As filed with the Securities and Exchange Commission on May 28, 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. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 7 [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)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on [date] pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on July 30, 1999 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.
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INSTITUTIONAL DAILY 600 FIFTH AVENUE
INCOME FUND NEW YORK, N.Y. 10020
Class A Shares; Class B Shares (212) 830-5220
PROSPECTUS
August 3, 1999
The 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 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 9 Management, Organization and Capital Structure
and Performance 9 Shareholder Information
5 Risk/Return Summary: Fee Table 15 Tax Consequences
6 Investment Objectives, Principal Investment 16 Distribution Arrangements
Strategies and Related Risks 18 Financial Highlights
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I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
Investment Objectives
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The 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 the preservation of capital and the maintenance of liquidity.
There is no assurance that the Fund will achieve its investment objective.
Principal Investment Strategies
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The Fund intends to achieve its investment objectives through three separate
portfolios. The Fund is a money market fund which 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.
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, its 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 debts, 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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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.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
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.
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 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 the Fund.
While analyzing this information, please note that the Funds' 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)
================================================================================
[GRAPHIC OMITTED]
Calendar Year End % Total Return
- ----------------- ---------------
1996 5.10%
1997 5.17%
1998 5.07%
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(1) As of March 31, 1999, the Fund's U.S. Treasury Portfolio had a year-to-date
return of 1.07%.
(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 1.14% for the quarter ended December 31, 1998.
(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
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For the periods ended December 31, 1998
One Year 5.07% 5.33%
Average Annual Total Returns
since Inception (Class A, November 29, 1995)
(Class B, November 18, 1996) 5.10% 5.38%
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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 March 31, 1999, the Fund's Money Market Portfolio had a year-to-date
return of 1.15%.
(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 1.25%
for the quarter ended June 30, 1996.
(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
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For the periods ended December 31, 1998
One Year 5.28% 5.54%
Average Annual Total Returns
since Inception (Class A, April 3, 1995)
(Class B, May 13, 1994) 5.35% 5.53%
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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)
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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 with respect to both Class A and Class B shares of both
Portfolios was .10%. The Administration Fees, with respect to both Class A and
Class B shares of both Portfolios was .02%. The actual Total Fund Operating
Expenses for both the Money Market Portfolio's and the U.S. Treasury Portfolio's
Class A shares was .45% and for the Class B shares was .20%. 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:
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 through its three portfolios, seeks
to provide a high level of current income while maintaining liquidity and
preserving capital. 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 Administration, the Government National Mortgage
Association, the General Services Administration and the Maritime
Administration.
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
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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 certificates of deposit, time deposits and bankers' acceptances
issued by domestic banks, foreign branches of domestic banks, foreign
subsidiaries of domestic banks, and domestic and foreign branches of
foreign banks. 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.
(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 [foregoing] quality criteria. 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 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
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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.
For a more detailed description of (i) the securities that the Fund will invest
in, (ii) fundamental investment restrictions, and (iii) industry regulations
governing credit quality and maturity, please refer to the Statement of
Additional Information.
Risks
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The Fund complies with industry-standard requirements on the quality,
maturity and diversification of its investments which are designed to help
maintain a $1.00 share price. A significant change in interest rates or a
default on the Fund's investments could cause its share price (and the value of
your investment) to change.
Since the Money Market Portfolio may contain securities issued by foreign
governments and other 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.
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 generaly believed that
municipal issuers may be more vulnerable to Year 2000 issues or problems than
will other issuers.
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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
$____ billion. The Manager has been an investment adviser since 1970 and
currently is manager of seventeen other registered investment companies and 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 a 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 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 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
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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
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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 both 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
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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
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
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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
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Investors who wish to invest in the Fund directly may obtain a current
prospectus and the subscription order form necessary to open an account by
telephoning the Fund at the following numbers:
Within New York 212-830-5220
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 New York) and then instruct a member commercial bank to wire money
immediately to:
For U.S. Treasury Portfolio:
11
<PAGE>
Investors Fiduciary Trust Company
ABA # 101003621
Reich & Tang Funds
DDA # 890752-9554
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 # 890752-9554
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 # 890752-9554
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 dividends declared on the day a redemption becomes effective.
12
<PAGE>
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.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the
13
<PAGE>
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 both
Portfolios at least once a year and, at the shareholder's option, are reinvested
in additional shares of the Portfolio from which they were paid or are paid in
cash.
All dividends and distributions of capital gains are automatically invested,
at no charge, in additional Fund shares of the same Class of shares immediately
upon payment thereof unless a shareholder has elected by written notice to the
Fund to receive either of such distributions in cash.
Because Class A shares bear 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 of the same Class from one
Portfolio of the Fund into the same Class of shares 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 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.
14
<PAGE>
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
- --------------------------------------------------------------------------------
Each dividend and capital gains distribution, if any, declared by the Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or reinvested in additional shares of the same Class shares of the
applicable Portfolio having an aggregate net asset value as of the payment date
of such dividend or distribution equal to the cash amount of such dividend or
distribution. 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.
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.
The Class A shares will bear the Shareholder Servicing Fee under the Plan.
As a result, the net income of and the dividends payable to the Class A shares
will be lower than the net income of and dividends payable to the Class B shares
of the Fund. Dividends paid to each Class of shares of the Fund will, however,
be declared and paid on the same days at the same times and, except as noted
with respect to the Shareholder Servicing Fee payable under the Plan, will be
determined in the same manner and paid in the same amounts.
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.
The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemptions) paid
to shareholders who have not complied with IRS regulations. In connection with
this withholding requirement, a shareholder will be asked to certify on his
application that the social security or tax identification number provided is
correct and that the shareholder is not subject to 31% backup withholding for
previous underreporting to the IRS.
Distributions from the United States Government Portfolio that are derived
from
15
<PAGE>
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. 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 provides that, in addition to the Shareholder Servicing Fee, the
Fund will pay for (i) telecommunications expenses, including the cost of
dedicated lines and CRT terminals, incurred by the 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.
[These payments are limited to a maximum of .05% per annum of each Portfolio's
Class' shares' average daily net assets.]
The Plan provides that the Manager may make payments from time to time from
its own resources, which may include the management fee and past profits for the
following purposes: (i) to defray costs, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing on behalf of the Class A shares
of the Fund; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Class A shares of the Fund; and (iii)
to pay the costs of printing and distributing the Fund's Prospectus to
prospective investors, and to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
Class A shares. The Distributor may also make payments from time to time from
its own resources, which may include the Shareholder Servicing Fee (with respect
to Class A shares) and past profits, for the purposes enumerated in (i) above.
The Distributor will determine the amount of such payments made pursuant to the
Plan, provided that such payments will not increase the amount which the Fund is
required to pay to the Manager and Distributor for any fiscal year under either
the Investment Management Contract in effect for that year
16
<PAGE>
or under the Shareholder Servicing Agreement in effect for that year.
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.
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 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>
18
<PAGE>
VI. 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. 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>
19
<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>
PINNACLE SHARES OF
INSTITUTIONAL DAILY 600 FIFTH AVENUE
INCOME FUND NEW YORK, N.Y. 10020
Class B Shares (212) 830-5220
PROSPECTUS
August 3, 1999
The 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 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 9 Management, Organization and Capital Structure
and Performance 9 Shareholder Information
5 Risk/Return Summary: Fee Table 14 Tax Consequences
6 Investment Objectives, Principal Investment 15 Distribution Arrangements
Strategies and Related Risks 17 Financial Highlights
</TABLE>
<PAGE>
I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
Investment Objectives
- --------------------------------------------------------------------------------
The 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 the preservation of capital and the maintenance of liquidity.
There is no assurance that the Fund will achieve its investment objective.
Principal Investment Strategies
- --------------------------------------------------------------------------------
The Fund intends to achieve its investment objectives through three separate
portfolios. The Fund is a money market fund which 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.
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, its 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 debts, 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
- --------------------------------------------------------------------------------
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.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
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.
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 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 the Fund. While analyzing this information, please note that
the Funds' 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.
2
<PAGE>
Institutional Daily Income Fund U.S.Treasury Portfolio - Class B Shares(1)(2)(3)
================================================================================
[GRAPHIC OMITTED]
Calendar Year End % Total Return
- ----------------- ---------------
1997 5.43
1998 5.33%
================================================================================
(1) As of March 31, 1999, the Fund's U.S. Treasury Portfolio had a year-to-date
return of 1.13%.
(2) 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 1.20%
for the quarter ended December 31, 1998.
(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 B
-------
For the periods ended December 31, 1998
One Year 5.33%
Average Annual Total Returns
since Inception (November 18, 1996) 5.38%
3
<PAGE>
Institutional Daily Income Fund Money Market Portfolio - Class B Shares(1)(2)(3)
================================================================================
[GRAPHIC OMITTED]
Calendar Year End % Total Return
- ----------------- ---------------
1995 5.97%
1996 5.43%
1997 5.59%
1998 5.54%
================================================================================
(1) As of March 31, 1999, the Fund's Money Market Portfolio had a year-to-date
return of 1.21%.
(2) 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.
(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 B
-------
For the periods ended December 31, 1998
One Year 5.54%
Average Annual Total Returns
since Inception (May 13, 1994) 5.53%
4
<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>
The Manager voluntarily waived a portion of the Investment Management Fees with
respect to Class B shares for the Money Market Portfolio and U.S. Treasury
Portfolio. After such waivers the Investment Management Fees with respect to
Class B shares was .10%. The actual Total Fund Operating Expenses for both the
Money Market Portfolio's and the U.S. Treasury Portfolio's Class B shares was
.20%. 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:
Class B 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.
5
<PAGE>
II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objectives
- --------------------------------------------------------------------------------
The Fund is a money market fund, which through its three portfolios, seeks
to provide a high level of current income while maintaining liquidity and
preserving capital. 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 Administration, the Government National Mortgage
Association, the General Services Administration and the Maritime
Administration.
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
6
<PAGE>
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 certificates of deposit, time deposits and bankers' acceptances
issued by domestic banks, foreign branches of domestic banks, foreign
subsidiaries of domestic banks, and domestic and foreign branches of
foreign banks. 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.
(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 [foregoing] quality criteria. 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 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
7
<PAGE>
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.
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 and other 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.
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 generaly believed that
municipal issuers may be more vulnerable to Year 2000 issues or problems than
will other issuers.
8
<PAGE>
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
$____ billion. The Manager has been an investment adviser since 1970 and
currently is manager of seventeen other registered investment companies and 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 a 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
Pinnacle Shares have been created for the primary purpose of providing a
short-term investment product for investors who purchase shares directly from
Cowles, Sabol & Co., through dealers with whom Cowles, Sabol & Co. has entered
into agreements for this purpose or through certain "Participating
Organizations" (see "Investments though Participating Organizations") with whom
they have accounts. Pinnacle Shares are identical to other shares of the Fund,
which are offered pursuant to a separate prospectus, with respect to investment
objectives and yield, but differ with respect to certain other matters.
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
- --------------------------------------------------------------------------------
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
9
<PAGE>
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 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 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
- --------------------------------------------------------------------------------
Investors may invest in Pinnacle Shares through Cowles, Sabol & Co. or
through dealers with whom Cowles, Sabol & Co. has entered into agreements for
this purpose as described herein and those who have accounts with Participating
Organizations may invest in Pinnacle Shares through their Participating
Organization in accordance with the procedures established by the Participating
Organizations. An investor who purchases Pinnacle Shares through a Participating
Organization that receives payment from the Manager or the Distributor will
become a Class B shareholder. (See "Investments Through Participating
Organizations" 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 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
10
<PAGE>
respect to both 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 with which they have accounts. "Participating
Organizations" are securities brokers, banks and financial institutions or other
industry professionals or organizations which have entered into shareholder
servicing agreements with the Distributor with respect to investment of their
customer accounts in the Fund. When instructed by its customer to purchase or
redeem Fund shares, the Participating Organization, on behalf of the customer,
transmits to the Fund's transfer agent a purchase or redemption order, and in
the case of a purchase order, payment for the shares being purchased.
Participating Organizations may confirm to their customers who are
shareholders in the Fund ("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 Cowles, Sabol & Co., Inc.
P.O. Box 260208
Encino, CA 91426-0208
11
<PAGE>
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 Cowles, Sabol & Co. at (818) 906-0881 and then instruct a
member commercial bank to wire money immediately to:
Chase Manhattan Bank, New York, NY
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 Cowles, Sabol & Co., 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
12
<PAGE>
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 Cowles, Sabol & Co., 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.
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
13
<PAGE>
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 both
Portfolios at least once a year and, at the shareholder's option, are reinvested
in additional shares of the Portfolio from which they were paid or are paid in
cash.
All dividends and distributions of capital gains are automatically invested,
at no charge, in additional Fund shares of the same Class of shares immediately
upon payment thereof unless a shareholder has elected by written notice to the
Fund to receive either of such distributions in cash.
Because Class A shares bear 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 of the same Class from one
Portfolio of the Fund into the same Class of shares 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 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
- --------------------------------------------------------------------------------
Each dividend and capital gains distribution, if any, declared by the Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or reinvested in additional shares of the same Class shares of the
applicable Portfolio having an aggregate net asset value as of the payment date
of such dividend or distribution equal to the cash amount of such dividend or
distribution. A shareholder who elects
14
<PAGE>
to reinvest in additional shares will be treated for tax purposes as if it had
received and reinvested the cash dividend. 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.
The Class A shares will bear the Shareholder Servicing Fee under the Plan.
As a result, the net income of and the dividends payable to the Class A shares
will be lower than the net income of and dividends payable to the Class B shares
of the Fund. Dividends paid to each Class of shares of the Fund will, however,
be declared and paid on the same days at the same times and, except as noted
with respect to the Shareholder Servicing Fee payable under the Plan, will be
determined in the same manner and paid in the same amounts.
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.
The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemptions) paid
to shareholders who have not complied with IRS regulations. In connection with
this withholding requirement, a shareholder will be asked to certify on his
application that the social security or tax identification number provided is
correct and that the shareholder is not subject to 31% backup withholding for
previous underreporting to the IRS.
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.
V. DISTRIBUTION ARRANGEMENTS
Rule 12b-1 Fees
- --------------------------------------------------------------------------------
Investors do not pay a sales charge to purchase shares of the Fund. However,
the Fund pays fees in connection with the distribution of shares and for
services provided to the Class A shareholders. The Fund pays these fees from its
assets on an ongoing basis and therefore, over
15
<PAGE>
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 provides that, in addition to the Shareholder Servicing Fee, the
Fund will pay for (i) telecommunications expenses, including the cost of
dedicated lines and CRT terminals, incurred by the 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.
[These payments are limited to a maximum of .05% per annum of each Portfolio's
Class' shares' average daily net assets.]
The Plan provides that the Manager may make payments from time to time from
its own resources, which may include the management fee and past profits for the
following purposes: (i) to defray costs, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing on behalf of the Class A shares
of the Fund; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Class A shares of the Fund; and (iii)
to pay the costs of printing and distributing the Fund's Prospectus to
prospective investors, and to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
Class A shares. The Distributor may also make payments from time to time from
its own resources, which may include the Shareholder Servicing Fee (with respect
to Class A shares) and past profits, for the purposes enumerated in (i) above.
The Distributor will determine the amount of such payments made pursuant to the
Plan, provided that such payments will not increase the amount which the Fund is
required to pay to the Manager and Distributor for any fiscal year under either
the Investment Management Contract in effect for that year or under the
Shareholder Servicing Agreement in effect for that year.
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.
16
<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 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>
17
<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.
======================================================
PINNACLE
SHARES OF
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
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
This Statement of Additional Information (SAI) is not a Prospectus. The SAI
expands upon and supplements the information contained in the current Prospectus
of Institutional Daily Income Fund (the "Fund"), dated August 3, 1999 and should
be read in conjunction with the Fund's Prospectus.
A Prospectus may be obtained from any Participating Organization or by writing
or calling the Fund toll-free at 1-(800) 221-3079. The 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.
This Statement of Additional Information is incorporated by reference into the
Fund's Prospectus in its entirety.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Table of Contents
- ------------------------------------------------------------------------------------------------------------------------
Fund History.........................................2 Capital Stock and Other Securities......................18
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..............................12 Underwriters............................................19
Control Persons and Principal Holders of Calculation of Performance Data.........................20
Securities........................................13 Financial Statements....................................21
Investment Advisory and Other Services..............14 Description of Ratings..................................22
Brokerage Allocation and Other Practices............17
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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.
Bank Obligations
Domestic banks organized under Federal law are supervised and examined by the
Comptroller of the Currency and are required to be members of the Federal
Reserve System and to be insured by the Federal Deposit Insurance Corporation
("FDIC"). Domestic banks organized under state law are supervised and examined
by state banking authorities. State banks whose certificates of deposit may be
purchased by the Fund are insured by the FDIC and are subject to Federal
examination and to Federal law and regulation.
Obligations of foreign branches of domestic banks, foreign subsidiaries of
domestic banks and domestic and foreign branches of foreign banks, such as
certificates of deposit ("CDs") and time deposits ("TDs") may be general
obligations of the parent banks in addition to the issuing branch, or may be
limited by the terms of a specific obligation and governmental regulation. Such
obligations are subject to different risks than are those of domestic banks.
These risks include foreign economic and political developments, foreign
governmental restrictions that may adversely affect payment of principal and
interest on the obligations, foreign exchange controls and foreign withholding
and other taxes on interest income. Foreign branches and subsidiaries are not
necessarily subject to the same or similar regulatory requirements that apply to
domestic banks, such as mandatory reserve requirements, loan limitations, and
accounting, auditing and financial recordkeeping requirements. In addition, less
information may be publicly available about a foreign branch of a domestic bank
or about a foreign subsidiary of a domestic bank or about a domestic or foreign
branch of a foreign bank than about a domestic bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by Federal and State
regulation as well as governmental action in the country in which the foreign
bank has its head office. In addition, branches licensed by the Comptroller of
the Currency and branches licensed by certain states ("State Branches") may or
may not be required to: (1) pledge to the regulator, by depositing assets with a
designated bank within the state, an amount of its assets equal to 5% of its
total liabilities; and (2) maintain assets within the state of an amount equal
to a specified percentage of the aggregate amount of liabilities of the foreign
bank payable at or through all of its agencies or branches within the state. The
deposits of State Branches may not necessarily be insured by the FDIC.
In view of the foregoing factors associated with the purchase of CDs and the TDs
issued by foreign branches of domestic banks, by foreign subsidiaries of
domestic banks, by foreign branches of foreign banks or by domestic branches of
foreign banks, the Manager carefully evaluates such investments on a case by
case basis.
Foreign Bank Obligations
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.
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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 with respect to those securities that
are different in some respects from those incurred by a fund which invests only
in debt obligations of the United States and domestic issuers, although such
obligations may be higher yielding when compared to the securities of the United
States and domestic issuers. In making foreign investments, therefore, the Money
Market Portfolio will give appropriate consideration to the following factors,
among others.
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 and liquidity in most foreign securities markets are less than in the
United States and, at times, volatility of price can be greater than in the
United States. The issuers of some of these securities, such as bank
obligations, 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, practices and requirements comparable to those applicable to United
States issuers.
Because evidences of ownership of such securities usually are held outside the
United States, the Money Market Portfolio will be subject to additional risks
which include possible adverse political and economic developments, possible
seizure or nationalization of foreign deposits and possible adoption of
governmental restrictions which might adversely affect the payment of principal
and interest on the foreign securities or might restrict the payment of
principal and interest to the issuer, whether from currency blockage or
otherwise.
Furthermore, some of these securities may be subject to stamp 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. Income earned or received
by the Money Market Portfolio from sources within foreign countries may be
reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States, however, may reduce
or eliminate such taxes. The Manager will attempt to minimize such taxes by the
timing of transactions and other strategies, but there can be no assurance that
such efforts will be successful. All such taxes paid by the Money Market
Portfolio will reduce its net income available for distribution to shareholders.
The Manager will consider available yields, net of any required taxes, in
selecting foreign securities.
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
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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 interest paid on the
instruments over the negotiated yield at which the participations were purchased
by the Portfolio.
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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 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.
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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.
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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
Portfolio 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.
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
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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 "Dividends,
Distributions and Taxes" in the Prospectus.) 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 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
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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 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.
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
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<PAGE>
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 Portfolios 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 Municipal 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 "Dividends, Distributions and Taxes" in the Prospectus). 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
(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
10
<PAGE>
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).
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.
11
<PAGE>
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 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
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<PAGE>
December 1990. Mr. De Sanctis is also Treasurer of 17 other funds in the Reich &
Tang Fund Complex, and is Vice President and Treasurer of Cortland Trust, Inc.
Rosanne Holtzer, 34 - Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly Manager of Fund Accounting for the Manager with which she 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 "Manager" 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 (and, with respect to certain of the funds
in the Fund Complex, estimated to be paid during 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 [ ] Money Market Portfolio - Class A
shares outstanding, [ ] Money Market Portfolio Class B shares
outstanding, [ ] U.S. Treasury Portfolio -Class A shares outstanding
and [ ] U.S. Treasury Portfolio Class B shares outstanding. 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
Money Market Portfolio - Class B
U.S. Treasury Portfolio - Class A
U.S. Treasury Portfolio - Class B
13
<PAGE>
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 [$12.3]
billion. In addition to the Fund, the Manager acts as investment manager and
administrator of seventeen 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.
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 thirteen 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
Limited Partnerships, Greystone Partners; L.P., Harris Associates, L.P., Jurika
& Voyles, L.P., Loomis, Sayles & Company, L.P., New England Funds, L.P., Nvest
Associates, Inc., 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 to 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
14
<PAGE>
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 and $468,085, of
which $156,029 was waived from the Money Market Portfolio and the U.S. Treasury
Portfolio, respectively. 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 and $302,799, of which $68,224 was waived from the Money Market
Portfolio and the U.S. Treasury Portfolio, respectively.
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 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 Funds 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 and $195,035, of which $117,021 was waived from the
Money Market Portfolio and the U.S. Treasury Portfolio, respectively. 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 and $146,609, of which
$87,965 was waived from the Money Market Portfolio and the U.S. Treasury
Portfolio, respectively.
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 both
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
15
<PAGE>
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 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).
Under the Distribution Agreement, the Distributor, for nominal consideration
(i.e., $1.00) and as agent for the Fund, will solicit orders for the purchase of
the Fund's shares, provided that any subscriptions and orders will not be
binding on the Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that, in addition to
the Service Fee, the Fund will pay for (i) telecommunications expenses,
including the cost of dedicated lines and CRT terminals, incurred by the
Participating Organizations and Distributor in carrying out their obligations
under the Shareholder Servicing Agreement with respect to the Class A shares and
(ii) preparing, printing and delivering the Fund's prospectus to existing
shareholders of the Fund and preparing and printing subscription application
forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from
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
16
<PAGE>
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 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
17
<PAGE>
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 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 two classes of common stock, Class A
and Class B. 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 and Class B 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.
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Net Asset Value
The Fund does not determine net asset value per share of each Class on any day
in which the New York Stock Exchange is closed for trading. Those days include:
New Year's Day, Martin Luther King Jr Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The net asset value of 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. 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
Federal Income Taxes
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.
The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemptions) paid
to shareholders who have not complied with IRS regulations. In connection with
this withholding requirement, a shareholder will be asked to certify on his
application that the social security or tax identification number provided is
correct and that the shareholder is not subject to 31% backup withholding for
previous underreporting to the IRS.
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
19
<PAGE>
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
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%.
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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%.
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.
22
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<PAGE>
PART C - OTHER INFORMATION
Item 23. Exhibits.
** (a) Declaration of Trust of the Registrant.
** (b) By-Laws of the Registrant.
(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.1) Transfer Agent Agreement between Registrant and Fundtech Services
L.P.
** (h.2) Administrative Services Agreement between the Registrant and Reich &
Tang Asset Management L.P.
** (i.1) Opinion of Battle Fowler LLP to the use of their name under the
heading "Counsel and Auditors" in the Statement of Additional Information.
** (i.2) 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.
(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.
* (m.1) Form of Distribution and Service Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940.
(m.2)Form of Distribution Agreement between the Registrant and Reich & Tang
Distributors, Inc. (see Exhibit e.)
**** (m.3) Shareholder Servicing Agreement and Administrative Services Contract
between the Registrant and Reich & Tang Distributors, Inc.
(n) Financial Data Schedule (for EDGAR Filing only).
***** (o) Rule 18f-3 Plan for Multi-Class.
*** (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 Pre-Effective Amendment No. 1 to Registration Statement No.
33-74470 on April 8, 1994 and incorporated herein by reference.
*** Filed with Post-Effective Amendment No. 1 to Registration Statement No.
33-74470 on October 28, 1994 and incorporated herein by reference.
**** Filed with Post-Effective Amendment No. 2 to Registration Statement No.
33-74470 on January 31, 1995 and incorporated herein by reference.
*****Filed on November 5, 1997 with Post-Effective Amendment No. 2 to the
Virginia Daily Municipal Income Fund, Inc. (File No. 33-90538) Registration
Statement and incorporated herein by reference.
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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. under the caption
"Management, Organization and Capital Structure" in the Prospectus and
"Investment Advisory and Other Services" in the Statement of Additional
Information of the Registration Statement is incorporated herein by reference.
The Registrant's investment adviser, Reich & Tang Asset Management L.P.
is a registered investment adviser. Reich & Tang Asset Management L.P.'s
investment advisory clients include California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax
Free Income Fund, Inc., Florida Daily Municipal Income Fund, Georgia Daily
Municipal Income Fund, Inc., 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., Pax World Money Market Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc., and Virginia
Daily Municipal Income Fund, Inc., registered investment companies whose
addresses are 600 Fifth Avenue, New York, New York 10020, which invest
principally in money market instruments; Delafield Fund, Inc. and Reich & Tang
Equity Fund, Inc. are registered investment companies whose address is 600 Fifth
Avenue, New York, New York 10020, which invests principally in equity
securities. In addition, RTAMLP is the sole general partner of Alpha Associates
L.P., August Associates L.P., Reich & Tang Minutus I, L.P., Reich & Tang Minutus
II, L.P., Reich & Tang Equity Partners L.P., Reich & Tang Micro Cap L.P., Reich
& Tang Concentrated Portfolio L.P. and Tucek Partners L.P., private investment
partnerships organized as limited partnerships. Peter S. Voss, President, Chief
Executive Officer and a Director of Nvest Corporation (formerly New England
Investment Companies, Inc.) since October 1992, Chairman of the Board of Nvest
Corporation since December 1992, Group Executive Vice President, Bank of
America, responsible for the global asset management private banking businesses,
from April 1992 to October 1992, Executive Vice President of Security Pacific
Bank, and Chief Executive Officer of Security Pacific Hoare Govett Companies a
wholly-owned subsidiary of Security Pacific Corporation, from April 1988 to
April 1992, Director of The New England since March 1993, Chairman of 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, Executive Vice President and Chief Financial Officer of The Boston
Company, a diversified financial services company, from March 1989 until July
1993, from September 1985 to December 1988, Mr. Ryland was employed by Kenner
Parker Toys, Inc. as Senior Vice President and Chief Financial Officer. Edward
N. Wadsworth, Executive Vice President, General Counsel, Clerk and Secretary of
Nvest Corporation since December 1989, Senior Vice President and Associate
General Counsel of The New England from 1984 until December 1992, and Secretary
of Westpeak and Draycott and the Treasurer of Nvest Corporation. Lorraine C.
Hysler has been Secretary of RTAM since July 1994, Assistant Secretary of NEIC
since September 1993, Vice President of the Mutual Funds Group of NEICLP from
September 1993 until July 1994, and Vice President of Reich & Tang Mutual Funds
since July 1994. Ms. Hysler joined Reich & Tang, Inc. in May 1977 and served as
Secretary from April 1987 until September 1993. Richard E. Smith, III has been a
Director of RTAM since July 1994, President and Chief Operating Officer of the
Capital Management Group of NEICLP from May 1994 until July 1994, President and
Director of RTAM since July 1994, President and Chief Operating Officer of the
Chief Operating Officer of the Reich & Tang Capital Management Group since July
1994, Executive Vice President and Director of Rhode Island Hospital Trust from
March 1993 to May 1994, President, Chief Executive Officer and Director of USF&G
Review Management Corp. from January 1988 until September 1992. Steven W. Duff
has been a Director of RTAM since October 1994, President and Chief Executive
Officer of Reich & Tang Mutual Funds since August 1994, Senior Vice President of
NationsBank from June 1981 until August 1994, Mr. Duff is President and a
Director of 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., 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., Pax World Money Market Fund,
Inc., Short Term Income Fund, Inc. and Virginia Daily Municipal Income Fund,
Inc., President and Trustee of Institutional Daily Municipal Income Fund,
Pennsylvania Daily Municipal Income Fund, 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, Vice President of Mutual Funds Division of NEICLP from
September 1993 until July 1994, Vice President of Reich & Tang Mutual
C-2
<PAGE>
Funds since July 1994. Ms. Finn joined Reich & Tang, Inc. in September
1970 and served as Vice President from September 1982 until May 1987 and as Vice
President and Assistant Secretary from May 1987 until September 1993. Ms. Finn
is also Secretary of Back Bay Funds, Inc., California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc.,
Delafield Fund, Inc., Daily Tax Free Income Fund, Inc., Institutional Daily
Municipal Income Fund, Michigan Daily Tax Free Income Funds, Inc., New Jersey
Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Pax World Money Market Fund,
Inc., Pennsylvania Daily Municipal Income Fund, Tax Exempt Proceeds Fund, Inc.
and Virginia Daily Municipal Income Fund, Inc., a Vice President and Secretary
of Reich & Tang Equity Fund, Inc., and Short Term Income Fund, Inc. Richard De
Sanctis has been Treasurer of RTAM since July 1994, Assistant Treasurer of NEIC
since September 1993 and Treasurer of the Mutual Funds Group of NEICLP from
September 1993 until July 1994, Treasurer of the Reich & Tang Mutual Funds since
July 1994. Mr. De Sanctis joined Reich & Tang, Inc. in December 1990 and served
as Controller of Reich & Tang, Inc., from January 1991 to September 1993. . Mr.
De Sanctis is also Treasurer of Back Bay Funds, Inc., California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free
Income Fund, Inc., Delafield Fund, Inc., Institutional Daily Municipal Income
Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina
Daily Municipal Income Fund, Inc., 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. and is Vice President and Treasurer of Cortland
Trust, Inc. Richard I. Weiner has been Vice President of RTAM since July 1994,
has been Vice President of NEIC since September 1993, Vice President of the
Capital Management Group of NEIC from September 1993 until July 1994, Vice
President of Reich & Tang Asset Management L.P. Capital Management Group since
July 1994. Mr. Weiner joined Reich & Tang, Inc. in August 1970 and has served as
a Vice President 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
Back Bay Funds, Inc., California Daily Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield
Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily Income
Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina
Daily Municipal Income Fund, Inc., 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. and is Vice President and Assistant Treasurer of
Cortland Trust, Inc.
Item 27. Principal Underwriters.
(a) Reich & Tang Distributors, Inc., the Registrant's Distributor, is
also distributor for Back Bay Funds, Inc., California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc.,
Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal
Income Fund, Georgia Daily Municipal Income Fund, Institutional Daily Income
Fund, New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pax World
Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang
Equity Fund, Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc.
and Virginia Daily Municipal Income Fund, Inc.
(b) The following are the directors and officers of Reich & Tang
Distributors Inc. The principal business address of Messrs. Voss, Ryland, and
Wadsworth is 399 Boylston Street, Boston, Massachusetts 02116. For all other
persons' the principal address is 600 Fifth Avenue, New York, New York 10020.
Positions and Offices Positions and Offices
Name with the Distributor with the Registrant
Peter S. Voss Director None
G. Neal Ryland Director None
Edward N. Wadsworth Executive Officer None
Richard E. Smith III President None
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.
C-3
<PAGE>
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-4
<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(a) 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 28th day of May, 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 May 28, 1999.
SIGNATURE TITLE DATE
(1) Principal Executive Officer
Steven W. Duff Chairman and President 05/28/99
By:/s/Steven W. Duff
Steven W. Duff
(2) Principal Financial and
Accounting Officer
/s/Richard De Sanctis
Richard De Sanctis Treasurer 05/28/99
(3) Majority of the Board of Trustees
Dr. W. Giles Mellon Trustee
Dr. Yung Wong Trustee
Robert Straniere Trustee
By:/s/Bernadette N. Finn 05/28/99
Bernadette N. Finn
Attorney-in-Fact*
* An executed copy of the Powers of Attorney was filed with Post-Effective
Amendment No. 1 to the Registration Statement on October 28, 1994 and
incorporated herein by reference.
C-5
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. 7
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
May 26, 1999
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