INSTITUTIONAL DAILY INCOME FUND
DEFS14A, 2000-08-24
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                                                       Registration No. 33-74470

                           SCHEDULE 14A INFORMATION

          Proxy Statement Pursuant to Section 14(a) of the Securities
                    Exchange Act of 1934 (Amendment No.  )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_]  Preliminary Proxy Statement
[_]  CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-
     6(E)(2))
[X]  Definitive Proxy Statement
[_]  Definitive Additional Materials
[_]  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12


                        Institutional Daily Income Fund
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               (Name of Registrant as Specified In Its Charter)


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   (Name of Person(s) Filing Proxy Statement, if other than the Registrant)


Payment of Filing Fee (Check the appropriate box):

[X]  No fee required
[_]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.


     (1) Title of each class of securities to which transaction applies:

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     (2) Aggregate number of securities to which transaction applies:

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     (3) Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
         the filing fee is calculated and state how it was determined):

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     (5) Total fee paid:

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[_]  Fee paid previously with preliminary materials.

[_]  Check box if any part of the fee is offset as provided by Exchange
     Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
     was paid previously. Identify the previous filing by registration statement
     number, or the Form or Schedule and the date of its filing.

     (1) Amount Previously Paid:

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<PAGE>

                        Institutional Daily Income Fund
                                 (the "Fund")
                            Money Market Portfolio
                            U.S. Treasury Portfolio
                               600 Fifth Avenue
                           New York, New York 10020

                                                                August 21, 2000

Dear Shareholder:

  As we announced to you in July, the parent company of the Fund's manager has
entered into an agreement to be acquired by CDC Asset Management, a leading
French financial institution, as more fully described in the enclosed proxy
statement. As a result, we are soliciting your vote for approval of certain
items as described in the enclosed proxy statement. Reading this letter
completely may make your review of the proxy statement easier. We ask that you
review the proxy statement and vote your shares promptly. You can vote by
returning the enclosed card or following the instructions located on your
proxy card to vote via the Internet or touch-tone phone.

Q. What are the Proposals about?

  Two proposals are described in the enclosed proxy statement.

  The first proposal relates to the management agreement for the Fund on
behalf of the Money Market Portfolio and U.S. Treasury Portfolio. The laws
governing mutual funds generally require that when an investment manager
undergoes a change in ownership, the management agreement with the fund will
terminate. In order for the Fund to continue with Reich & Tang Asset
Management L.P. as the investment manager, shareholders of each Portfolio must
approve the new form of agreement for their Portfolio. The proposed new
agreement is substantially the same as the current agreement. Fees will not
change and no changes are planned to the portfolio managers of your Fund.

  The second proposal relates to the ratification of the selection of
PricewaterhouseCoopers LLP as the Fund's independent accountants.

Q. How will the CDC transaction affect the Fund?

  The transaction is not expected to affect the daily operations of the Fund
or the investment management activities of Reich & Tang Asset Management L.P.
Reich & Tang Asset Management L.P. and the Fund will continue to operate
autonomously, but will be part of a larger organization with the resources of
CDC Asset Management. We will continue to work to meet your expectations for
competitive performance and high quality customer service. The Fund's
investment objectives, strategies and portfolio managers are not expected to
change as a result of the transaction.
<PAGE>

Remember--Your Vote Counts!

  Your vote is extremely important, even if you only own a few Fund shares.
Voting promptly is also important. If we do not receive enough votes, we will
have to resolicit shareholders, which can be time consuming and may delay the
meeting. You may receive a reminder call to return your proxy from D.F. King &
Company, a proxy solicitation firm.

  Now you can use the Internet or your telephone, if you want to vote
electronically. Please see your proxy card for more information and the
instructions. If you do vote electronically, you do not need to mail your
proxy card. However, if you want to change your vote you may do so using the
proxy card, telephone or Internet.

  Thank you for your cooperation in voting on these important proposals. If
you have questions, please call your financial representative. Or, if your
questions relate specifically to the proxy matters, please call our service
center representatives toll-free at 1-800-221-3079.

Sincerely,

/s/ Steven W. Duff

Steven W. Duff
President

<PAGE>

                        Institutional Daily Income Fund
                                 (the "Fund")

                            Money Market Portfolio
                            U.S. Treasury Portfolio
                               600 Fifth Avenue
                           New York, New York 10020
                                (212) 830-5220

                   Notice of Special Meeting of Shareholders
                               October 10, 2000

  A Special Meeting of the shareholders of the Fund will be held at 9:20 a.m.
at the offices of the Fund, 600 Fifth Avenue, New York, New York for these
purposes:

    1. To approve a new Investment Management Contract with Reich & Tang
  Asset Management L.P. for the Fund on behalf of the Money Market Portfolio
  and U.S. Treasury Portfolio.

    2. To ratify the selection of PricewaterhouseCoopers LLP as independent
  accountants of the Fund for its fiscal year ending March 31, 2001.

    3. To consider and act upon any other matters that properly come before
  the meeting and any adjourned session of the meeting.

  Shareholders of record at the close of business on August 15, 2000 are
entitled to notice of and to vote at the meeting and any adjourned session.

                                       By order of the Board of Trustees

                                       Bernadette N. Finn
                                       Secretary of the Fund

August 21, 2000

 Please respond. Your vote is important. Please complete, sign, date and
 return the enclosed proxy card, whether or not you plan to attend the
 meeting.
<PAGE>

                                PROXY STATEMENT

                        Institutional Daily Income Fund
                                 (the "Fund")

                            Money Market Portfolio
                            U.S. Treasury Portfolio

                               600 Fifth Avenue
                           New York, New York 10020
                                (212) 830-5220

  The Trustees of Institutional Daily Income Fund (the "Fund"), are soliciting
proxies from the shareholders of the Money Market Portfolio and the U.S.
Treasury Portfolio (collectively, the "Portfolios") in connection with a
Special Meeting of Shareholders of the Fund (the "Meeting"). The Meeting has
been called to be held on October 10, 2000 at 9:20 a.m. at the offices of the
Fund, 600 Fifth Avenue, New York, New York. The meeting notice, this Proxy
Statement and proxy cards are being sent to shareholders of record on August
15, 2000 (the "Record Date) beginning on or about August 21, 2000.

  The only items of business that the Trustees expect will come before the
Meeting are (i) approval of a new Investment Management Contract for each
Portfolio of the Fund (the "New Investment Management Contract") with Reich &
Tang Asset Management L.P. (the "Manager") and (ii) ratification of
PricewaterhouseCoopers LLP as independent accountants for the Fund for its
current fiscal year ending March 31, 2001. As explained below, the proposed
New Investment Management Contract is identical (except for its date) to the
Investment Management Contract currently in effect for each Portfolio of the
Fund (the "Current Investment Management Contract").

PROPOSAL 1 APPROVAL OF NEW INVESTMENT MANAGEMENT CONTRACT

  The reason the Trustees are proposing the New Investment Management Contract
for the Fund on behalf of each of the Portfolios is that the Current
Investment Management Contract will terminate when the Manager's parent
company, Nvest Companies, L.P. ("Nvest"), is acquired by a new parent company,
CDC Asset Management ("CDC AM"). (A federal law, the Investment Company Act of
1940, as amended (the "Investment Company Act"), provides generally that the
advisory agreements of mutual funds automatically terminate when the
investment adviser or its parent company undergo a significant change of
ownership.) The Trustees have carefully considered the matter, and have
concluded that it is appropriate to enter into the New Investment Management
Contract for the Fund, so that the Manager can continue to manage the Fund on
the same terms as are now in effect, following the acquisition of Nvest by CDC
AM.

  The acquisition of Nvest by CDC AM will occur only if various conditions are
satisfied (or waived by the parties, if permitted by law). These conditions
<PAGE>

include, among others, certain government approvals of the acquisition and
approval of the acquisition by vote of the unitholders of Nvest and Nvest,
L.P. ("Nvest, L.P."), Nvest's advising general partner. Nvest currently
expects that the acquisition will occur during the fourth calendar quarter of
2000, but the acquisition could be delayed. If the acquisition does not occur,
the New Investment Management Contract will not be needed because the
automatic termination of the Current Investment Management Contract will not
occur.

  Under the Investment Company Act, the Fund cannot enter into a New
Investment Management Contract unless the shareholders of the Fund vote to
approve the New Investment Management Contract. The Meeting is being held to
seek shareholder approval by each Portfolio of the New Investment Management
Contract. No change in advisory fee rate is being proposed.

  Each share is entitled to cast one vote, and fractional shares are entitled
to a proportionate fractional vote.

  The Trustees recommend that the shareholders of each Portfolio vote to
approve the New Investment Management Contract for their Portfolio.

 Description of the New Investment Management Contract

  The New Investment Management Contract is identical to the Current
Investment Management Contract, except that the date of the New Investment
Management Contract will be the date that CDC AM acquires Nvest. Appendix A to
this Proxy Statement sets forth information about the Current Investment
Management Contract, including the date of the Current Investment Management
Contract and the advisory fee rates under both the New Investment Management
Contract and the Current Investment Management Contract. Appendix B to this
Proxy Statement contains the form of the Investment Management Contract. The
Current Investment Management Contract and the New Investment Management
Contract match the form in Appendix B, except for the date of the agreement.
The next several paragraphs briefly summarize some important provisions of the
New Investment Management Contract, but for a complete understanding of the
agreement you should read Appendices A and B.

  The New Investment Management Contract essentially provides that the
Manager, under the Trustees' general control and supervision, will manage each
portfolio of securities and make decisions with respect to the purchase and
sale of investments.

  The New Investment Management Contract provides that it will continue in
effect for an initial period of two years (beginning on the date CDC AM
acquires Nvest). After that, it will continue in effect from year to year with
respect to each Portfolio as long as the continuation is approved at least
annually (i) by the

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Trustees or by vote of a majority of the outstanding voting securities of the
Portfolio, and (ii) by vote of a majority of the Trustees who are not
"interested persons," as that term is defined in the Investment Company Act,
of the Fund or the Manager (these Trustees who are not "interested persons"
are referred to below as the "Independent Trustees").

  The New Investment Management Contract may be terminated with respect to a
Portfolio without penalty by vote of the Trustees or by vote of a majority of
the outstanding voting securities of such Portfolio, on sixty days' written
notice to the Manager, or by the Manager upon sixty days' written notice to
the Fund, and each terminates automatically in the event of its "assignment"
as defined in the Investment Company Act. The Investment Company Act defines
"assignment" to include, in general, transactions in which a significant
change in the ownership of an investment adviser or its parent company occur
(such as the acquisition of Nvest by CDC AM).

  The New Investment Management Contract provides that the Manager will not be
liable to the Fund or its shareholders, except for liability arising from the
Manager's willful misfeasance, bad faith, gross negligence or reckless
disregard of duty.

  Pursuant to an Administrative Services Contract with the Fund, the Manager
also performs clerical, accounting supervision and office service functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of bookkeeping related services by State Street Kansas City, (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 waive its rights to any portion of the
management fee or the administrative services fee and may use any portion of
the management fee and the administrative services fee for purposes of
shareholder and administrative services and distribution of the Fund's shares.
There can be no assurance that such fees will be waived in the future.

  Distribution and Service Plan. Pursuant to Rule 12b-1 under the Investment
Company Act, the Securities and Exchange Commission has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule.
The Fund's Board has adopted a distribution and service plan (the "Plan") and,
pursuant to the Plan, has entered into a Distribution Agreement and a
Shareholder Servicing Agreement (with respect to Class A shares only) with
Reich & Tang Distributors, Inc. (the "Distributor") as distributor of the
Fund's shares.

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<PAGE>

Because the acquisition of Nvest by CDC AM will be considered to result in the
assignment of the Fund's Distribution and Shareholder Servicing Agreements
with the Distributor, causing those agreements to terminate upon the
acquisition, the Board approved a new Distribution Agreement and a new
Shareholder Servicing Agreement with Reich & Tang Distributors, Inc. to take
effect if a New Investment Management Agreement is approved by shareholders of
the Fund and upon consummation of the acquisition. The new agreements would
replace the current agreements with the Distributor and would be identical to
that agreement, except for the dates of execution and effectiveness. These new
agreements do not require the approval of the Fund's shareholders.

Basis for the Trustees' Recommendation

  The Trustees determined at a meeting held on July 25, 2000 to recommend that
the Fund's shareholders vote to approve the New Investment Management
Contract.

  In coming to this recommendation, the Trustees considered a wide range of
information of the type they regularly consider when determining whether to
continue the Fund's management agreement in effect from year to year. The
Trustees considered information about, among other things:

  .   the Manager and its personnel (including particularly those personnel
      with responsibilities for providing services to the Fund), resources
      and investment process;

  .   the terms of the investment management contract (in this case, the New
      Investment Management Contract);

  .   the scope and quality of the services that the Manager has been
      providing to the Fund;

  .   the investment performance of the Fund and of similar funds managed by
      other advisers;

  .   the management fee rates payable to the Manager by the Fund and by
      other funds and client accounts managed by the Manager, and payable by
      similar funds managed by other advisers (Appendix C to this Proxy
      Statement contains information comparing the Fund's management fee
      schedule to the fee schedule for other funds managed by the Manager
      that have investment objectives similar to the Fund's);

  .   the total expense ratio of the Fund and of similar funds managed by
      other advisers;

  .   the Manager's practices regarding the selection and compensation of
      brokers and dealers that execute portfolio transactions for the Fund,
      and the brokers' and dealers' provision of brokerage and research
      services to

                                       4
<PAGE>

      the Manager (see "Certain Brokerage Matters" below for more
      information about these matters); and

  .   compensation payable by the Fund to affiliates of the Manager for
      other services (see Appendix D to this Proxy Statement for more
      information about this compensation).

  In addition to reviewing these kinds of information, which the Trustees
regularly consider on an annual or more frequent basis, the Trustees gave
particular consideration to matters relating to the possible effects on the
Manager and the Fund of the acquisition of Nvest by CDC AM. Among other
things, the Trustees considered:

  .   the stated intention of Nvest and CDC AM that the Manager will
      continue to have a high degree of managerial autonomy from its parent
      organizations and from other subsidiaries of Nvest;

  .   the stated intention of Nvest, CDC AM and the Manager that the
      acquisition not change the investment approach or process used by the
      Manager in managing the Fund;

  .   representations of senior executives of the Manager and the portfolio
      managers of the Fund that they have no intention of terminating their
      employment with the Manager as a result of CDC AM's acquisition of
      Nvest, and representations of the Manager, Nvest and CDC AM that they
      have no intention of terminating the employment of these executives or
      portfolio managers as a result of the acquisition;

  .   certain actions taken by CDC AM, Nvest and the Manager to help retain
      and incent key personnel of Nvest and the Manager;

  .   assurances from the Manager that it has no plans, as a result of or in
      connection with CDC AM's acquisition of Nvest, to change or
      discontinue existing arrangements under which it waives fees or bears
      expenses of the Fund;

  .   the general reputation and the financial resources of CDC AM and its
      parent organizations; and

  .   the fact that affiliates of the Manager who currently provide transfer
      agency, distribution and shareholder services to the Fund are willing
      to continue to do so following the acquisition, and that the
      compensation rates payable by the Fund for these services are not
      expected to change as a result of the acquisition.

  In addition, the Trustees considered that the agreement relating to the
acquisition of Nvest by CDC AM provides that CDC AM and its immediate parent
company will (subject to certain qualifications) use their reasonable best
efforts to assure compliance with Section 15(f) of the Investment Company Act.
Section

                                       5
<PAGE>

15(f) provides that a mutual fund investment adviser or its affiliates can
receive benefit or compensation in connection with a change of control of the
investment adviser (such as CDC AM's acquisition of the Manager's parent,
Nvest) if two conditions are satisfied. First, for three years after the
change of control, at least 75% of the members of the board of any registered
investment company advised by the adviser must consist of persons who are not
"interested persons," as defined in the Investment Company Act, of the
adviser. (No changes in the current composition of the Trustees are required
to satisfy this condition.) Second, no "unfair burden" may be imposed on any
such registered investment company as a result of the change of control
transaction or any express or implied terms, conditions or understandings
applicable to the transaction. "Unfair burden" means any arrangement, during
the two years after the transaction, by which the investment adviser or any
"interested person" of the adviser receives or is entitled to receive any
compensation, directly or indirectly, from such investment company or its
security holders (other than fees for bona fide investment advisory or other
services) or from any other person in connection with the purchase or sale of
securities or other property to, from or on behalf of such investment company.

  After carefully considering the information summarized above, the Trustees,
including the Independent Trustees, unanimously voted to approve the New
Investment Management Contract for the Fund on behalf of each Portfolio and to
recommend that each Portfolio's shareholders vote to approve the New
Investment Management Contract.

 Information About the Ownership of the Manager and the CDC AM/Nvest
  Transaction

  The Manager is a limited partnership which has one general partner, Reich &
Tang Asset Management, Inc. (the "Manager General Partner"). Mr. Steven W.
Duff is the principal executive officer of the Manager's Mutual Funds
Division. Mr. Duff's principal occupation is his position with the Manager's
Mutual Funds Division. The address of the Manager, the Manager General Partner
and Mr. Duff is 600 Fifth Avenue, New York, New York 10020. The Manager also
advises pension trusts, profit-sharing trusts and endowments. The Manager
General Partner is a direct wholly-owned subsidiary of Nvest Holdings, Inc.
("Nvest Holdings"), which in turn is a direct wholly-owned subsidiary of
Nvest. Nvest's managing general partner, Nvest Corporation, is a direct
wholly-owned subsidiary of MetLife New England Holdings, Inc. MetLife New
England Holdings, Inc. is a direct wholly-owned subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Nvest Corporation is also the sole general
partner of Nvest, L.P. Nvest, L.P., Nvest's advising general partner, is a
publicly traded company listed on the New York Stock Exchange. In addition to
owning Nvest Corporation, MetLife owns, directly or indirectly, approximately
a 48% limited partnership interest in Nvest.

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<PAGE>

Nvest, L.P. owns approximately 15% of Nvest. (These percentages, which are as
of June 30, 2000, do not reflect the vesting and exercise, described below, of
various options held by personnel of Nvest and of its affiliates, including
the Manager, to acquire limited partnership units of Nvest, L.P.) If the
proposed acquisition is completed, Nvest Corporation will cease to be the
managing general partner of Nvest and the general partner of Nvest, L.P., and
MetLife will cease to own any partnership interest in Nvest. MetLife is a
wholly-owned subsidiary of MetLife, Inc., a publicly traded company listed on
the New York Stock Exchange. The address of Nvest, Nvest Corporation, Nvest
Holdings and Nvest, L.P. is 399 Boylston Street, Boston, Massachusetts 02116.
The address of MetLife New England Holdings, Inc., MetLife and MetLife, Inc.
is One Madison Avenue, New York, New York 10010.

  On June 16, 2000, Nvest and CDC AM announced that they and certain of their
respective affiliated companies had entered into an Agreement and Plan of
Merger (the "Merger Agreement"). Under the Merger Agreement, CDC AM would
acquire all of the outstanding units of partnership interest in both Nvest and
Nvest, L.P., at a price of $40 per unit. This price is subject to reduction
(but not below $34 per unit) based in part on a formula that takes into
account the investment advisory fees payable to the Manager and other Nvest
affiliates by their mutual fund and other investment advisory clients that
have consented to the transaction. Under this formula, the price per unit that
CDC AM will pay to acquire Nvest, including the price it will pay to those
Fund trustees and officers who hold or have been granted options to acquire
units (see below), could be reduced if a Fund's shareholders do not approve
the New Investment Management Contract for their Fund. Assuming a transaction
price of $40 per unit, and the number of units and options outstanding as of
June 30, 2000, the aggregate price payable by CDC AM to acquire all of the
units of Nvest will be approximately $1.5 billion, and the aggregate price
payable by CDC AM to acquire all of the units of Nvest, L.P. (including
payments with respect to units subject to options) will be approximately $375
million.

  The transaction will not occur unless various conditions are satisfied (or
waived by the parties, if permitted by law). One of these conditions is
obtaining approval or consent from investment advisory clients of the Manager
and other Nvest affiliates (including mutual fund clients) whose advisory fees
represent a specified percentage of the total advisory fee revenues of the
Nvest organization. Because of this condition, approval or disapproval by the
Fund's shareholders of a New Investment Management Contract, taken together
with other clients' consents or approvals, could affect whether or not the
transaction occurs. As described below, certain trustees and officers of the
Fund will receive certain material payments or benefits if the transaction
occurs. The transaction will result in the automatic termination of the
Current Investment Management Contract. If for some

                                       7
<PAGE>

reason the transaction does not occur, the automatic termination of the
Current Investment Management Contract will not occur, and the New Investment
Management Contract will not be entered into, even if it has been approved by
the Fund's shareholders.

  As a result of the acquisition, Nvest and Nvest, L.P. would become indirect
wholly-owned subsidiaries of CDC AM, which in turn is 60% owned by CDC
Finance, a wholly-owned subsidiary of Caisse des depots et Consignations
("CDC"). Founded in 1816, CDC is a major diversified financial institution
with a strong global presence in the banking, insurance, investment banking,
asset management and global custody industries. In addition to its 60%
ownership of CDC AM through CDC Finance, CDC owns 40% of CNP Assurances, the
leading French insurance company, which itself owns 20% of CDC AM. CDC also
owns 35% of Caisse National des Caisses d'Epargne, which also owns 20% of CDC
AM. CDC is 100% owned by the French state. The main place of business of CDC
AM is 7, place des Cinq Martyrs du Lycee Buffon, 75015 Paris, France. The
registered address of CDC Finance is 56, rue de Lille, 75007 Paris, France.
The registered address of CDC is 56, rue de Lille, 75007 Paris, France. The
registered address of CNP Assurances is 4, place Raoul Dautry, 75015 Paris,
France. The registered address of Caisse National des Caisses d'Epargne is 5,
rue Masseran, 75007 Paris, France. Following the acquisition, it is expected
that Nvest will be renamed CDC Asset Management--North America.

  Various personnel of Nvest and of its affiliates, including the Manager,
have previously been granted options to purchase limited partnership units of
Nvest, L.P. ("Nvest L.P. Units"). The Merger Agreement provides that these
options will vest and become fully exercisable immediately before CDC AM's
acquisition of Nvest and Nvest, L.P., even though some of these options would
not otherwise have vested or been exercisable at that time. Each option will
be converted into the right to receive cash from Nvest in an amount equal to
the difference between the option's exercise price and the transaction price
of $40 per unit (subject to reduction, but not below $34 per unit, as
explained above).

  Certain Relationships and Interests of Fund Trustees and Officers. Steven W.
Duff, a Trustee and officer of the Fund, and the following persons who are
officers of the Fund are also officers or employees of the Manager or
directors of the Manager General Partner: Richard De Sanctis, Molly Flewharty,
Bernadette N. Finn, Roseanne Holtzer, Lesley M. Jones and Dana E. Messina
(collectively, the "Manager Affiliates"). Some of the Manager Affiliates,
including Mr. Duff, own partnership units in Nvest or Nvest, L.P. or have the
right to acquire partnership units under options and, upon completion of CDC
AM's acquisition of Nvest, will receive the consideration provided in the
Merger Agreement for the partnership units they own or have the right to
acquire under options. Depending on the number of units a Manager Affiliate
owns or has the right to acquire, the

                                       8
<PAGE>

amount of consideration he or she receives could be substantial. Also, in
connection with CDC AM's acquisition of Nvest, CDC AM will establish a
retention program under which certain Manager Affiliates, including Mr. Duff,
may receive cash retention awards payable over one to three years. To receive
these awards, which are in addition to regular salary and bonus payments and
in some cases may be substantial in amount, an eligible Manager Affiliate must
remain employed by the Manager and must agree to refrain from competing with
the Manager and soliciting clients of the Manager.

 Certain Brokerage Matters

  In their consideration of the New Investment Management Contract, the
Trustees took account of the Manager's practices regarding the selection and
compensation of brokers and dealers that execute portfolio transactions for
the Fund, and the brokers' and dealers' provision of brokerage and research
services to the Manager. The Manager has informed the Trustees that it does
not expect to change these practices as a result of CDC AM's acquisition of
Nvest. The following is a summary of these practices:

  The Fund's purchases and sales of portfolio securities are usually principal
transactions. Portfolio securities are generally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There are usually 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

                                       9
<PAGE>

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 accounts or investment companies 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 contemporaneously engaged in
the purchase or sale of the same security, the transactions may be averaged as
to price and allocated equitably to each account. In some cases, this policy
might adversely affect the price paid or received by the Fund or the size of
the position obtainable for the Fund. In addition, when purchases or sales of
the same security for the Fund and for other investment companies managed by
the Manager occur contemporaneously, the purchase or sale orders may be
aggregated in order to obtain any price advantages 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.

PROPOSAL 2 RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS

  The Trustees recommend that the shareholders ratify the selection of
PricewaterhouseCoopers LLP, independent public accountants, to audit the
accounts of the Fund for the fiscal year ending March 31, 2001.
PricewaterhouseCoopers LLP performed the audit for the Fund's fiscal year
ended March 31, 2000. The accounting firm of McGladrey & Pullen LLP or its
predecessors had audited the accounts of the Fund since inception. Effective
August 13, 1999, McGladrey & Pullen LLP resigned as the Fund's independent
accountants because its Investment Company Group had joined
PricewaterhouseCoopers LLP. At that time, PricewaterhouseCoopers LLP was
recommended to the Board by the Audit Committee and appointed as independent
accountants by the Trustees. PricewaterhouseCoopers LLP does not have any
direct financial interest or any material indirect financial interest in the
Fund.

  A representative of PricewaterhouseCoopers LLP is not expected to be present
at the shareholder's meeting. If the shareholders do not ratify the Trustees'
recommendation, the Trustees will submit another proposal to the shareholders
with a recommendation for independent public accountants.

 Other Information

  Principal Distributor's Address. The address of the Fund's principal
distributor, Reich Tang Distributors Inc., is 600 Fifth Avenue, New York, New
York, 10020.

                                      10
<PAGE>

  Fund Annual Report. The Fund has previously sent its Annual Report to its
shareholders for the period ended March 31, 2000. You can obtain a copy of
this Report without charge by writing to the Fund at 600 Fifth Avenue, New
York, New York 10020 or by calling 1-800-221-3079.

  Certain Purchases and Sales of Securities of the Manager, Nvest, Nvest, L.P.
and MetLife, Inc. No Board Member had any purchases or sales of any securities
of the Manager, Nvest, Nvest, L.P. or MetLife, Inc. since the beginning of the
Fund's most recently completed fiscal year, except purchases or sales that
represented one percent or less of the outstanding securities of any class of
those companies.

  Outstanding Shares and Significant Shareholders. Appendix E to this Proxy
Statement lists the total number of shares outstanding as of July 31, 2000 for
the Fund's Money Market Portfolio and U.S. Treasury Portfolio shares. It also
identifies holders of more than 5% of the Money Market Portfolio and U.S.
Treasury Portfolio shares, and contains information about the shareholdings in
the Fund of the Trustees and the executive officers of the Fund. Only
shareholders of record at the close of business on August 15, 2000 are
entitled to vote at the Meeting.

 Information About Proxies and the Conduct of the Meeting

  Solicitation of Proxies. Proxies will be solicited primarily by mailing this
Proxy Statement and its enclosures, but proxies may also be solicited through
further mailings, telephone calls, personal interviews or e-mail by officers
of the Fund or by employees or agents of the Manager or of Nvest and its
affiliated companies. In addition, D. F. King & Co., Inc. has been engaged to
assist in the solicitation of proxies, at an estimated cost of $1,500.

  Costs of Solicitation. All of the costs of the Meeting, including the costs
of soliciting proxies, will be paid by the Manager, Nvest and/or CDC AM. None
of these costs will be borne by the Fund.

  Voting and Tabulation of Proxies. Shares represented by duly executed
proxies will be voted as instructed on the proxy. If no instructions are
given, the proxy will be voted in favor of the proposals. You may vote by any
one of the three following methods: (1) by mailing the enclosed proxy card,
(2) through use of the internet or (3) by telephone. If you mail the enclosed
proxy and no choice is indicated for a proposal listed in the attached Notice
of Meeting, your proxy will be voted in favor of that proposal. Votes made
through use of the internet or by telephone must have an indicated choice in
order to be accepted. At any time before it has been voted, your proxy may be
revoked in one of the following ways: (i) by sending a signed, written letter
of revocation to the Secretary of the Fund, (ii) by properly executing a
later-dated proxy (by methods of voting described above), or (iii) by
attending the Meeting, requesting return of any previously delivered proxy and
voting in person.

                                      11
<PAGE>

  Votes cast in person or by proxy at the Meeting will be counted by persons
appointed by the Fund as tellers for the Meeting (the "Tellers"). A majority
of the shares outstanding on the record date, present in person or represented
by proxy, constitutes a quorum for the transaction of business by the
shareholders of the Fund at the Meeting. In determining whether a quorum is
present, the Tellers will count shares represented by proxies that reflect
abstentions, and "broker non-votes," as shares that are present and entitled
to vote. Since these shares will be counted as present, but not as voting in
favor of any proposal, these shares will have the same effect as if they cast
votes against the proposal. "Broker non-votes" are shares held by brokers or
nominees as to which (i) the broker or nominee does not have discretionary
voting power and (ii) the broker or nominee has not received instructions from
the beneficial owner or other person who is entitled to instruct how the
shares will be voted.

  Required Vote. The vote required to approve the New Investment Management
Contract for each Portfolio is the lesser of (1) 67% of the shares of that
Portfolio are present at the Meeting, if the holders of more than 50% of the
shares of that Portfolio outstanding as of the record date are present or
represented by proxy at the Meeting, or (2) more than 50% of the shares of the
Portfolio outstanding on the record date. If the required vote is not
obtained, the Trustees will consider what other actions to take in the best
interests of the Portfolios. The vote required to ratify the selection of
PricewaterhouseCoopers LLP as independent accountants is a majority of the
shares of the Fund present at the Meeting in person or by proxy.

  Adjournments; Other Business. If a quorum is not present at the Meeting, or
if a quorum is present but sufficient votes to approve any of the proposals
are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the nature of the proposals that are the subject of the Meeting,
the percentage of votes actually cast, the percentage of negative votes
actually cast, the nature of any further solicitation and the information to
be provided to shareholders with respect to the reasons for the solicitation.
Any adjournment will require the affirmative vote of a majority of those
shares represented at the Meeting in person or by proxy. A shareholder vote
may be taken on one or more of the proposals in this proxy statement prior to
any adjournment if sufficient votes have been received for approval.

  The Meeting has been called to transact any business that properly comes
before it. The only business that management of the Fund intends to present or
knows that others will present is: (i) the approval of the New Investment
Management Contract and (ii) the ratification of the selection of independent
accountants for the Fund for its fiscal year ending March 31, 2001. If any
other matters properly come before the Meeting, and on all matters incidental
to the

                                      12
<PAGE>

conduct of the Meeting, the persons named as proxies intend to vote the
proxies in accordance with their judgment, unless the Secretary of the Fund
has previously received written contrary instructions from the shareholder
entitled to vote the shares.

  Shareholder Proposals at Future Meetings. The Fund does hold annual or other
regular meetings of shareholders. Shareholder proposals to be presented at any
future meeting of shareholders of the Fund must be received by the Fund in
writing a reasonable amount of time before the Fund solicits proxies for that
meeting, in order to be considered for inclusion in the proxy materials for
that meeting.

                                      13
<PAGE>

                                                                      Appendix A

<TABLE>
<CAPTION>
                                                     Description
                                                      of Board
                                                       Member
                                                       Action
                                                      Regarding
                                                       Current        Date of Last
                                                     Investment        Submission
                                                     Management        of Current
                                                      Contract         Investment
                                    Date of Current     Since     Management Contract
                          Advisory    Investment    Beginning of    for Shareholder
                          Fee Rate    Management     Fund's Last  Approval and Reason
Name of Fund              Schedule     Contract      Fiscal Year     for Submission
------------             ---------- --------------- ------------- --------------------
<S>                      <C>        <C>             <C>           <C>
Institutional Daily      .12% per   August 30, 1996 Continuance   February 15, 1996*
Income Fund              annum of                   approved
Money Market Portfolio   average                    July 25, 2000
U.S. Treasury Portfolio  daily
                         net assets
</TABLE>
-----------
* In 1996, the merger of New England Mutual Life Insurance Company into
 Metropolitan Life Insurance Company was treated as a change of control of New
 England Investment Companies, L.P., the limited partner and owner of the 99.5%
 limited partnership interest in the Manager. Such a change of control resulted
 in the assignment and automatic termination of the investment management
 contracts. Therefore, shareholders were asked to approve a new investment
 management contract.

                                      A-1
<PAGE>

                                                                     Appendix B

                    FORM OF INVESTMENT MANAGEMENT CONTRACT

                        INSTITUTIONAL DAILY INCOME FUND
                                 (the "Fund")
                            U.S. Treasury Portfolio
                            Money Market Portfolio
                              Municipal Portfolio
                              (the "Portfolios")
                              New York, New York

                                                                         , 2000

Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10022

Gentlemen:

  We herewith confirm our agreement with you as follows:

  1. We propose to engage in the business of investing and reinvesting our
assets in securities of the type, and in accordance with the limitations,
specified in our Declaration of Trust, By-Laws and Registration Statement
filed with the Securities and Exchange Commission under the Investment Company
Act of 1940 (the "1940 Act") and the Securities Act of 1933, including the
Prospectus forming a part thereof (the "Registration Statement"), all as from
time to time in effect, and in such manner and to such extent as may from time
to time be authorized by our Board of Trustees. We enclose copies of the
documents listed above and will furnish you such amendments thereto as may be
made from time to time.

  2. (a) We hereby employ you to manage the investment and reinvestment of our
assets of our Portfolios as above specified, and, without limiting the
generality of the foregoing, to provide the investment management services
specified below.

    (b) Subject to the general control of our Board of Trustees, you will
  make decisions with respect to all purchases and sales of the portfolio
  securities of the Portfolios. To carry out such decisions, you are hereby
  authorized, as our agent and attorney-in-fact for our account and at our
  risk and in our name, to place orders for the investment and reinvestment
  of our assets. In all purchases, sales and other transactions in our
  portfolio securities

                                      B-1
<PAGE>

  you are authorized to exercise full discretion and act for us in the same
  manner and with the same force and effect as our corporation itself might
  or could do with respect to such purchases, sales or other transactions,
  as well as with respect to all other things necessary or incidental to the
  furtherance or conduct of such purchases, sales or other transactions.

    (c) You will report to our Board of Trustees at each meeting thereof all
  changes in our portfolios since your prior report, and will also keep us
  in touch with important developments affecting our portfolios and, on your
  initiative, will furnish us from time to time with such information as you
  may believe appropriate for this purpose, whether concerning the
  individual entities whose securities are included in our portfolios, the
  activities in which such entities engage, Federal income tax policies
  applicable to our investments, or the conditions prevailing in the money
  market or the economy generally. You will also furnish us with such
  statistical and analytical information with respect to our portfolio
  securities as you may believe appropriate or as we may reasonably request.
  In making such purchases and sales of our portfolio securities, you will
  comply with the policies set from time to time by our Board of Trustees as
  well as the limitations imposed by our Declaration of Trust and by the
  provisions of the Internal Revenue Code and the 1940 Act relating to
  regulated investment companies and the limitations contained in the
  Registration Statement.

    (d) It is understood that you will from time to time employ, subcontract
  with or otherwise associate with yourself, entirely at your expense, such
  persons as you believe to be particularly fitted to assist you in the
  execution of your duties hereunder.

    (e) You or your affiliates will also furnish us, at your own expense,
  such investment advisory supervision and assistance as you may believe
  appropriate or as we may reasonably request subject to the requirements of
  any regulatory authority to which you may be subject. You and your
  affiliates will also pay the expenses of promoting the sale of our shares
  (other than the costs of preparing, printing and filing our registration
  statement, printing copies of the prospectus contained therein and
  complying with other applicable regulatory requirements), except to the
  extent that we are permitted to bear such expenses under a plan adopted
  pursuant to Rule 12b-1 under the 1940 Act or a similar rule.

  3. We agree, subject to the limitations described below, to be responsible
for, and hereby assume the obligation for payment of, all our expenses,
including: (a) brokerage and commission expenses, (b) Federal, state or local
taxes, including issue and transfer taxes incurred by or levied on us, (c)
commitment fees and certain insurance premiums, (d) interest charges on
borrowings, (e) charges and expenses of our custodian, (f) charges, expenses
and payments relating to the

                                      B-2
<PAGE>

issuance, redemption, transfer and dividend disbursing functions for us, (g)
recurring and nonrecurring legal and accounting expenses, including those of
the bookkeeping agent, (h) telecommunications expenses, (i) the costs of
organizing and maintaining our existence as a corporation, (j) compensation,
including trustees' fees, of any of our trustees, officers or employees who
are not your officers or officers of your affiliates, and costs of other
personnel providing clerical, accounting supervision and other office services
to us as we may request, (k) costs of stockholder services including, charges
and expenses of persons providing confirmations of transactions in our shares,
periodic statements to stockholders, and recordkeeping and stockholders'
services, (l) costs of stockholders' reports, proxy solicitations, and
corporate meetings, (m) fees and expenses of registering our shares under the
appropriate Federal securities laws and of qualifying such shares under
applicable state securities laws, including expenses attendant upon the
initial registration and qualification of such shares and attendant upon
renewals of, or amendments to, those registrations and qualifications, (n)
expenses of preparing, printing and delivering our prospectus to existing
shareholders and of printing shareholder application forms for shareholder
accounts, (o) payment of the fees and expenses provided for herein, under the
Administrative Services Agreement and with respect to Class A Shares only,
pursuant to the Shareholder Servicing Agreement and Distribution Agreement and
(p) any other distribution or promotional expenses contemplated by an
effective plan adopted by us pursuant to Rule 12b-1 under the Act. Our
obligation for the foregoing expenses is limited by your agreement to be
responsible, while this Agreement is in effect, for any amount by which the
annual operating expenses for each Portfolio (excluding taxes, brokerage,
interest and extraordinary expenses) exceed the limits on investment company
expenses prescribed by any state in which the shares for such Portfolio are
qualified for sale.

  4. We will expect of you, and you will give us the benefit of, your best
judgment and efforts in rendering these services to us, and we agree as an
inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
security holders by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.

  5. In consideration of the foregoing the Portfolios will pay you a fee at
the annual rate of .12% of each Portfolio's average daily net assets. Your fee
will be accrued by us daily, and will be payable on the last day of each
calendar month for services performed hereunder during that month or on such
other schedule as you shall request of us in writing. You may use any portion
of this fee for distribution of our shares, or for making servicing payments
to organizations whose customers

                                      B-3
<PAGE>

or clients are our shareholders. You may waive your right to any fee to which
you are entitled hereunder, provided such waiver is delivered to us in
writing. Any reimbursement of our expenses, to which we may become entitled
pursuant to paragraph 3 hereof, will be paid to us at the same time as we pay
you.

  6. This Agreement will become effective on the date hereof and shall
continue in effect until      , and thereafter for successive twelve-month
periods (computed from each    ), provided that such continuation is
specifically approved at least annually by our Board of Trustees or by a
majority vote of the holders of the outstanding voting securities of each
respective Portfolio voting separately, as defined in the 1940 Act and the
rules thereunder, and, in either case, by a majority of those of our directors
who are neither party to this Agreement nor, other than by their service as
directors of the corporation, interested persons, as defined in the 1940 Act,
of any such person who is party to this Agreement. Upon the effectiveness of
this Agreement, it shall supersede all previous Agreements between us covering
the subject matter hereof. With respect to each Portfolio, this Agreement may
be terminated at any time, without the payment of any penalty, (i) by vote of
a majority of the outstanding voting securities of each respective Portfolio
voting separately, as defined in the 1940 Act and the rules thereunder, or
(ii) by a vote of a majority of our entire Board of Trustees, on sixty days'
written notice to you, or by you on sixty days' written notice to us.

  7. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you and this agreement shall terminate
automatically in the event of any such transfer, assignment, sale,
hypothecation or pledge by you. The terms "transfer", "assignment" and "sale"
as used in this paragraph shall have the meanings ascribed thereto by
governing law and in applicable rules or regulations of the Securities and
Exchange Commission.

  8. Except to the extent necessary to perform your obligations hereunder,
nothing herein shall be deemed to limit or restrict your right, or the right
of any of your employees or the officers and directors of Reich & Tang Asset
Management, Inc., your general partner, who may also be a director, officer or
employee of ours, or of a person affiliated with us, as defined in the 1940
Act, to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.

                                      B-4
<PAGE>

  If the foregoing is in accordance with your understanding, will you kindly so
indicate by signing and returning to us the enclosed copy hereof.

                                        Very truly yours,

                                        INSTITUTIONAL DAILY INCOME FUND
                                        U.S. Treasury Portfolio
                                        Money Market Portfolio
                                        Municipal Portfolio

                                        By: ____________________________________
                                            Name:
                                            Title:

ACCEPTED:      , 2000

REICH & TANG ASSET MANAGEMENT L.P.

By: REICH & TANG ASSET MANAGEMENT, INC., General
     Partner

By: _______________________________________________
  Name:
  Title:

                                      B-5
<PAGE>

                                                                     Appendix C

               Certain Other Mutual Funds Advised by the Manager

  The Manager acts as investment adviser or sub-adviser to the following other
mutual funds that have investment objectives similar to the Fund's, for
compensation at the annual percentage rates of the corresponding average net
asset levels of those funds set forth below.

                        Institutional Daily Income Fund

<TABLE>
<CAPTION>
                                                                    Manager's
                                                                   Relationship
                           Net Assets of                             to Fund
   Other Fund(s) with      Other Funds at                          (Manager or
   Similar Objectives      June 30, 2000        Fee Rate(1)        Sub-Adviser)
   ------------------      --------------       -----------        ------------
<S>                        <C>            <C>                      <C>
Burnham Investors Trust    $  211,859,545 .15% per annum of        Sub-Adviser
                                          average daily net assets

California Daily Tax Free     385,720,218 .30% per annum of        Manager
Income Fund, Inc.                         average daily net assets

Connecticut Daily Tax         189,697,692 .30% per annum of        Manager
Free Income Fund, Inc.                    average daily net assets

Cortland Trust, Inc.        2,307,202,110 0.80% of the first $500  Manager
                                          million of the Trust's
                                          average daily net
                                          assets,

                                          0.775% of the average
                                          daily net assets of the
                                          Trust in excess of $500
                                          million but less than $1
                                          billion,

                                          0.75% of the average
                                          daily net assets of the
                                          Trust in excess of $1
                                          billion but less than
                                          $1.5 billion,

                                          plus 0.725% of the
                                          Trust's average daily
                                          net assets in excess of
                                          $1.5 billion.

Daily Tax Free Income         725,922,546 .325% average daily net  Manager
Fund, Inc.                                assets not in excess of
                                          $750 million, plus .30%
                                          of average daily net
                                          assets in excess of $750
                                          million

Florida Daily Municipal        79,950,196 .40% per annum of        Manager
Income Fund                               average daily net assets

Georgia Daily Municipal        12,093,579 .40% per annum of        Manager
Income Fund, Inc.                         average daily net assets

Michigan Daily Tax Free        14,788,365 .30% per annum of        Manager
Income Fund, Inc.                         average daily net assets
</TABLE>
-----------
(1) .02% Investment Management fee waived for Florida, .40% waived for
    Georgia, .30% waived for Michigan.

                                      C-1
<PAGE>

<TABLE>
<CAPTION>
                                                                    Manager's
                                                                   Relationship
                           Net Assets of                             to Fund
   Other Fund(s) with      Other Funds at                          (Manager or
   Similar Objectives      June 30, 2000        Fee Rate(2)        Sub-Adviser)
   ------------------      --------------       -----------        ------------
<S>                        <C>            <C>                      <C>
New Jersey Daily           $  147,469,750 .30% per annum of        Manager
Municipal Income Fund,                    average daily net assets
Inc.

New York Daily Tax Free       428,583,548 .30% per annum of        Manager
Income Fund, Inc.                         average daily net assets

North Carolina Daily          250,604,096 .40% per annum of        Manager
Municipal Income Fund,                    average daily net assets
Inc.

Pennsylvania Daily              7,722,720 .40% per annum of        Manager
Municipal Income Fund                     average daily net assets

Pax World Money Market        125,687,035 .15% per annum of        Sub-Adviser
Fund, Inc.                                average daily net assets

Short Term Income Fund,     1,259,022,443 .30% of average daily    Manager
Inc.                                      net assets not in excess
Money Market Portfolio                    of $750 million, plus
                                          .29% of average daily
                                          net assets in excess of
                                          $750 million but not in
                                          excess of $1 billion,
                                          plus .28% of such assets
                                          in excess of $1 billion
                                          but not in excess of
                                          $1.5 billion, plus .27%
                                          of such assets in excess
                                          of $1.5 billion

Short Term Income Fund,       615,730,987 .275% of average daily   Manager
Inc.                                      net assets not in excess
U.S. Government Portfolio                 of $250 million, plus
                                          .25% of such assets in
                                          excess of $250 million

Tax Exempt Proceeds Fund,     208,002,982 .40% per annum of        Manager
Inc.                                      average daily net assets
                                          up to $250 million; .35%
                                          per annum of average
                                          daily net assets between
                                          $250 million and $500
                                          million; and .30% per
                                          annum of average daily
                                          net assets over $500
                                          million.

The Valiant Fund            1,004,730,241 .06% of the first $500   Sub-Adviser
                                          million of the Fund's
                                          average daily net
                                          assets, plus .05% of
                                          average daily net assets
                                          in excess of $500
                                          million but less than $1
                                          billion, plus .04% of
                                          such assets in excess of
                                          $1 billion but less than
                                          $1.5 billion, plus .035%
                                          of such assets in excess
                                          of $2 billion

Virginia Daily Municipal        3,964,767 .40% per annum of        Manager
Income Fund, Inc.                         average daily net assets
</TABLE>
-----------
(2) .40% Investment Management fee waived for Pennsylvania, .40% waived for
    Virginia

                                      C-2
<PAGE>

                                                                      Appendix D

<TABLE>
<CAPTION>
                                                                                Distribution and
                                                                                   Shareholder
                                                                                Servicing (12b-1)
                         Management  Management   Administrative Administrative   Fees Paid to
                          Fee Paid  Fee Waived by  Fees Paid to  Fees Waived by     Manager's
    Name of Fund         to Manager    Manager       Manager        Manager        Affiliates
    ------------         ---------- ------------- -------------- -------------- -----------------
<S>                      <C>        <C>           <C>            <C>            <C>
Institutional Daily
Income Fund               $472,729    $ 90,521       $196,971       $118,182       $  398,230
Money Market Portfolio

Institutional Daily
Income Fund               $809,496    $126,559       $337,290       $170,996       $1,577,248
U.S. Treasury Portfolio
</TABLE>

                                      D-1
<PAGE>

                                                                     Appendix E

Shares Outstanding

  For the Money Market Portfolio and U.S. Treasury Portfolio shares, the
number of shares outstanding as of July 31, 2000 was as follows:

<TABLE>
<CAPTION>
Name of Fund                                                    Number of Shares
------------                                                    ----------------
<S>                                                             <C>
Institutional Daily Income Fund
 Money Market Portfolio........................................  1,068,849,115
 U.S. Treasury Portfolio.......................................    440,454,407
</TABLE>

Ownership of Shares

  As of July 31, 2000, the Fund believes that the Trustees and officers of the
Fund, as a group, owned less than one percent of each Portfolio and of the
Fund as a whole. As of July 31, 2000, the Fund believes that no person
beneficially owned 5% or more of the shares of the Money Market Portfolio or
the U.S. Treasury Portfolio, respectively.

                                      E-1
<PAGE>

IDIFPX00
<PAGE>

600 FIFTH AVENUE
NEW YORK, NEW YORK 10020







                         PLEASE VOTE YOUR PROXY TODAY

       Prompt response will save the expense of additional solicitations

CHOOSE THE VOTING METHOD THAT IS MOST CONVENIENT FOR YOU.

1.  VOTE BY MAIL: Sign and date your proxy card and return it in the enclosed
    ------------
    postage paid envelope. NOTE: Your proxy is not valid unless it is signed.
                                 -------------------------------------------

2.  VOTE BY TOUCH-TONE PHONE: Dial 1-800-690-6903, enter the CONTROL NUMBER
    ------------------------
    printed in the right-hand column and follow the simple instructions.
    Telephone voting is available 24 hours a day, 7 days a week. THE CALL IS
                                                                 -----------
    TOLL-FREE. If you received more than one proxy card, you can vote each card
    ---------
    during the call. Each card has a different control number.

3.  VOTE VIA THE INTERNET: Log on to www.proxyvote.com, enter the CONTROL
    ---------------------
    NUMBER printed in the right-hand column and follow the instructions on the
    screen. If you received more than one proxy card, you may vote them all
    during the same session. Each card has a different control number.

                       IF YOU VOTE BY PHONE OR INTERNET,
                     PLEASE DO NOT RETURN YOUR PROXY CARD.

                              VOTE TODAY BY MAIL,
                       TOUCH-TONE PHONE OR THE INTERNET
                         CALL TOLL-FREE 1-800-690-6903
                        OR LOG ON TO www.proxyvote.com


                        INSTITUTIONAL DAILY INCOME FUND
          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
               SPECIAL MEETING OF SHAREHOLDERS--OCTOBER 10, 2000

  THE UNDERSIGNED SHAREHOLDER OF TAX EXEMPT PROCEEDS FUND, INC. (THE "FUND")
HEREBY APPOINTS RICHARD DE SANCTIS AND BERNADETTE N. FINN, AND EACH OF THEM, AS
ATTORNEYS AND PROXIES OF THE UNDERSIGNED, WITH POWER OF SUBSTITUTION, TO VOTE
ALL OF THE SHARES OF COMMON STOCK OF THE FUND STANDING IN THE NAME OF THE
UNDERSIGNED AT THE CLOSE OF BUSINESS ON AUGUST 15, 2000 AT THE SPECIAL MEETING
OF SHAREHOLDERS OF THE FUND TO BE HELD AT THE OFFICES OF THE FUND AT 600 FIFTH
AVENUE, NEW YORK, NY 10020 AT 9:40 ON OCTOBER 10, 2000, AND AT ALL ADJOURNMENTS
THEREOF, WITH ALL OF THE POWERS THE UNDERSIGNED WOULD POSSESS IF THEN AND THERE
PERSONALLY PRESENT AND ESPECIALLY (BUT WITHOUT LIMITING THE GENERAL
AUTHORIZATION AND POWER THEREBY GIVEN) TO VOTE AS INDICATED ON THE PROPOSALS, AS
MORE FULLY DESCRIBED IN THE PROXY STATEMENT FOR THE MEETING AND VOTE AND ACT ON
ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING.

  THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED "FOR"
THE PROPOSALS LISTED BELOW UNLESS OTHERWISE INDICATED.

BY SIGNING AND DATING THE LOWER PORTION OF THIS CARD, YOU AUTHORIZE THE
PROXIES TO VOTE EACH PROPOSAL AS MARKED, OR, IF NOT MARKED TO VOTE, "FOR" EACH
PROPOSAL AND TO USE THEIR DISCRETION TO VOTE ANY OTHER MATTER AS MAY PROPERLY
COME BEFORE THE MEETING. IF YOU DO NOT INTEND TO PERSONALLY ATTEND THE
MEETING, PLEASE COMPLETE, DETACH AND MAIL THE LOWER PORTION OF THIS CARD AT
ONCE IN THE ENCLOSED ENVELOPE.


<TABLE>
<CAPTION>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS [X]                IDIFUN     KEEP THIS PORTION FOR YOUR RECORDS
---------------------------------------------------------------------------------------------------------------------------
                                                                                 (DETACH HERE AND RETURN THIS PORTION ONLY)
                                  THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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INSTITUTIONAL DAILY INCOME FUND
<S>                                                                                        <C>




  Vote On Proposals                                                                        For   Against   Abstain

1. TO APPROVE A NEW INVESTMENT MANAGEMENT CONTRACT                                          [_]      [_]       [_]

2. TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS
   OF THE FUND FOR ITS FISCAL YEAR ENDING NOVEMBER 30, 2001                                 [_]      [_]       [_]

PLEASE SIGN NAME OR NAMES AS PRINTED ABOVE TO AUTHORIZE THE VOTING OF YOUR
SHARES AS INDICATED ABOVE. WHERE SHARES ARE REGISTERED WITH JOINT OWNERS, ALL
JOINT OWNERS SHOULD SIGN. PERSONS SIGNING AS EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC. SHOULD SO INDICATE.


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Signature (PLEASE SIGN WITHIN BOX)    DATE           Signature (Joint Owners)           Date
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