Securities Act File No. 33-
Investment Company Act File No. 811-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 //
Pre-Effective Amendment No. //
Post-Effective Amendment No. //
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 //
Amendment No. //
(check appropriate box or boxes)
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DBNA INVESTMENTS, INC.
(Exact Name of Registrant as Specified in Charter)
31 West 52nd Street, New York, New York 10019
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 474-7000
Robert R. Gambee
c/o Deutsche Bank Securities Corporation
31 West 52nd Street
New York,New York 10019
(Name and Address of Agent for Service)
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Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
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)
// on (date) pursuant to paragraph (a)(1)
// 75 days after filing pursuant to paragraph (a)(2)
// on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
// this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24F-2(A)(1) UNDER THE
INVESTMENT COMPANY ACT OF 1940
Registrant hereby registers an indefinite number of shares of its Common Stock.
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Registrant hereby amends its Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until Registrant shall file a further amendment that specifically states
that such Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until such Registration
Statement shall become effective on such date as the Commission, acting pursuant
to such Section 8(a), may determine.
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DBNA INVESTMENTS, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A
Item No. Location
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PART A
<S> <C> <C>
1. Cover Page..................................... Cover Page
2. Synopsis...................................... "The Treasury Fund's Expenses"
3. Condensed Financial Information............... Not Applicable
4. General Description of Registrant............. Cover Page; "Overview"; "Investment Objectives and
Policies"; "Additional Investment Activities of
the Funds"; "Limiting Investment Risks"; "Organization and
Capital Stock"
5. Management of the Fund........................ Cover Page; "The Treasury Fund's Expenses";
"Investment Objectives and Policies"; "Management";
"Other Information Concerning Expenses"
5A. Management's Discussion of Fund
Performance............................... Not Applicable
6. Capital Stock and Other Securities............ Cover Page; "Dividends and Distributions";
"Taxes"; "Organization and Capital Stock";
"Reports to Shareholders"
7. Purchase of Securities Being Offered.......... "The Treasury Fund's Expenses"; "Management -- The
Distributor" (and with respect to the Investors Shares
Prospectus) "--Service Organizations"; "Pricing of Shares";
"How to Purchase and Redeem Shares"
8. Redemption or Repurchase...................... "How to Purchase and Redeem Shares"
9. Pending Legal Proceedings..................... Not Applicable
PART B
10. Cover Page.................................... Cover Page
11. Table of Contents............................. Table of Contents
12. General Information and History............... Not Applicable
13. Investment Objectives and Policies............ "Investment Policies"; "Additional Investment Activities";
"Limiting Investment Risks"
14. Management of the Fund........................ "Management -- Directors and Officers"
15. Control Persons and Principal
Holders of Securities..................... "Management -- Directors and Officers"; "Organization and
Capital Stock" (in Part A)
16. Investment Advisory and Other
Services.................................. "Management"; "Service Organizations"; "Distributor";
"Auditors"; "The Treasury Fund's Expenses" (in Part A);
"Management -- Manager" and "-- Investment Advisor" (in
Part A)
17. Brokerage Allocation.......................... "Portfolio Transactions"; "Other Information Concerning
Expenses" (in Part A)
18. Capital Stock and Other Securities............ "Dividends"; "Capital Stock"
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19. Purchase, Redemption and Pricing
of Securities Being Offered............... "Distributor"; "Net Asset Value"
20. Tax Status.................................... "Additional Information Concerning Taxes"
21. Underwriters.................................. "Distributor"
22. Calculation of Performance Data............... "Yield"
23. Financial Statements.......................... "Audited Financial Statements" (to come)
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
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Subject to completion dated June ___, 1995
DBNA INVESTMENTS, INC.
31 West 52nd Street
New York, NY 10019
Institutional Shares Prospectus
DBNA Investments, Inc. (the "Company") is a registered, open-end management
investment company offering shares in five separate money market portfolios: the
DBNA Treasury Money Market Fund, the DBNA Government Money Market Fund, the DBNA
Money Market Fund, the DBNA Tax-Exempt Money Market Fund and the DBNA New York
Tax-Exempt Money Market Fund. This Prospectus describes each of these money
market portfolios (each a "Fund" and collectively, the "Funds"), each having its
own investment objectives and policies, as described below. Each of the Funds,
other than the DBNA New York Tax-Exempt Fund, is a diversified portfolio of the
Company.
The DBNA Treasury Money Market Fund (the "Treasury Fund") seeks as high a
level of current income as is consistent with safety, liquidity and stability of
principal. The Treasury Fund invests only in short-term United States Treasury
obligations, which are backed by the full faith and credit of the United States
Government and STRIPS (as described on page 21 herein). Investors may benefit
from income tax exclusions and exemptions that are available in certain states
and localities.
The DBNA Government Money Market Fund (the "Government Fund") seeks as high
a level of current income as is consistent with liquidity and stability of
principal. The Government Fund invests in short-term obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities.
The DBNA Money Market Fund (the "Money Market Fund") seeks as high a level
of current income as is consistent with liquidity and stability of principal.
The Money Market Fund invests in high-quality, short-term United States
dollar-denominated money market instruments, and may also enter into repurchase
agreements with respect to such obligations.
The DBNA Tax-Exempt Money Market Fund (the "Tax-Exempt Fund") seeks as high
a level of current income exempt from federal income tax as is consistent with
liquidity and stability of principal. The Tax-Exempt Fund invests primarily in
high-quality, short-term municipal obligations, the interest on which is exempt
from federal income tax.
The DBNA New York Tax-Exempt Money Market Fund (the "New York
Tax-Exempt Fund") seeks as high a level of current income exempt from federal
income tax and New York State and New York City personal income tax as is
consistent with liquidity and stability of principal. The New York Tax-Exempt
Fund invests primarily in high-quality, short-term municipal obligations issued
by or on behalf of the State of New York or by its instrumentalities or
political subdivisions, the interest on which is exempt from federal income tax
and New York State and New York City personal income taxes.
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Investments in the Funds are not guaranteed or insured by the United States
Government. The Funds attempt to maintain a stable net asset value of $1.00.
However, there is no assurance that the Funds will be able to maintain such a
stable net asset value. Shares of the Funds are not deposits or obligations of,
or endorsed or guaranteed by, Deutsche Bank or its affiliates, nor are they
federally insured by the Federal Deposit Insurance Corp. ("FDIC"), the Federal
Reserve Board or any other agency. Shares of the Funds involve investment risk,
including possible loss of principal.
Shares are sold without a sales charge by the Funds' Distributor whose
address and telephone number appear below. The minimum initial investment in
Institutional Shares is $100,000 which may be waived by the Funds.
This Prospectus sets forth concisely the information concerning the Funds
that a prospective investor should know before investing in the Funds. This
Prospectus should be read and retained for ready reference to information about
the Funds. Separate prospectuses with respect to the Funds may be used in
addition to this combined Prospectus. A Statement of Additional Information
dated __________, 1995, containing additional information about the Funds has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference into this Prospectus. An investor may obtain a
Statement of Additional Information without charge by writing the Company at its
address shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
July , 1995
Manager:
Deutsche Bank Securities Corporation
31 West 52nd Street
New York, NY 10019
Investment Adviser: Distributor:
Deutsche Asset Management North America, Inc. AMT Capital Services, Inc.
31 West 52nd Street 430 Park Avenue
New York, NY 10019 New York, NY 10022
Tel.: 800-898-DBNA or Tel.: 800-762-4848
(outside New York) or
212-474-7000 212-308-4848
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TABLE OF CONTENTS
Page
Overview 4
The Treasury Fund's Expenses 5
Investment Objectives and Policies 7
The Treasury Fund 8
The Government Fund 9
The Money Market Fund 10
The Tax-Exempt Fund 14
The New York Tax-Exempt Fund 17
Additional Investment Activities of the Funds 20
Limiting Investment Risks 25
Management 26
Manager 26
Investment Adviser 27
Custodian and Transfer Agent 28
Distributor 28
Regulatory Matters 29
Other Information Concerning Expenses 30
Pricing of Shares 30
How to Purchase and Redeem Shares 31
Purchase of Shares 31
Redemption of Shares 32
Dividends and Distributions 32
Yield 34
Taxes 34
Organization and Capital Stock 37
Reports to Shareholders 38
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No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Funds' Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or its Distributor. This Prospectus does not constitute an offering by the
Company or by the Distributor in any jurisdiction in which such offering may not
lawfully be made. The shares of certain Funds of the Company have not been
registered for sale in all states, and therefore, are not being offered for sale
to residents in those states, except to the extent exemptions from such
registration may apply.
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OVERVIEW
The Company is a registered, open-end management investment company
offering shares in Funds designed to meet short-term investment needs. This
Prospectus describes the operations of the following five Funds:
- The Treasury Fund
- The Government Fund
- The Money Market Fund
- The Tax-Exempt Fund
- The New York Tax-Exempt Fund
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THE TREASURY FUND'S EXPENSES
The following table illustrates that an investment in the Treasury Fund is
subject only to the estimated annual operating expenses indicated below:
Shareholder Transaction Expenses:
Sales Load Imposed on Purchases ......................................... None
Sales Load Imposed on Reinvested Dividends .............................. None
Deferred Sales Load .................................................... None
Redemption Fees ......................................................... None
Exchange Fees............................................................ None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fee .......................................................... ___%
12b-1 Fees .............................................................. None
Other Expenses (after Expense Reimbursements) ........................... .__%
Total Fund Operating Expenses (after Expense Reimbursements) ............ __%
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Example 1 year 3 years
An investor would pay the following expenses
on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the
end of each time period: ............................ $ ___ $ ___
This table is designed to assist investors in understanding the various direct
and indirect costs and expenses that an investor in the Treasury Fund would
bear. For a description of contractual fee arrangements or the fees and expenses
included in Other Expenses, see "Management". In connection with the example,
please note that $1,000 is less than the Fund's minimum initial investment
requirement and that there are no redemption or exchange fees imposed by the
Fund. The Treasury Fund has entered into an expense reimbursement agreement with
Deutsche Bank Securities Corporation to reduce management fees and to reimburse
other expenses in order that the total operating expenses of the Treasury Fund
for the first 12 months of operations not exceed ___% of its average annual net
assets. Absent such arrangements, the management fee and other expenses for the
Treasury Fund are estimated to be ___% and ___%, respectively, of the Treasury
Fund's average annual net assets. See "How to Purchase and Redeem Shares ---
Purchase of Shares" and "--- Redemption of Shares". The example is hypothetical;
it is included solely for illustrative purposes. It should not be considered a
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representation of past or future performance; actual expenses may be more or
less than those shown.
Charges, not reflected in the expense table above, may be incurred directly
by customers of financial institutions in connection with an investment in the
Fund.
Shares of the Government Fund, the Money Market Fund, the Tax-Exempt Fund
and the New York Tax-Exempt Fund are not currently being offered; therefore,
there is no fee table data regarding any of these four Funds.
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INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Fund are set forth below.
The investment objective of each Fund is a fundamental policy and may not be
changed without the affirmative vote of a majority of its outstanding shares. Of
course, achievement of these objectives cannot be guaranteed.
Each Fund invests exclusively in United States dollar-denominated
securities which present minimal credit risks and, with the exception of U.S.
Government securities, are rated in the highest short-term rating category (the
two highest short-term rating categories in the case of The New York Tax-Exempt
Fund) by at least two nationally recognized statistical rating organizations
("NRSROs"), or by the only NRSRO that has rated the security, or if unrated, in
comparable securities. If a security is backed by an unconditional demand
feature, the issuer of the demand feature rather than the issuer of the
underlying security may be relied upon in determining whether the foregoing
criteria have been met. In addition, all securities purchased by the Funds have
remaining maturities of thirteen months or less, and the Funds are managed so
that the average maturity of all portfolio instruments (on a dollar-weighted
basis) will not exceed 90 days. The Funds seek to maintain a stable net asset
value of $1.00 per share; however, there is no assurance that this will be
achieved. Because the Funds invest only in short-term securities which present
minimal credit risks, they will not achieve as high a level of income as would
be the case if they had the ability to invest in lower quality, longer term
securities.
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The Treasury Fund
The investment objectives of the Treasury Fund are to seek as high a level
of current income as is consistent with safety, liquidity and stability of
principal. The Treasury Fund invests exclusively in a diversified portfolio of
obligations of the United States Treasury, which are backed by the full faith
and credit of the United States Government as to payment of principal and
interest, and STRIPS (Separate Trading of Registered Interest and Principal of
Securities, as described below). United States Treasury obligations consist of
bills, notes and bonds, which generally differ only in their interest rates,
maturities and times of issuance. The Treasury Fund does not purchase securities
issued or guaranteed by agencies or instrumentalities of the United States
Government.
While many states provide that a regulated investment company may pass
through (without restriction) to its shareholders state and local income tax
exemptions otherwise available to direct owners of United States Treasury
obligations, under the laws of certain states distributions by the Treasury Fund
may be taxable as income even though a portion of such distributions may be
derived from interest on United States Government securities which, if realized
directly, would be exempt from state and local income taxes. In addition,
certain states will treat shareholders' dividends from the Treasury Fund
attributable to income from STRIPS in the same manner as interest income from
United States Government securities; accordingly, such income may be exempt from
state and local income taxes. Each shareholder of the Treasury Fund will receive
an annual statement showing the amount of dividends received from obligations
the interest on which is exempt from state and local income taxes. The exemption
from state and local income taxes does not preclude states from asserting other
taxes on the ownership of United States Government securities. POTENTIAL
INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING STATE AND LOCAL
TAX CONSEQUENCES OF AN INVESTMENT IN THE TREASURY FUND.
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The Government Fund
The investment objectives of the Government Fund are to seek as high a
level of current income as is consistent with liquidity and stability of
principal. The Government Fund invests all of its assets in a diversified
portfolio of short-term obligations issued or guaranteed by the United States
Government or its agencies or instrumentalities, as described below. Guarantees
of principal and interest on obligations that may be purchased by the Government
Fund are not guarantees of the market value of such obligations, nor do they
extend to the value of shares of the Government Fund. State and local tax
consequences vary with respect to investments by the Government Fund in
obligations issued or guaranteed by the United States Government or its agencies
or instrumentalities. As a result, shareholders may be subject to state and
local income taxation with respect to dividends from the Government Fund.
United States Treasury Obligations
The Government Fund may invest in any United States Treasury obligations in
which the Treasury Fund may invest, as described above.
United States Government Agency and Instrumentality Obligations
The Government Fund may invest in securities issued or guaranteed by United
States Government agencies and instrumentalities, including obligations that are
supported by: (i) the full faith and credit of the United States Treasury (e.g.,
direct pass-through certificates of the Government National Mortgage
Association); (ii) the limited authority of the issuer or guarantor to borrow
from the United States Treasury (e.g., obligations of Federal Home Loan Banks);
or (iii) only the credit of the issuer or guarantor (e.g., obligations of the
Federal Home Loan Mortgage Corporation). In the case of obligations not backed
by the full faith and credit of the United States Treasury, the agency issuing
or guaranteeing the obligation is principally responsible for ultimate
repayment.
Securities that may be purchased by the Government Fund include obligations
issued or guaranteed by the agencies and instrumentalities of the United States
Government set forth in the Statement of Additional Information. See "Additional
Information on Portfolio Instruments -- United States Government Securities
- -United States Government Agency and Instrumentality Obligations in the
Statement of Additional Information.
Participation Certificates
The Government Fund may purchase participation certificates as described
under "Additional Investment Activities of the Funds - Participation
Certificates" below.
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The Money Market Fund
The investment objectives of the Money Market Fund are to seek as high a
level of current income as is consistent with liquidity and stability of
principal. The Money Market Fund will invest in a diversified portfolio of
high-quality, short-term United States dollar-denominated money market
instruments, such as those described below, and repurchase obligations with
respect thereto.
United States Government Securities
The Money Market Fund may invest in any obligations in which the Treasury
Fund and the Government Fund may invest, as described above.
Bank Obligations
The Money Market Fund may invest in bank obligations (including bank
obligations subject to repurchase agreements). Bank obligations that may be
purchased by the Money Market Fund are limited to negotiable certificates of
deposit, bankers' acceptances, fixed time deposits and deposit notes. A
certificate of deposit is a short-term negotiable certificate issued by a
commercial bank against funds deposited in the bank and is either
interest-bearing or purchased on a discount basis. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. The borrower is liable for payment
as is the bank, which unconditionally guarantees to pay the draft at its face
amount on the maturity date. Fixed time deposits are obligations of branches of
United States banks or foreign banks that are payable at a stated maturity date
and bear a fixed rate of interest. Although fixed time deposits do not have a
market, there are no contractual restrictions on the right to transfer a
beneficial interest in the deposit to a third party. Fixed time deposits subject
to withdrawal penalties and having notice periods of more than seven days are
deemed "illiquid" for the purposes of the fourth investment limitation set forth
under "Limiting Investment Risks" below. Deposit notes are notes issued by
commercial banks that generally bear fixed rates of interest and typically have
original maturities ranging from eighteen months to five years, although the
Money Market Fund will only acquire deposit notes with remaining maturities of
thirteen months or less.
The Money Market Fund limits its investments in United States bank
obligations to obligations of United States banks that have more than $1 billion
in total assets at the time of investment and are subject to regulation by the
United States Government. The Money Market Fund limits its investments in
foreign bank obligations to United States dollar-denominated obligations of
foreign banks that at the time of investment have more than US$10 billion, or
the equivalent in other currencies, in total assets, and have branches or
agencies in the United States. The Money Market Fund may also invest in
obligations of foreign branches of United States banks, as well as obligations
of United States branches of foreign banks, if the Money Market Fund is
permitted to invest directly in obligations of the United States bank or foreign
bank, respectively, in accordance with the foregoing limitations. The Fund,
however, will not purchase obligations of Deutsche Bank AG or its affiliates.
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Participation Certificates
The Money Market Fund may purchase participation certificates as described
under "Additional Investment Activities of the Funds - Participation
Certificates" below.
Asset-Backed Securities
The Money Market Fund may purchase asset-backed securities. Asset-backed
securities represent defined interests in an underlying pool of assets. Such
securities may be issued as pass-through certificates, which represent undivided
fractional interests in the underlying pool of assets. Alternatively,
asset-backed securities may be issued as interests, generally in the form of
debt securities, in a special purpose entity organized solely for the purpose of
owning the underlying assets and issuing such securities. In the latter case,
such securities are secured by and payable from a stream of payments generated
by the underlying assets. The assets underlying asset-backed securities are
often a pool of assets similar to one another, such as motor vehicle receivables
or credit card receivables. Alternatively, the underlying assets may be
particular types of securities, various contractual rights to receive payments
and/or other types of assets. Asset-backed securities frequently carry limited
credit protection in the form of extra collateral, subordinate certificates,
cash reserve accounts, letters of credit or other enhancements. Any asset-backed
securities held by the Fund must comply with the Fund's portfolio maturity and
credit quality requirements. For a more detailed discussion of asset-backed
securities, see "Additional Investment Activities - Asset-Backed Securities" in
the Statement of Additional Information.
Commercial Paper
The Money Market Fund may invest in commercial paper consisting of direct
obligations of domestic and foreign issuers that: (i) are rated in the highest
short-term rating category by at least two nationally recognized statistical
rating organizations ("NRSROs") or by the only NRSRO that has rated the
security; or (ii) if not rated, are of an investment quality comparable to rated
commercial paper in which the Money Market Fund may invest.
Corporate Debt Securities
The Money Market Fund may invest in non-convertible corporate debt
securities such as bonds and debentures that have remaining maturities of
thirteen months or less and that are of an investment quality comparable to
rated commercial paper in which the Money Market Fund may invest.
Foreign Government Obligations and Obligations Issued by Supranational Entities
The Money Market Fund may invest in foreign government obligations issued
or guaranteed by the governments of countries located in Western Europe and
Scandinavia, and of Australia, Japan and Canada (including its provinces). For a
description of certain risks associated with investment by the Money Market Fund
in foreign obligations, see "Risk Factors" below.
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Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Supranational entities, the obligations of which may be purchased by
the Money Market Fund, are the International Bank for Reconstruction and
Development (the World Bank), the Inter-American Development Bank, the
International Finance Corporation, the European Investment Bank, the European
Coal and Steel Community, the Nordic Investment Bank, the Asian Development Bank
and the African Development Bank. In general, supranational entities have no
taxing authority and are dependent upon their members for payments of interest
and principal. Moreover, the lending activities of supranational entities are
limited to a percentage of their total capital (including "callable capital"
contributed by a member at an entity's call), reserves and net income.
Municipal Obligations
The Money Market Fund may also invest in high-quality, short-term municipal
obligations that carry yields competitive with those of other types of money
market instruments in which the Money Market Fund may invest.
Dividends paid by the Money Market Fund derived from interest on municipal
obligations that may be purchased by it will be taxable to shareholders for
federal income tax purposes.
Risk Factors
In view of the ability of the Money Market Fund to invest without
limitation in domestic bank obligations, an investment in the Money Market Fund
should be made with an understanding of the characteristics of the United States
banking industry and the risks that such an investment may entail. Banks in the
United States are subject to extensive government regulation that may limit both
the amounts and types of loans and other financial commitments that may be made
and the interest rates and fees that may be charged. The profitability of this
industry is largely dependent upon the availability and cost of capital funds
for the purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an important part in the
operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations.
The Money Market Fund may invest without limitation in United States
dollar-denominated securities of foreign issuers. Investments by the Money
Market Fund in securities of foreign banks, foreign branches of United States
banks, and foreign governmental and private issuers may involve investment risks
such as future political and economic developments, the possible imposition of
foreign withholding taxes on interest income payable on such securities held by
the Money Market Fund, the possible seizure or nationalization of foreign assets
and the possible establishment of exchange controls or other foreign
governmental laws or restrictions that might adversely affect the payment of the
principal of and interest on such securities held by the Money Market Fund. In
addition, there may be less publicly available information about a foreign
issuer than about a United States issuer, and foreign issuers may not be subject
to the same accounting, auditing and financial record-keeping standards and
requirements as United States issuers. Finally, in the event of a default in any
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such foreign obligations, it may be more difficult for the Money Market Fund to
obtain or enforce a judgment against the issuers of such securities.
The Money Market Fund does not purchase securities that it believes, at the
time of purchase, will be subject to exchange controls or foreign withholding
taxes; however, there can be no assurance that such laws may not become
applicable to certain of the Money Market Fund's investments. In the event
unforeseen exchange controls or foreign withholding taxes are imposed with
respect to the Money Market Fund's investments, the effect may be to reduce the
income received by the Money Market Fund on such investments.
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The Tax-Exempt Fund
The investment objectives of the Tax-Exempt Fund are to seek as high a
level of current income exempt from federal income tax as is consistent with
liquidity and stability of principal. The Tax-Exempt Fund invests primarily in a
diversified portfolio of high-quality, short-term municipal obligations, the
interest on which is exempt from federal income tax.
Municipal Commercial Paper
Investments in municipal commercial paper by the Tax-Exempt Fund consist of
commercial paper that is rated in the highest short-term rating category by at
least two nationally recognized statistical rating organizations ("NRSROs") or
by the only NRSRO that has rated the security, or, if not rated, is of
investment quality comparable to rated municipal commercial paper in which the
Tax-Exempt Fund may invest.
Municipal Notes
The Tax-Exempt Fund may invest in municipal notes with remaining maturities
of thirteen months or less and that are rated in the highest short-term rating
category by at least two NRSROs or by the only NRSRO that has rated the
security, or, if not rated, are of investment quality comparable to rated
municipal notes in which the Tax-Exempt Fund may invest.
Municipal notes generally have maturities at the time of issuance of three
years or less. Municipal notes that may be purchased by the Tax-Exempt Fund
include, but are not limited to:
Tax Anticipation Notes. Tax anticipation notes are sold as interim
financing in anticipation of collection of taxes. Uncertainty in a municipal
issuer's capacity to raise taxes as a result of such factors as a decline in its
tax base or a rise in delinquencies could adversely affect the issuer's ability
to meet its obligations on outstanding tax anticipation notes.
Bond Anticipation Notes. Bond anticipation notes are sold as interim
financing in anticipation of a bond sale. The ability of a municipal issuer to
meet its obligations on its bond anticipation notes is primarily dependent on
its adequate access to the longer term municipal bond market and the likelihood
that the proceeds of such bond sales will be used to pay the principal of, and
interest on such bond anticipation notes.
Revenue Anticipation Notes. Revenue anticipation notes are sold as interim
financing in anticipation of receipt of other revenues. A decline in the receipt
of certain revenues, such as anticipated revenues from another level of
government, could adversely affect an issuer's ability to meet its obligations
on outstanding revenue anticipation notes.
Municipal notes also include construction loan notes and project notes. Tax
anticipation notes, bond anticipation notes and revenue anticipation notes are
usually general obligations of the issuer. Project notes are issued by local
housing authorities to finance urban renewal and public housing projects and are
secured by the full faith and credit of the United States Government.
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Municipal Bonds
Investments by the Tax-Exempt Fund in municipal bonds consist of bonds with
remaining maturities of thirteen months or less and that are of investment
quality comparable to rated municipal commercial paper or municipal notes in
which the Tax-Exempt Fund may invest.
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Municipal obligations are debt obligations issued by or on behalf of
states, cities, municipalities and other public authorities. The two principal
classifications of municipal obligations that may be held by the Tax-Exempt Fund
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Revenue
securities may include private activity bonds. Such bonds may be issued by or on
behalf of public authorities to finance various privately operated facilities
and are not payable from the unrestricted revenues of the issuer. As a result,
the credit quality of private activity bonds is frequently related directly to
the credit standing of private corporations or other entities.
The Tax-Exempt Fund's portfolio may also include "moral obligation"
securities, which are normally issued by special purpose public authorities. If
the issuer of moral obligation securities is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality that created the issuer.
In addition, the Tax-Exempt Fund may invest in resource recovery bonds,
which may be general obligations of the issuing municipality or supported by
corporate or bank guarantees. The viability of the resource recovery project,
environmental protection regulations and project operator tax incentives may
affect the value and credit quality of resource recovery bonds.
As a fundamental policy, the Tax-Exempt Fund will maintain, under normal
market conditions, at least 80% of the value of its total assets in obligations
that are exempt from federal income tax and that are not a specific tax
preference item under the federal alternative minimum tax for either individuals
or corporations. See "Taxes." The Tax-Exempt Fund currently intends to invest
substantially all of its assets in such obligations. To the extent not so
invested, the remaining 20% of the value of the Tax-Exempt Fund's assets may be
invested in obligations that are tax preference items under the federal
alternative minimum tax ("AMT Items") or high quality, short-term government and
money market instruments of the types in which the Money Market Fund may invest.
The Tax-Exempt Fund may hold uninvested cash reserves pending investment
if, in the opinion of the Tax-Exempt Fund's manager or investment adviser,
suitable tax-exempt obligations are unavailable, or during temporary defensive
periods. Uninvested cash reserves will not earn income. In addition to or in
lieu of holding uninvested cash reserves under these circumstances, the
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Tax-Exempt Fund may elect to invest temporarily in excess of 20% of the current
value of its total assets in AMT Items or Other Taxable Instruments. To the
extent that the Tax-Exempt Fund deviates from its investment policies as a
result of the unavailability of suitable obligations or for other temporary
defensive purposes, its investment objective of seeking income exempt from
federal income tax may not be achieved.
Risk Factors
The Tax-Exempt Fund does not intend to concentrate its investments in any
one industry. This limitation, however, is not applicable to investments by the
Tax-Exempt Fund in municipal obligations where the issuer is regarded as a
state, city, municipality or other public authority since such entities are not
members of any industry. Thus, from time to time (although there is no current
intention to do so), the Tax-Exempt Fund may invest 25% or more of its assets in
municipal obligations that are related in such a way that an economic, business
or political development or change affecting one such obligation could also
affect the other obligations; for example, municipal obligations the interest on
which is paid from revenues of similar types of projects or municipal
obligations whose issuers are located in the same state.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. None of the
Tax-Exempt Fund, its manager or its investment adviser will review the
proceedings relating to the issuance of municipal obligations or the basis for
such opinions.
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The New York Tax-Exempt Fund
The investment objectives of the New York Tax-Exempt Fund are to seek as
high a level of current income exempt from federal income tax and New York State
and New York City personal income taxes as is consistent with liquidity and the
stability of principal. The New York Tax-Exempt Fund invests primarily in a
non-diversified portfolio of high-quality, short-term municipal obligations
issued (i) by the State of New York and its cities, municipalities and other
public authorities, and (ii) by territories and possessions of the United
States, the District of Columbia and their respective authorities, agencies,
instrumentalities and political sub-divisions, the interest on which is exempt
from federal income tax and from the personal income taxes of New York State and
New York City.
Municipal Commercial Paper
The New York Tax-Exempt Fund may invest in municipal commercial paper that
is rated in the two highest short-term rating categories by at least two
nationally recognized statistical rating organizations ("NRSROs") or by the only
NRSRO that has rated the security or, if not rated, is of investment quality
comparable to rated municipal commercial paper in which the New York Tax-Exempt
Fund may invest.
Municipal Notes
The New York Tax-Exempt Fund may invest in municipal notes with remaining
maturities of thirteen months or less and which are rated in the two highest
short-term rating categories by at least two NRSROs or by the only NRSRO that
has rated the security or, if not rated, are of investment quality comparable to
rated municipal notes in which the New York Tax-Exempt Fund may invest.
Municipal notes are further described above. See "Tax-Exempt Fund - Municipal
Notes".
Municipal Bonds
Municipal bonds purchased by the New York Tax-Exempt Fund consist of bonds
with remaining maturities of thirteen months or less and which are of investment
quality comparable to rated municipal commercial paper or municipal notes in
which the New York Tax-Exempt Fund may invest.
--------------------
The general classifications of municipal obligations in which the New York
Tax-Exempt Fund may invest are described above. See "Tax-Exempt Fund."
The New York Tax-Exempt Fund currently intends to invest substantially all
of its assets in obligations that are exempt from federal income tax and from
the personal income taxes of the State of New York and New York City and that
are not AMT items. See "Taxes." To the extent that the unavailability of
suitable obligations for investment by the New York Tax-Exempt Fund prevents it
from investing substantially all of its assets in such obligations, the New York
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Tax-Exempt Fund's investment adviser may purchase municipal obligations issued
by other states, their agencies and instrumentalities. Under normal market
conditions, however, the New York Tax-Exempt Fund will invest at least 65% of
its total assets in obligations that are exempt from federal income tax and from
the personal income taxes of the State of New York and New York City, as
described above. In addition, it is a fundamental policy of the New York
Tax-Exempt Fund to invest, under normal market conditions, at least 80% of its
total assets in obligations that are exempt from federal income tax and that are
not AMT Items. The remaining 20% of the New York Tax-Exempt Fund's assets may be
invested in AMT Items or Other Taxable Instruments.
The New York Tax-Exempt Fund may hold uninvested cash reserves pending
investment if, in the opinion of the New York Tax-Exempt Fund's manager or
investment adviser, suitable tax-exempt obligations are unavailable, or during
temporary defensive periods. Uninvested cash reserves will not earn income. In
addition to or in lieu of holding uninvested cash reserves under these
circumstances, the New York Tax-Exempt Fund may elect to invest temporarily in
excess of 20% of the current value of its total assets in AMT Items or Other
Taxable Instruments.
If at some future date, in the opinion of its manager or investment
adviser, adverse conditions prevail in the market for obligations exempt from
federal income tax and from the personal income taxes of the State of New York
and New York City (including conditions under which such obligations are
unavailable for investment), the New York Tax-Exempt Fund may, for temporary
defensive purposes, invest more than 35% of its assets in municipal obligations
issued by other states, their agencies or instrumentalities or in AMT Items or
Other Taxable Instruments. Moreover, if at some future date, in the opinion of
the investment adviser, adverse conditions in the market for municipal bonds
generally should prevail, the New York Tax-Exempt Fund may temporarily invest
more than 20% of its assets in cash reserves or in AMT Items or Other Taxable
Instruments in order to maintain a defensive posture. To the extent that the New
York Tax-Exempt Fund deviates from its investment policies as a result of the
unavailability of suitable obligations or for other temporary defensive
purposes, its investment objective of seeking income exempt from federal income
tax and New York State and New York City personal income taxes may not be
achieved.
Risk Factors
The New York Tax-Exempt Fund is not subject to the diversification
requirements set forth in the 1940 Act and may have a larger position in a
single issuer than would be the case if the New York Tax-Exempt Fund were
diversified. However, as a fundamental investment limitation, the New York
Tax-Exempt Fund limits its investments so that with regard to 50% of total
assets, no more than 5% of assets are invested in the securities of a single
issuer, and with respect to the remaining 50% of total assets, no more than 25%
of total assets are invested in the securities of a single issuer. This ability
to concentrate in particular issuers is designed to permit the manager or
investment adviser to the New York Tax-Exempt Fund to maximize, subject to the
aforementioned fundamental investment limitation, the percentage of the New York
Tax-Exempt Fund's assets that are municipal obligations exempt from New York
State and New York City personal income taxes, as well as federal income tax.
The investment return on a non-diversified portfolio typically is dependent upon
the performance of a smaller number of securities relative to the number of
securities held in a diversified portfolio. The New York Tax-Exempt Fund's
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assumption of large positions in the obligations of a small number of issuers
will affect the value of the New York Tax-Exempt Fund's portfolio to a greater
extent than that of a diversified portfolio in the event of changes in the
financial condition or in the market's assessment of the issuers.
Because the New York Tax-Exempt Fund will invest primarily in obligations
issued by the State of New York and its cities, municipalities and other public
authorities, it is more susceptible to factors adversely affecting issuers of
such obligations than a comparable municipal bond fund that is not so
concentrated. New York State and New York City have recently encountered
financial difficulties. If either New York State or any of its local
governmental entities is unable to meet its financial obligations, the income
derived by the New York Tax-Exempt Fund and its ability to preserve capital and
liquidity could be adversely affected. See "Special Factors Affecting the New
York Tax-Exempt Fund" in the Statement of Additional Information for further
information.
In addition, from time to time, the New York Tax-Exempt Fund may invest 25%
or more of its assets in municipal obligations that are related in other ways
such that an economic, business or political development or change affecting one
such obligation could also affect the other obligations; for example, municipal
obligations the interest on which is paid from revenues of similar types of
projects. In addition, from time to time the New York Tax-Exempt Fund may invest
25% or more of its assets in industrial development bonds, which, although
issued by industrial development authorities, may be backed only by those assets
and revenues of non-governmental users.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax (and, with respect to New
York municipal obligations, to the exemption of interest thereon from New York
State and, if applicable, New York City personal income taxes) are rendered by
bond counsel to the respective issuers at the time of issuance. None of the New
York Tax-Exempt Fund, its manager or its investment adviser will review the
proceedings relating to the issuance of municipal obligations or the basis for
such opinions.
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ADDITIONAL INVESTMENT ACTIVITIES OF THE FUNDS
Floating and Variable Rate Instruments
Certain of the obligations that the Funds may purchase have a floating or
variable rate of interest. Such obligations may include obligations issued or
guaranteed by agencies or instrumentalities of the United States Government,
certificates of deposit and municipal obligations. Floating or variable rate
obligations bear interest at rates that are not fixed, but vary with changes in
specified market rates or indices, such as the prime rate, and at specified
intervals.
Certain of the floating or variable rate obligations that may be purchased
by the Funds may carry a demand feature that would permit the holder to tender
them back to the issuer of the underlying instrument, or to a third party, at
par value prior to maturity. Such obligations include variable rate demand or
master notes, which provide for periodic adjustments in the interest rate.
Master demand notes, which are instruments issued pursuant to an agreement
between the issuer and the holder, may permit the indebtedness thereunder to
vary. The holder of an obligation with a third party demand feature may be
required to pay the third party a "tender fee," the amount of which would be
periodically adjusted so that the obligation/demand feature combination would
reasonably be expected to have a market value that approximates the par value of
the obligation. The obligation/demand feature combination would therefore be
functionally equivalent to ordinary variable or floating rate obligations as
described above, and the Funds may purchase such obligations subject to certain
conditions specified by the Securities and Exchange Commission (the
"Commission.")
The Tax-Exempt Fund and the New York Tax-Exempt Fund may also invest in
participation interests in variable rate municipal obligations held by a bank in
trust or otherwise, which have demand features that permit the Fund to tender
its bonds to a third party at periodic intervals and receive par value. The
Funds consider variable rate instruments structured as participations to be
essentially equivalent to other variable rate demand obligations it purchases.
The Internal Revenue Service has not ruled on whether the interest on such
participations is tax-exempt, and, accordingly, the Funds would purchase such
instruments based on opinions of bond counsel.
Each of the Money Market Fund, the Tax-Exempt Fund and the New York
Tax-Exempt Fund may invest without limitation in obligations that have a demand
feature permitting that Fund to tender the obligation to a foreign bank. A
Fund's ability to receive payment in such circumstances under the demand feature
from such foreign banks may involve certain of the risks described under
"Investment Objectives and Policies - the Money Market Fund - Risk Factors"
above, such as future political and economic developments, the possible
establishment of laws or restrictions that might adversely affect the payment of
the bank's obligations under the demand feature and the difficulty of obtaining
or enforcing a judgment against the bank.
Each of the Funds may invest in floating and variable rate obligations with
stated maturities in excess of thirteen months, upon compliance with certain
conditions contained in Rule 2a-7 promulgated under the 1940 Act, in which case
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such obligations will be treated, in accordance with Rule 2a-7, as having
maturities not exceeding thirteen months. For example, Rule 2a-7 would permit a
Fund to purchase a variable rate demand instrument with a stated maturity in
excess of thirteen months, provided that the next interest readjustment date and
the next date on which the Fund could demand payment fell within thirteen
months. Each Fund will limit its purchases of floating and variable rate
obligations to those of the same quality as it otherwise is allowed to purchase.
STRIPS and Zero Coupon Obligations
Each of the Funds may invest in separately traded principal and interest
components of securities backed by the full faith and credit of the United
States Treasury. The principal and interest components of United States Treasury
bonds with remaining maturities of longer than ten years are eligible to be
traded independently under the Separate Trading of Registered Interest and
Principal of Securities ("STRIPS") program. Under the STRIPS program, the
principal and interest components are separately issued by the United States
Treasury at the request of depository financial institutions, which then trade
the component parts separately. The interest component of STRIPS may be more
volatile than that of United States Treasury bills with comparable maturities.
In accordance with Rule 2a-7, the Funds' investments in STRIPS are limited to
those with maturity components not exceeding thirteen months. The Funds will not
actively trade in STRIPS. Each of the Tax-Exempt Fund and the New York
Tax-Exempt Fund will limit such investments together with any Other Taxable
Instruments, and each of the other Funds will limit such investments to 20% of
its total assets.
In addition to investing in STRIPS, the Tax-Exempt Fund and the New York
Tax-Exempt Fund may invest in zero coupon municipal obligations. Such
obligations are debt securities that do not pay regular interest payments.
Instead, zero coupon municipal obligations are sold at a substantial discount
from their value at maturity and, when held to maturity, their entire return,
which consists of the amortization of discount, comes from the difference
between their purchase price and maturity value. Because interest on a zero
coupon obligation is not distributed on a current basis, the obligation tends to
be subject to greater price fluctuations in response to changes in interest
rates than are ordinary interest-paying securities with similar maturities. The
value of zero coupon obligations appreciates more during periods of declining
interest rates and depreciates more during periods of rising interest rates. In
accordance with Rule 2a-7, investments by the Tax-Exempt Fund and the New York
Tax-Exempt Fund in zero coupon municipal obligations are limited to those with
maturities not exceeding thirteen months. Investments by the Tax-Exempt Fund and
the New York Tax-Exempt Fund in zero coupon municipal obligations will be
limited, together with any investments in STRIPS, to 20% of the respective total
assets of those Funds. Under the stripped bond rules of the Internal Revenue
Code of 1986, as amended (the "Code") investments by the relevant Funds in
STRIPS and zero coupon obligations will result in the accrual of interest income
on such investments in advance of the receipt of the cash corresponding to such
income.
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Reverse Repurchase Agreements and Loans of Portfolio Securities
Each Fund may also enter into reverse repurchase agreements to avoid
selling securities during unfavorable market conditions to meet redemptions.
Pursuant to a reverse repurchase agreement, a Fund will sell portfolio
securities and agree to repurchase them from the buyer at a particular date and
price. Whenever a Fund enters into a reverse repurchase agreement, it will
establish a segregated account in which it will maintain liquid assets in an
amount at least equal to the repurchase price marked to market daily (including
accrued interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. The Funds pay interest on amounts obtained
pursuant to reverse repurchase agreements. Reverse repurchase agreements are
considered to be borrowings by the Funds under the 1940 Act and are subject to
the limitations with respect to entering into reverse repurchase agreements
included in the third investment limitation under "Limiting Investment Risks"
below.
In addition to entering into reverse repurchase agreements, each Fund may
lend portfolio securities in order to generate additional income. Such loans may
involve risks that the borrower may fail to return the securities or may fail to
provide additional collateral. No Fund currently intends to make loans of
portfolio securities with a value in excess of 5% of the value of its total
assets.
Illiquid or Restricted Securities
Each Fund, other than the Treasury Fund and the Government Fund, may
purchase securities for which there is a limited trading market or which are
subject to restrictions on resale to the public. Investments in securities which
are "restricted" may involve added expenses to the Funds should the Funds be
required to bear registration costs with respect to such securities and could
involve delays in disposing of such securities which might have an adverse
effect upon the price and timing of sales of such securities and the liquidity
of the Funds with respect to redemptions. As set forth under "Limiting
Investment Risks," no Fund will invest more than 10% of the value of its total
assets in illiquid investments, such as "restricted securities" which are
illiquid, and securities that are not readily marketable. As more fully
described in the Statement of Additional Information, the Funds, except the
Treasury Fund and the Government Fund, may purchase certain restricted
securities ("Rule 144A securities") for which there may be a secondary market of
qualified institutional buyers as contemplated by Rule 144A under the Securities
Act of 1933. The Funds' holdings of Rule 144A securities that are liquid
securities will not be subject to the 10% limitation described above. Rule 144A
is a recent development and there is no assurance that a liquid market in Rule
144A securities will develop or be maintained. To the extent that the number of
qualified institutional buyers is reduced, a previously liquid Rule 144A
security may be determined to be illiquid, thus increasing the percentage of
illiquid assets in a Fund's portfolio. The Board of Directors of the Company
will be responsible for monitoring the liquidity of Rule 144A securities and the
selection by the investment adviser of such securities pursuant to procedures
adopted by the Board of Directors. For a more complete discussion of Rule 144A
securities, see "Additional Investment Activities - Rule 144A Securities" in the
Statement of Additional Information.
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None of the Funds may invest an amount equal to 10% or more of the current
value of its total assets in investments that are illiquid, including repurchase
agreements having notice periods of more than seven days and fixed time deposits
subject to withdrawal penalties having notice periods of more than seven days.
For purposes of this limitation, the Funds consider instruments that they cannot
terminate and realize the proceeds thereon within seven days to be instruments
having notice periods of more than seven days.
Firm Commitments and When-Issued Securities
Each Fund may purchase securities on a firm commitment basis, including
when-issued securities. Securities purchased on a firm commitment basis are
purchased for delivery beyond the normal settlement date at a stated price and
yield. Such securities are recorded as an asset and are subject to changes in
value based upon changes in the general level of interest rates. The Funds will
make commitments to purchase securities on a firm commitment basis only with the
intention of actually acquiring the securities, but may sell them before the
settlement date if it is deemed advisable.
No income accrues to the purchaser of a security on a firm commitment basis
prior to delivery. Purchasing a security on a firm commitment basis can involve
a risk that the market price at the time of delivery may be lower than the
agreed upon purchase price, in which case there could be an unrealized loss at
the time of delivery.
Each Fund will establish a segregated account in which it will maintain
liquid assets in an amount at least equal in value to the Fund's commitments to
purchase securities on a firm commitment basis. If the value of these assets
declines, the Fund will place additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
Stand-by Commitments
Each Fund, except the Treasury Fund, may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities held in their portfolios. In a put transaction, a Fund
acquires the right to sell a security at an agreed- upon price within a
specified period prior to its maturity date, and a stand-by commitment entitles
a Fund to same-day settlement and to receive an exercise price equal to the
amortized cost of the underlying security plus accrued interest, if any, at the
time of exercise. In the event that the party obligated to purchase the
underlying security from a Fund defaults on its obligation to purchase the
underlying security, then that Fund might be unable to recover all or a portion
of any loss sustained from having to sell the security elsewhere. Acquisition of
puts will have the effect of increasing the cost of securities subject to the
put and thereby reducing the yields otherwise available from such securities.
Participation Certificates
The instruments that may be purchased by the Government Fund and the Money
Market Fund include participation certificates issued by a bank, insurance
company or other financial institution in obligations owned by such institutions
or affiliated organizations that may otherwise be purchased by the Funds, and
loan participation certificates. A participation certificate gives a Fund an
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undivided interest in the underlying obligations in the proportion that such
Fund's interest bears to the total principal amount of such obligations. Certain
of such participation certificates may carry a demand feature that would permit
the holder to tender them back to the issuer or to a third party prior to
maturity. See "Floating and Variable Rate Instruments" above for additional
information with respect to demand instruments that may be purchased by the
Funds. The Funds may invest in participation certificates even if the underlying
obligations carry stated maturities in excess of thirteen months, upon
compliance with certain conditions contained in Rule 2a-7. Loan participation
certificates are considered by the Funds to be "illiquid" for purposes of the
fourth investment limitation under "Limiting Investment Risks" below.
Other Money Market Funds
Each of the Government Fund, the Money Market Fund, the Tax-Exempt Fund and
the New York Tax-Exempt Fund may invest up to 10% of the value of its total
assets in shares of other money market funds subject, in the case of the
Tax-Exempt Fund and the New York Tax-Exempt Fund, to the limitations on
investing in taxable money market instruments. A Fund will only invest in other
money market funds that are subject to the requirements of Rule 2a-7 under the
1940 Act and that are considered to present minimal credit risks, and its
investment adviser will monitor the policies and investments of other money
market funds in which it invests, based on information furnished to shareholders
of those funds, with respect to their compliance with their investment
objectives and Rule 2a-7.
Repurchase Agreements
Securities held by the Money Market Fund may be subject to repurchase
agreements. Pursuant to a repurchase agreement, the Fund will purchase portfolio
securities from a seller that commits itself, at the time of sale, to repurchase
the securities at a mutually agreed upon time and price. Repurchase agreements
may be characterized as loans that are collateralized by the underlying
securities. The term of a repurchase agreement will always be less than thirteen
months. The Fund will enter into repurchase agreements with commercial banks
only if such banks meet the standards set forth under "Money Market Fund - Bank
Obligations", and will enter into repurchase agreements with brokers and dealers
only if such parties are deemed creditworthy in accordance with standards
adopted by the Company's Board of Directors. At the time the Fund enters into a
repurchase agreement, the value of the underlying security, including accrued
interest, will equal or exceed the value of the repurchase agreement, and, in
the case of repurchase agreements exceeding one day, the seller will agree that
the value of the underlying security, including accrued interest, will on each
day equal or exceed the value of the repurchase agreement. In addition, the
manager or investment adviser for the Fund will monitor, on an ongoing basis,
the creditworthiness of the seller and the value of the underlying security,
including accrued interest, to ensure that such value equals or exceeds the
value of the repurchase agreement. In the event of default by the seller under
the repurchase agreement, the Fund could experience losses that include: (i)
possible decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto; (ii) additional expenses to the
Fund for enforcing those rights; (iii) possible loss of all or part of the
income or proceeds of the repurchase agreement; and (iv) possible delay in the
disposition of the underlying security pending court action or possible loss of
rights in such securities. Repurchase agreements are considered to be loans
under the 1940 Act, collateralized by the underlying securities. There is no
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limitation on the amount of the Fund's assets that may be subject to repurchase
agreements.
--------------------
For more detailed descriptions of certain of the Funds' investment
activities, see "Investment Policies - Additional Investment Activities" in the
Statement of Additional Information.
Except with respect to investment by the Tax-Exempt Fund and the New York
Tax-Exempt Fund of at least 80% of their respective assets in tax-exempt
obligations, as described above, the foregoing investment policies and
activities are not fundamental and may be changed by the Board of Directors of
the Company without the approval of shareholders. Additional fundamental
investment policies of the Funds are identified under "Limiting Investment
Risks" below and in the Statement of Additional Information.
LIMITING INVESTMENT RISKS
To protect investors further, the Funds have adopted the following
investment limitations, certain of which are subject to additional operating
limitations as described below:
(i) The Money Market Fund may not invest more than 5% of the current
value of its total assets in the securities of any one issuer, other than
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities; provided, however, that up to 25% of the
value of the total assets of the Money Market Fund may be invested without
regard to this limitation, so long as no more than 25% of its total assets
are invested in the securities of any one issuer; *
(ii) neither the Tax-Exempt Fund nor the New York Tax-Exempt Fund may
invest more than 5% of the current value of its total assets in the
securities of any one issuer, other than obligations issued or guaranteed
by the United States Government, its agencies or instrumentalities;
however, up to 25% of the value of the total assets of the Tax-Exempt Fund
may be invested without regard to this limitation, and up to 50% of the
value of the total assets of the New York Tax-Exempt Fund may be invested
without regard to this limitation, so long as no more than 25% of its total
assets are invested in the securities of any one issuer; and
- --------------------
* As a matter of non-fundamental policy, the Money Market Fund intends to
limit further investments in the securities of any single issuer (other
than securities issued or guaranteed by the United States Government, its
agencies or instrumentalities) to not more than 5% of its total assets at
the time of purchase, provided that the Money Market Fund may invest up to
25% of its total assets in the securities of a single issuer for a period
of up to three business days.
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(iii) none of the Funds may issue senior securities, borrow money or
pledge or mortgage their assets, except that each Fund may borrow from
banks up to one-third of the current value of its total assets for
temporary purposes and these borrowings may be secured by the pledge of not
more than one-third of the current value of the Fund's total assets, and
each Fund may enter into reverse repurchase agreements in accordance with
its investment policies and in amounts not in excess of one-third of the
value of its assets, less bank borrowings outstanding for temporary
purposes, at the time of entry into such agreements; provided that
additional portfolio securities may not be purchased by such Fund while
borrowings and reverse repurchase agreements which together exceed 5% of
the Fund's total assets exist.
The foregoing percentage limitations are applied at the time investment
securities are purchased for the Funds.
With respect to investment limitations (i) and (ii), the Money Market Fund,
the Tax-Exempt Fund and the New York Tax-Exempt Fund will consider unconditional
demand features as not being issued by the entity providing the demand feature,
provided that the value of all securities held by each such Fund issued by or
subject to demand features from each such entity and owned by such Fund does not
exceed 10% of such Fund's total assets. With respect to investment limitation
(i), the Money Market Fund will treat repurchase agreements as an acquisition of
the underlying securities, provided that the obligation to repurchase the
underlying securities is fully collateralized.
The foregoing investment limitations and those described in the Statement
of Additional Information are fundamental policies of each of the Funds that may
be changed only when permitted by law and approved by the holders of a majority
of such Fund's outstanding shares, as described under "Capital Stock" in the
Statement of Additional Information.
MANAGEMENT
The business and affairs of the Funds are managed under the general
direction and supervision of the Company's Board of Directors. The Funds'
day-to-day operations are handled by the Company's officers.
Manager
Subject to the supervision of the Company's Board of Directors, Deutsche
Bank Securities Corporation ("DBSC") serves as the manager to the Treasury Fund,
the Government Fund, the Money Market Fund, the Tax-Exempt Fund and the New York
Tax-Exempt Fund (the "Funds"), in each case pursuant to a Management Agreement
with the Company (each, a "Management Agreement" and together, the "Management
Agreements"). Subject to the supervision of the Company's Board of Directors,
DBSC renders or contracts to obtain investment advisory services, including
investment research, advice and supervision, determining which securities shall
be purchased or sold by the Funds, making purchases and sales of securities on
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behalf of the Funds and determining how voting and other rights with respect to
securities of the Funds shall be exercised, and also provides such office space,
bookkeeping, accounting, internal legal, and other services (exclusive of those
provided by the distributor, custodian, transfer agent and other service
providers retained by the Company with respect to the Funds) and such personnel
as shall be necessary for the day-to-day operations of the Funds. Each
Management Agreement provides that, as compensation for services under the
Management Agreement, DBSC is entitled to receive from each of the Funds a
monthly fee at an annual rate of ___% of its average daily net assets, subject
to reduction of a Fund's excess expenses if such fee together with the Fund's
other expenses for its fiscal year exceed the most restrictive applicable state
expense limitation.
DBSC is the successor to a business which began in 1940 and in which
Deutsche Bank AG acquired a controlling interest in 1978. In 1993 its
predecessor, Deutsche Bank Securities Corporation merged with Deutsche Bank
Government Securities, Inc. and C.J. Lawrence, Inc., an investment banking,
research and brokerage firm established in 1864, to form DBSC.
DBSC acts as manager to several closed-end funds listed on the New York
Stock Exchange with aggregate assets of approximately $1 billion. Through its
Dublin affiliate it acts as manager to nine other investment funds and
investment companies with aggregate assets of approximately $800 million.
Investment Adviser
Deutsche Asset Management North America, Inc. ("DBAMNA") provides
investment advisory services to the Funds, in each case pursuant to an
Investment Advisory Agreement with DBSC (each, an "Investment Advisory
Agreement" and together, the "Investment Advisory Agreements"). Pursuant to the
Investment Advisory Agreements and subject to the supervision of the Board of
Directors of the Company and DBSC, DBAMNA provides each Fund with investment
advisory services, including investment research, advice and supervision,
determining which securities shall be purchased or sold by the Fund and making
purchases and sales of securities on behalf of the Fund. Each Investment
Advisory Agreement provides that, as compensation for services under the
Investment Advisory Agreement, DBAMNA is entitled to receive from DBSC a monthly
fee at an annual rate of ___% of each Fund's average daily net assets, subject
to reduction of 50% of a Fund's excess expenses if the Fund's total expenses for
its fiscal year exceed the most restrictive applicable state expense limitation.
Fees for DBAMNA's services will be paid by the Manager. DBAMNA provides a wide
range of asset management services to individuals, institutions and retirement
benefit plans. Its investment management responsibilities, as of the date of
this Prospectus, include accounts with aggregate assets in excess of $3.7
billion. Deutsche Bank AG is the largest commercial and investment bank in
Germany and among the ten largest in the world. The Deutsche Bank Group has over
$175 billion in assets under management.
* * *
Each of DBSC and DBAMNA is a direct, wholly-owned subsidiary of DB U.S.
Financial Markets Holding Corporation which in turn is an indirect, wholly-owned
subsidiary of Deutsche Bank AG.
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Custodian and Transfer Agent
Investors Bank & Trust Company ("IBT") serves as custodian of the assets of
the Funds. IBT has also entered into an agreement with the Company for the
provision of transfer agency and dividend disbursing services for the Funds. The
business address of IBT is P.O. BOX 1537 - OPS22, Boston, MA 02205-1537. If
needed for overnight mail, the street address of IBT is 89 South Street OPS22,
Boston, MA 02111.
* * *
A discussion of the terms of the Company's management, investment advisory,
custody and transfer agency arrangements is contained in the Statement of
Additional Information.
Distributor
Shares in each Fund are sold on a continuous basis without a sales load by
the Funds' independent distributor, AMT Capital Services, Inc. (the
"Distributor"), whose principal offices are located at 430 Park Avenue, New
York, NY 10022, Telephone: (212) 308-4848; Fax: (212) 308-5190. Residents
outside of New York may call (800) 762-4848. Expenses of the Distributor will
not be borne by any Fund.
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REGULATORY MATTERS
Banking laws and regulations, including the Glass-Steagall Act as currently
interpreted by the Board of Governors of the Federal Reserve System, prohibit a
bank holding company registered under the Bank Holding Company Act of 1956, as
amended (the "Bank Holding Company Act"), or any affiliate thereof from
sponsoring, organizing, controlling, or distributing the shares of a registered,
open-end investment company continuously engaged in the issuance of its shares,
and such laws also prohibit banks generally from issuing, underwriting, selling
or distributing securities, but do not prohibit such a bank holding company or
affiliate from acting as manager or investment adviser, transfer agent, or
custodian to such an investment company or from purchasing shares of such a
company as agent for and upon the order of a customer. While Deutsche Bank AG is
not a registered bank holding company, by virtue of its U.S. branches in New
York, Chicago and Los Angeles, Deutsche Bank AG is subject to the provisions of
the Bank Holding Company Act in accordance with the International Banking Act of
1978, as amended. DBSC and the Company believe that DBSC, DBAMNA, or any other
affiliate of Deutsche Bank North America Holding Corp. ("DBNA Holding"), may
perform the management or investment advisory services for the Funds, as the
case may be, described in this Prospectus. However, future changes in legal
requirements relating to the permissible activities of banks and their
affiliates, as well as future interpretations of present requirements, could
prevent DBSC, DBAMNA or any other affiliate of DBNA Holding from continuing to
perform management or investment advisory services for the Company, as the case
may be, or require DBSC, DBAMNA or any other affiliate of DBNA Holding to alter
or discontinue the services provided by it to shareholders of the Funds.
If DBSC, DBAMNA or any other affiliate of DBNA were prohibited from
performing management or investment advisory services for the Funds, as the case
may be, it is expected that the Company's Board of Directors would recommend to
the Funds' shareholders that they approve new agreements with another entity or
entities qualified to perform such services and selected by the Board of
Directors. If DBSC, DBAMNA or any other affiliate of DBNA were required to
discontinue all or part of its shareholder servicing activities, its customers
would be permitted to remain the beneficial owners of Fund shares and
alternative means for continuing the servicing of such customers would be
sought. The Funds do not anticipate that investors would suffer any adverse
financial consequences as a result of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state laws.
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OTHER INFORMATION CONCERNING EXPENSES
Except as noted below, DBSC bears all expenses in connection with the
performance of its management services. Each Fund bears the expenses incurred in
its operations, including: organizational expenses; taxes; interest; fees
(including fees paid to its directors); fees payable to the Commission; state
securities fees; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; management fees; charges
of its custodian, transfer agent, and fees of service organizations; certain
insurance costs; auditing and legal expenses; fees of independent pricing
services; costs of shareholders' reports and shareholder meetings; and any
extraordinary expenses. Each Fund also pays for brokerage fees and commissions,
if any, in connection with the purchase of portfolio securities.
PRICING OF SHARES
The price of the shares of each Fund is based on the net asset value of
such Fund. The net asset value of each Fund is determined and the shares of each
Fund are priced as of 4:00 p.m., Eastern time, on each Business Day. "Business
Day" means each weekday except those holidays on which the Federal Reserve Bank
of New York, the New York Stock Exchange (the "Exchange"), the manager,
investment adviser, or the Funds' Custodian and Transfer Agent are closed.
(Currently, those holidays are: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day). Net asset value
per share for purposes of pricing sales and redemptions is calculated by
dividing the value of all securities and other assets belonging to a Fund, less
the liabilities charged to that Fund, by the number of outstanding shares of
that Fund.
Each Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share. The
Company's Board of Directors will review the holdings of each Fund, at such
intervals as it may deem appropriate, to determine whether that Fund's net asset
value calculated by using available market quotations deviates from $1.00 per
share based on amortized cost. In the event the Company's Board of Directors
determines that a deviation exists that may result in material dilution or other
unfair results to investors or existing shareholders, the Board will take such
corrective action as it regards as necessary and appropriate. See "Net Asset
Value" in the Statement of Additional Information.
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HOW TO PURCHASE AND REDEEM SHARES
Purchase of Shares
The minimum initial investment in each Fund is $100,000. The Funds reserve
the right to waive the minimum initial investment amount.
For Clients of C.J. Lawrence/Deutsche Bank Securities Corporation
Purchase orders and subsequent investments by clients of C.J.
Lawrence/Deutsche Bank Securities Corporation ("DBSC clients") must be placed
through the clients' DBSC representative in accordance with the requirements of
maintaining a brokerage account. Upon receipt of purchase orders of all DBSC
clients, DBSC will effect an aggregate wire transfer purchase for the
appropriate Funds with the Funds' Transfer Agent, subject to the purchase
requirements described below. These shares will be held in DBSC's name, but the
DBSC client will have the right to vote its respective shares.
For Other Investors
Investors who are not clients of DBSC ("direct investors") must place all
initial purchase orders through the Funds' Distributor, AMT Capital Services,
Inc., subject to purchase requirements described below. Initial purchase orders
from direct investors are effective when AMT Capital receives a completed
account application (and other required documents) and Federal funds become
available to the Fund in the Fund's account with the Transfer Agent. AMT Capital
Services is located at 430 Park Avenue, New York, NY 10022. Telephone: (212)
308-4848, (800) 762-4848. Fax: (212) 308-5190. Subsequent investments may be
made directly with the Fund by contacting the Transfer Agent at (800) 898-DBNA.
Purchase Requirements
The offering of shares of the Funds is continuous and purchases of shares
of the Funds may be made on any Business Day. The Funds offer shares at a public
offering price equal to the net asset value next determined after receipt of a
purchase order. All purchases of shares must be made by wire transfer of Federal
funds. Share purchase orders are effective on a particular date if the Funds'
Transfer Agent is notified of the incoming wire transfer, specifying which Fund
is to be purchased, prior to 12:00 noon and Federal funds are received by the
custodian prior to 4:00 P.M. on that day. Purchase orders for a Fund's shares
for which such funds have not been received by the Fund's custodian by 4:00
P.M., Eastern time, will be held for investment in the applicable Fund until
such funds are received on the next aplicable Business Day. Shares of the Funds
begin earning dividends on the day the purchase order is executed. The Company
reserves the right to reject any purchase order and to suspend the offering of
shares of any Fund for a period of time.
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Redemption of Shares
For Clients of C.J. Lawrence/Deutsche Bank Securities Corporation
DB clients may redeem all or part of their shares in a Fund on any Business
Day by contacting their representative of DB. Upon receipt of redemption orders
of all DB clients, DB will effect an aggregate wire transfer redemption for the
appropriate Funds with the Funds' Transfer Agent, subject to the redemption
requirements described below.
For Other Investors
Investors who are not clients of DB ("direct investors") may redeem all or
part of their shares in a Fund on any Business Day by contacting the Funds'
Transfer Agent at (800) 898-DBNA and clearly indicating which shares are to be
redeemed.
In connection with a written redemption request, direct investors may be
required to have the signatures of all registered owners or authorized parties
guaranteed by an Eligible Guarantor Institution, which includes a domestic bank,
broker, dealer, credit union, national securities exchange, registered
securities association, clearing agency or savings association. The Funds'
transfer agent, however, may reject redemption instructions if the guarantor is
neither a member of nor a participant in a medallion guarantee program
(currently known as "STAMP" (R), "SEMP" or NYSE MSP). Corporations,
partnerships, trusts or other legal entities may be required to submit
additional documentation.
Redemption Requirements
Redemption orders are effected at the net asset value per share next
determined after the order is received by the Funds' transfer agent. If such
redemption request is received by 12:00 noon Eastern time on any Business Day,
the redemption will be effective and payment will be made generally on the same
Business Day. If a redemption request is received between 12:00 noon Eastern
time and the close of business, or if it is received on a non-Business Day, the
redemption will be effective and payment will be made generally on the next
Business Day.
The Funds may suspend the right of redemption or postpone the day of
payment for shares for more than seven days during any period when (i) trading
on the Exchange is restricted by applicable rules and regulations of the
Securities and Exchange Commission; (ii) the Exchange is closed for other than
customary weekend and holiday closings; (iii) the Securities and Exchange
Commission has by order permitted such suspension; or (iv) an emergency exists
as determined by the Commission.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of each Fund is declared daily as a dividend to
the respective shareholders of each Fund as of 4:00 p.m., Eastern time, on the
day of declaration. Net investment income for dividend purposes consists of (i)
interest accrued and accreted discount earned on the Fund's assets (including
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both original issue and market discount), less (ii) amortization of market
premium on such assets and the accrued expenses of the Fund. Fund shares begin
earning dividends on the day the purchase order is executed and continue earning
dividends through and including the day before the redemption order for the
shares is executed. Net realized short-term capital gains, if any, will be
distributed at least annually.
Dividends are generally paid to shareholders of record on the first
Business Day of each month, but in any event within the first five Business Days
of each month. Dividends are paid in the form of additional shares of the same
Fund, unless the shareholder of record has elected prior to the date of
distribution to receive payment in cash. Such election, or any revocation
thereof, must be made in writing to the Fund's transfer agent and will become
effective with respect to dividends paid after its receipt. Dividends that are
otherwise taxable are taxable to investors whether received in cash or in
additional shares of a Fund.
The Funds do not expect to realize net long-term capital gains.
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YIELD
From time to time, the Funds may make available information as to their
"yield" and "effective yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. The "yield" of
each Fund refers to the income generated by an investment in that Fund over a
seven-day period. This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment.
The Treasury Fund may quote a "pass-through yield" to demonstrate the
taxable yield necessary to produce an after-tax yield equivalent to a particular
state's tax-exempt yield achieved by that Fund. The "pass-through yield" refers
to that portion of income derived from interest income on direct obligations of
the United States Government that qualified for exemption from state taxes.
The Tax-Exempt Fund and the New York Tax-Exempt Fund may make available
information as to their "tax-equivalent yields." The "tax-equivalent yield"
refers to the yield on a taxable investment necessary to produce an after-tax
yield equal to a Fund's tax-free yield, and is calculated by increasing the
annualized yield shown for the Fund to the extent necessary to reflect the
payment of specified tax rates. Thus the tax-equivalent yield for a Fund will
always exceed such Fund's yield.
The yield of the Funds may be quoted and compared to those of other mutual
funds with similar investment objectives and to other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
yield of the Funds may be compared to yields set forth in the weekly statistical
release designated H.15(519) or the monthly statistical release designated
G.13(415) published by the Board of Governors of the Federal Reserve System and
the yield of the Funds' may be compared to yields published by Lipper Analytical
Services, Inc. or set forth in such publications as Donoghue's Money Fund
Report, Bank Rate Monitor and the Wall Street Journal. Performance and yield
data as reported in various national and local financial publications may also
be used in comparing the performance and yields of the Funds.
TAXES
The following discussion is a brief summary of some of the important tax
considerations affecting the Company, the Funds and its shareholders. No attempt
is made to present a detailed explanation of all federal, state, local and
foreign income tax considerations, and this discussion is not intended as a
substitute for careful tax planning. ACCORDINGLY, POTENTIAL INVESTORS ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS WITH SPECIFIC REFERENCE TO THEIR OWN TAX
SITUATION.
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Taxation of the Funds
Each Fund will be treated as a separate entity for federal income tax
purposes, and thus the provisions of the Code, applicable to regulated
investment companies generally will be applied to each Fund separately, rather
than to the Company as a whole. Each Fund will elect and intends to qualify as a
regulated investment company under the Code. If so qualified, each Fund will not
be subject to federal income taxes with respect to investment income and capital
gains, if any, realized during any year, that are distributed to its
shareholders, provided that the Fund distributes (i) at least 90% of its net
investment income and net short-term capital gains, and (ii) at least 90% of the
excess of its tax-exempt interest income net of certain deductions allocable to
such income during such taxable year. Net investment income, for dividend
purposes, includes accrued interest, accretion of discounts and amortization of
premiums, plus or minus any gains or losses realized on sales of portfolio
securities, less the estimated expenses of a Fund. The Funds do not expect to
realize long-term capital gains or losses. Distributions of any net realized
short-term caital gains will be taxable to shareholders as ordinary income. Each
Fund will be subject to a 4% non-deductible excise tax on its taxable income to
the extent it does not meet certain distribution requirements by the end of each
calendar year. Each Fund intends to make sufficient distributions to avoid
application of this excise tax.
The Funds may be subject to tax in certain states in which they do
business. Further, in those states that have income tax laws, the tax treatment
of the Funds and of shareholders with respect to distributions by the Funds may
differ from federal tax treatment.
Taxation of Shareholders
Dividends paid by each Fund from net investment income and net short-term
capital gains, will be taxable to shareholders that are otherwise subject to tax
as ordinary income regardless of whether the shareholder receives such dividends
in additional shares or in cash. Dividends declared in October, November or
December of any calendar year, payable to shareholders of record on a specified
date in such a month, will be deemed to have been received by the shareholders
and paid by the Fund on December 31, provided such dividends are paid during
January of the following year. Although each Fund does not expect to realize net
long-term capital gains, such gains, if realized, will be distributed at least
annually and will be taxable as long-term capital gains, whether received in
cash or reinvested in additional shares, regardless of how long the shareholder
has held shares of the Fund.
Because substantially all of the income of each Fund will arise from
interest, no part of the distributions to shareholders is expected to qualify
for the dividends-received deduction allowed to corporations under the Code.
State and Local Taxes - The Treasury Fund
The Treasury Fund will invest in United States Government securities and
STRIPS. While many states provide that a regulated investment company may pass
through (without restriction) to its shareholders state and local income tax
exemptions otherwise available to direct owners of certain United States
Government securities (such as United States Treasury obligations), under the
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laws of certain states distributions by the Treasury Fund may be taxable as
income even though a portion of such distributions may be derived from interest
on United States Government securities which, if realized directly, would be
exempt from state and local income taxes. In addition, certain states will treat
shareholders' dividends from the Treasury Fund attributable to income from
STRIPS in the same manner as interest income from United States Government
securities; accordingly, such income may be exempt from state and local income
taxes. Each shareholder of the Treasury Fund will receive an annual statement
showing the amount of dividends received from obligations the interest on which
is exempt from state and local income taxes. The exemption from state and local
income taxes does not preclude states from asserting other taxes on the
ownership of United States Government securities. POTENTIAL INVESTORS ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS REGARDING STATE AND LOCAL TAX CONSEQUENCES OF
AN INVESTMENT IN THE TREASURY FUND.
The Tax-Exempt Fund and the New York Tax-Exempt Fund
The Tax-Exempt Fund and the New York Tax-Exempt Fund each intend to qualify
to pay "exempt-interest dividends," as that term is defined in the Code, by
holding at the end of each quarter of its taxable year at least 50% of the value
of its total assets in the form of obligations described in section 103(a) of
the Code. Generally, an exempt-interest dividend is that part of dividend
distributions made by the Tax-Exempt Fund or the New York Tax-Exempt Fund which
consists of interest received by such Funds with respect to tax-exempt
securities. Each of these Fund's policy is to pay in each taxable year
exempt-interest dividends equal to at least 90% of such Fund's interest from
tax-exempt obligations net of certain deductions. Except as discussed below,
exempt-interest dividends will be exempt from federal income tax. In addition,
dividends from the New York Tax-Exempt Fund will not be subject to New York
State and New York City personal income taxes to the extent that such
distributions qualify as exempt-interest dividends and represent interest income
attributable to federally tax-exempt obligations of the State of New York and
its political subdivisions (as well as certain other federally tax-exempt
obligations the interest on which is exempt from New York State and New York
City personal income taxes, such as certain obligations of Puerto Rico).
Dividends from The New York Tax-Exempt Fund, however, are not excluded in
determining New York State or New York City franchise taxes on corporations and
financial institutions.
Interest on indebtedness incurred or continued by a shareholder of the
Tax-Exempt Fund or the New York Tax-Exempt Fund, whether a corporation or an
individual, to purchase or carry shares of the Tax-Exempt Fund or the New York
Tax-Exempt Fund is not deductible. Entities or persons who are "substantial
users" (or related persons) of facilities financed by industrial development
bonds should consult their tax advisors before purchasing shares of the
Tax-Exempt Fund or the New York Tax-Exempt Fund.
Although exempt-interest dividends may be excluded from a shareholder's
gross income for federal income tax purposes, a portion of the exempt-interest
dividends may be a specific preference item for purposes of determining the
shareholder's liability (if any) under the federal individual and corporate
alternative minimum tax provisions of the Code. Exempt-interest dividends will
constitute a specific preference item for purposes of the federal alternative
minimum tax to the extent that such dividends are derived from certain types of
private activity bonds issued after August 7, 1986. In addition, all
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exempt-interest dividends will be a component of the "adjusted current earnings"
adjustment item for purposes of the federal corporate alternative minimum tax.
Moreover, the receipt of dividends from the Tax-Exempt Fund or the New York
Tax-Exempt Fund may increase a corporate shareholder's liability for
environmental taxes under Section 59A of the Code and a foreign corporate
shareholder's liability under the branch profits tax.
The exemption of interest income for federal income tax purposes and, in
the case of the New York Tax-Exempt Fund, for New York State and New York City
personal income tax purposes, may not result in similar exemptions under the tax
law of state and local authorities outside New York. In general, a state exempts
from state income tax only interest earned on obligations issued by that state
or its political subdivisions and instrumentalities.
Each year the Funds will notify shareholders of the federal and state
income tax, and in the case of the New York Tax-Exempt Fund, the New York City
personal income tax, consequences of distributions made by the Tax-Exempt Fund
and the New York Tax-Exempt Fund. All or a portion of the Tax-Exempt Fund's and
the New York Tax-Exempt Fund's gain from the sale or redemption of tax-exempt
obligations acquired after April 30, 1993 attributable to market discount will
be treated as ordinary income rather than capital gain. This rule may increase
the amount of ordinary income dividends received by shareholders.
Descriptions of tax consequences set forth in this Prospectus and in the
Statement of Additional Information are intended to be a general guide. In
addition, descriptions of state and local income tax consequences in this
Prospectus and in the Statement of Additional Information have not been
independently verified by the Company, its investment adviser or its counsel and
should not be relied upon as authoritative, although the Company will
investigate the state and, if applicable, the local tax rate in effect in any
given state or locality to the extent necessary to quote a tax equivalent yield
for that state or locality in its advertisements.
INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING SPECIFIC
QUESTIONS AS TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
OWNERSHIP OF SHARES IN ANY OF THE FUNDS.
ORGANIZATION AND CAPITAL STOCK
The Company was incorporated in Maryland on April 24, 1995. The authorized
capital stock of the Company consists of 10,000,000,000 shares of Common Stock
having a par value of $.001 per share. The Company's Articles of Incorporation
currently authorize the issuance of shares of each of the following five Funds
or investment portfolios: the "DBNA Treasury Money Market Fund", the "DBNA
Government Money Market Fund", the "DBNA Money Market Fund", the "DBNA
Tax-Exempt Money Market Fund" and the "DBNA New York Tax-Exempt Money Market
Fund", each consisting of 2,000,000,000 shares. Presently each Fund consists of
two classes designated as "Institutional Shares" (which are offered pursuant to
this Prospectus) and "Investors Shares." With respect to each investment
portfolio, each class participates in the same portfolio of investments and is
identical to the other class of the same investment portfolio, except for
certain different expenses and services. Investors may call the Company at
1-800-898-DBNA to determine whether Investors Shares are available from their
sales representative, and if so, to obtain additional information about such
shares. Investors may also obtain information about Investors Shares from the
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Distributor or their sales representative. Shares of each class may be exchanged
only for shares of the same class in another Fund. From time to time in the
future, the Company's Board of Directors is authorized to create and classify or
reclassify unissued shares of Common Stock in separate investment portfolios and
classes of such portfolios without further action by shareholders.
All shares of the Company (regardless of portfolio or class) have
noncumulative voting rights for the election of Directors, and all shares of the
Company, when issued, will be fully paid, non-assessable and fully transferable.
All shares of the Company have equal voting rights and will be voted in the
aggregate, and not by portfolio or class, except where voting by portfolio or
class is required by law or where the matter involved affects only one portfolio
or class. Under Maryland law, the Company's state of incorporation, and the
Company's By-Laws, the Company is not required and does not currently intend to
hold shareholder meetings annually for the election of directors unless required
under the 1940 Act. Shareholders, however, do have the right to call a meeting
to consider the removal of one or more of the Company's directors if such a
request is made, in writing, by the holders of at least 10% of the Company's
outstanding voting securities. In such cases, the Company will assist in calling
the meeting (including effecting any necessary shareholder communications) as
required under the 1940 Act. A more detailed statement of the voting rights of
shareholders is contained in the Statement of Additional Information.
As of the date of this Prospectus, [insert address] is a "control person"
of the Company because it owns all the shares of the Treasury Fund; however, it
is anticipated that shortly after the commencement of the public offering of
shares of the Treasury Fund pursuant to this Prospectus, ____ will own less than
25% of the outstanding shares of the Treasury Fund.
REPORTS TO SHAREHOLDERS
Shareholders of record will receive unaudited semi-annual reports showing
the portfolio for the Funds in which such shareholder is invested and other
information, and an annual report containing financial statements audited by
independent certified public accountants. Deloitte & Touche LLP has been
appointed as the Funds' auditors. The Funds' fiscal year ends on December 31.
Customers can write or call a representative of DBSC with any questions
relating to their investment in the Funds.
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Subject to completion dated June ___, 1995
DBNA INVESTMENTS, INC.
31 West 52nd Street
New York, NY 10019
Investors Shares Prospectus
DBNA Investments, Inc. (the "Company") is a registered, open-end management
investment company offering shares in five separate money market portfolios: the
DBNA Treasury Money Market Fund, the DBNA Government Money Market Fund, the DBNA
Money Market Fund, the DBNA Tax-Exempt Money Market Fund and the DBNA New York
Tax- Exempt Money Market Fund. This Prospectus describes each of these money
market portfolios (each a "Fund" and collectively, the "Funds"), each having its
own investment objectives and policies, as described below. Each of the Funds,
other than the DBNA New York Tax-Exempt Fund, is a diversified portfolio of the
Company.
The DBNA Treasury Money Market Fund (the "Treasury Fund") seeks as high a
level of current income as is consistent with safety, liquidity and stability of
principal. The Treasury Fund invests only in short-term United States Treasury
obligations, which are backed by the full faith and credit of the United States
Government and STRIPS (as described on page 21 herein). Investors may benefit
from income tax exclusions and exemptions that are available in certain states
and localities.
The DBNA Government Money Market Fund (the "Government Fund") seeks as high
a level of current income as is consistent with liquidity and stability of
principal. The Government Fund invests in short-term obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities.
The DBNA Money Market Fund (the "Money Market Fund") seeks as high a level
of current income as is consistent with liquidity and stability of principal.
The Money Market Fund invests in high-quality, short-term United States
dollar-denominated money market instruments, and may also enter into repurchase
agreements with respect to such obligations.
The DBNA Tax-Exempt Money Market Fund (the "Tax-Exempt Fund") seeks as high
a level of current income exempt from federal income tax as is consistent with
liquidity and stability of principal. The Tax-Exempt Fund invests primarily in
high-quality, short-term municipal obligations, the interest on which is exempt
from federal income tax.
The DBNA New York Tax-Exempt Money Market Fund (the "New York Tax-Exempt
Fund") seeks as high a level of current income exempt from federal income tax
and New York State and New York City personal income tax as is consistent with
liquidity and stability of principal. The New York Tax-Exempt Fund invests
primarily in high-quality, short-term municipal obligations issued by or on
behalf of the State of New York or by its instrumentalities or political
subdivisions, the interest on which is exempt from federal income tax and New
York State and New York City personal income taxes.
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Investments in the Funds are not guaranteed or insured by the United States
Government. The Funds attempt to maintain a stable net asset value of $1.00.
However, there is no assurance that the Funds will be able to maintain such a
stable net asset value. Shares of the Funds are not deposits or obligations of,
or endorsed or guaranteed by, Deutsche Bank or its affiliates, nor are they
federally insured by the Federal Deposit Insurance Corp. ("FDIC"), the Federal
Reserve Board or any other agency. Shares of the Funds involve investment risk,
including possible loss of principal.
Shares are sold without a sales charge by the Funds' Distributor whose
address and telephone number appear below. The minimum initial investment in
Investors Shares is $100,000 which may be waived by the Funds.
This Prospectus sets forth concisely the information concerning the Funds
that a prospective investor should know before investing in the Funds. This
Prospectus should be read and retained for ready reference to information about
the Funds. Separate prospectuses with respect to the Funds may be used in
addition to this combined Prospectus. A Statement of Additional Information
dated __________, 1995, containing additional information about the Funds has
been filed with the Securities and Exchange Commission and is hereby
incorporated by reference into this Prospectus. An investor may obtain a
Statement of Additional Information without charge by writing the Company at its
address shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
July , 1995
Manager:
Deutsche Bank Securities Corporation
31 West 52nd Street
New York, NY 10019
Investment Adviser: Distributor:
Deutsche Asset Management North America, Inc. AMT Capital Services, Inc.
31 West 52nd Street 430 Park Avenue
New York, NY 10019 New York, NY 10022
Tel.: 800-898-DBNA or Tel.: 800-762-4848
(outside New York) or
212-474-7000 212-308-4848
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TABLE OF CONTENTS
Page
Overview 4
The Treasury Fund's Expenses 5
Investment Objectives and Policies 7
The Treasury Fund 8
The Government Fund 9
The Money Market Fund 10
The Tax-Exempt Fund 14
The New York Tax-Exempt Fund 17
Additional Investment Activities of the Funds 20
Limiting Investment Risks 25
Management 26
Manager 26
Investment Adviser 27
Custodian and Transfer Agent 28
Distributor 28
Service Organizations 28
Regulatory Matters 29
Other Information Concerning Expenses 30
Pricing of Shares 30
How to Purchase and Redeem Shares 31
Purchase of Shares 31
Redemption of Shares 32
Dividends and Distributions 32
Yield 34
Taxes 34
Organization and Capital Stock 37
Reports to Shareholders 38
--------------------
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Funds' Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or its Distributor. This Prospectus does not constitute an offering by the
Company or by the Distributor in any jurisdiction in which such offering may not
lawfully be made. The shares of certain Funds of the Company have not been
registered for sale in all states, and therefore, are not being offered for sale
to residents in those states, except to the extent exemptions from such
registration may apply.
3
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OVERVIEW
The Company is a registered, open-end management investment company
offering shares in Funds designed to meet short-term investment needs. This
Prospectus describes the operations of the following five Funds:
- The Treasury Fund
- The Government Fund
- The Money Market Fund
- The Tax-Exempt Fund
- The New York Tax-Exempt Fund
4
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THE TREASURY FUND'S EXPENSES
The following table illustrates that an investment in the Treasury Fund is
subject only to the estimated annual operating expenses indicated below:
Shareholder Transaction Expenses:
Sales Load Imposed on Purchases .............................. None
Sales Load Imposed on Reinvested Dividends ................... None
Deferred Sales Load .......................................... None
Redemption Fees .............................................. None
Exchange Fees ................................................ None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fee ............................................... ___%
12b-1 Fees ................................................... .25%
Other Expenses (after Expense Reimbursements)................. .__%
Total Fund Operating Expenses (after Expense Reimbursements). .__%
-------------- ====
Example 1 year 3 years
An investor would pay the following expenses
on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the
end of each time period: ......................... $ ___ $ ___
This table is designed to assist investors in understanding the various direct
and indirect costs and expenses that an investor in the Treasury Fund would
bear. For a description of contractual fee and Rule 12b-1 arrangements or the
fees and expenses included in Other Expenses, see "Management". In connection
with the example, please note that $1,000 is less than the Fund's minimum
initial investment requirement and that there are no redemption or exchange fees
imposed by the Fund. The Treasury Fund has entered into an expense reimbursement
agreement with Deutsche Bank Securities Corporation to reduce management fees
and to reimburse other expenses in order that the total operating expenses of
the Treasury Fund for the first 12 months of operations not exceed ___% of its
average annual net assets. Absent such arrangements, the management fee and
other expenses for the Treasury Fund are estimated to be ___% and ___%,
respectively, of the Treasury Fund's average annual net assets. See "How to
Purchase and Redeem Shares --- Purchase of Shares" and "-- Redemption of
Shares". The example is hypothetical; it is included solely for illustrative
5
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purposes. It should not be considered a representation of past or future
performance; actual expenses may be more or less than those shown.
Charges, not reflected in the expense table above, may be incurred directly
by customers of financial institutions in connection with an investment in the
Fund.
Shares of the Government Fund, the Money Market Fund, the Tax-Exempt Fund
and the New York Tax-Exempt Fund are not currently being offered; therefore,
there is no fee table data regarding any of these four Funds.
6
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INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Fund are set forth below.
The investment objective of each Fund is a fundamental policy and may not be
changed without the affirmative vote of a majority of its outstanding shares. Of
course, achievement of these objectives cannot be guaranteed.
Each Fund invests exclusively in United States dollar-denominated
securities which present minimal credit risks and, with the exception of U.S.
Government securities, are rated in the highest short-term rating category (the
two highest short-term rating categories in the case of The New York Tax-Exempt
Fund) by at least two nationally recognized statistical rating organizations
("NRSROs"), or by the only NRSRO that has rated the security, or if unrated, in
comparable securities. If a security is backed by an unconditional demand
feature, the issuer of the demand feature rather than the issuer of the
underlying security may be relied upon in determining whether the foregoing
criteria have been met. In addition, all securities purchased by the Funds have
remaining maturities of thirteen months or less, and the Funds are managed so
that the average maturity of all portfolio instruments (on a dollar-weighted
basis) will not exceed 90 days. The Funds seek to maintain a stable net asset
value of $1.00 per share; however, there is no assurance that this will be
achieved. Because the Funds invest only in short-term securities which present
minimal credit risks, they will not achieve as high a level of income as would
be the case if they had the ability to invest in lower quality, longer term
securities.
7
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The Treasury Fund
The investment objectives of the Treasury Fund are to seek as high a level
of current income as is consistent with safety, liquidity and stability of
principal. The Treasury Fund invests exclusively in a diversified portfolio of
obligations of the United States Treasury, which are backed by the full faith
and credit of the United States Government as to payment of principal and
interest, and STRIPS (Separate Trading of Registered Interest and Principal of
Securities, as described below). United States Treasury obligations consist of
bills, notes and bonds, which generally differ only in their interest rates,
maturities and times of issuance. The Treasury Fund does not purchase securities
issued or guaranteed by agencies or instrumentalities of the United States
Government.
While many states provide that a regulated investment company may pass
through (without restriction) to its shareholders state and local income tax
exemptions otherwise available to direct owners of United States Treasury
obligations, under the laws of certain states distributions by the Treasury Fund
may be taxable as income even though a portion of such distributions may be
derived from interest on United States Government securities which, if realized
directly, would be exempt from state and local income taxes. In addition,
certain states will treat shareholders' dividends from the Treasury Fund
attributable to income from STRIPS in the same manner as interest income from
United States Government securities; accordingly, such income may be exempt from
state and local income taxes. Each shareholder of the Treasury Fund will receive
an annual statement showing the amount of dividends received from obligations
the interest on which is exempt from state and local income taxes. The exemption
from state and local income taxes does not preclude states from asserting other
taxes on the ownership of United States Government securities. POTENTIAL
INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING STATE AND LOCAL
TAX CONSEQUENCES OF AN INVESTMENT IN THE TREASURY FUND.
8
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The Government Fund
The investment objectives of the Government Fund are to seek as high a
level of current income as is consistent with liquidity and stability of
principal. The Government Fund invests all of its assets in a diversified
portfolio of short-term obligations issued or guaranteed by the United States
Government or its agencies or instrumentalities, as described below. Guarantees
of principal and interest on obligations that may be purchased by the Government
Fund are not guarantees of the market value of such obligations, nor do they
extend to the value of shares of the Government Fund. State and local tax
consequences vary with respect to investments by the Government Fund in
obligations issued or guaranteed by the United States Government or its agencies
or instrumentalities. As a result, shareholders may be subject to state and
local income taxation with respect to dividends from the Government Fund.
United States Treasury Obligations
The Government Fund may invest in any United States Treasury obligations in
which the Treasury Fund may invest, as described above.
United States Government Agency and Instrumentality Obligations
The Government Fund may invest in securities issued or guaranteed by United
States Government agencies and instrumentalities, including obligations that are
supported by: (i) the full faith and credit of the United States Treasury (e.g.,
direct pass-through certificates of the Government National Mortgage
Association); (ii) the limited authority of the issuer or guarantor to borrow
from the United States Treasury (e.g., obligations of Federal Home Loan Banks);
or (iii) only the credit of the issuer or guarantor (e.g., obligations of the
Federal Home Loan Mortgage Corporation). In the case of obligations not backed
by the full faith and credit of the United States Treasury, the agency issuing
or guaranteeing the obligation is principally responsible for ultimate
repayment.
Securities that may be purchased by the Government Fund include obligations
issued or guaranteed by the agencies and instrumentalities of the United States
Government set forth in the Statement of Additional Information. See "Additional
Information on Portfolio Instruments -- United States Government Securities --
United States Government Agency and Instrumentality Obligations" in the
Statement of Additional Information.
Participation Certificates
The Government Fund may purchase participation certificates as described
under "Additional Investment Activities of the Funds - Participation
Certificates" below.
9
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The Money Market Fund
The investment objectives of the Money Market Fund are to seek as high a
level of current income as is consistent with liquidity and stability of
principal. The Money Market Fund will invest in a diversified portfolio of
high-quality, short-term United States dollar-denominated money market
instruments, such as those described below, and repurchase obligations with
respect thereto.
United States Government Securities
The Money Market Fund may invest in any obligations in which the Treasury
Fund and the Government Fund may invest, as described above.
Bank Obligations
The Money Market Fund may invest in bank obligations (including bank
obligations subject to repurchase agreements). Bank obligations that may be
purchased by the Money Market Fund are limited to negotiable certificates of
deposit, bankers' acceptances, fixed time deposits and deposit notes. A
certificate of deposit is a short-term negotiable certificate issued by a
commercial bank against funds deposited in the bank and is either
interest-bearing or purchased on a discount basis. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. The borrower is liable for payment
as is the bank, which unconditionally guarantees to pay the draft at its face
amount on the maturity date. Fixed time deposits are obligations of branches of
United States banks or foreign banks that are payable at a stated maturity date
and bear a fixed rate of interest. Although fixed time deposits do not have a
market, there are no contractual restrictions on the right to transfer a
beneficial interest in the deposit to a third party. Fixed time deposits subject
to withdrawal penalties and having notice periods of more than seven days are
deemed "illiquid" for the purposes of the fourth investment limitation set forth
under "Limiting Investment Risks" below. Deposit notes are notes issued by
commercial banks that generally bear fixed rates of interest and typically have
original maturities ranging from eighteen months to five years, although the
Money Market Fund will only acquire deposit notes with remaining maturities of
thirteen months or less.
The Money Market Fund limits its investments in United States bank
obligations to obligations of United States banks that have more than $1 billion
in total assets at the time of investment and are subject to regulation by the
United States Government. The Money Market Fund limits its investments in
foreign bank obligations to United States dollar-denominated obligations of
foreign banks that at the time of investment have more than US$10 billion, or
the equivalent in other currencies, in total assets, and have branches or
agencies in the United States. The Money Market Fund may also invest in
obligations of foreign branches of United States banks, as well as obligations
of United States branches of foreign banks, if the Money Market Fund is
permitted to invest directly in obligations of the United States bank or foreign
bank, respectively, in accordance with the foregoing limitations. The Fund,
however, will not purchase obligations of Deutsche Bank AG or its affiliates.
10
<PAGE>
Participation Certificates
The Money Market Fund may purchase participation certificates as described
under "Additional Investment Activities of the Funds - Participation
Certificates" below.
Asset-Backed Securities
The Money Market Fund may purchase asset-backed securities. Asset-backed
securities represent defined interests in an underlying pool of assets. Such
securities may be issued as pass-through certificates, which represent undivided
fractional interests in the underlying pool of assets. Alternatively,
asset-backed securities may be issued as interests, generally in the form of
debt securities, in a special purpose entity organized solely for the purpose of
owning the underlying assets and issuing such securities. In the latter case,
such securities are secured by and payable from a stream of payments generated
by the underlying assets. The assets underlying asset-backed securities are
often a pool of assets similar to one another, such as motor vehicle receivables
or credit card receivables. Alternatively, the underlying assets may be
particular types of securities, various contractual rights to receive payments
and/or other types of assets. Asset-backed securities frequently carry limited
credit protection in the form of extra collateral, subordinate certificates,
cash reserve accounts, letters of credit or other enhancements. Any asset-backed
securities held by the Fund must comply with the Fund's portfolio maturity and
credit quality requirements. For a more detailed discussion of asset-backed
securities, see "Additional Investment Activities - Asset-Backed Securities" in
the Statement of Additional Information.
Commercial Paper
The Money Market Fund may invest in commercial paper consisting of direct
obligations of domestic and foreign issuers that: (i) are rated in the highest
short-term rating category by at least two nationally recognized statistical
rating organizations ("NRSROs") or by the only NRSRO that has rated the
security; or (ii) if not rated, are of an investment quality comparable to rated
commercial paper in which the Money Market Fund may invest.
Corporate Debt Securities
The Money Market Fund may invest in non-convertible corporate debt
securities such as bonds and debentures that have remaining maturities of
thirteen months or less and that are of an investment quality comparable to
rated commercial paper in which the Money Market Fund may invest.
Foreign Government Obligations and Obligations Issued by Supranational Entities
The Money Market Fund may invest in foreign government obligations issued
or guaranteed by the governments of countries located in Western Europe and
Scandinavia, and of Australia, Japan and Canada (including its provinces). For a
description of certain risks associated with investment by the Money Market Fund
in foreign obligations, see "Risk Factors" below.
11
<PAGE>
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Supranational entities, the obligations of which may be purchased by
the Money Market Fund, are the International Bank for Reconstruction and
Development (the World Bank), the Inter-American Development Bank, the
International Finance Corporation, the European Investment Bank, the European
Coal and Steel Community, the Nordic Investment Bank, the Asian Development Bank
and the African Development Bank. In general, supranational entities have no
taxing authority and are dependent upon their members for payments of interest
and principal. Moreover, the lending activities of supranational entities are
limited to a percentage of their total capital (including "callable capital"
contributed by a member at an entity's call), reserves and net income.
Municipal Obligations
The Money Market Fund may also invest in high-quality, short-term municipal
obligations that carry yields competitive with those of other types of money
market instruments in which the Money Market Fund may invest.
Dividends paid by the Money Market Fund derived from interest on municipal
obligations that may be purchased by it will be taxable to shareholders for
federal income tax purposes.
Risk Factors
In view of the ability of the Money Market Fund to invest without
limitation in domestic bank obligations, an investment in the Money Market Fund
should be made with an understanding of the characteristics of the United States
banking industry and the risks that such an investment may entail. Banks in the
United States are subject to extensive government regulation that may limit both
the amounts and types of loans and other financial commitments that may be made
and the interest rates and fees that may be charged. The profitability of this
industry is largely dependent upon the availability and cost of capital funds
for the purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an important part in the
operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations.
The Money Market Fund may invest without limitation in United States
dollar-denominated securities of foreign issuers. Investments by the Money
Market Fund in securities of foreign banks, foreign branches of United States
banks, and foreign governmental and private issuers may involve investment risks
such as future political and economic developments, the possible imposition of
foreign withholding taxes on interest income payable on such securities held by
the Money Market Fund, the possible seizure or nationalization of foreign assets
and the possible establishment of exchange controls or other foreign
governmental laws or restrictions that might adversely affect the payment of the
principal of and interest on such securities held by the Money Market Fund. In
addition, there may be less publicly available information about a foreign
issuer than about a United States issuer, and foreign issuers may not be subject
to the same accounting, auditing and financial record-keeping standards and
requirements as United States issuers. Finally, in the event of a default in any
12
<PAGE>
such foreign obligations, it may be more difficult for the Money Market Fund to
obtain or enforce a judgment against the issuers of such securities.
The Money Market Fund does not purchase securities that it believes, at the
time of purchase, will be subject to exchange controls or foreign withholding
taxes; however, there can be no assurance that such laws may not become
applicable to certain of the Money Market Fund's investments. In the event
unforeseen exchange controls or foreign withholding taxes are imposed with
respect to the Money Market Fund's investments, the effect may be to reduce the
income received by the Money Market Fund on such investments.
13
<PAGE>
The Tax-Exempt Fund
The investment objectives of the Tax-Exempt Fund are to seek as high a
level of current income exempt from federal income tax as is consistent with
liquidity and stability of principal. The Tax-Exempt Fund invests primarily in a
diversified portfolio of high-quality, short-term municipal obligations, the
interest on which is exempt from federal income tax.
Municipal Commercial Paper
Investments in municipal commercial paper by the Tax-Exempt Fund consist of
commercial paper that is rated in the highest short-term rating category by at
least two nationally recognized statistical rating organizations ("NRSROs") or
by the only NRSRO that has rated the security, or, if not rated, is of
investment quality comparable to rated municipal commercial paper in which the
Tax-Exempt Fund may invest.
Municipal Notes
The Tax-Exempt Fund may invest in municipal notes with remaining maturities
of thirteen months or less and that are rated in the highest short-term rating
category by at least two NRSROs or by the only NRSRO that has rated the
security, or, if not rated, are of investment quality comparable to rated
municipal notes in which the Tax-Exempt Fund may invest.
Municipal notes generally have maturities at the time of issuance of three
years or less. Municipal notes that may be purchased by the Tax-Exempt Fund
include, but are not limited to:
Tax Anticipation Notes. Tax anticipation notes are sold as interim
financing in anticipation of collection of taxes. Uncertainty in a municipal
issuer's capacity to raise taxes as a result of such factors as a decline in its
tax base or a rise in delinquencies could adversely affect the issuer's ability
to meet its obligations on outstanding tax anticipation notes.
Bond Anticipation Notes. Bond anticipation notes are sold as interim
financing in anticipation of a bond sale. The ability of a municipal issuer to
meet its obligations on its bond anticipation notes is primarily dependent on
its adequate access to the longer term municipal bond market and the likelihood
that the proceeds of such bond sales will be used to pay the principal of, and
interest on such bond anticipation notes.
Revenue Anticipation Notes. Revenue anticipation notes are sold as interim
financing in anticipation of receipt of other revenues. A decline in the receipt
of certain revenues, such as anticipated revenues from another level of
government, could adversely affect an issuer's ability to meet its obligations
on outstanding revenue anticipation notes.
Municipal notes also include construction loan notes and project notes. Tax
anticipation notes, bond anticipation notes and revenue anticipation notes are
usually general obligations of the issuer. Project notes are issued by local
housing authorities to finance urban renewal and public housing projects and are
secured by the full faith and credit of the United States Government.
14
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Municipal Bonds
Investments by the Tax-Exempt Fund in municipal bonds consist of bonds with
remaining maturities of thirteen months or less and that are of investment
quality comparable to rated municipal commercial paper or municipal notes in
which the Tax-Exempt Fund may invest.
--------------------
Municipal obligations are debt obligations issued by or on behalf of
states, cities, municipalities and other public authorities. The two principal
classifications of municipal obligations that may be held by the Tax-Exempt Fund
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Revenue
securities may include private activity bonds. Such bonds may be issued by or on
behalf of public authorities to finance various privately operated facilities
and are not payable from the unrestricted revenues of the issuer. As a result,
the credit quality of private activity bonds is frequently related directly to
the credit standing of private corporations or other entities.
The Tax-Exempt Fund's portfolio may also include "moral obligation"
securities, which are normally issued by special purpose public authorities. If
the issuer of moral obligation securities is unable to meet its debt service
obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality that created the issuer.
In addition, the Tax-Exempt Fund may invest in resource recovery bonds,
which may be general obligations of the issuing municipality or supported by
corporate or bank guarantees. The viability of the resource recovery project,
environmental protection regulations and project operator tax incentives may
affect the value and credit quality of resource recovery bonds.
As a fundamental policy, the Tax-Exempt Fund will maintain, under normal
market conditions, at least 80% of the value of its total assets in obligations
that are exempt from federal income tax and that are not a specific tax
preference item under the federal alternative minimum tax for either individuals
or corporations. See "Taxes." The Tax-Exempt Fund currently intends to invest
substantially all of its assets in such obligations. To the extent not so
invested, the remaining 20% of the value of the Tax-Exempt Fund's assets may be
invested in obligations that are tax preference items under the federal
alternative minimum tax ("AMT Items") or high quality, short-term government and
money market instruments of the types in which the Money Market Fund may invest.
The Tax-Exempt Fund may hold uninvested cash reserves pending investment
if, in the opinion of the Tax-Exempt Fund's manager or investment adviser,
suitable tax-exempt obligations are unavailable, or during temporary defensive
periods. Uninvested cash reserves will not earn income. In addition to or in
lieu of holding uninvested cash reserves under these circumstances, the
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Tax-Exempt Fund may elect to invest temporarily in excess of 20% of the current
value of its total assets in AMT Items or Other Taxable Instruments. To the
extent that the Tax-Exempt Fund deviates from its investment policies as a
result of the unavailability of suitable obligations or for other temporary
defensive purposes, its investment objective of seeking income exempt from
federal income tax may not be achieved.
Risk Factors
The Tax-Exempt Fund does not intend to concentrate its investments in any
one industry. This limitation, however, is not applicable to investments by the
Tax-Exempt Fund in municipal obligations where the issuer is regarded as a
state, city, municipality or other public authority since such entities are not
members of any industry. Thus, from time to time (although there is no current
intention to do so), the Tax-Exempt Fund may invest 25% or more of its assets in
municipal obligations that are related in such a way that an economic, business
or political development or change affecting one such obligation could also
affect the other obligations; for example, municipal obligations the interest on
which is paid from revenues of similar types of projects or municipal
obligations whose issuers are located in the same state.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. None of the
Tax-Exempt Fund, its manager or its investment adviser will review the
proceedings relating to the issuance of municipal obligations or the basis for
such opinions.
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The New York Tax-Exempt Fund
The investment objectives of the New York Tax-Exempt Fund are to seek as
high a level of current income exempt from federal income tax and New York State
and New York City personal income taxes as is consistent with liquidity and the
stability of principal. The New York Tax-Exempt Fund invests primarily in a
non-diversified portfolio of high-quality, short-term municipal obligations
issued (i) by the State of New York and its cities, municipalities and other
public authorities, and (ii) by territories and possessions of the United
States, the District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions, the interest on which is exempt
from federal income tax and from the personal income taxes of New York State and
New York City.
Municipal Commercial Paper
The New York Tax-Exempt Fund may invest in municipal commercial paper that
is rated in the two highest short-term rating categories by at least two
nationally recognized statistical rating organizations ("NRSROs") or by the only
NRSRO that has rated the security or, if not rated, is of investment quality
comparable to rated municipal commercial paper in which the New York Tax-Exempt
Fund may invest.
Municipal Notes
The New York Tax-Exempt Fund may invest in municipal notes with remaining
maturities of thirteen months or less and which are rated in the two highest
short-term rating categories by at least two NRSROs or by the only NRSRO that
has rated the security or, if not rated, are of investment quality comparable to
rated municipal notes in which the New York Tax-Exempt Fund may invest.
Municipal notes are further described above. See "Tax-Exempt Fund - Municipal
Notes".
Municipal Bonds
Municipal bonds purchased by the New York Tax-Exempt Fund consist of bonds
with remaining maturities of thirteen months or less and which are of investment
quality comparable to rated municipal commercial paper or municipal notes in
which the New York Tax-Exempt Fund may invest.
--------------------
The general classifications of municipal obligations in which the New York
Tax-Exempt Fund may invest are described above. See "Tax-Exempt Fund."
The New York Tax-Exempt Fund currently intends to invest substantially all
of its assets in obligations that are exempt from federal income tax and from
the personal income taxes of the State of New York and New York City and that
are not AMT items. See "Taxes." To the extent that the unavailability of
suitable obligations for investment by the New York Tax- Exempt Fund prevents it
from investing substantially all of its assets in such obligations, the New York
17
<PAGE>
Tax-Exempt Fund's investment adviser may purchase municipal obligations issued
by other states, their agencies and instrumentalities. Under normal market
conditions, however, the New York Tax-Exempt Fund will invest at least 65% of
its total assets in obligations that are exempt from federal income tax and from
the personal income taxes of the State of New York and New York City, as
described above. In addition, it is a fundamental policy of the New York
Tax-Exempt Fund to invest, under normal market conditions, at least 80% of its
total assets in obligations that are exempt from federal income tax and that are
not AMT Items. The remaining 20% of the New York Tax-Exempt Fund's assets may be
invested in AMT Items or Other Taxable Instruments.
The New York Tax-Exempt Fund may hold uninvested cash reserves pending
investment if, in the opinion of the New York Tax-Exempt Fund's manager or
investment adviser, suitable tax-exempt obligations are unavailable, or during
temporary defensive periods. Uninvested cash reserves will not earn income. In
addition to or in lieu of holding uninvested cash reserves under these
circumstances, the New York Tax-Exempt Fund may elect to invest temporarily in
excess of 20% of the current value of its total assets in AMT Items or Other
Taxable Instruments.
If at some future date, in the opinion of its manager or investment
adviser, adverse conditions prevail in the market for obligations exempt from
federal income tax and from the personal income taxes of the State of New York
and New York City (including conditions under which such obligations are
unavailable for investment), the New York Tax-Exempt Fund may, for temporary
defensive purposes, invest more than 35% of its assets in municipal obligations
issued by other states, their agencies or instrumentalities or in AMT Items or
Other Taxable Instruments. Moreover, if at some future date, in the opinion of
the investment adviser, adverse conditions in the market for municipal bonds
generally should prevail, the New York Tax-Exempt Fund may temporarily invest
more than 20% of its assets in cash reserves or in AMT Items or Other Taxable
Instruments in order to maintain a defensive posture. To the extent that the New
York Tax-Exempt Fund deviates from its investment policies as a result of the
unavailability of suitable obligations or for other temporary defensive
purposes, its investment objective of seeking income exempt from federal income
tax and New York State and New York City personal income taxes may not be
achieved.
Risk Factors
The New York Tax-Exempt Fund is not subject to the diversification
requirements set forth in the 1940 Act and may have a larger position in a
single issuer than would be the case if the New York Tax-Exempt Fund were
diversified. However, as a fundamental investment limitation, the New York
Tax-Exempt Fund limits its investments so that with regard to 50% of total
assets, no more than 5% of assets are invested in the securities of a single
issuer, and with respect to the remaining 50% of total assets, no more than 25%
of total assets are invested in the securities of a single issuer. This ability
to concentrate in particular issuers is designed to permit the manager or
investment adviser to the New York Tax-Exempt Fund to maximize, subject to the
aforementioned fundamental investment limitation, the percentage of the New York
Tax-Exempt Fund's assets that are municipal obligations exempt from New York
State and New York City personal income taxes, as well as federal income tax.
The investment return on a non-diversified portfolio typically is dependent upon
the performance of a smaller number of securities relative to the number of
securities held in a diversified portfolio. The New York Tax-Exempt Fund's
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assumption of large positions in the obligations of a small number of issuers
will affect the value of the New York Tax-Exempt Fund's portfolio to a greater
extent than that of a diversified portfolio in the event of changes in the
financial condition or in the market's assessment of the issuers.
Because the New York Tax-Exempt Fund will invest primarily in obligations
issued by the State of New York and its cities, municipalities and other public
authorities, it is more susceptible to factors adversely affecting issuers of
such obligations than a comparable municipal bond fund that is not so
concentrated. New York State and New York City have recently encountered
financial difficulties. If either New York State or any of its local
governmental entities is unable to meet its financial obligations, the income
derived by the New York Tax-Exempt Fund and its ability to preserve capital and
liquidity could be adversely affected. See "Special Factors Affecting the New
York Tax-Exempt Fund" in the Statement of Additional Information for further
information.
In addition, from time to time, the New York Tax-Exempt Fund may invest 25%
or more of its assets in municipal obligations that are related in other ways
such that an economic, business or political development or change affecting one
such obligation could also affect the other obligations; for example, municipal
obligations the interest on which is paid from revenues of similar types of
projects. In addition, from time to time the New York Tax-Exempt Fund may invest
25% or more of its assets in industrial development bonds, which, although
issued by industrial development authorities, may be backed only by those assets
and revenues of non-governmental users.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from federal income tax (and, with respect to New
York municipal obligations, to the exemption of interest thereon from New York
State and, if applicable, New York City personal income taxes) are rendered by
bond counsel to the respective issuers at the time of issuance. None of the New
York Tax-Exempt Fund, its manager or its investment adviser will review the
proceedings relating to the issuance of municipal obligations or the basis for
such opinions.
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ADDITIONAL INVESTMENT ACTIVITIES OF THE FUNDS
Floating and Variable Rate Instruments
Certain of the obligations that the Funds may purchase have a floating or
variable rate of interest. Such obligations may include obligations issued or
guaranteed by agencies or instrumentalities of the United States Government,
certificates of deposit and municipal obligations. Floating or variable rate
obligations bear interest at rates that are not fixed, but vary with changes in
specified market rates or indices, such as the prime rate, and at specified
intervals.
Certain of the floating or variable rate obligations that may be purchased
by the Funds may carry a demand feature that would permit the holder to tender
them back to the issuer of the underlying instrument, or to a third party, at
par value prior to maturity. Such obligations include variable rate demand or
master notes, which provide for periodic adjustments in the interest rate.
Master demand notes, which are instruments issued pursuant to an agreement
between the issuer and the holder, may permit the indebtedness thereunder to
vary. The holder of an obligation with a third party demand feature may be
required to pay the third party a "tender fee," the amount of which would be
periodically adjusted so that the obligation/demand feature combination would
reasonably be expected to have a market value that approximates the par value of
the obligation. The obligation/demand feature combination would therefore be
functionally equivalent to ordinary variable or floating rate obligations as
described above, and the Funds may purchase such obligations subject to certain
conditions specified by the Securities and Exchange Commission (the
"Commission.")
The Tax-Exempt Fund and the New York Tax-Exempt Fund may also invest in
participation interests in variable rate municipal obligations held by a bank in
trust or otherwise, which have demand features that permit the Fund to tender
its bonds to a third party at periodic intervals and receive par value. The
Funds consider variable rate instruments structured as participations to be
essentially equivalent to other variable rate demand obligations it purchases.
The Internal Revenue Service has not ruled on whether the interest on such
participations is tax-exempt, and, accordingly, the Funds would purchase such
instruments based on opinions of bond counsel.
Each of the Money Market Fund, the Tax-Exempt Fund and the New York
Tax-Exempt Fund may invest without limitation in obligations that have a demand
feature permitting that Fund to tender the obligation to a foreign bank. A
Fund's ability to receive payment in such circumstances under the demand feature
from such foreign banks may involve certain of the risks described under
"Investment Objectives and Policies - the Money Market Fund - Risk Factors"
above, such as future political and economic developments, the possible
establishment of laws or restrictions that might adversely affect the payment of
the bank's obligations under the demand feature and the difficulty of obtaining
or enforcing a judgment against the bank.
Each of the Funds may invest in floating and variable rate obligations with
stated maturities in excess of thirteen months, upon compliance with certain
conditions contained in Rule 2a-7 promulgated under the 1940 Act, in which case
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such obligations will be treated, in accordance with Rule 2a-7, as having
maturities not exceeding thirteen months. For example, Rule 2a-7 would permit a
Fund to purchase a variable rate demand instrument with a stated maturity in
excess of thirteen months, provided that the next interest readjustment date and
the next date on which the Fund could demand payment fell within thirteen
months. Each Fund will limit its purchases of floating and variable rate
obligations to those of the same quality as it otherwise is allowed to purchase.
STRIPS and Zero Coupon Obligations
Each of the Funds may invest in separately traded principal and interest
components of securities backed by the full faith and credit of the United
States Treasury. The principal and interest components of United States Treasury
bonds with remaining maturities of longer than ten years are eligible to be
traded independently under the Separate Trading of Registered Interest and
Principal of Securities ("STRIPS") program. Under the STRIPS program, the
principal and interest components are separately issued by the United States
Treasury at the request of depository financial institutions, which then trade
the component parts separately. The interest component of STRIPS may be more
volatile than that of United States Treasury bills with comparable maturities.
In accordance with Rule 2a-7, the Funds' investments in STRIPS are limited to
those with maturity components not exceeding thirteen months. The Funds will not
actively trade in STRIPS. Each of the Tax-Exempt Fund and the New York Tax-
Exempt Fund will limit such investments together with any Other Taxable
Instruments, and each of the other Funds will limit such investments to 20% of
its total assets.
In addition to investing in STRIPS, the Tax-Exempt Fund and the New York
Tax-Exempt Fund may invest in zero coupon municipal obligations. Such
obligations are debt securities that do not pay regular interest payments.
Instead, zero coupon municipal obligations are sold at a substantial discount
from their value at maturity and, when held to maturity, their entire return,
which consists of the amortization of discount, comes from the difference
between their purchase price and maturity value. Because interest on a zero
coupon obligation is not distributed on a current basis, the obligation tends to
be subject to greater price fluctuations in response to changes in interest
rates than are ordinary interest- paying securities with similar maturities. The
value of zero coupon obligations appreciates more during periods of declining
interest rates and depreciates more during periods of rising interest rates. In
accordance with Rule 2a-7, investments by the Tax-Exempt Fund and the New York
Tax-Exempt Fund in zero coupon municipal obligations are limited to those with
maturities not exceeding thirteen months. Investments by the Tax-Exempt Fund and
the New York Tax-Exempt Fund in zero coupon municipal obligations will be
limited, together with any investments in STRIPS, to 20% of the respective total
assets of those Funds. Under the stripped bond rules of the Internal Revenue
Code of 1986, as amended (the "Code") investments by the relevant Funds in
STRIPS and zero coupon obligations will result in the accrual of interest income
on such investments in advance of the receipt of the cash corresponding to such
income.
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Reverse Repurchase Agreements and Loans of Portfolio Securities
Each Fund may also enter into reverse repurchase agreements to avoid
selling securities during unfavorable market conditions to meet redemptions.
Pursuant to a reverse repurchase agreement, a Fund will sell portfolio
securities and agree to repurchase them from the buyer at a particular date and
price. Whenever a Fund enters into a reverse repurchase agreement, it will
establish a segregated account in which it will maintain liquid assets in an
amount at least equal to the repurchase price marked to market daily (including
accrued interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. The Funds pay interest on amounts obtained
pursuant to reverse repurchase agreements. Reverse repurchase agreements are
considered to be borrowings by the Funds under the 1940 Act and are subject to
the limitations with respect to entering into reverse repurchase agreements
included in the third investment limitation under "Limiting Investment Risks"
below.
In addition to entering into reverse repurchase agreements, each Fund may
lend portfolio securities in order to generate additional income. Such loans may
involve risks that the borrower may fail to return the securities or may fail to
provide additional collateral. No Fund currently intends to make loans of
portfolio securities with a value in excess of 5% of the value of its total
assets.
Illiquid or Restricted Securities
Each Fund, other than the Treasury Fund and the Government Fund, may
purchase securities for which there is a limited trading market or which are
subject to restrictions on resale to the public. Investments in securities which
are "restricted" may involve added expenses to the Funds should the Funds be
required to bear registration costs with respect to such securities and could
involve delays in disposing of such securities which might have an adverse
effect upon the price and timing of sales of such securities and the liquidity
of the Funds with respect to redemptions. As set forth under "Limiting
Investment Risks," no Fund will invest more than 10% of the value of its total
assets in illiquid investments, such as "restricted securities" which are
illiquid, and securities that are not readily marketable. As more fully
described in the Statement of Additional Information, the Funds, except the
Treasury Fund and the Government Fund, may purchase certain restricted
securities ("Rule 144A securities") for which there may be a secondary market of
qualified institutional buyers as contemplated by Rule 144A under the Securities
Act of 1933. The Funds' holdings of Rule 144A securities that are liquid
securities will not be subject to the 10% limitation described above. Rule 144A
is a recent development and there is no assurance that a liquid market in Rule
144A securities will develop or be maintained. To the extent that the number of
qualified institutional buyers is reduced, a previously liquid Rule 144A
security may be determined to be illiquid, thus increasing the percentage of
illiquid assets in a Fund's portfolio. The Board of Directors of the Company
will be responsible for monitoring the liquidity of Rule 144A securities and the
selection by the investment adviser of such securities pursuant to procedures
adopted by the Board of Directors. For a more complete discussion of Rule 144A
securities, see "Additional Investment Activities - Rule 144A Securities" in the
Statement of Additional Information.
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None of the Funds may invest an amount equal to 10% or more of the current
value of its total assets in investments that are illiquid, including repurchase
agreements having notice periods of more than seven days and fixed time deposits
subject to withdrawal penalties having notice periods of more than seven days.
For purposes of this limitation, the Funds consider instruments that they cannot
terminate and realize the proceeds thereon within seven days to be instruments
having notice periods of more than seven days.
Firm Commitments and When-Issued Securities
Each Fund may purchase securities on a firm commitment basis, including
when-issued securities. Securities purchased on a firm commitment basis are
purchased for delivery beyond the normal settlement date at a stated price and
yield. Such securities are recorded as an asset and are subject to changes in
value based upon changes in the general level of interest rates. The Funds will
make commitments to purchase securities on a firm commitment basis only with the
intention of actually acquiring the securities, but may sell them before the
settlement date if it is deemed advisable.
No income accrues to the purchaser of a security on a firm commitment basis
prior to delivery. Purchasing a security on a firm commitment basis can involve
a risk that the market price at the time of delivery may be lower than the
agreed upon purchase price, in which case there could be an unrealized loss at
the time of delivery.
Each Fund will establish a segregated account in which it will maintain
liquid assets in an amount at least equal in value to the Fund's commitments to
purchase securities on a firm commitment basis. If the value of these assets
declines, the Fund will place additional liquid assets in the account on a daily
basis so that the value of the assets in the account is equal to the amount of
such commitments.
Stand-by Commitments
Each Fund, except the Treasury Fund, may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities held in their portfolios. In a put transaction, a Fund
acquires the right to sell a security at an agreed-upon price within a specified
period prior to its maturity date, and a stand-by commitment entitles a Fund to
same-day settlement and to receive an exercise price equal to the amortized cost
of the underlying security plus accrued interest, if any, at the time of
exercise. In the event that the party obligated to purchase the underlying
security from a Fund defaults on its obligation to purchase the underlying
security, then that Fund might be unable to recover all or a portion of any loss
sustained from having to sell the security elsewhere. Acquisition of puts will
have the effect of increasing the cost of securities subject to the put and
thereby reducing the yields otherwise available from such securities.
Participation Certificates
The instruments that may be purchased by the Government Fund and the Money
Market Fund include participation certificates issued by a bank, insurance
company or other financial institution in obligations owned by such institutions
or affiliated organizations that may otherwise be purchased by the Funds, and
loan participation certificates. A participation certificate gives a Fund an
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undivided interest in the underlying obligations in the proportion that such
Fund's interest bears to the total principal amount of such obligations. Certain
of such participation certificates may carry a demand feature that would permit
the holder to tender them back to the issuer or to a third party prior to
maturity. See "Floating and Variable Rate Instruments" above for additional
information with respect to demand instruments that may be purchased by the
Funds. The Funds may invest in participation certificates even if the underlying
obligations carry stated maturities in excess of thirteen months, upon
compliance with certain conditions contained in Rule 2a-7. Loan participation
certificates are considered by the Funds to be "illiquid" for purposes of the
fourth investment limitation under "Limiting Investment Risks" below.
Other Money Market Funds
Each of the Government Fund, the Money Market Fund, the Tax-Exempt Fund and
the New York Tax-Exempt Fund may invest up to 10% of the value of its total
assets in shares of other money market funds subject, in the case of the
Tax-Exempt Fund and the New York Tax- Exempt Fund, to the limitations on
investing in taxable money market instruments. A Fund will only invest in other
money market funds that are subject to the requirements of Rule 2a-7 under the
1940 Act and that are considered to present minimal credit risks, and its
investment adviser will monitor the policies and investments of other money
market funds in which it invests, based on information furnished to shareholders
of those funds, with respect to their compliance with their investment
objectives and Rule 2a-7.
Repurchase Agreements
Securities held by the Money Market Fund may be subject to repurchase
agreements. Pursuant to a repurchase agreement, the Fund will purchase portfolio
securities from a seller that commits itself, at the time of sale, to repurchase
the securities at a mutually agreed upon time and price. Repurchase agreements
may be characterized as loans that are collateralized by the underlying
securities. The term of a repurchase agreement will always be less than thirteen
months. The Fund will enter into repurchase agreements with commercial banks
only if such banks meet the standards set forth under "Money Market Fund - Bank
Obligations", and will enter into repurchase agreements with brokers and dealers
only if such parties are deemed creditworthy in accordance with standards
adopted by the Company's Board of Directors. At the time the Fund enters into a
repurchase agreement, the value of the underlying security, including accrued
interest, will equal or exceed the value of the repurchase agreement, and, in
the case of repurchase agreements exceeding one day, the seller will agree that
the value of the underlying security, including accrued interest, will on each
day equal or exceed the value of the repurchase agreement. In addition, the
manager or investment adviser for the Fund will monitor, on an ongoing basis,
the creditworthiness of the seller and the value of the underlying security,
including accrued interest, to ensure that such value equals or exceeds the
value of the repurchase agreement. In the event of default by the seller under
the repurchase agreement, the Fund could experience losses that include: (i)
possible decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto; (ii) additional expenses to the
Fund for enforcing those rights; (iii) possible loss of all or part of the
income or proceeds of the repurchase agreement; and (iv) possible delay in the
disposition of the underlying security pending court action or possible loss of
rights in such securities. Repurchase agreements are considered to be loans
under the 1940 Act, collateralized by the underlying securities. There is no
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limitation on the amount of the Fund's assets that may be subject to repurchase
agreements.
--------------------
For more detailed descriptions of certain of the Funds' investment
activities, see "Investment Policies - Additional Investment Activities" in the
Statement of Additional Information.
Except with respect to investment by the Tax-Exempt Fund and the New York
Tax-Exempt Fund of at least 80% of their respective assets in tax-exempt
obligations, as described above, the foregoing investment policies and
activities are not fundamental and may be changed by the Board of Directors of
the Company without the approval of shareholders. Additional fundamental
investment policies of the Funds are identified under "Limiting Investment
Risks" below and in the Statement of Additional Information.
LIMITING INVESTMENT RISKS
To protect investors further, the Funds have adopted the following
investment limitations, certain of which are subject to additional operating
limitations as described below:
(i) The Money Market Fund may not invest more than 5% of the current
value of its total assets in the securities of any one issuer, other than
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities; provided, however, that up to 25% of the
value of the total assets of the Money Market Fund may be invested without
regard to this limitation, so long as no more than 25% of its total assets
are invested in the securities of any one issuer; *
(ii) neither the Tax-Exempt Fund nor the New York Tax-Exempt Fund may
invest more than 5% of the current value of its total assets in the
securities of any one issuer, other than obligations issued or guaranteed
by the United States Government, its agencies or instrumentalities;
however, up to 25% of the value of the total assets of the Tax-Exempt Fund
may be invested without regard to this limitation, and up to 50% of the
value of the total assets of the New York Tax-Exempt Fund may be invested
without regard to this limitation, so long as no more than 25% of its total
assets are invested in the securities of any one issuer; and
- --------------------
* As a matter of non-fundamental policy, the Money Market Fund intends to
limit further investments in the securities of any single issuer (other
than securities issued or guaranteed by the United States Government, its
agencies or instrumentalities) to not more than 5% of its total assets at
the time of purchase, provided that the Money Market Fund may invest up to
25% of its total assets in the securities of a single issuer for a period
of up to three business days.
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(iii) none of the Funds may issue senior securities, borrow money or
pledge or mortgage their assets, except that each Fund may borrow from
banks up to one-third of the current value of its total assets for
temporary purposes and these borrowings may be secured by the pledge of not
more than one-third of the current value of the Fund's total assets, and
each Fund may enter into reverse repurchase agreements in accordance with
its investment policies and in amounts not in excess of one-third of the
value of its assets, less bank borrowings outstanding for temporary
purposes, at the time of entry into such agreements; provided that
additional portfolio securities may not be purchased by such Fund while
borrowings and reverse repurchase agreements which together exceed 5% of
the Fund's total assets exist.
The foregoing percentage limitations are applied at the time investment
securities are purchased for the Funds.
With respect to investment limitations (i) and (ii), the Money Market Fund,
the Tax-Exempt Fund and the New York Tax-Exempt Fund will consider
unconditional demand features as not being issued by the entity providing the
demand feature, provided that the value of all securities held by each such Fund
issued by or subject to demand features from each such entity and owned by such
Fund does not exceed 10% of such Fund's total assets. With respect to investment
limitation (i), the Money Market Fund will treat repurchase agreements as an
acquisition of the underlying securities, provided that the obligation to
repurchase the underlying securities is fully collateralized.
The foregoing investment limitations and those described in the Statement
of Additional Information are fundamental policies of each of the Funds that may
be changed only when permitted by law and approved by the holders of a majority
of such Fund's outstanding shares, as described under "Capital Stock" in the
Statement of Additional Information.
MANAGEMENT
The business and affairs of the Funds are managed under the general
direction and supervision of the Company's Board of Directors. The Funds'
day-to-day operations are handled by the Company's officers.
Manager
Subject to the supervision of the Company's Board of Directors, Deutsche
Bank Securities Corporation ("DBSC") serves as the manager to the Treasury Fund,
the Government Fund, the Money Market Fund, the Tax-Exempt Fund and the New York
Tax-Exempt Fund (the "Funds"), in each case pursuant to a Management Agreement
with the Company (each, a "Management Agreement" and together, the "Management
Agreements"). Subject to the supervision of the Company's Board of Directors,
DBSC renders or contracts to obtain investment advisory services, including
investment research, advice and supervision, determining which securities shall
be purchased or sold by the Funds, making purchases and sales of securities on
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behalf of the Funds and determining how voting and other rights with respect to
securities of the Funds shall be exercised, and also provides such office space,
bookkeeping, accounting, internal legal, and other services (exclusive of those
provided by the distributor, custodian, transfer agent and other service
providers retained by the Company with respect to the Funds) and such personnel
as shall be necessary for the day-to-day operations of the Funds. Each
Management Agreement provides that, as compensation for services under the
Management Agreement, DBSC is entitled to receive from each of the Funds a
monthly fee at an annual rate of ___% of its average daily net assets, subject
to reduction of a Fund's excess expenses if such fee together with the Fund's
other expenses for its fiscal year exceed the most restrictive applicable state
expense limitation.
DBSC is the successor to a business which began in 1940 and in which
Deutsche Bank AG acquired a controlling interest in 1978. In 1993 its
predecessor, Deutsche Bank Securities Corporation merged with Deutsche Bank
Government Securities, Inc. and C.J. Lawrence, Inc., an investment banking,
research and brokerage firm established in 1864, to form DBSC.
DBSC acts as manager to several closed-end funds listed on the New York
Stock Exchange with aggregate assets of approximately $1 billion. Through its
Dublin affiliate it acts as manager to nine other investment funds and
investment companies with aggregate assets of approximately $800 million.
Investment Adviser
Deutsche Asset Management North America, Inc. ("DBAMNA") provides
investment advisory services to the Funds, in each case pursuant to an
Investment Advisory Agreement with DBSC (each, an "Investment Advisory
Agreement" and together, the "Investment Advisory Agreements"). Pursuant to the
Investment Advisory Agreements and subject to the supervision of the Board of
Directors of the Company and DBSC, DBAMNA provides each Fund with investment
advisory services, including investment research, advice and supervision,
determining which securities shall be purchased or sold by the Fund and making
purchases and sales of securities on behalf of the Fund. Each Investment
Advisory Agreement provides that, as compensation for services under the
Investment Advisory Agreement, DBAMNA is entitled to receive from DBSC a monthly
fee at an annual rate of ___% of each Fund's average daily net assets, subject
to reduction of 50% of a Fund's excess expenses if the Fund's total expenses for
its fiscal year exceed the most restrictive applicable state expense limitation.
Fees for DBAMNA's services will be paid by the Manager. DBAMNA provides a wide
range of asset management services to individuals, institutions and retirement
benefit plans. Its investment management responsibilities, as of the date of
this Prospectus, include accounts with aggregate assets in excess of $3.7
billion. Deutsche Bank AG is the largest commercial and investment bank in
Germany and among the ten largest in the world. The Deutsche Bank Group has over
$175 billion in assets under management.
* * *
Each of DBSC and DBAMNA is a direct, wholly-owned subsidiary of DB U.S.
Financial Markets Holding Corporation which in turn is an indirect, wholly-owned
subsidiary of Deutsche Bank AG.
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Custodian and Transfer Agent
Investors Bank & Trust Company ("IBT") serves as custodian of the assets of
the Funds. IBT has also entered into an agreement with the Company for the
provision of transfer agency and dividend disbursing services for the Funds. The
business address of IBT is P.O. BOX 1537 - OPS22, Boston, MA 02205-1537. If
needed for overnight mail, the street address of IBT is 89 South Street OPS22,
Boston, MA 02111.
* * *
A discussion of the terms of the Company's management, investment advisory,
custody and transfer agency arrangements is contained in the Statement of
Additional Information.
Distributor
Shares in each Fund are sold on a continuous basis without a sales load by
the Funds' independent distributor, AMT Capital Services, Inc. (the
"Distributor"), whose principal offices are located at 430 Park Avenue, New
York, NY 10022, Telephone: (212) 308-4848; Fax: (212) 308-5190. Residents
outside of New York may call (800) 762-4848. Expenses of the Distributor will
not be borne by any Fund.
Service Organizations
The Company has adopted a Plan pursuant to Rule 12b-1 (the "Plan") with
respect to the Investors Classes of the Funds. In accordance with the Plan, the
Company may enter into service agreements with broker-dealers, banks and other
financial institutions (each a "Service Organization") for the provision of
certain shareholder servicing, marketing or distribution services. Pursuant to
the service agreements, each such Investors Class may make payments to Service
Organizations that will not exceed, on an annualized basis, .25% of such Class'
average daily net assets for these services.
The Plan requires that, at least quarterly, the Board of Directors must
review a written report prepared by the Treasurer of the Company setting forth
all the amounts expended pursuant to the Plan and the purposes therefor. Rule
12b-1 also requires that the selection and nomination of Directors who are not
"interested persons" of the Company be made by such Independent Directors.
Pursuant to the Plan, the Company and Deutsche Bank Trust Corporation ("DBTC"),
an affiliate of DBSC and DBAMNA, have entered into the Company's only services
agreement, namely a Marketing Services Agreement (the "Services Agreement").
Pursuant to the Services Agreement, DBTC (i) markets shares of the Investors
Class to prospective investors, including distribution of prospectuses and
statements of additional information and sales material approved by the Fund(s);
(ii) displays and makes prospectuses available on premises; and (iii) assists
customers in completing application forms, selecting and changing dividend and
other account options and opening custody accounts with DBTC. For such services
DBTC receives a fee, calculated daily and payable monthly, at the annual rate of
.25% of each Investors Class' average daily net assets that are attributable to
DBTC.
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REGULATORY MATTERS
Banking laws and regulations, including the Glass-Steagall Act as currently
interpreted by the Board of Governors of the Federal Reserve System, prohibit a
bank holding company registered under the Bank Holding Company Act of 1956, as
amended (the "Bank Holding Company Act"), or any affiliate thereof from
sponsoring, organizing, controlling, or distributing the shares of a registered,
open-end investment company continuously engaged in the issuance of its shares,
and such laws also prohibit banks generally from issuing, underwriting, selling
or distributing securities, but do not prohibit such a bank holding company or
affiliate from acting as manager or investment adviser, transfer agent, or
custodian to such an investment company or from purchasing shares of such a
company as agent for and upon the order of a customer. While Deutsche Bank AG is
not a registered bank holding company, by virtue of its U.S. branches in New
York, Chicago and Los Angeles, Deutsche Bank AG is subject to the provisions of
the Bank Holding Company Act in accordance with the International Banking Act of
1978, as amended. DBSC and the Company believe that DBSC, DBAMNA, or any other
affiliate of Deutsche Bank North America Holding Corp. ("DBNA Holding"), may
perform the management or investment advisory services for the Funds, as the
case may be, described in this Prospectus. However, future changes in legal
requirements relating to the permissible activities of banks and their
affiliates, as well as future interpretations of present requirements, could
prevent DBSC, DBAMNA or any other affiliate of DBNA Holding from continuing to
perform management or investment advisory services for the Company, as the case
may be, or require DBSC, DBAMNA or any other affiliate of DBNA Holding to alter
or discontinue the services provided by it to shareholders of the Funds.
If DBSC, DBAMNA or any other affiliate of DBNA were prohibited from
performing management or investment advisory services for the Funds, as the case
may be, it is expected that the Company's Board of Directors would recommend to
the Funds' shareholders that they approve new agreements with another entity or
entities qualified to perform such services and selected by the Board of
Directors. If DBSC, DBAMNA or any other affiliate of DBNA were required to
discontinue all or part of its shareholder servicing activities, its customers
would be permitted to remain the beneficial owners of Fund shares and
alternative means for continuing the servicing of such customers would be
sought. The Funds do not anticipate that investors would suffer any adverse
financial consequences as a result of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state laws.
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OTHER INFORMATION CONCERNING EXPENSES
Except as noted below, DBSC bears all expenses in connection with the
performance of its management services. Each Fund bears the expenses incurred in
its operations, including: organizational expenses; taxes; interest; fees
(including fees paid to its directors); fees payable to the Commission; state
securities fees; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; management fees; charges
of its custodian, transfer agent, and fees of service organizations; certain
insurance costs; auditing and legal expenses; fees of independent pricing
services; costs of shareholders' reports and shareholder meetings; and any
extraordinary expenses. Each Fund also pays for brokerage fees and commissions,
if any, in connection with the purchase of portfolio securities.
PRICING OF SHARES
The price of the shares of each Fund is based on the net asset value of
such Fund. The net asset value of each Fund is determined and the shares of each
Fund are priced as of 4:00 p.m., Eastern time, on each Business Day. "Business
Day" means each weekday except those holidays on which the Federal Reserve Bank
of New York, the New York Stock Exchange (the "Exchange"), the manager,
investment adviser, or the Funds' Custodian and Transfer Agent are closed.
(Currently, those holidays are: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day). Net asset value
per share for purposes of pricing sales and redemptions is calculated by
dividing the value of all securities and other assets belonging to a Fund, less
the liabilities charged to that Fund, by the number of outstanding shares of
that Fund.
Each Fund uses the amortized cost method to value its portfolio securities
and seeks to maintain a constant net asset value of $1.00 per share. The
Company's Board of Directors will review the holdings of each Fund, at such
intervals as it may deem appropriate, to determine whether that Fund's net asset
value calculated by using available market quotations deviates from $1.00 per
share based on amortized cost. In the event the Company's Board of Directors
determines that a deviation exists that may result in material dilution or other
unfair results to investors or existing shareholders, the Board will take such
corrective action as it regards as necessary and appropriate. See "Net Asset
Value" in the Statement of Additional Information.
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HOW TO PURCHASE AND REDEEM SHARES
Purchase of Shares
The minimum initial investment in each Fund is $100,000. The Funds reserve
the right to waive the minimum initial investment amount.
For Clients of C.J. Lawrence/Deutsche Bank Securities Corporation
Purchase orders and subsequent investments by clients of C.J.
Lawrence/Deutsche Bank Securities Corporation ("DBSC clients") must be placed
through the clients' DBSC representative in accordance with the requirements of
maintaining a brokerage account. Upon receipt of purchase orders of all DBSC
clients, DBSC will effect an aggregate wire transfer purchase for the
appropriate Funds with the Funds' Transfer Agent, subject to the purchase
requirements described below. These shares will be held in DBSC's name, but the
DBSC client will have the right to vote its respective shares.
For Other Investors
Investors who are not clients of DBSC ("direct investors") must place all
initial purchase orders through the Funds' Distributor, AMT Capital Services,
Inc., subject to purchase requirements described below. Initial purchase orders
from direct investors are effective when AMT Capital receives a completed
account application (and other required documents) and Federal funds become
available to the Fund in the Fund's account with the Transfer Agent. AMT Capital
Services is located at 430 Park Avenue, New York, NY 10022. Telephone: (212)
308-4848, (800) 762-4848. Fax: (212) 308-5190. Subsequent investments may be
made directly with the Fund by contacting the Transfer Agent at (800) 898-DBNA.
Purchase Requirements
The offering of shares of the Funds is continuous and purchases of shares
of the Funds may be made on any Business Day. The Funds offer shares at a public
offering price equal to the net asset value next determined after receipt of a
purchase order. All purchases of shares must be made by wire transfer of Federal
funds. Share purchase orders are effective on a particular date if the Funds'
Transfer Agent is notified of the incoming wire transfer, specifying which Fund
is to be purchased, prior to 12:00 noon and Federal funds are received by the
custodian prior to 4:00 P.M. on that day. Purchase orders for a Fund's shares
for which such funds have not been received by the Fund's custodian by 4:00
P.M., Eastern time, will be held for investment in the applicable Fund until
such funds are received on the next aplicable Business Day. Shares of the Funds
begin earning dividends on the day the purchase order is executed. The Company
reserves the right to reject any purchase order and to suspend the offering of
shares of any Fund for a period of time.
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Redemption of Shares
For Clients of C.J. Lawrence/Deutsche Bank Securities Corporation
DB clients may redeem all or part of their shares in a Fund on any Business
Day by contacting their representative of DB. Upon receipt of redemption orders
of all DB clients, DB will effect an aggregate wire transfer redemption for the
appropriate Funds with the Funds' Transfer Agent, subject to the redemption
requirements described below.
For Other Investors
Investors who are not clients of DB ("direct investors") may redeem all or
part of their shares in a Fund on any Business Day by contacting the Funds'
Transfer Agent at (800) 898-DBNA and clearly indicating which shares are to be
redeemed.
In connection with a written redemption request, direct investors may be
required to have the signatures of all registered owners or authorized parties
guaranteed by an Eligible Guarantor Institution, which includes a domestic bank,
broker, dealer, credit union, national securities exchange, registered
securities association, clearing agency or savings association. The Funds'
transfer agent, however, may reject redemption instructions if the guarantor is
neither a member of nor a participant in a medallion guarantee program
(currently known as "STAMP" (R), "SEMP" or NYSE MSP). Corporations,
partnerships, trusts or other legal entities may be required to submit
additional documentation.
Redemption Requirements
Redemption orders are effected at the net asset value per share next
determined after the order is received by the Funds' transfer agent. If such
redemption request is received by 12:00 noon Eastern time on any Business Day,
the redemption will be effective and payment will be made generally on the same
Business Day. If a redemption request is received between 12:00 noon Eastern
time and the close of business, or if it is received on a non- Business Day, the
redemption will be effective and payment will be made generally on the next
Business Day.
The Funds may suspend the right of redemption or postpone the day of
payment for shares for more than seven days during any period when (i) trading
on the Exchange is restricted by applicable rules and regulations of the
Securities and Exchange Commission; (ii) the Exchange is closed for other than
customary weekend and holiday closings; (iii) the Securities and Exchange
Commission has by order permitted such suspension; or (iv) an emergency exists
as determined by the Commission.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of each Fund is declared daily as a dividend to
the respective shareholders of each Fund as of 4:00 p.m., Eastern time, on the
day of declaration. Net investment income for dividend purposes consists of (i)
interest accrued and accreted discount earned on the Fund's assets (including
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both original issue and market discount), less (ii) amortization of market
premium on such assets and the accrued expenses of the Fund. Fund shares begin
earning dividends on the day the purchase order is executed and continue earning
dividends through and including the day before the redemption order for the
shares is executed. Net realized short-term capital gains, if any, will be
distributed at least annually.
Dividends are generally paid to shareholders of record on the first
Business Day of each month, but in any event within the first five Business Days
of each month. Dividends are paid in the form of additional shares of the same
Fund, unless the shareholder of record has elected prior to the date of
distribution to receive payment in cash. Such election, or any revocation
thereof, must be made in writing to the Fund's transfer agent and will become
effective with respect to dividends paid after its receipt. Dividends that are
otherwise taxable are taxable to investors whether received in cash or in
additional shares of a Fund.
The Funds do not expect to realize net long-term capital gains.
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YIELD
From time to time, the Funds may make available information as to their
"yield" and "effective yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. The "yield" of
each Fund refers to the income generated by an investment in that Fund over a
seven-day period. This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment.
The Treasury Fund may quote a "pass-through yield" to demonstrate the
taxable yield necessary to produce an after-tax yield equivalent to a particular
state's tax-exempt yield achieved by that Fund. The "pass-through yield" refers
to that portion of income derived from interest income on direct obligations of
the United States Government that qualified for exemption from state taxes.
The Tax-Exempt Fund and the New York Tax-Exempt Fund may make available
information as to their "tax-equivalent yields." The "tax-equivalent yield"
refers to the yield on a taxable investment necessary to produce an after-tax
yield equal to a Fund's tax-free yield, and is calculated by increasing the
annualized yield shown for the Fund to the extent necessary to reflect the
payment of specified tax rates. Thus the tax-equivalent yield for a Fund will
always exceed such Fund's yield.
The yield of the Funds may be quoted and compared to those of other mutual
funds with similar investment objectives and to other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
yield of the Funds may be compared to yields set forth in the weekly statistical
release designated H.15(519) or the monthly statistical release designated
G.13(415) published by the Board of Governors of the Federal Reserve System and
the yield of the Funds' may be compared to yields published by Lipper Analytical
Services, Inc. or set forth in such publications as Donoghue's Money Fund
Report, Bank Rate Monitor and the Wall Street Journal. Performance and yield
data as reported in various national and local financial publications may also
be used in comparing the performance and yields of the Funds.
TAXES
The following discussion is a brief summary of some of the important tax
considerations affecting the Company, the Funds and its shareholders. No attempt
is made to present a detailed explanation of all federal, state, local and
foreign income tax considerations, and this discussion is not intended as a
substitute for careful tax planning. ACCORDINGLY, POTENTIAL INVESTORS ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS WITH SPECIFIC REFERENCE TO THEIR OWN TAX
SITUATION.
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Taxation of the Funds
Each Fund will be treated as a separate entity for federal income tax
purposes, and thus the provisions of the Code, applicable to regulated
investment companies generally will be applied to each Fund separately, rather
than to the Company as a whole. Each Fund will elect and intends to qualify as a
regulated investment company under the Code. If so qualified, each Fund will not
be subject to federal income taxes with respect to investment income and capital
gains, if any, realized during any year, that are distributed to its
shareholders, provided that the Fund distributes (i) at least 90% of its net
investment income and net short-term capital gains, and (ii) at least 90% of the
excess of its tax-exempt interest income net of certain deductions allocable to
such income during such taxable year. Net investment income, for dividend
purposes, includes accrued interest, accretion of discounts and amortization of
premiums, plus or minus any gains or losses realized on sales of portfolio
securities, less the estimated expenses of a Fund. The Funds do not expect to
realize long-term capital gains or losses. Distributions of any net realized
short-term caital gains will be taxable to shareholders as ordinary income. Each
Fund will be subject to a 4% non-deductible excise tax on its taxable income to
the extent it does not meet certain distribution requirements by the end of each
calendar year. Each Fund intends to make sufficient distributions to avoid
application of this excise tax.
The Funds may be subject to tax in certain states in which they do
business. Further, in those states that have income tax laws, the tax treatment
of the Funds and of shareholders with respect to distributions by the Funds may
differ from federal tax treatment.
Taxation of Shareholders
Dividends paid by each Fund from net investment income and net short-term
capital gains, will be taxable to shareholders that are otherwise subject to tax
as ordinary income regardless of whether the shareholder receives such dividends
in additional shares or in cash. Dividends declared in October, November or
December of any calendar year, payable to shareholders of record on a specified
date in such a month, will be deemed to have been received by the shareholders
and paid by the Fund on December 31, provided such dividends are paid during
January of the following year. Although each Fund does not expect to realize net
long-term capital gains, such gains, if realized, will be distributed at least
annually and will be taxable as long-term capital gains, whether received in
cash or reinvested in additional shares, regardless of how long the shareholder
has held shares of the Fund.
Because substantially all of the income of each Fund will arise from
interest, no part of the distributions to shareholders is expected to qualify
for the dividends-received deduction allowed to corporations under the Code.
State and Local Taxes - The Treasury Fund
The Treasury Fund will invest in United States Government securities and
STRIPS. While many states provide that a regulated investment company may pass
through (without restriction) to its shareholders state and local income tax
exemptions otherwise available to direct owners of certain United States
Government securities (such as United States Treasury obligations), under the
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laws of certain states distributions by the Treasury Fund may be taxable as
income even though a portion of such distributions may be derived from interest
on United States Government securities which, if realized directly, would be
exempt from state and local income taxes. In addition, certain states will treat
shareholders' dividends from the Treasury Fund attributable to income from
STRIPS in the same manner as interest income from United States Government
securities; accordingly, such income may be exempt from state and local income
taxes. Each shareholder of the Treasury Fund will receive an annual statement
showing the amount of dividends received from obligations the interest on which
is exempt from state and local income taxes. The exemption from state and local
income taxes does not preclude states from asserting other taxes on the
ownership of United States Government securities. POTENTIAL INVESTORS ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS REGARDING STATE AND LOCAL TAX CONSEQUENCES OF
AN INVESTMENT IN THE TREASURY FUND.
The Tax-Exempt Fund and the New York Tax-Exempt Fund
The Tax-Exempt Fund and the New York Tax-Exempt Fund each intend to qualify
to pay "exempt-interest dividends," as that term is defined in the Code, by
holding at the end of each quarter of its taxable year at least 50% of the value
of its total assets in the form of obligations described in section 103(a) of
the Code. Generally, an exempt-interest dividend is that part of dividend
distributions made by the Tax-Exempt Fund or the New York Tax-Exempt Fund which
consists of interest received by such Funds with respect to tax-exempt
securities. Each of these Fund's policy is to pay in each taxable year
exempt-interest dividends equal to at least 90% of such Fund's interest from
tax-exempt obligations net of certain deductions. Except as discussed below,
exempt-interest dividends will be exempt from federal income tax. In addition,
dividends from the New York Tax-Exempt Fund will not be subject to New York
State and New York City personal income taxes to the extent that such
distributions qualify as exempt-interest dividends and represent interest income
attributable to federally tax-exempt obligations of the State of New York and
its political subdivisions (as well as certain other federally tax-exempt
obligations the interest on which is exempt from New York State and New York
City personal income taxes, such as certain obligations of Puerto Rico).
Dividends from The New York Tax-Exempt Fund, however, are not excluded in
determining New York State or New York City franchise taxes on corporations and
financial institutions.
Interest on indebtedness incurred or continued by a shareholder of the
Tax-Exempt Fund or the New York Tax-Exempt Fund, whether a corporation or an
individual, to purchase or carry shares of the Tax-Exempt Fund or the New York
Tax-Exempt Fund is not deductible. Entities or persons who are "substantial
users" (or related persons) of facilities financed by industrial development
bonds should consult their tax advisors before purchasing shares of the
Tax-Exempt Fund or the New York Tax-Exempt Fund.
Although exempt-interest dividends may be excluded from a shareholder's
gross income for federal income tax purposes, a portion of the exempt-interest
dividends may be a specific preference item for purposes of determining the
shareholder's liability (if any) under the federal individual and corporate
alternative minimum tax provisions of the Code. Exempt- interest dividends will
constitute a specific preference item for purposes of the federal alternative
minimum tax to the extent that such dividends are derived from certain types of
private activity bonds issued after August 7, 1986. In addition, all
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exempt-interest dividends will be a component of the "adjusted current earnings"
adjustment item for purposes of the federal corporate alternative minimum tax.
Moreover, the receipt of dividends from the Tax- Exempt Fund or the New York
Tax-Exempt Fund may increase a corporate shareholder's liability for
environmental taxes under Section 59A of the Code and a foreign corporate
shareholder's liability under the branch profits tax.
The exemption of interest income for federal income tax purposes and, in
the case of the New York Tax-Exempt Fund, for New York State and New York City
personal income tax purposes, may not result in similar exemptions under the tax
law of state and local authorities outside New York. In general, a state exempts
from state income tax only interest earned on obligations issued by that state
or its political subdivisions and instrumentalities.
Each year the Funds will notify shareholders of the federal and state
income tax, and in the case of the New York Tax-Exempt Fund, the New York City
personal income tax, consequences of distributions made by the Tax-Exempt Fund
and the New York Tax-Exempt Fund. All or a portion of the Tax-Exempt Fund's and
the New York Tax-Exempt Fund's gain from the sale or redemption of tax-exempt
obligations acquired after April 30, 1993 attributable to market discount will
be treated as ordinary income rather than capital gain. This rule may increase
the amount of ordinary income dividends received by shareholders.
Descriptions of tax consequences set forth in this Prospectus and in the
Statement of Additional Information are intended to be a general guide. In
addition, descriptions of state and local income tax consequences in this
Prospectus and in the Statement of Additional Information have not been
independently verified by the Company, its investment adviser or its counsel and
should not be relied upon as authoritative, although the Company will
investigate the state and, if applicable, the local tax rate in effect in any
given state or locality to the extent necessary to quote a tax equivalent yield
for that state or locality in its advertisements.
INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING SPECIFIC
QUESTIONS AS TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
OWNERSHIP OF SHARES IN ANY OF THE FUNDS.
ORGANIZATION AND CAPITAL STOCK
The Company was incorporated in Maryland on April 24, 1995. The authorized
capital stock of the Company consists of 10,000,000,000 shares of Common Stock
having a par value of $.001 per share. The Company's Articles of Incorporation
currently authorize the issuance of shares of each of the following five Funds
or investment portfolios: the "DBNA Treasury Money Market Fund", the "DBNA
Government Money Market Fund", the "DBNA Money Market Fund", the "DBNA
Tax-Exempt Money Market Fund" and the "DBNA New York Tax-Exempt Money Market
Fund", each consisting of 2,000,000,000 shares. Presently each Fund consists of
two classes designated as "Investors Shares" (which are offered pursuant to this
Prospectus) and "Institutional Shares." With respect to each investment
portfolio, each class participates in the same portfolio of investments and is
identical to the other class of the same investment portfolio, except for
certain different expenses and services. Investors may call the Company at
1-800-898-DBNA to determine whether Investors Shares are available from their
sales representative, and if so, to obtain additional information about such
shares. Investors may also obtain information about Institutional Shares from
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the Distributor or their sales representative. Shares of each class may be
exchanged only for shares of the same class in another Fund. From time to time
in the future, the Company's Board of Directors is authorized to create and
classify or reclassify unissued shares of Common Stock in separate investment
portfolios and classes of such portfolios without further action by
shareholders.
All shares of the Company (regardless of portfolio or class) have
noncumulative voting rights for the election of Directors, and all shares of the
Company, when issued, will be fully paid, non-assessable and fully transferable.
All shares of the Company have equal voting rights and will be voted in the
aggregate, and not by portfolio or class, except where voting by portfolio or
class is required by law or where the matter involved affects only one portfolio
or class. Under Maryland law, the Company's state of incorporation, and the
Company's By-Laws, the Company is not required and does not currently intend to
hold shareholder meetings annually for the election of directors unless required
under the 1940 Act. Shareholders, however, do have the right to call a meeting
to consider the removal of one or more of the Company's directors if such a
request is made, in writing, by the holders of at least 10% of the Company's
outstanding voting securities. In such cases, the Company will assist in calling
the meeting (including effecting any necessary shareholder communications) as
required under the 1940 Act. A more detailed statement of the voting rights of
shareholders is contained in the Statement of Additional Information.
As of the date of this Prospectus, [insert address] is a "control person"
of the Company because it owns all the shares of the Treasury Fund; however, it
is anticipated that shortly after the commencement of the public offering of
shares of the Treasury Fund pursuant to this Prospectus, ____ will own less than
25% of the outstanding shares of the Treasury Fund.
REPORTS TO SHAREHOLDERS
Shareholders of record will receive unaudited semi-annual reports showing
the portfolio for the Funds in which such shareholder is invested and other
information, and an annual report containing financial statements audited by
independent certified public accountants. Deloitte & Touche LLP has been
appointed as the Funds' auditors. The Funds' fiscal year ends on December 31.
Customers can write or call a representative of DBSC with any questions
relating to their investment in the Funds.
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DBNA INVESTMENTS, INC.
31 West 52nd Street
New York, NY 10019
STATEMENT OF ADDITIONAL INFORMATION
DBNA Investments, Inc. (the "Company") is a registered, open-end management
investment company offering shares in five separate money market portfolios: the
DBNA Treasury Money Market Fund, the DBNA Government Money Market Fund, the DBNA
Money Market Fund, the DBNA Tax-Exempt Money Market Fund and the DBNA New York
Tax-Exempt Money Market Fund (collectively, the "Funds"). The investment
objectives of each Fund are described in the prospectuses of the Company dated
............................ (each a "Prospectus") under the caption "Investment
Objectives and Policies."
This Statement of Additional Information is not a prospectus and is
authorized for distribution only when preceded or accompanied by the Prospectus.
This Statement of Additional Information contains additional information to that
set forth in the Prospectus and should be read in conjunction with it. Copies of
the Prospectus may be obtained without charge by writing or calling the Company
at its address or telephone number above.
.........................., 1995
SAI-1
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TABLE OF CONTENTS
Investment Policies 3
Additional Information on Portfolio Instruments 3
Ratings 4
Additional Investment Activities 4
Special Factors affecting
the DBNA New York Tax-Exempt Money Market Fund 7
Limiting Investment Risks 21
Management 23
Directors and Officers 23
Manager and Investment Adviser 25
Custodian and Transfer Agent 26
Service Organizations 26
Portfolio Transactions 28
Distributor 29
Net Asset Value 29
Dividends 30
Yield 30
Additional Information Concerning Taxes 31
Capital Stock 33
Auditors 34
Audited Financial Statements to come
SAI-2
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INVESTMENT POLICIES
The following information supplements the discussion of the investment
objectives and policies of the Funds found under "Investment Objectives and
Policies" in the Prospectus. Except for the matters specified under "Limiting
Investment Risks" in the Prospectus and in this Statement of Additional
Information, and as otherwise stated in the Prospectus, all matters described
herein and in the Prospectus are not fundamental and may be changed by the Board
of Directors of the Company without the approval of shareholders. See "Capital
Stock".
In addition to the obligations and investment activities described below
and in the Prospectus, the Funds may invest in types of securities and engage in
investment activities that become permissible in the future to the extent
consistent with the requirements of Rule 2a-7 promulgated under the Investment
Company Act of 1940, as amended (the "1940 Act").
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
United States Government Securities
United States Treasury Obligations. The United States Treasury issues
various types of marketable securities. These securities are direct obligations
of the United States Government and differ primarily in the length of their
maturity. Treasury bills, the most frequently issued marketable United States
Government security, have a maturity of up to one year and are issued on a
discount basis.
United States Government Agency and Instrumentality Obligations. Agencies
and instrumentalities that issue or guarantee debt securities and that have been
established or sponsored by the United States Government include, among others,
the Government National Mortgage Association, the Banks for Cooperatives, the
Export-Import Bank of the United States, the Farm Credit Administration, the
Federal Home Loan Mortgage Corporation, the Federal National Mortgage
Association and the Student Loan Marketing Association.
Bank Obligations
Bank obligations include negotiable certificates of deposit, bankers'
acceptances and fixed income deposits. Descriptions of these obligations and of
the banks, the obligations of which the Funds may purchase, are set forth in the
Prospectus.
Municipal Obligations
Municipal Commercial Paper. Municipal commercial paper is a debt obligation
with a stated maturity of 270 days or less that is issued by a municipality to
finance seasonal working capital needs or a short-term financing in anticipation
of longer-term debt.
SAI-3
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Municipal Notes. Municipal notes generally have maturities at the time of
issuance of three years or less.
Municipal Bonds. Municipal bonds generally have maturities at the time of
issuance of up to thirty years.
The taxable market is a broader and more liquid market with a greater
number of investors, issuers and market makers than the market for municipal
obligations. The more limited marketability of tax-exempt municipal obligations
may make it difficult in certain circumstances to dispose of large investments
advantageously. In general, tax-exempt municipal obligations are also subject to
credit risks such as the loss of credit ratings or possible default. In
addition, interest on certain tax-exempt municipal obligations might lose its
tax-exempt status in the event of a change in the tax laws.
RATINGS
The rating "P-1" is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's") and the ratings "A-1" and "A-1+" are the
highest commercial paper ratings assigned by Standard & Poor's Corporation
("S&P").
Municipal commercial paper rated "Prime-1" by Moody's or "A-1" by S&P is of
the highest quality, with a degree of safety regarding timely payment that is
either overwhelming or very strong. Municipal commercial paper rated "Prime-2"
by Moody's or "A-2" by S&P is of high quality, indicating a strong capacity for
timely repayment.
Other nationally recognized statistical rating organizations ("NRSROs")
have rating categories similar to those used by Moody's and S&P.
After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require the Fund to sell such security. However, the investment
adviser will reassess promptly whether the security presents minimal credit
risks and determine whether continuing to hold the security is in the best
interests of the Fund. To the extent the ratings given by any NRSRO may change
as a result of changes in such organizations or in their rating systems, the
Funds will attempt to use comparable ratings as standards for investments in
accordance with the investment policies contained in the Prospectus and in this
Statement of Additional Information.
ADDITIONAL INVESTMENT ACTIVITIES
The discussion below supplements the information set forth in the
Prospectus under "Additional Investment Activities of the Funds." A Fund will
enter into the following types of transactions only with institutions considered
by the investment adviser, based on guidelines established by the Company's
Board of Directors, to present minimal credit risks.
SAI-4
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Asset-Backed Securities
Asset-backed securities are generally issued as pass-through certificates,
which represent undivided fractional ownership interests in the underlying pool
of assets, or as debt instruments, which are generally issued as the debt of a
special purpose entity organized solely for the purpose of owning such assets
and issuing such debt. Asset-backed securities are often backed by a pool of
assets representing the obligations of a number of different parties.
Asset-backed securities frequently carry limited credit protection in the form
of extra collateral, subordinate certificates, cash reserve accounts, letters of
credit or other enhancements. For example, payments of principal and interest
may be guaranteed up to certain amounts and for a certain time period by a
letter of credit or other enhancement issued by a financial institution
unaffiliated with the entities issuing the securities. Assets which, to date,
have been used to back asset-backed securities include motor vehicle installment
sales contracts or installment loans secured by motor vehicles, receivables from
revolving credit (credit card) agreements, commercial and residential mortgages
and aircraft and retail store leases.
Asset-backed securities present certain risks which are, generally, related
to limited interests, if any, in related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicers to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities. Other types of
asset-backed securities will be subject to the risks associated with the
underlying assets. If a letter of credit or other form of credit enhancement is
exhausted or otherwise unavailable, holders of asset-backed securities may also
experience delays in payments or losses if the full amounts due on underlying
assets are not realized.
Loans of Portfolio Securities
Each Fund may lend securities from its portfolio if liquid assets in an
amount at least equal to 100% of the current market value of the securities
loaned (including accrued interest thereon) plus the interest payable to the
Fund with respect to the loan is maintained by the Fund in a segregated account.
The Funds will typically loan their portfolio securities only on a short-term
basis, and will not enter into any portfolio security lending arrangements
having a duration of longer than thirteen months. Any securities that a Fund may
receive as collateral will not become a part of its portfolio at the time of the
loan and, in the event of a default by the borrower, the Fund will, if permitted
by law, dispose of such collateral except for such part thereof that is a
security in which the Fund is permitted to invest. During the time securities
are on loan, the borrower will pay the Fund any accrued income on those
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securities, and the Fund may invest the cash collateral and earn additional
income or receive an agreed-upon fee from a borrower that has delivered cash
equivalent collateral. Cash collateral received by a Fund will be invested in
securities in which such Fund is permitted to invest. The value of securities
loaned will be marked to market daily, and the borrower must increase the
collateral for such securities whenever their market value rises above the level
of the collateral. Portfolio securities purchased with cash collateral are
subject to possible depreciation. Loans of securities by a Fund will be subject
to termination at the Fund's or the borrower's option. While voting rights on
the loaned securities may pass to the borrower, the Company's Board of Directors
must terminate the loan and regain the right to vote the securities if a
material event adversely affecting the investment occurs. A Fund may pay
reasonable administrative and custodial fees in connection with a securities
loan and may pay a negotiated portion of the interest or fee earned with respect
to the collateral to the borrower or a placing broker. No Fund currently intends
to make loans of portfolio securities with a value in excess of 5% of the value
of its total assets, but in no event will such loans exceed 33 1/3% of the value
of its total assets.
Rule 144A Securities
As indicated in the Prospectus, each Fund, except The DBNA Treasury Money
Market Fund, may purchase certain restricted securities ("Rule 144A securities")
for which there may be a secondary market of qualified institutional buyers, as
contemplated by Rule 144A under the Securities Act of 1933. Rule 144A provides
an exemption from the registration requirements of the Securities Act for the
resale of certain restricted securities to qualified institutional buyers.
One effect of Rule 144A is that certain restricted securities may now be
liquid, although there is no assurance that a liquid market for Rule 144A
securities will develop or be maintained. The Board of Directors of the Company
has adopted policies and procedures for the purpose of determining whether
securities that are eligible for resale under Rule 144A are liquid or illiquid
for purposes of the Funds' limitation on investment in illiquid securities.
Pursuant to those policies and procedures, the Board of Directors will delegate
to the investment adviser for each Fund the determination for the Funds that
they advise as to whether a particular security is liquid or illiquid, requiring
that consideration be given to, among other things, the frequency of trades and
quotes for the security, the number of dealers willing to sell the security and
the number of potential purchasers, dealer undertakings to make a market in the
security, the nature of the security and the time needed to dispose of the
security. The Board of Directors will periodically review the Funds' purchases
and sales of Rule 144A securities.
Stand-by Commitments
Each Fund, except the DBNA Treasury Money Market Fund, may acquire rights
to "put" its securities at an agreed-upon price within a specified period prior
to their maturity date. Such Funds may also enter into put transactions
sometimes referred to as "stand-by commitments," which entitle such Funds to
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same-day settlement and to receive an exercise price equal to the amortized
cost of the underlying security plus accrued interest, if any, at the time of
exercise. Each such Fund's right to exercise a stand-by commitment will be
unconditional and unqualified.
The Funds expect that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, a Fund may pay for certain stand-by commitments either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to a stand-by commitment (thus reducing the yield to
maturity otherwise available for the same securities). The Funds intend to enter
into stand-by commitments solely to facilitate portfolio liquidity and do not
intend to exercise their rights thereunder for trading purposes. The acquisition
of a stand-by commitment will not affect the valuation of the underlying
security, which will continue to be valued in accordance with the amortized cost
method. The actual stand-by commitment will be valued at zero in determining net
asset value. Where a Fund pays any consideration directly or indirectly for a
stand-by commitment, its cost will be reflected as unrealized depreciation for
the period during which the stand-by commitment is held by the Fund and will be
reflected in realized gain or loss when the stand-by commitment is exercised or
expires.
In the event that the issuer of a stand-by commitment acquired by a Fund
defaults on its obligation to purchase the underlying security, then that Fund
might be unable to recover all or a portion of any loss sustained from having to
sell the security elsewhere.
If the value of the underlying security increases, the potential for
unrealized or realized gain is reduced by the cost of the stand-by commitment.
The maturity of a portfolio security will not be considered shortened by a
stand-by commitment to which such obligation is subject. Therefore, stand-by
commitment transactions will not affect the average weighted maturity of the
Fund's portfolio.
SPECIAL FACTORS AFFECTING
THE DBNA NEW YORK TAX-EXEMPT MONEY MARKET FUND
Introduction
The following information is a summary of special factors affecting the
DBNA New York Tax-Exempt Money Market Fund. It does not purport to be a complete
description and is based on information from official statements relating to
securities offerings of New York issuers.
New York (the "State") is the third most populous State in the nation and
has a relatively high level of personal wealth. The State's economy is diverse
with a comparatively large share of the nation's finance, insurance,
transportation, communications and services employment, and a very small share
of the nation's farming and mining activity. The State's location, air transport
facilities and natural harbors have made it an important link in international
commerce. Travel and tourism constitute an important part of the economy. The
State has a declining proportion of its workforce engaged in manufacturing and
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an increasing proportion engaged in service industries. This transition reflects
a national trend.
Although industry and commerce are broadly spread across the State,
particular activities are concentrated in the following areas: Westchester
County -- headquarters for several major corporations; Buffalo -- heavy
industry; Rochester -- manufacture of photographic and optical equipment;
Syracuse and the Utica-Rome area -- production of machinery and transportation
equipment; Albany-Troy-Schenectady -- government center and production of
electrical products; Binghampton -- original site of the International Business
Machines Corporation and continued concentration of employment in computer and
other high technology manufacturing; and New York City (the "City") --
headquarters for the nation's securities business, and for a major portion of
the nation's major commercial banks, diversified financial institutions, and
life insurance companies. In addition, the City houses the home offices of three
major radio and television broadcasting networks, most of the national magazines
and a substantial portion of the nation's book publishers. The City also retains
leadership in the design and manufacture of men's and women's apparel.
The State has historically been one of the wealthiest states in the nation.
For decades, however, the State economy has grown more slowly than that of the
nation as a whole, resulting in the gradual erosion of its relative economic
affluence. Statewide, urban centers have experienced significant changes
involving migration of the more affluent to the suburbs and an influx of
generally less affluent residents. Regionally, the older Northeast cities have
suffered because of the relative success that the South and the West have had in
attracting people and business. The City has also had to face greater
competition as other major cities have developed financial and business
capabilities which make them less dependent on the specialized services
traditionally available almost exclusively in the City.
The State has for many years had a very high State and local tax burden
relative to other states. The State and its localities have used these taxes to
develop and maintain their transportation networks, public schools and colleges,
public health systems, other social services and recreational facilities.
Despite these benefits, the burden of State and local taxation, in combination
with the many other causes of regional economic dislocation, may have
contributed to the decisions of some businesses and individuals to relocate
outside, or not locate within, the State.
Authorities
The Metropolitan Transit Authority (the "MTA") oversees the operation of
the City's bus and subway system by the New York City Transit Authority and the
Manhattan and Bronx Surface Transit Operating Authority (collectively, the "TA")
and, through subsidiaries, operates certain commuter rail and bus lines. The MTA
has depended and will continue to depend upon federal, state and local
government support to operate the transit system because fare revenues are
insufficient.
Over the past several years, the State has enacted several taxes--including
a surcharge on the profits of banks, insurance corporations and general business
corporations doing business in the 12-county region served by the MTA and a
special one-quarter of one percent regional sales and use tax--that provide
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additional revenues for mass transit purposes, including assistance to the MTA.
In addition, a one-quarter of one-percent regional mortgages recording tax paid
on certain mortgage creates an additional source of recurring revenues for the
MTA.
In 1993, State legislation authorized the funding of a five-year $9.56
billion MTA capital plan for the five-year period, 1992 through 1996 (the
"1992-96 Capital Program"). The MTA has received approval of the 1992-96 Capital
Program based on this legislation from the 1992-96 Capital Program Review Board,
as State law requires. This is the third five-year plan since the Legislature
authorized procedures for the adoption, approval and amendment of a five-year
plan in 1981 for a capital program designed to upgrade the performance of the
MTA's transportation systems and to supplement, replace and rehabilitate
facilities and equipment. The MTA, the TBTA and the TA are collectively
authorized to issue an aggregate of $3.1 billion of bonds (net of certain
statutory exclusions) to finance a portion of the 1992-96 Capital Program. The
1992-96 Capital Program is expected to be financed in significant part through
dedication of State petroleum business taxes.
There can be no assurance that all the necessary governmental actions for
the Capital Program will be taken, that funding sources currently identified
will not be decreased or eliminated, or that the 1992-96 Capital Program, or
parts thereof, will not be delayed or reduced. Furthermore, the power of the MTA
to issue certain bonds expected to be supported by the appropriation of State
petroleum business taxes is currently the subject of a court challenge. If the
Capital Program is delayed or reduced, ridership and fare revenues may decline,
which could, among other things, impair the MTA's ability to meet its operating
expenses without additional State assistance.
State Financial Plan
The State Constitution requires the Governor to submit to the Legislature a
balanced Executive Budget which contains a complete plan of expenditures for the
ensuing fiscal year and all moneys and revenues estimated to be available
therefor, accompanied by bills containing all proposed appropriations or
reappropriations and any new or modified revenue measures to be enacted in
connection with the Executive Budget. The entire plan constitutes the proposed
State Financial Plan for that fiscal year. A final budget must be approved
before the statutory deadline of April 1. (To be updated in final version.)
The State's fiscal year which commenced on April 1, 1995 and ends on March
31, 1996 is referred to herein as the State's 1995-96 fiscal year.
On February 1, the Governor presented his 1995-96 Executive Budget to the
Legislature, as required by the State Constitution. The Governor's budget is
balanced on a cash basis in the General Fund. The Governor may amend his budget
up to 30 days after its submission to the Legislature. There can be no assurance
that the Legislature will enact the proposed Executive Budget into law, or that
actual results will not differ materially and adversely from the projections set
forth below.
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The 1995-96 Executive Budget is the first to be submitted by the Governor,
who assumed office on January 1. It proposes actual reductions in the
year-over-dollar levels of State spending from the General Fund for the first
time in over half a century with a proposed cut of 3.4%. Proposed spending on
State operations is projected to drop even more sharply, by 7.7%. Nominal
spending from all State funding sources (i.e. excluding Federal aid) is proposed
to drop by 0.3% from the prior fiscal year, in contrast to the prior decade when
annual State-funded spending growth averaged more than 6.0%. There are, however,
risks and uncertainties concerning whether or not certain tax and spending cuts
proposed in the Executive Budget will be enacted, or if enacted, will be upheld
in the face of potential legal challenges. For example, there can be no
assurance that cuts in social-welfare entitlement programs will not be
challenged in court. Further, the Comptroller has indicated his intention to
challenge in Court the proposed use of certain pension reserves in the Executive
Budget.
According to the Executive Budget, in the 1995-96 fiscal year, the State
Financial Plan, based on current-law provisions governing spending and revenues,
would be out of balance by almost $4.7 billion, as a result of three key
factors: (1) the projected structural deficit resulting from the ongoing
disparity between sluggish growth in receipts, the effect of prior-year tax
changes, and the rapid acceleration of spending growth ($2.1 billion); (2) the
impact of unfunded 1994-95 initiatives, including capital projects such as
sports and recreational facilities, an increase in revenue sharing to local
governments, further State takeover of local Medicaid costs, more school aid,
and increased tuition assistance ($1.1 billion); and (3) the use of one-time
solutions to fund recurring spending in the 1994-95 budget ($1.5 billion). Tax
cuts proposed to spur economic growth and provide relief for low and
middle-income tax payers add $240 million to the projected imbalance or budget
gap, bringing the total to approximately $5 billion.
The Executive Budget proposes to close this budget gap for the 1995-96
fiscal year through (1) $1.9 billion from cost containment savings in
social-welfare programs, particularly Medicaid cost-containment recommendations
($1.277 billion), Income-Maintenance restructuring recommendations ($340
million), and the consolidation of various child-care programs into a Family
Services Block Grant to counties and New York City; (2) $2.5 billion in savings
from State agency restructuring that is expected to reduce spending on the State
workforce, SUNY and CUNY, mental hygiene programs, capital projects, the prison
population, and public authorities; (3) $350 million in savings from local
assistance reforms, by freezing school aid, revenue sharing and county costs of
pre-school special education at current levels, while proposing program
legislation to provide relief from certain mandates that increase local
spending; and (4) $200 million in new revenue measures, primarily a new Quick
Draw Lottery game and changes to tax-payment schedules.
The Executive Board indicates that for years State revenues have grown at a
slower rate than State spending, producing an increasing structural deficit, and
that if the proposals in the Executive Budget are enacted (particularly the
spending cuts described above) the State will start to eliminate the structural
imbalance that has characterized the State's fiscal record. There can, however,
be no assurances that the tax and spending cuts proposed in the Executive Budget
will be enacted as proposed, or that if enacted, will eliminate potential
imbalances in future fiscal years. The Governor's recommended multi-year
personal income tax cuts are designed to reduce the yield on that tax by about
one-third by 1998, and could require significant additional spending cuts in
those years, increased economic growth to provide additional revenues,
additional revenue measures, or a combination of those factors.
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The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. Those factors can be
very complex, may vary from fiscal year to fiscal year, and are frequently the
result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the Federal government, that
are not under the control of the State. The State Financial Plan is based upon
forecasts of national and State economic activity. Economic forecasts have
frequently failed to predict accurately the timing and magnitude of changes in
the national and the State economies. Many uncertainties exist in forecasts of
both the national and State economies, including consumer attitudes toward
spending, Federal financial and monetary policies, the availability of credit,
and the condition of the world economy, which could have an adverse effect on
the State. There can be no assurance that the State economy will not experience
results in the current fiscal year that are worse than predicted, with
corresponding material and adverse effects on the State's projections of
receipts and disbursements.
The national economy began to expand in 1991, although the growth rate for
the first two years of the expansion was modest by historical standards. The
State economy remained in recession until 1993, when employment growth resumed.
Since early 1993, the State has gained approximately 100,000 jobs. Employment
growth has been hindered during recent years by significant cutbacks in the
computer and instrument manufacturing, utility, and defense industries. Personal
income increased substantially in 1992 and 1993, aided significantly by large
bonus payments in banking and financial industries.
The national economy performed better in 1994 than in any year since the
recovery began in 1991. National job and income growth were substantial. In
response, the Federal Reserve Board (FRB) shifted to a policy of monetary
tightening by raising interest rates throughout the year. The federal funds rate
is currently up 300 basis points from the level of a year ago. As a result, the
economy is expected to slow sharply in the next several quarters, as higher
interest rates reduce the growth in consumer spending and business investment.
The Division of the Budget expects average annual growth in real gross domestic
product (GDP) to be 2.8% in 1995, following the 4% pace estimated for 1994. This
is somewhat more conservative than the 3.1% growth rate expected by the Blue
Chip consensus of leading economic forecasters.
Inflationary pressures have increased due to strong national growth
throughout 1994, with a fairly low unemployment rate and high capacity
utilization, and economic recoveries in Europe and Japan. However, foreign
competition is expected to help to moderate the increase in the inflation rate.
With a slowing economy and only a modest acceleration of inflation, wage and
personal income growth are expected to be moderate.
The State economy turned in a mixed performance during 1994. The moderate
employment growth that characterized 1993 continued into mid-1994, then
virtually ceased. After July, the trade and construction sectors stopped adding
jobs and government employment declined. Growth, though considerably slower than
earlier in the year, continued in the service sector. Wages grew at around 3.5%,
reflecting, in part, a plunge in bonus payments from securities firms whose
profits dropped in 1994. Personal income rose 4.0% in 1994.
Employment growth is expected to slow to less than 0.5% in 1995. Continued
restructuring by large corporations and all levels of government largely
account for the subdued growth rate in the forecast. Slow growth in
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employment and average wages is expected to restrain wage growth to a modest
3.2% in 1995. Personal income is anticipated to receive a boost from higher
interest rates and rise by 4.4%.
The State Financial Plan is based on a projection of national and State
economic activity which forecasts that the overall rate of growth of the
national economy during calendar year 1994 will be similar to the "consensus" of
a widely followed survey of national economic forecasters. Growth in the real
gross domestic product during 1994 is projected to be moderate (3.5 percent),
with declines in defense spending and net exports more than offset by increases
in consumption and investment. Continuing efforts by business to reduce costs is
expected to exert a drag on economic growth. Inflation, as measured by the
Consumer Price Index, is projected to remain about 3 percent due to moderate
wage growth and foreign competition. Growth rates for personal income and wages
are projected to increase.
The four governmental fund types that comprise the State Financial Plan are
the General Fund, the Special Revenue Funds, the Capital Projects Funds, and the
Debt Service Funds. The General Fund is the general operating fund of the State
and is used to account for all financial transactions, except those required to
be accounted for in another fund. It is the State's largest fund and receives
almost all State taxes and other resources not dedicated to particular purposes.
The Financial Plan for the 1995-96 fiscal year released on February 1,
1995, projects General Fund receipts, including transfers from other funds, of
$32.516 billion, a reduction of $747 million from the revised 1994-95 State
Financial Plan. Tax receipts are projected at $29.391 billion for the 1995-96
fiscal year, a reduction of $1.071 billion from the prior year.
Although growth in the base for tax receipts is expected to accelerate
during the 1995-96 fiscal year, tax receipts are expected to fall by 3.5%,
principally due to the combined effect of implementing during the 1995-96 fiscal
year (1) a portion of the tax reductions originally enacted in 1987 and deferred
each year since 1990, (2) additional tax cuts to prevent tax increases also
originally enacted in 1987 from taking effect, and (3) the proposed employer day
care credit ($5 million), together with the incremental cost of the tax
reductions enacted in 1994 (more than $500 million), which effectively negate
the effect of projected growth in the recurring revenue base. In addition,
certain nonrecurring revenues in the 1994-95 receipts base, including the
1993-94 surplus of $1.026 billion, additional earmarking to dedicated funds
(more than $210 million) and other miscellaneous one-time receipts (more than
$100 million) are not available in the 1995-96 fiscal year, thereby reducing
potential year-over-year growth by another 4 percentage points.
Personal income tax receipts, which show a sharp increase in 1994-95 and a
projected decline in 1995-96, do not reflect the actual underlying pattern of
tax liability across the fiscal years. In 1994, tax liability is actually
estimated to have grown relatively slowly, less than 2.5%, with the apparently
strong reported increase in 1994-95 collections resulting from the net drawdown
of $869 million from the refund reserve, which increased stated 1994-95 cash
receipts by that amount. In 1995, before the tax reductions described below, tax
liability would actually have been projected to rise about 6%, primarily owing
to an acceleration in wage growth (largely attributable to changes in the timing
of bonus payments), a sharp rise in interest income, and higher reported capital
gains.
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Personal income tax reductions recommended in the Executive Budget are
projected to produce taxpayer-savings of $720 million in calendar year 1995
reflecting the scheduled implementation of the 1987 tax reductions, which
include a reduction in the top tax rate from 7.875% to 7.59375% and an increase
in the standard deduction ranging from 10 to 14%, depending on filing status, as
well as the elimination of scheduled changes that would have increased taxes for
low- and middle-income taxpayers. The tax reductions recommended by the Governor
are part of a multi-year program designed to reduce the yield of income tax by
about one-third by 1998.
Growth in user taxes and fees is expected to slow to about 1% in 1995-96,
reflecting nearly $70 million of additional tax relief in this category in the
coming year resulting from tax reductions enacted in 1994, the absence of
extraordinary audit collections received in 1994-95, and a slowdown in the
underlying growth rate of sales and use tax collections from more than 5% in
1994-95 to 3.5% in the coming year, offset by a projected improvement of $41
million as a result of recommended legislation to enhance sales tax collection
procedures. Business tax receipts are projected to fall in the 1995-96 fiscal
year largely reflecting the effect of tax reductions enacted in 1994. Underlying
liability, which is expected to rise only modestly in 1995, is not expected to
increase enough to offset the effect of those tax reductions. Expected growth in
other tax receipts in the 1995-95 fiscal year reflects, among other factors, a
slight increase in the cost of the 1994 tax cuts, the diversion to the
Environmental Protection Fund of a recommended $25 million in receipts from the
real estate transfer tax and proposed legislation accelerating remittance of the
transfer tax to the State. Growth in overall collections from miscellaneous
receipts in the coming fiscal year is expected to result largely from several
discrete actions involving settlement of environmental litigation, the
recommended merger of public authorities, and transactions with the Power
Authority, which together account for over $200 million of projected
miscellaneous receipts anticipated in 1995-96. Transfers from other funds
continue at prior year levels, with the addition of the transfer of $220 million
in excess funds from the Metropolitan Mass Transportation Operating Assistance
Fund.
Disbursements in the General Fund are projected to total $32.361 billion in
1995-96, a decrease of $1,144 million or 3.4%. This decline reflects a broad
agenda of cost containment actions, more than offsetting modest increases for
fixed costs, such as pensions, debt service on bonds sold during the current
year, and capital projects under construction.
In the category of grants to local governments, the 1995-96 Executive
Budget recommendations generally preserve support for direct aid, such as school
aid, revenue sharing, and public health programs, at 1994-95 levels. Operating
aid to public schools is capped at 1994-95 amounts, while reimbursements for
transportation and building aid follow current law. Costs for social welfare
programs, however, are recommended to be dramatically reduced, reflecting more
than $1.5 billion in cost containment actions. Medicaid decreases by $662
million, or 11.3% to $5.215 billion; welfare costs decrease $109 million, or
4.9%, to $2.111 billion. State support for children's services is recommended to
be converted to a block grant, providing local governments greater flexibility
in administering these programs. All other local programs decline, primarily
reflecting the elimination of $128 million in operating aid to the New York City
Transit Authority, matching the reduction in New York City support of the
Authority.
Spending recommended for State operations is projected to decline by
$485 million, or 7.7%, to the lowest level since the 1985-86 fiscal year.
Recommendations in the Executive Budget which would reduce the workforce by
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approximately 11,400 positions (most of which reduce disbursements in this
category), are projected to result in personal service savings of more than $300
million. Additional savings reflect initiatives of the State University of New
York and mental health agencies to maximize revenues to offset their costs.
Spending recommended for general State charges is projected to increase $59
million, which reflects the 1995-96 cost associated with returning the New York
State and Local Employee Retirement Systems to the aggregate cost actuarial
method from the projected unit credit actuarial method, as required by the
Comptroller. Costs associated with the proposed early retirement program add
another $22 million. Health insurance costs are projected to increase six
percent and seven percent, for calendar years 1995 and 1996, respectively.
Workers' compensation costs are projected to grow at 3.5%. Unemployment
insurance costs are expected to double, in anticipation of up to 6,900 layoffs
of State employees in the 1995-96 fiscal year.
The Executive Budget proposes to offset part of the increase in pension
contributions by using $110 million currently on deposit in the Retirement
Systems' reserves for pension supplementation, which, together with the other
minor changes in assumptions, is expected to reduce the State's 1995-96 pension
contribution to $286 million. The Executive Budget also recommends a similar
offset of $120 million to be provided toward pension bills of other
participating employers. The Comptroller, as sole trustee of the Common
Retirement Fund and administrative head of the Retirement Systems, has indicated
that, if the proposals are enacted, he would commence legal proceedings to
prevent the proposed use of those reserves, which he considers to be a violation
of the State Constitution. The Executive disagrees and considers the use to
comply with the State Constitution.
General Fund debt service on short-term obligations of the State reflects
the elimination of the State's spring borrowing. Transfers in support of debt
service are projected to grow steadily, as the State proposes to continue to
issue bonds to support approximately 48% of its capital projects. Transfers in
support of capital projects are projected to increase despite significant
proposed cutbacks in spending, owing in part to the loss of non-recurring
receipts from sources other than the General Fund.
The Division of the Budget estimates that the 1995-96 Financial Plan
includes approximately $650 million in non-recurring resources, approximately 2%
of the General Fund budget. These actions include items discussed above, such as
the pension offset and the transfer of excess public authority funds, as well as
retroactive Federal reimbursements and some non-recurring social welfare cost
containment actions. The Budget Division believes that recommendations included
in the Executive Budget will provide fully annualized savings in 1996-97 which
more than offset the non-recurring resources used in 1995-96.
In addition to the General Fund, the State Financial Plan includes Special
Revenue Funds, Capital Projects Funds and Debt Service Funds.
Special Revenue Funds are used to account for the proceeds of specific
revenue sources such as Federal grants that are legally restricted, either by
the Legislature or outside parties, to expenditures for specified purposes.
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For 1995-96, the State Financial Plan projects disbursements of $25.825
billion from these funds. This includes $6.696 million from Special Revenue
Funds containing State revenues, and $19.129 billion from funds containing
Federal grants, primarily for social welfare programs. Disbursements recommended
in the Executive Budget from State Special Revenue Funds are projected to
increase $724 million or 12.1% from 1994-95. This increase reflects significant
growth in spending supported by lottery proceeds, State University revenues, and
dedicated taxes for transportation purposes. Total disbursements for programs
supported by Federal grants which account for approximately three-quarters of
all spending in the Special Revenue Funds, are estimated to increase $478
million or 2.6% over projected 1994-95. The single largest program is Medicaid,
which comprises 60% of this Federal aid, and is expected to amount to
approximately $11.4 billion both in 1994-95 and 1995-96. Growth in other Federal
spending is primarily attributable to the expansion of the school lunch and
breakfast programs, increased Federal reimbursement of certain State costs under
the Emergency Assistance to Families program, and increased spending for the
Women with Infant Children (WIC) program. No significant changes in the type or
level of Federal aid are assumed.
Capital Projects Funds are used to account for the financial resources used
for the acquisition, construction, or rehabilitation of major state capital
facilities and for capital assistance grants to certain local government or
public authorities. This fund type consists of the Capital Projects Fund, which
is supported by tax dollars transferred from the General Fund, and 37 other
capital funds established to distinguish specific capital construction purposes
supported by other revenues.
Disbursements from the Capital Projects funds in 1995-96 are estimated at
$3.901 billion. That estimate is the result of a review required by the Governor
and the Budget Director of the necessity and affordability of projects, as well
as the impact on current and future revenues and debt service requirements. This
review reduced the amount the Division of the Budget estimates would otherwise
have been spent on capital projects by $555 million, thereby avoiding an
estimated increase of $227 million in General Fund support for capital projects.
Despite the actions described above, capital spending is still expected to
increase 10.5% over the 1994-95 projection of $3.531 billion.
Debt Service Funds are used to account for the payment of principal of, and
interest on, long-term debt of the State and to meet commitments under
lease-purchase and other contractual-obligation financing arrangements.
Disbursements are estimated at $2.498 billion in the 1995-96 fiscal year, an
increase of $288 million or 13% from 1994-95. Of this increase, $61 million
results from the loss of non-recurring resources available in the prior fiscal
year, including savings from refundings of State-supported debt. Debt service
would otherwise be projected to grow at 9%, reflecting $68 million for the
General Debt Service Fund, $70 million for Dedicated Highway and Bridge Fund
bonds, $30 million for payments from the Mental Hygiene Services Fund and $62
million for bonds of the Local Government Assistance Corporation (LGAC).
SAI-15
<PAGE>
The increase in debt service costs recommended in the Executive Budget
primarily reflects prior capital commitments financed by bonds issued by the
State and State-supported debt issued by its public authorities, and the
completion of the LGAC program. The increase has been moderated by the
reductions to bond-financed capital spending as discussed above, and reflects
debt issuances in 1994-95 and 1995-96 which are lower than they would have been,
absent the Governor's review of capital spending.
Discussion and Analysis
New York State's financial operations have improved during recent fiscal
years. During the period 1989-90 through 1991-92, the State incurred General
Fund operating deficits that were closed with receipts from the issuance of tax
and revenue anticipation notes ("TRANs"). First, the national recession, and
then the lingering economic slowdown in the New York and regional economy,
resulted in repeated shortfalls in receipts and three budget deficits. For its
1992-93 and 1993-94 fiscal years, the State recorded balanced budgets on a cash
basis, with substantial fund balances in each year as described below.
The State's budget for the 1994-95 fiscal year was enacted by the
Legislature on June 7, 1994, more than two months after the start of the fiscal
year. Prior to adoption of the budget, the Legislature enacted appropriations
for disbursements considered to be necessary for State operations and other
purposes, including all necessary appropriations for debt service. The State
Financial Plan for the 1994-95 fiscal year was formulated on June 16, 1994 and
is based on the State's budget as enacted by the Legislature and signed into law
by the Governor. The State Financial Plan will be updated quarterly pursuant to
law in July and October and by February 1.
Receipts through the first two quarters of the 1994-95 fiscal year fell
short of expectations by $132 million. These shortfalls were concentrated in the
personal and business income taxes, where quarterly personal income, bank and
insurance tax payments were lower than expected. Based on the revised economic
outlook and this receipt shortfall, projected General Fund receipts for the
1994-95 fiscal year were reduced by $267 million. Estimates of the yield of the
personal income tax were lowered by $334 million, primarily reflecting weak
estimated tax collections and lower withholding collections due to reduced
expectations for wage and salary growth - particularly securities industry
bonuses - during the balance of the year. Business tax receipts were also
reduced modestly, reflecting revised estimates of liability and lower payments
from banks and insurance companies; however, these reductions were partially
offset by increases in the general business corporation and utility taxes.
Estimates in other receipt categories were increased by a total of $113 million.
The largest increases were in the sales tax, reflecting collections to date and
the revised economic outlook, and estate taxes which were buoyed by unexpectedly
large collections during the first six months of the 1994-95 fiscal year.
Increases were also made in estimates for the real property gains tax and the
real estate transfer tax, based on strong collections to date.
SAI-16
<PAGE>
Disbursements through the first six months of the fiscal year fell short of
projections by $153 million, owing in part to changes in the timing of payments
but also to lower spending trends in certain programs, most notably in payments
for social services programs. Projections of 1994-95 General Fund disbursements
were reduced by $281 million, with savings in virtually every category of the
State Financial Plan. Payments for social services programs were projected to be
$140 million lower than projected in the State Financial Plan as initially
formulated, reflecting experience through the first six months of the fiscal
year and an initiative to increase Federal reimbursement for administrative
costs. Although school aid costs increased reflecting revisions to the current
and two prior school years based on final audits and revised aid claims, these
costs were expected to be offset by recoveries from the Federal government in
support of programs for pupils with disabilities. Other reductions reflected
lower pension costs. increased health insurance dividends, debt management
savings, and slower spending for certain programs and capital projects. Higher
spending was projected for a single program - the Department of Correctional
Services - to accommodate an unanticipated increase in the State's prison
population.
On February 1, 1995, as part of his Executive Budget for the 1995-96 fiscal
year, the Governor submitted the third quarterly update to the State Financial
Plan for the current year. This update reflects changes to receipts and
disbursements based on: (1) an updated economic forecast for both the nation and
the State, (2) an analysis of actual receipts and disbursements through the
first nine months of the fiscal year, (3) an analysis of changing program
requirements, and (4) the Governor's proposed plan to close a potential $259
million deficit. The changes are reflected after the mid-year update to the
State Financial Plan was restated to conform to certain accounting treatments
used by the State Comptroller in reporting actual results, but do not affect the
actual closing cash position of the General Fund.
Estimates of General Fund receipts for the current fiscal year have been
reduced by $585 million, from the mid-year update, and are down $1.058 billion
from the budget enacted in June 1994 (of which $227 million results from the
restatement of the State Financial Plan, noted above). The reductions from the
mid-year update are concentrated in (1) the personal income tax where lower
withholdings and estimated taxes reflect the cessation of job growth in the last
half of 1994, and even more severe reductions in brokerage industry bonuses than
expected earlier, and deferrals of capital gains realizations in anticipation of
potential Federal tax changes, and (2) the bank tax, where substantial
overpayments of 1993 liability have depressed net collections in the current
year. Offsetting this projected loss in receipts, however, are projected
reductions of $312 million in disbursements from the mid-year update,
attributable to lower spending through the first nine months of the fiscal year,
and to the use of greater-than-anticipated receipts from the State lottery. The
total reduction in projected disbursements from the budget enacted in June -
including payments from reserve funds - is $1.008 billion (of which $182 million
results from the restatement of the State Financial Plan).
The net result of the projected reductions in receipts and disbursement is
a negative margin of $273 million against the mid-year update's projection of a
$14 million surplus, producing a potential deficit of $259 million for the
1994-95 fiscal year. The Governor has proposed to close this deficit through a
hiring freeze, a review of pending contracts, and spending cuts in certain
programs that were started or expanded in the 1994-95 budget.
SAI-17
<PAGE>
After these actions, the balance in the General Fund at the close of the
1994-95 fiscal year is expected to be $157 million. The required deposit to the
Tax Stabilization Reserve Fund is projected to add $23 million to the existing
balance of $134 million in that fund.
1993-94 Fiscal Year
The State ended its 1993-94 fiscal year with a balance of $1.140 billion in
the tax refund reserve account, $265 million in its Contingency Reserve Fund
("CRF") and $134 million in its Tax Stabilization Reserve Fund. These fund
balances were primarily the result of an improving national economy, State
employment growth, tax collections that exceeded earlier projections and
disbursements that were below expectations. Deposits to the personal income tax
refund reserve have the effect of reducing reported personal income tax receipts
in the fiscal year when made and withdrawals from such reserve increase receipts
in the fiscal year when made. The balance in the tax refund reserve account will
be used to pay taxpayer refunds, rather than drawing from 1994-95 receipts.
1992-93 Fiscal Year
The State ended its 1992-93 fiscal year with a balance of $671 million in
the tax refund reserve account and $67 million in the Tax Stabilization Reserve
Fund. The State's 1992-93 fiscal year was characterized by performance that was
better than projected for the national and regional economies. National gross
domestic product, State personal income, and State employment and unemployment
performed better than originally projected in April 1992. This favorable
economic performance, particularly at year end, combined with a tax-induced
acceleration of income into 1992, was the primary cause of the General Fund
surplus. Personal income tax collections were more than $700 million higher than
originally projected (before reflecting the tax refund reserve account
transaction), primarily in the withholding and estimated payment components of
the tax. There were, however, large and mainly offsetting variances in other
categories of receipts.
SAI-18
<PAGE>
Certain Litigation
Certain litigation pending against New York or its officers or employees
could have a substantial or long-term adverse effect on New York finances. Among
the more significant of these cases are those that involve: (i) the validity of
agreements and treaties by which various Indian tribes transferred to New York
title to certain land in central New York; (ii) certain aspects of New York's
Medicaid rates and regulations, including reimbursements to providers of
mandatory and optional Medicaid services, and the eligibility for and nature of
home care services; (iii) challenges to provisions of Section 2807-C of the
Public Health Law, which impose a 13% surcharge on inpatient hospital bills paid
by commercial insurers and employee welfare benefit plans and portions of
Chapter 55 of the laws of 1992, which require hospitals to impose and remit to
the State an 11% surcharge on hospital bills paid by commercial insurers and
which require health maintenance organizations to remit to the State a surcharge
of up to 9%; (iv) an action against the State of New York and New York City
officials alleging that the present level of shelter allowance for public
assistance recipients is inadequate under statutory standards to maintain proper
housing; (v) challenges to the practice of reimbursing certain Office of Mental
Health patient care expenses from the client's Social Security benefits; (vi)
alleged responsibility of New York officials to assist in remedying racial
segregation in the City of Yonkers; (vii) an action, in which New York is a
third party defendant, for injunctive or other appropriate relief, concerning
liability for the maintenance of stone groins constructed along certain areas of
Long Island's shoreline; (viii) a challenge to the constitutionality of and seek
to enjoin, certain highway, bridge and mass transportation bonding programs of
the New York State Thruway Authority and the Metropolitan Transportation
Authority authorized by Chapter 56 of the laws of 1993; (ix) a claim that the
State's Department of Environmental Conservation prevented the completion of a
cogeneration facility by the projected date by failing to provide data in a
timely manner and that the plaintiff thereby suffered damages; and (x)
challenges, including a challenge by the New York Comptroller, to the
constitutionality of financing programs of the Thruway Authority authorized by
Chapters 166 and 410 of the Laws of 1991. In addition, aspects of petroleum
business taxes are the subject of administrative claims and litigation.
Adverse developments in those proceedings or the initiation of new
proceedings could affect the ability of New York to maintain a balanced
Financial Plan for the 1995-1996 fiscal year or in subsequent fiscal years. An
adverse decision in any of the above cited proceedings could exceed the amount
of the Revised 1995-1996 State Financial Plan reserve for the payment of
judgments and, therefore, could affect the ability of New York to maintain a
balanced 1995-96 State Financial Plan. In its Notes to its General Purpose
Financial Statements for the fiscal year ended March 31, 1995, the State reports
its estimated liability for awarded and anticipated unfavorable judgments at
$675 million. The State believes that the State's Financial Plan includes
sufficient reserves for the payment of judgments that may be required during the
1995-1996 fiscal year.
SAI-19
<PAGE>
The City of New York
The fiscal health of the State of New York is closely related to the fiscal
health of its localities, particularly the City, which has required and
continues to require significant financial assistance from New York. The City's
independently audited operating results for each of its 1981 through 1993 fiscal
years show a General Fund surplus reported in accordance with GAAP. In addition,
the City's financial statements for the 1993 fiscal year received an unqualified
opinion from the City's independent auditors, the eleventh consecutive year the
City has received such an opinion.
On February 14, 1995, the Mayor released the Preliminary Budget for the
City's 1996 fiscal year (commencing July 1), which addresses a projected $2.7
billion budget cap. Most of the gap-closing initiatives may be implemented only
with the cooperation of the City's municipal unions, or the State or Federal
governments. The Office of the State Deputy Comptroller for the City of New York
(OSDC) and the State Financial Control Board continue their respective oversight
activities.
In response to the City's fiscal crisis in 1975, the State took action to
assist the City in returning to fiscal stability. Among those actions, the State
established the Municipal Assistance Corporation for the City of New York
("MAC") to provide financing assistance to the City; the New York State
Financial Control Board (the "Control Board") to oversee the City's financial
affairs; the Office of the State Deputy Comptroller for the City of New York
("OSDC") to assist the Control Board in exercising its powers and
responsibilities; and a "Control Period" from 1975 to 1986 during which the City
was subject to certain statutorily-prescribed fiscal-monitoring arrangements.
Although the Control Board terminated the Control Period in 1986 when certain
statutory conditions were met, thus suspending certain Control Board powers, the
Control Board, MAC and OSDC continue to exercise various fiscal-monitoring
functions over the City, and upon the occurrence or "substantial likelihood and
imminence" of the occurrence of certain events, including, but not limited to a
City operating budget deficit of more than $100 million, the Control Board is
required by law to reimpose a Control Period. Currently, the City and its
Covered Organizations (i.e., those which receive or may receive monies from the
City directly, indirectly or contingently) operate under a four-year financial
plan which the City prepares annually and periodically updates.
The staffs of OSDC and the Control Board issue periodic reports on the
City's financial plans, as modified, analyzing forecasts of revenues and
expenditures, cash flow, and debt service requirements, as well as compliance
with the financial plan, as modified, by the City and its Covered Organizations.
OSDC staff reports issued during the mid-1980's noted that the City's budgets
benefited from a rapid rise in the City's economy, which boosted the City's
collection of property, business and income taxes. These resources were used to
increase the City's workforce and the scope of discretionary and mandated City
services. Subsequent OSDC staff reports examined the 1987 stock market crash and
the 1989-92 recession, which affected the New York City region more severely
than the nation, and attributed an erosion of City revenues and increasing
strain on City expenditures to that recession. According to a recent OSDC staff
report, the City's economy is now slowly recovering, but the scope of that
recovery is uncertain and unlikely, in the foreseeable future, to match the
expansion of the mid-1980's. Also, staff reports of OSDC and the Control Board
have indicated that the City's recent balanced budgets have been accomplished,
SAI-20
<PAGE>
in part, through the use of non-recurring resources, tax increases and
additional State assistance; that the City has not yet brought its long-term
expenditures in line with recurring revenues; and that the City is therefore
likely to continue to face future projected budget gaps requiring the City to
increase revenues and/or reduce expenditures. According to the most recent staff
reports of OSDC and the Control Board, during the four-year period covered by
the current financial plan, the City is relying on obtaining substantial
resources from initiatives needing approval and cooperation of its municipal
labor unions, Covered Organizations, and City Council, as well as the State and
Federal governments, among others.
The City requires significant amounts of financing for seasonal and capital
purposes. The City issued $1.75 billion of notes for seasonal financing purposes
during its fiscal year ended June 30, 1994. The City's capital financing program
projects long-term financing requirements of approximately $17 billion for the
City's fiscal years 1995 through 1998. The major capital requirements include
expenditures for the City's water supply and sewage disposal systems, roads,
bridges, mass transit, schools, hospitals and housing.
Other Localities
In addition to the City, certain localities, including the City of Yonkers,
could have financial problems leading to requests for additional State
assistance. The potential impact on the State of such requests by localities is
not included in the projections of the State's receipts and disbursements for
the State's 1994-95 fiscal year. Municipalities and school districts have
engaged in substantial short-term and long-term borrowings. In 1992, the total
indebtedness of all localities in the State other than New York City was
approximately $15.7 billion.
From time to time, Federal expenditure reductions could reduce, or in some
cases, eliminate, Federal funding of some local programs, and accordingly might
impose substantial increased expenditure requirements on affected localities. If
the State, the City or any of the public authorities were to suffer serious
financial difficulties jeopardizing their respective access to the public credit
markets, the marketability of notes and bonds issued by localities within the
State could be adversely affected. Localities also face anticipated and
potential problems resulting from certain pending litigation, judicial decisions
and long-range economic trends. Long-range potential problems of declining urban
population, increasing expenditures and other economic trends could adversely
affect localities and require increasing State assistance in the future.
LIMITING INVESTMENT RISKS
In addition to the limitations described under "Limiting Investment Risks"
in the Prospectus, the Funds are subject to the following investment
limitations:
None of the Funds may:
(i) purchase any securities that would cause more than 25% of the
value of their respective total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their
principal business activities in the same industry; provided that there is
no limitation: (a) in the case of the DBNA Treasury Money Market Fund or
SAI-21
<PAGE>
the DBNA Government Money Market Fund, with respect to investment in
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities; (b) in the case of the DBNA Money Market
Fund, with respect to investment in obligations issued or guaranteed by the
United States Government, its agencies or instrumentalities or with respect
to obligations of domestic banks and domestic branches of foreign banks;
and (c) in the case of the DBNA Tax-Exempt Money Market Fund and the DBNA
New York Tax-Exempt Money Market Fund (the "Tax-Exempt Funds"), with
respect to obligations issued or guaranteed by the United States Government
or its agencies or instrumentalities, or by any state or territory, any
possession of the United States, the District of Columbia, or any of their
authorities, agencies, instrumentalities, or political subdivisions. In
determining the industry of an issuer, wholly-owned finance companies will
be considered to be in the industries of their parents and utilities will
be divided according to their services;
(ii) make loans, except that: (a) each Fund may purchase and hold debt
instruments (including bonds, debentures or other obligations and
certificates of deposit, bankers' acceptances and fixed time deposits) in
accordance with its investment objectives and policies; (b) each Fund may
lend portfolio securities with a value not in excess of one-third of the
value of its total assets; and (c) the DBNA Money Market Fund may enter
into repurchase agreements with respect to portfolio securities;
(iii) purchase or sell real estate or interests in real estate limited
partnerships (other than municipal obligations or other money market
securities secured by real estate or interests therein or securities issued
by companies that invest in real estate or interests therein), commodities
or commodity contracts (including futures contracts), warrants or interests
in oil, gas, mineral or other exploration or development programs or
leases;
(iv) underwrite securities of other issuers, except to the extent that
the purchase of investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with any Fund's investment program may be deemed to be an
underwriting;
(v) purchase securities of other investment companies (except as part
of a merger, consolidation or reorganization or purchase of assets approved
by a Fund's shareholders); provided that a Fund may purchase shares of any
registered open-end investment company that determines its net asset value
per share based on the amortized cost or penny-rounding method, if
immediately after any such purchase the Fund does not (a) own more than 3%
of the outstanding voting stock of any one investment company, (b) invest
more than 5% of the value of its total assets in any one investment
company, or (c) invest more than 10% of the value of its total assets in
SAI-22
<PAGE>
the aggregate in securities of investment companies;
(vi) invest in or sell put options, call options, straddles, spreads,
or any combination thereof, except that the Funds may acquire rights to put
their portfolio securities in order to maintain liquidity.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value of a
Fund's portfolio securities will not constitute violation of such limitation.
For purposes of the investment limitations applicable to the Tax-Exempt
Funds, as well as for purposes of diversification under the 1940 Act, the
identification of the issuer of a municipal obligation depends on the terms and
conditions of the obligation. If the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from
those of the government creating the subdivision and the obligation is backed
only by the assets and revenues of the subdivision, such subdivision would be
regarded as the sole issuer. Similarly, in the case of a private activity bond,
if the bond is backed only by the assets and revenues of the non-governmental
user, the non-governmental user would be deemed to be the sole issuer. If in
either case the creating government or another entity guarantees an obligation,
the guarantee would be considered a separate security and be treated as an issue
of such government or entity.
The investment limitations described above and in the Prospectus with
respect to the Funds under "Limiting Investment Risks" are fundamental policies
of each of the Funds and may be changed only when permitted by law and approved
by the holders of a majority of such Fund's outstanding voting securities, as
described under "Capital Stock".
In order to permit the sale of their shares in certain states, any of the
Funds may make commitments more restrictive than the investment policies and
limitations described above and in the Prospectus. Should any such Fund
determine that any such commitment is no longer in its best interests, it will
revoke the commitment by terminating sales of its shares in the state involved.
MANAGEMENT
Directors and Officers
The principal occupations for the past five years of the Directors and
executive officers of the Company are listed below. Directors deemed to be
"interested persons" of the Company for purposes of the 1940 Act are indicated
by an asterisk.
SAI-23
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name and Address Age Position(s) Held with Principal Occupation(s) During Past 5 Years
Registrant
Edward C. Schmults 64 Director Member of the Board of Directors of GP Financial
68 Pheasant Lane Corp; Member of the Board of Trustees of The Edna
Greenwich, CT 06830 McConnell Clark Foundation; Senior Vice President-
External Affairs and General Counsel of GTE
Corporation (1984-1994); Deputy Attorney General of the
U.S.; Department of Justice (1981-1984); Partner,
White & Case (1965-1973 and 1977-1981); Director of
The Germany Fund, Inc. and The Future Germany Fund,
Inc.
Francis H. Schott 69 Director Member of the Board of Directors and the Executive
311 Cantrell Road Committee, Mutual of America; Member of the Board
Ridgewood, NJ 07450 of Directors of Federal Home Loan Bank of New
York; Senior Vice President and Chief Economist,
Equitable Life Assurance Society (1967-1991);
Director of The New Germany Fund, Inc.
Robert H. Wadsworth 55 Director President of Robert H. Wadsworth & Associates, Inc.
6732 E. Fanfol Drive Member of the Boards of Supervisory Directors of
Paradise Valley, AZ 85253 ML High Yield-Treasury Securities Fund N.V. and
ML High Yield-Treasury Securities Fund II N.V.;
Director of The Germany Fund, Inc. and The Future
Germany Fund, Inc.
G. Richard Stamberger* 48 President and CEO and President of DBAM NA (since 1995)
31 West 52nd Street Director and Managing Director of DBSC (since 1993);
New York, NY 10019 Managing Director of C.J. Lawrence, Inc.
(1990-1992) Managing Director of Prudential
Equity Management Associates at the Prudential
Insurance Co. of America (1984-1989); Chief
Executive Officer and Executive Vice President
of The Germany Fund, Inc., The New Germany
Fund, Inc. and The Future Germany Fund, Inc.
Walter Fabricius* 58 Director Managing Director of DBSC (since 1993); Director of
31 West 52nd Street DBSC Asset Management Limited (since 1989);
New York, NY 10019 Executive Vice President of Deutsche Bank Capital
Corporation ("DBCC") (1988-1992). Partner and
Director of Freudenberg & Co.
Robert R. Gambee 52 Executive Vice President, Director of DBSC (since 1993); Director of DBCC
31 West 52nd Street Secretary and Treasurer (1991-1992); First Vice President of DBCC (1987-
New York, NY 10019 1991); Vice President, Secretary and Treasurer of
The Germany Fund, Inc., The New Germany Fund,
Inc. and The Future Germany Fund, Inc.
Joseph Cheung 36 Vice President, Assistant Vice President (since 1994) and
31 West 52nd Street Assistant Secretary Associate (1991-1994) of DBSC; Senior
New York, NY 10019 and Assistant Accountant at Deloitte & Touche (prior thereto);
Treasurer Assistant Secretary and Assistant Treasurer of
The Germany Fund, Inc., The New Germany Fund,
Inc. and The Future Germany Fund, Inc.
* Directors deemed to be "interested persons" of the Company for purposes of the 1940 Act.
</TABLE>
SAI-24
<PAGE>
Name and Director Aggregate Compensation Total Compensation from
from Fund* other funds in Fund Complex
Edward C. Schmults --- $30,000**
Francis Schott --- $15,000**
Robert H. Wadsworth --- $45,750**
* Estimated for the Company's initial fiscal year commencing ______________
and ending ______________.
** Total compensation paid during the 1994 calendar year. Mr. Schott serves as
a director of one such fund, Mr. Schmults serves as a director of two and
Mr. Wadsworth of three other funds in the Fund complex.
The Directors and officers of the Company together as a group own less than
1% of the issued and outstanding shares of the Company.
Each Director of the Company serves until his or her successor is elected
and qualified, or until his or her earlier resignation or removal, as provided
in the Company's by-laws. Directors of the Company receive from the Company an
annual fee of $........ ($....... in the case of the Chairman) and a fee of
$..... for each meeting of the Board of Directors attended and are reimbursed
for all out-of-pocket expenses relating to attendance at such meetings. Officers
of the Company do not receive compensation from the Company for serving as
officers. No person who is a director, officer or employee of the investment
advisers of the Company serves as a director, officer or employee of the
Company.
Manager and Investment Adviser
Each of Deutsche Bank Securities Corporation ("DBSC") and Deutsche Asset
Management North America, Inc. ("DBAMNA") is a direct, wholly-owned subsidiary
of DB U.S. Financial Markets Holding Corporation, which is a wholly-owned
subsidiary of Deutsche Bank North America Holding Corp., which is in turn a
wholly-owned subsidiary of Deutsche Bank AG, a publicly held company trading on
the Frankfurt Stock Exchange.
Each of the Management Agreement and Investment Advisory Agreement of each
Fund (each, an "Agreement" and collectively, the "Agreements") provides that the
manager and the investment adviser, respectively, shall not be liable for any
error of judgment or for any loss suffered by the Fund in connection with the
matters to which the Agreement relates, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
duties and obligations thereunder.
Unless sooner terminated, an Agreement will remain in effect with respect
to a particular Fund until _________ 1997, and will continue from year to year
thereafter if such continuance is approved at least annually by the Company's
Board of Directors or by a vote of a majority (as defined under "Capital Stock")
of the outstanding shares of such Fund and, in either case, by a majority of the
Directors who are not parties to the Agreement or "interested persons" (as
defined in the 1940 Act) of any party by votes cast in person at a meeting
called for such purpose. Each Management Agreement is terminable by the Company
SAI-25
<PAGE>
or DBSC on not less than 60 days' written notice to the other party. Each
Investment Advisory Agreement is terminable by the Company, DBSC or DBAMNA on
not less than 60 days' written notice to the Company, DBSC or DBAMNA, as the
case may be, and will terminate automatically in the event of its assignment or
upon termination of the Management Agreement.
Custodian and Transfer Agent
Investors Bank & Trust Company ("IBT") serves as the Company's transfer
agent and dividend disbursing agent pursuant to a Transfer Agency and Services
Agreement (the "Transfer Agency Agreement") with the Company. Under the Transfer
Agency Agreement, IBT has agreed, among other things, to: (i) issue and redeem
shares of each Fund; (ii) transmit all communications by each Fund to its
shareholders of record, including reports to shareholders, dividend and
distribution notes and proxy materials for meetings of shareholders; (iii)
respond to correspondence by security brokers and others relating to its duties;
(iv) maintain shareholder accounts; and (v) make periodic reports to the Board
of Directors concerning the Funds operations.
IBT also serves as the Company's custodian pursuant to a Custodian
Agreement (the "Custodian Agreement") with the Company. The Custodian is located
at 89 South Street, Boston, MA 02111. Under the Custodian Agreement, the
Custodian has agreed to (i) maintain a separate account or accounts in the name
of each Fund; (ii) hold and disburse portfolio securities on account of each
Fund; (iii) collect and receive all income and other payments and distributions
on account of each Fund's portfolio securities; (iv) respond to correspondence
by security brokers and others relating to its duties; and (v) make periodic
reports to the Company's Board of Directors concerning the Funds' operations.
The Custodian is authorized under the Custodian Agreement to select one or more
banks or trust companies to serve as sub-custodian on behalf of the Funds,
provided that the Custodian remains responsible for the performance of all of
its duties under the Custodian Agreement.
SERVICE ORGANIZATIONS
As stated in the Prospectus for the Investors Classes, in accordance with
the Plan Pursuant to Rule 12b-1 (the "Plan") with respect to the Investors
Classes, the Company may enter into services agreements with broker-dealers,
banks and other financial institutions (each a "Service Organization"), pursuant
to which each such Investors Class may make payments to Service Organizations
that will not exceed, on an annualized basis, .25% of such Class' average daily
net assets for any activities or expenses primarily intended to result in the
sale of such Class' shares or expenses for the provision of shareholder services
to such Class' shareholders, including, but not limited to: (i) making payments
to Service Organizations to compensate them for the provision of marketing or
distribution services with respect to such Class' shares or for the provision of
certain shareholder services to such Class' shareholders. Although it is not
SAI-26
<PAGE>
currently contemplated, the Plan also permits each Investors Class to pay, or
reimburse the Fund's distributor, manager or other party, for (a) the
preparation, printing and distribution of prospectuses and sales literature
relating to such Class, communications to and with such Class' shareholders and
advertisements, (b) expenses for travel, communication, compensation and
benefits of sales and marketing personnel relating to such Class, and (c) the
portion of overhead allocable to promotion and marketing activities relating to
such Class, provided that payments under clause (ii) shall be made pursuant to
an agreement or agreements provided by the Board of Directors.
The Plan shall remain in effect until ______________ 1996, and from year to
year thereafter, but only so long as such continuance is specifically approved
at least annually by votes of a majority of both (a) the Directors of the
Company (the "Directors") and (b) those Directors of the Company (the
"Directors") and (b) those Directors who are not "interested persons" of the
Company (as defined in the 1940 Act) and have no direct or indirect financial
interest in the operation of the Plan or any agreements related to it (the
"Independent Directors"), cast in person at a meeting called for the purpose of
voting on the Plan.
The Plan requires that, at least quarterly, the Board of Directors must
review a written report prepared by the Treasurer of the Company setting forth
all the amounts expended pursuant to the Plan and the purposes therefor. Rule
12b-1 also requires that the selection and nomination of Directors who are not
"interested persons" of the Company be made by such Independent Directors.
Pursuant to the Plan, Deutsche Bank Trust Corporation ("DBTC"), an affiliate of
DBSC and DBAMNA, and the Company have entered into the Company's only services
agreement, namely a Marketing Services Agreement (the "Services Agreement").
Pursuant to the Services Agreement, DBTC (i) markets shares of the Investors
Class to prospective investors, including distribution of prospectuses and
statements of additional information and sales material approved by the Fund(s);
(ii) displays and makes prospectuses available on premises; and (iii) assists
customers in completing application forms, selecting and changing dividend and
other account options and opening custody accounts with DBTC. For such services
DBTC receives a fee, calculated daily and payable monthly, at the annual rate of
.25% of each Investors Class' average daily net assets that are attributable to
DBTC.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Investors Classes in connection with the investment of
fiduciary moneys in the Funds. Institutions, including banks regulated by state
banking authorities and the Board of Governors of the Federal Reserve System,
and investment advisers and other money managers subject to the jurisdiction of
the Commission, the Department of Labor or state securities commissions are
urged to consult their legal advisors before investing fiduciary moneys in the
Funds.
SAI-27
<PAGE>
PORTFOLIO TRANSACTIONS
DBAMNA has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Company's Board of Directors. DBAMNA is primarily responsible
for the portfolio decisions of the Funds, and the placing of the Funds'
portfolio decisions.
Portfolio securities normally will be purchased or sold from or to issuers
directly or to dealers serving as market makers for the securities at a net
price, which may include dealer spreads and underwriting commissions.
In placing orders, it is the policy of DBAMNA to obtain the best results
taking into account the dealer's general execution and operational facilities,
the type of transaction involved and other factors such as the dealer's risk in
positioning the securities involved. While DBAMNA generally seeks the best price
in placing its orders, the Funds may not necessarily be paying the lowest prices
available.
Under the 1940 Act, persons affiliated with the Company are prohibited from
dealing with the Company as a principal in the purchase and sale of securities
unless an exemptive order allowing such transactions is obtained from the
Commission. Each of the Funds may purchase securities from underwriting
syndicates of which DBSC or any of its affiliates is a member under certain
conditions, in accordance with the provisions of a rule adopted under the 1940
Act and any restrictions imposed by the Board of Governors of the Federal
Reserve System.
As investment adviser for the Funds, DBAMNA may, with respect to the Funds
it manages, in circumstances in which two or more brokers that are in a position
to offer comparable results for the Funds, give preference to a broker that has
provided statistical or other research services to them. By allocating
transactions in this manner, DBAMNA is able to supplement its research and
analysis with the views and information of other securities firms. Information
so received will be in addition to, and not in lieu of, the services required to
be performed by DBAMNA under its Investment Advisory Agreement, and the expenses
of DBAMNA will not necessarily be reduced as a result of the receipt of this
supplemental research information. Furthermore, research services furnished by
brokers through whom DBAMNA effects securities transactions for the Funds may be
used by it in servicing other accounts, and not all of these services may be
used by DBAMNA in connection with advising the Funds. The Funds normally will
not be entering into transactions on a brokerage basis.
DBAMNA and its affiliates deal, trade and invest for their own accounts in
the types of securities in which the Funds may invest and may have deposit, loan
and commercial banking relationships with the issuers of securities purchased by
a Fund.
Investment decisions for each Fund are made independently from those for
other accounts advised or managed by DBAMNA. Some of DBAMNA's other accounts may
also invest in the same securities as the Funds. When a purchase or sale of the
SAI-28
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same security is made at substantially the same time on behalf of a Fund and
another account managed by DBAMNA, the investments are allocated as to amount in
a manner that DBAMNA believes to be equitable to the Fund and such other
account. In some instances, this investment procedure may inadvertently affect
the price paid or received by a Fund or the size of the position obtained or
sold by such Fund. To the extent permitted by law, DBAMNA may aggregate the
securities to be sold or purchased for other accounts it manages in order to
obtain best execution.
DBAMNA may place portfolio transactions with securities firms that have
provided assistance in the distribution of shares of the Funds if it reasonably
believes that the quality of the transaction and the net price or commission is
comparable to what they would be with other qualified securities firms.
Transactions with affiliated broker-dealers will only be executed on an
agency basis in accordance with applicable Commission regulations.
DISTRIBUTOR
Shares of the Company are distributed continuously on a best efforts basis
and without a sales load by AMT Capital Services, Inc. (the "Distributor")
pursuant to a Distribution Agreement (the "Distribution Agreement") with the
Company.
The Distribution Agreement will continue in effect until _______ 1997 and
will continue from year to year thereafter if such continuance is approved at
least annually by the Company's Board of Directors or by vote of a majority of
the outstanding shares of the Company (as defined in the 1940 Act) and, in
either case by a majority of the Directors who are not parties to the
Distribution Agreement or "interested persons" (as defined in the 1940 Act) of
any party by votes cast in person at a meeting called for such purpose.
NET ASSET VALUE
As indicated under "Pricing of Shares" in the Prospectus, each Fund uses
the amortized cost method to determine the value of its portfolio securities
pursuant to Rule 2a-7 under the 1940 Act. The amortized cost method involves
valuing a security at its cost initially and thereafter accruing or amortizing
any discount or premium, as the case may be, over the period until maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price each Fund would receive if the security were sold. During
such periods, the yield to investors in such Fund may differ somewhat from that
obtained in a similar entity that uses available indications as to market value
to value its portfolio instruments.
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Rule 2a-7 provides that in order to value its portfolio using the amortized
cost method, each Fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase securities having remaining maturities (as
defined in Rule 2a-7) of thirteen months or less and invest only in securities
determined by the Company's Board of Directors to present minimal credit risks
and meet certain quality requirements. Pursuant to Rule 2a-7, the Board of
Directors has established procedures designed to stabilize, to the extent
reasonably possible, each Fund's price per share as computed for the purpose of
sales and redemptions at $1.00. Such procedures include review of each Fund's
portfolio holdings by the Board of Directors, at such intervals as it may deem
appropriate, to determine whether such Fund's net asset value calculated by
using available market quotations deviates from $1.00 per share based on
amortized cost. In the event the Board of Directors determines that a deviation
exists that may result in material dilution or other unfair results to investors
or existing shareholders, the Board of Directors will take such corrective
action as it regards as necessary and appropriate, including the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity, withholding dividends or establishing a net
asset value per share by using available market quotations.
The Company has filed an election pursuant to Rule 18f-1 under the 1940 Act
to pay in cash all requests for redemption by any shareholder of record of a
particular Fund, limited in amount with respect to each shareholder during any
90-day period to the lessor of (i) $250,000, or (ii) 1% of the net asset value
of such Fund at the beginning of such period.
DIVIDENDS
As stated in the Prospectus, the Company intends to maintain the net asset
value per share of the Funds at $1.00. As a result of a significant expense or
realized or unrealized loss incurred by any of the Funds, it is possible that
such Fund's net asset value per share may fall below $1.00. Should the Company
incur or anticipate any unusual or unexpected significant expense or loss which
would affect disproportionately the income of a Fund for a particular period,
the Board of Directors would at that time consider whether to adhere to the
present dividend policy with respect to the Funds or to revise it in order to
ameliorate to the extent possible the disproportionate effect of such expense or
loss on the income of the Fund experiencing such effect. Such expense or loss
may result in a shareholder's receiving no dividends for the period in which it
holds shares of a Fund and in its receiving upon redemption a price per share
lower than that which it paid.
YIELD
Each Fund makes available various yield information with respect to its
shares, including yield quotations based upon the seven-day period ended on the
date of calculation. In arriving at such quotations as to their respective
shares, each Fund first determines the net change during the period in value of
a hypothetical pre-existing account having a balance of one share at the
beginning of the period (such net change being inclusive of the value of any
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additional shares issued in connection with the distributions of net income as
well as net income accrued on both the original share and any such additional
shares but exclusive of realized gains and losses from the sale of securities
and unrealized appreciation and depreciation), then divides such net change by
the value of the account at the beginning of the period to obtain the base
period return, and then multiplies the base period return by 365/7.
In addition, each Fund may make available "compound effective yield"
quotations, computed by adding 1 to the base period return (calculated as
above), raising the sum to a power equal to 365 divided by 7, and subtracting 1
from the result.
With respect to the Tax-Exempt Funds, tax equivalent yields are computed by
dividing that portion of such Funds' yield that is tax-exempt by one minus a
stated income tax rate and adding the quotient to that portion, if any, of such
Funds' yield that is not tax-exempt.
Yield quotations provided by the Funds are carried to at least the nearest
hundredth of one percent. Yield quotations are based on historical earnings and
are not intended to indicate future performance.
ADDITIONAL INFORMATION CONCERNING TAXES
The following discussion is only a brief summary of certain additional tax
considerations affecting the Company, its Funds and its shareholders. No attempt
is made to present a detailed explanation of all federal, state, local and
foreign tax concerns, and the discussion set forth here and in the Prospectus is
not intended as a substitute for careful tax planning. Investors are urged to
consult their own tax advisers with specific questions relating to federal,
state, local or foreign taxes.
General
Each Fund intends to qualify to be treated as a regulated investment
company (a "RIC") under Subchapter M of the Code during the 199_ taxable year
and intends to continue to so qualify in subsequent years. Qualification as a
RIC requires, among other things, that each Fund: (a) derive at least 90% of its
gross income in each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
stock, securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stocks or securities; (b) derive less than 30% of its gross
income in each taxable year from the sale or other disposition of any of the
following held for less than three months: (i) stock or securities, (ii)
options, futures, or forward contracts, or (iii) foreign currencies (or foreign
currency options, futures or forward contracts) that are not directly related to
its principal business of investing in stock or securities (or options and
futures with respect to stocks or securities) (the ""30% limitation"); and (c)
diversify its holdings so that, at the end of each quarter of each taxable year,
(i) at least 50% of the market value of the Fund's assets is represented by
cash, cash items, United States Government securities, securities of other
regulated investment companies and other securities with such other securities
SAI-31
<PAGE>
limited, in respect of any issuer, to an amount not greater than 5% of the value
of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities (other than United States Government securities or the securities of
other regulated investment companies) of any one issuer.
As stated in the Prospectus, descriptions of tax consequences set forth in
the Prospectus and in this Statement of Additional Information are intended to
be a general guide. In addition, descriptions of state and local income tax
consequences set forth in the Prospectus have not been independently verified by
the Company, its investment adviser or their counsel and should not be relied
upon as authoritative.
Investors should consult their own tax advisers regarding specific
questions as to the federal, state, local and foreign tax consequences of
ownership of shares in any of the Funds.
Special Tax Considerations Pertaining to the Tax-Exempt Funds
Shares of the tax-exempt Funds would not be a suitable investment for
tax-exempt institutions and may not be a suitable investment for retirement
plans qualified under section 401 of the Code, H.R. 10 plans and individual
retirement accounts, because such plans and accounts are generally tax-exempt
and, therefore, would not gain any additional benefit from the receipt of
exempt-interest dividends from the tax-exempt Funds. Moreover, subsequent
distributions of such dividends to the beneficiaries will be taxable. In
addition, the tax-exempt Funds may not be an appropriate investment for entities
that are "substantial users" of facilities financed by private activity bonds or
"related persons" thereof. A "substantial user" is defined under United States
Treasury Regulations to include a non-exempt person who regularly uses a part of
such facilities in his trade or business and, unless such facility, or part
thereof, is constructed, reconstructed or acquired specifically for the
non-exempt person, whose gross revenue derived with respect to the facilities
financed by the issuance of bonds is more than 5% of the total revenue derived
by all users of such facilities. "Related persons" include certain related
natural persons, affiliated corporations, partnerships and their partners and
Sub- chapter S corporations and their shareholders.
All or a portion of the exempt-interest dividends distributed by the Tax
Free Funds may be included in calculating alternative minimum taxable income for
purposes of the alternative minimum tax imposed by the Code on both individual
and corporate taxpayers, and for purposes of the environmental tax imposed on
certain corporations by section 59A of the Code. Likewise, all or a portion of
the exempt-interest dividends received by certain foreign corporations may be
subject to the federal branch profits tax and all or a portion of the
exempt-interest dividends may be taxable to certain Subchapter S corporations
that have Subchapter C earnings and profits and substantial passive investment
income. In addition, the exempt-interest dividends may reduce the deduction for
loss reserves for certain insurance companies. Such corporations and insurance
companies, and taxpayers that may be subject to the alternative minimum tax,
should consult their tax advisers before investing in the Fund.
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Because the Tax Free Funds will distribute exempt-interest dividends,
interest on indebtedness incurred or continued to purchase or carry shares of
the Tax Free Funds may not be deductible for federal income tax purposes. The
Code may also require shareholders that receive exempt-interest dividends to
treat as taxable income a portion of certain otherwise nontaxable social
security and railroad retirement benefit payments.
All or a portion of a tax-exempt Fund's gain from the sale or redemption of
tax-exempt obligations attributable to market discount will be treated as
ordinary income rather than capital gain. This rule may increase the amount of
ordinary income dividends received by shareholders.
Backup Withholding
The Company may be required to withhold federal income tax at a rate of 31%
("backup withholding") from dividends (except shareholders of the tax-exempt
Funds to the extent that such Funds distribute exempt-interest dividends) and
redemption proceeds paid to non-corporate shareholders. This tax may be withheld
from dividends if (i) the payee fails to furnish the Company with the payee's
correct taxpayer identification number, (ii) the Internal Revenue Service
notifies the Company that the payee has failed to report properly certain
interest and dividend income to the Internal Revenue Service and to respond to
notices to that effect, or (iii) when required to do so, the payee fails to
certify that he or she is not subject to backup withholding. Redemption proceeds
may be subject to withholding under the circumstances described in (i) above.
CAPITAL STOCK
For additional information as to the organization and capital stock of the
Company, see "Organization and Capital Stock" in the Prospectus.
As used in the Prospectus and in this Statement of Additional Information,
the term "majority", when referring to the approvals to be obtained from
shareholders in connection with matters affecting any particular Fund or class
thereof (e.g., approval of investment advisory contracts), means the vote of the
lesser of (i) 67% of the shares of that Fund or class, as the case may be,
represented at a meeting if the holders of more than 50% of the outstanding
shares of such Fund or class are present in person or by proxy, or (ii) more
than 50% of the outstanding shares of such Fund or class. Shareholders are
entitled to one vote for each full share held and the fractional votes for
fractional shares held.
The By-Laws of the Company provide that the Company shall not be required
to hold a meeting of shareholders in any year in which the election of the
Directors to the Company's Board of Directors is not required to be acted upon
under the 1940 Act.
SAI-33
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Each share of a particular class of a particular Fund represents an equal
proportionate interest in that class with each other share of the same class and
is entitled to such dividends and distributions out of the income earned on the
assets belonging to that class as are declared in the discretion of the
Company's Board of Directors. In the event of the liquidation or dissolution of
the Company, shares of a class are entitled to receive the assets attributable
to that class that are available for distribution and a proportionate
distribution, based upon the relative net assets of all classes of the Company,
of any general assets of the Company that are not attributable to any Fund that
are available for distribution. Shareholders are not entitled to any preemptive
or conversion rights.
In accordance with the Company's Articles of Incorporation, the management
fee is a Fund expense and therefore is allocated to each class of the Fund on
the basis of the relative aggregate net asset value of the issued shares of each
such class. Subject to the provisions of the Company's Articles of
Incorporation, determinations by the Board of Directors as to the direct and
allocable liabilities, and the allocable portion of any general assets of the
Company, with respect to a particular Fund are conclusive.
AUDITORS
The Statement of Assets and Liabilities of the DBNA Treasury Money Market
Fund as of __________, 1995, which appears in this Statement of Additional
Information has been included herein in reliance on the report of Deloitte &
Touche LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing. Deloitte & Touche LLP has offices at Two World Financial Center, New
York, NY 10281.
[AUDITED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS]
SAI-34
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PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Part B - DBNA Investments, Inc. Financial Statements:
Statement of Assets and Liabilities dated _____________, 1995.
(b) Exhibits:
Exhibit
Number Description
- ------- -----------
1 -- Registrant's Articles of Incorporation.
2 -- Registrant's form of By-Laws.
3 -- None.
4(a) -- Forms of Stock Certificate for shares of the DBNA Treasury Money
Market Fund, Institutional Class and Investors Class, respectively.*
4(b) -- Forms of Stock Certificate for shares of the DBNA Government Money
Market Fund, Institutional Class and Investors Class, respectively.*
4(c) -- Forms of Stock Certificate for shares of the DBNA Money Market Fund,
Institutional Class and Investors Class, respectively.*
4(d) -- Forms of Stock Certificate for shares of the DBNA Tax-Exempt Money
Market Fund, Institutional Class and Investors Class, respectively.*
4(e) -- Forms of Stock Certificate for shares of the DBNA New York Tax-Exempt
Money Market Fund, Institutional Class and Investors Class,
respectively.*
4(f) -- Selected portion of Registrant's Articles of Incorporation and
By-Laws relating to the rights of stockholders.
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Exhibit
Number Description
- ------- -----------
5(a) -- Form of Management Agreement between Registrant on behalf of a Fund
and Deutsche Bank Securities Corporation.
5(b) -- Form of Investment Advisory Agreement between Deutsche Bank
Securities Corporation and Deutsche Asset Management North
America, Inc.
6 -- Distribution Agreement between Registrant and AMT
Capital Services, Inc.*
7 -- None.
8 -- Custodian Agreement between Registrant and Investors Bank & Trust
Company.*
9(a) -- Transfer Agency and Service Agreement between Registrant and
Investors Bank & Trust Company.*
10 -- Opinion and consent of Sullivan & Cromwell.*
11(a) -- Report of Deloitte & Touche LLP.*
11(b) -- Consent of Deloitte & Touche LLP.*
12 -- None.
13 -- Initial Subscription Agreement.*
14 -- None.
15(a) -- Plan Pursuant to Rule 12b-1.
15(b) -- Marketing Services Agreement.
16 -- None.
17 -- None.
18 -- Rule 18f-3 Plan.*
- ------------
* To be filed by Pre-Effective Amendment
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Item 25. Persons Controlled by or under Common Control with Registrant.
As of the date of the Prospectus, ______________ is a control person of the
Registrant because it owns all of the shares of the Treasury Fund.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class at , 1995
-------------- ------------------------
Shares of DBNA Treasury Money Market
Fund, par value $.001 per share......... ................... 0
Shares of DBNA Government Money Market
Fund, par value $.001 per share......... ................... 0
Shares of DBNA Money Market Fund, par
value $.001 per share................... ................... 0
Shares of DBNA Tax-Exempt Money Market
Fund, par value $.001 per share......... ................... 0
Shares of DBNA New York Tax-Exempt
Money Market Fund, par value $.001 per
share................................... ................... 0
Item 27. Indemnification.
Reference is made to Article VIII of Registrant's Articles of
Incorporation, Article IV of Registrant's By-Laws [and Paragraph [5] of the
Distribution Agreement between Registrant and AMT Capital Services, Inc.].
Section 2-418 of the Maryland General Corporation Law reads as follows:
"2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
(a) In this section the following words have the meaning indicated.
(1) "Director" means any person who is or was a director of a corporation
and any person who, while a director of a corporation, is or was serving at the
request of the
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the corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
other enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or foreign predecessor entity of a
corporation in a merger, consolidation, or other transaction in which the
predecessor's existence ceased upon consummation of the transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a director, the office of director in
the corporation; and
(ii) When used with respect to a person other than a director as
contemplated in subsection (j), the elective or appointive office in the
corporation held by the officer, or the employment or agency relationship
undertaken by the employee or agent in behalf of the corporation.
(iii) "Official capacity" does not include service for any other
foreign or domestic corporation or any partnership, joint venture, trust,
other enterprise, or employee benefit plan.
(5) "Party" includes a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(6) "Proceeding" means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative.
(b)(1) A Corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity unless it is established that:
(i) the act or omission of the director was material to the matter
giving rise to the proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and deliberate dishonesty; or
(ii) the director actually received an improper personal benefit in
money, property, or services; or
(iii) In the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful.
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(2)(i) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.
(ii) However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made in respect of any proceeding
in which the director shall have been adjudged to be liable to the
corporation.
(3) (i) The termination of any proceeding by judgment, order, or
settlement does not create a presumption that the director did not meet the
requisite standard of conduct set forth in this subsection.
(ii) The termination of any proceeding by conviction, or a plea of
nolo contendere or its equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption that the director did
not meet that standard of conduct.
(c) A director may not be indemnified under subsection (B) of this section
in respect of any proceeding charging improper personal benefit to the director,
whether or not involving action in the director's official capacity, in which
the director was adjudged to be liable on the basis that personal benefit was
improperly received.
(d) Unless limited by the charter:
(1) A director who has been successful, on the merits or otherwise, in the
defense of any proceeding referred to in subsection (B) of this section shall be
indemnified against reasonable expenses incurred by the director in connection
with the proceeding.
(2) A court of appropriate jurisdiction upon application of a director and
such notice as the court shall require, may order indemnification in the
following circumstances:
(i) If it determines a director is entitled to reimbursement under
paragraph (1) of this subsection, the court shall order indemnification, in
which case the director shall be entitled to recover the expenses of
securing such reimbursement; or
(ii) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances,
whether or not the director has met the standards of conduct set forth in
subsection (b) of this section or has been adjudged liable under the
circumstances described in subsection (c) of this section, the court may
order such indemnification as the court shall deem proper. However,
indemnification with respect to any proceeding by or in the right of the
corporation or in which liability shall have
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been adjudged in the circumstances described in subsection (c) shall be limited
to expenses.
(3) court of appropriate jurisdiction may be the same court in which the
proceeding involving the director's liability took place.
(e)(1) Indemnification under subsection (b) of this section may not be made
by the corporation unless authorized for a specific proceeding after a
determination has been made that indemnification of the director is permissible
in the circumstances because the director has met the standard of conduct set
forth in subsection (b) of this section.
(2) Such determination shall be made:
(i) By the board of directors by a majority vote of a quorum
consisting of directors not, at the time, parties to the proceeding, or, if
such a quorum cannot be obtained, then by a majority vote of a committee of
the board consisting solely of two or more directors not, at the time,
parties to such proceeding and who were duly designated to act in the
matter by a majority vote of the full board in which the designated
directors who are parties may participate;
(ii) By special legal counsel selected by the board of directors or a
committee of the board by vote as set forth in subparagraph (i) of this
paragraph, or, if the requisite quorum of the full board cannot be obtained
therefor and the committee cannot be established, by a majority vote of the
full board in which director [sic] who are parties may participate; or
(iii) By the shareholders.
(3) Authorization of indemnification and determination as to reasonableness
of expenses shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses shall be
made in the manner specified in subparagraph (ii) of paragraph (2) of this
subsection for selection of such counsel.
(4) Shares held by directors who are parties to the proceeding may not be
voted on the subject matter under this subsection.
(f)(1) Reasonable expenses incurred by a director who is a party to a
proceeding may be paid or reimbursed by the corporation in advance of the final
disposition of the proceeding upon receipt by the corporation of:
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(i) A written affirmation by the director of the director's good faith
belief that the standard of conduct necessary for indemnification by the
corporation as authorized in this section has been met; and
(ii) A written undertaking by or on behalf of the director to repay
the amount if it shall ultimately be determined that the standard of
conduct has not been met.
(2) The undertaking required by subparagraph (ii) of paragraph (1) of this
subsection shall be an unlimited general obligation of the director but need not
be secured and may be accepted without reference to financial ability to make
the repayment.
(3) Payments under this subsection shall be made as provided by the
charter, bylaws, or contract or as specified in subsection (e) of this section.
(g) The indemnification and advancement of expenses provided or authorized
by this section may not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director may be entitled under the
charter, the bylaws, a resolution of shareholders or directors, an agreement or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office.
(h) This section does not limit the corporation's power to pay or reimburse
expenses incurred by a director in connection with an appearance as a witness in
a proceeding at a time when the director has not been made a named defendant or
respondent in the proceeding.
(i) For purposes of this section:
(1) The corporation shall be deemed to have requested a director to serve
an employee benefit plan where the performance of the director's duties to the
corporation also imposes duties on, or otherwise involves services by, the
director to the plan or participants or beneficiaries of the plan;
(2) Excise taxes assessed on a director with respect to an employee benefit
plan pursuant to applicable law shall be deemed fines; and
(3) Action taken or omitted by the director with respect to an employee
benefit plan in the performance of the director's duties for a purpose
reasonably believed by the director to be in the interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.
(j) Unless limited by the charter:
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(1) An officer of the corporation shall be indemnified as and to the extent
provided in subsection (d) of this section for a director and shall be entitled,
to the same extent as a director, to seek indemnification pursuant to the
provisions of subsection (d);
(2) A corporation may indemnify and advance expenses to an officer,
employee, or agent of the corporation to the same extent that it may indemnify
directors under this section; and
(3) A corporation, in addition, may indemnify and advance expenses to an
officer, employee, or agent who is not a director to such further extent,
consistent with law, as may be provided by its charter, bylaws, general or
specific action of its board of directors or contract.
(k)(1) A corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the corporation,
or who, while a director, officer, employee, or agent of the corporation, is or
was serving at the request of the corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position, whether or not the
corporation would have the power to indemnify against liability under the
provisions of this section.
(2) A corporation may provide similar protection, including a trust fund,
letter of credit, or surety bond, not inconsistent with this section.
(3) The insurance or similar protection may be provided by a subsidiary or
an affiliate of the corporation.
(l) Any indemnification of, or advance of expenses to, a director in
accordance with this section, if arising out of a proceeding by or in the right
of the corporation, shall be reported in writing to the shareholders with the
notice of the next stockholders' meeting or prior to the meeting."
Item 28. Business and Other Connections of Investment Adviser
See "Investment Adviser" in the Prospectus and "Management-Investment
Adviser" in the Statement of Additional Information. Information as to the
directors and officers of the Adviser is included in its Form ADV filed with the
Commission and is incorporated herein by reference thereto.
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Item 29. Principal Underwriters
(a) AMT Capital Services, Inc. ("AMT") is the Fund's principal underwriter.
AMT also acts as a principal underwriter to TIFF Fund, FFTW Funds and AMT
Capital Funds.
(b) Not applicable
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder will be
maintained at the offices of Investors Bank & Trust Company, 89 South Street,
Boston, MA 02111, Deutsche Asset Management North America, Inc., 31 West 52nd
Street, New York, New York 10019 and Deutsche Bank Securities Corporation, 31
West 52nd Street, New York, New York 10019.
Item 31. Management Services
None
Item 32. Undertakings
Registrant undertakes that it will file:
(a) an amendment to the registration statement with certified financial
statements showing the initial capital received before accepting subscriptions
from any persons in excess of 25 if the Registrant proposes to raise its initial
capital pursuant to Section 14(a)(3) of the 1940 Act [15 U.S.C. 80a-14(a)(3)];
and
(b) a post-effective amendment, using financial statements which need not
be certified, within four to six months from the effective date of the
Registrant's registration statement under the Securities Act of 1933, as
amended.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York, and the State of New York on the 30th day
of June 1995.
DBNA INVESTMENTS, INC.
By: /s/ G. RICHARD STAMBERGER
----------------------------
G. Richard Stamberger,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ G. RICHARD STAMBERGER Director and President June 30, 1995
- --------------------------- (Chief Executive Officer)
G. Richard Stamberger
/S/ WALTER FABRICIUS Director June 30, 1995
- ---------------------------
Walter Fabricius
/S/ ROBERT R. GAMBEE Executive Vice President, June 30, 1995
- --------------------------- Secretary and Treasurer
Robert R. Gambee (Chief Financial and
Accounting Officer)
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EXHIBIT INDEX
1 Registrant's Articles of Incorporation.
2 Registrant's form of By-Laws.
4(f) Selected portion of Registrant's Articles of Incorporation and By-Laws
relating to the rights of stockholders.
5(a) Form of Management Agreement between Registrant on behalf of a Fund and
Deutsche Bank Securities Corporation.
5(b) Form of Investment Advisory Agreement between Deutsche Bank Securities
Corporation and Deutsche Asset Management North America, Inc.
15(a) Plan Pursuant to Rule 12b-1.
15(b) Marketing Services Agreement.
ARTICLES OF INCORPORATION
OF
DBNA INVESTMENTS, INC.
ARTICLE I
Incorporator
I, the incorporator, Norman Gretzinger, whose post office address is 250
Park Avenue, New York, New York 10177, being at least eighteen years of age, am,
under and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations, forming a corporation.
ARTICLE II
Name
The name of the corporation is DBNA INVESTMENTS, INC. (the "Corporation").
ARTICLE III
Purposes
The purpose for which the Corporation is formed is to act as an open-end
investment company of the management type registered as such with the Securities
and Exchange Commission pursuant to the Investment Company Act of 1940 and to
exercise and generally to enjoy all of the powers, rights and privileges granted
to, or conferred upon, corporations by the General Laws of the State of Maryland
now or hereafter in force.
<PAGE>
ARTICLE IV
Principal Office and Resident Agent
The post office address of the place at which the principal office of the
Corporation in the State of Maryland is located is c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202.
The name of the Corporation's resident agent is The Corporation Trust
Incorporated, and its post office address is 32 South Street, Baltimore,
Maryland 21202. Said resident agent is a corporation of the State of Maryland.
ARTICLE V
Common Stock
Section 1. (a) The total number of shares of stock of all series and
classes that the Corporation has authority to issue is 10,000,000,000 shares of
Common Stock (individually, a "Share" and collectively, the "Shares") with a par
value of $.001 per share, having an aggregate par value of $10,000,000. The
Shares on the date hereof constitute five series, designated as:
"DBNA Treasury Money Market Fund"
"DBNA Government Money Market Fund"
"DBNA Money Market Fund"
"DBNA Tax-Exempt Money Market Fund" and
"DBNA New York Tax-Exempt Money Market Fund"
each consisting of 2,000,000,000 Shares (such five series, together with any
further series of Shares from time to time created by the Board of Directors,
being herein referred to
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individually as a "Series" and collectively as the "Series"). The Board of
Directors may, from time to time and without stockholder action, classify Shares
of a particular Series into one or more additional classes of that Series, the
voting, dividend, liquidation and other rights of which shall differ from the
classes of Shares of that Series to the extent provided in Articles
Supplementary for such additional class, such Articles Supplementary to be filed
for record with the appropriate authorities of the State of Maryland. Initially,
the Shares of each Series shall each consist of two classes, designated as the
"Institutional" and "Investors" classes of such Series, each class consisting,
until further changed, of the lesser of (x) 2,000,000,000 Shares or (y) the
number of Shares that could be issued by issuing all of the Shares of Common
Stock of that Series less the total number of Shares of all other classes of
Common Stock of that Series then issued and outstanding (such classes, together
with any further class or classes of any Series from time to time created by the
Board of Directors, being herein referred to individually as a "Class" and
collectively as "Classes"). Any reference herein to a Series shall, unless
otherwise indicated, refer to all Shares of any Class or Classes of such Series.
The Board of Directors of the Corporation shall have the power and authority (a)
to increase and decrease the aggregate number of Shares of stock or the number
of Shares of stock
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of any Series or Class that the Corporation has authority to issue and (b) to
classify or reclassify (including classification as Series or Classes) any
unissued Shares from time to time by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of such unissued
Shares, provided that, upon the creation of any Class or Classes with respect to
any Series not having a Class, the Board of Directors shall, for purposes of
identification, also have the power and authority to designate a Class name for
such Series.
(b) A description of the relative preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of all Series (or Classes thereof) of Shares
is as follows, unless otherwise set forth in Articles Supplementary filed with
the Maryland State Department of Assessments and Taxation describing any further
Series or Class or Classes from time to time created by the Board of Directors:
(i) Assets Belonging to Series. All consideration received by the
Corporation for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds thereof, including
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any proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to that Series for
all purposes, subject only to the rights of creditors, and shall be so
recorded upon the books of account of the Corporation. Such consideration,
assets, income, earnings, profits and proceeds, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds, in
whatever form the same may be, together with any General Asset Items (as
hereinafter defined) allocated to that Series as provided in the following
sentence, are herein referred to as "assets belonging to" that Series. In
the event that there are any assets, income, earnings, profits or proceeds
thereof, funds or payments that are not readily identifiable as belonging
to any particular Series (collectively, "General Asset Items"), the Board
of Directors shall allocate such General Asset Items to and among any one
or more of the Series created from time to time in such manner and on such
basis as it, in its sole discretion, deems fair and
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<PAGE>
equitable; and any General Asset Items so allocated to a particular Series
shall belong to that Series. Each such allocation by the Board of Directors
shall be conclusive and binding upon the stockholders of all Series for all
purposes.
(ii) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged with the liabilities of the Corporation
in respect of that Series and with all expenses, costs, charges and
reserves attributable to that Series, and shall be so recorded upon the
books of account of the Corporation. Such liabilities, expenses, costs,
charges and reserves, together with any General Liability Items (as
hereinafter defined) allocated and charged to that Series as provided in
the following sentence, are herein referred to as "liabilities belonging
to" that Series. In the event there are any general liabilities, expenses,
costs, charges or reserves of the Corporation that are not readily
identifiable as belonging to any particular Series (collectively, "General
Liability Items"), the Board of Directors shall allocate and charge such
General Liability Items to and among any one or more of the Series created
from time to time in such manner and on such basis as the Board of
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Directors in its sole discretion deems fair and equitable; and any General
Liability Items so allocated and charged to a particular Series shall
belong to that Series. Each such allocation and charge by the Board of
Directors shall be conclusive and binding upon the stockholders of all
Series for all purposes.
(iii) Class Variations. With respect to any Series having two or more
Classes, the Board of Directors may allocate assets or liabilities
belonging to such Series between or among its Classes in such manner and on
such basis as the Board of Directors in its sole discretion deems fair and
equitable. Each such allocation by the Board of Directors shall be
conclusive and binding upon the stockholders of all Classes for all
purposes. Any Class may be subject to such sales loads, contingent deferred
sales charges, Rule 12b-1 fees, administrative fees, service fees or other
fees, however designated, in such amounts as may be established from time
to time by the Board of Directors and set forth in the then current
prospectus for such Class. Expenses related solely to a particular Class of
a Series (including, without limitation, distribution expenses under a Rule
12b-1 plan and administrative
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<PAGE>
expenses under an administrative or service agreement, plan or other
arrangement, however designated) shall be borne by that Class and shall be
appropriately reflected in the manner determined by the Board of Directors
in the net asset value, dividends, distributions and liquidation rights of
the Shares of that Class. In the absence of any such allocation by the
Board of Directors, the assets or liabilities of a Series shall be
allocated to each Class on the basis of the relative aggregate net asset
value of the issued Shares of such Class.
(iv) Dividends. Dividends and distributions from funds legally
available therefor on Shares of a particular Class may be paid to the
holders of Shares of that Class at such times, in such amounts, in such
manner, from such of the income and capital gains, accrued or realized,
from the assets belonging to that Class, after providing for actual and
accrued liabilities belonging to that Class, and as of such date, as the
Board of Directors may determine and need not be individually declared, but
may be declared and paid in accordance with a formula adopted by the Board
(whether or not the amount of dividend or
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<PAGE>
distribution so declared can be calculated at the time of such
declaration).
(v) Liquidation. In the event of the liquidation or dissolution of the
Corporation, the stockholders of each Class that has been created shall be
entitled to receive, as a Class, when and as declared by the Board of
Directors, the excess of the assets belonging to that Class over the
liabilities belonging to that Class. The assets so distributable to the
stockholders of any particular Class shall be distributed among such
stockholders in proportion to the number of Shares of that Class held by
them and recorded on the books of the Corporation. Any vote authorizing
liquidation of a particular Class or Classes or proceedings for their
dissolution may authorize the Board of Directors to determine, as provided
herein, and to the extent provision is not made herein, in accordance with
generally accepted accounting principles, what constitute the assets of the
Corporation belonging to a particular Class available for distribution to
stockholders of that Class and may divide, or authorize the Board of
Directors to divide, such assets between or among the stockholders of that
Class in such manner that every stockholder of that Class will receive a
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<PAGE>
proportionate amount of the value of such assets (determined as aforesaid)
belonging to that Class upon such liquidation or dissolution.
(vi) Voting. Unless otherwise required by the Investment Company Act
of 1940 or any rules, regulations or orders issued thereunder
(collectively, the "Investment Company Act") or other applicable law, on
each matter submitted to vote of the stockholders, each holder of a Share
shall be entitled to one vote for each such Share and a fractional vote for
each fractional Share, standing in such holder's name on the books of the
Corporation irrespective of the Series or Class thereof and all Shares of
all Series and Classes shall vote as a single class and not by Series or
Class ("single class voting"); provided, however, that (A) as to any matter
with respect to which a separate vote of any Series or Class is required by
the Investment Company Act or would be required under the Maryland General
Corporation Law, such requirements as to a separate vote by that Series or
Class shall apply in lieu of single class voting as described above, except
that to the extent permitted by the Investment Company Act and the Maryland
General Corporation Law, the Shares of any such Series or Classes shall
vote together
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<PAGE>
as a single class and not by Series or Class; (B) in the event that the
separate vote requirements referred to in (A) above apply with respect to
one or more Classes of a Series then, subject to (D) below, the Shares of
all other Classes of that Series shall vote as a single class; (C) in the
event that the separate vote requirements referred to in (A) above apply
with respect to one or more Series, then, subject to (B) above, the Shares
of all Classes of each such Series shall vote together as a single class
and, subject to (D) below, the Shares of all other Series shall vote as a
single class; and (D) as to any matter that does not affect the interest of
a particular Series or Class, only the holders of Shares of the one or more
affected Series or Classes shall be entitled to vote.
(vii) Equality. All Shares of each particular Class shall represent an
equal proportionate interest in the assets belonging to that Class (subject
to the liabilities belonging to that Class) and each Share of any
particular Class shall be equal to each other Share of that Class, but the
provisions of this sentence shall not restrict any distinctions permissible
under these Articles of Incorporation that may exist with
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<PAGE>
respect to stockholder elections to receive dividends or distributions in
cash or Shares of the same Class or that may otherwise exist with respect
to dividends and distributions on Shares of the same Class.
(viii) Net Asset Value. The net asset value of each Share of a
particular Class shall be determined in good faith pursuant to the
direction of the Board of Directors in a manner not inconsistent with the
Investment Company Act.
(ix) Redemption. (A) All Shares now or hereafter authorized shall be
subject to redemption and redeemable at the option of the stockholder, in
the sense used in the General Corporation Law of the State of Maryland.
Each holder of Shares of a particular Class, upon request to the
Corporation accompanied by surrender of the appropriate stock certificate
or certificates, if any, in proper form for transfer, shall be entitled to
require the Corporation to redeem all or any part of the Shares of that
Class standing in the name of such holder on the books of the Corporation
at a redemption price per Share based on the net asset value per Share of
that Class determined in accordance with Section 1(b)(viii) of Article V of
these Articles
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<PAGE>
of Incorporation, less any redemption fee or a contingent deferred sales
load permitted under applicable law and authorized by the Board of
Directors for that Class.
(B) Notwithstanding Section 1(ix) of Article V of these Articles of
Incorporation, the Board of Directors of the Corporation may suspend the
right of the holders of Shares of a particular Series or Class to require
the Corporation to redeem such Shares or may suspend any voluntary purchase
of such Shares and may postpone the date of payment for the foregoing for
more than seven days after surrender of such Shares to the Corporation for
such purpose:
(i) for any period (A) during which the New York Stock Exchange
is closed other than customary weekend and holiday closings, or (B)
during which trading on the New York Stock Exchange is restricted;
(ii) for any period during which an emergency, as defined by the
rules of the Securities and Exchange Commission or any successor
thereto, exists as a result of which (A) disposal by the Corporation
of securities owned by it is not reasonably practicable, or (B) it is
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<PAGE>
not reasonably practicable for the Corporation fairly to
determine the value of its net assets; or
(iii) for such periods as the Securities and Exchange Commission
or any successor thereto may by order permit for the protection of
stockholders of the Corporation.
(C) All Shares now or hereafter authorized shall be subject to
redemption and redeemable at the option of the Corporation. The Board of
Directors may by resolution, without the vote or consent of stockholders,
from time to time authorize the Corporation to require the redemption of
all or any part of the outstanding Shares of a particular Class upon the
sending of written notice thereof to each stockholder any of whose Shares
are to be so redeemed and upon such terms and conditions as the Board of
Directors shall deem advisable, out of funds legally available therefor, at
a redemption price per Share based on the net asset value per Share of that
Class determined in accordance with Section 1(b)(viii) of Article V of
these Articles of Incorporation, less any redemption fee or contingent
deferred sales load permitted under
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<PAGE>
applicable law and authorized by the Board of Directors for that Class, and
to take all other steps deemed necessary or advisable in connection
therewith.
(D) The Board of Directors may by resolution from time to time
authorize the repurchase by the Corporation, either directly or through an
agent, of Shares of a particular Class upon such terms and conditions and
for such consideration as the Board of Directors shall deem advisable out
of funds legally available therefor at prices not in excess of their net
asset value determined in accordance with Section 1(b)(viii) of Article V
of these Articles of Incorporation and to take all other steps deemed
necessary or advisable in connection therewith.
(E) Except as otherwise permitted by the Investment Company Act or
Section 1(ix)(B) of Article V of these Articles of Incorporation, payment
of the redemption or repurchase price of Shares of a particular Class
surrendered to the Corporation for redemption pursuant to the provisions of
Section 1(ix)(A) or (C) of Article V of these Articles of Incorporation or
for repurchase by the Corporation pursuant to the provisions of Section
1(ix)(D) of Article V shall
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<PAGE>
be made by the Corporation within seven days after surrender of such Shares
to the Corporation for such purpose. Any such payment may be made in whole
or in part in portfolio securities of the Series to which the Shares relate
or in cash, as the Board of Directors shall deem advisable, and no
stockholder shall have the right, other than as determined by the Board of
Directors, to have his Shares redeemed or repurchased in portfolio
securities.
(F) In the absence of any specification as to the purposes for which
Shares of a particular Class are redeemed or repurchased by the
Corporation, all Shares so redeemed or repurchased shall be deemed to be
acquired for retirement in the sense contemplated by the laws of the State
of Maryland. Shares retired by repurchase or redemption shall thereafter
have the status of authorized but unissued Shares.
Section 2. (a) The presence in person or by proxy of the holders of record
of one-third of the Shares issued and outstanding and entitled to vote thereat
shall constitute a quorum for the transaction of any business at all meetings of
the stockholders except as otherwise provided by law or in these Articles of
Incorporation.
(b) On any given matter, the presence at any meeting, in person or by
proxy, of holders of record of less
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than one-third of the Shares issued and outstanding and entitled to vote thereat
shall not prevent action at such meeting upon any matter or matters that may
properly come before the meeting, if there shall be present thereat, in person
or by proxy, holders of record of the number of Shares required for action in
respect of such other matter or matters.
Section 3. Notwithstanding any provision of the General Laws of the State
of Maryland requiring action to be taken or authorized by the affirmative vote
of the holders of a designated proportion greater than a majority of the Shares
of all Series or of the Shares of one or more Series or Classes, as the case may
be, entitled to vote thereon, such action shall be valid and effective if taken
or authorized by the affirmative vote of the holders of a majority of the Shares
of all Series or of one or more Series or Classes, as the case may be,
outstanding and entitled to vote thereon pursuant to the provisions of these
Articles of Incorporation.
Section 4. No holder of Shares shall, as such holder, have any preemptive
right to purchase or subscribe for any part of any new or additional issue of
stock of any Series or Class, or of rights or options to purchase any stock, or
of securities convertible into, or carrying rights or options to purchase, stock
of any Series or Class, whether now or hereafter authorized or whether issued
for
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money for a consideration other than money or by way of a dividend or otherwise,
and all such rights are hereby waived by each holder of capital stock and any
other Series or Class of stock or securities of the Corporation that may
hereafter be created.
Section 5. All persons who shall acquire any of the Shares shall acquire
the same subject to the provisions of these Articles of Incorporation.
ARTICLE VI
Directors
The initial number of directors of the Corporation shall be two, which
shall be the minimum number of directors for so long as there is only one or
fewer shareholders. The names of the directors who shall act as such until the
first annual meeting and until their successors are duly elected and qualified
are: Walter Fabricius and G. Richard Stamberger. Upon such time as the
Corporation has three or more stockholders, the minimum number of directors
shall be increased to three in accordance with the provisions of Section 2-402
of the Maryland General Corporation Law. However, the By-Laws of the Corporation
may fix the number of directors at a number other than three and may authorize
the Board of Directors, by the vote of a majority of the entire Board of
Directors, to increase or decrease the number of directors within a limit
specified in the By-Laws,
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provided that in no case shall the number of directors be less than three, and
to fill the vacancies created by any such increase in the number of directors.
Unless otherwise provided by the By-Laws of the Corporation, the directors of
the Corporation need not be stockholders.
The By-Laws of the Corporation may divide the Directors of the Corporation
into classes and prescribe the tenure of office of the several classes, except
that the term of office of a director may not be longer than five years or,
except in the case of an initial or substitute director, shorter than the period
between annual meetings, and the term of office of at least one class shall
expire each year.
ARTICLE VII
Miscellaneous
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation, and for creating,
defining, limiting and regulating the powers of the Corporation, the directors
and the stockholders.
Section 1. The Board of Directors shall have the management and control of
the property, business and affairs of the Corporation and is hereby vested with
all the powers possessed by the Corporation itself so far as is not inconsistent
with law or these Articles of Incorporation.
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In furtherance and without limitation of the foregoing provisions, it is
expressly declared that, subject to these Articles of Incorporation, the Board
of Directors shall have power:
(a) To make, alter, amend or repeal from time to time By-Laws of the
Corporation except as such power may otherwise be limited in the By-Laws.
(b) To issue and sell Shares of all Series and Classes, whether now or
hereafter authorized.
(c) To determine (or to delegate to others pursuant to its direction),
in good faith, so far as accounting matters are involved, in accordance
with generally accepted accounting principles, the amount of assets,
obligations or liabilities of the Corporation or any Series or Class
thereof, the amount of net income of the Corporation or any Series thereof
from dividends and interest for any period or amounts at any time legally
available for the payment of dividends, the amount of any reserves or
charges set up and the propriety thereof, the time of or purpose for
creating reserves or the use, alteration or cancellation of any reserves or
charges (whether or not any obligation or liability for which such reserves
or charges shall have been created shall have been
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paid or discharged or shall be then or thereafter required to be paid or
discharged), the price of any security owned by the Corporation or any
other matters relating to the issuance, sale, redemption or other
acquisition or disposition of securities or Shares. Any reasonable
determination made in good faith by the Board of Directors or its delegate
pursuant to the direction of the Board shall be final and conclusive, and
shall be binding upon the Corporation and all holders of its Shares, past,
present and future, and Shares are issued and sold on the condition and
understanding, evidenced by the purchase of Shares or acceptance of stock
certificates, that any and all such determinations shall be binding as
aforesaid.
Section 2. The directors of the Corporation may receive compensation for
their services, subject, however, to such limitations with respect thereto as
may be determined from time to time by the stockholders.
Section 3. Except as required by law, the holders of Shares shall have only
such right to inspect the records, documents, accounts and books of the
Corporation as may be granted by the Board of Directors of the Corporation.
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ARTICLE VIII
Liability and Indemnification
Section 1. A director or officer of the Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director or officer, except to the extent such exemption from
liability or limitation thereof is not permitted by law (including the
Investment Company Act) as currently in effect or as the same may hereafter be
amended.
No amendment, modification or repeal of this Section 1 of this Article VIII
of these Articles of Incorporation shall adversely affect any right or
protection of a director or officer that exists at the time of such amendment,
modification or repeal.
Section 2. The Corporation shall indemnify to the fullest extent permitted
by law (including the Investment Company Act) as currently in effect or as the
same may hereafter be amended, any person made or threatened to be made a party
to any action, suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such person or such person's testator
or intestate is or was a director or officer of the Corporation or serves or
served at the request of the Corporation any other enterprise as a director or
officer. To the fullest extent permitted by law (including the Investment
Company Act) as currently in effect or as the same may hereafter be
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<PAGE>
amended, expenses incurred by any such person in defending any such action, suit
or proceeding shall be paid or reimbursed by the Corporation promptly upon
receipt by it of an undertaking of such person to repay such expenses if it
shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation. The rights provided to any person by this
Section 2 of this Article VIII of these Articles of Incorporation shall be
enforceable against the Corporation by such person who shall be presumed to have
relied upon it in serving or continuing to serve as a director or officer as
provided above. No amendment of this Section 2 of this Article VIII of these
Articles of Incorporation shall impair the rights of any person arising at any
time with respect to events occurring prior to such amendment. For purposes of
this Section 2 of this Article VIII of these Articles of Incorporation, the term
"Corporation" shall include any predecessor of the Corporation and any
constituent corporation (including any constituent of a constituent) absorbed by
the Corporation in a consolidation or merger; the term "other enterprise" shall
include any corporation, partnership, joint venture, trust or employee benefit
plan; service "at the request of the Corporation" shall include service as a
director or officer of the Corporation which imposes duties on, or involves
services by, such director or officer with respect to an employee benefit plan,
its participants or beneficiaries;
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<PAGE>
any excise taxes assessed on a person with respect to an employee benefit plan
shall be deemed to be indemnifiable expenses; and action by a person with
respect to any employee benefit plan which such person reasonably believes to be
in the interest of the participants and beneficiaries of such plan shall be
deemed to be action not opposed to the best interests of the Corporation.
Section 3. Nothing in this Article VIII of these Articles of Incorporation
protects or purports to protect any director or officer against any liability to
the Corporation or its stockholders to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
ARTICLE IX
Amendments
The Corporation reserves the right from time to time to amend, alter, or
repeal any of the provisions of these Articles of Incorporation (including any
amendment that changes the terms of any of the outstanding shares by
classification, reclassification or otherwise), and any contract rights, as
expressly set forth in these Articles of Incorporation, of any outstanding
shares, and to add or insert any other provisions that may, under the statutes
of the State of Maryland at the time in force, be lawfully
-24-
<PAGE>
contained in articles of incorporation, and all rights at any time conferred
upon the stockholders of the Corporation by these Articles of Incorporation are
subject to the provisions of this Article IX of these Articles of Incorporation.
----------------------------
I have signed these Articles of Incorporation and acknowledge the same to
be my act and state under penalty of perjury that to the best of my knowledge,
information and belief the matters and facts set forth therein are true in all
material respects, all on April 21, 1995.
By:
---------------------------------
Norman Gretzinger
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BY-LAWS
of
DBNA INVESTMENTS, INC.
ARTICLE I
Stockholders
SECTION 1. Place of Meeting. All meetings of stockholders shall be held at
the principal office of the Corporation in the State of Maryland or at such
other place within the United States as may from time to time be designated by
the Board of Directors and stated in the notice of such meeting.
SECTION 2. Annual Meeting. The Corporation shall not be required to hold an
annual meeting of its stockholders in any year in which the election of
directors is not required to be acted upon under the Investment Company Act of
1940. In the event that the Corporation shall hold an annual meeting of
stockholders, such meeting shall be held at a date and time set by the Board of
Directors, provided, however, that if the purpose of the meeting is to elect
directors or to approve an investment advisory agreement or distribution
agreement, then the date and time of such meeting shall be set in accordance
with the Investment Company Act of 1940. Any stockholders' meeting held in
accordance with the preceding sentence may constitute the annual meeting of
stockholders for the fiscal year of the Corporation in which the meeting is
held.
SECTION 3. Special Meetings. Special meetings of the stockholders for any
purpose or purposes may be called by the Chairman of the Board of Directors, the
President or a majority of the Board of Directors. In addition, such special
meetings shall be called by the Secretary upon receipt of the request in writing
signed by stockholders entitled to cast at least 10% of all votes entitled to be
cast at the meeting. Such request shall state the purpose or purposes of the
meeting and the matters proposed to be acted on. The Secretary shall inform such
stockholders of the reasonably estimated costs of preparing and mailing a notice
of the meeting and upon payment by such stockholders to the Corporation of such
costs, the Secretary shall give notice as specified in Section 5 of this
Article. Unless requested by stockholders entitled to cast a majority of all the
votes entitled to be cast at the meeting, a special meeting need not be called
to consider any matter that is substantially the same as a matter voted on at a
special meeting of the stockholders held during the preceding 12 months.
<PAGE>
SECTION 4. Record Dates. The Board of Directors may fix, in advance, a date
as the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders, or stockholders entitled
to receive payment of any dividend or the allotment of any other rights, or in
order to make a determination of stockholders for any other proper purpose. Such
date in any case shall not be more than 90 days, and in case of a meeting of
stockholders, not less than 10 days, prior to the date on which the particular
action, requiring such determination of stockholders, is to be taken.
SECTION 5. Notice of Meeting. Not less than 10 and not more than 90 days
before each meeting of stockholders, the Secretary shall give to each
stockholder entitled to vote at the meeting and to each other stockholder
entitled to notice of such meeting, written notice of the time, date, place,
and, in the case of a special meeting or when otherwise required by the laws of
the State of Maryland, the purpose or purposes of the meeting. Such notice shall
be given in the manner required by the laws of the State of Maryland.
No notice of the time, place or purpose of any meeting of stockholders need
be given to any stockholder who attends in person or by proxy or to any
stockholder who, in writing executed and filed with the records of the meeting,
either before or after the holding thereof, waives such notice.
SECTION 6. Adjournment. A meeting of stockholders convened on the date for
which it was called may be adjourned from time to time without further notice,
other than as announced at the meeting, to a date not more than 120 days after
the original record date. At any such adjourned meeting at which a quorum shall
be present, any action may be taken that could have been taken at the meeting
originally called.
SECTION 7. Quorum and Voting. Quorum at any meeting of the stockholders
shall be as set forth in the Articles of Incorporation. Except as otherwise
provided by law, the number of votes cast at any meeting of the stockholders at
which a quorum is present sufficient to approve any matter which properly comes
before such meeting shall be as set forth in the Articles of Incorporation.
SECTION 8. Inspectors. At any election of Directors, the Chairman of the
meeting may, and upon the request of the holders of ten percent (10%) of the
stock entitled to vote at such election shall, appoint two inspectors of
election who shall first subscribe an oath or affirmation to execute faithfully
the duties of inspectors at such election with strict impartiality and according
to the best of their ability, and shall after the election make a certificate of
the result of the vote taken. No candidate for the office of Director shall be
appointed such Inspector.
SECTION 9. Conduct of Meetings. Each meeting of stockholders shall be
presided over by the Chairman of the Board or, if he is not present, by the
President or, if he is not present, by a Vice President or if neither of them is
present, by a chairman to be elected at the meeting. The Secretary of the
Corporation shall act as secretary of
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<PAGE>
the meeting or, if he is not present, an Assistant Secretary shall so act. If
neither the Secretary nor the Assistant Secretary is present, the chairman of
the meeting shall appoint a secretary.
SECTION 10. Concerning Validity of Proxies, Ballots, etc. At every meeting
of the stockholders, all proxies shall be received and taken in charge of and
all ballots shall be received and canvassed by the secretary of the meeting, who
shall decide all questions concerning the qualification of voters, the validity
of the proxies and the acceptance or rejection of votes, unless inspectors of
election shall have been appointed by the Chairman of the meeting, in which
event such inspectors of election shall decide all such questions.
SECTION 11. Action Without Meeting. Any action to be taken by stockholders
may be taken without a meeting if (a) all stockholders entitled to vote on the
matter consent to the action in writing, and (b) all stockholders entitled to
notice of the meeting but not entitled to vote at it sign a written waiver of
any right to dissent and (c) the written consents are filed with the records of
the meeting of stockholders. Such consent shall be treated for all purposes as a
vote at a meeting.
ARTICLE II
Board of Directors
SECTION 1. Powers. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors, which may exercise
all powers of the Corporation and do all lawful acts and things that are not by
law, the Articles of Incorporation of the Corporation or these By-Laws directed
or required to be done by the stockholders.
SECTION 2. Number and Tenure. The number of Directors fixed by the Articles
of Incorporation of the Corporation as the number that shall constitute the
whole Board may be increased or decreased by a vote of a majority of the entire
Board of Directors from time to time, provided that this number shall not be
more than 21. Each Director shall hold office until his successor is elected and
qualifies or until his earlier resignation or removal.
SECTION 3. Vacancies. Vacancies in the Board of Directors for any cause
may, subject to the Investment Company Act of 1940, be filled by a majority of
the Directors then in office, although less than a quorum, or by a sole
remaining Director; except that, vacancies in the Board of Directors that result
from an increase in the authorized number of Directors may, subject to the
Investment Company Act of 1940, be filled by a majority of the entire Board of
Directors. A Director elected by the Board of Directors to fill a vacancy serves
until his successor is elected and qualifies or until his earlier resignation or
removal.
SECTION 4. Removal of Directors. At any meeting of stockholders, the
stockholders of the Corporation may remove any Director from office, either with
or
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<PAGE>
without cause, by the affirmative vote of a majority of the votes entitled to be
cast for the election of directors and may elect a successor to fill any
resulting vacancy for the unexpired term of the removed Director.
SECTION 5. Place of Meetings. Meetings of the Board of Directors, regular
or special, may be held at any place in or outside of the State of Maryland as
the Board may from time to time determine.
SECTION 6. Regular Meetings. Regular Meetings of the Board of Directors
shall be held at such time fixed by the Board of Directors. No notice of regular
meetings shall be required.
SECTION 7. Special Meetings. Special meetings of the Board of Directors may
be called at any time by the Chairman of the Board, the President or a majority
of the Directors. Written notice of the time and place of any special meeting
shall be delivered or telecopied to each Director not less than one day before
the meeting or mailed to each Director not less than three days before the
meeting. No notice need be given to any Director who attends in person or to any
Director who, in writing executed and filed with the records of the meeting
either before or after the holding thereof, waives such notice. Such notice or
waiver of notice need not state the purpose or purposes of such meeting.
SECTION 8. Telephone Meetings. Members of the Board of Directors or any
committee thereof may participate in a meeting by means of conference telephone
or similar communications equipment if all persons participating in the meeting
can hear each other at the same time. Participation in a meeting by these means
constitutes, subject to the provisions of the Investment Company Act of 1940,
presence in person at the meeting.
SECTION 9. Quorum. One-third of the total number of Directors shall
constitute a quorum for the transaction of business, provided that a quorum
shall be no less than two Directors, except where the Board consists of only one
Director, a quorum shall be one Director. If at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those present
may adjourn the meeting until a quorum shall have been obtained. Except as
otherwise provided by law, the Articles of Incorporation of the Corporation,
these By-Laws or any contract or agreement to which the Corporation is a party,
the act of a majority of the Directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors.
SECTION 10. Committee. The Board of Directors, by the affirmative vote of a
majority of the whole Board, may designate an executive committee and other
committees composed of two or more Directors, and the members thereof, and each
committee shall have the powers, authority and duties specified in the
resolution creating the same and permitted by law. If a member of a committee is
absent or disqualified, the members present at a meeting, whether or not
constituting a quorum, may appoint another member of the Board of Directors to
act at the meeting in place of the absent or disqualified member.
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<PAGE>
SECTION 11. Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting, if a written consent to such action is signed by all
members of the Board or of such committee, as the case may be, and such written
consent is filed with the minutes of the proceedings of the Board or committee.
SECTION 12. Compensation of Directors. The Board of Directors may authorize
reasonable compensation to Directors for their services as Directors and as
members of committees of the Board of Directors and may authorize the
reimbursement of reasonable expenses incurred by Directors in connection with
rendering those services.
ARTICLE III
Officers
SECTION 1. Election. The Board of Directors shall elect a Chairman of the
Board (who shall be a Director), a President, a Secretary and a Treasurer. The
Board of Directors may also in its discretion elect one or more Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers, agents and
employees. Any two or more offices, except those of President and Vice
President, may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity, if such
instrument is required by law or these By-Laws to be executed, acknowledged or
verified by two or more officers. The Board of Directors may fill any vacancy
that may occur in any office.
SECTION 2. Term of Office. The term of office of all officers shall be one
year and until their respective successors are elected and qualified. Any
officer may be removed from office at any time with or without cause by the
Board of Directors whenever, in the judgment of the Board of Directors, the best
interests of the Corporation will be served thereby.
SECTION 3. Powers and Duties. The officers of the Corporation shall have
such powers and duties as generally pertain to their respective offices as well
as such powers and duties as may from time to time be conferred by resolution of
the Board of Directors.
ARTICLE IV
Insurance
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director or officer of the Corporation or serves or served at
the request of the Corporation any other enterprise as a director or officer,
whether or not the Corporation would have power to indemnify him.
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<PAGE>
ARTICLE V
General Provisions
SECTION 1. Annual Statement. The Chairman of the Board or the Treasurer
shall prepare or cause to be prepared annually a full and correct statement of
the affairs of the Corporation, including a balance sheet and a financial
statement of operations for the preceding fiscal year. The statement of affairs
shall be submitted at the annual meeting of the stockholders, if any, and,
within 20 days after the meeting (or, in the absence of an annual meeting within
120 days after the end of the fiscal year), placed on file at the Corporation's
principal office in the State of Maryland.
SECTION 2. Stock Ledger. The Corporation shall maintain at the office of
its transfer agent an original or duplicate stock ledger containing the names
and addresses of all stockholders and the number of shares of each class held by
each stockholder. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for visual
inspection.
SECTION 3. Amendment of By-Laws. These By-Laws may be altered, amended,
added to or repealed by the Board of Directors.
- --------------------------------------
ADOPTED: , 1995
------------------------
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Exhibit 4(f)
Selected Portion of
Registrant's Articles of Incorporation
Relating to the Rights of Stockholders:
Article V, Section 1(b), paragraphs (iv) through (vi) and (ix) of Registrant's
Articles of Incorporation with respect to dividends, liquidation, voting and
redemption rights, respectively, are hereby incorporated by reference.
Exhibit 5(a)
[Form of Management Agreement]
DBNA [ ] MONEY MARKET FUND
OF
DBNA INVESTMENTS, INC.
MANAGEMENT AGREEMENT
Agreement made this ___ day of ____________, 1995 between DBNA INVESTMENTS,
INC., a Maryland corporation (the "Company"), with respect to its portfolio
known as the DBNA [ ] MONEY MARKET FUND (the "Fund"), and DEUTSCHE BANK
SECURITIES CORPORATION, a Delaware corporation (the "Manager").
W I T N E S S E T H
WHEREAS, the Company is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act");
WHEREAS, the Company is authorized to issue shares of Common Stock in
separate series and classes, with each such series representing the interests in
a separate portfolio of securities and other assets, and with each class within
a series representing interests in the portfolio of securities and other assets
in the series; and
WHEREAS, the Fund is a series of the Company, and the Company desires to
retain the Manager to render or contract to obtain as hereinafter provided
investment
<PAGE>
advisory services to the Company and to manage the business and other
affairs of the Fund, and the Manager is willing to render such services;
NOW, THEREFORE, the parties agree as follows:
1. The Company hereby appoints the Manager to act as manager to the Company
with respect to the Fund and its classes on the terms set forth in this
Agreement. The Manager accepts such appointment and agrees to render the
services herein described and to assume the obligations herein set forth, for
the compensation herein provided.
2. Subject to the supervision of the Board of Directors of the Company, the
Manager shall manage the affairs of the Fund and agrees to provide the services
described in this Agreement on the terms set forth herein. The Manager is
entering into an agreement dated the date hereof (the "Investment Advisory
Agreement") with Deutsche Asset Management North America, Inc., and from time to
time in the future, may engage, in lieu thereof, any other registered investment
adviser approved in accordance with applicable law (the "Investment Adviser")
pursuant to which the Investment Adviser will provide the Fund with investment
advisory services, including investment research, advice and supervision,
determining which securities shall be purchased or sold by the Fund, making
purchases and sales of securities on behalf of the Fund and determining how
voting and other rights with respect to securities of the Fund
-2-
<PAGE>
shall be exercised, subject in each case to the supervision of the Board of
Directors of the Company and in accordance with Articles of Incorporation,
By-Laws and the objectives, policies and investment restrictions set forth in
the Registration Statement and Prospectus(es) of the Fund and the requirements
of the Investment Company Act and other applicable law. The Manager will
continue to have responsibility for investment advisory services provided under
the Investment Advisory Agreement. In connection with the performance of its
duties hereunder, the Manager shall provide such office space, bookkeeping,
accounting, internal legal, clerical, secretarial and other services (exclusive
of, and in addition to, any such services provided by any others retained by the
Company on behalf of the Fund) and such other personnel as shall be necessary
for the day-to-day operations of the Fund.
3. The Company has delivered to the Manager copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Articles of Incorporation of the Company, filed with the Secretary
of State of Maryland (such Articles of Incorporation, as in effect on the
date hereof and as amended from time to time, are herein called the
"Articles of Incorporation");
-3-
<PAGE>
(b) By-Laws of the Company (such By-Laws, as in effect on the date
hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Directors of the Company
authorizing the appointments of the Manager and the Investment Adviser and
approving the form of this Agreement;
(d) Notification of Registration of the Company under the Investment
Company Act on Form N-8A as filed with the Securities and Exchange
Commission (the "Commission") and any amendment thereto;
(e) The Registration Statement under the Securities Act of 1933 and
the Investment Company Act on Form N-1A (the "Registration Statement") and
all amendments or supplements thereto, as filed with the Commission
relating to the Company and all amendments or supplements thereto;
(f) Prospectus(es) and Statement(s) of Additional Information and all
amendments or supplements thereto; and
(g) Such other certificates, documents or opinions that the Manager,
in its reasonable discretion, deems necessary or appropriate in the proper
performance of its duties.
4. To the extent permitted by applicable law, the Manager shall authorize
and permit any of its directors, officers and employees who may be elected as
directors or
-4-
<PAGE>
officers of the Company to serve in the capacities in which they are
elected. All services to be furnished by the Manager under this Agreement may be
furnished through the medium of any such directors, officers or employees of the
Manager.
5. To the extent required by Section 31 of the Investment Company Act and
the rules thereunder, the Manager agrees that all books and records that it or
the Investment Adviser or any other delegate of the Manager prepares or
maintains for the Company with respect to the Fund are the property of the
Company, and the Manager will surrender promptly to the Company any of such
records upon the Company's request. The Manager further agrees to preserve such
records for the periods prescribed by Rule 31a-2 under the Investment Company
Act, maintained at the Company's expense.
6. In connection with the services rendered by the Manager under this
Agreement, the Manager will bear the costs arising from the performance of its
obligations under this Agreement, including the salaries and the expenses of all
personnel of the Manager. During the term of this Agreement, the Company will
bear all expenses of the Manager, not specifically assumed by the Manager,
incurred in the Fund's operations. In addition to the fee payable to the Manager
pursuant to this Agreement, the Company shall
-5-
<PAGE>
bear all costs of its operations, including, but not limited to, the following:
(a) the fees and expenses of the Company's directors, officers and
employees who are not affiliated persons of the Manager or the Company's
investment adviser,
(b) the fees and expenses of the custodian,
(c) the fees and expenses of the Company's transfer agent and dividend
disbursing agent,
(d) the charges and expenses of legal counsel (including legal fees of
special counsel for the independent directors of the Company, if such
counsel is retained) and independent accountants for the Company,
(e) brokers' commissions, if any, and any issue or transfer taxes
chargeable to the Fund in connection with its securities transactions,
(f) all taxes and corporate fees payable by the Company to federal,
state or other governmental agencies,
(g) the fees of any trade association of which the Company may be a
member,
(h) the cost of stock certificates evidencing shares of the Fund,
(i) the fees and expenses involved in registering and maintaining
registrations of the Company with the
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<PAGE>
Commission, registering the Company as a broker or dealer, if
required, and qualifying its shares under state securities laws, including
the preparation of the Company's registration statements for filing under
federal and state securities laws for such purposes,
(j) allocable communications expenses with respect to investor
services and all expenses of stockholders' and directors' meetings and of
preparing, printing and mailing reports to stockholders in the amount
necessary for distribution to the stockholders,
(k) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Company's business,
(l) organizational expenses, including legal expenses, of the Company,
(m) fees of service organizations pursuant to any Rule 12b-1 Plan that
the Fund has adopted, and
(n) insurance premiums.
7. For the services provided, the expenses assumed and the facilities
furnished by the Manager pursuant to this Agreement, the Fund will pay to the
Manager as full compensation pursuant to this Agreement a fee at an annual rate
of 0.20% of the Fund's average daily net assets (unless otherwise reduced
pursuant to paragraph 8 hereof). This fee will be computed daily and will be
paid to the Manager monthly. For the purpose of determining the monthly fee
-7-
<PAGE>
payable to the Manager, the Fund's net asset value shall be computed at the
time and in the manner specified in the Fund's Prospectus. Upon any termination
of this Agreement before the end of a month, the prorated fee through the
effective date of termination of this Agreement shall be payable upon such date.
8. If in any fiscal year the total expenses of the Fund incurred by, or
allocated to, the Fund excluding taxes, interest, brokerage commissions and
other portfolio transaction expenses, other expenditures that are capitalized in
accordance with generally accepted accounting principles, extraordinary expenses
and amounts accrued or paid under a Rule 12b-1 Plan of the Fund, if any, but
including the fees provided for in paragraph 7 ("includable expenses"), exceed
the most restrictive expense limitation applicable to the Fund imposed by state
securities laws or regulations thereunder, as these limitations may be raised or
lowered from time to time, the fee payable to the Manager as otherwise
determined under paragraph 7 hereof shall be reduced to the extent of the
excess, but only to the extent of the fee hereunder for the fiscal year. At the
end of each month of the Fund's fiscal year, the Company on behalf of the Fund
shall review the includable expenses accrued during that fiscal year to the end
of the period and shall estimate the contemplated includable expenses for the
balance of that fiscal year. If as a result of that review
-8-
<PAGE>
and estimation it appears likely that the includable expenses will exceed
the limitations referred to in this paragraph 8 for a fiscal year with respect
to the Fund, the monthly fee set forth in paragraph 7 payable to the Manager for
such month shall be reduced, subject to a later adjustment, by an amount equal
to the pro rata portion (prorated on the basis of the remaining months of the
fiscal year, including the month just ended) of the amount by which the
includable expenses for the fiscal year are expected to exceed the limitations
provided for in this paragraph 8. The Manager hereby agrees that to the extent
the total amount actually paid to the Manager as its fee for the fiscal year
exceeds the amount to which the Manager is entitled after applicaton of this
paragraph 8 (such excess amount herein referred to as the "Excess Amount") the
Manager will return the Excess Amount within [10] days of receiving notice of
the Excess Amount from the Fund.
9. The Manager assumes no responsibility under this Agreement other than to
render the services called for hereunder.
10. The Manager shall not be liable for any error of judgment or for any
loss suffered by the Fund in connection with the matters to which this Agreement
relates, except a loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services (in which case any award of damages
shall be limited to the
-9-
<PAGE>
period and the amount set forth in Section 36(b)(3) of the Investment
Company Act) or a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
11. This Agreement shall remain in effect until ____________, 1997 and from
year to year thereafter, but only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the Investment
Company Act; provided, however, that this Agreement may be terminated by the
Company at any time, without the payment of any penalty, by the Board of
Directors of the Company, or by vote of a majority of the outstanding voting
securities of the Fund (as defined in the Investment Company Act and a rule
thereunder), or by the Manager at any time, without the payment of any penalty,
upon not less than 60 days' written notice to the other party. This Agreement
shall terminate automatically in the event of its assignment (as defined in the
Investment Company Act).
12. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Manager who may also be a director, officer
or employee of the Company to engage in any other business or to devote his or
her time and attention in part to the management or other aspects of any
business, whether of a similar or
-10-
<PAGE>
dissimilar nature, nor limit or restrict the right of the Manager to engage
in any other business or to render services of any kind, whether of a similar or
dissimilar nature, to any other corporation, firm, individual or association.
The Manager shall be deemed to be an independent contractor, unless otherwise
expressly provided or authorized by this Agreement.
13. During the term of this Agreement, the Company agrees to furnish the
Manager at its principal office all Prospectuses, proxy statements, reports to
stockholders, sales literature, or other material prepared for distribution to
stockholders of the Fund or the public that refer in any way to the Manager,
prior to use thereof and not to use such material if the Manager reasonably
objects in writing within five business days (or such other time as may be
mutually agreed) after receipt thereof. In the event of termination of this
Agreement, the Company will continue to furnish to the Manager copies of any of
the above-mentioned materials that refer in any way to the Manager. The Company
shall furnish or otherwise make available to the Manager such other information
relating to the business affairs of the Company as the Manager at any time, or
from time to time, reasonably requests in order to discharge its obligations
hereunder.
14. This Agreement may be amended by mutual consent of the parties hereto,
provided that the consent of
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<PAGE>
the Company is obtained in accordance with the requirements of the
Investment Company Act.
15. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid: (1) to Deutsche Bank Securities Corporation at 31 West 52nd
Street, New York, New York 10019, Attention: Office of the Secretary; or (2) to
the Company at 31 West 52nd Street, New York, New York 10019, Attention: Office
of the Secretary and Treasurer; or (3) at such other address as either party
shall designate by notice to the other party.
16. The Company agrees that if in the future the Manager (or any affiliate
thereof) is no longer the manager or investment adviser to any series of the
Company, then the Company shall, within a reasonable period of time, change the
names of the Company and the series and classes of its shares of Common Stock in
order to delete any and all references to "DBNA".
17. The Manager shall not be responsible or liable for any failure or delay
in performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its control, including without
limitation, work stoppage, power or other mechanical failure, computer virus,
natural disaster, governmental action or communication disruption, nor shall
-12-
<PAGE>
any such failure or delay give the Company the right to terminate this
Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the date first above written.
DBNA INVESTMENTS, INC.
By:
-------------------------------
Name:
Title:
DEUTSCHE BANK SECURITIES CORPORATION
By:
-------------------------------
Name:
Title:
-13-
Exhibit 5(b)
[Form of Investment Advisory Agreement]
DBNA [ ] MONEY MARKET FUND
OF
DBNA INVESTMENTS, INC.
INVESTMENT ADVISORY AGREEMENT
Agreement made this ___ day of ____________, 1995 between DEUTSCHE BANK
SECURITIES CORPORATION, a Delaware corporation (the "Manager"), and DEUTSCHE
ASSET MANAGEMENT NORTH AMERICA, INC., a Delaware corporation (the "Investment
Adviser"), with respect to services to be provided to a portfolio known as the
DBNA [ ] Money Market Fund (the "Fund") of DBNA Investments, Inc., a
Maryland Corporation (the "Company").
W I T N E S S E T H
WHEREAS, the Company is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, the Company is authorized to issue shares of Common Stock in
separate series and classes, with each such series representing the interests in
a separate portfolio of securities and other assets, and with each class within
a series representing interests in the portfolio of securities and other assets
in the series; and
WHEREAS, the Fund is a series of the Company; and
<PAGE>
WHEREAS, the Manager has entered into a Management Agreement dated
_________ __, 1995 (the "Management Agreement") with the Company on behalf of
the Fund pursuant to which the Manager will render to the Fund or contract to
obtain as therein provided investment advisory and other management services
described therein; and
WHEREAS, the Manager desires to retain the Investment Adviser to render
investment advisory services to the Fund, and the Investment Adviser is willing
to render such investment advisory services;
NOW, THEREFORE, the parties agree as follows:
1. Subject to the necessary approvals required by applicable law, the
Manager hereby appoints the Investment Adviser to act as investment adviser to
the Company with respect to the Fund and its classes on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
render the services herein described and to assume the obligations herein set
forth, for the compensation herein provided.
2. Subject to the supervision of the Board of Directors of the Company and
the Manager, the Investment Adviser will provide the Fund with investment
advisory services, including investment research, advice and supervision,
determining which securities shall be purchased or sold by the Fund making
purchases and sales of securities on behalf of the Fund and determining how
voting and other
-2-
<PAGE>
rights with respect to securities of the Fund shall be exercised, subject
in each case to the supervision of the Board of Directors of the Company and in
accordance with Articles of Incorporation, By-Laws and the objectives, policies
and investment restrictions set forth in the Registration Statement and
Prospectus(es) of the Fund and the requirements of the Investment Company Act
and other applicable law.
3. The Manager has delivered or caused to be delivered to the Investment
Adviser copies of each of the following documents and will deliver or cause to
be delivered to it all future amendments and supplements, if any:
(a) Articles of Incorporation of the Company, filed with the Secretary
of State of Maryland (such Articles of Incorporation, as in effect on the
date hereof and as amended from time to time, are herein called the
"Articles of Incorporation");
(b) By-Laws of the Company (such By-Laws, as in effect on the date
hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Directors of the Company
authorizing the appointment of the Investment Adviser and approving the
form of this Agreement;
-3-
<PAGE>
(d) Notification of Registration of the Company under the Investment
Company Act on Form N-8A as filed with the Securities and Exchange
Commission (the "Commission") and any amendment thereto;
(e) The Registration Statement under the Securities Act of 1933 and
the Investment Company Act on Form N-1A (the "Registration Statement"), as
filed with the Commission relating to the Company and all amendments or
supplements thereto;
(f) Prospectus(es) and the Statement(s) of Additional Information and
all amendments or supplements thereto; and
(g) The Management Agreement.
4. To the extent permitted by applicable law, the Investment Adviser shall
authorize and permit any of its directors, officers and employees who may be
elected as directors or officers of the Company to serve in the capacities in
which they are elected. All services to be furnished by the Investment Adviser
under this Agreement may be furnished through the medium of any such directors,
officers or employees of the Investment Adviser.
5. The Investment Adviser agrees that all books and records that it
maintains for the Manager on behalf of the Fund with respect to its securities
transactions are the property of the Company, and the Investment Adviser will
surrender promptly to the Company any of such records upon
-4-
<PAGE>
the Company's request. The Investment Adviser further agrees to preserve
such records for the periods prescribed by Rule 31a-2 under the Investment
Company Act.
6. In connection with the services rendered by the Investment Adviser under
this Agreement, the Investment Adviser will bear all of its costs arising from
the performance of its obligations under this Agreement, including the salaries
and the expenses of all personnel of the Investment Adviser.
7. For the services provided and the expenses assumed pursuant to this
Agreement, the Manager will pay to the Investment Adviser as full compensation
pursuant to this Agreement a fee at an annual rate of 0.10% of the Fund's
average daily net assets (unless otherwise reduced pursuant to paragraph 8
hereof). This fee will be computed daily and will be paid to the Investment
Adviser monthly. For the purpose of determining the monthly fee payable to the
Investment Adviser, the Fund's net asset value shall be computed at the time and
in the manner specified in the Fund's Prospectus. Upon any termination of this
Agreement before the end of a month, the prorated fee through the effective date
of termination of this Agreement shall be payable upon such date.
8. If in any fiscal year the total expenses of the Fund incurred by, or
allocated to, the Fund excluding taxes, interest, brokerage commissions and
other portfolio
-5-
<PAGE>
transaction expenses, other expenditures that are capitalized in accordance
with generally accepted accounting principles, extraordinary expenses and
amounts accrued or paid under a Rule 12b-1 Plan of the Fund, if any, but
including the fees provided for pursuant to the Fund's Management Agreement
("includable expenses"), exceed the most restrictive expense limitation
applicable to the Fund imposed by state securities laws or regulations
thereunder, as these limitations may be raised or lowered from time to time, the
fee payable to the Investment Adviser as otherwise determined under paragraph 7
hereof shall be reduced to the extent of 50% of the excess, but only to the
extent of the fee hereunder for the fiscal year. If, at the end of each month of
the Fund's fiscal year, it appears likely that the Fund's includable expenses
(as reviewed and estimated by the Company in accordance with the terms of the
Management Agreement) will exceed the limitations referred to in this paragraph
8 for a fiscal year with respect to the Fund, the monthly fee set forth in
paragraph 7 payable to the Investment Adviser for such month shall be reduced,
subject to a later adjustment, by an amount equal to 50% of the pro rata portion
(prorated on the basis of the remaining months of the fiscal year, including the
month just ended) of the amount by which the includable expenses for the fiscal
year are expected to exceed the limitations provided for in this paragraph 8.
The Investment Adviser hereby agrees that to
-6-
<PAGE>
the extent the total amount actually paid to the Investment Adviser as its
fee for the fiscal year exceeds the amount to which the Investment Adviser is
entitled after application of this paragraph 8 (such excess amount herein
referred to as the "Excess Amount") the Investment Adviser will return the
Excess Amount within [10] days of receiving notice of the Excess Amount from the
Manager.
9. The Investment Adviser assumes no responsibility under this Agreement
other than to render the services called for hereunder.
10. The Investment Adviser shall not be liable for any error of judgment or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services (in which case any award of
damages shall be limited to the period and the amount set forth in Section
36(b)(3) of the Investment Company Act) or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement.
11. This Agreement shall remain in effect until ____________, 1997 and from
year to year thereafter, but only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the
-7-
<PAGE>
Investment Company Act; provided, however, that this Agreement may be
terminated at any time, without the payment of any penalty, by the Manager, the
Investment Adviser or the Company by its Board of Directors or the vote of a
majority of the outstanding voting securities of the Fund (as defined in the
Investment Company Act and a rule thereunder), upon not less than 60 days'
written notice by the terminating entity to the Manager, the Investment Adviser
and the Company, as the case may be. This Agreement shall terminate
automatically in the event of its assignment (as defined in the Investment
Company Act) or upon termination of the Management Agreement.
12. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Investment Adviser who may also be a
director, officer or employee of the Company to engage in any other business or
to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit or
restrict the right of the Investment Adviser to engage in any other business or
to render services of any kind, whether of a similar or dissimilar nature, to
any other corporation, firm, individual or association. The Investment Adviser
shall be deemed to be an independent contractor, unless otherwise expressly
provided or authorized by this Agreement.
-8-
<PAGE>
13. During the term of this Agreement, the Company agrees to furnish the
Investment Adviser at its principal office all Prospectuses, proxy statements,
reports to stockholders, sales literature, or other material prepared for
distribution to stockholders of the Fund or the public that refer in any way to
the Investment Adviser, prior to use thereof and not to use such material if the
Investment Adviser reasonably objects in writing within five business days (or
such other time as may be mutually agreed) after receipt thereof. In the event
of termination of this Agreement, the Company will continue to furnish to the
Investment Adviser copies of any of the above-mentioned materials that refer in
any way to the Investment Adviser. The Company shall furnish or otherwise make
available to the Investment Adviser such other information relating to the
business affairs of the Company as the Investment Adviser at any time, or from
time to time, reasonably requests in order to discharge its obligations
hereunder.
14. This Agreement may be amended by mutual consent of the parties hereto,
provided that the consent of the Company is also obtained in accordance with the
requirements of the Investment Company Act.
15. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid: (1) Deutsche Bank Securities Corporation at 31 West
-9-
<PAGE>
52nd Street, New York, New York 10019, Attention: Office of the Secretary;
(2) to Deutsche Asset Management North America, Inc. at 31 West 52nd Street, New
York, New York 10019, Attention: Office of the Secretary; or (3) to the Company
at 31 West 52nd Street, New York, New York 10019, Attention: Office of the
Secretary and Treasurer; or (4) at such other address as any of the foregoing
shall designate by notice to the other party.
16. The Investment Adviser shall not be responsible or liable for any
failure or delay in performance of its obligations under this Agreement arising
out of or caused, directly or indirectly, by circumstances beyond its control,
including without limitation, work stoppage, power or other mechanical failure,
computer virus, natural disaster, governmental action or communication
disruption, nor shall any such failure or delay give the Manager or the Company
the right to terminate this Agreement.
-10-
<PAGE>
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the date first written above.
DEUTSCHE BANK SECURITIES CORPORATION
By:
--------------------------------------
Name:
Title:
DEUTSCHE ASSET MANAGEMENT
NORTH AMERICA, INC.
By:
--------------------------------------
Name:
Title:
-11-
Exhibit 15(a)
DBNA INVESTMENTS, INC.
PLAN PURSUANT TO RULE 12b-1
WHEREAS, DBNA Investments, Inc. (the "Company"), an open-end management
investment company registered as such under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), desires to adopt a Plan Pursuant to
Rule 12b-1 under the Investment Company Act with respect to shares of the
Investors class ("Investors Shares") of each of its portfolios known as the DBNA
Treasury Money Market Fund, DBNA Government Money Market Fund, DBNA Money Market
Fund, DBNA Tax-Exempt Money Market Fund, and DBNA New York Tax-Exempt Money
Market Fund (each such Fund, and any other portfolio of the Company with respect
to which this Plan may in the future be adopted, being referred to herein as a
"Fund" and collectively as the "Funds"), and the Board of Directors of the
Company (the "Board of Directors") has determined that there is a reasonable
likelihood that adoption of this Plan Pursuant to Rule 12b-1 ("Plan") will
benefit each Fund and its holders of Investors Shares and accordingly has
approved the adoption of this Plan;
NOW, THEREFORE, the Company hereby adopts, and the manager hereby agrees
to, this Plan in accordance with Rule 12b-1 under the Investment Company Act on
the following terms and conditions:
1. Each Fund may make payments that will not exceed, on an annualized
basis, .25 of 1% of such Fund's average daily net assets that are Investors
Shares for any activities or expenses primarily intended to result in the
sale of such Fund's Investors Shares or expenses for the provision of
shareholder services to such Fund's Investors class shareholders
(collectively, "Covered Expenses"), including, but not limited to: (i)
making payments to broker-dealers, banks and other financial institutions
(each, a "Service Organization") to compensate them for the provision of
marketing or distribution services with respect to such Fund's Investors
Shares or for the provision of certain shareholder services to such Fund's
Investors class shareholders, in each case pursuant to service agreements
approved by the Board of Directors between the Company and the Service
Organizations ("Service Agreements"); and (ii) paying, or reimbursing the
Fund's distributor, manager or other party, for (a) the preparation,
printing and distribution of prospectuses and sales literature relating to
such Fund, communications to and with such Fund's Investors class
shareholders and advertisements (including the creative costs associated
therewith), (b) expenses for travel, communication, compensation and
benefits of sales and marketing personnel relating to such Fund and (c) the
portion of overhead allocable to promotion and marketing activities
relating to such Fund, provided that
<PAGE>
payments under clause (ii) shall be made pursuant to an agreement or
agreements approved by the Board of Directors. Amounts paid hereunder in
respect of the Investors Shares of any Fund will not be used to pay
expenses incurred with respect to shares of any other class of such Fund or
shares of any other Fund or other portfolio of the Company except that
Covered Expenses attributable to Investors Shares of more than one Fund or
to more than one class of shares of a Fund or Funds (the Investors Shares
of such Fund together with such other shares to which such expenses are
also attributable being referred to herein as the "Benefited Shares") will
be allocated among the Benefited Shares of a Fund in accordance with an
allocation method approved by the Board of Directors. Any such allocation
of Covered Expenses hereunder will be subject to the review of the Board of
Directors.
2. Any Covered Expenses relating to a Fund's Investors Shares accrued
by a Service Organization in one fiscal year of such Fund may not be paid
from fees hereunder received or receivable from such Fund with respect to
subsequent fiscal years. Fees hereunder also will not be used by the
recipient to pay any interest expense, carrying charges or other financing
costs.
3. This Plan shall become effective with respect to a Fund (the
"Effective Date") upon the approval of the Plan by a "vote of a majority of
the outstanding voting securities" of Investors Shares of such Fund (as
defined in the Investment Company Act and a rule thereunder).
4. This Plan shall remain in effect until _______________ and from
year to year thereafter, but only so long as such continuance is
specifically approved at least annually by votes of a majority of both (a)
the Directors of the Company (the "Directors") and (b) those Directors who
are not "interested persons" of the Company (as defined in the Investment
Company Act) and have no direct or indirect financial interest in the
operation of the Plan or any agreements related to it (the "Independent
Directors"), cast in person at a meeting (or meetings) called for the
purpose of voting on this Plan.
5. The Treasurer of the Company shall provide to the Board of
Directors and the Directors shall review, at least quarterly, a quarterly
written report, and once a year, an annual written report, complying with
the requirements of Rule 12b-1 under the Investment Company Act setting
forth all amounts expended pursuant to this Plan and the purposes for which
such expenditures were made.
6. This Plan may be terminated with respect to a Fund by the Company
at any time by the "vote of a majority of the outstanding voting
securities" of Investors Shares of such Fund or by the vote of a majority
of the Independent Directors.
-2-
<PAGE>
7. This Plan may not be amended with respect to Investors Shares of a
Fund to increase materially the amount of expenses provided for in
paragraph 1 hereof unless such amendment is approved by a "vote of a
majority of the outstanding voting securities" of Investors Shares of such
Fund, and no material amendments to this Plan shall be made unless approved
in the manner provided for annual continuance in paragraph 4 hereof.
8. While this Plan is in effect, the selection and nomination of
Directors who are not "interested persons" of the Company (as defined in
the Investment Company Act) shall be committed to the discretion of the
Directors who are not "interested persons."
9. The Fund shall preserve copies of this Plan, any related agreement
and any report made pursuant to paragraph 5 hereof for a period of not less
than six years from the date of this Plan, such agreement or such report,
as the case may be, the first two years in an easily accessible place.
- -----------------------------------
(Effective Date)
-3-
Exhibit 15(b)
MARKETING SERVICES AGREEMENT
_______ __, 199_
DBNA Investments, Inc.,
31 West 52nd Street,
New York, New York 10019.
Ladies and Gentlemen:
The undersigned understands that you, DBNA Investments, Inc., have adopted
a Plan Pursuant to Rule 12b-1 (the "Plan") under the Investment Company Act of
1940, as amended (the "Investment Company Act"), for purposes of promoting the
sale of Investors class shares ("Investors Shares") relating to your portfolios
known as the DBNA Treasury Money Market Fund, DBNA Government Money Market Fund,
DBNA Money Market Fund, DBNA Tax-Exempt Money Market Fund, and DBNA New York
Tax-Exempt Money Market Fund (each such Fund, and any other portfolio of yours
with respect to which the Plan may have been or may be adopted being referred to
herein as a "Fund" and collectively as the "Funds").
We confirm our agreement with you to serve as a "Service Organization" as
defined in, and in accordance with, the terms of the Plan and this Marketing
Services Agreement ("Service Agreement"), as follows:
1. We hereby agree that for the performance of our services we shall
receive payments pursuant to and as contemplated by paragraph 1(i) of the
Plan. These services shall include the following:
(i) marketing Investors Shares to prospective investors,
including distribution of prospectuses and statements of additional
information and sales material approved by the Fund(s);
(ii) displaying and making prospectuses available on premises;
and
(iii) assisting customers in completing application forms,
selecting and changing dividend and other account options and opening
custody accounts with us.
Payments for such services shall be a fee, calculated daily and payable monthly,
at the annual rate of .25% of each Fund's average daily net assets that are
Investors Shares attributable to us.
<PAGE>
2. We understand that the frequency of payment and the amount thereof
as well as any other supplemental terms, conditions or qualifications for
us to receive payments hereunder are subject to change by you, without
notice to us, pursuant to amendment of the Plan. We also understand that
any payments received hereunder pursuant to the Plan are subject to
limitations set forth in the Plan, and shall be paid only so long as the
Plan is in effect. Further, you may, in your discretion and without notice,
suspend or withdraw the sale of Investors Shares, including the sale of
such Shares to or through us for the account of any of our customers or
clients ("Clients"). Notwithstanding the above, in order to seek to assure
that for each Fund that declares daily dividends the net asset value per
share is the same for all classes of shares of such Fund, we agree to waive
such portion of any payments to us hereunder to the extent necessary to
ensure that payments, if any, required to be accrued by the Investors
Shares on any day do not exceed the income to be accrued to such Investors
Shares on that day.
3. We will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in our business, or any personnel employed by us)
as may be reasonably necessary or beneficial in order to provide the
aforementioned services and assistance.
4. Neither we nor any of our officers, employees or agents are
authorized to make any representations concerning you, the Funds or the
Investors Shares except those contained in the then current prospectus(es)
for the Investors Shares, copies of which will be supplied to us, or in
such supplemental sales literature or advertising as may be authorized by
you in writing.
5. For all purposes of this Agreement, we will be deemed to be an
independent contractor and will have no authority to act as agent for you
in any matter or in any respect. By its written acceptance of this
Agreement, we agree to and do release, indemnify and hold you harmless from
and against any and all direct or indirect liabilities or losses resulting
from requests, directions, actions or inactions of or by us or our
officers, employees or agents regarding our responsibilities hereunder or
the purchase, redemption, transfer or registration of Investors Shares by
or on behalf of Clients. We and our employees will, upon request, be
available during normal business hours to consult with you or your
designees concerning the performance of our responsibilities under this
Agreement.
-2-
<PAGE>
6. We understand that any agreements related to the Plan (including
this Service Agreement) with respect to a Fund must be approved by your
Board of Directors, including a majority of those who are not "interested
persons" of you (as defined in the Investment Company Act) and have no
direct or indirect financial interest in the operation of the Plan or any
agreement related to it (the "Independent Directors"), by votes cast in
person at a meeting called for the purpose of voting on such agreements.
7. This Service Agreement will remain in effect for an initial term of
one year and thereafter will continue in effect so long as such continuance
is specifically approved at least annually by vote of your Board of
Directors in the manner described in paragraph 6 above.
8. This Service Agreement shall terminate automatically (i) with
respect to all Funds in the event of its assignment, the term "assignment"
for this purpose having the meaning set forth in Section 2(a)(4) of the
Investment Company Act or (ii) with respect to a Fund in the event that the
Plan is terminated with respect to such Fund. This Service Agreement may be
terminated at any time with respect to a Fund, without payment of any
penalty, by a majority of the Independent Directors or by a "vote of a
majority of the outstanding voting securities" of Investors Shares of such
Fund (as defined in the Investment Company Act and a rule thereunder), on
60 days' written notice addressed to you at your principal place of
business.
9. We will furnish you or your designees with such information as you
may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services
described herein), and will otherwise cooperate with you and your designees
(including, without limitation, any auditors designated by you) in
connection with the preparation of reports to your Board of Directors
concerning this Agreement and the monies paid or payable by you pursuant
hereto, as well as any other reports or filings that may be required by
law.
10. You may enter into other similar Service Agreements with any other
person or persons without our consent.
11. By our written acceptance of this Agreement, we represent, warrant
and agree that: (i) the amount payable to us hereunder, together with any
other compensation we receive from Clients for services contemplated by
this Agreement, will not be excessive or unreasonable under the laws and
instruments governing our relationships with Clients; and (ii) we will
provide Clients a schedule
-3-
<PAGE>
of any fees that we may charge to them relating to the investment of their
assets in Investors Shares. In addition, we understand that this Agreement
has been entered into pursuant to Rule 12b-1 under the Investment Company
Act and is subject to the provisions of Rule 12b-1 as well as any other
applicable rules, regulations or orders promulgated by the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc.
or other governmental authorities.
12. This Service Agreement shall become effective as to Investors
Shares of a Fund on the later of the Effective Date of the Plan (as defined
therein) with respect to such Fund and the date when this Agreement is
executed and dated by you below. This Service Agreement and all the rights
and obligations of the parties hereunder shall be governed by and construed
under the laws of the State of New York.
13. We hereby agree that we shall defend, indemnify and hold you
harmless and each of your officers, directors, employees, agents,
shareholders and affiliates, if any, from and against any and all claims,
demands, actions, losses, damages, liabilities, costs and expenses
(including without limitation reasonable attorneys' fees and other costs or
expenses incident to any claim, suit, action or proceeding) arising out of
or in connection with: (a) any breach by us of any representation,
warranty, covenant or agreement contained in this Agreement; or (b) our
failure to perform our duties and obligations as set forth in this
Agreement. The provisions of this paragraph 13 shall survive termination of
this Agreement.
-4-
<PAGE>
14. We shall comply with any and all compliance standards adopted by
you relating to the promotion of sales of Investors Shares and notified to
us.
--------------------------------
(Service Organization)
By:
--------------------------------
Name:
Title:
--------------------------------
(Address)
--------------------------------
(city) (state) (zip code)
ACCEPTED:
DBNA INVESTMENTS, INC.
BY:
--------------------------------
Name:
Title:
DATE:
--------------------------------
-5-
