealers with whom MSI has
entered into agreements for the purposes described herein. All other investors,
and investors who have accounts with Participating Organizations but who do not
wish to invest in the Fund through their Participating Organizations, may invest
in the Fund directly as Class B shareholders of the Fund and not receive the
benefit of the servicing functions performed by a Participating Organization.
Class B shares may also be offered to investors who purchase their shares
through other Participating Organizations who do not receive compensation from
the Distributor or the Manager because they may not be legally permitted to
receive such as fiduciaries. The Manager pays the expenses incurred in the
distribution of Class B shares. Participating Organizations whose clients become
Class B shareholders will not receive compensation from the Manager or
Distributor for the servicing they may provide to their clients. With respect to
all Classes of shares, the minimum initial investment in the Fund with respect
to each Portfolio is $1,000,000. The minimum amount for subsequent investments
is $10,000 for all shareholders.
Investments Through Participating
Organizations
- --------------------------------------------------------------------------------
Participant Investors may, if they wish, invest in the Fund through the
Participating Organizations, such as MSI, with which they have accounts.
"Participating Organizations" are securities brokers, banks and financial
institutions or other industry professionals or organizations which have entered
into shareholder servicing agreements with the Distributor with respect to
investment of their customer accounts in the Fund. When instructed by its
customer to purchase or redeem Fund shares, the Participating Organization, on
11
<PAGE>
behalf of the customer, transmits to the Fund's transfer agent a purchase or
redemption order, and in the case of a purchase order, payment for the shares
being purchased.
Participating Organizations may confirm to their customers who are
shareholders in the Fund ("Participant Investors") each purchase and redemption
of Fund shares for the customers' accounts. Also, Participating Organizations
may send periodic account statements to their customers showing (i) the total
number of Fund shares owned by each customer as of the statement closing date,
(ii) purchases and redemptions of Fund shares by each customer during the period
covered by the statement, and (iii) the income earned by Fund shares of each
customer during the statement period (including dividends paid in cash or
reinvested in additional Fund shares). Participant Investors whose Participating
Organizations have not undertaken to provide such statements will receive them
from the Fund directly.
Participating Organizations may charge Participant Investors a fee in
connection with their use of specialized purchase and redemption procedures. In
addition, Participating Organizations offering purchase and redemption
procedures similar to those offered to shareholders who invest in the Fund
directly, may impose charges, limitations, minimums and restrictions in addition
to or different from those applicable to shareholders who invest in the Fund
directly. Accordingly, the net yield to investors who invest through
Participating Organizations may be less than by investing in the Fund directly.
A Participant Investor should read this Prospectus in conjunction with the
materials provided by the Participating Organization describing the procedures
under which Fund shares may be purchased and redeemed through the Participating
Organization.
In the case of qualified Participating Organizations, orders received by the
Fund's transfer agent before 2:30 p.m., New York City time, on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day only if the Federal Funds required in connection with the orders are
received by the Fund's transfer agent before 2:30 p.m., New York City time, on
that day. Orders for which Federal Funds are received after 2:30 p.m., New York
City time, will result in share issuance the following Fund Business Day.
Participating Organizations are responsible for instituting procedures to insure
that purchase orders by their respective clients are processed expeditiously.
Initial Purchases of Pinnacle Shares
- --------------------------------------------------------------------------------
Investors who wish to invest in the Fund directly may obtain a current
prospectus and the subscription order form necessary to open an account by
telephoning the Fund at the following numbers:
Within New York 212-830-5220
Outside New York (TOLL FREE) 800-221-3079
Mail
Investors may send a check made payable to "Institutional Daily Income Fund"
along with a completed subscription order form to:
Pinnacle Shares of Institutional
Daily Income Fund
c/o Mutual Securities, Inc.
P.O. Box 260208
Encino, CA 91426-0208
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member of the Federal Reserve System
will normally be converted into Federal Funds within two business days after
receipt of the check. Checks drawn on a non-member bank may take substantially
longer to convert into Federal Funds. An investor's purchase order will not be
accepted until the Fund receives Federal Funds.
Bank Wire
To purchase Pinnacle shares of the Fund using the wire system for
transmittal of money among banks, investors should first obtain a new account
number by telephoning Mutual Securities, Inc. at (818) 906-0881 and then
instruct a member commercial bank to wire money immediately to:
Chase Manhattan Bank, New York, NY
12
<PAGE>
ABA # 021000021
Account of National Financial
Acct. #066196-221
for further credit to: (Brokerage Account No.)
Customer name:
The investor should then promptly complete and mail the subscription order
form.
Investors planning to wire funds should instruct their bank so the wire
transfer can be accomplished on the same day. There may be a charge by the
investor's bank for transmitting the money by bank wire, and there also may be a
charge for use of Federal Funds. The Fund does not charge investors in the Fund
for its receipt of wire transfers. Payment in the form of a "bank wire" received
prior to 2:30 p.m., New York City time, on a Fund Business Day will be treated
as a Federal Funds payment received on that day.
Subsequent Purchases of Shares
- --------------------------------------------------------------------------------
Subsequent purchases can be made by bank wire, as indicated above, or by
mailing a check to:
Pinnacle Shares of Institutional
Daily Income Fund
c/o Mutual Securities, Inc.
P.O. Box 260208
Encino, CA 91426-0208
There is a $10,000 minimum for subsequent purchases of shares. All payments
should clearly indicate the shareholder's account number.
Provided that the information on the subscription form on file with the Fund
is still applicable, a shareholder may reopen an account without filing a new
subscription order form at any time during the year the shareholder's account is
closed or during the following calendar year.
Redemption of Shares
- --------------------------------------------------------------------------------
A redemption is effected immediately following, and at a price determined in
accordance with, the next determination of net asset value per share of each
Class of each Portfolio following receipt by the Fund's transfer agent of the
redemption order (and any supporting documentation which it may require).
Normally, payment for redeemed shares is made on the same Fund Business Day
after the redemption is effected, provided the redemption request is received
prior to 2:30 p.m., New York City time. However, redemption payments will not be
effected unless the check (including a certified or cashier's check) used for
investment has been cleared for payment by the investor's bank, which could take
up to 15 days after investment. Shares redeemed are not entitled to participate
in dividends declared on the day a redemption becomes effective.
A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee.
When a signature guarantee is called for, the shareholder should have
"Signature Guaranteed" stamped under his signature. It should be signed and
guaranteed by an eligible guarantor institution which includes a domestic bank,
a domestic savings and loan institution, a domestic credit union, a member bank
of the Federal Reserve system or a member firm of a national securities
exchange, pursuant to the Fund's transfer agent's standards and procedures.
Written Requests
Shareholders may make a redemption in any amount by sending a written
request to the Fund addressed to:
Pinnacle Shares of Institutional
Daily Income Fund
c/o Mutual Securities, Inc.
P.O. Box 260208
Encino, CA 91426-0208
All previously issued certificates submitted for redemption must be endorsed
by the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with signature guaranteed.
13
<PAGE>
Normally the redemption proceeds are paid by check and mailed to the
shareholder of record.
Telephone
The Fund accepts telephone requests for redemption from shareholders who
elect this option on their subscription order form. The proceeds of a telephone
redemption will be sent to the shareholder at its address or, to its 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 such shareholders risk possible loss of
principal and interest in the event of a telephone redemption not authorized by
them. Telephone requests to wire redemption proceeds must be for amounts in
excess of $10,000. The Fund will employ reasonable procedures to confirm that
telephone redemption instructions are genuine, and will require that
shareholders electing such option provide a form of personal identification. The
failure by the Fund to employ such reasonable procedures may cause the Fund to
be liable for the losses incurred by investors due to telephone redemptions
based upon unauthorized or fraudulent instructions.
A shareholder making a telephone withdrawal should call the Fund at
212-830-5220; outside New York at 800-221-3079, and state: (i) the name of the
shareholder appearing on the Fund's records, (ii) the shareholder's account
number with the Fund, (iii) the amount to be withdrawn, and (iv) the name of the
person requesting the redemption. Usually the proceeds are sent to the
designated bank account or address on the same Fund Business Day the redemption
is effected, provided the redemption request is received before 2:30 p.m., New
York City time and on the next Fund Business Day if the redemption request is
received after 2:30 p.m., New York City time. The Fund may modify or discontinue
the telephone redemption option at any time upon 60 days written notice to
shareholders.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by check. Unless other instructions are given
in proper form to the Fund's transfer agent, a check for the proceeds of a
redemption will be sent to the shareholders' address of record. If a shareholder
elects to redeem all the shares of the Fund he owns, all dividends accrued to
the date of such redemption will be paid to the shareholder along with the
proceeds of the redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted. Any period during which
an emergency (as determined by the SEC) exists as a result of which disposal by
the Fund of its portfolio securities is not reasonably practicable or as a
result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or for such other period as the SEC may
by order permit for the protection of the shareholders of the Fund.
The Fund has reserved the right to redeem the shares of any shareholder if
the net asset value of all the remaining shares in the shareholder's or his
Participating Organization's account after a withdrawal is less than $250,000.
Written notice of a proposed mandatory redemption will be given at least 30 days
in advance to any shareholder whose account is to be redeemed or the Fund may
impose a monthly service charge of $10 on such accounts. For Participant
Investor accounts, notice of a proposed mandatory redemption will be given only
to the appropriate Participating Organization. The Participating Organization
will be responsible for notifying the Participant Investor of the proposed
mandatory redemption. During the notice period a shareholder or Participating
Organization who receives such a notice may avoid mandatory redemption by
purchasing sufficient additional shares to increase his total net asset value to
the minimum amount. Shareholders who purchase shares under these circumstances
are not subject to the normal $10,000 minimum for subsequent purchases.
14
<PAGE>
Dividends and Distributions
- --------------------------------------------------------------------------------
The Fund declares dividends equal to all its net investment income
(excluding capital gains and losses, if any, and amortization of market
discount) on each Fund Business Day and pays dividends monthly. There is no
fixed dividend rate. In computing these dividends, interest earned and expenses
are accrued daily.
Distributions of long-term capital gains, if any, are paid by the U.S.
Treasury and Money Market Portfolios at least once a year and, at the
shareholder's option, are paid in cash or reinvested in additional shares of the
Portfolio from which they were paid having an aggregate net asset value equal to
the cash amount.
All dividends and distributions of capital gains are automatically invested,
at no charge, in additional Fund shares of the same Class of shares immediately
upon payment thereof unless a shareholder has elected by written notice to the
Fund to receive either of such distributions in cash.
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. Except as described herein, each Portfolio's net investment
income (including net realized short-term capital gains, if any) will be
declared as a dividend on each Fund Business Day. The Fund declares dividends
for Saturdays, Sundays and holidays on the previous Fund Business Day. The Fund
pays dividends monthly after the close of business on the last calendar day of
each month or after the close of business on the previous Fund Business Day if
the last calendar day of each month is not a Fund Business Day. 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.
Because Class A shares bear the service fee under the Fund's 12b-1 Plan, the
net income of and the dividends payable to the Class A shares will be lower than
the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of each portfolio of the Fund will,
however, be declared and paid on the same days at the same times and, except as
noted with respect to the service fees payable under the Plan, will be
determined in the same manner and paid in the same amounts.
Exchange Privilege
- --------------------------------------------------------------------------------
An investor may, without cost, exchange shares from the same Class of one
Portfolio of the Fund into the same Class of any other Portfolio of the Fund,
subject to the $1,000,000 minimum initial investment requirement per Portfolio,
the availability of such shares and the maintenance of the suggested minimum
balance of $250,000. Shares are exchanged on the basis of relative net asset
value per share. Exchanges are in effect redemptions from one Portfolio and
purchases of another Portfolio and therefore the Portfolio's purchase and
redemption procedures and requirements are applicable to exchanges.
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 Reich & Tang Distributors, Inc. 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
15
<PAGE>
have elected that option, by telephone. The Fund reserves the right to reject
any exchange request and will notify shareholders accordingly.
Tax Consequences
- --------------------------------------------------------------------------------
The purchase of shares in the Fund will be the purchase of an asset and the
shareholder's basis for its shares in the Fund will be its cost of the shares,
including any fees or expenses. The sale of shares in the Fund will be the
taxable disposition of an asset, with gain or loss recognized in an amount equal
to the difference between the shareholder's tax basis for the shares and the
proceeds received on the sale. The exchange of shares of one Portfolio for
shares of another Portfolio, if available, will also be treated as a taxable
disposition of the shares exchanged, on which gain or loss will be recognized.
In either case, loss recognition may be affected by the loss disallowance rules
of the Code.
The Fund intends to continue to qualify for special treatment applicable to
a regulated investment company under the Internal Revenue Code of 1986, as
amended, for each Portfolio. To qualify as a regulated investment company, each
Portfolio must meet certain complex tests concerning its investments and
distributions. For each year a Portfolio qualifies as a regulated investment
company, the Portfolio will not be subject to Federal income tax on income
distributed to its shareholders in the form of dividends or capital gains
distributions. Additionally, each Portfolio will not be subject to a Federal
excise tax if the Portfolio distributes at least 98% of its ordinary income and
98% of its capital gain income to its shareholders. Dividends of net ordinary
income and distributions of net short-term capital gains are taxable to the
recipient shareholders as ordinary income but will not be eligible, in the case
of corporate shareholders, for the dividend-received deduction.
Dividends and distributions are treated in the same manner for federal
income tax purposes whether the shareholders receive cash or additional shares.
The Fund expects that distributions, as a result of its investment objectives,
will consist primarily of ordinary income. A shareholder who elects to reinvest
in additional shares will be treated for tax purposes as if it had received and
reinvested the cash dividend.
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 regarding the
supplying of their taxpayer identification number and the reporting of income.
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.
Distributions from the U.S. Treasury Portfolio that are derived from
interest on certain obligations of the United States Government and agencies
thereof may be exempt from state and local taxes in certain states. Investors
should consult their own tax advisors regarding specific questions as to
Federal, state or local taxes.
V. DISTRIBUTION ARRANGEMENTS
Rule 12b-1 Fees
- --------------------------------------------------------------------------------
Investors do not pay a sales charge to purchase shares of the Fund.
However, the Fund pays fees in connection with the distribution of shares and
for services provided to the Class A shareholders only. The Fund pays these fees
from its assets on an ongoing basis and therefore, over time, the payment of
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
The Fund's Board of Trustees has adopted a Rule 12b-1 distribution and
service plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Class A
shares of the Fund only).
Under the Distribution Agreement, the Distributor serves as distributor of
the Fund's shares and, for nominal consideration (i.e., $1.00) and as agent for
the Fund, will solicit orders for the purchase of the Fund's shares, provided
that any
16
<PAGE>
orders will not be binding on the Fund until accepted by the Fund as principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect only to the Class A shares, a service fee equal to .25% per annum of
each Portfolio's Class A shares' average daily net assets (the "Shareholder
Servicing Fee") for providing personal shareholder services and for the
maintenance of shareholder accounts. This fee is accrued daily and paid monthly
and any portion of the fee may be deemed to be used by the Distributor for
payments to Participating Organizations with respect to their provision of such
services to their clients or customers who are shareholders of the Class A
shares of each Portfolio. The Class B shareholders will not receive the benefit
of such services from Participating Organizations and, therefore, will not be
assessed a Shareholder Servicing Fee.
The Plan and the Shareholder Servicing Agreement provide that the Fund will
pay for (i) telecommunications expenses, including the cost of dedicated lines
and CRT terminals, incurred by the Distributor and Participating Organizations
in carrying out their obligations under the Shareholder Servicing Agreement with
respect to Class A shares, and (ii) preparing, printing and delivering the
Fund's prospectus to existing shareholders of the Fund and preparing and
printing subscription application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from
its own resources, which may include the management fee and past profits for the
following purposes: (i) to defray costs, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing on behalf of the Class A shares
of the Fund; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Class A shares of the Fund; and (iii)
to pay the costs of printing and distributing the Fund's Prospectus to
prospective investors, and to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
Class A shares.
The Plan also provides that the Distributor may make payments from time to
time from its own resources, which may include the Shareholder Servicing Fee
(with respect to Class A shares) and past profits, for the purposes enumerated
in (i) in the preceding paragraph. The Distributor will determine the amount of
such payments made pursuant to the Plan, provided that such payments will not
increase the amount which the Fund is required to pay to the Manager and
Distributor for any fiscal year under either the Investment Management Contract
in effect for that year or under the Shareholder Servicing Agreement in effect
for that year.
17
<PAGE>
VI. FINANCIAL HIGHLIGHTS
This financial highlights table is intended to help you understand the financial
performance of both classes of the U.S. Treasury Portfolio and the Money Market
Portfolio for the past 5 years or shorter period depending on the inception date
of the Portfolio. Certain information reflects financial results for a single
Portfolio share. The highlights reflect an investment in the Class B shares of
the Fund since there were no Pinnacle shares issued during the periods covered
by this table. There are no financial highlights available for the Municipal
Portfolio since this Portfolio is not yet offered for sale. The total returns in
the table represent the rate that an investor would have earned on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McGladrey and Pullen, LLP, whose report, along
with the Fund's financial statements, is included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
U.S. Treasury Portfolio
---------------------------------------------------------------------------
For the Year Ended March 31, November 18, 1996
CLASS B ------------------------------------ (Commencement of Sales) to
- ------- 1999 1998 March 31, 1997
--------- --------- --------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C>
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00
-------- ------- --------
Income from investment operations:
Net investment income....................... 0.050 0.054 0.019
Less distributions:
Dividends from net investment income........ ( 0.050) ( 0.054) ( 0.019)
-------- ------- --------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00
======== ======= ========
Total Return.................................. 5.12% 5.50% 5.27%*
Ratios/Supplemental Data:
Net assets, end of period (000)............... $ 79,793 $ 6,833 $ 7,799
Ratios to average net assets:
Expenses (net of fees waived)+.............. 0.20% 0.17% 0.17%*
Net investment income....................... 4.73% 5.37% 5.14%*
Expenses paid indirectly.................... 0.00% 0.00% 0.01%*
Management and administration fees waived... 0.04% 0.07% 0.05%*
</TABLE>
<TABLE>
<CAPTION>
Money Market Portfolio
-------------------------------------------------------------------------------
For the Year Ended March 31, April 6, 1994
CLASS B -------------------------------------------------- (Commencement of Sales) to
- ------- 1999 1998 1997 1996 March 31, 1995
-------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from investment operations:
Net investment income........................ 0.053 0.055 0.053 0.057 0.045
Less distributions:
Dividends from net investment income......... ( 0.053) ( 0.055) ( 0.053) ( 0.057) ( 0.045)
------- ------- ------- ------- -------
Net asset value, end of period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return................................... 5.38% 5.64% 5.42% 5.85% 5.16%*
Ratios/Supplemental Data:
Net assets, end of period (000)................ $ 221,119 $ 227,893 $ 158,525 $ 127,282 $ 35,857
Ratios to average net assets:
Expenses (net of fees waived and reimbursed)+ 0.20% 0.20% 0.17% 0.16% 0.02%*
Net investment income........................ 5.27% 5.50% 5.29% 5.64% 5.14%*
Expenses paid indirectly..................... 0.00% 0.00% 0.01% 0.04% 0.00%*
Management and administration fees waived 0.05% 0.07% 0.09% 0.13% 0.13%*
Expenses reimbursed.......................... 0.00% 0.00% 0.00% 0.03% 0.25%*
* Annualized
+ Includes expenses paid indirectly.
</TABLE>
18
<PAGE>
A Statement of Additional Information (SAI) dated August 3, 1999, and the Fund's
Annual and Semi-Annual Reports include additional information about the Fund and
its investments and are incorporated by reference into this prospectus. You may
obtain the SAI, the Annual and Semi-Annual Reports and material incorporated by
reference without charge by calling the Fund at 1-800-221-3079. To request other
information, please call your financial intermediary or the Fund.
======================================================
INSTITUTIONAL
DAILY INCOME
FUND
Pinnacle Class of Shares
PROSPECTUS
August 3, 1999
Distributed by: Mutual Securites, Inc.
P.O. Box 260208
Encino, CA 91426-0208
(800) 750-STOCK
======================================================
A current SAI has been filed with the Securities and Exchange Commission. You
may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C.
20549-6009.
811-8312
PIDIF899P
<PAGE>
INSTITUTIONAL DAILY INCOME FUND
600 Fifth Avenue, New York, NY 10020
(212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
August 3, 1999
RELATING TO THE INSTITUTIONAL DAILY INCOME FUND
PROSPECTUS DATED AUGUST 3, 1999
AND THE PINNACLE CLASS OF SHARES OF INSTITUTIONAL DAILY INCOME FUND
PROSPECTUS DATED AUGUST 3, 1999
This Statement of Additional Information (SAI) is not a Prospectus. The SAI
expands upon and supplements the information contained in the current
Prospectuses of Institutional Daily Income Fund (the "Fund"), dated August 3,
1999, and should be read in conjunction with each Prospectus.
A Prospectus may be obtained from any Participating Organization or by writing
or calling the Fund toll-free at 1-(800) 221-3079. The Financial Statements of
the Fund have been incorporated by reference to the Fund's Annual Report. The
Annual Report is available, without charge, upon request by calling the
toll-free number provided. The material relating to Purchase, Redemption, and
Pricing of Shares has been incorporated by reference to the Prospectus of each
Class of shares.
You may obtain a Prospectus for the Pinnacle Class of shares of the Fund by
writing or calling the Fund toll-free at 1-800-221-3079.
This Statement of Additional Information is incorporated by reference into the
Fund's Prospectus in its entirety.
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<S> <C> <C> <C>
Table of Contents
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Fund History.........................................2 Capital Stock and Other Securities......................17
Description of the Fund and its Investments and Purchase, Redemption and Pricing of Shares..............18
Risks..............................................2 Taxation of the Fund....................................19
Management of the Fund..............................10 Underwriters............................................20
Control Persons and Principal Holders of Calculation of Performance Data.........................20
Securities........................................12 Financial Statements....................................21
Investment Advisory and Other Services..............13 Description of Ratings..................................22
Brokerage Allocation and Other Practices............17
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<PAGE>
I. FUND HISTORY
The Fund was incorporated on January 20, 1994 in the state of Massachusetts.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The Fund is a diversified, no-load, open-end management investment company
consisting of three managed portfolios of money market instruments (the
"Portfolios"). The investment objective of the Fund's Portfolios is to seek as
high a level of current income (or current tax exempt income for the Municipal
Portfolio) to the extent consistent with preserving capital and maintaining
liquidity. The Portfolios were designed to meet the short-term investment needs
of corporate and institutional investors. No assurance can be given that these
objectives will be achieved.
The following discussion expands upon the description of the Fund's investment
objectives and policies in the Prospectus.
Credit Ratings and Risks
The Money Market and Municipal Portfolios may only purchase United States
dollar-denominated securities that have been determined by the Fund's Board of
Trustees to present minimal credit risks and that are Eligible Securities at the
time of acquisition. The term Eligible Securities means: (i) securities which
have or are deemed to have remaining maturities of 397 days or less and rated in
the two highest short-term rating categories by any two nationally recognized
statistical rating organizations ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal Obligations (collectively, the "Requisite
NRSROs"); or (ii) unrated securities determined by the Fund's Board of Trustees
to be of comparable quality. In addition, securities which have or are deemed to
have remaining maturities of 397 days or less but that at the time of issuance
were long-term securities (i.e. with maturities greater than 366 days) are
deemed unrated and may be purchased if such had received a long-term rating from
the Requisite NRSROs in one of the three highest rating categories. Provided,
however, that such may not be purchased if it (i) does not satisfy the rating
requirements set forth in the preceding sentence and (ii) has received a
long-term rating from any NRSRO that is not within the three highest long-term
rating categories. A determination of comparability by the Board of Trustees is
made on the basis of its credit evaluation of the issuer, which may include an
evaluation of a letter of credit, guarantee, insurance or other credit facility
issued in support of the securities. While there are several organizations that
currently qualify as NRSROs, two examples of NRSROs are Standard & Poor's Rating
Services, a division of The McGraw-Hill Companies, ("S&P") and Moody's Investors
Service, Inc. ("Moody's"). The two highest ratings by S&P and Moody's are "AAA"
and "AA" by S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by
Moody's in the case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by
Moody's in the case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2"
by Moody's in the case of tax-exempt commercial paper. The highest rating in the
case of variable and floating demand notes is "VMIG-1" by Moody's or "SP-1/AA"
by S&P. Such instruments may produce a lower yield than would be available from
less highly rated instruments.
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
Subsequent to its purchase by the Fund, a rated security may cease to be rated
or its rating may be reduced below the minimum required for purchase by the
Fund. If this occurs, the Board of Trustees of the Fund shall promptly reassess
whether the security presents minimal credit risks and shall cause the Fund to
take such action as the Board of Trustees determines is in the best interest of
the Fund and its shareholders. However, reassessment is not required if the
security is disposed of or matures within five business days of the Manager
becoming aware of the new rating and provided further that the Board of Trustees
is subsequently notified of the Manager's actions.
In addition, in the event that a security (i) is in default, (ii) ceases to be
an Eligible Security under Rule 2a-7 of the 1940 Act or (iii) is determined to
no longer present minimal credit risks, or an event of insolvency occurs with
respect to the issues of a portfolio security or the provider of any Demand
Feature or Guarantee, the Fund will dispose of the security absent a
determination by the Fund's Board of Trustees that disposal of the security
would not be in the best interests of the Fund. Disposal of the security shall
occur as soon as practicable consistent with achieving an orderly disposition by
sale, exercise of any demand feature or otherwise. In the event of a default
with respect to a security
2
<PAGE>
which immediately before default accounted for 1/2 of 1% or more of the Fund's
total assets, the Fund shall promptly notify the SEC of such fact and of the
actions that the Fund intends to take in response to the situation.
Foreign Securities
The Money Market Portfolio may invest in certain foreign securities. Investment
in obligations of foreign issuers and in foreign branches of domestic banks
involves somewhat different investment risks from those affecting obligations of
United States domestic issuers. There may be limited publicly available
information with respect to foreign issuers and foreign issuers are not
generally subject to uniform accounting, auditing and financial standards and
requirements comparable to those applicable to domestic companies. There may
also be less government supervision and regulation of foreign securities
exchanges, brokers and listed companies than in the United States. Foreign
securities markets have substantially less volume than national securities
exchanges and securities of some foreign companies are less liquid and more
volatile than securities of comparable domestic companies. Brokerage commissions
and other transaction costs on foreign securities exchanges are generally higher
than in the United States. Dividends and interest paid by foreign issuers may be
subject to withholding and other foreign taxes, which may decrease the net
return on foreign investments as compared to dividends and interest paid to the
Money Market Portfolio by domestic companies. Additional risks include future
political and economic developments, the possibility that a foreign jurisdiction
might impose or change withholding taxes on income payable with respect to
foreign securities, the possible seizure, nationalization or expropriation of
the foreign issuer or foreign deposits and the possible adoption of foreign
governmental restrictions such as exchange controls.
Repurchase Agreements
Investments by the Fund in repurchase agreements are made in accordance with
procedures established by the Fund providing that the securities serving as
collateral for each repurchase agreement are delivered to the Fund's custodian
either physically or in book entry form and that the collateral is marked to the
market with sufficient frequency to ensure that each repurchase agreement is
fully collateralized at all times. A buyer of a repurchase agreement runs the
risk of loss with respect to his investment in the event of a default by the
issuer if, at the time of default, the value of the collateral securing the
agreement is less than the price paid for the repurchase agreement. Were a
default to occur, the Fund would look to the collateral securing the repurchase
agreement to recover its entire investment. 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 in selling the collateral. The Fund enters into repurchase
agreements only with member banks of the Federal Reserve System and "primary
dealers" (as designated by the Federal Reserve Bank of New York) in United
States government securities. In the view of the management of the Fund, the
restrictions and procedures described above which govern the Fund's investments
in repurchase agreements substantially minimize the Fund's risk of losses in
making those investments. Repurchase agreements may be considered to be loans
under the Investment Company Act of 1940, as amended (the "1940 Act").
Reverse Repurchase Agreements
Reverse repurchase agreements involve the sale of securities held by a Portfolio
pursuant to an agreement to repurchase the securities at an agreed upon price
and date. The U.S. Treasury Portfolio is permitted to enter into reverse
repurchase agreements for liquidity purposes or when it is able to purchase
other securities which will produce more income than the cost of the agreement.
Each Portfolio that is permitted to enter into reverse repurchase agreements may
do so only with those member banks of the Federal Reserve System and
broker-dealers who are recognized as primary dealers in U.S. government
securities by the Federal Reserve Bank of New
4
<PAGE>
York whose creditworthiness has been reviewed and found to meet the investment
criteria of the Portfolio. When engaging in reverse repurchase transactions, the
Fund will maintain, in a segregated account with its Custodian, securities equal
in value to those subject to the agreement. These agreements are considered to
be borrowings and therefore are included in the asset restriction contained
under "Investment Restrictions" relating to borrowings which allows a Portfolio
to borrow money from banks for extraordinary or emergency purposes and to engage
in reverse repurchase agreements provided that such in the aggregate do not
exceed one-third of the value of the total assets of that Portfolio less its
liabilities. Any Portfolio that utilizes reverse repurchase agreements to this
extent may be considered to be leveraging its portfolio; however, since the
Portfolios are required to maintain segregated accounts to cover their positions
on these reverse repurchase agreements, the risks inherent in this leveraging
technique are minimized.
The Portfolio could experience delays in recovering securities in the event of
the bankruptcy of the other party to a reverse repurchase agreement and could
experience a loss to the extent that the value of the securities may have
decreased in the meantime.
Variable Rate Demand Instruments
The Money Market Portfolio and Municipal Portfolio may purchase variable rate
demand instruments. Variable rate demand instruments that the Portfolios will
purchase are tax exempt Municipal Securities or taxable (variable amount master
demand notes) debt obligations that provide for a periodic adjustment in the
interest rate paid on the instrument and permit the holder to demand payment of
the unpaid principal balance plus accrued interest at specified intervals upon a
specified number of days' notice either from the issuer or by drawing on a bank
letter of credit, a guarantee, insurance or other credit facility issued with
respect to such instrument.
The variable rate demand instruments in which the Portfolios may invest are
payable on not more than thirty calendar days' notice either on demand or at
specified intervals not exceeding one year depending upon the terms of the
instrument. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily to up to one year and their
adjustments are based upon the prime rate of a bank or other appropriate
interest rate adjustment index as provided in the respective instruments. The
Fund will decide which variable rate demand instruments it will purchase in
accordance with procedures prescribed by its Board of Trustees to minimize
credit risks. A Portfolio utilizing the amortized cost method of valuation may
only purchase variable rate demand instruments if (i) the instrument is subject
to an unconditional demand feature, exercisable by the Portfolio in the event of
default in the payment of principal or interest on the underlying securities,
which itself qualifies as a First Tier Eligible Security or (ii) the instrument
is not subject to an unconditional demand feature but does qualify as a First
Tier Eligible Security and has a long-term rating by the Requisite NRSROs in one
of the two highest rating categories or, if unrated, is determined to be of
comparable quality by the Fund's Board of Trustees. If an instrument is ever
deemed to be of less than high quality, the Portfolio either will sell it in the
market or exercise the demand feature.
The variable rate demand instruments that the Portfolios may invest in include
participation certificates purchased by the Portfolios from banks, insurance
companies or other financial institutions in fixed or variable rate, tax-exempt
Municipal Securities (expected to be concentrated in IRBs) or taxable debt
obligations (variable amount master demand notes) owned by such institutions or
affiliated organizations. A participation certificate gives the Portfolios an
undivided interest in the obligation in the proportion that the Portfolio's
participation interest bears to the total principal amount of the obligation and
provides the demand repurchase feature described below. Where the institution
issuing the participation does not meet the Portfolio's high quality standards,
the participation is backed by an irrevocable letter of credit or guaranty of a
bank (which may be a bank issuing a confirming letter of credit, or a bank
serving as agent of the issuing bank with respect to the possible repurchase of
the certificate of participation or a bank serving as agent of the issuer with
respect to the possible repurchase of the issue) or insurance policy of an
insurance company that the Board of Trustees of the Fund has determined meets
the prescribed quality standards for the Portfolio. The Portfolio has the right
to sell the participation certificate back to the institution and, where
applicable, draw on the letter of credit, guarantee or insurance after no more
than 30 days' notice either on demand or at specified intervals not exceeding
397 days (depending on the terms of the participation), for all or any part of
the full principal amount of the Portfolio's participation interest in the
security, plus accrued interest. The Portfolios intend to exercise the demand
only (1) upon a default under the terms of the bond documents, (2) as needed to
provide liquidity to the Portfolio in order to make redemptions of the Portfolio
shares, or (3) to maintain a high quality investment portfolio. The institutions
issuing the participation certificates will retain a service and letter of
credit fee (where applicable) and a fee for providing the demand repurchase
feature, in an amount equal to the excess of the
5
<PAGE>
interest paid on the instruments over the negotiated yield at which the
participations were purchased by the Portfolio. The total fees generally range
from 5% to 15% of the applicable "prime rate"1 or other interest rate index.
With respect to insurance, the Portfolios will attempt to have the issuer of the
participation certificate bear the cost of the insurance, although the
Portfolios retain the option to purchase insurance if necessary, in which case
the cost of insurance will be an expense of the Portfolio subject to the expense
limitation on investment company expenses prescribed by any state in which the
Portfolio's shares are qualified for sale. The Manager has been instructed by
the Fund's Board of Trustees to continually monitor the pricing, quality and
liquidity of the variable rate demand instruments held by the Portfolio,
including the participation certificates, on the basis of published financial
information and reports of the rating agencies and other bank analytical
services to which the Portfolio may subscribe. Although these instruments may be
sold by the Portfolio, the Portfolio intends to hold them until maturity, except
under the circumstances stated above (see "Tax Consequences" in the Prospectus).
While the value of the underlying variable rate demand instruments may change
with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or securities increase,
the potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The Portfolios may contain variable rate demand instruments on which
stated minimum or maximum rates, or maximum rates set by state law limit the
degree to which interest on such variable rate demand instruments may fluctuate;
to the extent it does, increases or decreases in value may be somewhat greater
than would be the case without such limits. Additionally, the Portfolios may
contain variable rate demand participation certificates in fixed rate Municipal
Securities and taxable debt obligations (the Portfolios will not acquire a
variable note demand participation certificate in fixed rate municipal
securities without an opinion of counsel). The fixed rate of interest on these
obligations will be a ceiling on the variable rate of the participation
certificate. In the event that interest rates increased so that the variable
rate exceeded the fixed rate on the obligations, the obligations could no longer
be valued at par and this may cause the Portfolios to take corrective action,
including the elimination of the instruments. Because the adjustment of interest
rates on the variable rate demand instruments is made in relation to movements
of the applicable banks' prime rate, or other interest rate adjustment index,
the variable rate demand instruments are not comparable to long-term fixed rate
securities. Accordingly, interest rates on the variable rate demand instruments
may be higher or lower than current market rates for fixed rate obligations or
obligations of comparable quality with similar maturities.
For purposes of determining whether a variable rate demand instrument held by a
Portfolio matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (1) the period required
before the Portfolio is entitled to receive payment of the principal amount of
the instrument or (2) the period remaining until the instrument's next interest
rate adjustment. The maturity of a variable rate demand instrument will be
determined in the same manner for purposes of computing the Portfolios'
dollar-weighted average portfolio maturity. If a variable rate demand instrument
ceases to meet the investment criteria of the Portfolio, it will be sold in the
market or through exercise of the repurchase demand.
When-Issued Securities
All Portfolios may purchase debt obligations offered on a "when-issued" or
"delayed delivery" basis. When so offered, the price, which is generally
expressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment for the when-issued securities take place at a
later date. Normally, the settlement date occurs within one month of the
purchase of debt obligations; during the period between purchase and settlement,
no payment is made by the purchaser to the issuer and no interest accrues to the
purchaser. To the extent that assets of a Portfolio are not invested prior to
the settlement of a purchase of securities, that Portfolio will earn no income;
however, it is intended that each Portfolio will be fully invested to the extent
practicable and subject to the policies stated above. While when-issued
securities may be sold prior to the settlement date, it is intended that each
Portfolio will purchase such securities with the purpose of actually acquiring
them unless a sale appears desirable for investment reasons. At the time the
Portfolio makes the commitment to purchase a debt obligation on a when-issued
basis, it will record the transaction and reflect the value of the security in
determining its net asset value. The Fund does not believe that the net asset
value or income of the Portfolios' securities will be adversely affected by
their purchase of debt obligations on a when-issued basis. Each Portfolio will
establish a segregated
- --------
1 The "prime rate" is generally the rate charged by a bank to its creditworthy
customers for short-term loans. The prime rate of a particular bank may differ
from other banks and will be the rate announced by each bank on a particular
day. Changes in the prime rate may occur with great frequency and generally
become effective on the date announced.
6
<PAGE>
account in which it will maintain cash and marketable securities equal in value
to commitments for when-issued securities. Such segregated securities either
will mature or, if necessary, be sold on or before the settlement date.
Participation Interests
The Money Market Portfolio and Municipal Portfolio may purchase from banks
participation interests in all or part of specific holdings of Municipal or
other debt obligations (including corporate loans). Where the institution
issuing the participation does not meet the Portfolio's quality standards, the
participation may be backed by an irrevocable letter of credit or guarantee that
the Board of Trustees has determined meets the prescribed quality standards of
each Portfolio. Thus, even if the credit of the selling bank does not meet the
quality standards of a Portfolio, the credit of the entity issuing the credit
enhancement will. Each Portfolio will have the right to sell the participation
interest back to the bank for the full principal amount of the Portfolio's
interest in the Municipal or debt obligation plus accrued interest, but only (1)
as required to provide liquidity to that Portfolio, (2) to maintain the quality
standards of each Portfolio's investment portfolio or (3) upon a default under
the terms of the debt obligation. The selling bank may receive a fee from a
Portfolio in connection with the arrangement. When purchasing bank participation
interests, the Portfolio will treat both the bank and the underlying borrower as
the issuer of the instrument for the purpose of complying with the
diversification requirement of the investment restrictions discussed below.
Domestic and Foreign Bank Obligations, Certificates of Deposit and Bankers'
Acceptances
The Money Market Portfolio and Municipal Portfolio may purchase certificates of
deposit, time deposits, bankers' acceptances, commercial paper and other
obligations issued or guaranteed by the 50 largest banks in the United States.
For this purpose banks are ranked by total deposits as shown by their most
recent annual financial statements. The "other obligations" in which the
Portfolios may invest include instruments (such as bankers' acceptances,
commercial paper and certificates of deposit) issued by United States
subsidiaries of the 50 largest banks in the United States where the instruments
are guaranteed as to principal and interest by such banks. At the time the
Portfolio invests in any certificate of deposit, bankers' acceptance or other
bank obligation, the issuer or its parent must have its debt rated within the
quality standards of the Portfolio or if unrated be of comparable quality as
determined by the Fund's Board of Trustees.
Privately Placed Securities
The Money Market Portfolio and Municipal Portfolio may invest in securities
issued as part of privately negotiated transactions between an issuer and one or
more purchasers. Except with respect to certain commercial paper issued in
reliance on the exemption from regulations in Section 4(2) of the Securities Act
of 1933 (the "Securities Act") and securities subject to Rule 144A of the
Securities Act which are discussed below, these securities are typically not
readily marketable, and therefore are considered illiquid securities. The price
these Portfolios pay for illiquid securities, and any price received upon
resale, may be lower than the price paid or received for similar securities with
a more liquid market. Accordingly, the valuation of privately placed securities
by these Portfolios will reflect any limitations on their liquidity. As a matter
of policy, none of the Portfolios will invest more than 10% of the market value
of the total assets of the Portfolio in repurchase agreements maturing in over
seven days and other illiquid investments. The Portfolios may purchase
securities that are not registered ("restricted securities") under the
Securities Act, but can be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act. The Portfolios may also purchase certain
commercial paper issued in reliance on the exemption from regulations in Section
4(2) of the Securities Act ("4(2) Paper"). However, each Portfolio will not
invest more than 10% of its net assets in illiquid investments, which include
securities for which there is no ready market, securities subject to contractual
restriction on resale, certain investments in asset-backed and receivable-backed
securities and restricted securities (unless, with respect to these securities
and 4(2) Paper, the Fund's Trustees continuously determine, based on the trading
markets for the specific restricted security, that it is liquid). The Trustees
may adopt guidelines and delegate to the Manager the daily function of
determining and monitoring liquidity of restricted securities and 4(2) Paper.
The Trustees, however, will retain sufficient oversight and be ultimately
responsible for the determinations.
Since it is not possible to predict with assurance exactly how this market for
restricted securities sold and offered under Rule 144A will develop, the
Trustees will carefully monitor the Portfolios investments in these securities,
focusing on such factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Portfolios to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities.
7
<PAGE>
Description of Municipal Obligations (Municipal Portfolio)
(1) Municipal Bonds are debt obligations of states, cities, counties,
municipalities and municipal agencies (all of which are generally referred
to as "municipalities") which generally have a maturity at the time of
issue of one year or more and which are issued to raise funds for various
public purposes such as construction of a wide range of public facilities,
to refund outstanding obligations and to obtain funds for institutions and
facilities.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by
the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Issuers of general obligation bonds
include states, counties, cities, towns and other governmental units. The
principal of, and interest on, revenue bonds are payable from the income of
specific projects or authorizations and generally are not supported by the
issuer's general power to levy taxes. In some cases, revenues derived from
specific taxes are pledged to support payments on a revenue bond.
In addition, certain kinds of "private activity bonds" are issued by or on
behalf of public authorities to provide funding for various privately
operated industrial facilities (hereinafter referred to as "industrial
revenue bonds" or "IRBs"). Interest on the IRBs is generally exempt, with
certain exceptions, from federal income tax pursuant to Section 103(a) of
the Internal Revenue Code (the "Code"), provided the issuer and corporate
obligor thereof continue to meet certain conditions. (See "Tax
Consequences" in the Prospectuses and "Taxation of the Fund" herein.) IRBs
are, in most cases, revenue bonds and do not generally constitute the
pledge of the credit of the issuer of such bonds. The payment of the
principal and interest on IRBs usually depends solely on the ability of the
user of the facilities financed by the bonds or other guarantor to meet its
financial obligations and, in certain instances, the pledge of real and
personal property as security for payment. If there is not an established
secondary market for the IRBs, the IRBs will be supported by letters of
credit, guarantees, insurance or other credit facilities that meet the high
quality criteria of the Municipal Portfolio stated in the Prospectus and
provide a demand feature which may be exercised by the Portfolio to provide
liquidity. In accordance with the investment restrictions, the Municipal
Portfolio is permitted to invest up to 10% of the portfolio in high
quality, short-term Municipal Securities (including IRBs) that may not be
readily marketable or have a liquidity feature.
(2) The principal kinds of Municipal Notes include tax anticipation notes, bond
anticipation notes, revenue anticipation notes and grant anticipation
notes. Notes sold in anticipation of collection of taxes, a bond sale or
receipt of other revenues are usually general obligations of the issuing
municipality or agency.
(3) Issues of Municipal Commercial Paper typically represent very short term,
unsecured, negotiable promissory notes. These obligations are often issued
to meet seasonal working capital needs of municipalities or to provide
interim construction financing and are paid from general revenues of
municipalities or are refinanced with long term debt. In most cases
Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions which may be called upon in the
event of default by the issuer of the commercial paper.
(4) Municipal Leases, which may take the form of a lease or an installment
purchase or conditional sale contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications
equipment and other capital assets. Municipal Leases frequently have
special risks not normally associated with general obligation or revenue
bonds. Leases and installment purchases or conditional sale contracts
(which normally provide for title to the leased asset to pass eventually to
the government issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt-issuance
limitations of many state constitutions and statutes are deemed to be
inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has
no obligation to make future payments under the lease or contract unless
money is appropriated for such purpose by the appropriate legislative body
on a yearly or other
8
<PAGE>
periodic basis. These types of municipal leases may be considered illiquid
and subject to the 10% limitation of investment in illiquid securities set
forth under "Investment Restrictions" contained herein. The Board of
Trustees may adopt guidelines and delegate to the Manager the daily
function of determining and monitoring the liquidity of municipal leases.
In making such determination, the Board and the Manager may consider such
factors as the frequency of trades for the obligation, the number of
dealers willing to purchase or sell the obligations and the number of other
potential buyers and the nature of the marketplace for the obligations,
including the time needed to dispose of the obligations and the method of
soliciting offers. If the Board determines that any municipal leases are
illiquid, such leases will be subject to the 10% limitation on investments
in illiquid securities. The Board of Trustees is also responsible for
determining the credit quality of municipal leases, on an ongoing basis,
including an assessment of the likelihood that the lease will not be
canceled.
(5) The Fund expects that, on behalf of the Municipal Portfolio, it will not
invest more than 25% of each Portfolio's total assets in municipal
obligations whose issuers are located in the same state or more than 25% of
each Portfolio's total assets in municipal obligations the security of
which is derived from any one category. There could be economic, business
or political developments which might affect all municipal obligations of a
similar type. However, the Fund believes that the most important
consideration affecting risk is the quality of particular issues of
municipal obligations rather than factors affecting all, or broad classes
of, municipal obligations.
(6) When the Municipal Portfolio purchases Municipal Securities it may also
acquire stand-by commitments from banks and other financial institutions
with respect to such Municipal Securities. Under a stand-by commitment, a
bank or broker-dealer agrees to purchase at the Portfolio's option a
specified Municipal Securities at a specified price with same day
settlement. A stand-by commitment is the equivalent of a "put" option
acquired by the Portfolio with respect to a particular Municipal Securities
held in its portfolio.
Stand-By Commitments
The amount payable to the Municipal Portfolio upon its exercise of a stand-by
commitment normally would be (1) the acquisition cost of the Municipal
Securities (excluding any accrued interest that the Portfolio paid on the
acquisition), less any amortized market premium or plus any amortized market or
original issue discount during the period the Portfolio owned the security plus
(2) all interest accrued on the security since the last interest payment date
during the period the security was owned by the Portfolio. Absent unusual
circumstances relating to a change in market value, the Portfolio would value
the underlying Municipal Security at amortized cost. Accordingly, the amount
payable by a bank or dealer during the time a stand-by commitment is exercisable
would be substantially the same as the market value of the underlying Municipal
Security.
The Municipal Portfolio's right to exercise a stand-by commitment would be
unconditional and unqualified. A stand-by commitment would not be transferable
by the Portfolio, although it could sell the underlying Municipal Security to a
third party at any time.
The Manager expects that stand-by commitments generally will be available
without the payment of any direct or indirect consideration. However, if
necessary and advisable, the Portfolio may pay for stand-by commitments either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to such a commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by commitments held in the Portfolio would not
exceed 1/2 of 1% of the value of the Portfolio's total assets calculated
immediately after each stand-by commitment was acquired.
The Municipal Portfolio would enter into stand-by commitments only with banks
and other financial institutions that, in the Manager's opinion, present minimal
credit risks and where the issuer of the Municipal Obligation meets the
investment criteria of the Municipal Portfolio. The Municipal Portfolio's
reliance upon the credit of these banks and broker-dealers would be supported by
the value of the underlying Municipal Securities held by the Portfolio that were
subject to the commitment.
The Municipal Portfolio intends to acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The purpose of this practice is to permit the
Municipal Portfolio to be fully invested in securities the interest on which is
exempt from federal income taxes while preserving the necessary liquidity to
purchase securities on a when-issued basis, to meet unusually large redemptions
and to purchase at a later date securities other than those subject to the
stand-by commitment.
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<PAGE>
The acquisition of a stand-by commitment would not affect the valuation or
assumed maturity of the underlying Municipal Securities which will continue to
be valued in accordance with the amortized cost method. Stand-by commitments
acquired by the Municipal Portfolio would be valued at zero in determining net
asset value. In those cases in which the Portfolio paid directly or indirectly
for a stand-by commitment, its cost would be reflected as unrealized
depreciation for the period during which the commitment is held by the
Portfolio. Stand-by commitments would not affect the dollar weighted average
maturity of the Portfolio. The maturity of a security subject to a stand-by
commitment is longer than the stand-by repurchase date.
The stand-by commitments that the Municipal Portfolio may enter into are subject
to certain risks, which include the ability of the issuer of the commitment to
pay for the securities at the time the commitment is exercised, the fact that
the commitment is not marketable by the Portfolio, and that the maturity of the
underlying security will generally be different from that of the commitment.
In addition, the Municipal Portfolio may apply to the Internal Revenue Service
for a ruling, or seek from its counsel an opinion, that interest on Municipal
Obligations subject to stand-by commitments will be exempt from federal income
taxation (see "Tax Consequences" in the Prospectuses and "Taxation of the Fund"
herein). In the absence of a favorable tax ruling or opinion of counsel, the
Municipal Portfolio will not engage in the purchase of securities subject to
stand-by commitments.
Put Options
The Municipal Portfolio may purchase municipal bonds or notes with the right to
resell them at an agreed price or yield within a specified period prior to
maturity to facilitate portfolio liquidity. This right to resell is known as a
"put." The aggregate price paid for securities with puts may be higher than the
price which otherwise would be paid. Consistent with the investment objectives
of this Portfolio and subject to the supervision of the Trustees, the purpose of
this practice is to permit the Portfolio to be fully invested in tax exempt
securities while maintaining the necessary liquidity to purchase securities on a
when-issued basis, to meet unusually large redemptions and to purchase at a
later date securities other than those subject to the put. The principal risk of
puts is that the put writer may default on its obligation to repurchase. The
Manager will monitor each writer's ability to meet its obligations under puts.
See "Investment Restrictions" herein and "Tax Consequences" in the Prospectus.
The amortized cost method is used by the Money Market Portfolio and the
Municipal Portfolio to value any municipal securities; no value is assigned to
any puts on such municipal securities. The cost of any such put is carried as an
unrealized loss from the time of purchase until it is exercised or expires.
General
The Fund intends to continue qualify as a "regulated investment company" under
Subchapter M of the Code (the "Code"). For the Fund to qualify, at the close of
each quarter of the taxable year, at least 50% of the value of its total assets
must consist of cash, government securities, investment company securities and
other securities. They must be limited in respect of any one issuer to not more
than 5% in value of the total assets of the Fund and to not more than 10% of the
outstanding voting securities of such issuer. In addition, at the close of each
quarter of its taxable year, not more than 25% in value of the Fund's total
assets may be invested in securities of one issuer (however, this restriction
does not apply to the Fund's investing in Government securities). The
limitations described in this paragraph regarding qualification as a "regulated
investment company" are not fundamental policies and may be revised if
applicable Federal income tax requirements are revised. (See "Federal Income
Taxes" herein.)
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions which
apply to all Portfolios. They may not be changed unless approved by a majority
of the outstanding shares "of each series of the Fund's shares that would be
affected by such a change." The term "majority of the outstanding shares" of the
Fund means the vote of the lesser of (i) 67% or more of the shares of the Fund
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund. The Fund may not:
(a) invest in securities of companies that have conducted operations for less
than three years, including the operations of predecessors;
(b) invest in or hold securities of any issuer if officers and trustees of the
Fund or Reich & Tang Asset Management, Inc., the general partner of its
investment manager, individually own beneficially more than 1/2 of 1% of
the issuer's securities or in the aggregate own more than 5% of the
issuer's securities; and
10
<PAGE>
(c) (1) make investments for the purpose of exercising control over any issuer
or other person; (2) purchase securities having voting rights at the time
of purchase; (3) purchase securities of other investment companies, except
in connection with a merger, acquisition, consolidation or reorganization
involving the Fund; (4) invest in real estate (other than debt obligations
secured by real estate or interests therein or debt obligations issued by
companies which invest in real estate or interests therein), commodities,
commodity contracts, commodity options, interests in oil or gas or
interests in other mineral exploration or development programs; (5) invest
in commodities, commodity contracts, commodity options, interests and
leases in oil, gas or other mineral exploration or development programs (a
Fund may, however, purchase and sell securities of companies engaged in the
exploration, development, production, refining, transporting and marketing
of oil, gas or minerals); (6) purchase restricted securities or purchase
securities on margin; (7) make short sales of securities or intentionally
maintain a short position in any security or write, purchase or sell puts,
calls, straddles, spreads or any combination thereof; (8) act as an
underwriter of securities; (9) issue senior securities, except insofar as
the Fund may be deemed to have issued a senior security in connection with
any permitted borrowings; (10) acquire securities that are not readily
marketable or repurchase agreements calling for resale within more than
seven days if, as a result thereof, more than 10% of the value of its net
assets would be invested in such illiquid securities; (11) invest more than
5% of the total market value of any Portfolio's assets (determined at the
time of the proposed investment and giving effect thereto) in the
securities of any one issuer other than the United States Government, its
agencies or instrumentalities; (12) with respect to the U.S. Treasury
Portfolio and the Money Market Portfolio, invest more than 25% of the value
of the Portfolio's total assets in securities of companies in the same
industry (excluding United States government securities and, as to the
Money Market Portfolio only, certificates of deposit and bankers'
acceptances of domestic banks) and, with respect to the Municipal
Portfolio, purchase (i) pollution control and industrial revenue bonds or
(ii) securities which are not Municipal Obligations if in either case the
purchase would cause more than 25% of the value of the Portfolio's total
assets to be invested in companies in the same industry (for the purpose of
this restriction wholly-owned finance companies are considered to be in the
industry of their parents if their activities are similarly related to
financing the activities of their parents); (13) with respect to 75% of the
value of a Portfolio's total assets, the Fund may not invest more than 10%
of a Portfolio's assets in securities that are subject to underlying puts
from the same institution, and no single bank shall issue its letter of
credit and no single financial institution shall issue a credit enhancement
covering more than 10% of the total assets of the Fund. However, the
Portfolio may only invest more that 10% of its assets in securities subject
to puts from the same institution if such puts are issued by a
non-controlled person (as defined in the 1940 Act); (14) make loans, except
that the Fund may purchase for a Portfolio the debt securities described
above under "Description of the Fund and Its Investments and Risks " and
may enter into repurchase agreements as therein described; (15) borrow
money, unless (i) the borrowing does not exceed 10% of the total market
value of the assets of the Portfolio with respect to which the borrowing is
made (determined at the time of borrowing but without giving effect
thereto) and the money is borrowed from one or more banks as a temporary
measure for extraordinary or emergency purposes or to meet unexpectedly
heavy redemption requests and furthermore each Portfolio will not make
additional investments when borrowings exceed 5% of the value of a
Portfolio's net assets or (ii) with respect to the U.S. Treasury Portfolio,
otherwise provided herein and permissible under the 1940 Act; and (16)
pledge, mortgage, assign or encumber any of a Portfolio's assets except to
the extent necessary to secure a borrowing permitted by clause (13) made
with respect to the Portfolio.
In addition, the Fund may not, on behalf of the Portfolio or Portfolios
specified:
(d) with respect to the U.S. Treasury Portfolio and the Money Market Portfolio,
invest more than 25% of the value of the Portfolio's total assets in
securities of companies in the same industry (excluding U.S. Government
securities and, as to Money Market Portfolio only, certificates of deposit
and bankers' acceptances of domestic banks); and
(e) with respect to the Municipal Portfolio, purchase (i) pollution control and
industrial revenue bonds or (ii) securities which are not Municipal
Obligations, if in either case the purchase would cause more than 25% of
the value of the Portfolio's total assets to be invested in companies in
the same industry (for the purposes of this restriction wholly-owned
finance companies are considered to be in the industry of their parents if
their activities are primarily related to financing the activities of the
parents).
11
<PAGE>
If a percentage restriction is adhered to at the time of an investment a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of a Fund's portfolio's assets will not
constitute a violation of such restriction.
III. MANAGEMENT OF THE FUND
The Fund's Board of Trustees, which is responsible for the overall management
and supervision of the Fund, has employed the Manager to serve as investment
manager of the Fund. The Manager provides persons satisfactory to the Fund's
Board of Trustees to serve as officers of the Fund. Such officers, as well as
certain other employees and trustees of the Fund, may be trustees or officers of
Reich & Tang Asset Management, Inc., the sole general partner of the Manager or
employees of the Manager or its affiliates. Due to the services performed by the
Manager, the Fund currently has no employees and its officers are not required
to devote their full-time to the affairs of the Fund.
The Trustees and Officers of the Fund and their principal occupations during the
past five years are set forth below. Unless otherwise specified, the address of
each of the following persons is 600 Fifth Avenue, New York, New York 10020. Mr.
Duff may be deemed an "interested person" of the Fund, as defined in the 1940
Act, on the basis of his affiliation with Reich & Tang Asset Management L.P.
Steven W. Duff, 45 - President and Trustee of the Fund, has been President of
the Mutual Funds Division of the Manager since September 1994. Mr. Duff was
formerly Director of Mutual Fund Administration at NationsBank which he was
associated with from June 1981 to August 1994. Mr. Duff is also President and a
Director/Trustee of 13 other funds in the Reich & Tang Fund Complex, Director of
Pax World Money Market Fund, Inc., Executive Vice President of Reich & Tang
Equity Fund, Inc., President of Back Bay Funds, Inc., and President and Chief
Executive Officer of Tax Exempt Proceeds Fund, Inc.
Dr. W. Giles Mellon, 68 - Trustee of the Fund, has been Professor of Business
Administration in the Graduate School of Management, Rutgers University since
1966. His address is Rutgers University Graduate School of Management, 92 New
Street, Newark, New Jersey 07102. Dr. Mellon is a Director/Trustee of 15 other
funds in the Reich & Tang Fund Complex.
Robert Straniere, 58 - Trustee of the Fund, has been a member of the New York
State Assembly and a partner with The Straniere Law Firm since 1981. His address
is 182 Rose Avenue, Staten Island, New York 10306. Mr. Straniere is also a
Director/Trustee of 15 other funds in the Reich & Tang Fund Complex, and a
Director of Life Cycle Mutual Funds, Inc.
Dr. Yung Wong, 60 - Trustee of the Fund, was Director of Shaw Investment
Management (UK) Limited from 1994 to October 1995 and formerly General Partner
of Abacus Partners Limited Partnership (a general partner of a venture capital
investment firm) from 1984 to 1994. His address is 29 Alden Road, Greenwich,
Connecticut 06831. Dr. Wong has been a Director of Republic Telecom Systems
Corporation (a provider of telecommunications equipment) since January 1989 and
of TelWatch, Inc. (a provider of network management software) since August 1989.
Dr. Wong is also a Director/Trustee of 15 other funds in the Reich & Tang Fund
Complex. Dr. Wong is also a Trustee of Eclipse Financial Asset Trust.
Molly Flewharty, 48 - Vice President of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. which she was associated with from
December 1977 to September 1993. Ms. Flewharty is also Vice President of 18
other funds in the Reich & Tang Fund Complex.
Lesley M. Jones, 51 - Vice President of the Fund, has been Senior Vice President
of the Mutual Funds Division of the Manager since September 1993. Ms. Jones was
formerly Senior Vice President of Reich & Tang, Inc. which she was associated
with from April 1973 to September 1993. Ms. Jones is also a Vice President of 14
other funds in the Reich & Tang Fund Complex.
Dana E. Messina, 42 - Vice President of the Fund, has been Executive Vice
President of the Mutual Funds Division of the Manager since January 1995 and was
Vice President from September 1993 to January 1995. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. with which she was associated with from
December 1980 to September 1993. Ms. Messina is also Vice President of 15 other
funds in the Reich & Tang Fund Complex.
Bernadette N. Finn, 51 - Vice President and Secretary of the Fund, has been Vice
President of the Mutual Funds Division of the Manager since September 1993. Ms.
Finn was formerly Vice President and Assistant Secretary of
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<PAGE>
Reich & Tang, Inc. which she was associated with from September 1970 to
September 1993. Ms. Finn is also Vice President and Secretary of 4 other funds,
and a Secretary of 15 additional funds in the Reich & Tang Fund Complex.
Richard De Sanctis, 42 - Treasurer of the Fund, has been Assistant Treasurer of
NEIC since September 1993. Mr. De Sanctis was formerly Controller of Reich &
Tang, Inc., from January 1991 to September 1993 and Vice President and Treasurer
of Cortland Financial Group, Inc. and Vice President of Cortland Distributors,
Inc. from 1989 to December 1990. Mr. De Sanctis is also Treasurer of 17 other
funds in the Reich & Tang Fund Complex, and is Vice President and Treasurer of
Cortland Trust, Inc.
Rosanne Holtzer, 35 - Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly Manager of Fund Accounting for the Manager with which she has been
associated with from June 1986. Ms. Holtzer is also Assistant Treasurer of 18
other funds in the Reich & Tang Fund Complex.
The Fund paid an aggregate remuneration of $12,000 to its trustees with respect
to the period ended March 31, 1999, all of which consisted of trustees' fees
paid to the three disinterested trustees, pursuant to the terms of the
Investment Management Contract (see "Investment Advisory and Other Services"
herein).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COMPENSATION TABLE
Name of Person, Aggregate Pension or Retirement Estimated Annual Total Compensation from
Position Compensation from Benefits Accrued as Benefits upon Fund and Fund Complex
the Fund Part of Fund Expenses Retirement Paid to Trustees*
W. Giles Mellon,
Director $4,000 0 0 $59,000 (16 Funds)
Robert Straniere,
Director $4,000 0 0 $59,000 (16 Funds)
Yung Wong,
Director $4,000 0 0 $59,000 (16 Funds)
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending March 31, 1999. The parenthetical number represents the
number of investment companies (including the Fund) from which such person
receives compensation that are considered part of the same Fund complex as the
Fund, because, among other things, they have a common investment advisor.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On June 30, 1999 there were 226,717,538 Class A shares outstanding in the Money
Market Portfolio, 259,520,105 Class B shares outstanding in the Money Market
Portfolio, 613,811,741 Class A shares outstanding in the U.S. Treasury Portfolio
and 83,985,762 Class B shares outstanding in the U.S. Treasury Portfolio. On
June 30, 1999, there were no Pinnacle Class shares outstanding in any of the
Portfolios.
As of June 30, 1999, the amount of shares owned by all officers and trustees of
the Fund, as a group, was less than 1% of the outstanding shares. Set forth
below is certain information as to persons who owned 5% or more of the Fund's
outstanding shares as of June 30, 1999:
Name and Address % of Class Nature of Ownership
Money Market Portfolio - Class A
Hambrecht and Quist 78.53% Record
34 Exchange Place
Jersey City, NJ 07311-3988
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<PAGE>
Lewco Securities 6.70% Record
34 Exchange Place
Jersey City, NJ 07311-3988
Money Market Portfolio - Class B
NFSC, as Agent for the Exclusive Benefit of 56.00% Record
Customers Pinnacle Shares of Institutional
Daily Income Fund
200 Liberty Street
New York, NY 10281
Attn: Mike McLaughlin
U.S. Treasury Portfolio - Class A
Neuberger & Berman 89.45% Record
as Agent for Customer
55 Water Street
New York, NY 10041
Attn: Steve Gallaro
U.S. Treasury Portfolio - Class B
Neuberger & Berman 70.07% Record
as Agent for Customer
55 Water Street
New York, NY 10041
Attn: Steve Gallaro
NFSC, as Agent for the Exclusive Benefit of 26.65% Record
Customers Pinnacle Shares of Institutional
Daily Income Fund
200 Liberty Street
New York, NY 10281
Attn: Mike McLaughlin
V. INVESTMENT ADVISORY AND OTHER SERVICES
The Investment Manager for the Fund is Reich & Tang Asset Management L.P., a
Delaware limited partnership with principal offices at 600 Fifth Avenue, New
York, New York 10020. The Manager was as of June 30, 1999, investment manager,
adviser, or supervisor with respect to assets aggregating in excess of $13.6
billion. In addition to the Fund, the Manager acts as investment manager and
administrator of eighteen other investment companies and also advises pension
trusts, profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager due to a restructuring by New England Investment
Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998, Nvest
Companies, L.P. ("Nvest Companies") due to a change in name of NEICOP, replaces
NEICOP as the limited partner and owner of a 99.5% interest in the Manager.
Reich & Tang Asset Management, Inc. (an indirect wholly-owned subsidiary of
Nvest Companies) is the sole general partner and owner of the remaining 0.5%
interest of the Manager. Nvest Corporation, a Massachusetts Corporation
(formerly known as New England Investment Companies, Inc.), serves as the
managing general partner of Nvest Companies.
14
<PAGE>
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
MetLife is a mutual life insurance company and is the second largest life
insurance company in the United States in terms of total assets. MetLife
provides a wide range of insurance and investment products and services to
individuals and groups and is the leader among United States life insurance
companies in terms of total life insurance in force. MetLife and its affiliates
provide insurance or other financial services to approximately 36 million people
worldwide.
Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through more than seventeen
subsidiaries, divisions and affiliates offering a wide array of investment
styles and products to institutional clients. Its business units, in addition to
the manager, include AEW Capital Management, L.P., Back Bay Advisors, L.P.,
Capital Growth Management L.P., Greystone Partners; L.P., Harris Associates,
L.P., Jurika & Voyles, L.P., Kobrick Funds, LLC, Loomis, Sayles & Company, L.P.,
New England Funds, L.P., Nvest Advisor Services, L.P., Nvest Associates, Inc.,
Nvest Retirement Services, Nvest Services Company, Snyder Capital Management,
L.P., Vaughan, Nelson, Scarborough & McCullough, L.P., and Westpeak Investment
Advisors, L.P. These affiliates in the aggregate are investment advisors or
managers of more than 80 other registered investment companies.
The recent name change did not result in a change of control of the Manager and
has no impact upon the Manager's performance of its responsibilities and
obligations.
On January 21, 1999, the Board of Trustees, including a majority of the trustees
who are not interested persons (as defined in the 1940 Act) of the Fund or the
Manager, approved the continuance of the Investment Management Contract
effective April 1, 1999, which has a term which extends to March 31, 2000. The
contract is continued in force thereafter for successive twelve-month periods
beginning each April 1, provided that such majority vote of the Fund's
outstanding voting securities or by a majority of the trustees who are not
parties to the Investment Management Contract or interested persons of any such
party, by votes cast in person at a meeting called for the purpose of voting on
such matter.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Trustees of
the Fund.
The Manager provides persons satisfactory to the Board of Trustees of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and trustees of the Fund, may be trustees or officers of NEIC, the
sole general partner of the Manager, or employees of the Manager or its
affiliates.
The Investment Management Contract is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Trustees,
or by the Manager on sixty days written notice, and will automatically terminate
in the event of its assignment. The Investment Management Contract provides that
in the absence of willful misfeasance, bad faith or gross negligence on the part
of the Manager, or of reckless disregard of its obligations thereunder, the
Manager shall not be liable for any action or failure to act in accordance with
its duties thereunder.
Under the Investment Management Contract each of the Portfolios will pay an
annual management fee of .12% of such Portfolios average daily net assets. The
Manager, at its discretion, may voluntarily waive all or a portion of the
management fee. 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 and for distribution of Fund shares. For the Fund's fiscal
year ended March 31, 1999 the Manager received investment management fees
totaling $472,729, of which $90,521 was waived, from the Money Market Portfolio
and $809,496, of which $126,559 was waived, from the U.S. Treasury Portfolio.
For the Fund's fiscal year ended March 31, 1998 the Manager received investment
management fees totaling $348,323, of which $115,985 was waived, from the Money
Market Portfolio and $468,085, of which $156,029 was waived, from the U.S.
Treasury Portfolio. For the Fund's fiscal year ended March 31, 1997 the Manager
received investment management fees totaling $175,379, of which $92,518 was
waived, from the Money Market Portfolio and $302,799, of which $68,224 was
waived, from the U.S. Treasury Portfolio.
Pursuant to an 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
15
<PAGE>
the performance of bookkeeping 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, 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 an annual fee of .05% of each Portfolio's average
daily net assets. For the Fund's fiscal year ended March 31, 1999, the Manager
received administration fees in the aggregate of $196,971, of which $118,182 was
waived, from the Money Market Portfolio and $337,290, of which $170,996 was
waived, from the U.S. Treasury Portfolio. For the Fund's fiscal year ended March
31, 1998, the Manager received administration fees in the aggregate of $145,134,
of which $87,081 was waived, from the Money Market Portfolio and $195,035, of
which $117,021 was waived, from the U.S. Treasury Portfolio. For the Fund's
fiscal year ended March 31, 1997 the Manager received administration fees in the
aggregate of $82,861, of which $49,717 was waived, from the Money Market
Portfolio and $146,609, of which $87,965 was waived, from the U.S. Treasury
Portfolio.
The Manager at its discretion may waive its rights to any portion of the
management fee or the administrative services fee and may use any portion of the
management fee for purposes of shareholder and administrative services and
distribution of the Fund's shares. There can be no assurance that such fees will
be waived in the future.
Investment management fees and operating expenses which are attributable to all
Classes of a Portfolio will be allocated daily to each Class based on the
percentage of outstanding shares at the end of the day. Additional shareholder
services provided by Participating Organizations to Class A shareholders
pursuant to the Plan shall be compensated by the Distributor from its
shareholder servicing fee, the Manager from its management fee. Expenses
incurred in the distribution of Class B shares and the servicing of Class B
shares shall be paid by the Manager.
Expense Limitation
The Manager has agreed, pursuant to the Investment Management Contract, to
reimburse the Fund for its expenses (exclusive of interest, taxes, brokerage and
extraordinary expenses) that in any year exceed the limits on investment company
expenses prescribed by any state in which the Fund's shares are qualified for
sale. For the purpose of this obligation to reimburse expenses, the Fund's
annual expenses are estimated and accrued daily, and any appropriate estimated
payments are made to it on a monthly basis. Subject to the obligations of the
Manager to reimburse the Fund for its excess expenses as described above, the
Fund has, under the Investment Management Contract, confirmed its obligation for
payment of all its other expenses. This includes all operating expenses, taxes,
brokerage fees and commissions, commitment fees, certain insurance premiums,
interest charges and expenses of the custodian, transfer agent and dividend
disbursing agent's fees, telecommunications expenses, auditing and legal
expenses, bookkeeping agent fees, costs of forming the corporation and
maintaining corporate existence, compensation of trustees, officers and
employees of the Fund and costs of other personnel performing services for the
Fund who are not officers of the Manager or its affiliates, costs of investor
services, shareholders' reports and corporate meetings, SEC registration fees
and expenses, state securities laws registration fees and expenses, expenses of
preparing and printing the Fund's prospectus for delivery to existing
shareholders and of printing application forms for shareholder accounts, and the
fees and reimbursements payable to the Manager under the Investment Management
Contract and the Distributor under the Shareholder Servicing Agreement.
The Fund may from time to time hire its own employees or contract to have
management services performed by third parties (including Participating
Organizations) as discussed herein. The management of the Fund intends to do so
whenever it appears advantageous to the Fund. The Fund's expenses for employees
and for such services are among the expenses subject to the expense limitation
described above.
Distribution And Service Plan
The Fund's distributor is Reich & Tang Distributors, Inc. (the "Distributor"), a
Delaware corporation with principal officers at 600 Fifth Avenue, New York, New
York 10020. Pursuant to Rule 12b-1 under the 1940 Act, the SEC has required that
an investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Fund's Board of Trustees has adopted a distribution and service plan (the
"Plan") and, pursuant to the Plan, the Fund has entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to Class A shares
only) with the Distributor, as distributor of the Fund's shares.
Under the Plan, the Fund and the Distributor will enter into a Shareholder
Servicing Agreement with respect to the Class A shares. Under the Shareholder
Servicing Agreement, the Distributor receives from each Portfolio a Service
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Fee equal to .25% per annum of the Fund's Class A shares average daily net
assets (the "Service Fee"). The service fee is in exchange for providing
personal shareholder services and for the maintenance of shareholder accounts.
The Service Fee is accrued daily and paid monthly and any portion of the Service
Fee may be deemed to be used by the Distributor for payments to Participating
Organizations with respect to servicing their clients or customers who are
shareholders of the Fund. The Class B shareholders will not receive the benefit
of such services from Participating Organizations and, therefore, will not be
assessed a Service Fee.
The following information applies only to the Class A shares of the Portfolios.
For the fiscal year ended March 31,1999, the Fund paid a Service Fee for
expenditures pursuant to the Plan in amounts aggregating $398,230 with respect
to the Money Market Portfolio and $1,577,248 with respect to the U.S. Treasury
Portfolio. During such period, the Manager and Distributor made payments
pursuant to the Plan to or on behalf of Participating Organizations of $380,871
with respect to the Money Market Portfolio and $1,482,619 with respect to the
U.S. Treasury Portfolio. Of the payments made pursuant to the Plan by the Fund,
the Money Market Portfolio, $0 spent on advertising, $4,359 on printing and
mailing of prospectuses to other than current shareholders, $0 on compensation
to underwriters, $0 on compensation to broker-dealers, $20,751 on compensation
to sales personnel, and $0 on interest, carrying or other financial charges. Of
the payments made pursuant to the Plan by the Fund, the U.S. Treasury Portfolio,
$0 on advertising, $10,611 on printing and mailing of prospectuses to other than
current shareholders, $0 on compensation to underwriters, $0 on compensation to
broker-dealers, $10,795 on compensation to sales personnel, and $0 on interest,
carrying or other financial charges. The excess of such payments over the total
payments the Distributor received from the Fund represents distribution and
servicing expenses funded by the Distributor from its own resources, or the
Manager from its own resources (which may be deemed to be an indirect payment by
the Fund). For the fiscal year ended March 31, 1999, the total amount spent
pursuant to the Distribution Plan for the Class A shares for the U.S. Treasury
Portfolio and the Money Market Portfolio were .24% and .25%, respectively, of
the average daily net assets of the Class A shares of the particular Portfolio,
all of which was paid by the Fund to the Distributor.
Under the Distribution Agreement, the Distributor, for nominal consideration
(i.e., $1.00) and as agent for the Fund, will solicit orders for the purchase of
the Fund's shares, provided that any subscriptions and orders will not be
binding on the Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that the Distributor
will pay for (i) telecommunications expenses, including the cost of dedicated
lines and CRT terminals, incurred by the Participating Organizations and
Distributor in carrying out their obligations under the Shareholder Servicing
Agreement with respect to the Class A shares and (ii) preparing, printing and
delivering the Fund's prospectus to existing shareholders of the Fund and
preparing and printing subscription application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from
their own resources, which may include the management fee, and past profits for
the following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements for performing shareholder servicing and related
administrative functions on behalf of the Class A shares of the Fund; (ii) to
compensate certain Participating Organizations for providing assistance in
distributing the Fund's shares; and (iii) to pay the costs of printing and
distributing the Fund's prospectus to prospective investors, and to defray the
cost of the preparation and printing of brochures and other promotional
materials, mailings to prospective shareholders, advertising, and other
promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Service Fee with respect to Class A shares 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 or the Distributor for any fiscal year under the Investment Management
Contract or the Shareholder Servicing Agreement in effect for that year.
In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Trustees. In addition, the Plan requires the
Fund and the Distributor to prepare, at least quarterly, written reports setting
forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
The Plan provides that it will remain in effect until December 31, 1999.
Thereafter it may continue in effect for successive annual periods commencing
January 1, provided it is approved by the Class A shareholders or by the Board
of Trustees. This includes a majority of trustees who are not interested persons
of the Fund and who have no
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direct or indirect interest in the operation of the Plan or in the agreements
related to the Plan. The Plan further provides that it may not be amended to
increase materially the costs which may be spent by the Fund for distribution
pursuant to the Plan without Class A shareholder approval, and the other
material amendments must be approved by the trustees in the manner described in
the preceding sentence. The Plan may be terminated at any time by a vote of a
majority of the disinterested trustees of the Fund or the Fund's Class A
shareholders.
Custodian And Transfer Agent
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities. Reich & Tang Services,
Inc., an affiliate of the Fund's Manager, located at 600 Fifth Avenue, New York,
NY 10020, is transfer agent and dividend agent for the shares of the Fund. The
custodian and transfer agent do not assist in, and are not responsible for,
investment decisions involving assets of the Fund.
Counsel and Auditors
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Battle Fowler LLP, 75 East 55th Street, New York, New York 10022.
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, have been selected as auditors for the Fund.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its formation.
Any transaction for which the Fund pays a brokerage commission will be effected
at the best price and execution available. Thus, the Fund will select a broker
for such a transaction based upon which broker can effect the trade at the best
price and execution available. Purchases from underwriters of portfolio
securities include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price. The Fund purchases participation
certificates in variable rate Municipal Obligations with a demand feature from
banks or other financial institutions at a negotiated yield to the Fund based on
the applicable interest rate adjustment index for the security. The interest
received by the Fund is net of a fee charged by the issuing institution for
servicing the underlying obligation and issuing the participation certificate,
letter of credit, guarantee or insurance and providing the demand repurchase
feature.
Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed in the
best interest of shareholders of the Fund rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price. No preference in purchasing portfolio securities will
be given to banks or dealers that are Participating Organizations.
Investment decisions for the Fund will be made independently from those for any
other investment companies or accounts that may be or become managed by the
Manager or its affiliates. If, however, the Fund and other investment companies
or accounts managed by the Manager are simultaneously engaged in the purchase or
sale of the same security, the transactions may be averaged as to price and
allocated equitably to each account. In some cases, this policy might adversely
affect the price paid or received by the Fund or the size of the position
obtainable for the Fund. In addition, when purchases or sales of the same
security for the Fund and for other investment companies managed by the Manager
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantage available to large denomination purchasers or
sellers.
No portfolio transactions are executed with the Manager or its affiliates acting
as principal. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Manager or its affiliates.
VII. CAPITAL STOCK AND OTHER SECURITIES
The authorized capital stock of the Fund consists of ten billion shares of stock
having a par value of one tenth of one cent ($.001) per share. The Fund's Board
of Trustees is authorized to divide the shares into separate series of stock,
one for each of the Portfolios that may be created. Except as noted below, 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
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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.
Each series of the Fund is subdivided into three classes of common stock, Class
A, Class B and Pinnacle Class. Each share, regardless of class, will represent
an interest in the same portfolio of investments and will have identical voting,
dividend, liquidation and other rights, preferences, powers, restrictions,
limitations, qualifications, designations and terms and conditions, except that:
(i) the Class A, Class B and Pinnacle Class shares will have different class
designations; (ii) only the Class A shares will be assessed a service fee
pursuant to the Rule 12b-1 Distribution and Service Plan of the Fund of .25% of
the Class A shares' average daily net assets; (iii) only the holders of the
Class A shares will be entitled to vote on matters pertaining to the Plan and
any related agreements in accordance with provisions of Rule 12b-1; and (iv) the
exchange privilege will permit stockholders to exchange their shares only for
shares of the same class of any other Portfolio of the Fund. Payments that are
made under the Plan will be calculated and charged daily to the appropriate
class prior to determining daily net asset value per share and
dividends/distributions.
Under its amended Articles of Incorporation, the Fund has the right to redeem
for cash shares of stock owned by any shareholder to the extent and at such
times as the Fund's Board of Trustees 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
trustees can elect 100% of the trustees if the holders choose to do so. In that
event, the holders of the remaining shares will not be able to elect any person
or persons to the Board of Trustees. Unless specifically requested by an
investor, the Fund will not issue certificates evidencing Fund shares.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
or special meetings only (i) for the election (or re-election) of trustees, (ii)
for approval of the revised investment advisory contracts with respect to a
particular class or series of stock, (iii) for approval of the Fund's
distribution agreement with respect to a particular class or series of stock,
and (iv) upon the written request of shareholders entitled to cast not less than
25% of all the votes entitled to be cast at such meeting. Annual and other
meetings may be required with respect to such additional matters relating to the
Fund as may be required by the 1940 Act, including the removal of Fund
director(s) and communication among shareholders, any registration of the Fund
with the SEC or any state, or as the Trustees may consider necessary or
desirable. Each Trustee serves until his successor is elected or qualified, or
until such Trustee sooner dies, resigns, retires or is removed by the vote of
the shareholders.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
The material relating to the purchase and redemption of shares in each
prospectus for each class of shares offered is hereby incorporated by reference.
Net Asset Value
The Fund does not determine net asset value per share of each Class on any day
in which the New York Stock Exchange is closed for trading. Those days include:
New Year's Day, Martin Luther King Jr Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The net asset value of each portfolio of the Fund's shares is determined as of
2:30 p.m., New York City time, on each Fund Business Day. The net asset value of
a Class is computed by dividing the value of the Fund's net assets for such
Class (i.e., the value of its securities and other assets less its liabilities,
including expenses payable or accrued but excluding capital stock and surplus)
by the total number of shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. If fluctuating interest
rates cause the market value of the Fund's portfolio to deviate more than 1/2 of
1% from the value determined on the basis of amortized cost, the Board of
Trustees will consider whether any action should be initiated, as described in
the following paragraph.
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Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
The Fund's Board of Trustees has established procedures to stabilize the Fund's
net asset value at $1.00 per share of each Class. These procedures include a
review of the extent of any deviation of net asset value per share, based on
available market rates, from the Fund's $1.00 amortized cost per share of each
Class. Should that deviation exceed 1/2 of 1%, the Board will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redemption of shares in
kind, selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument with a
remaining maturity greater than 397 days, will limit portfolio investments,
including repurchase agreements, to those United States dollar-denominated
instruments that the Fund's Board of Trustees determines present minimal credit
risks, and will comply with certain reporting and record keeping procedures. The
Fund has also established procedures to ensure compliance with the requirement
that portfolio securities are Eligible Securities.
IX. TAXATION OF THE FUND
Taxes
The Fund intends, for each Portfolio, to qualify and elect to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). To qualify as a regulated investment company, the Fund must
distribute to shareholders at least 90% of its investment company taxable income
(which includes, among other items, dividends, taxable interest and the excess
of net short-term capital gains over net long-term capital losses), and meet
certain diversification of assets, source of income, and other requirements of
the Code. By meeting these requirements, the Fund generally will not be subject
to Federal income tax on its investment company taxable income distributed to
shareholders or on its net capital gains (the excess of net long-term capital
gains over net short-term capital losses) designated by the Fund as capital gain
dividends and distributed to shareholders. If the Fund does not meet all of
these Code requirements, it will be taxed as an ordinary corporation and its
distributions will generally be taxed to shareholders as ordinary income. In
determining the amount of net capital gains to be distributed, any capital loss
carryover from prior years will be applied against capital gains to reduce the
amount of distributions paid.
Amounts, other than tax-exempt interest, not distributed on a timely basis in
accordance with a calendar year distribution requirement may be subject to a
nondeductible 4% excise tax. To prevent imposition of the excise tax, the Fund
must distribute for the calendar year an amount equal to the sum of (1) at least
98% of its ordinary income (excluding any capital gains or losses) for the
calendar year, (2) at least 98% of the excess of its capital gains over capital
losses (adjusted for certain losses) for the one-year period ending October 31
of such year, and (3) all ordinary income and capital gain net income (adjusted
for certain ordinary losses) for previous years that were not distributed during
such years.
Generally, on the sale or exchange of obligations held for more than one year,
gain realized by the Fund that is not attributable to accrued market discount
will be long-term capital gain. However, gain on the disposition of a bond
purchased at a market discount generally will be treated as ordinary income
rather than capital gain, to the extent of the accrued market discount.
Distributions of investment company taxable income generally are taxable to
shareholders as ordinary income. Distributions from the Fund are not eligible
for the dividends-received deduction available to corporations. Distributions of
net capital gains, if any, designated by the Fund as capital gain dividends are
taxable to shareholders as long-term capital gains, regardless of the length of
time the Fund's shares have been held by the shareholder. All distributions are
taxable to the shareholder whether reinvested in additional shares or received
in cash. Shareholders will be notified annually as to the Federal tax status of
distributions.
Upon the taxable disposition (including a sale or redemption) of shares of the
Fund, a shareholder may realize a gain or loss, depending upon its basis in the
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands, and will be long-term or
short-term, generally depending upon the shareholder's holding period for the
shares. Non-corporate shareholders are subject to tax at a maximum rate of 20%
on capital gains resulting from the disposition of shares held for more than 12
months. A loss realized by a shareholder on the disposition of Fund shares with
respect to which capital gains dividends have been paid will, to the extent of
such capital gain dividends, also be treated as long-term capital loss if such
shares have been held by
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the shareholder for six months or less.
Income received by the Fund from sources within foreign countries may be subject
to withholding and other similar income taxes imposed by the foreign country,
which may decrease the net return on foreign investments as compared to
dividends and interest paid by domestic issuers. The Fund does not expect to be
eligible to elect to allow shareholders to claim such foreign taxes as a credit
against their U.S. tax liability.
The Fund is required to report to the Internal Revenue Service ("IRS") all
distributions to shareholders except in the case of certain exempt shareholders.
Distributions by the Fund (other than distributions to exempt shareholders) are
generally subject to back up withholding of Federal income tax at a rate of 31%
if (1) the shareholder fails to furnish the Fund with and to certify the
shareholder's correct taxpayer identification number or social security number,
(2) the IRS notifies the Fund or a shareholder that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. If the withholding provisions are applicable, distributions
(whether requested to be reinvested in additional shares or taken in cash) will
be reduced by the amounts required to be withheld.
The foregoing discussion relates only to Federal income tax law as applicable to
U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by the Fund also may be subject
to state and local taxes, and the treatment of distributions under state and
local income tax laws may differ from the Federal income tax treatment.
Shareholders should consult their tax advisors with respect to particular
questions of Federal, state and local taxation. Shareholders who are not U.S.
persons should consult their tax advisors regarding U.S. foreign tax
consequences of ownership of shares of the Fund, including the likelihood that
distributions to them would be subject to withholding of U.S. tax at a rate of
30% (or at a lower rate under a tax treaty).
Distributions from the United States Government Portfolio that are derived from
interest on certain obligations of the United States Government and agencies
thereof may be exempt from state and local taxes in certain states. Investors
should consult their own tax advisors regarding specific questions as to
Federal, state or local taxes.
X. UNDERWRITERS
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a sales charge. The Distributor does not receive an
underwriting commission. In effecting sales of Fund shares under the
Distribution Agreement, the Distributor, for nominal consideration (i.e., $1.00)
and as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
The Glass-Steagall Act and other applicable laws and regulations prohibit banks
and other depository institutions from engaging in the business of underwriting,
selling or distributing most types of securities. In the opinion of the Manager,
however, based on the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing other services for
investment companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of Trustees will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution would result in loss to shareholders or change
in the Fund's net asset value. In addition, state securities laws on this issue
may differ from the interpretations of Federal law expressed herein and banks
and financial institutions may be required to register ad dealers pursuant to
state law.
XI. CALCULATION OF PERFORMANCE DATA
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The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the SEC. Under that method, the Fund's portfolios'
yield figures, which are based on a chosen seven-day period, are computed as
follows: the portfolio's return for the seven-day period is obtained by dividing
the net change in the value of a hypothetical account having a balance of one
share at the beginning of the period by the value of such account at the
beginning of the period (expected to always be $1.00). This is multiplied by
(365/7) with the resulting annualized figure carried to the nearest hundredth of
one percent. For purposes of the foregoing computation, the determination of the
net change in account value during the seven-day period reflects (i) dividends
declared on the original share and on any additional shares, including the value
of any additional shares purchased with dividends paid on the original share,
and (ii) fees charged to all shareholder accounts. Realized capital gains or
losses and unrealized appreciation or depreciation of the Fund's portfolio
securities are not included in the computation. Therefore annualized yields may
be different from effective yields quoted for the same period.
The portfolio's "effective yield" for each Class is obtained by adjusting its
"current yield" to give effect to the compounding nature of the Fund's
portfolio, as follows: the unannualized base period return is compounded and
brought out to the nearest one hundredth of one percent by adding one to the
base period return, raising the sum to a power equal to 365 divided by 7, and
subtracting one from the result, i.e., effective yield = [(base period return +
1)365/7] - 1.
Although published yield information is useful to investors in reviewing the
Fund's portfolios' performance, investors should be aware that the Fund's
portfolios' yields fluctuate from day to day. The Fund's portfolios' yields for
any given period are not an indication, or representation by the Fund, of future
yields or rates of return on the Fund's shares, and may not provide a basis for
comparison with bank deposits or other investments that pay a fixed yield for a
stated period of time. Investors who purchase the Fund's shares directly may
realize a higher yield than Participant Investors because they will not be
subject to any fees or charges that may be imposed by Participating
Organizations.
The Fund may from time to time advertise its portfolios' tax equivalent current
yield. The tax equivalent yield for each Class is computed based upon a 30-day
(or one month) period ended on the date of the most recent balance sheet
included in this Statement of Additional Information. It is computed by dividing
that portion of the yield of the Fund (as computed pursuant to the formulae
previously discussed) which is tax exempt by one minus a stated income tax rate
and adding the quotient to that portion, if any, of the yield of the Fund that
is not tax exempt. The tax equivalent yield for the Fund may also fluctuate
daily and does not provide a basis for determining future yields.
The Fund may from time to time advertise a tax equivalent effective yield table
which shows the yield that an investor would need to receive from a taxable
investment in order to equal a tax-free yield from the Fund. This is calculated
by dividing that portion of the Fund's effective yield that is tax-exempt by 1
minus a stated income tax rate and adding the quotient to that portion, if any,
of the Fund's effective yield that is not tax-exempt.
The Fund's Money Market Portfolio's Class A shares' yield for the seven day
period ended March 31, 1999 was 4.56% which is equivalent to an effective yield
of 4.66%. The Fund's U.S. Treasury Portfolio's Class A shares' yield for the
seven day period ended March 31, 1999 was 4.40% which is equivalent to an
effective yield of 4.50%.
The Fund's Money Market Portfolio's Class B shares' yield for the seven day
period ended March 31, 1999 was 4.81% which is equivalent to an effective yield
of 4.92%. The Fund's U.S. Treasury Portfolio's Class B shares' yield for the
seven day period ended March 31, 1999 was 4.65% which is equivalent to an
effective yield of 4.76%.
There is no seven day yield available for the Pinnacle Class since there were no
Pinnacle shares issued as of March 31, 1999.
XII. FINANCIAL STATEMENTS
The audited financial statements for the Fund for the fiscal year ended March
31, 1999 and the report therein of McGladrey & Pullen, LLP, are herein
incorporated by reference to the Fund's Annual Report. The Annual Report is
available upon request and without charge.
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DESCRIPTION OF RATINGS*
Description of Moody's Investors Service, Inc.'s Two Highest Municipal Bond
Ratings:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Con. ( c ) Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These are bonds
secured by (i) earnings of projects under construction, (ii) earnings of
projects unseasoned in operating experience, (iii) rentals which begin when
facilities are completed, or (iv) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Description of Moody's Investors Service, Inc.'s Two Highest Ratings of State
and Municipal Notes and Other Short-Term Loans:
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Symbols used will be as follows:
MIG-1: Loans bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2: Loans bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
Description of Standard & Poor's Rating Services Two Highest Debt Ratings:
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only to a small degree.
Plus ( + ) or Minus ( - ): The AA rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Standard & Poor's does not provide ratings for state and municipal notes.
Description of Standard & Poor's Rating Services Two Highest Commercial Paper
Ratings:
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Description of Moody's Investors Service, Inc.'s Two Highest Commercial Paper
Ratings:
Moody's employs the following designations, both judged to be investment grade,
to indicate the relative repayment capacity of rated issues: Prime-1, highest
quality; Prime-2, higher quality.
* As described by the rating agencies.
23
<PAGE>
PART C - OTHER INFORMATION
Item 23. Exhibits.
(a) Declaration of Trust of the Registrant. (originally filed as Exhibit 1
to Pre-Effective Amendment No. 1 to Registration Statement, and
re-filed herein for EDGAR purposes only).
(b) By-Laws of the Registrant (originally filed as Exhibit 2 to
Pre-Effective Amendment No. 1 to Registration Statement, and re-filed
herein for EDGAR purposes only).
(c) Not applicable.
* (d) Form of Investment Management Contract between the Registrant and
Reich & Tang Asset Management, L.P.
* (e) Form of Distribution Agreement between the Registrant and Reich & Tang
Distributors, Inc.
(f) Not applicable.
(g) Custody Agreement between the Registrant and Investors Fiduciary Trust
Company.
(h) Transfer Agency Agreement between Registrant and Reich & Tang Services
L.P.
** (h.1)Administrative Services Agreement between the Registrant and
Reich & Tang Asset Management L.P.
(i) Opinion of Battle Fowler LLP to the use of their name under the
heading "Counsel and Auditors" in the Statement of Additional
Information (originally filed as Exhibit 10.1 to Pre-Effective
Amendment No. 1 to Registration Statement, and re-filed herein for
EDGAR purposes only).
(i.1) Opinion of Dechert, Price & Rhoads as to the legality of the
securities being registered, including their consent to the filing
thereof and to the use of their name under the heading "Counsel and
Auditors" in the Statement of Additional Information (originally filed
as Exhibit 10.2 to Pre-Effective Amendment No. 1 to Registration
Statement, and re-filed herein for EDGAR purposes only).
(j) Consent of Independent Certified Public Accountants.
(k) Not applicable.
(l) 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 (originally
filed as Exhibit 13 to Pre-Effective Amendment No. 1 to Registration
Statement, and re-filed herein for EDGAR purposes only).
* (m) Form of Distribution and Service Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940.
(m.1)Form of Distribution Agreement between the Registrant and Reich &
Tang Distributors, Inc. (see Exhibit e.)
* (m.2) Shareholder Servicing Agreement between the Registrant and Reich &
Tang Distributors, Inc.
(n) Financial Data Schedule (for EDGAR Filing only).
(o) Form of Amendment No. 4 to Rule 18f-3 for Multi-Class Plan.
(p) Powers of Attorney
-------------------------
* Filed with Post-Effective Amendment No. 6 to Registration Statement No.
33-74470 on July 29, 1998 and incorporated herein by reference.
** Filed with Post -Effective Amendment No. 4 to Registration Statement No.
33-74470 on July 28, 1996 and incorporated herein by reference.
C-1
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant.
None.
Item 25. Indemnification.
The Registrant incorporates herein by reference the response to Item
27 of the Registration Statement filed with the SEC on July 28, 1997 with
Post-Effective Amendment No. 5.
Item 26. Business and Other Connections of the Investment Adviser.
The description of Reich & Tang Asset Management L.P. ("RTAMLP") under
the caption "Management, Organization and Capital Structure" in the
Prospectus and "Investment Advisory and Other Services" and "Management of
the Fund" in the Statement of Additional Information constituting parts A
and B, respectively, of this Post-Effective Amendment No. 26 to the
Registration Statement are incorporated herein by reference.
Registrant's investment advisor, RTAMLP, is a registered investment
advisor. Nvest Companies, L.P. (Nvest) is the limited partner and owner of
a 99.5% interest in RTAMLP. Reich & Tang Asset Management, Inc. ("RTAM")(an
indirect wholly-owned subsidiary of Nvest) is the sole general partner and
owner of the remaining .05% interest in RTAMLP. RTAMLP's investment
advisory clients include more than twenty-one registered investment
companies which invest in money market instruments, equity securities and
debt securities. In addition, RTAMLP is the sole general partner of ten
investment partnerships organized as limited partnerships.
Peter S. Voss, President, has been Chief Executive Officer and a
Director of Nvest Corporation (formerly New England Investment Companies,
Inc.) since October 1992, Chairman of the Board of Nvest Corporation since
December 1992, Director of The New England since March 1993, Chairman of
the Board of Directors of NEIC's subsidiaries other than Loomis, Sayles &
Company, L.P. ("Loomis") and Back Bay Advisors, L.P. ("Back Bay"), where he
serves as a Director, and Chairman of the Board of Trustees of all of the
mutual funds in the TNE Fund Group and the Zenith Funds. G. Neil Ryland,
Executive Vice President, Treasurer and Chief Financial Officer Nvest
Corporation since July 1993. Edward N. Wadsworth, Executive Vice President,
General Counsel, Clerk and Secretary of Nvest Corporation since December
1989, and Secretary of Westpeak and Draycott and the Treasurer of Nvest
Corporation. Lorraine C. Hysler has been Secretary of RTAM since July 1994,
Assistant Secretary of NEIC since September 1993, and Vice President of
Reich & Tang Mutual Funds since July 1994. Richard E. Smith, III has been a
Director of RTAM since July 1994, and President and Director of RTAM since
July 1994, President and Chief Operating Officer of the Reich & Tang
Capital Management Group since July 1994. Steven W. Duff has been a
Director of RTAM since October 1994, and President and Chief Executive
Officer of Reich & Tang Mutual Funds since August 1994. Mr. Duff is
President and a Director/Trustee of 14 funds in the Reich & Tang Fund
Complex, President of Back Bay Funds, Inc., Director of Pax World Money
Market Fund, Inc., President and Chief Executive Officer of Tax Exempt
Proceeds Fund, Inc., and Executive Vice President of Reich & Tang Equity
Fund, Inc. Bernadette N. Finn has been Vice President/Compliance of RTAM
since July 1994, and Vice President of Reich & Tang Mutual Funds since July
1994. Ms. Finn is also Secretary of 14 funds in the Reich & Tang Complex
and a Vice President and Secretary of 5 funds in the Reich & Tang Fund
Complex. Richard DeSanctis has been Treasurer of RTAM since July 1994,
Assistant Treasurer of NEIC since September 1993, Treasurer of the Reich &
Tang Mutual Funds since July 1994. Mr. DeSanctis is also Treasurer of 18
funds in the Reich & Tang Fund Complex. and is Vice President and Treasurer
of Cortland Trust, Inc. Richard I. Weiner has been Vice President of RTAM
since July 1994, Vice President of NEIC since September 1993, and Vice
President of Reich & Tang Asset Management L.P. Capital Management Group
since July 1994. Mr. Weiner has served as a Vice President of Reich & Tang,
Inc. since September 1982. Rosanne Holtzer has been Vice President of the
Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly Manager of Fund Accounting for the Manager with which she was
associated with from June 1986, in addition she is also Assistant Treasurer
of 19 funds in the Reich & Tang Fund Complex.
Item 27. Principal Underwriters.
(a) Reich & Tang Distributors, Inc., the Registrant's Distributor, is
also distributor for Back Bay Funds, Inc., California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust,
Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily
Municipal Income Fund, Georgia Daily Municipal Income Fund, Institutional
Daily Income Fund, New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Pax World Money Market Fund, Inc., Pennsylvania Daily Municipal
Income Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc.,
Tax Exempt Proceeds Fund, Inc. and Virginia Daily Municipal Income Fund,
Inc.
C-2
(b) The following are the directors and officers of Reich & Tang
Distributors Inc. The principal business address of Messrs. Voss, Ryland, and
Wadsworth is 399 Boylston Street, Boston, Massachusetts 02116. For all other
persons' the principal address is 600 Fifth Avenue, New York, New York 10020.
Positions and Offices Positions and Offices
Name with the Distributor with the Registrant
Peter S. Voss Director None
G. Neal Ryland Director None
Edward N. Wadsworth Executive Officer None
Richard E. Smith III President None
Peter DeMarco Executive Vice President None
Steven W. Duff Director President
Bernadette N. Finn Vice President Secretary
Lorraine C. Hysler Secretary None
Richard De Sanctis Treasurer Treasurer
Richard I. Weiner Vice President None
(c) Not applicable.
Item 28. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained in the physical possession of Registrant at 600 Fifth
Avenue, New York, New York 10020, the Registrant's Manager; and at Investors
Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri, 64105, the
Registrant's custodian; and at Reich & Tang Services, Inc., 600 Fifth Avenue,
New York, New York 10020, the Registrant's Transfer Agent and Dividend
Disbursing Agent.
Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
Not applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has met all the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, and State of New York, on the 29th day of July, 1999.
INSTITUTIONAL DAILY INCOME FUND
By: /s/Bernadette N. Finn
Bernadette N. Finn
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities indicated and on July 29, 1999.
SIGNATURE TITLE DATE
(1) Principal Executive Officer
Steven W. Duff Chairman and President 07/29/99
By:/s/Steven W. Duff
Steven W. Duff
(2) Principal Financial and
Accounting Officer
/s/Richard De Sanctis
Richard De Sanctis Treasurer 07/29/99
(3) Majority of the Board of Trustees
Dr. W. Giles Mellon Trustee
Dr. Yung Wong Trustee
Robert Straniere Trustee
By:/s/Bernadette N. Finn 07/29/99
Bernadette N. Finn
Attorney-in-Fact*
* See Exhibit (p) herein for Powers of Attorney.
C-4
<PAGE>
INSTITUTIONAL DAILY INCOME FUND
DECLARATION OF TRUST
JANUARY 20, 1994
TABLE OF CONTENTS
Page
ARTICLE I -- Name and Definitions............................................2
Section 1.1 Name......................................................2
Section 1.2 Definitions...............................................2
ARTICLE II -- Trustees........................................................5
Section 2.1 General Powers............................................5
Section 2.2 Investments...............................................6
Section 2.3 Legal Title...............................................10
Section 2.4 Issuance and Repurchase
of Shares................................................10
Section 2.5 Delegation; Committees....................................11
Section 2.6 Collection and Payment....................................11
Section 2.7 Expenses..................................................12
Section 2.8 Manner of Acting; By-Laws.................................12
Section 2.9 Miscellaneous Powers......................................13
Section 2.10 Principal Transactions....................................14
Section 2.11 Number of Trustees........................................15
Section 2.12 Election and Term.........................................15
Section 2.13 Resignation and Removal...................................15
Section 2.14 Vacancies.................................................16
Section 2.15 Delegation of Power to Other
Trustees.................................................18
ARTICLE III -- Contracts......................................................18
Section 3.1 Distribution Contract.....................................18
Section 3.2 Advisory or Management Contract...........................19
Section 3.3 Affiliations of Trustees or
Officers, Etc..........................................19
Section 3.4 Compliance with 1940 Act..................................20
ARTICLE IV -- Limitations of Liability of Shareholders,
Trustees and Others.........................................21
Section 4.1 No Personal Liability of Shareholders,
Trustees, Etc............................................21
Section 4.2 Non-Liability of Trustees, Etc............................22
Section 4.3 Mandatory Indemnification.................................23
Section 4.4 No Bond Required of Trustees..............................26
Section 4.5 No Duty of Investigation; Notice in
Trust Instruments, Etc...................................26
Section 4.6 Reliance on Experts, Etc..................................27
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<PAGE>
ARTICLE V -- Shares of Beneficial Interest....................................28
Section 5.1 Beneficial Interest.....................................28
Section 5.2 Rights of Shareholders..................................28
Section 5.3 Trust Only..............................................29
Section 5.4 Issuance of Shares......................................29
Section 5.5 Register of Shares......................................30
Section 5.6 Transfer of Shares......................................31
Section 5.7 Notices; Reports .......................................32
Section 5.8 Treasury Shares.........................................33
Section 5.9 Voting Powers...........................................33
Section 5.10 Meetings of Shareholders................................34
Section 5.11 Series Designation......................................35
Section 5.12 Class Designation.......................................39
Section 5.13 Assent to Declaration of Trust..........................41
ARTICLE VI -- Redemption and Repurchase of Shares.............................42
Section 6.1 Redemption of Shares...................................42
Section 6.2 Price..................................................42
Section 6.3 Payment................................................43
Section 6.4 Effect of Suspension of
Determination of Net Asset
Value.................................................43
Section 6.5 Repurchase by Agreement................................44
Section 6.6 Redemption of Shareholder's
Interest..............................................44
Section 6.7 Reductions in Number of
Outstanding Shares Pursuant
to Net Asset Value Formula............................45
Section 6.8 Suspension of Right of
Redemption............................................45
ARTICLE VII -- Determination of Net Asset Value, Net
Income and Distributions...................................46
Section 7.1 Net Asset Value........................................46
Section 7.2 Distributions to Shareholders..........................48
Section 7.3 Determination of Net Income; Constant Net
Asset Value; Reduction of Outstanding
Shares................................................49
Section 7.4 Allocation Between Principal
and Income............................................51
Section 7.5 Power to Modify Foregoing
Procedures...........................................51
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<PAGE>
ARTICLE VIII -- Duration, Termination of Trust;
Amendment; Mergers, Etc...................................52
Section 8.1 Duration..............................................52
Section 8.2 Termination of Trust or Series
of the Trust.........................................52
Section 8.3 Amendment Procedure .................................54
Section 8.4 Merger, Consolidation and Sale of Assets..............56
Section 8.5 Incorporation ........................................56
ARTICLE IX -- Reports to Shareholders.........................................58
ARTICLE X -- Miscellaneous....................................................58
Section 10.1 Filing................................................58
Section 10.2 Governing Law.........................................59
Section 10.3 Counterparts..........................................59
Section 10.4 Reliance by Third Parties.............................59
Section 10.5 Provisions in Conflict with Law
or Regulations.......................................60
Section 10.6 Principal Place of Business...........................61
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<PAGE>
DECLARATION OF TRUST
OF
INSTITUTIONAL DAILY INCOME FUND
DATED January 20, 1994
DECLARATION OF TRUST made January 20, 1994;
WHEREAS, the Trustees desire to establish a trust for the investment and
reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of the holders, from time to time, of the shares of
beneficial interest issued hereunder and subject to the provisions hereof.
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby, until and unless
changed by the Trustees as provided in Section 8.3(a) hereof, is the
"Institutional Daily Income Fund."
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "By-laws" means the By-laws referred to in Section 2.8 hereof, as from
time to time amended.
(b) "Class" means the two or more classes as may be established and
designated from time to time by the Trustees pursuant to Section 5.13 hereof.
(c) The terms "Commission" and "Interested Person," have the meanings given
them in the 1940 Act. Except as otherwise defined by the Trustees in conjunction
with the establishment of any series of Shares, the term "vote of a majority of
the Shares outstanding and entitled to vote" shall have the same meaning as the
term "vote of a majority of the outstanding voting securities" given it in the
1940 Act.
2
<PAGE>
(d) "Custodian" means any Person other than the Trust who has custody of
any Trust Property as required by ss. 17(f) of the 1940 Act, but does not
include a system for the central handling of securities described in said ss.
17(f).
(e) "Declaration" means this Declaration of Trust as amended from time to
time. Reference in this Declaration of Trust to "Declaration", "hereof" and
"hereunder" shall be deemed to refer to this Declaration rather than exclusively
to the article or section in which such words appear.
(f) "Distributor" means the party, other than the Trust, to the contract
described in Section 3.1 hereof.
(g) "His" shall include the feminine and neuter, as well as the masculine,
genders.
(h) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
(i) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
3
<PAGE>
(j) "Series" individually or collectively means the two or more series as
may be established and designated from time to time by the Trustees pursuant to
Section 5.11 hereof. Unless the context otherwise requires, the term "series"
shall include classes into which shares of the Trust, or of a series, may be
divided from time to time.
(k) "Shareholder" means a record owner of Outstanding Shares.
(l) "Shares" means the equal proportionate units of interest into which the
beneficial interest in the Trust shall be divided from time to time, including
the Shares of any and all series and classes which may be established by the
Trustees, and includes fractions of Shares as well as whole Shares.
"Outstanding" Shares means those Shares shown from time to time on the books of
the Trust or its Transfer Agent as then issued and outstanding, but shall not
include Shares which have been redeemed or repurchased by the Trust and which
are at the time held in the Treasury of the Trust.
(m) "Transfer Agent" means any Person other than the Trust who maintains
the Shareholder records of the Trust, such as the list of Shareholders, the
number of Shares credited to each account, and the like.
4
<PAGE>
(n) The "Trust" means the Institutional Daily Income Fund.
(o) The "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(p) The "Trustees" means the Person who has signed this Declaration, so
long as he shall continue in office in accordance with the terms hereof, and all
other Persons who may from time to time be duly elected, qualified and serving
as Trustees in accordance with the provisions of Article II hereof, and
reference herein to a Trustee or the Trustees shall refer to such Person or
Persons in this capacity or their capacities as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1 General Powers. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their
5
<PAGE>
own right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees shall have power to conduct the business of the Trust
and carry on its operations in any and all of its branches and maintain offices
both within and without the Commonwealth of Massachusetts, in any and all states
of the United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they may
deem necessary, proper or desirable in order to promote the interests of the
Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be executed
without order of or resort to any court.
Section 2.2 Investments. The Trustees shall have the power:
6
<PAGE>
(a) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest in, securities,
including common and preferred stocks; warrants; bonds; debentures; bills; time
notes and all other evidences of indebtedness; negotiable or non-negotiable
instruments; government securities, including securities of any state,
municipality or other political subdivision, or any governmental or
quasi-governmental agency or instrumentality; and money market instruments
including bank certificates of deposit, finance paper, commercial paper,
bankers' acceptances and all kinds of repurchase agreements, of any corporation,
company, trust, association, firm or other business organization however
established, and of any country, state, municipality or other political
subdivisions, or any governmental or quasi-governmental agency or
instrumentality.
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade
in and deal in, to acquire or write any rights or options to purchase or sell,
to sell or otherwise dispose of, to lend, and to pledge any such securities and
repurchase agreements.
7
<PAGE>
(d) To exercise all rights, powers and privileges of ownership or interest
in all securities and repurchase agreements included in the Trust Property,
including the right to vote thereon and otherwise act with respect thereto and
to do all acts for the preservation, protection, improvements and enhancement in
value of all such securities and repurchase agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash, and any interest therein.
(f) To borrow money and in this connection issue notes or other evidence of
indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or undertake
the performance of any obligation or engagement of any other Person and to lend
Trust Property.
(g) To aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included in the
Trust Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest; to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
8
<PAGE>
(h) To enter into a plan of distribution and any related agreements whereby
the Trust may finance directly or indirectly any activity which is primarily
intended to result in the sale of Shares.
(i) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the
9
<PAGE>
Trust, nor shall the Trustees be limited by any law limiting the
investments which may be made by fiduciaries.
Section 2.3 Legal Title. Legal title to all the Trust Property, including
the property of any series of the Trust, shall be vested in the Trustees as
joint tenants except that the Trustees shall have power to cause legal title to
any Trust Property to be held by or in the name of one or more of the Trustees,
or in the name of the Trust, or in the name of any other Person as nominee, on
such terms as the Trustees may determine, provided that the interest of the
Trust therein is deemed appropriately protected. The right, title and interest
of the Trustees in the Trust Property and the property of each series of the
Trust shall vest automatically in each Person who may hereafter become a
Trustee. Upon the termination of the term of office, resignation, removal or
death of a Trustee he shall automatically cease to have any right, title or
interest in any of the Trust Property or the property of any series of the
Trust, and the right, title and interest of such Trustee in all such property
shall vest automatically in the remaining Trustees. Such vesting and cessation
of title shall be effective whether or not conveying documents have been
executed and delivered.
Section 2.4 Issuance and Repurchase of Shares. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in Shares and, subject to the
provisions set forth in Articles VI and VII and Section 5.11 hereof, to apply to
any such repurchase, redemption, retirement, cancellation or acquisition of
Shares any funds or property of the particular series of the Trust with respect
to which such Shares are issued, whether capital or surplus or otherwise, to the
full extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts governing business corporations.
10
<PAGE>
Section 2.5. Delegation; Committees. The Trustees shall have
power to delegate from time to time to such of their number or to officers,
employees or agents of the Trust the doing of such things and the execution of
such instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient, to the same extent as such
delegation is permitted by the 1940 Act.
Section 2.6. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property interest securing any
obligations, by virtue of which any property is owed to the Trust; and to enter
into releases, agreements and other instruments.
11
<PAGE>
Section 2.7. Expenses. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees.
Section 2.8. Manner of Acting; By-Laws. Except as otherwise provided herein
or in the By-Laws, any action to be taken by the Trustees may be taken by a
majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of the entire number
of Trustees then in office. The Trustees may adopt By-laws not consistent with
this Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such By-laws to the extent such power is not reserved to the
Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
12
<PAGE>
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
Section 2.9 Miscellaneous Powers. The Trustees shall have the power to: (a)
employ or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have
13
<PAGE>
the power to indemnify such Person against such liability; (e) establish
pension, profit-sharing, Share purchase, and other retirement, incentive and
benefit plans for any Trustees, officers, employees and agents of the Trust; (f)
to the extent permitted by law, indemnify any person with whom the Trust has
dealings, including the Investment Adviser, Distributor, Transfer Agent and
selected dealers, to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine and change the
fiscal year of the Trust and the method by which its accounts shall be kept; and
(i) adopt a seal for the Trust, but the absence of such seal shall not impair
the validity of any instrument executed on behalf of the Trust.
Section 2.10. Principal Transactions. Except in transactions not permitted
by the 1940 Act or rules and regulations adopted by the Commission, the Trustees
may, on behalf of the Trust, buy any securities from or sell any securities to,
or lend any assets of the Trust to, any Trustee or officer of the Trust or any
firm of which any such Trustee or officer is a member acting as principal, or
have any such dealings with the Investment Adviser, Distributor or Transfer
Agent or with any Interested Person of such Person; and the Trust may employ any
such Person, or firm or company in which such Person is an Interested Person, as
broker, legal counsel, registrar, transfer agent, dividend disbursing agent or
custodian upon customary terms.
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Section 2.11. Number of Trustees. The number of Trustees shall initially be
two (2), and thereafter shall be such number as shall be fixed from time to time
by a written instrument signed by a majority of the Trustees, provided, however,
that the number of Trustees shall in no event be less than one (1) nor more than
fifteen (15).
Section 2.12. Election and Term. Except for the Trustees named herein,
designated by such Trustees prior to the issuance of Shares, or appointed to
fill vacancies pursuant to Section 2.14 hereof, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders called for that purpose. Except in the event of resignation or
removal pursuant to Section 2.13 hereof, each Trustee shall hold office until
the next such meeting of Shareholders and until his successor is duly elected
and qualified.
Section 2.13. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall be
effective upon such delivery, or at a later date according to the
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terms of the instrument. Any of the Trustees may be removed (provided the
aggregate number of Trustees after such removal shall not be less than one) with
cause, by the action of two-thirds of the remaining Trustees. Any Trustee may be
removed at any meeting of Shareholders by vote of two-thirds of the Outstanding
Shares. The Trustees shall promptly call a meeting of the Shareholders for the
purpose of voting upon the question of removal of any such Trustee or Trustees
when requested in writing so to do by the holders of not less than ten percent
of the Outstanding Shares and, in that connection, the Trustees will assist
shareholder communications to the extent provided for in Section 16(c) under the
1940 Act. Upon the resignation or removal of a Trustee, or his otherwise ceasing
to be a Trustee, he shall execute and deliver such documents as the remaining
Trustees shall require for the purpose of conveying to the Trust or the
remaining Trustees any Trust Property or property of any series of the Trust
held in the name of the resigning or removed Trustee. Upon the incapacity or
death of any Trustee, his legal representative shall execute and deliver on his
behalf such documents as the remaining Trustee shall require as provided in the
preceding sentence.
Section 2.14. Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the
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office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing vacancy, including a vacancy existing by
reason of an increase in the number of Trustees. Subject to the provisions of
Section 16(a) of the 1940 Act, the remaining Trustees shall fill such vacancy by
the appointment of such other person as they in their discretion shall see fit,
made by a written instrument signed by a majority of the Trustees then in
office. Any such appointment shall not become effective, however, until the
person named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.14, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees in office shall be conclusive evidence of the existence
of such vacancy.
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Section 2.15. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two (2) Trustees personally exercise the powers granted to the
Trustees under this Declaration, except as herein otherwise expressly provided.
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may in their discretion
from time to time enter into an exclusive or non-exclusive underwriting contract
or contracts providing for the sale of the Shares at a price based on the net
asset value of a Share, whereby the Trustees may either agree to sell the Shares
to the other party to the contract or appoint such other party their sales agent
for the Shares, and in either case on such terms and conditions as may be
prescribed in the By-laws, if any, and such further terms and conditions as the
Trustees may in their discretion determine not inconsistent with the provisions
of this Article III or of the By-laws; and such contract may also provide for
the repurchase of the Shares by such other party as agent of the Trustees.
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Section 3.2. Advisory or Management Contract. The Trustees may in their
discretion from time to time enter into an investment advisory or management
contract or separate contracts with respect to one or more series of the Trust
whereby the other party to such contract shall undertake to furnish to the Trust
such management, investment advisory, statistical and research facilities and
services and such other facilities and services, if any, and all upon such terms
and conditions as the Trustees may in their discretion determine, including the
grant of authority to such other party to determine what securities shall be
purchased or sold by the Trust and what portion of its assets shall be
uninvested, which authority shall include the power to make changes in the
Trust's investments.
The Trustees may also employ, or authorize the Trust's investment adviser
to employ, one or more sub-advisers from time to time to perform such of the
acts and services of the investment adviser and upon such terms and conditions
as may be agreed upon between the investment adviser and such sub-advisers and
approved by the Trustees. Any reference in this Declaration to the investment
adviser shall be deemed to include such sub-advisers unless the context
otherwise requires.
Section 3.3. Affiliations of Trustees or Officers, Etc. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is
a shareholder, director, officer,
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partner, trustee, employee, manager, adviser or distributor of or for
any partnership, corporation, trust, association or other organization
or of or for any parent or affiliate of any organization, with which a
contract of the character described in Sections 3.1 or 3.2 above or
for services as Custodian, Transfer Agent or disbursing agent or for
related services may have been or may hereafter be made, or that any
such organization, or any parent or affiliate thereof, is a
Shareholder of or has an interest in the Trust, or that
(ii) any partnership, corporation, trust, association or other
organization with which a contract or the character described in
Sections 3.1 or 3.2 above or for services as Custodian, Transfer Agent
or disbursing agent or for related services may have been or may
hereafter be made also has any one or more of such contracts with one
or more other partnerships, corporations, trusts, associations or
other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to this Trust or its
Shareholders.
Section 3.4. Compliance with 1940 Act. Any contract entered
into pursuant to Sections 3.1 or 3.2 shall be consistent
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with and subject to the requirements of Section 15 of the Investment Company Act
of 1940 (including any amendment thereof or other applicable Act of Congress
hereafter enacted) with respect to its continuance in effect, its termination
and the method of authorization and approval of such contract or renewal
thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS ,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust is made
a party to any suit or proceeding to enforce any such liability of the Trust, he
shall not, on account thereof, be held to any personal liability. The
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Trust shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability, provided that any such expenses shall be paid
solely out of the funds and property of the series of the Trust with respect to
which such Shareholder's Shares are issued. The rights accruing to a Shareholder
under this Section 4.1 shall not exclude any other right to which such
Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, agent or service provider thereof for
any action or failure to act by him or any other such Trustee, officer,
employee, agent or service provider (including without limitation the failure to
compel in any way any former or acting Trustee to redress any breach of trust)
except for his own bad faith, willful misfeasance, gross negligence or reckless
disregard of the duties involved in the conduct of his office. The term "service
provider" as used in this Section 4.2 shall
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include any investment adviser, principal underwriter or other person with whom
the Trust has an agreement for provision of services.
Section 4.3. Mandatory Indemnification.
(a) Subject to the exceptions and limitations contained in paragraph (b)
below:
(i) every person who is, or has been, a Trustee or officer of the
Trust shall be indemnified by the Trust to the fullest extent
permitted by law against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer
and against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal,
or other, including appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
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(i) against any liability to the Trust or the Shareholders by
reason of a final adjudication by the court or other body before which
the proceeding was brought that he engaged in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved
in the conduct of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i)
resulting in a payment by a Trustee or officer, unless there has been
a determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(A) by the court or other body approving the settlement or
other disposition;
(B) based upon a review of readily available facts (as
opposed to a full trial-type inquiry) by (x) vote a majority of
the Disinterested Trustees acting on the matter (provided that a
majority of the Disinterested Trustees then in office act on
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the matter) or (y) written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or officer and shall
inure to the benefit of the heirs, executors, administrators and assigns of such
a person. Nothing contained herein shall affect any rights to indemnification to
which personnel of the Trust other than Trustees and officers may be entitled by
contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of the
Section 4.3 may be advanced by the Trust prior to final disposition thereof upon
receipt of an undertaking by or on behalf of the recipient to repay such amount
if it is ultimately determined that he is not entitled to indemnification under
this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust shall be
insured against losses arising out of any such advances; or
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(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees act on the matter)
or an independent legal counsel in a written opinion shall determine, based
upon a review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient ultimately
will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is
not (A) an "Interested Person" of the Trust (including anyone who has been
exempted from being an "Interested Person" by any rule, regulation or order
of the Commission), or (B) involved in the claim, action, suit or
proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee shall be obligated to
give any bond or other security for the performance of any of his duties
hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust Instruments, Etc. No
purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered
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to or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing whatsoever executed in
connection with the Trust shall be conclusively presumed to have been executed
or done by the executors thereof only in their capacity as Trustees under this
Declaration or in their capacity as officers, employees or agents of the Trust.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees may recite
that the same is executed or made by them not individually, but as Trustees
under the Declaration, and that the obligations of the Trust under any such
instrument are not binding upon any of the Trustees or Shareholders
individually, but bind only the estate of the Trust or series, as applicable,
and may contain any former recital which they or he may deem appropriate, but
the omission of such recital shall not operate to bind the Trustees
individually. The Trustees shall at all times maintain insurance for the
protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgement shall deem advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee and officer or employee
of the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel, or upon reports made to the Trust by any of
its officers or employees or by the Investment
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Adviser, Distributor, Transfer Agent, selected dealers, accountants, appraisers
or other experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or expert
may also be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest of
$.01 per value per Share. All Shares shall be of one class, except as provided
in Section 5.11 and Section 5.12 hereof. The number of Shares of beneficial
interest authorized hereunder is unlimited. All Shares issued hereunder
including, without limitation, Shares issued in connection with a dividend in
Shares or a split of Shares, shall be fully paid and non-assessable.
Section 5.2. Rights of Shareholders. The ownership of the Trust Property
and the property of each Series of the Trust of every description and the right
to conduct any business hereinbefore described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein other than the
beneficial interest conferred by their Shares, and they shall have no right to
call for any partition or division of any property, profits, rights or interests
of the Trust nor can they
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be called upon to share or assume any losses of the Trust or suffer an
assessment of any kind by virtue of their ownership of Shares. The Shares shall
be personal property giving only the rights in this Declaration specifically set
forth. The Shares shall not entitle the holder of preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may determine
with respect to any series of Shares.
Section 5.3. Trust Only. It is the intention of the Trustees to create only
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their discretion may, from
time to time without vote of the Shareholders, issue Shares, in addition to the
then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times and on such terms as the Trustees may deem
best, and may in such manner
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acquire other assets (including the acquisition of assets subject to, and in
connection with the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares and Shares
held in the treasury, and Shares may be issued in separate series as provided in
Section 5.11 hereof. The Trustee may from time to time divide or combine the
Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust or any series. Contributions to
the Trust may be accepted for, and Shares shall be redeemed as, whole Shares
and/or 1/1,000ths of a Share or integral multiple thereof.
Section 5.5. Register of Shares. A register shall be kept at the principal
office of the Trust or an office of the Transfer Agent which shall contain the
names and addresses of the Shareholders and the number of Shares held by them
respectively and a record of all transfers thereof. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein or in the
By-laws provided, until he has given his address to the Transfer Agent or such
other officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the
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Trustees, in their discretion, may authorize the issuance of share
certificates and promulgate appropriate rules and regulations as to their use.
Section 5.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any Person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer
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Agent or registrar nor any officer or agent of the Trust shall be affected by
any notice of such death, bankruptcy or incompetence, or other operation of law.
Section 5.7. Notices; Reports. Any and all notices to which any Shareholder
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage pre-paid, addressed to any Shareholder of record at his
last known address as recorded on the register of the Trust. A notice of a
meeting, an annual report and any other communication to Shareholders need not
be sent to a Shareholder (i) if an annual report and a proxy statement for two
consecutive shareholder meetings have been mailed to such Shareholder's address
and have been returned as undeliverable, (ii) if all, and at least two, checks
(if sent by first class mail) in payment of dividends on Shares during a
twelve-month period have been mailed to such Shareholder's address and have been
returned as undeliverable or (iii) in any other case in which a proxy statement
concerning a meeting of security holders is not required to be given pursuant to
the Commission's proxy rules as from time to time in effect under the Securities
Exchange Act of 1934. However, delivery of such proxy statements, annual reports
and other communications shall resume if and when such Shareholder delivers or
cause to be delivered to the Trust written notice setting forth such
Shareholder's then current address.
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Section 5.8. Treasury Shares. Shares held in the treasury shall, until
reissued pursuant to Section 5.4, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
Section 5.9. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.12; (ii) for the
removal of Trustees as provided in Section 2.13; (iii) with respect to any
investment advisory or management contract entered into pursuant to Section 3.2;
(iv) with respect to termination of the Trust as provided in Section 8.2; (v)
with respect to any amendment of this Declaration to the extent and as provided
in Section 8.3; (vi) with respect to any merger, consolidation or sale of assets
as provided in Section 8.4; (vii) with respect to incorporation of the Trust to
the extent and as provided in Section 8.5; (viii) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or any series or class
thereof or the Shareholders; (ix) with respect to any plan adopted pursuant to
Rule 12b-1 (or any successor rule) under the 1940 Act; and (x) with respect to
such additional matters relating to the Trust as may be required by this
Declaration, the
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By-laws or any registration of the Trust as an investment company under the 1940
Act with the Commission (or any successor agency) or as the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote, except that the Trustees may, in
conjunction with the establishment of any series or class of Shares, establish
conditions under which the several series or class shall have separate voting
rights or, if a series or class would not, in the sole judgment of the Trustees,
be materially affected by a proposal, no voting rights. There shall be no
cumulative voting in the election of Trustees. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration or the By-laws to be taken by Shareholders.
The By-laws may include further provisions for Shareholders' votes and meetings
and related matters.
Section 5.10. Meetings of Shareholders. Meetings of Shareholders may be
called at any time by the President, and shall be called by the President and
Secretary at the request in writing, or by resolution, of a majority of
Trustees, or at the written request of the holder or holders of ten percent
(10%) or more of the total number of Shares then issued and outstanding of the
Trust entitled to vote at such meeting. Any such request shall state the purpose
of the proposed meeting.
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Section 5.11. Series Designation. The Trustees, in their discretion, may
authorize the division of Shares into two or more series, and the different
series shall be established and designated and the variations in the relative
rights and preferences as between the different series shall be fixed and
determined, by the Trustees; provided, that all Shares shall be identical except
that there may be variations so fixed and determined between different series as
to investment objective, purchase price, right of redemption, special and
relative rights as to dividends and on liquidation, conversion rights, and
conditions under which the several series shall have separate voting rights. All
references to Shares in this Declaration shall be deemed to be Shares of any or
all series as the context may require.
If the Trustee shall divide the Shares of the Trust into two or more
series, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust shall apply equally to
each series of the Trust except as the context requires otherwise.
(b) The number of authorized Shares and the number of Shares of each
series that may be issued shall be
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unlimited. The Trustees may classify or reclassify any unissued Shares or
any Shares previously issued and reacquired of any series into one or more
series that may be established and designated from time to time. The
Trustees may hold as treasury shares (of the same or some other series),
reissue for such consideration and on such terms as they may determine, or
cancel any Shares of any series acquired by the Trust at their discretion
from time to time.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the
rights of creditors of such series and except as may otherwise be required
by applicable tax laws, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series established and
designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair
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and equitable. Each such allocation by the Trustees shall be conclusive and
binding upon all persons for all purposes.
(d) The assets belonging to each particular series shall be charged
with the liabilities of the Trust in respect of that series and all
expenses, costs, charges and reserves attributable to that series, and any
general liabilities, expenses, costs, charges or reserves of the Trust
which are not readily identifiable as belonging to any particular series
shall be allocated and charged by the Trustees to and among any one or more
of the series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair and
equitable and no series shall be liable to any person except for its
allocated share. Each allocation of liabilities, expenses, costs, charges
and reserves by the Trustees shall be conclusive and binding upon all
persons for all purposes. The Trustees shall have full discretion, to the
extent not inconsistent with the 1940 Act, to determine which items are
capital; and each such determination and allocation shall be conclusive and
binding upon all persons. The assets of a particular series of the Trust
shall, under no circumstances, be charged with liabilities attributable to
any other series of the Trust. All persons extending credit to, or
contracting with or having any claim against a particular series of the
Trust shall look only to the assets of that particular series for payment
of such credit, contract or claim. No
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Shareholder or former Shareholder of any series shall have any claim on or
right to any assets allocated or belonging to any other series.
(e) Each Share of a series of the Trust shall represent a beneficial
interest in the net assets of such series. Each holder of Shares of a
series shall be entitled to receive his pro rata share of distributions of
income and capital gains made with respect to such series. Upon redemption
of his Shares or indemnification for liabilities incurred by reason of his
being or having been a Shareholder of a series, such Shareholder shall be
paid solely out of the funds and property of such series of the Trust. Upon
liquidation or termination of a series of the Trust, Shareholders of such
series shall be entitled to receive a pro rata share of the net assets of
such series. A Shareholder of a particular series of the Trust shall not be
entitled to participate in a derivative or class action on behalf of any
other series or the Shareholders of any other series of the Trust.
(f) Notwithstanding any other provision hereof, on any matter
submitted to a vote of Shareholders of the Trust, all Shares then entitled
to vote shall be voted by individual series, except that (i) when required
by the 1940 Act, Shares shall be voted in the aggregate and not by
individual series, and (ii) when the Trustees have determined
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that the matter affects only the interests of Shareholders of a limited
number of series, then only the Shareholders of such series shall be
entitled to vote thereon.
The establishment and designation of any series of Shares shall be
effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the
relative rights and preferences of such series, or as otherwise provided in
such instrument. At any time that there are no Shares outstanding of any
particular series previously established and designated, the Trustees may
by an instrument executed by a majority of their number abolish that series
and the establishment and designation thereof. Each instrument referred to
in this paragraph shall have the status of an amendment to this
Declaration.
Section 5.12. Class Designation. The Trustees, in their discretion, may
authorize the division of the Shares of the Trust, or, if any series be
established, the Shares of any series, into two or more classes, and the
different classes shall be established and designated, and the variations in the
relative rights and preferences as between the different classes shall be fixed
and determined, by the Trustees; provided, that all Shares of the Trust or of
any series shall be identical to all other shares of the Trust or the same
series, as the case may be, except that there may be variations between
different classes as to allocation of expenses, right of redemption, special and
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relative rights as to dividends and on liquidation, conversion rights, and
conditions under which the several classes shall have separate voting rights.
All references to Shares in this Declaration shall be deemed to be Shares of any
or all classes as the context may require.
If the Trustees shall divide the Shares of the Trust or any series into two
or more classes, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust, or any series of the
Trust, shall apply equally to each class of Shares of the Trust or of any series
of the Trust, except as the context requires otherwise.
(b) The number of Shares of each class that may be issued shall be
unlimited. The Trustees may classify or reclassify any unissued Shares of the
Trust or of any series or any Shares previously issued and reacquired of the
Trust or of any series into one or more classes that may be established and
designated from time to time. The Trustees may hold as treasury Shares (of the
same or some other class), reissue for such consideration and on such terms as
they may determine, or cancel any Shares of any class reacquired by the Trust at
their discretion from time to time.
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(c) Liabilities, expenses, costs, charges and reserves related to the
distribution of, and other identified expenses that should properly be allocated
to, the Shares of a particular class may be charged to and borne solely by such
class and the bearing of expenses solely by a class of Shares may be
appropriately reflected (in a manner determined by the Trustees) and cause
differences in the net asset value attributable to, and the dividend, redemption
and liquidation rights of, the Shares of different classes. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all classes for all purpose.
(d) The establishment and designation of any class of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such class, or as otherwise provided in such instrument. The
Trustees may, by an instrument executed by a majority of their number, abolish
any class and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment to this
Declaration.
Section 5.13. Assent to Declaration of Trust. Every Shareholder, by virtue
of having become a shareholder, shall be held to have expressly assented and
agreed to the terms hereof and to have become a party hereto.
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ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed or repurchased Shares may be resold by the Trust.
The Trust shall redeem the Shares at the price determined as hereinafter
set forth, upon the appropriately verified written application of the record
holder thereof (or upon such other form of request as the Trustees may
determine) at such office or agency as may be designated from time to time for
that purpose by the Trustees. The Trustees may from time to time specify
additional conditions, not inconsistent with the 1940 Act, regarding the
redemption of Shares in the Trust's then effective registration statement or
prospectus under the Securities Act of 1933.
Section 6.2. Price. Shares will be redeemed at their net asset value
determined as set forth in Section 7.1 hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall
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be the net asset value of such Shares next determined as set forth in Section
7.1 hereof after receipt of such application.
Section 6.3. Payment. Payment for such Shares shall be made in cash or in
property out of the assets of the relevant series of the Trust to the
Shareholder of record at such time and in the manner, not inconsistent with the
1940 Act or other applicable laws, as may be specified from time to time in the
Trust's then effective registration statement or prospectus under the Securities
Act of 1933, subject to the provisions of Section 6.4 hereof.
Section 6.4. Effect of Suspension of Determination of Net Asset Value. If,
pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of the
determination of net asset value, the rights of Shareholders (including those
who shall have applied for redemption pursuant to Section 6.1 hereof but who
shall not yet have received payment) to have Shares redeemed and paid for by the
Trust shall be suspended until the termination of such suspension is declared.
Any record holder who shall have his redemption right so suspended may, during
the period of such suspension, by appropriate written notice of revocation at
the office or agency where application was made, revoke any application for
redemption not honored and withdraw any certificates on deposit. The redemption
price of Shares for which redemption applications have not been revoked shall be
the
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net asset value of such Shares next determined as set forth in Section 7.1
after the termination of such suspension, and payment shall be made within seven
(7) days after the date upon which the application was made plus the period
after such application during which the determination of net asset value was
suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per Share determined as of the time when the purchase or contract of
purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof, provided payment is not made for the
Shares prior to the time as of which such net asset value is determined.
Section 6.6. Redemption of Shareholder's Interest. The Trust shall have the
right at any time without prior notice to the Shareholder to redeem Shares of
any Shareholder for their then current net asset value per Share if at such time
the Shareholder owns Shares having an aggregate net asset value of less than an
amount set from time to time by the Trustees subject to such terms and
conditions as the Trustees may approve, and subject to the Trust's giving
general notice to all Shareholders of its intention to avail itself of such
right, either by
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publication in the Trust's prospectus, if any, or by such other means as the
Trustees may determine.
Section 6.7. Reductions in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may reduce the number of outstanding Shares
pursuant to the provisions of Section 7.3.
Section 6.8. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary weekend and holiday closing, (ii)
during which trading on the New York Stock Exchange is restricted, (iii) during
which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
(iv) during any other period when the Commission may for the protection of
security holders of the Trust by order permit suspension of the right of
redemption or postponement of the date of payment or redemption; provided that
applicable rules and regulations of the Commission shall govern as to whether
the conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify but not later than the close
of business on the business
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day next following the declaration of suspension, and thereafter there shall be
no right of redemption or payment on redemption until the Trust shall declare
the suspension at an end, except that the suspension shall terminate in any
event on the first day on which said stock exchange shall have reopened or the
period specified in (ii) or (iii) shall have expired (as to which, in the
absence of an official ruling by the Commission, the determination of the Trust
shall be conclusive). In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the net asset value existing after the termination of the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The value of the assets of any series of the
Trust shall be determined by appraisal of the securities allocated to such
series, such appraisal to be on the basis of the amortized cost of such
securities in the case of money market securities or market value in the case of
other securities, or, consistent with the rules and regulations of the
Commission, by such other method as shall be deemed to reflect the fair value
thereof, determined in good faith by or under the direction of the Trustees.
From the total value of said assets, there shall be deducted all indebtedness,
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interest, taxes, payable or accrued, including estimated taxes on unrealized
book profits, expenses and management charges accrued to the appraisal date, net
income determined and declared as a distribution and all other items in the
nature of liabilities attributable to the Trust or such series or class thereof
which shall be deemed appropriate. The net asset value of a Share shall be
determined by dividing the net asset value of the class, or, or if no class has
been established, of the series, or, if no series has been established, of the
Trust, by the number of Shares of that class, or series, or of the Trust, as
applicable, outstanding. The net asset value of the Trust or any class or series
of the Trust shall be determined pursuant to the procedure and methods
prescribed or approved by the Trustees in their discretion and as set forth in
the most recent Registration Statement of the Trust as filed with the Securities
and Exchange Commission pursuant to the requirements of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and the Rules
thereunder. The net asset value of the Shares shall be determined at least once
on each business day, as of the close of trading on the New York Stock Exchange
or as of such other time or times as the Trustees shall determine. The power and
duty to make the daily calculations may be delegated by the Trustees to the
Investment Adviser, the Custodian, the Transfer Agent or such other Person as
the Trustees by resolution may determine. The Trustees may suspend the daily
determination of net asset value to the extent permitted by the 1940 Act.
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Section 7.2. Distributions to Shareholders. The Trustees shall from time to
time distribute ratably among the Shareholders of a series such proportion of
the net profits, surplus (including paid-in surplus), capital, or assets of such
series held by the Trustees as they may deem proper. Such distributions may be
made in cash or property (including without limitation any type of obligations
of such series or any assets thereof), and the Trustees may distribute ratably
among the Shareholders additional Shares of such series issuable hereunder in
such manner, at such times, and on such terms as the Trustees may deem proper.
Such distributions may be among the Shareholders of record at the time of
declaring a distribution or among the Shareholders of record at such other date
or time or dates or times as the Trustees shall determine. The Trustees may in
their discretion determine that, solely for the purposes of such distributions,
Outstanding Shares shall exclude Shares for which orders have been placed
subsequent to a specified time on the date the distribution is declared or on
the next preceding day if the distribution is declared as of a day on which New
York banks are not open for business, all as described in the then effective
registration statement or prospectus under the Securities Act of 1933. Pursuant
to a standing resolution, the Trustees may declare distributions on a daily or
other periodic basis. The Trustees may always retain from the net profits such
amount as they may deem necessary to pay the debts or expenses of
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the series or to meet obligations of the series, or as they may deem desirable
to use in the conduct of its affairs or to retain for future requirements or
extensions of the business. The Trustees may adopt and offer to Shareholders
such dividend reinvestment plans, cash dividend payout plans or related plans as
the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or the series to avoid or reduce liability for taxes.
Section 7.3. Determination of Net Income; Constant Net Asset Value;
Reduction of Outstanding Shares. Subject to Section 5.11 and Section 5.12
hereof, the net income of any series of the Trust shall be determined in such
manner as the Trustees shall provide by resolution. Expenses of the series,
including the advisory or management fee, shall be accrued each day. Such net
income may be determined by or under the direction of the Trustees as of the
close of trading on the New York Stock Exchange on each day on which such market
is open or as of such other time or times as the Trustees shall determine, and,
except
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as provided herein, all the net income of the series, so determined, may be
declared as a dividend on the Outstanding Shares of such series. If, for any
reason, the net income of the series determined at any time is a negative
amount, the Trustees shall have the power (i) to offset each Shareholder's pro
rata share of such negative amount from the accrued dividend account of such
Shareholder, or (ii) to reduce the number of Outstanding Shares of the series by
reducing the number of Shares in the account of such Shareholder by that number
of full and factional Shares which represents the amount of such excess negative
net income, or (iii) to cause to be recorded on the books of the series an asset
account in the amount of such negative income, which account may be reduced by
the amount, provided that the same shall thereupon become the property of the
series and shall not be paid to any Shareholder, of dividends declared
thereafter upon the Outstanding Shares on the day such negative net income is
experienced, until such asset account is reduced to zero; or (iv) to combine the
methods described in clauses (i), (ii) and (iii) of this sentence, in order to
cause the net asset value per Share of the series to remain at a constant amount
per Outstanding Share immediately after each such determination and declaration.
The Trustees shall also have the power to fail to declare a dividend out of net
income for the purpose of causing the net asset value per Share of the series to
be increased to a constant amount. The Trustees shall not be required to adopt,
but may at any time adopt, discontinue or amend the practice of
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maintaining the net asset value per Share of a series at a constant amount.
Section 7.4. Allocation Between Principal and Income. The Trustees shall
have full discretion to determine whether any cash or property received shall be
treated as income or as principal and whether any item of expense shall be
charged to the income or the principal account, and their determination made in
good faith shall be conclusive upon the Shareholders. In the case of stock
dividends received, the Trustees shall have full discretion to determine, in the
light of the particular circumstances, how much if any of the value thereof
shall be treated as income, the balance, if any, to be treated as principal.
Section 7.5. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the series' Shares or net income, or the declaration
and payment of dividends and distributions as they may deem necessary or
desirable. Without limiting the generality of the foregoing, the Trustees may
establish several series of Shares in accordance with Section 5.11, and declare
dividends thereon in such manner as they shall determine.
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ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust or the series of the Trust shall continue
without limitation of time but subject to the provisions of this Article VIII.
Section 8.2. Termination of Trust or Series of the Trust. (a) The Trust or
any series of the Trust may be terminated by the affirmative vote of the holders
of not less than two-thirds of the Shares outstanding and entitled to vote, at
any meeting of the Shareholders or by an instrument in writing, without a
meeting, signed by a majority of the Trustees and consented to by the holders of
not less than two-thirds of such Shares, or by such other vote as may be
established by the Trustees with respect to any series of Shares. Upon the
termination of the Trust or any series of the Trust,
(i) The Trust or the series of the Trust shall carry on no
business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust or the series of the Trust and all of the powers of the Trustees
under this Declaration shall continue until the affairs of the Trust
or the series of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust or the series
of the Trust, collect its assets,
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sell, convey, assign, exchange, transfer or otherwise dispose of all
or any part of the remaining Trust Property or property of the series
of the Trust to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate its
business; provided that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
Property or property of the series of the Trust shall require
Shareholder approval in accordance with Section 8.4 hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and
refunding agreements as they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property or property of
the series of the Trust, in cash or in kind or partly each, among the
Shareholders according to their respective rights.
(b) After termination of the Trust or any series of the Trust and
distribution to the Shareholders as herein provided, a majority of the Trustees
shall execute and lodge
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among the records of the Trust or the series of the Trust an instrument in
writing setting forth the fact of such termination, and the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder, and
the rights and interests of all Shareholders shall thereupon cease.
Section 8.3. Amendment Procedure. (a) This Declaration may be amended by a
vote of the holders of a majority of the Shares outstanding and entitled to vote
or by any instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of a majority of the Shares outstanding
and entitled to vote. The Trustees may also amend this Declaration without the
vote or consent of Shareholders to change the name of the Trust, to supply any
omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, to make any other changes in the Declaration
which do not materially adversely affect the rights of Shareholders hereunder,
or if they deem it necessary to conform this Declaration to the requirements of
applicable federal laws or regulations or the requirements of the regulated
investment company provisions of the Internal Revenue Code, but the Trustees
shall not be liable for failing to do so.
(b) No amendment may be made under this Section 8.3 which would change any
rights with respect to any Shares of the Trust by reducing the amount payable
thereon upon liquidation of
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the Trust or by diminishing or eliminating any voting rights pertaining thereto,
except with the vote or consent of the holders of two-thirds of the Shares
outstanding and entitled to vote, or by such other vote as may be established by
the Trustees with respect to any series of Shares. Nothing contained in this
Declaration shall permit the amendment of this Declaration to impair the
exemption from personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall become effective,
this Declaration may be terminated or amended in any respect by the affirmative
vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.
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Section 8.4. Merger, Consolidation and Sale of Assets. The Trust may merge
or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized at any meeting of Shareholders called
for the purpose by the affirmative vote of the holders of two-thirds of the
Shares outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting, consented to by the holders of two-thirds of the
Shares or by such other vote as may be established by the Trustees with respect
to any series of Shares; provided, however, that if such merger, consolidation,
sale, lease or exchange is recommended by the Trustees, the vote or written
consent of the holders of a majority of the Shares outstanding and entitled to
vote, or such other vote or written consent as may be established by the
Trustees with respect to any series of Shares, shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to the
statutes of the Commonwealth of Massachusetts.
Section 8.5. Incorporation. With the approval of the holders of a majority
of the Shares outstanding and entitled to vote, or by such other vote as may be
established by the Trustees with respect to any series of Shares, the Trustees
may cause to
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be organized or assist in organizing a corporation or corporations
under the laws of any jurisdiction or any other trust, partnership, association
or other organization to take over all of the Trust Property or to carry on any
business in which the Trust shall directly or indirectly have any interest, and
to sell, convey and transfer the Trust Property to any such corporation, trust,
association or organization in exchange for the Shares or securities thereof or
otherwise, and to lend money to, subscribe for the Shares or securities of, and
enter into any contracts with any such corporation, trust, partnership,
association or organization, or any corporation, partnership, trust, association
or organization in which the Trust holds or is about to acquire shares or any
other interest. The Trustees may also cause a merger or consolidation between
the Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organizations or entities.
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ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semiannually submit to the Shareholders a
written financial report, which may be included in the Trust's prospectus, of
the transactions of the Trust, including financial statements which shall at
least annually be certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
Section 10.1. Filing. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Each amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner
provided herein, and unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing. A restated Declaration, integrating into a single
instrument all of the provisions of the Declaration which are then in effect and
operative, may be executed from time to time by a majority of the Trustees and
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shall, upon filing with the Secretary of the Commonwealth of Massachusetts, be
conclusive evidence of all amendments contained therein and may hereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
Section 10.2. Governing Law. This Declaration is executed by the Trustees
and delivered in the Commonwealth of Massachusetts and with reference to the
laws thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said State.
Section 10.3. Counterparts. This Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 10.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing
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any written instrument satisfies the requirements of this Declaration, (e) the
form of any By-laws adopted by or the identity of any officers elected by the
Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
Section 10.5. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
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Section 10.6. Principal Place of Business. The principal place of business
of the Trust is c/o New England Investment Companies L.P., 100 Park Avenue, New
York, New York 10017. The principal place of business may be changed by
resolution of a majority of the Trustees.
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IN WITNESS WHEREOF, the undersigned has executed this instrument this 20th
day of January, 1994.
\s\ Caroline Pearson
--------------------
Caroline Pearson
(as Trustee and not individually)
Ten Post Office Square, Suite 1230
Boston, MA 02109
\s\ Mary C. Cove
----------------
Mary C. Cove
(as Trustee and not individually)
Ten Post Office Square, Suite 1230
Boston, MA 02109
COMMONWEALTH OF MASSACHUSETTES
ss. January 20, 1994
There personally appeared the above named Caroline Pearson and Mary C. Cove
who acknowledge the foregoing insturment to be their free act and deed.
Before me,
\s\ Marilyn Baker
-----------------
Notary Public
My Commission Expires: 11/17/2000
BY-LAWS
OF
INSTITUTIONAL DAILY INCOME FUND
JANUARY 20, 1994
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS 1
ARTICLE II - OFFICES 1
Section 1. Resident Agent 1
Section 2. Offices 1
ARTICLE III - SHAREHOLDERS 2
Section 1. Meetings 2
Section 2. Notice of Meetings 2
Section 3. Record Date for Meetings
and Other Purposes 2
Section 4. Proxies 3
Section 5. Action without Meeting 4
ARTICLE IV - TRUSTEES 4
Section 1. Meetings of the Trustees 4
Section 2. Quorum and Manner of Acting 6
ARTICLE V - COMMITTEES 6
Section 1. Executive and Other Committees 6
Section 2. Meetings, Quorum and Manner of Acting 7
ARTICLE VI - OFFICERS 8
Section 1. General Provisions 8
Section 2. Term of Office and Qualifications 8
Section 3. Removal 9
Section 4. Powers and Duties of the President 9
Section 5. Powers and Duties of Vice Presidents 9
Section 6. Powers and Duties of the Treasurer 10
Section 7. Powers and Duties of the Secretary 10
Section 8. Powers and Duties of Assistant
Treasurers 11
Section 9. Powers and Duties of Assistant
Secretaries 11
Section 10. Compensation of Officers and Trustees
and Members of the Advisory Board 11
ARTICLE VII - FISCAL YEAR 12
ARTICLE VIII - SEAL 12
ARTICLE IX - WAIVERS OF NOTICE 12
<PAGE>
TABLE OF CONTENTS (continued)
Page
----
ARTICLE X - CUSTODY OF SECURITIES 13
Section 1. Employment of a Custodian 13
Section 2. Action Upon Termination of
Custodian Agreement 13
Section 3. Provisions of Custodian Agreement 14
Section 4. Central Certificate System 15
Section 5. Acceptance of Receipts in Lieu of
Certificates 15
ARTICLE XI - AMENDMENTS 16
ARTICLE XII - INSPECTION OF BOOKS 16
ARTICLE XIII - MISCELLANEOUS 16
-ii-
<PAGE>
BY-LAWS
OF
INSTITUTIONAL DAILY INCOME FUND
ARTICLE I
DEFINITIONS
Any terms defined in the Declaration of Trust of Institutional
Daily Income Fund dated January 20, 1994, as amended from time to time, shall
have the same meaning when used herein.
ARTICLE II
OFFICES
Section 1. Resident Agent. The Trust shall maintain a resident
agent in the Commonwealth of Massachusetts, which agent shall initially be CT
Corporation System, 2 Oliver Street, Boston, Massachusetts 02109. The Trustees
may designate a successor resident agent, provided, however, that such
appointment shall not become effective until written notice thereof is delivered
to the office of the Secretary of the Commonwealth.
Section 2. Offices. The Trust may have its principal office
and other offices in such places within as well as without the Commonwealth as
the Trustees may from time to time determine.
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ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders shall be
held as provided in the Declaration of Trust at such place within or without the
Commonwealth of Massachusetts as the Trustees shall designate. The holders of a
majority of outstanding Shares present in person or by proxy shall constitute a
quorum at any meeting of the Shareholders.
Section 2. Notice of Meetings. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder at his address as recorded on
the register of the Trust mailed at least ten (10) days and not more than sixty
(60) days before the meeting. Only the business stated in the notice of the
meeting shall be considered at such meeting. Any adjourned meeting may be held
as adjourned without further notice. No notice need be given to any Shareholder
who shall have failed to inform the Trust of his current address or if a written
waiver of notice, executed before or after the meeting by the Shareholder or his
attorney thereunto authorized, is filed with the records of the meeting.
Section 3. Record Date for Meetings and Other Purposes. For
the purpose of determining the Shareholders who are entitled to notice of and to
vote at any meeting, or to participate in any distribution, or for the purpose
of any other
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action, the Trustees may from time to time close the transfer books
for such period, not exceeding thirty (30) days, as the Trustees may determine;
or without closing the transfer books the Trustees may fix a date not more than
sixty (60) days prior to the date of any meeting of Shareholders or distribution
or other action as a record date for the determinations of the persons to be
treated as Shareholders of record for such purposes, except for dividend
payments which shall be governed by the Declaration.
Section 4. Proxies. At any meeting of Shareholders, any holder
of Shares entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Shareholders of record shall be entitled to
vote. Each whole share shall be entitled to one vote as to any matter on which
it is entitled by the Declaration to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. When any Share is held jointly by
several persons, any one of them may vote at any meeting in person or by proxy
in respect of such Share, but if more than one of them shall be present at such
meeting in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote
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shall not be received in respect of such Share. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. If the holder of any such Share is a minor or
legally incompetent, and subject to guardianship or the legal control of any
other person as regards the charge or management of such Share, he may vote by
his guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy.
Section 5. Action Without Meeting. Any action which may be
taken by Shareholders may be taken without a meeting if a majority of
Shareholders entitled to vote on the matter (or such larger proportion thereof
as shall be required by law, the Declaration or these By-Laws for approval of
such matter) consent to the action in writing and the written consents are filed
with the records of the meetings of Shareholders. Such consents shall be treated
for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be
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given. Meetings of the Trustees other than regular or stated meetings shall be
held whenever called by the President, or by any one of the Trustees, at the
time being in office. Notice of the time and place of each meeting other than
regular or stated meetings shall be given by the Secretary or an Assistant
Secretary or by the officer or Trustee calling the meeting and shall be mailed
to each Trustee at least two days before the meeting, or shall be faxed,
telegraphed, cabled, or wirelessed to each Trustee at his business address, or
personally delivered to him at least one day before the meeting. Such notice
may, however, be waived by any Trustee. Notice of a meeting need not be given to
any Trustee if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting, or to any Trustee who attends
the meeting without protesting prior thereto or at its commencement the lack of
notice to him. A notice or waiver of notice need not specify the purpose of any
meeting. The Trustees may meet by means of a telephone conference circuit or
similar communications equipment by means of which all persons participating in
the meeting shall be deemed to have been held at a place designated by the
Trustees at the meeting. Participation in a telephone conference meeting shall
constitute presence in person at such meeting. Any action required or permitted
to be taken at any meeting of the Trustees may be taken by the Trustees without
a meeting if all the Trustees consent to the action in writing and the written
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consents are filed with the records of the Trustees' meetings. Such consents
shall be treated as a vote for all purposes.
Section 2. Quorum and Manner of Acting. A majority of the
Trustees shall be present in person at any regular or special meeting of the
Trustees in order to constitute a quorum for the transaction of business at such
meeting and (except as otherwise required by law, the Declaration or these
By-Laws) the act of a majority of the Trustees present at any such meeting, at
which a quorum is present, shall be the act of the Trustees. In the absence of a
quorum, a majority of the Trustees present may adjourn the meeting from time to
time until a quorum shall be present. Notice of an adjourned meeting need not be
given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by
vote of a majority of all the Trustees may elect from their own number an
Executive Committee to consist of not less than three (3) to hold office at the
pleasure of the Trustees, which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session, including
the purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to them except those
powers which by
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law, the Declaration or these By-Laws they are prohibited from delegating. The
Trustees may also elect from their own number other Committees from time to
time, the number composing such Committees, the powers conferred upon the same
(subject to the same limitations as with respect to the Executive Committee) and
the term of membership on such Committees to be determined by the Trustees. The
Trustees may designate a chairman of any such Committee. In the absence of such
designation, the Committee may elect its own Chairman.
Section 2. Meetings, Quorum and Manner of Acting. The Trustees
may (1) provide for stated meetings of any Committee, (2) specify the manner of
calling and notice required for special meetings of any Committee, (3) specify
the number of members of a Committee required to constitute a quorum and the
number of members of a Committee required to exercise specified powers delegated
to such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its
meetings and records of decisions taken without a meeting and cause them to be
recorded in a book designated for that purpose and kept in the Office of the
Trust.
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ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall
be a President, a Treasurer and a Secretary, who shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as the
business of the Trust may require, including one or more Executive Vice
Presidents, one or more Vice Presidents, one or more Assistant Secretaries, and
one or more Assistant Treasurers. The Trustees may delegate to any officer or
Committee the power to appoint any subordinate officers or agents.
Section 2. Term of Office and Qualifications. Except as
otherwise provided by law, the Declaration or these By-Laws, the President, the
Treasurer and the Secretary shall each hold office until his successor shall
have been duly elected and qualified, and all other officers shall hold office
at the pleasure of the Trustees. The Secretary and Treasurer may be the same
person. A Vice President and the Treasurer or Assistant Treasurer or a Vice
President and the Secretary or Assistant Secretary may be the same person, but
the offices of Vice President and Secretary and Treasurer shall not be held by
the same person. The President shall hold no other office. Except as above
provided, any two offices may be held by the same person. Any officer may be,
but none need be, a Trustee or Shareholder.
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Section 3. Removal. The Trustees, at any regular or special
meeting of the Trustees, may remove any officer without cause, by a vote of a
majority of the Trustees then in office. Any officer or agent appointed by an
officer or Committee may be removed with or without cause by such appointing
officer or Committee.
Section 4. Powers and Duties of the President. The President
may call meetings of the Trustees and of any Committee thereof when he deems it
necessary and shall preside at all meetings of the Shareholders. Subject to the
control of the Trustees and to the control of any Committees of the Trustees,
within their respective spheres, as provided by the Trustees, he shall at all
times exercise a general supervision and direction over the affairs of the
Trust. He shall have the power to employ attorneys and counsel for the Trust and
to employ such subordinate officers, agents, clerks and employees as he may find
necessary to transact the business of the Trust. He shall also have the power to
grant, issue, execute or sign such powers of attorney, proxies or other
documents as may be deemed advisable or necessary in furtherance of the
interests of the Trust. The President shall have such other powers and duties as
from time to time may be conferred upon or assigned to him by the Trustees.
Section 5. Powers and Duties of Vice Presidents. In the
absence or disability of the President, any Vice President designated by the
Trustees shall perform all the duties and may
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exercise any of the powers of the President, subject to the control of the
Trustees. Each Vice President shall perform such other duties as may be assigned
to him from time to time by the Trustees and the President.
Section 6. Powers and Duties of the Treasurer. The Treasurer
shall be the principal financial and accounting officer of the Trust. He shall
deliver all funds of the Trust which may come into his hands to such Custodian
as the Trustees may employ pursuant to Article X of these By-Laws. He shall in
general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Trustees.
Section 7. Powers and Duties of the Secretary. The Secretary
shall keep the minutes of all meetings of the Trustees and of the Shareholders
in proper books provided for that purpose; he shall have custody of the seal of
the Trust; he shall have charge of the Share transfer books, lists and records
unless the same are in the charge of the Transfer Agent. He shall attend to the
giving and serving of all notices by the Trust in accordance with the provisions
of these By-Laws and as required by law; and subject to these By-Laws, he shall
in general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Trustees.
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Section 8. Powers and Duties of Assistant Treasurers. In the
absence or disability of the Treasurer, any Assistant Treasurer designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Treasurer. Each Assistant Treasurer shall perform such other duties as
from time to time may be assigned to him by the Trustees.
Section 9. Powers and Duties of Assistant Secretaries. In the
absence or disability of the Secretary, any Assistant Secretary designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Secretary. Each Assistant Secretary shall perform such other duties as
from time to time may be assigned to him by the Trustees.
Section 10. Compensation of Officers and Trustees and Members
of the Advisory Board. Subject to any applicable provisions of the Declaration,
the compensation of the officers and Trustees and members of any Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.
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ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of
January in each year and shall end on the 31st day of December in each year,
provided, however, that the Trustees may from time to time change the fiscal
year.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and
shall have such inscription thereon as the Trustees may from time to time
prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the
Declaration or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been faxed for the purposes of these By-Laws upon confirmation of facsimile
transmission to a number designated for that purpose by the intended recipient.
A notice shall be deemed to have been telegraphed, cabled or wirelessed for the
purposes of these By-Laws when it has been delivered to a representative of any
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telegraph, cable or wireless company with instructions that it be telegraphed,
cabled or wirelessed.
ARTICLE X
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall place
and at all times maintain in the custody of a Custodian (including any
sub-custodian for the Custodian, which may be a foreign bank which meets
applicable requirements of law) all trusts, securities and similar investments
included in the Trust Property. The Custodian (and any sub-custodian) shall be a
bank having not less than $2,000,000 aggregate capital, surplus and undivided
profits and shall be appointed from time to time by the Trustees, who shall fix
its remuneration.
Section 2. Action Upon Termination of Custodian Agreement.
Upon termination of a Custodian Agreement or inability of the Custodian to
continue to serve, the Trustees shall promptly appoint a successor custodian,
but in the event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Trustees shall call as promptly as
possible a special meeting of the Shareholders to determine whether the Trust
shall function without a custodian or shall be liquidated. If so directed by
vote of the holders of a majority of the outstanding voting securities, the
Custodian
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shall deliver and pay over all Trust Property held by it as specified in such
vote.
Section 3. Provisions of Custodian Agreement. The following
provisions shall apply to the employment of a Custodian and to any contract
entered into with the Custodian so employed:
The Trustees shall cause to be delivered to the Custodian
all securities included in the Trust Property or to which
the Trust may become entitled, and shall order the same to
be delivered by the Custodian only in completion of a sale,
exchange, transfer, pledge, loan of portfolio securities to
another person, or other disposition thereof, all as the
Trustees may generally or from time to time require or
approve or to a successor Custodian; and the Trustees shall
cause all trusts included in the Trust Property or to which
it may become entitled to be paid to the Custodian, and
shall order the same disbursed only for investment against
delivery of the securities acquired, or the return of cash
held as collateral for loans of portfolio securities, or in
payment of expenses, including management compensation, and
liabilities of the Trust, including distributions to
shareholders, or to a successor Custodian.
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Section 4. Central Certificate System. Subject to such
rules, regulations and orders as the Commission may adopt, the Trustees may
direct the Custodian to deposit all or any part of the securities owned by the
Trust in a system for the central handling of securities established by a
national securities exchange or a national securities association registered
with the Commission under the Securities Exchange Act of 1934, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
Section 5. Acceptance of Receipts in Lieu of Certificates.
Subject to such rules, regulations and orders as the Commission may adopt, the
Trustees may direct the Custodian to accept written receipts or other written
evidences indicating purchases of securities held in book-entry form in the
Federal Reserve System in accordance with regulations promulgated by the Board
of Governors of the Federal Reserve System and the local Federal Reserve Banks
in lieu of receipt of certificates representing such securities.
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ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or
repealed, or new By-Laws may be adopted by (a) vote of a majority of the Shares
outstanding and entitled to vote or (b) the Trustees, provided, however, that no
By-Law may be amended, adopted or repealed by the Trustees if such amendment,
adoption or repeal requires, pursuant to law, the Declaration or these By-Laws,
a vote of the Shareholders.
ARTICLE XII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to
what extent, and at what times and places, and under what conditions and
regulations the accounts and books of the Trust or any of them shall be open to
the inspection of the shareholders; and no shareholder shall have any right of
inspecting any account or book or document of the Trust except as conferred by
laws or authorized by the Trustees or by resolution of the shareholders.
ARTICLE XIII
MISCELLANEOUS
(A) Except as hereinafter provided, no officer or Trustee of the
Trust and no partner, officer, director or
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shareholder of the Investment Adviser of the Trust or of the Distributor of the
Trust, and no Investment Adviser or Distributor of the Trust, shall take long or
short positions in the securities issued by the Trust.
(1) The foregoing provisions shall not prevent the
Distributor from purchasing Shares from the Trust if such purchases
are limited (except for reasonable allowances for clerical errors,
delays and errors of transmission and cancellation of orders) to
purchases for the purpose of filling orders for such Shares
received by the Distributor, and provided that orders to purchase
from the Trust are entered with the Trust or the Custodian promptly
upon receipt by the Distributor of purchase orders for such Shares,
unless the Distributor is otherwise instructed by its customer.
(2) The foregoing provision shall not prevent the
Distributor from purchasing Shares of the Trust as agent for the
account of the Trust.
(3) The foregoing provision shall not prevent the purchase
from the Trust or from the Distributor of Shares issued by the
Trust, by any officer, or Trustee of the Trust or by any partner,
officer, director or shareholder of the Investment Adviser of the
Trust or of the Distributor of the Trust at the price available to
the
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public generally at the moment of such purchase, or as described in the then
currently effective Prospectus of the Trust.
(4) The foregoing shall not prevent the Distributor, or any
affiliate thereof, of the Trust from purchasing Shares prior to the
effectiveness of the first registration statement relating to the
Shares under the Securities Act of 1933.
(B) The Trust shall not lend assets of the Trust to any
officer or Trustee of the Trust, or to any partner, officer, director or
shareholder of, or person financially interested in, the Investment Adviser of
the Trust, or the Distributor of the Trust, or to the Investment Adviser of the
Trust or to the Distributor of the Trust.
(C) The Trust shall not impose any restrictions upon the transfer
of the Shares of the Trust except as provided in the Declaration, but this
requirement shall not prevent the charging of customary transfer agent fees.
(D) The Trust shall not permit any officer or Trustee of the Trust,
or any partner, officer or director of the Investment Adviser or Distributor of
the Trust to deal for or on behalf of the Trust with himself as principal or
agent, or with any partnership, association or corporation in which he has a
financial interest; provided that the foregoing provisions shall not prevent (a)
officers and Trustees of the Trust or partners,
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officers or directors of the Investment Adviser or Distributor of the Trust from
buying, holding or selling shares in the Trust, or from being partners, officers
or directors or otherwise financially interested in the Investment Adviser or
Distributor of the Trust; (b) purchases or sales of securities or other property
by the Trust from or to an affiliated person or to the Investment Adviser or
Distributor of the Trust if such transaction is exempt from the applicable
provisions of the 1940 Act; (c) purchases of investments for the portfolio of
the Trust or sales of investments owned by the Trust through a security dealer
who is, or one or more of whose partners, shareholders, officers or directors
is, an officer or Trustee of the Trust, or a partner, officer or director of the
Investment Adviser or Distributor of the Trust, if such transactions are handled
in the capacity of broker only and commissions charged do not exceed customary
brokerage charges for such services; (d) employment of legal counsel, registrar,
Transfer Agent, dividend disbursing agent or Custodian who is, or has a partner,
shareholder, officer, or director who is, an officer or Trustee of the
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Trust, or a partner, officer or director of the Investment Adviser or
Distributor of the Trust, if only customary fees are charged for services to the
Trust; (e) sharing statistical research, legal and management expenses and
office hire and expenses with any other investment company in which an officer
or Trustee of the Trust, or a partner, officer or director of the Investment
Adviser or Distributor of the Trust, is an officer or director or otherwise
financially interested.
END OF BY-LAWS
CUSTODY AGREEMENT
THIS AGREEMENT made the 1st day of April , 1994, by and between INVESTORS
FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of the state
of Missouri, having its trust office located at 127 West 10th Street, Kansas
City, Missouri 64105 ("Custodian"), and The Funds listed in Exhibit A , a
_______________ corporation, having its principal office and place of business
at 600 Fifth Avenue; New York, New York 10020 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of Fund's investment portfolio; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian as
custodian of the securities and monies at any time owned by the Fund.
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to Custodian:
1. That it is a corporation or trust (as specified above) duly
organized and existing and in good standing under the laws of its
state of organization, and that it is registered under the
Investment Company Act of 1940 (the "1940 Act"); and
2. That it has the requisite power and authority under applicable
law, its articles of incorporation and its bylaws to enter into
this Agreement; that it has taken all requisite action necessary
to appoint Custodian as custodian for the Fund; that this
Agreement has been duly executed and delivered by Fund; and that
this Agreement constitutes a legal, valid and binding obligation
of Fund, enforceable in accordance with its terms.
<PAGE>
B. Custodian hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and in
good standing under the laws of the State of Missouri; and
2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; that this Agreement has been duly executed and
delivered by Custodian; and that this Agreement constitutes a
legal, valid and binding obligation of Custodian, enforceable in
accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Except as permitted by the 1940 Act, Fund will deliver or cause to be
delivered to Custodian on the effective date of this Agreement, or as
soon thereafter as practicable, and from time to time thereafter, all
portfolio securities acquired by it and monies then owned by it or
from time to time coming into its possession during the time this
Agreement shall continue in effect. Custodian shall have no
responsibility or liability whatsoever for or on account of securities
or monies not so delivered.
B. Delivery of Accounts and Records
Fund shall turn over or cause to be turned over to Custodian all of
the Fund's relevant accounts and records previously maintained.
Custodian shall be entitled to rely conclusively on the completeness
and correctness of the accounts and records turned over to it, and
Fund shall indemnify and hold Custodian harmless of and from any and
all expenses, damages and losses whatsoever arising out of or in
connection with any error, omission, inaccuracy or other deficiency of
such accounts and records or in the failure of Fund to provide, or to
provide in a timely manner, any accounts, records or information
needed by the Custodian to perform its functions hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets of Fund
delivered to it from time to time segregated in a separate account,
and if Fund
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is comprised of more than one portfolio of investment securities (each
a "Portfolio") Custodian shall keep the assets of each Portfolio
segregated in a separate account. Custodian will not deliver, assign,
pledge or hypothecate any such assets to any person except as
permitted by the provisions of this Agreement or any agreement
executed by it according to the terms of Section 3.S. of this
Agreement. Upon delivery of any such assets to a subcustodian pursuant
to Section 3.S. of this Agreement, Custo-dian will create and maintain
records identifying those assets which have been delivered to the
subcustodian as belonging to the Fund, by Portfolio if applicable. The
Custodian is responsible for the safekeeping of the securities and
monies of Fund only until they have been transmitted to and received
by other persons as permitted under the terms of this Agreement,
except for securities and monies transmitted to subcustodians
appointed under Section 3.S. of this Agreement, for which Custodian
remains responsible to the extent provided in Section 3.S. hereof.
Custodian may participate directly or indirectly through a
subcustodian in the Depository Trust Company (DTC), Treasury/Federal
Reserve Book Entry System (Fed System), Participant Trust Company
(PTC) or other depository approved by the Fund (as such entities are
defined at 17 CFR Section 270.17f-4(b)) (each a "Depository" and
collectively, the "Depositories").
D. Registration of Securities
The Custodian shall at all times hold registered securities of the
Fund in the name of the Custodian, the Fund, or a nominee of either of
them, unless specifically directed by instructions to hold such
registered securities in so-called "street name," provided that, in
any event, all such securities and other assets shall be held in an
account of the Custodian containing only assets of the Fund, or only
assets held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the Custodian at
all time shall indicate the Fund or other customer for which such
securities and other assets are held in such account and the
respective interests therein. If,
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however, the Fund directs the
Custodian to maintain securities in "street name", notwithstanding
anything contained herein to the contrary, the Custodian shall be
obligated only to utilize its best efforts to timely collect income
due the Fund on such securities and to notify the Fund of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers. All securities, and the
ownership thereof by Fund, which are held by Custodian hereunder,
however, shall at all times be identifiable on the records of the
Custodian. The Fund agrees to hold Custodian and its nominee harmless
for any liability as a shareholder of record of securities held in
custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other securities or
cash issued or paid in connection with any reorganization,
recapitalization, merger, consolidation, split-up of shares, change of
par value, conversion or otherwise, and will deposit any such
securities in accordance with the terms of any reorganization or
protective plan. Without instructions, Custodian is authorized to
exchange securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par value of
the stock is changed, and, upon receiving payment therefor, to
surrender bonds or other securities held by it at maturity or when
advised of earlier call for redemption, except that Custodian shall
receive instructions prior to surrendering any convertible security.
F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of securities
shall be made by it, deliver to Custodian instructions which shall
specify with respect to each such purchase:
1. If applicable, the name of the Portfolio making such purchase;
2. The name of the issuer and description of the security;
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3. The number of shares and the principal amount purchased, and accrued
interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes and
other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase; and
8. The name of the person from whom or the broker or dealer through whom
the purchase was made.
9. Whether the security is to be received in certificated form or via a
specified Depository.
In accordance with such instructions, Custodian will pay for out of
monies held for the account of Fund, but only insofar as such monies
are available for such purpose, and receive the portfolio securities
so purchased by or for the account of Fund, except that Custodian may
in its sole discretion advance funds to the Fund which may result in
an overdraft because the monies held by the Custodian on behalf of the
Fund are insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, such payment shall
be made by the Custodian only upon receipt of securities: (a) by the
Custodian; (b) by a clearing corporation of a national exchange of
which the Custodian is a member; or (c) by a Depository.
Notwithstanding the foregoing, (i) in the case of a repurchase
agreement, the Custodian may release funds to a Depository prior to
the receipt of advice from the Depository that the securities
underlying such repurchase agreement have been transferred by
book-entry into the account maintained with such Depository by the
Custodian, on behalf of its customers, provided that the Custodian's
instructions to the Depository require that the Depository make
payment of such funds only upon transfer by book-entry of the
securities underlying the repurchase agreement in such account; (ii)
in the case of time deposits, call account deposits, currency deposits
and other deposits, foreign
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exchange transactions, futures contracts or options, the Custodian may
make payment therefor before receipt of an advice or confirmation
evidencing said deposit or entry into such transaction; and (iii) in
the case of the purchase of securities, the settlement of which occurs
outside of the United States of America, the Custodian may make, or
cause a subcustodian appointed pursuant to Section 3.S.2. of this
Agreement to make, payment therefor in accordance with generally
accepted local custom and market practice.
G. Sales and Deliveries of Investments of the Fund - Other than Options
and Futures
Fund will, on each business day on which a sale of investment
securities (other than options and futures) of Fund has been made,
deliver to Custodian instructions specifying with respect to each such
sale:
1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the securities;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by Fund upon such sale; and
9. The name and address of the broker or dealer through whom or person
to whom the sale was made. 1.
In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of Fund to the broker or other person specified in the instructions
relating to such sale. Except as otherwise instructed by Fund, such
delivery shall be made upon receipt of payment therefor: (a) in such
form as is satisfactory to the
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Custodian; (b) credit to the account of the Custodian with a clearing
corporation of a national securities exchange of which the Custodian
is a member; or (c) credit to the account of the Custodian, on behalf
of its customers, with a Depository. Notwithstanding the foregoing:
(i) in the case of securities held in physical form, such securities
shall be delivered in accordance with "street delivery custom" to a
broker or its clearing agent; or (ii) in the case of the sale of
securities, the settlement of which occurs outside of the United
States of America, the Custodian may make, or cause a subcustodian
appointed pursuant to Section 3.S.2. of this Agreement to make,
payment therefor in accordance with generally accepted local custom
and market practice.
H. Purchases or Sales of Options and Futures
Fund will, on each business day on which a purchase or sale of the
following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:
1. If applicable, the name of the Portfolio making such purchase or
sale;
2. Security Options
A. The underlying security;
B. The price at which purchased or sold;
C. The expiration date;
D. The number of contracts;
E. The exercise price;
F. Whether the transaction is an opening, exercising, expiring
or closing transaction;
G. Whether the transaction involves a put or call;
H. Whether the option is written or purchased;
I. Market on which option traded; and
J. Name and address of the broker or dealer through whom the
sale or purchase was made.
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3. Options on Indices
A. The index;
B. The price at which purchased or sold;
C. The exercise price;
D. The premium;
E. The multiple;
F. The expiration date;
G. Whether the transaction is an opening, exercising, expiring
or closing transaction;
H. Whether the transaction involves a put or call;
I. Whether the option is written or purchased; and
J. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions.
4. Security Index Futures Contracts
A. The last trading date specified in the contract and, when
available, the closing level, thereof;
B. The index level on the date the contract is entered into;
C. The multiple;
D. Any margin requirements;
E. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of
Custodian, Fund shall deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement which shall be incorporated by reference into this
Custody Agreement); and
F. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions. 1.
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5. Options on Index Future Contracts
A. The underlying index future contract;
B. The premium;
C. The expiration date;
D. The number of options;
E. The exercise price;
F. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
G. Whether the transaction involves a put or call;
H. Whether the option is written or purchased; and
I. The market on which the option is traded.
I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of Fund, and subject to
such additional terms and conditions as Custodian may require:
1. Upon receipt of instructions, Custodian will release or cause to
be released securities held in custody to the pledgee designated
in such instructions by way of pledge or hypothecation to secure
any loan incurred by Fund; provided, however, that the securities
shall be released only upon payment to Custodian of the monies
borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, further securities
may be released or caused to be released for that purpose upon
receipt of instructions. Upon receipt of instructions, Custodian
will pay, but only from funds available for such purpose, any
such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing such loan.
2. Upon receipt of instructions, Custodian will release securities
held in custody to the borrower designated in such instructions;
provided, however, that the securities will be released only upon
deposit with Custodian of full cash collateral as specified in
such instructions, and
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that Fund will retain the right to any dividends, interest or
distribution on such loaned securities. Upon receipt of
instructions and the loaned securities, Custodian will release
the cash collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with securities or other property of Fund
except as may be otherwise provided in this Agreement or directed from
time to time by the Fund in writing.
K. Deposit Accounts
Custodian will open and maintain one or more special purpose deposit
accounts in the name of Custodian ("Accounts"), subject only to draft
or order by Custodian upon receipt of instructions. All monies
received by Custodian from or for the account of Fund shall be
deposited in said Accounts. Barring events not in the control of the
Custodian such as strikes, lockouts or labor disputes, riots, war or
equipment or transmission failure or damage, fire, flood, earthquake
or other natural disaster, action or inaction of governmental
authority or other causes beyond its control, at 9:00 a.m., Kansas
City time, on the second business day after deposit of any check into
an Account, Custodian agrees to make Fed Funds available to the Fund
in the amount of the check. Deposits made by Federal Reserve wire will
be available to the Fund immediately and ACH wires will be available
to the Fund on the next business day. Income earned on the portfolio
securities will be credited to the Fund based on the schedule attached
as Exhibit A. The Custodian will be entitled to reverse any credited
amounts where credits have been made and monies are not finally
collected. If monies are collected after such reversal, the Custodian
will credit the Fund in that amount. Custodian may open and maintain
Accounts in its own banking department, or in such other banks or
trust companies as may be designated by it or by Fund in writing, all
such Accounts, however, to be in the name of Custodian and subject
only to its
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draft or order. Funds received and held for the account of different
Portfolios shall be maintained in separate Accounts established for
each Portfolio.
L. Income and other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the account of Fund
all income and other payments which become due and payable on or
after the effective date of this Agreement with respect to the
securities deposited under this Agreement, and credit the account
of Fund in accordance with the schedule attached hereto as
Exhibit A. If, for any reason, the Fund is credited with income
that is not subsequently collected, Custodian may reverse that
credited amount.
2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
a. the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for
payment of:
1. all coupons and other income items requiring
presentation; and
2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the Custodian has actual knowledge, or
should reasonably be expected to have knowledge; and
b. the endorsement for collection, in the name of Fund, of all
checks, drafts or other negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfaction against
the costs and expenses
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of such suit or other actions. Custodian will receive, claim and
collect all stock dividends, rights and other similar items and will
deal with the same pursuant to instructions. Unless prior instructions
have been received to the contrary, Custodian will, without further
instructions, sell any rights held for the account of Fund on the last
trade date prior to the date of expiration of such rights.
M. Payment of Dividends and other Distributions
On the declaration of any dividend or other distribution on the shares
of capital stock of Fund ("Fund Shares") by the Board of Directors of
Fund, Fund shall deliver to Custodian instructions with respect
thereto. On the date specified in such instructions for the payment of
such dividend or other distribution, Custodian will pay out of the
monies held for the account of Fund, insofar as the same shall be
available for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be necessary to pay the
amount per share payable in cash on Fund Shares issued and outstanding
on the record date established by such resolution.
N. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund, Fund or
its agent shall advise Custodian of the aggregate dollar amount to be
paid for such shares and shall confirm such advice in writing. Upon
receipt of such advice, Custodian shall charge such aggregate dollar
amount to the account of Fund and either deposit the same in the
account maintained for the purpose of paying for the repurchase or
redemption of Fund Shares or deliver the same in accordance with such
advice. Custodian shall not have any duty or responsibility to
determine that Fund Shares have been removed from the proper
shareholder account or accounts or that the proper number of Fund
Shares have been cancelled and removed from the shareholder records.
O. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will deposit or
cause to be deposited with Custodian the amount received for such
shares.
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Custodian shall not have any duty or responsibility to determine that
Fund Shares purchased from Fund have been added to the proper
shareholder account or accounts or that the proper number of such
shares have been added to the shareholder records.
P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or mailed to
Fund all proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements affecting or
relating to securities held by Custodian for Fund and will, upon
receipt of instructions, execute and deliver or cause its nominee to
execute and deliver or mail or have delivered or mailed such proxies
or other authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by Custodian,
neither it nor its nominee will exercise any power inherent in any
such securities, including any power to vote the same, or execute any
proxy, power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver with respect
thereto, or take any other similar action.
Q. Disbursements
Custodian will pay or cause to be paid, insofar as funds are available
for the purpose, bills, statements and other obligations of Fund
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by Fund,
interest charges, dividend disbursements, taxes, management fees,
custodian fees, legal fees, auditors' fees, transfer agents' fees,
brokerage commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting forth the
name of the person to whom payment is to be made, the amount of the
payment, and the purpose of the payment.
R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund a detailed
statement of the amounts received or paid and of securities received
or delivered for
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the account of Fund during each business day. Custodian will, from
time to time, upon request by Fund, render a detailed statement of the
securities and monies held for Fund under this Agreement, and
Custodian will maintain such books and records as are necessary to
enable it to do so. Custodian will permit such persons as are
authorized by Fund, including Fund's independent public accountants,
reasonable access to such records or will provide reasonable
confirmation of the contents of such records, and if demanded,
Custodian will permit federal and state regulatory agencies to examine
the securities, books and records. Upon the written instruc-tions of
Fund or as demanded by federal or state regulatory agencies, Custodian
will instruct any subcustodian to permit such persons as are
authorized by Fund, including Fund's independent public accountants,
reasonable access to such records or to provide reasonable
confirmation of the contents of such records, and to permit such
agencies to examine the books, records and securities held by such
subcustodian which relate to Fund.
S. Appointment of Subcustodians
1. Notwithstanding any other provisions of this Agreement, all or
any of the monies or securities of Fund may be held in
Custodian's own custody or in the custody of one or more other
banks or trust companies acting subcustodians as may be selected
by Custodian. Any such subcustodian selected by the Custodian
must have the qualifications required for a custodian under the
1940 Act, as amended. It is understood that Custodian initially
intends to appoint United Missouri Bank, N.A. (UMB) and United
Missouri Trust Company of New York (UMTCNY) as subcustodians.
Custodian shall be responsible to the Fund for any loss, damage
or expense suffered or incurred by the Fund resulting from the
actions or omissions of UMB, UMTCNY and any other subcustodians
selected and appointed by Custodian (except subcustodians
appointed at the request of Fund and as provided in Subsection 2
below) to the same extent Custodian
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<PAGE>
would be responsible to the Fund under Section 5. of this
Agreement if it committed the act or omission itself. Upon
request of the Fund, Custodian shall be willing to contract with
other subcustodians reasonably acceptable to the Custodian for
purposes of (i) effecting third-party repurchase transactions
with banks, brokers, dealers, or other entities through the use
of a common custodian or subcustodian, or (ii) providing
depository and clearing agency services with respect to certain
variable rate demand note securities, or (iii) for other
reasonable purposes specified by Fund; provided, however, that
the Custodian shall be responsible to the Fund for any loss,
damage or expense suffered or incurred by the Fund resulting from
the actions or omissions of any such subcustodian only to the
same extent such subcustodian is responsible to the Custodian.
The Fund shall be entitled to review the Custodian's contracts
with any such subcustodians appointed at the request of Fund.
Custodian shall be responsible to the Fund for any loss, damage
or expense suffered or incurred by the Fund resulting from the
actions or omissions of any Depository only to the same extent
such Depository is responsible to Custodian.
2. Notwithstanding any other provisions of this Agreement, Fund's
foreign securities (as defined in Rule 17f-5(c)(1) under the 1940
Act) and Fund's cash or cash equivalents, in amounts deemed by
the Fund to be reasonably necessary to effect Fund's foreign
securities transactions, may be held in the custody of one or
more banks or trust companies acting as subcustodians, and
thereafter, pursuant to a written contract or contracts as
approved by Fund's Board of Directors, may be transferred to
accounts maintained by any such subcustodian with eligible
foreign custodians, as defined in Rule 17f-5(c)(2). Custodian
shall be responsible to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from the actions or
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<PAGE>
omissions of any foreign subcustodians or a domestic subcustodian
contracting with such foreign subcustodians only to the same
extent such domestic subcustodian is responsible to the
Custodian.
T. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records maintained
by Custodian pursuant to this Agreement are the property of Fund, and
will be made available to Fund for inspection or reproduction within a
reasonable period of time, upon demand. Custodian will assist Fund's
independent auditors, or upon approval of Fund, or upon demand, any
regulatory body, in any requested review of Fund's accounts and
records but shall be reimbursed by Fund for all expenses and employee
time invested in any such review outside of routine and normal
periodic reviews. Upon receipt from Fund of the necessary information
or instructions, Custodian will supply information from the books and
records it maintains for Fund that Fund needs for tax returns,
questionnaires, periodic reports to shareholders and such other
reports and information requests as Fund and Custodian shall agree
upon from time to time.
U. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no procedure
approved or directed by Fund or its accountants or other advisors
conflicts with or violates any requirements of its prospectus,
articles of incorporation, bylaws, any applicable law, rule or
regulation, or any order, decree or agreement by which Fund may be
bound. Fund will be responsible to notify Custodian of any changes in
statutes, regulations, rules, requirements or policies which might
necessitate changes in Custodian's responsibilities or procedures.
V. Overdrafts
If Custodian shall in its sole discretion advance funds to the account
of the Fund which results in an overdraft in any Account because the
monies held therein by Custodian on behalf of the Fund are
insufficient to pay the total
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<PAGE>
amount payable upon a purchase of securities as specified in Fund's
instructions or for some other reason, the amount of the overdraft
shall be payable by the Fund to Custodian upon demand together with
the overdraft charge set forth on the then-current Fee Schedule from
the date advanced until the date of payment. Fund hereby grants
Custodian a lien on and security interest in the assets of the Fund to
secure the full amount of any outstanding overdraft and related
overdraft charges.
W. Exercise of Rights; Tender Offers
Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to the agent of such issuer or trustee, for the
purpose of exercise or sale, provided that the new securities, cash or
other assets, if any, are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that
the consideration for such securities is to be paid or delivered to
the Custodian or the tendered securities are to be returned to the
Custodian.
4. INSTRUCTIONS.
A. The term "instructions", as used herein, means written (including
telecopied or telexed) or oral instructions which Custodian reasonably
believes were given by a designated representative of Fund. Fund shall
deliver to Custodian, prior to delivery of any assets to Custodian and
thereafter from time to time as changes therein are necessary, written
instructions naming one or more designated representatives to give
instructions in the name and on behalf of Fund, which instructions may
be received and accepted by Custodian as conclusive evidence of the
authority of any designated representative to act for Fund and may be
considered to be in full force and effect (and Custodian will be
fully), protected in acting in reliance thereon) until receipt by
Custodian of notice to the contrary. Unless such written instructions
delegating authority to any person to give instructions specifically
limit such authority to specific matters or require that the approval
of anyone else will first have been
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<PAGE>
obtained, Custodian will be under no obligation to inquire into the
right of such person, acting alone, to give any instructions
whatsoever which Custodian may receive from such person. If Fund fails
to provide Custodian any such instructions naming designated
representatives, any instructions received by Custodian from a person
reasonably believed to be an appropriate representative of Fund shall
constitute valid and proper instructions hereunder.
B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such
oral instruction. At Custodian's sole discretion, Custodian may record
on tape, or otherwise, any oral instruction whether given in person or
via telephone, each such recording identifying the parties, the date
and the time of the beginning and ending of such oral instruction.
5. LIMITATION OF LIABILITY OF CUSTODIAN
A. Custodian shall at all times use reasonable care and due diligence and
act in good faith in performing its duties under this Agreement.
Custodian shall not be responsible for, and the Fund shall indemnify
and hold Custodian harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability which may be asserted against Custodian, incurred by
Custodian or for which Custodian may be held to be liable, arising out
of or attributable to:
1. All actions taken by Custodian pursuant to this Agreement or any
instructions provided to it hereunder, provided that Custodian
has acted in good faith and with due diligence and reasonable
care; and
2. The Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to pay
or reimburse Custodian under this indemnification provision), the
Fund's negligence or willful misconduct, or the failure of any
representation or warranty of the Fund hereunder to be and remain
true and correct in all respects at all times.
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B. Custodian may request and obtain at the expense of Fund the advice and
opinion of counsel for Fund or of its own counsel with respect to
questions or matters of law, and it shall be without liability to Fund
for any action taken or omitted by it in good faith, in conformity
with such advice or opinion. If Custodian reasonably believes that it
could not prudently act according to the instructions of the Fund or
the Fund's accountants or counsel, it may in its discretion, with
notice to the Fund, not act according to such instructions.
C. Custodian may rely upon the advice and statements of Fund, Fund's
accountants and officers or other authorized individuals, and other
persons believed by it in good faith to be expert in matters upon
which they are consulted, and Custodian shall not be liable for any
actions taken, in good faith, upon such advice and statements.
D. If Fund requests Custodian in any capacity to take any action which
involves the payment of money by Custodian, or which might make it or
its nominee liable for payment of monies or in any other way,
Custodian shall be indemnified and held harmless by Fund against any
liability on account of such action; provided, however, that nothing
herein shall obligate Custodian to take any such action except in its
sole discretion.
E. Custodian shall be protected in acting as custodian hereunder upon any
instruc-tions, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed and shall be entitled to receive upon request as
conclusive proof of any fact or matter required to be ascertained from
Fund hereunder a certificate signed by an officer or designated
representative of Fund.
F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased by or for
Fund, the legality of the purchase of any securities or foreign
currency positions or evidence of ownership required by Fund to
be received by
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<PAGE>
Custodian, or the propriety of the decision to purchase or amount
paid therefor;
2. The legality of the sale of any securities or foreign currency
positions by or for Fund, or the propriety of the amount for
which the same are sold;
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the repurchase or redemption of any Fund Shares,
or the propriety of the amount to be paid therefor; or
5. The legality of the declaration of any dividend by Fund, or the
legality of the issue of any Fund Shares in payment of any stock
dividend.
G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the payment
of money to be received by it on behalf of Fund until Custodian
actually receives such money; provided, however, that it shall advise
Fund promptly if it fails to receive any such money in the ordinary
course of business and shall cooperate with Fund toward the end that
such money shall be received.
H. Except as provided in Section 3.S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.
I. Custodian shall not be responsible or liable for the failure or delay
in performance of its obligations under this Agreement, or those of
any entity for which it is responsible hereunder, arising out of or
caused, directly or indirectly, by circumstances beyond the affected
entity's reasonable control, including, without limitation: any
interruption, loss or malfunction of any utility, transportation,
computer (hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance,
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terrorism, vandalism, explosions, labor disputes,
freezes, floods, fires, tornados, acts of God or public enemy,
revolutions, or insurrection.
J. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS
AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE
OTHER PARTY, FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY
ACT OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF
ADVISED OF THIS POSSIBILITY THEREOF.
6. COMPENSATION. In consideration for its services hereunder, Fund will pay to
Custodian such compensation as shall be set forth in a separate fee
schedule to be agreed to by Fund and Custodian from time to time. A copy of
the initial fee schedule is attached hereto and incorporated herein by
reference. Custodian shall also be entitled to receive, and Fund agrees to
pay to Custodian, on demand, reimbursement for Custodian's cash
disbursements and reasonable out-of-pocket costs and expenses, including
attorney's fees, incurred by Custodian in connection with the performance
of services hereunder. Custodian may charge such compensation against
monies held by it for the account of Fund. Custodian will also be entitled
to charge against any monies held by it for the account of Fund the amount
of any loss, damage, liability, advance, overdraft or expense for which it
shall be entitled to reimbursement from Fund, including but not limited to
fees and expenses due to Custodian for other services provided to the Fund
by Custodian. Custodian will be entitled to reimbursement by the Fund for
the losses, damages, liabilities, advances, overdrafts and expenses of
subcustodians only to the extent that (i) Custodian would have been
entitled to reimbursement hereunder if it had incurred the same itself
directly, and (ii) Custodian is obligated to reimburse the subcustodian
therefor.
7. TERM AND TERMINATION. The initial term of this Agreement shall be for a
period of _____. Thereafter, either party to this Agreement may terminate
the same by notice in writing, delivered or mailed, postage prepaid, to the
other party hereto and received not less than ninety (90) days prior to the
date upon which such termination will take effect. Upon termination of this
Agreement, Fund will pay
21
<PAGE>
Custodian its fees and compensation due hereunder and its reimbursable
disbursements, costs and expenses paid or incurred to such date and Fund
shall designate a successor custodian by notice in writing to Custodian by
the termination date. In the event no written order designating a successor
custodian has been delivered to Custodian on or before the date when such
termination becomes effective, then Custodian may, at its option, deliver
the securities, funds and properties of Fund to a bank or trust company at
the selection of Custodian, and meeting the qualifications for custodian
set forth in the 1940 Act and having not less than Two Million Dollars
($2,000,000) aggregate capital, surplus and undivided profits, as shown by
its last published report, or apply to a court of competent jurisdiction
for the appointment of a successor custodian or other proper relief, or
take any other lawful action under the circumstances; provided, however,
that Fund shall reimburse Custodian for its costs and expenses, including
reasonable attorney's fees, incurred in connection therewith. Custodian
will, upon termination of this Agreement and payment of all sums due to
Custodian from Fund hereunder or otherwise, deliver to the successor
custodian so specified or appointed, or as specified by the court, at
Custodian's office, all securities then held by Custodian hereunder, duly
endorsed and in form for transfer, and all funds and other properties of
Fund deposited with or held by Custodian hereunder, and Custodian will
co-operate in effecting changes in book-entries at all Depositories. Upon
delivery to a successor custodian or as specified by the court, Custodian
will have no further obligations or liabilities under this Agreement.
Thereafter such successor will be the successor custodian under this
Agreement and will be entitled to reasonable compensation for its services.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to appoint a successor custodian, the Custodian shall
be entitled to compensation as provided in the then-current fee schedule
hereunder for its services during such period as the Custodian retains
possession of such securities, funds and other properties, and the
provisions of this Agreement relating to the duties and obligations of the
Custodian shall remain in full force and effect.
22
<PAGE>
8. NOTICES. Notices, requests, instructions and other writings addressed to
Fund at __________________, or at such other address as Fund may have
designated to Custodian in writing, will be deemed to have been properly
given to Fund hereunder; and notices, requests, instructions and other
writings addressed to Custodian at its offices at 127 West 10th Street,
Kansas City, Missouri 64105, Attention: Custody Department, or to such
other address as it may have designated to Fund in writing, will be deemed
to have been properly given to Custodian hereunder.
9. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio:
A. Each Portfolio shall be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered by this
Agreement, every reference herein to the Fund shall be deemed to
relate solely to the particular Portfolio to which such transaction
relates. Under no circumstances shall the rights, obligations or
remedies with respect to a particular Portfolio constitute a right,
obligation or remedy applicable to any other Portfolio. The use of
this single document to memorialize the separate agreement of each
Portfolio is understood to be for clerical convenience only and shall
not constitute any basis for joining the Portfolios for any reason.
B. Additional Portfolios may be added to this Agreement, provided that
Custodian consents to such addition. Rates or charges for each
additional Portfolio shall be as agreed upon by Custodian and Fund in
writing.
10. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of Missouri, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
23
<PAGE>
C. The representations and warranties and the indemnifications extended
hereunder are intended to and shall continue after and survive the
expiration, termination or cancellation of this Agreement. 1.
D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by each party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed as
a continuing or permanent waiver of any such terms, conditions, rights
or privileges, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred. No
waiver, release or discharge of any party's rights hereunder shall be
effective unless contained in a written instrument signed by the party
sought to be charged.
F. The captions in the Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
H. If any part, term or provision of this Agreement is determined by the
courts or any regulatory authority to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held
to be illegal or invalid.
I. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party.
24
<PAGE>
J. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
Custodian and Fund.
K. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by either party hereunder shall not
affect any rights or obligations of the other party hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ Allen A. Straun
Title: EVP
FUND
By: /s/ Bernadette N. Finn
Title: Secretary
25
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
INVESTORS FIDUCIARY TRUST COMPANY
AVAILABILITY SCHEDULE BY TRANSACTION TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSACTION DTC PHYSICAL FED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE
- ---- ----------- ---------- ----------- ---------- ----------- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
Calls Put As Received C or F* As Received C or F*
- ------------------------------------------------------------------------------------------------------------------------------------
Maturities As Received C or F* Mat. Date C or F* Mat. Date F
- ------------------------------------------------------------------------------------------------------------------------------------
Tender Reorgs. As Received C As Received C N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends Paydate C Paydate C N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Floating Rate Int. Paydate C Paydate C N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Floating Rate Int. N/A As Rate Received C N/A
(No Rate)
- ------------------------------------------------------------------------------------------------------------------------------------
Mtg. Backed P&I Paydate C Paydate + 1 Bus. Day C Paydate F
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Int. Paydate C Paydate C Paydate F
- ------------------------------------------------------------------------------------------------------------------------------------
Euroclear N/A C Paydate C
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Legend
C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
* Availability based on how received.
26
<PAGE>
EXHIBIT A
Name of Fund
California Daily Tax Free Income Fund, Inc.*
Connecticut Daily Tax Free Income Fund, Inc.*
Cortland Trust, Inc.*
Daily Tax Free Income Fund, Inc.*
Delafield Fund, Inc.*
Florida Daily Municipal Income Fund+
Institutional Daily Income Fund+
Michigan Daily Tax Free Income Fund, Inc.*
New Jersey Daily Municipal Income Fund, Inc.*
New York Daily Tax Free Income Fund, Inc.*
North Carolina Daily Municipal Income Fund, Inc.*
Pennsylvania Daily Municipal Income Fund+
Reich & Tang Equity Fund, Inc.*
Reich & Tang Government Securities Trust+
Short Term Income Fund, Inc.*
Tax Exempt Proceeds Fund, Inc.*
* Maryland Corporation
+ Massachusetts Business Trust
Dated: August 30, 1994
TRANSFER AGENCY AGREEMENT
Agreement made as of the 22 day of April, 1996,
between each fund listed on the attached Schedule A having its principal office
and place of business at 600 Fifth Avenue, New York, New York 10020 (each fund
hereinafter referred to as the "Fund"), and Reich & Tang Services L.P., a
Delaware limited partnership, having its principal office and place of business
at 600 Fifth Avenue NYC, NY 10020 (hereinafter referred to
as the "Transfer Agent").
W I T N E S S E T H
That for and in consideration of the mutual promises
hereinafter set forth, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases shall have the following meanings:
1. "Approved Institution" shall mean an entity so named in a
Certificate. From time to time the Find may amend a previously delivered
Certificate by delivering to the Transfer Agent a Certificate naming an
additional entity or deleting any entity named in a previously delivered
Certificate.
2. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Transfer Agent by the Fund which is signed by any Officer, as hereinafter
defined, and actually received by the Transfer Agent.
3. "Custodian" shall mean The Bank of New York, as custodian
under the terms and conditions of the Custody Agreement between The Bank of New
York and the Fund, or its successor(s).
4. "Fund Business Day" shall be deemed to be each day on which
the New York Stock Exchange, Inc. is open for trading.
5. "Officer" shall be deemed to be the Fund's Chairman of the
Board, the Fund's President, any Vice President of the Fund, the Fund's
Secretary, the Fund's Treasurer, the Fund's Controller, any Assistant Controller
of the Fund, any Assistant to the Board of Directors of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf of the Fund and
named in the Certificate annexed hereto as Appendix
<PAGE>
A, as such Certificate may be amended from time to time, and any person
reasonably believed by the Transfer Agent to be such a person.
6. "Series" shall mean the various portfolios of the
Fund as described from time to time in the current and effective
Prospectus.
7. "Shares: shall mean all or any part of each class of the
shares of capital stock of the Fund and of any Series of the Fund listed in the
Certificate annexed hereto as Appendix B, as may be amended from time to time,
which from time to time are authorized and/or issued by the Fund.
8. "Prospectus" shall mean the last Fund prospectus actually
received by the Transfer Agent from the Fund with respect to which the Fund has
indicated a registration statement under the Federal Securities Act of 1933 has
become effective, including the statement of Additional Information incorporated
by reference therein.
9. "Transfer Agent" shall mean Reich & Tang Services L.P., as
transfer agent and divided disbursing agent under the terms and conditions of
this Agreement, its successor(s) or assign(s).
ARTICLE II
APPOINTMENT OF TRANSFER AGENT
1. The Fund hereby constitutes and appoints the Transfer Agent
as transfer agent of all the Shares of the Fund and as dividend disbursing agent
during the period of this Agreement.
2. The Transfer Agent hereby accepts appointment as transfer
agent and dividend disbursing agent and agrees to perform the duties thereof as
hereinafter set forth.
3. In connection with such appointment, the Fund shall deliver
the following documents to the Transfer Agent:
(a) A certified copy of the Articles of Incorporation
of the Fund and all amendments thereto;
(b) A certified copy of the By-Laws of the Fund;
(c) A certified copy of a resolution of the Board of Directors
of the Fund appointing the Transfer Agent and authorizing the execution of this
Transfer Agency Agreement;
<PAGE>
(d) A Certificate signed by the Secretary of the Fund
specifying with respect to each Series: the number of authorized Shares, the
number of authorized Shares issued, and the number of such authorized Shares
issued and currently outstanding, the names and specimen signatures of the
Officers of the Fund, and the name and address of the legal counsel for the
Fund;
(e) Specimen Share certificates for each class of Shares in
the form approved by the Board of Directors of the Fund, together with a
certificate signed by the Secretary of the Fund as to such approval;
(f) Copies of the Fund's Registration Statement, as amended to
date, and the most recently filed Post-Effective Amendment thereto, filed by the
Fund with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended,
together with any applications filed in connection therewith; and
(g) Opinion of counsel for the Fund with respect to the
validity of the authorized and outstanding Shares, whether such Shares are fully
paid and non-assessable and the status of such Shares under the Securities Act
of 1933, as amended, and any other applicable federal law or regulation (i.e.,
if subject to registration, that they have been registered and that the
Registration Statement has become effective or, if exempt, the specific grounds
therefor).
4. To the extent that the Fund issues certificates to its shareholders
pursuant to its current prospectus, the Fund shall furnish the Transfer Agent
with a sufficient supply of blank Share certificates and from time to time will
renew such supply upon request of the Transfer Agent. Such blank Share
certificates shall be properly signed, by facsimile or otherwise, by Officers of
the Fund authorized by law or by the by-laws to sign Share certificates, and, if
required, shall bear the corporate seal or facsimile thereof.
ARTICLE III
AUTHORIZATION AND ISSUANCE OF SHARES
1. The Fund shall deliver to the Transfer Agent the following documents
on or before the effective date of any increase or decrease in the total number
of Shares authorized to be issued:
(a) A certified copy of the amendment to the Articles
of Incorporation giving effect to such increase or decrease;
(b) In the case of an increase, an opinion of counsel for the
Fund with respect to the validity of the Shares of the
<PAGE>
Fund and the status of such Shares under the Securities Act of 1933, as amended,
and any other appropriate federal law or regulation (i.e., if subject to
registration, that they have been registered and that the Registration Statement
has become effective or, if exempt, the specific grounds therefor); and
(c) In the case of an increase, if the appointment of the
Transfer Agent was theretofore expressly limited, if the appointment of the
Transfer Agent was theretofore expressly limited, a certified copy of a
resolution of the Board of Directors of the Fund increasing the authority of the
Transfer Agent.
2. Prior to the issuance of any additional Shares of the Fund pursuant
to stock dividends or stock splits, etc., and prior to any reduction in the
number of shares outstanding, the Fund shall deliver the following documents to
the Transfer Agent:
(a) A certified copy of the resolution(s) adopted by the Board
of Directors and/or the shareholders of the Fund authorizing such issuance of
additional Shares of the Fund or such reduction, as the case may be, and
(b) An opinion of counsel for the Fund with respect to the
validity of the Shares of the Fund and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that they have been registered and
that the Registration Statement has become effective, or, if exempt, the
specific grounds therefor).
ARTICLE IV
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or other
capital adjustment requiring a change in the form of Share certificates, the
Transfer Agent will issue Share certificates in the new form in exchange for, or
upon transfer of, outstanding Share certificates in the old form, upon
receiving:
(a) A Certificate authorizing the issuance of Share
certificates in the new form;
(b) A certified copy of any amendment to the Articles of
Incorporation with respect to the change;
(c) Specimen Share certificates for each class of Shares in
the new form approved by the Board of Directors of the Fund, with a Certificate
signed by the Secretary of the Fund as to such approval; and
<PAGE>
(d) An opinion of counsel for the Fund with respect to the
validity of the Shares in the new form and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that the Shares have been
registered and that the Registration Statement has become effective or, if
exempt, the specific grounds therefor).
2. To the extent that the Fund issues certificates to its shareholders
pursuant to its current prospectus, the Fund shall furnish the Transfer Agent
with a sufficient supply of blank Share certificates in the new form, and from
time to time will replenish such supply upon the request of the Transfer Agent.
Such blank Share certificates shall be properly signed by Officers of the Fund
authorized by law or by the by-laws to sign Share certificates and, if required,
shall bear the corporate seal or facsimile thereof. The Fund agrees to indemnify
and exonerate, save and hold the Transfer Agent harmless, from and against any
and all claims or demands that may be asserted against the Transfer Agent with
respect to the genuineness of any Share certificate supplied to the Transfer
Agent pursuant to this section.
ARTICLE V
ISSUANCE, REDEMPTION, EXCHANGE AND TRANSFER OF SHARES
1. (a) The Transfer Agent shall accept with respect to each Fund
Business Day, at such times as are agreed upon from time to time by the Transfer
Agent and the Fund, each (i) purchase order received from a purchaser, or
shareholder, whether or not an Approved Institution, (ii) exchange request
involving shares of certain other investment companies listed in the Fund's
prospectus, and (iii) redemption request either received from a shareholder,
whether or not an Approved Institution, or contained in a Certificate, provided,
that (A) such purchase order or redemption request, as the case may be, is
reasonably believed by the Transfer Agent to be in conformity with the Fund's
purchase and redemption procedures described in the Prospectus, (B) where such
redemption request states redemption instructions which vary from the
instructions indicated on the shareholder's original subscription order form,
such request contains a signature guarantee, (C) such exchange request contains
a signature guarantee and instructs exchange into a fund that is listed in the
Fund's current prospectus, and (D) the Transfer Agent has agreed to accept and
act in accordance with such type of purchase order or redemption request, as the
case may be.
(b) The Transfer Agent shall also accept with respect to each
Fund Business Day, at such times as are agreed upon from time to time by the
Transfer Agent and the Fund, a computer tape consistent in all respects with the
Transfer Agent's tape layout
<PAGE>
package, as amended from time to time, which is believed by the Transfer Agent
to be furnished by or on behalf of any Approved Institution.
2. On each Fund Business Day the Transfer Agent shall, as of the time
at which the Fund computes the net asset value of each Series, issue to, and
redeem from, the accounts specified in a purchase order, redemption request, or
computer tape which in accordance with the Prospectus is effective on such Fund
Business Day the appropriate number of full and fractional Shares based on the
net asset value per Share of such Series specified in an advice received on such
Fund Business Day from the Fund. Notwithstanding the foregoing, if a redemption
specified in a computer tape is for a dollar value of Shares in excess of the
dollar value of uncertificated Shares in the specified account, the Transfer
Agent shall not effect such redemption in whole or in part, and shall orally
advise both the Fund and the Approved Institution which supplied such tape of
such discrepancy.
3. The Transfer Agent shall, as of each Fund Business Day specified in
a Certificate or resolution described in paragraph 1 of succeeding Article VI,
issue Shares of a Series, based on the net asset value per Share of such Series
specified in an advice received from the Fund on such Fund Business Day, in
connection with a reinvestment of a dividend or distribution on Shares of such
Series.
4. On each Fund Business Day the Transfer Agent shall supply the Fund
with a statement specifying with respect to the immediately preceding Fund
Business Day: the total number of Shares of each Series (including fractional
Shares) issued and outstanding at the opening of business on such day; the total
number of Shares of each Series sold to Reich & Tang Services L.P., as agent for
the purchasers, on such day, pursuant to preceding paragraph 2 of this Article;
the total number of Shares of each Series redeemed by Reich & Tang Services
L.P., as agent for the respective redeeming shareholders, on such day; the total
number of Shares of each Series, if any, sold to Reich & Tang Services L.P., as
agent for shareholders, on such day pursuant to preceding paragraph 3 of this
Article, and the total number of Shares of each Series issued and outstanding.
On the same day such statement is received by the Fund, the Fund shall confirm
the information contained therein by delivering to the Transfer Agent a
Certificate with respect to the same.
5. In connection with each purchase, each exchange and each redemption
of Shares, the Transfer Agent shall send such statements as are described in the
Prospectus. If the Prospectus indicates that certificates for Shares are
available, and if specifically requested in writing by any shareholder, or if
otherwise required hereunder, the Transfer Agent will countersign, issue and
mail by not less than first class insured
<PAGE>
mail, to such shareholder at the address set forth in the records of the
Transfer Agent, a Share certificate for any full Shares requested.
6. As of each Fund Business Day the Transfer Agent shall furnish the
Custodian with an advice setting forth the number and dollar amount of Shares to
be redeemed on such Fund Business Day in accordance with paragraph 2 of this
Article.
7. Upon receipt of moneys paid to it by the Custodian in connection
with a redemption of Shares, the Transfer Agent shall cancel the redeemed Shares
and after making appropriate deduction for any withholding of taxes required of
it by applicable law (a) in the case of a redemption of Shares pursuant to a
redemption described in preceding paragraph 1(a) of this Article, make payment
in accordance with the Fund's redemption and payment procedures described in the
Prospectus, and (b) in the case of a redemption of Shares pursuant to a computer
tape described in preceding paragraph 1(b) of the Article, make payment by
directing a federal funds wire order to the account previously designated by the
Approved Institution specified in said computer tape.
8. The Transfer Agent shall not be required to issue any Shares after
it has received from an Officer of the Fund or from an appropriate federal or
state authority written notification that the sale of Shares has been suspended
or discontinued, and the Transfer Agent shall be entitled to rely upon such
written notification.
9. Upon the issuance of any Shares in accordance with this Agreement
the Transfer Agent shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Fund in connection with such
issuance of any Shares.
10. Shares which are subject to restriction on transfer or redemption
(including, without limitation, Shares acquired pursuant to a restrictive
investment representation, Shares held by controlling persons, Shares subject to
shareholder's agreements, etc.), other than the general restrictions on the
transferability of the shares described in the Prospectus, must be issued in
Share certificate form and must be stamped on the face thereof with a legend
describing the extent and conditions of the restriction or referring to the
source of such restriction, and shall be so issued and so legended by the
Transfer Agent only if the Fund so directs in a Certificate. Legended Shares may
not be transferred or redeemed except upon receipt by the Transfer Agent of an
opinion of counsel for the Fund stating that such transfer or redemption is in
accordance with applicable law, and may be properly effected. The Transfer Agent
shall be entitled to rely upon such opinion and shall be
<PAGE>
indemnified by the Fund for any transfer or redemption made in
reliance upon any such opinion.
11. The Transfer Agent shall accept a computer tape consistent with the
Transfer Agent's tape layout package, as amended from time to time, which is
reasonably believed by the Transfer Agent to be furnished by or on behalf of any
Approved Institution and is represented to be instructions with respect to the
transfer of Shares from one account of such Approved Institution to another such
account, and shall effect the transfers specified in said computer tape.
12. (a) Except as otherwise provided in sub-paragraph (b) of this
paragraph and in paragraph 13 of this Article, Shares will be transferred,
exchanged or redeemed upon presentation to the Transfer Agent of Share
certificates, telephone redemption requests where such requests are authorized
in the subscription order form or in a subsequent written authorization or
instructions properly endorsed for transfer, exchange or redemption, and bearing
satisfactory evidence of the payment of stock transfer taxes. In the case of
small estates, where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate surety bond, and without further approval of
the Fund, transfer, exchange or redeem Shares registered in the name of a
decedent where the current market value of the Shares being transferred does not
exceed such amount as may from time to time be prescribed by various states. The
Transfer Agent reserves the right to refuse to transfer, exchange or redeem
Shares until it is satisfied that the endorsement on the stock certificate or
instructions is valid and genuine, and for that purpose it will require, unless
otherwise instructed by an authorized officer of the Fund, a guarantee of
signature by an eligible guarantor institution which includes a domestic bank, a
domestic credit union, a member bank of the Federal Reserve System or a member
firm of a national securities exchange; pursuant to the Transfer Agent's
standards and procedures. The Transfer Agent also reserves the right to refuse
the transfer, exchange or redeem Shares until it is satisfied that the requested
transfer or redemption is legally authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers, exchanges or redemptions
which the Transfer Agent, in its judgment, deems improper or unauthorized, or
until it is satisfied that there is no basis to any claims adverse to such
transfer, exchange or redemption. The Transfer Agent may, in effecting
transfers, exchanges and redemptions of Shares, rely upon those provisions of
the Uniform Act for the Simplification of Fiduciary Security Transfers or the
Uniform Commercial Code, as the same may be amended from time to time,
applicable to the transfer of securities, and the Fund shall indemnify the
Transfer Agent for any act done or omitted by it in good faith in reliance upon
such laws except where such laws conflict with the
<PAGE>
Securities Act of 1933, the Securities Exchange Act of 1934 or the Investment
Company Act of 1940.
(b) Notwithstanding the foregoing or any other provisions
contained in this Agreement to the contrary, the Transfer Agent shall be fully
protected by the Fund in not requiring any instruments, documents, assurances,
endorsements or guarantees, including, without limitation, any signature
guarantees, in connection with a redemption, or transfer, of Shares whenever the
Transfer Agent reasonably believes that requiring the same would be inconsistent
with the transfer and redemption procedures as described in the Prospectus.
13. Notwithstanding any provision contained in this Agreement to the
contrary, the Transfer Agent shall not be required or expected to require, as a
condition to any transfer of any Shares pursuant to paragraph 11 of this Article
or any exchange or redemption of any Shares pursuant to a computer tape
described in this Article, any documents, including, without limitation, any
documents of the kind described in sub-paragraph (a) of paragraph 12 of this
Article, to evidence the authority of the person requesting the transfer or
redemption and/or the payment of any stock transfer taxes, and shall be fully
protected in acting in accordance with the applicable provisions of this
Article.
14. (a) As used in this Agreement, the terms "computer tape" and
"computer tape believed by the Transfer Agent to be furnished by an Approved
Institution", shall include any tapes generated by the Transfer Agent to reflect
information believed by the Transfer Agent to have been inputted by an Approved
Institution, via a remote terminal or other similar link, into a data
processing, storage, or collection system, or similar system (the "System"),
located on the Transfer Agent's premises. For purposes of paragraph 1 of this
Article, such a computer tape shall be deemed to have been furnished at such
times as are agreed upon from time to time by the Transfer Agent and Fund only
if the information reflected thereon was inputted into the System at such times
as are agreed upon from time to time by the Transfer Agent and the Fund.
(b) Nothing contained in this Agreement shall constitute any
agreement or representation by the Transfer Agent to permit, or to agree to
permit, any Approved Institution to input information into a System.
<PAGE>
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
1. The Fund shall furnish to the Transfer Agent a copy of a resolution
of its Board of Directors, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to a Series the date of the
declaration of a dividend or distribution, the date of accrual or payment, as
the case may be, thereof, the record date as of which Shareholders entitled to
payment, or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution, the payment date on which all previously
accrued and unpaid dividends are to be paid, and the total amount, if any,
payable to the Transfer Agent on such payment date, or (ii) authorizing the
declaration of dividends and distributions on a daily or other periodic basis
and authorizing the Transfer Agent to rely on a Certificate setting forth the
information described in subsection (i) of this paragraph.
2. Upon the payment date specified in such Certificate or resolution,
as the case may be, the Fund shall, in the case of a cash dividend or
distribution, cause the Custodian to pay to the Transfer Agent an amount of
cash, if any, sufficient for the Transfer Agent to make the payment, if any,
specified in such Certificate or resolution, as the case may be, to the
Shareholders of record as of such payment date. The Transfer Agent will, upon
receipt of any such cash, make payment of such cash dividends or distributions
to the Shareholders of record as of the record date by: (i) mailing a check,
payable to the registered shareholder, to the address of record or dividend
mailing address, or (ii) wiring such amounts to the accounts previously
designated by an Approved Institution, as the case may be. The Transfer Agent
shall not be liable for any improper payments made in accordance with a
Certificate or resolution described in the preceding paragraph. If the Transfer
Agent shall not receive from the Custodian sufficient cash to make payments of
any cash dividend or distribution to all shareholders of the Fund as of the
record date, the Transfer Agent shall, upon notifying the Fund, withhold payment
to all shareholders of record as of the record date until sufficient cash is
provided to the Transfer Agent.
3. It is understood that the Transfer Agent shall in no way be
responsible for the determination of the rate or form of dividends or capital
gain distributions due to the shareholders.
4. It is understood that the Transfer Agent shall file such appropriate
information returns concerning the payment of dividends and capital gain
distributions with the proper federal, state and local authorities as are
required by law to be filed by the Fund but shall in no way be responsible for
the collection or
<PAGE>
withholding of taxes due on such dividends or distributions due to shareholders,
except and only to the extent, required of it by applicable law.
ARTICLE VII
CONCERNING THE FUND
1. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign Share certificates,
Certificates, notifications or requests, together with a specimen signature of
each new Officer. In the event any Officer who shall have signed manually or
whose facsimile signature shall have been affixed to blank Share certificates
shall die, resign or be removed prior to issuance of such Share certificates,
the Transfer Agent may issue such Share certificates of the Fund notwithstanding
such death, resignation or removal, and the Fund shall promptly deliver to the
Transfer Agent such approval, adoption or ratification as may be required by
law.
2. Each copy of the Articles of Incorporation of the Fund and copies of
all amendments thereto shall be certified by the Secretary of State (or other
appropriate official) of the state of organization, and if such Articles of
Incorporation and/or amendments are required by law also to be filed with a
county or other officer or official body, a certificate of such filing shall be
filed with a certified copy submitted to the Transfer Agent. Each copy of the
By-Laws and copies of all amendments thereto, and copies of resolutions of the
Board of Directors of the Fund, shall be certified by the Secretary of the Fund
under the corporate seal.
3. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent the Fund's currently effective Prospectus.
ARTICLE VIII
CONCERNING THE TRANSFER AGENT
1. The Transfer Agent shall not be liable and shall be fully protected
in acting upon any computer tape, writing or document reasonably believed by it
to be genuine and to have been signed or made by the proper person or persons
and shall not be held to have any notice of any change or authority of any
person until receipt of written notice thereof from the Fund or such person. It
shall also be protected in processing Share certificates which it reasonably
believes to bear the proper manual or facsimile signatures of the Officers of
the Fund and the property countersignature of the Transfer Agent.
<PAGE>
2. The Transfer Agent may establish such additional procedures, rules
and regulations governing the transfer or registration of certificates of stock
as it may deem advisable and consistent with such rules and regulations
generally adopted by bank transfer agents.
3. The Transfer Agent shall keep such records as are specified in
Appendix C hereto in the form and manner, and for such period, as it may deem
advisable but not inconsistent with the rules and regulations of appropriate
government authorities, in particular Rules 31a-2 and 31a-3 under the federal
Investment Company Act of 1940 as amended from time to time. The Transfer Agent
may deliver to the Fund from time to time at its discretion, for safekeeping or
disposition by the Fund in accordance with law, such records, papers, Share
certificates which have been canceled in transfer, exchange or redemption, or
other documents accumulated in the execution of its duties as such Transfer
Agent, as the Transfer Agent may deem expedient, other than those which the
Transfer Agent is itself required to maintain pursuant to applicable laws and
regulations, and the Fund shall assume all responsibility for any failure
thereafter to produce any record, paper, canceled Share certificate, or other
document so returned, if and when required. The records specified in Appendix C
hereto maintained by the Transfer Agent pursuant to this paragraph 3 shall be
considered to be the property of the Fund, shall be made available upon request
for inspection by the officers, employees, and auditors of the Fund, and records
shall be delivered to the Fund upon request and in any event upon the date of
termination of this Agreement, as specified in Article IX of this Agreement, in
the form and manner kept by the Transfer Agent on such date of termination or
such earlier date as may be requested by the Fund.
4. The Transfer Agent may employ agents or attorneys-in-fact at the
expense of the Fund, and shall not be liable for any loss or expense arising out
of, or in connection with, the actions or omissions to act of its agents or
attorneys-in-fact so long as the Transfer Agent acts in good faith and without
negligence or willful misconduct in connection with the selection of such agents
or attorneys-in-fact.
5. The Transfer Agent shall not be liable for any loss or damage,
including counsel fees, resulting from its actions or omissions to act or
otherwise, except for any loss or damage arising out of its own failure to act
in good faith, negligence or willful misconduct.
6. The Fund shall indemnify and exonerate, save and hold harmless the
Transfer Agent from and against any and all claims (whether with or without
basis in fact or law), demands, expenses (including attorney's fees) and
liabilities of any and every nature which the Transfer Agent may sustain or
incur or which may
<PAGE>
be asserted against the Transfer Agent by any person by reason of or as a result
of any action taken or omitted to be taken by the Transfer Agent in good faith
and without negligence or willful misconduct or in reliance upon (i) any
provision of this Agreement; (ii) the Prospectus; (iii) any instruction or order
including, without limitation, any computer tape reasonably believed by the
Transfer Agent to have been received from an Approved Institution; (iv) any
instrument, order or Share certificate reasonably believed by it to be genuine
and to be signed, countersigned or executed by any duly authorized Officer of
the Fund; (v) any Certificate or other instructions of an Officer; or (vi) any
opinion of legal counsel for the Fund or the Transfer Agent. The Fund shall
indemnify and exonerate, save and hold the Transfer Agent harmless from and
against any and all claims (whether with or without basis in fact or law),
demands, expenses (including attorney's fees) and liabilities of any and every
nature which the Transfer Agent may sustain or incur or which may be asserted
against the Transfer Agent by any person by reason of or as a result of any
action taken or omitted to be taken by the Transfer Agent in good faith and
without negligence or willful misconduct in connection with its appointment or
in reliance upon any law, act, regulation or any interpretation of the same even
though such law, act or regulation may thereafter have been altered, changed,
amended or repealed.
7. Specifically, but not by way of limitation, the Fund shall indemnify
and exonerate, save and hold the Transfer Agent harmless from and against any
and all claims (whether with or without basis in fact or law), demands, expenses
(including attorney's fees) and liabilities of any and every nature which the
Transfer Agent may sustain or incur or which may be asserted against the
Transfer Agent by any person in connection with the Transfer Agent's capacity
and authorization to issue Shares and the form and amount of authorized Shares.
8. Notwithstanding the foregoing, the Transfer Agent shall be liable to
the Fund with respect to any redemption check which the Transfer Agent pays on
which the signature of the drawer is forged, but only to the extent of the
lesser of (a) the amount of such redemption check minus $2,500.00 and (b) the
amount of insurance proceeds received by the Transfer Agent with respect to such
redemption check, and only if, and for so long as each of the following
conditions is satisfied: (i) insurance with respect to Fund redemption checks is
maintained by the Transfer Agent, and (ii) the Fund pays to the Transfer Agent
monthly the amount which the Transfer Agent determines to be the Fund's pro rata
share of the cost of such insurance coverage. The Fund agrees that the insurance
may be discontinued or canceled without any prior notice, and that the Transfer
Agent shall at all times have the absolute right, without any prior notice to
the Fund, to cease to maintain such insurance, and the Transfer Agent agrees to
notify the Fund promptly upon canceling or discontinuing any
<PAGE>
such insurance or upon learning of any such cancellation or discontinuance. In
the event such insurance is not maintained, or in the event the Fund does not
pay monthly to the Transfer Agent the amount which the Transfer Agent determines
to be the Fund's pro rata share of the cost of such insurance coverage, the
Transfer Agent shall not be liable for any loss or damage, including counsel
fees, resulting from its paying or not paying any redemption check, unless such
loss or damage arises out of the Transfer Agent's failure to use good faith,
negligence or willful misconduct.
9. At any time the Transfer Agent may apply to an Officer of the Fund
for written instructions with respect to any matter arising in connection with
the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or permitted by it in
good faith in accordance with such written instructions. Such application by the
Transfer Agent for written instructions from an Officer of the Fund may, at the
option of the Transfer Agent, set forth in writing any action proposed to be
taken or omitted by the Transfer Agent with respect to its duties or obligations
under this Agreement and the date on and/or after which such action shall be
taken, and the Transfer Agent shall not be liable for any action taken or
omitted in accordance with a proposal included in any such application on or
after the date specified therein unless, prior to taking or omitting any such
action, the Transfer Agent has received written instructions in response to such
application specifying the action to be taken or omitted. The Transfer Agent may
consult counsel to the Fund, or its own counsel, at the expense of the Fund and
shall be fully protected with respect to anything done or omitted by it in good
faith in accordance with the advice or opinion of counsel to the Fund or its own
counsel.
10. When mail is used for delivery of non-negotiable Share
certificates, the value of which does not exceed the limits of the Transfer
Agent's Blanket Bond, the Transfer Agent shall send such non-negotiable Share
certificates by first class mail, and such deliveries will be covered while in
transit by the Transfer Agent's Blanket Bond. Non-negotiable Share certificates,
the value of which exceed the limits of the Transfer Agent's Blanket Bond, will
be sent by insured registered mail. Negotiable Share certificates will be sent
by insured registered mail. The Transfer Agent shall advise the Fund of any
Share certificates returned as undelivered after being mailed as herein provided
for.
11. To the extent that the Fund issues certificates to its shareholders
pursuant to its current propspectus, the Transfer Agent may issue new Share
certificates in place of Share certificates represented to have been lost,
stolen, or destroyed upon receiving instructions in writing from an Officer and
<PAGE>
indemnity satisfactory to the Transfer Agent. Such instructions from the Fund
shall be in such form as approved by the Board of Directors of the Fund in
accordance with the provisions of law or of the By-Laws of the Fund governing
such matters. If the Transfer Agent receives written notification from the owner
of the lost, destroyed or stolen Share certificate within a reasonable time
after he has notice of it, the Transfer Agent shall promptly notify the Fund and
shall act pursuant to written instructions signed by an Officer. If the Fund
receives such written notification from the owner of the lost, destroyed or
stolen Share certificate within a reasonable time after he has notice of it, the
Fund shall promptly notify the Transfer Agent and the Transfer Agent shall act
pursuant to written instructions signed by an Officer. The Transfer Agent shall
not be liable for any act done or omitted by it pursuant to the written
instructions described herein. The Transfer Agent may issue new Share
certificates in exchange for, and upon surrender of, mutilated Share
certificates.
12. The Transfer Agent will issue and mail subscription warrants for
Shares of capital stock, Shares representing stock dividends, exchange or
splits, or act as conversion agent upon receiving written instructions from an
Officer and such other documents as the Transfer Agent may deem necessary.
13. The Transfer Agent will supply shareholder lists to the Fund from
time to time upon receiving a request therefor from an Officer of the Fund.
14. In case of any requests or demands for the inspection of the
shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund and to secure instructions from an Officer as to such inspection. The
Transfer Agent reserves the right, however, to exhibit the Shareholder records
to any person whenever it receives an opinion from its counsel that there is a
reasonable likelihood that the Transfer Agent will be held liable for the
failure to exhibit the shareholder records to such person.
15. At the request of an Officer, the Transfer Agent will address and
mail such appropriate notices to shareholders as the Fund may direct.
16. Notwithstanding any of the foregoing provisions of this Agreement,
the Transfer Agent shall be under no duty or obligation to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of the
Approved Institution or of the Fund, as the case may be, to request such sale or
issuance;
<PAGE>
(b) The legality of a transfer of Shares or of a redemption of
any Shares, the propriety of the amount to be paid therefor, or the authority of
the Approved Institution or of the Fund, as the case may be, to request such
transfer or redemption;
(c) The legality of the declaration of any dividend by the
Fund, or the legality of the issue of any Shares in payment of any stock
dividend; or
(d) The legality of any recapitalization or readjustment of
the Shares.
17. The Transfer Agent shall be entitled to receive and the Fund hereby
agrees to pay to the Transfer Agent for its performance hereunder, including its
performance of the duties and functions set forth in Appendix C hereto, (i) its
reasonable out-of-pocket expenses (including legal expenses and attorney's fees)
incurred in connection with this Agreement and its performance hereunder and
(ii) such compensation as may be agreed upon in writing from time to time by the
Transfer Agent and the Fund.
18. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
ARTICLE IX
TERMINATION
Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than 90 days after the date of receipt of
such notice. In the event such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Directors of the Fund,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement and designating a successor transfer agent or transfer agents. In
the event such notice is given by the Transfer Agent, the Fund shall, on or
before the termination date, deliver to the Transfer Agent a copy of a
resolution of its Board of Directors certified by the Secretary or any Assistant
Secretary designating a successor transfer agent. If the Fund fails to designate
a successor transfer agent and if the Transfer Agent is unable to find a
successor transfer agent, the Fund shall, upon the date specified in the notice
of termination of this Agreement and delivery of the records maintained
hereunder, be deemed to be its own transfer agent and the Transfer Agent shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement.
<PAGE>
ARTICLE X
MISCELLANEOUS
1. The Fund agrees that, prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of the
Transfer Agent hereunder, it shall advise the Transfer Agent of such proposed
change at least 30 days prior to the intended date of the same, and shall
proceed with such change only if it shall have received the written consent of
the Transfer Agent thereto.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address first
above written, or at such other place as the Fund may from time to time
designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent and mailed or delivered to it at its office as
indicated on page 1 of this Agreement or at such other place as the Transfer
Agent may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the formality of this
Agreement, and, except for an amendment to Appendix B or Appendix C hereto,
authorized or approved by a resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Transfer Agent.
6. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
7. This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
Attest:
/s/ Christine A. Bivetto By: /s/ Bernadette N. Finn
Attest: REICH & TANG SERVICES INC.
by Reich & Tang Asset Management, Inc.
as General Partner
/s/ Christine A. Bivetto By: /s/ Lorraine C. Hylser
<PAGE>
Schedule A
California Daily Tax Free Income Fund, Inc.
Connecticut Daily Tax Free Income Fund, Inc.
Cortland Trust, Inc.
Daily Dollar International, Ltd.
Daily Tax Free Income Fund, Inc.
Delafield Fund, Inc.
Florida Daily Municipal Income Fund
Institutional Daily Income Fund
Mexico Dollar Income Fund, Ltd.
Michigan Daily Tax Free Income Fund, Inc.
New Jersey Daily Municipal Income Fund, Inc.
New York Daily Tax Free Income Fund, Inc.
North Carolina Daily Municipal Income Fund, Inc.
Pennsylvania Daily Municipal Income Fund
Reich & Tang Equity Fund, Inc.
Short Term Income Fund, Inc.
Tax Exempt Proceeds Fund, Inc.
<PAGE>
CONSENT OF MESSRS. BATTLE FOWLER
We consent to the reference to our Firm under the heading "Federal Income
Taxes" in Pre-Effective Amendement No. 1 to the Registration Statement on Form
N-1A of Institutional Daily Income Fund as filed with the Securities and
Exchange Commission on April 8, 1994.
/s/ Battle Fowler
BATTLE FOWLER
New York, New York
April 8, 1994
LAW OFFICES OF
4000 BELL ATLANTIC TOWER DECHERT PRICE & RHOADS 477 MADISON AVENUE
1717 ARCH STREET NEW YORK, NY 10022-5891
PHILADELPHIA, PA 19103-2793 (212) 326-3500
(215) 994-4000 TEN POST OFFICE SQUARE * SOUTH
BOSTON, MA 02109-4603
1500 K STREET, N.W. 214 CARNEGIE CENTER
WASHINGTON, DC 20005-1208 PRINCETON, NJ 08540-6237
(202) 626-3300 TELEPHONE: (617) 728-7100 (609) 520-3200
TELEFAX: 845324 * BARDEP PHA
FAX: (617) 426-6567
TWENTY NORTH MARKET SQUARE 52 BEDFORD SQUARE
HARRISBURG, PA 17101-1603 LONDON WC1B 3EX, ENGLAND
(717) 237-2000 (071) 631-3383
65 AVENUE LOUISSE, BOX NO. 4
1050 BRUSSELS, BELGIUM
(02) 535-5411
April 6, 1994
Battle Fowler
280 Park Avenue
New York, NY 10017
Re: Institutional Daily Income Fund
Ladies and Gentlemen:
We have acted as special Massachusetts counsel for Insitutional Daily
Income fund, a massachusetts business trust (the "Fund"), in connection with the
organization oft he Fund and the issuance of shares of its Beneficial Interest.
As Massachusetts counsel for the Fund, we are familiar with its Declaration
of Trust and Bylaws. We have examined the Prospectus and Statement of Additional
Information included in the Fund's Registration Statement on Form N-1A,
substantially in the form in which it is to become effective (the "Prospectus"),
and have examined and relied upon such corporate records of the Fund and other
documents and certificates as to factual matters as we have deemed necessary to
render the opinion expressed herein. We have assumed without independent
verification the genuineness of all signatures and the conformity with the
originals of all documents submitted to us as copies.
Based on such examination, we are of the opinion and so advise you that:
1. The Fund is duly organized and validly existing as a business trust in
good standing under the laws of the Commonwealth of Massachusettes.
2. The 100,000 shares of presently issued and outstanding Beneficial
Interest of the Fund have been validly and legally issued and are
fully paid and nonassessable.
<PAGE>
Battle Fowler
April 6, 1994
Page 2
3. The shares of Beneficial Interest of the Fund to be offered for sale
pursuant to the Prospectus are duly authorized and, when sold, issued
and paid for as contemplated by the Prospectus, will have been validly
and legally issued and will be fully paid and nonassessable.
This letter expresses our opinion as to the Massachusettes law governing
matters such as due organization and the authorization and issuance of shares of
benficial interest, but it does not extend to the securities or "Blue Sky" laws
of Massachusettes, to federal securities or to other laws.
You may rely upon our foregoing opinion in rendering your opinion to the
Fund which is to be filed as an exhibit to the Registration Statement. We
consent to the filing of this opinion as an exhibit to the Registration
Statement and the reference to us under the caption "Counsel and Auditors" in
the Prospecuts. We do not thereby admit that we are "experts" as that term is
used in the Securities Act of 1933 and the regulations thereunder.
Very truly yours,
/s/ Dechert Price & Rhoads
EXHIBIT j
McGLADREY & PULLEN, L.L.P. RSM
-------------------------- ---
Certified Public Accountants & Consultants international
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated April 30, 1999, on the
financial statments referred to therein, in the Post-Effective Amendment No. 8
to the Registration Statement on Form N-1A, File No. 33-74470 of Institutional
Daily Income Fund as filed with the Securities and Exchange Commission.
We also consent to the reference to our Firm in each Prospectus under
the caption "Financial Highlights" and in the Statement of Additional
Information under the captions "Counsel and Auditors" and "Financial
Statements".
/s/ McGladrey & Pullen, LLP
New York, New York
July 29, 1999
March 15, 1994
Board of Trustees of Insitutional
Daily Income Fund
Gentlemen:
We hereby subscribe for 100,000 shares of beneficial interest, $.01 par
value per share, of Institutional Daily Income Fund, a Massachusettes business
trust (the "Trust"), at $1.00 per share for an aggregate purchase price of
$100,000. Our payment in full is confirmed.
We hereby represent and agree that we are purchasing these shares of
beneficial interest for investment purposes, for our own account and risk and
not with a view to any sale, division or other distribution thereof within the
meaning of the Securities Act of 1933 as amended, nor with any present intention
of distribution or selling such shares. We further agree that if any of such
shares are redeemed during the period that the deferred organizational expenses
of the Trust are being amortized, we will reimburse the Trust the then
unamortized organizational expenses in the same ratio as the number of shares
redeemed bears to the number of such shares held at the time of redemption.
Very truly yours,
NEW ENGLAND INVESTMENT COMPANIES, L.P.
By: NEW ENGLAND INVESTMENT COMPANIES, INC.
General Partner
By: /s/ William Berkowitz
Confirmed and Accepted:
INSITUTIONAL DAILY INCOME FUND
By: \s\ Bernadette N. Finn
REICH & TANG ASSET MANAGEMENT, L.P.
AMENDMENT NO. 4
TO
RULE 18f-3 MULTI-CLASS PLAN
July __ , 1999
I. Introduction.
Pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), the following sets forth the method for
allocating fees and expenses among each class of shares of the underlying
investment funds sponsored by Reich & Tang Asset Management, L.P. as set forth
in Exhibit A (each Fund referred to herein as the "Company") that issues
multiple classes of shares (the "Multi-Class Funds"). In addition, this Rule
18f-3 Multi-Class Plan (the "Plan") sets forth the shareholder servicing
arrangements, distribution arrangements, conversion features, exchange
privileges and other shareholder services of each class of shares in the
Multi-Class Funds.
The Company is an open-end series investment company
registered under the 1940 Act and the shares of which are registered on Form
N-1A under the Securities Act of 1933 (see Exhibit A for each Company's
registration number). Upon the effective date of this Plan, the Company hereby
elects to offer multiple classes of shares in the Multi-Class Funds pursuant to
the provisions of Rule 18f-3 and this Plan. This Plan does not make any material
changes to the class arrangements and expense allocations previously approved by
the Board of Directors of the Company pursuant to the exemptive order issued by
the Securities and Exchange Commission to California Daily Tax Free Income Fund,
et al. under Section 6(c) of the 1940 Act on November 18, 1992 (1940 Act Release
No. 812-7852).
The Company currently consists of the following separate
Funds:
California Daily Tax Free Income Fund, Inc., Connecticut Daily
Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Florida Daily
Municipal Income Fund, Georgia Daily Municipal Income Fund, Inc., Kentucky Daily
Municipal Income Fund, Inc., Institutional Daily Income Fund, Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Short Term Income Fund, Inc., Tennessee Daily Municipal Income Fund, Inc.,
Texas Daily Municipal Income Fund, Inc., and Virginia Daily Municipal Income
Fund, Inc.
<PAGE>
This Amendment No. 4 serves to create: (i) an Evergreen
Class of Shares of the Multi-Class Funds for the purpose of accommodating
clients of Evergreen Funds; (ii) a Chase Vista Select Class of Shares for the
purpose of accommodating clients of Chase Vista Funds; and (iii) a Pinnacle
Class of Shares for the purpose of accommodating clients of Cowles, Sabol & Co.
Amendment No.3 served to create a Total Resource Account ("TRA") Class of Shares
of the Multi-Class Funds for the purpose of accommodating clients and customers
of MetLife Securities, Inc. Amendment No. 2 served to include the following
Funds in the definition of Multi-Class Funds: Georgia Daily Municipal Income
Fund, Inc., Kentucky Daily Municipal Income Fund, Inc., Tennessee Daily
Municipal Income Fund, Inc. and Texas Daily Municipal Income Fund, Inc.
Amendment No. 1 served to create a Class C of shares of the Multi-Class Funds
for the purpose of accommodating clients and customers of Schroeder & Co.
("Schroeder"). All investors in Class C shares are clients of Schroeder whose
shares are maintained in omnibus account on the books of each Multi-Class Fund
with all sub-accounting performed by Schroeder.
II. Allocation of Expenses.
Pursuant to Rule 18f-3 under the 1940 Act, the Company shall
allocate to each class of shares in a Multi-Class Fund (i) any fees and expenses
incurred by the Company in connection with the distribution of such class of
shares under a distribution and service plan adopted for such class of shares
pursuant to Rule 12b-1, and (ii) any fees and expenses incurred by the Company
under a shareholder servicing plan in connection with the provision of
shareholder services to the holders of such class of shares. In addition,
pursuant to Rule 18f-3, the Company may allocate the following fees and expenses
to a particular class of shares in a single Multi-Class Fund:
(i) transfer agent fees and related expenses
identified by the transfer agent as being
attributable to such class of shares;
(ii) printing and postage expenses related to
preparing and distributing materials such as
shareholder reports, prospectuses, reports,
and proxies to current shareholder of such
class of shares or to regulatory agencies
with respect to such class of shares;
(iii) blue sky registration or qualification fees
incurred by such class of shares;
(iv) Securities and Exchange Commission
registration fees incurred by such class of
shares;
(v) the expense of administrative personnel and
services (including, but not limited to,
those of a fund accountant, [custodian]1 or
- --------
1. Rule 18f-3 requires that services related to the management of the
portfolio's assets, such as custodial fees, be borne by the fund and
not by class.
<PAGE>
divided paying agent charged with
calculating net asset values or
determining or paying dividends) as
required to support the shareholders of
such class of shares;
(vi) litigation or other legal expenses
relating solely to such class of shares;
(vii) fees of the Company's Directors incurred as
a result of issues relating to such class of
shares; and
(viii) independent accountants' fees relating
solely to such class of shares.
The initial determination of the class expenses that will be
allocated by the Company to a particular class of shares and any subsequent
changes thereto will be reviewed by the Board of Directors and approved by a
vote of the Directors of the Company, including a majority of the Directors who
are not interested persons of the Company.
Income, realized and unrealized capital gains and losses, and
any expenses of the Multi-Class Funds not allocated to a particular class of any
such Fund pursuant to this Plan shall be allocated to each class of the Fund on
the basis of the net asset value of that class in relation to the net asset of
the Fund.
III. Class Arrangements.
The following summarizes the Rule 12b-1 distribution fees,
shareholder servicing fees, exchange privileges and other shareholder services
applicable to each class of shares of the Multi-Class Funds. Additional details
regarding such fees and services are set forth in each Fund's current Prospectus
and Statement of Additional Information.
A. Class A Shares -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: Up to
.25% per annum of average daily net assets.
<PAGE>
6. Conversion Features: None.
7. Exchange Privileges: Subject to restrictions
and conditions set forth in the Prospectus,
Class A Shares may be exchanged for Class A
shares of any other Fund.
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
B. Class B Shares -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: None.
6. Conversion Features: None.
7. Exchange Privileges: Subject to restrictions
and conditions set forth in the Prospectus,
Class B shares may be exchanged for Class B
shares of other Multi-Class Funds.
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
C. Class C Shares (created for all funds which are
purchased by Schroeder & Co. clients)
1. Maximum Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: .25%
per annum of the average daily net assets.
<PAGE>
6. Sub-Accounting/Transfer Agent Fee: .20% per
annum of the average daily net assets.
7. Conversion Features: None.
8. Exchange Privileges: Subject to restrictions
and conditions set forth in the Prospectus,
Class C Shares may be exchanged for Class C
shares of any other Fund.
9. Other Incidental Shareholder Services: As
provided in the Prospectus.
D. TRA Class of Shares (created for all funds which are
purchased by MetLife Securities, Inc. clients)
1. Maximum Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: .25%
per annum of the average daily net assets.
6. Sub-Accounting/Transfer Agent Fee: [.20%]
per annum of the average daily net assets.
7. Conversion Features: None.
8. Exchange Privileges: Subject to restrictions
and conditions set forth in the Prospectus,
TRA Class of Shares may be exchanged for TRA
Class of Shares of any other Fund.
9. Other Incidental Shareholder Services: As
provided in the Prospectus.
E. Evergreen Class of Shares (created for all funds
which are purchased by clients of Evergreen Funds)
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
<PAGE>
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: Up to
.25% per annum of average daily net assets.
6. Conversion Features: None.
7. Exchange Privileges: Subject to restrictions
and conditions set forth in the Prospectus,
Evergreen shares may be exchanged for
Evergreen shares of any other Fund.
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
F. Chase Vista Select Class of Shares (created for
all funds which are purchased by clients of Chase
Vista Funds)
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: Up to
.25% per annum of average daily net assets.
6. Conversion Features: None.
7. Exchange Privileges: Subject to restrictions
and conditions set forth in the Prospectus,
Chase Vista Select shares may be exchanged
for Chase Vista Select shares of any other
Fund.
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
G. Pinnacle Class of Shares (created for all funds
which are purchased by clients of Cowles, Sabol & Co.)
1. Initial Sales Load: None.
<PAGE>
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: None.
6. Conversion Features: None.
7. Exchange Privileges: Subject to restrictions
and conditions set forth in the Prospectus,
Class B shares may be exchanged for Class B
shares of other Multi-Class Funds.
8. Other Incidental Shareholder Services: As
provided in the Prospectus.
IV. Board Review.
The Board of Directors of the Company shall review this Plan
as frequently as it deems necessary. Prior to any material amendments to this
Plan, the Company's Board of Directors, including a majority of the Directors
that are not interested persons of the Company, shall find that the Plan, as
proposed to be amended (including any proposed amendments to the method of
allocating class and/or fund expenses) is in the best interest of each class of
shares of a Multi-Class Fund individually and the Fund as a whole. In
considering whether to approve any proposed amendments(s) to the Plan, the
Directors of the Company shall request and evaluate such information as they
consider reasonably necessary to evaluate the proposed amendments(s) to the
Plan.
In making its determination to approve this amendment to the
Plan, the Board focused on, among other things, the relationship between or
among the classes and examined potential conflicts of interest between classes
regarding the allocation of fees, services, waivers and reimbursement of
expenses, and voting rights. The Board evaluated the level of services provided
to each class and the cost of those services to ensure that the services are
appropriate and the allocation of expenses is reasonable. In approving any
subsequent amendments to this Plan, the Board shall focus on and evaluate such
factors as well as any others deemed necessary by the Board.
<PAGE>
EXHIBIT A
California Daily Tax Free Income Fund, Inc.
Connecticut Daily Tax Free Income Fund, Inc.
Daily Tax Free Income Fund, Inc.
Florida Daily Municipal Income Fund
Georgia Daily Municipal Income Fund, Inc.
Institutional Daily Income Fund
Kentucky Daily Municipal Income Fund, Inc.
Michigan Daily Tax Free Income Fund, Inc.
New Jersey Daily Tax Free Income Fund, Inc.
North Carolina Daily Municipal Income Fund, Inc.
Pennsylvania Daily Municipal Income Fund
Short Term Income Fund, Inc.
Tennessee Daily Municipal Income Fund, Inc.
Texas Daily Municipal Income Fund, Inc.
Virginia Daily Municipal Income Fund, Inc.
SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Dana E. Messina and Bernadette N. Finn, and each of them , with full
power of substitution, as his true and lawful attorney and agent to execute in
his name and on his behalf, in any and all capacities, the Registration
Statement on Form N-1A, and any and all amendments thereto (including
pre-effective amendments) filed by Institutional Daily Income Fund (the "Fund")
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended, and any and
all other instruments which such attorney and agent deems necessary or advisable
to enable the Fund to comply with the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, the fules, regulations and
requirements of the Securities and Exchange Commission, and the securities or
Blue Sky laws of any state or other jurisdiction; and the undersigned hereby
ratifies and confirms as his own act and deed any and all that such attorney and
agent shall do or cause to be done by virtue hereof.
/s/ Steven W. Duff
------------------
Steven W. Duff
<PAGE>
SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Dana E. Messina and Bernadette N. Finn, and each of them , with full
power of substitution, as his true and lawful attorney and agent to execute in
his name and on his behalf, in any and all capacities, the Registration
Statement on Form N-1A, and any and all amendments thereto (including
pre-effective amendments) filed by Institutional Daily Income Fund (the "Fund")
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended, and any and
all other instruments which such attorney and agent deems necessary or advisable
to enable the Fund to comply with the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, the fules, regulations and
requirements of the Securities and Exchange Commission, and the securities or
Blue Sky laws of any state or other jurisdiction; and the undersigned hereby
ratifies and confirms as his own act and deed any and all that such attorney and
agent shall do or cause to be done by virtue hereof.
/s/ Robert Straniere
--------------------
Robert Straniere
<PAGE>
SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Dana E. Messina and Bernadette N. Finn, and each of them , with full
power of substitution, as his true and lawful attorney and agent to execute in
his name and on his behalf, in any and all capacities, the Registration
Statement on Form N-1A, and any and all amendments thereto (including
pre-effective amendments) filed by Institutional Daily Income Fund (the "Fund")
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended, and any and
all other instruments which such attorney and agent deems necessary or advisable
to enable the Fund to comply with the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, the fules, regulations and
requirements of the Securities and Exchange Commission, and the securities or
Blue Sky laws of any state or other jurisdiction; and the undersigned hereby
ratifies and confirms as his own act and deed any and all that such attorney and
agent shall do or cause to be done by virtue hereof.
/s/ Yung Wong
-------------------
Dr. Yung Wong
<PAGE>
SIGNATURES
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Dana E. Messina and Bernadette N. Finn, and each of them , with full
power of substitution, as his true and lawful attorney and agent to execute in
his name and on his behalf, in any and all capacities, the Registration
Statement on Form N-1A, and any and all amendments thereto (including
pre-effective amendments) filed by Institutional Daily Income Fund (the "Fund")
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended, and any and
all other instruments which such attorney and agent deems necessary or advisable
to enable the Fund to comply with the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, the fules, regulations and
requirements of the Securities and Exchange Commission, and the securities or
Blue Sky laws of any state or other jurisdiction; and the undersigned hereby
ratifies and confirms as his own act and deed any and all that such attorney and
agent shall do or cause to be done by virtue hereof.
/s/ Dr. W. Giles Mellon
-----------------------
Dr. W. Giles Mellon
<PAGE>
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