As filed with the Securities and Exchange Commission on July 9, 1999
Registration No. 33-41462
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20449
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 10 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 11 [X]
(Check appropriate box or boxes)
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 830-5200
BERNADETTE N. FINN
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Name and Address of Agent for Service)
Copy to:MICHAEL ROSELLA, ESQ.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective: (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a) (2)
[ ] on (date) pursuant to paragraph (a) (2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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PROSPECTUS July 9, 1999
EVERGREEN SHARES OF NORTH CAROLINA [GRAPHIC OMITTED]
DAILY MUNICIPAL INCOME FUND, INC.
Evergreen Class of Shares - distributed through Evergreen Distributor, Inc.
A money market fund whose investment objectives are to seek as high a level
of current income exempt from regular Federal income tax and, to the extent
possible, from North Carolina State income tax, as is believed to be consistent
with preservation of capital, maintenance of liquidity and stability of
principal.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
RISK/RETURN SUMMARY:INVESTMENTS, MANAGEMENT, ORGANIZATION AND
RISKS, AND PERFORMANCE.........................3 CAPITAL STRUCTURE..........................8
RISK/RETURN SUMMARY:FEE TABLE..................5 SHAREHOLDER INFORMATION......................8
INVESTMENT OBJECTIVES, PRINCIPAL Tax Consequences.......................12
INVESTMENT STRATEGIES, POLICIES DISTRIBUTION ARRANGEMENTS...................13
AND RELATED RISKS............................6 FINANCIAL HIGHLIGHTS........................14
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I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
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Investment Objectives
The Fund seeks as high a level of current income exempt from regular
Federal income tax and, to the extent possible, North Carolina State income tax,
as is believed to be consistent with preservation of capital, maintenance of
liquidity, and stability of principal. However, current income may be subject to
the Federal alternative minimum tax. There can be no assurance that the Fund
will achieve its investment objectives.
Principal Investment Strategies
The Fund intends to achieve its investment objectives by investing principally
in short-term, high quality, debt obligations of:
(i) North Carolina, and its political subdivisions,
(ii) Puerto Rico and other United States Territories, and their political
subdivisions, and
(iii) other states.
The Fund is a money market fund and seeks to maintain an investment portfolio
with a dollar-weighted average maturity of 90 days or less, to value its
investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.
The Fund intends to concentrate (e.g. 25% or more of the Fund's total net
assets) in North Carolina municipal obligations, including participation
certificates therein.
Principal Risks
o Although the Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund can each
decline in value.
o An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.
o Because the Fund intends to concentrate (e.g. 25% or more of the Fund's net
assets) in North Carolina municipal obligations, including participation
certificates therein, investors should also consider the greater risk of
the Portfolio's concentration versus the safety that comes with a less
concentrated investment portfolio.
o An investment in the Fund should be made with an understanding of the risks
which an investment in North Carolina municipal obligations may entail.
Payment of interest and preservation of capital are dependent upon the
continuing ability of North Carolina issuers and/or obligators of state,
municipal and public authority debt obligations to meet their payment
obligations. Risk factors affecting the State of North Carolina are
described in "North Carolina Risk Factors" in the Statement of Additional
Information.
Risk/Return Bar Chart And Table
The following bar chart and table may assist you in your decision to invest in
the Fund. The bar chart shows the change in the annual returns of the Fund over
the last 7 calendar years. The table shows the average annual returns of the
Fund's Class A shares for the last one and five year periods. The table also
includes the average annual return of the Class A shares since inception. While
analyzing this information, please note that the Fund's past performance is not
an indicator of how the Fund will perform in the future. The current 7-day yield
for the Class A shares may be obtained by calling the Fund toll-free at
1-800-221-3079.
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North Carolina Daily Municipal Income Fund, Inc. - Class A (1)(2)(3)(4)
[GRAPHIC OMITTED]
Calendar Year End % Total Return
- ----------------- ---------------
1992 2.49%
1993 1.78%
1994 2.17%
1995 3.20%
1996 2.73%
1997 2.88%
1998 2.69%
================================================================================
(1) The chart shows returns for the Class A shares of the Fund (which are not
offered by this prospectus) since as of December 31, 1998 there were no
Evergreen shares issued by the Fund. All classes of the Fund will have
substantially similar annual returns because the shares are invested in the
same portfolio of securities and the annual returns differ only to the
extent that the classes do not have the same expenses. If the expenses of
the Evergreen shares are higher than the Class A shares, then your annual
returns may be lower.
(2) As of June 30, 1999, the Fund had a year-to-date return of 1.12%.
(3) The Fund's highest quarterly return was 1.00% for the quarter ended
December 31, 1991; the lowest quarterly return was 0.40% for the quarter
ended March 31, 1993.
(4) Investors purchasing or redeeming shares through a Participating
Organization may be charged a fee in connection with such service and,
therefore, the net return to such investors may be less than the net return
by investing in the Fund directly.
Average Annual Total Return - North Carolina Daily Municipal Income Fund, Inc.
Class A
For the periods ended December 31, 1998
One Year 2.69%
Five Years 2.73%
Average Annual Total Return
since Inception 2.63%
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FEE TABLE
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This table describes the fees and expenses that you may pay if you buy and hold
Evergreen shares of the Fund.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Evergreen Shares
Management Fees 0.40%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses* 0.33%
Administration Fees 0.21%
Total Annual Fund Operating Expenses 0.98%
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* Estimated because there were no Evergreen shares issued during the fiscal year
ended August 31, 1998. The Distributor may voluntarily waive a portion of the
12b-1 Fee or the Fund may receive reimbursements of certain Other Expenses. This
fee waiver and reimbursement arrangement may be terminated or changed at any
time at the option of the Fund.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other money market funds.
Assume that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. Also assume that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Evergreen Shares: $100 $312 $542 $1,201
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II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
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Investment Objectives
The Fund is a short-term, tax-exempt money market fund whose investment
objectives are to seek as high a level of current income exempt from regular
Federal income tax and, to the extent possible, from North Carolina State income
tax, consistent with preserving capital, maintaining liquidity and stabilizing
principal.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund that would be affected by such a change.
Principal Investment Strategies
Generally
The Fund will invest primarily (i.e., at least 80%) in short-term, high quality,
debt obligations which include:
(i) North Carolina Municipal Obligations issued by or on behalf of the State of
North Carolina or any North Carolina local governments, or their
instrumentalities, authorities or districts;
(ii) Territorial Municipal Obligations issued by or on behalf of Puerto Rico and
the Virgin Islands or their instrumentalities, authorities, agencies and
political subdivisions; and
(iii) Municipal Obligations issued by or on behalf of other states, their
authorities, agencies, instrumentalities and political subdivisions.
These debt obligations are collectively referred to throughout this Prospectus
as Municipal Obligations.
The Fund will also invest in participation certificates in Municipal
Obligations. These "Participation Certificates" are purchased by the Fund from
banks, insurance companies or other financial institutions and in the opinion of
Battle Fowler LLP, counsel to the Fund, cause the Fund to be treated as the
owner of the underlying Municipal Obligations for Federal income tax purposes.
The Fund may invest more than 25% of its assets in Participation Certificates in
North Carolina Municipal Obligations and other North Carolina Municipal
Obligations.
Although the Fund will attempt to invest 100% of its total assets in Municipal
Obligations and Participation Certificates, the Fund reserves the right to
invest up to 20% of its total assets in taxable securities whose interest income
is subject to regular Federal, state and local income tax. The kinds of taxable
securities in which the Fund may invest are limited to short-term, fixed income
securities as more fully described in "Taxable Securities" in the Statement of
Additional Information.
Included in the same 20% of total assets in taxable securities, the Fund may
also purchase securities and Participation Certificates whose interest income
may be subject to the Federal alternative minimum tax.
To the extent suitable North Carolina Municipal Obligations are not available
for investment by the Fund, the Fund may purchase Municipal Obligations issued
by other states, their agencies and instrumentalities. The interest income from
these Municipal Obligations will be exempt from regular Federal income tax (in
the opinion of bond counsel to the issuers at the day of issuance), but will be
subject to the North Carolina Income Tax.
The Fund will invest at least 65% of its total assets in North Carolina
Municipal Obligations, although the exact amount may vary from time to time. As
a temporary defensive measure the Fund may, from time to time, invest in
securities that are inconsistent with its principal investment strategies in an
attempt to respond to adverse market, economic, political or other conditions as
determined by the Manager. Such a temporary defensive position may cause the
Fund to not achieve its investment objectives.
With respect to 75% of its total assets, the Fund shall invest not more than 10%
of its total assets in Municipal Obligations or Participation Certificates
issued by a single issuer. The Fund shall not invest more than 5% of its total
assets in Municipal Securities or Participation Certificates issued by a single
issuer unless the Municipal Obligations are of the highest quality.
With respect to 75% of its total assets, the Fund shall invest not more than 10%
of its total assets in Municipal Obligations or Participation Certificates
backed by a demand feature or guarantee from the same institution.
The Fund's investments may also include "when-issued" Municipal Obligations and
stand-by commitments.
The Fund's investment manager considers the following factors when buying and
selling securities for the portfolio: (i) availability of cash, (ii) redemption
requests,(iii) yield management, and (iv) credit management.
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In order to maintain a share price of $1.00, the Fund must comply with certain
industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other requirements pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities which have or are deemed to have a remaining maturity
of 397 days or less. Also, the average maturity for all securities contained in
each individual portfolio of the Fund, on a dollar-weighted basis, will be 90
days or less.
The Fund will only invest in either securities which have been rated (or whose
issuers have been rated) in the highest short-term rating category by nationally
recognized statistical rating organizations, or are unrated securities but which
have been determined by the Fund's Board of Directors to be of comparable
quality.
Subsequent to its purchase by the Fund, the quality of an investment may cease
to be rated or its rating may be reduced below the minimum required for purchase
by the Fund. If this occurs, the Board of Directors of the Fund shall reassess
the security's credit risks and shall take such action as it determines is in
the best interest of the Fund and its shareholders. Reassessment is not
required, however, if the security is disposed of or matures within five
business days of the Manager becoming aware of the new rating and provided
further that the Board of Directors is subsequently notified of the Manager's
actions.
For a more detailed description of (i) the securities that the Fund will invest
in, (ii) fundamental investment restrictions, and (iii) industry regulations
governing credit quality and maturity, please refer to the Statement of
Additional Information.
Risks
The Fund complies with industry-standard requirements on the quality, maturity
and diversification of its investments which are designed to help maintain a
$1.00 share price. A significant change in interest rates or a default on the
Fund's investments could cause its share price (and the value of your
investment) to change.
The Fund's management believes that by maintaining the Fund's investment
portfolio in liquid, short-term, high quality investments, including
Participation Certificates and other variable rate demand instruments that have
high quality credit support from banks, insurance companies or other financial
institutions, the Fund is largely insulated from the credit risks that may exist
on long-term North Carolina Municipal Obligations. The Fund is exposed to the
credit risk of the credit or liquidity support provider. Changes in the credit
quality of the provider could affect the value of the security and your
investment in the Fund.
The primary purpose of investing in a portfolio of North Carolina Municipal
Obligations is the special tax treatment accorded North Carolina resident
individual investors. Exempt-interest derived from North Carolina Municipal
Obligations will be exempt from the North Carolina Income Tax. Exempt-interest
dividends derived from Territorial Municipal Obligations also should be exempt
from the North Carolina Income Tax provided the Fund complies with applicable
North Carolina law. Other distributions from the Fund may be subject to North
Carolina Income tax. (See " Tax Consequences" herein.)
Because of the Fund's concentration in investments in North Carolina Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of North Carolina and its political subdivisions.
Payment of interest and preservation of principal, however, are dependent upon
the continuing ability of the North Carolina issuers and/or obligors of state,
municipal and public authority debt obligations to meet their obligations
thereunder. Investors should consider the greater risk of the Fund's
concentration versus the safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios of North Carolina
issues with those of more diversified portfolios, including out-of-state issues,
before making an investment decision.
Because the Fund may concentrate in Participation Certificates which may be
secured by bank letters of credit or guarantees, an investment in the Fund
should be made with an understanding of the characteristics of the banking
industry and the risks which such an investment may entail. This includes
extensive governmental regulations, changes in the availability and cost of
capital funds, and general economic conditions (see "Variable Rate Demand
Instruments and Participation Certificates" in the Statement of Additional
Information) which may limit both the amounts and types of loans and other
financial commitments which may be made and interest rates and fees which 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 under a letter
of credit.
As the Year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Manager is in the process of working with the Fund's service
providers to prepare for the Year 2000. Based on information currently
available, the Manager does not expect that the Fund
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will incur material costs to be Year 2000 compliant. Although the Manager does
not anticipate that the Year 2000 issue will have a material impact on the
Fund's ability to provide service at current levels, there can be no assurance
that steps taken in preparation for the Year 2000 will be sufficient to avoid an
adverse impact on the Fund. The Year 2000 problem may also adversely affect
issuers of the securities contained in the Fund, to varying degrees based upon
various factors, and thus may have a corresponding adverse affect on the Fund's
performance. The Manager is unable to predict what affect, if any, the Year 2000
problem will have on such issuers.
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III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
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The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of May 31, 1999, the Manager was the investment
manager, advisor or supervisor with respect to assets aggregating in excess of
$13.4 billion. The Manager has been an investment adviser since 1970 and
currently is manager of seventeen other registered investment companies and also
advises pension trusts, profit-sharing trusts and endowments.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund. Pursuant to the Investment Management Contract, the Fund pays the
Manager a fee equal to .40% per annum of the Fund's average daily net assets for
managing the Fund's investment portfolio and performing related services.
Pursuant to the Administrative Services Contract, the Manager performs clerical,
accounting supervision and office service functions for the Fund. The Manager
provides the Fund with the personnel to perform all other clerical and
accounting type functions not performed by the Manager. For its services under
the Administrative Services Contract, the Fund pays the Manager a fee equal to
.21% per annum of the Fund's average daily net assets. The Manager, at its
discretion, may voluntarily waive all or a portion of the administrative
services fee. Any portion of the total fees received by the Manager may be used
to provide shareholder services and for distribution of Fund shares.
In addition, Reich & Tang Distributors Inc., the Distributor, receives a
servicing fee equal to .25% per annum of the average daily net assets of the
Evergreen shares of the Fund under the Shareholder Servicing Agreement. The fees
are accrued daily and paid monthly. Investment management fees and operating
expenses, which are attributable to all Classes of shares of the Fund, will be
allocated daily to each Class of shares based on the percentage of shares
outstanding for each Class at the end of the day.
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IV. SHAREHOLDER INFORMATION
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Evergreen shares have been created for the primary purpose of providing a North
Carolina tax-free money market fund product for shareholders of certain funds
distributed by Evergreen Distributors, Inc. ("EDI"). Shares of the Fund, other
than Evergreen shares, are offered pursuant to a separate prospectus. Evergreen
shares are identical to other shares of the Fund, with respect to investment
objectives and yield, but differ with respect to certain other matters,
including shareholder services and purchase and redemption of shares.
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from Participating Organizations
and from investors directly.
Pricing of Fund Shares
The net asset value of each Class of the Fund's shares is determined as of 12
noon, New York City time, on each Fund Business Day. Fund Business Day means
weekdays (Monday through Friday) except days on which the New York Stock
Exchange is closed for trading. The net asset value of a Class is computed by
dividing the value of the Fund's net assets for such Class (i.e., the value of
its securities and other assets less its liabilities, including expenses payable
or accrued, but excluding capital stock and surplus) by the total number of
shares outstanding for such Class. The Fund intends to maintain a stable net
asset value at $1.00 per share although there can be no assurance that this will
be achieved.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the Investment Company Act of 1940 (the
"1940 Act"). Amortized cost valuation involves valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium. If fluctuating interest rates cause the market value of the Fund's
portfolio to deviate more than 1/2 of 1% from the
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value determined on the basis of amortized cost, the Board of Directors will
consider whether any action should be initiated. Although the amortized cost
method provides certainty in valuation, it may result in periods during which
the value of an instrument is higher or lower than the price an investment
company would receive if the instrument were sold.
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a charge for either sales or redemptions. Shares are
issued as of the first determination of the Fund's net asset value per share for
each Class made after acceptance of the investor's purchase order. In order to
maximize earnings on its portfolio, the Fund normally has its assets as fully
invested as is practicable. Many securities in which the Fund invests require
the immediate settlement in funds of Federal Reserve member banks on deposit at
a Federal Reserve Bank (commonly known as "Federal Funds"). The Fund does not
accept a purchase order until an investor's payment has been converted into
Federal Funds and is received by the Fund's transfer agent. Orders accompanied
by Federal Funds and received after 12 noon, New York City time, on a Fund
Business Day will result in the issuance of shares on the following Fund
Business Day. Fund shares begin accruing income on the day the shares are issued
to an investor. The Fund reserves the right to reject any purchase order for its
shares. Certificates for Fund shares will not be issued to an investor.
How to Buy Shares
Only Evergreen shares are offered through this Prospectus. You can purchase
shares of the Fund through broker-dealers, banks or other financial
intermediaries, or directly through Evergreen Distributor, Inc. ("EDI"). The
minimum initial investment is $1,000 which may be waived in certain situations.
There is no minimum for subsequent investments. In states where EDI is not
registered as a broker-dealer, shares of the Fund will only be sold through
other broker-dealers or other financial institutions that are registered.
Instructions on how to purchase shares of the Fund are set forth in the Share
Purchase Application.
Application Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss the Fund or the Fund's Manager incurs.
If such investor is an existing shareholder, the Fund may redeem shares from his
or her account to reimburse the Fund or the Fund's Manager for any loss. In
addition, such investors may be prohibited or restricted from making further
purchase in any of the Evergreen mutual funds.
How To Redeem Shares
You may "redeem", i.e., sell your shares in the Fund to the Fund on any Fund
Business Day, either directly or through your financial intermediary. The price
you will receive is the net asset value next calculated after the Fund receives
your request in proper form. Proceeds generally will be sent to you within seven
days. However, for shares recently purchased by check, the Fund will not send
proceeds until it is reasonably satisfied that the check has been collected
(which may take up to ten days). Once a redemption request has been telephoned
or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. The Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service. Certain financial intermediaries may require that
you give instructions earlier than 4:00 p.m. (Eastern time).
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to Evergreen Service Company which is the
registrar, transfer agent and dividend disbursing agent for the Fund. Stock
power forms are available from your financial intermediary, Evergreen Service
Company, and many commercial banks. Additional documentation is required for the
sale of shares by corporations, financial intermediaries, fiduciaries and
surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to Evergreen Service
Company.
Shareholders may withdraw amounts of $1,000 or more from their accounts by
calling Evergreen Service Company at 800-423-2615 between the hours of 8:00 a.m.
to 5:30 p.m. (Eastern time) each Fund Business Day. Redemption requests made
after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. Such redemption requests must include the
shareholder's account name, as registered with the Fund, and the account number.
During periods of drastic economic or market changes,
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shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach Evergreen Service Company by telephone
should follow the procedures outlined above for redemption by mail.
The telephone redemption service is not available to shareholders automatically.
Shareholders wishing to use the telephone redemption service must indicate this
on the Share Purchase Application and choose how the redemption proceeds are to
be paid. Redemption proceeds will either (i) be mailed by check to the
shareholder at the address in which the account is registered or (ii) be wired
to an account with the same registration as the shareholder's account in the
Fund at a designated commercial bank. Evergreen Service Company currently
deducts a $5.00 wire charge from all redemption proceeds wired. This charge is
subject to change without notice. Redemption proceeds will be wired on the same
day if the request is made prior to 12 noon (Eastern time). Such shares,
however, will not earn dividends for that day. Redemption requests received
after 12 noon will earn dividends for that day, and the proceeds will be wired
on the following business day. A shareholder who decides later to use this
service, or to change instructions already given, should fill out a Shareholder
Services Form and send it to Evergreen Service Company, P.O. Box 2121, Boston,
Massachusetts 02106-2121 with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
Evergreen Service Company. Shareholders should allow approximately ten days for
such form to be processed. The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. These procedures
include requiring some form of personal identification prior to acting upon
instructions and tape recording of telephone instructions. If the Fund fails to
follow such procedures, it may be liable for any losses due to unauthorized or
fraudulent instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine. The Fund reserves the right to
refuse a telephone redemption if it is believed advisable to do so. Financial
intermediaries may charge a fee for handling telephone requests. Procedures for
redeeming Fund shares by telephone may be modified or terminated without notice
at any time.
Redemptions by Check. Upon request, the Fund will provide holders of Evergreen
shares, without charge, with checks drawn on the Fund that will clear through
Evergreen Service Company. Shareholders will be subject to the Evergreen Service
Company rules and regulations governing such checking accounts. Checks will be
sent usually within ten business days following the date the account is
established. Checks may be made payable to the order of any payee in an amount
of $250 or more. The payee of the check may cash or deposit it like a check
drawn on a bank. (Investors should be aware that, as in the case with regular
bank checks, certain banks may not provide cash at the time of deposit, but will
wait until they have received payment from Evergreen Service Company.) When such
a check is presented to Evergreen Service Company for payment, Evergreen Service
Company, as the shareholder's agent, causes the Fund to redeem a sufficient
number of full and fractional shares in the shareholder's account to cover the
amount of the check. Checks will be returned by Evergreen Service Company if
there are insufficient or uncollectable shares to meet the withdrawal amount.
The check writing procedure for withdrawal enables shareholders to continue
earning income on the shares to be redeemed up to but not including the date the
redemption check is presented to Evergreen Service Company for payment.
Shareholders wishing to use this method of redemption should fill out the
appropriate part of the Share Purchase Application (including the Signature
Card) and mail the completed form to Evergreen Service Company, P.O. Box 2121,
Boston, Massachusetts 02106-2121. Shareholders requesting this service after an
account has been opened must contact Evergreen Service Company since additional
documentation will be required. Currently there is no charge either for checks
or for the clearance of any checks. This service may be terminated or altered at
any time.
Shareholder Services
The Fund provides Evergreen shareholders with the following shareholder
services. For more information about these services or your account, contact EDI
or the toll-free number on the back of this Prospectus. Some services are
described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $25,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account two business days after the request
is received.
10
<PAGE>
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designated a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically. In order to make a payment, a number of
shares equal in aggregate net asset value to the payment amount are redeemed at
their net asset value on the Fund Business Day immediately preceding the date of
payment. To the extent that the redemptions to make plan payments exceed the
number of shares purchased through reinvestment of dividends and distributions,
the redemptions reduce the number of shares purchased on original investment,
and may ultimately liquidate a shareholder's investment. Because the withdrawal
plan involves the redemption of Fund shares, such withdrawals may constitute
taxable events to the shareholder, but the Fund does not expect that there will
be any realized capital gains.
Investments Through Employee Benefit and Savings Plan. Certain qualified and
non-qualified benefit and savings plans may make shares of the Fund and the
other Evergreen mutual funds available to their participants. Each Fund's
investment adviser may provide compensation to organizations providing
administrative and recordkeeping services to plans which make shares of the
Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the last
business day of each month, unless otherwise requested by a shareholder in
writing. If the transfer agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
Shares are issued as of 12 noon, Eastern time, on any Fund Business Day on which
an order for the shares and accompanying Federal Funds are received by the
Fund's transfer agent before 12 noon. Orders accompanied by Federal Funds and
received after 12 noon, Eastern time, on a Fund Business Day will not result in
share issuance until the following Fund Business Day. Fund shares begin accruing
income on the day the shares are issued to an investor.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by check. If a shareholder elects to redeem all
the shares of the Fund he owns, all dividends accrued to the date of such
redemption will be paid to the shareholder along with the proceeds of the
redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than customary weekend and holiday closings) or during which
the SEC determines that trading thereon is restricted, or for any period during
which an emergency (as determined by the SEC) exists as a result of which
disposal by the Fund of its portfolio securities is not reasonably practicable
or as a result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or for such other period as the SEC may
by order permit for the protection of the shareholders of the Fund.
Redemption requests received by the Fund's transfer agent before 12 noon,
Eastern time, on any Fund Business Day become effective at 12 noon that day.
Shares redeemed are not entitled to participate in dividends declared on the day
a redemption becomes effective. A redemption request received after 12 noon,
Eastern time, on any Fund Business Day becomes effective on the next Fund
Business Day.
11
<PAGE>
The Fund has reserved the right to close an account that through redemptions has
remained below $1,000 for 30 days. Shareholders will receive 60 days' written
notice to increase the account value before the account is closed.
The redemption of shares may result in the investor's receipt of more or less
than he paid for his shares and, thus, in a taxable gain or loss to the
investor.
Dividends and Distributions
The Fund declares dividends equal to all its net investment income (excluding
capital gains and losses, if any, and amortization of market discount) on each
Fund Business Day and pays dividends monthly. There is no fixed dividend rate.
In computing these dividends, interest earned and expenses are accrued daily.
Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year.
All dividends and distributions of capital gains are automatically invested, at
no charge, in additional Fund shares of the same Class of shares immediately
upon payment thereof unless a shareholder has elected by written notice to the
Fund to receive either of such distributions in cash.
Because Evergreen shares bear a service fee under the Fund's 12b-1 Plan, the net
income of and the dividends payable to the Evergreen shares will be lower than
the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of the Fund will, however, be declared
and paid on the same days at the same times and, except as noted with respect to
the service fees payable under the Plan, will be determined in the same manner
and paid in the same amounts.
Tax Consequences
The purchase of Fund shares will be a purchase of an asset. Dividends paid by
the Fund that are properly designated by the Fund as derived from Municipal
Obligations and Participation Certificates will be exempt from regular Federal
income tax but may be subject to Federal alternative minimum tax. These
dividends are referred to as "exempt-interest dividends." Income exempt from
Federal Income tax may be subject to state and local income tax.
Dividends paid from taxable income and distributions of short-term capital gains
from tax-exempt or taxable obligations are taxable to shareholders as ordinary
income, whether received in cash or reinvested in additional shares of the Fund.
The Fund does not expect to realize long-term capital gains, and thus does not
contemplate distributing "capital gain dividends". The Fund will inform
shareholders of the amount and nature of its income and gains after the close of
the Fund's taxable year.
For Social Security recipients, interest on tax-exempt bonds, including "exempt
interest dividends" paid by the Fund, is to be added to adjusted gross income
for purposes of computing the amount of Social Security benefits includible in
gross income. Interest on certain "private activity bonds" will constitute an
item of tax preference subject to the individual alternative minimum tax.
Corporations will be required to include in alternative minimum taxable income
75% of the amount by which their adjusted current earnings (including tax-exempt
interest) exceeds their alternative minimum taxable income (determined without
this tax item). In certain cases Subchapter S corporations with accumulated
earnings and profits from Subchapter C years will be subject to a tax on
"passive investment income", including tax-exempt interest.
The sale, exchange or redemption of shares will generally be the taxable
disposition of an asset. The redemption of shares may result in the investor's
receipt of more or less than it paid for its shares and, thus may result in a
taxable gain or loss to the investor. An exchange pursuant to the exchange
privilege is treated as a sale on which a shareholder may realize a taxable gain
or loss.
With respect to variable rate demand instruments, including participation
certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner of the underlying Municipal Obligations and that the interest thereon
will be exempt from regular Federal income taxes to the Fund to the same extent
as the interest on the underlying Municipal Obligations. The Internal Revenue
Service has announced that it will not ordinarily issue advance rulings on the
question of the ownership of securities or participation interests therein
subject to a put and could reach a conclusion different from that reached by
counsel.
12
<PAGE>
The United States Supreme Court has held that there is no constitutional
prohibition against the Federal government's taxing the interest earned on state
or other municipal bonds. The decision does not, however, affect the current
exemption from taxation of the interest earned on the Municipal Obligations.
North Carolina Income Taxes
The following is based upon the advice of Kennedy Covington Lobdell and Hickman,
L.L.P., special North Carolina counsel to the Fund. The designation of all or a
portion of a dividend paid by the Fund as an "exempt-interest dividend" under
the Code does not necessarily result in the exemption of such amount from tax
under the laws of any state or local taxing authority. However, assuming that
the Fund is a regulated investment company within the meaning of Section 851 of
the Code, has filed with the North Carolina Department of Revenue its election
to be treated as a regulated investment company and has complied with certain
other requirements, exempt interest dividends received from the Fund and
correctly identified by the Fund as derived from obligations issued by or on
behalf of the State of North Carolina or any political subdivisions need not be
included in North Carolina taxable income by shareholders of the Fund subject to
North Carolina taxation. Dividends with respect to interest on obligations from
states other than North Carolina and its political subdivisions are required to
be added to Federal taxable income in calculating North Carolina taxable income.
The portion of distributions from the Fund that represents capital gain is
reportable for North Carolina income tax purposes as capital gain income and not
dividend income. Exempt-interest dividends correctly identified by the Fund as
derived from obligations of Puerto Rico and the Virgin Islands, as well as other
types of obligations that North Carolina is prohibited from taxing under the
Constitution or the laws of the United States of America or the constitution or
laws of North Carolina ("Territorial Municipal Obligations") should be exempt
from the North Carolina Income Taxation provided the Fund complies with
applicable North Carolina law.
Shareholders are urged to consult their tax advisers with respect to the
treatment of distributions from the Fund and ownership of shares of the Fund in
their own states and localities.
- --------------------------------------------------------------------------------
V. DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
Rule 12b-1 Fees
Investors do not pay a sales charge to purchase shares of the Fund. However, the
Fund pays fees in connection with the distribution of shares and for services
provided to Evergreen shareholders. The Fund pays these fees from its assets on
an ongoing basis and therefore, over time, the payment of these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
The Fund's Board of Directors has adopted a Rule 12b-1 distribution and service
plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Evergreen
shares of the Fund).
Under the Distribution Agreement, the Distributor serves as distributor of the
Fund's shares. For nominal consideration (i.e., $1.00) and as agent for the
Fund, the Distributor solicits orders for the purchase of the Fund's shares,
provided that any orders will not be binding on the Fund until accepted by the
Fund as principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect to the Evergreen shares, a service fee equal to .25% per annum of the
Evergreen shares' average daily net assets (the Shareholder Servicing Fee") for
providing personal shareholder services and for the maintenance of shareholder
accounts. The fee is accrued daily and paid monthly. Any portion of the fee may
be deemed to be used by the Distributor for payments to Participating
Organizations with respect to their provision of such services to their clients
or customers who are shareholders of the Evergreen shares of the Fund. The Class
B shareholders will not receive the benefit of such services from Participating
Organizations and, therefore, will not be assessed a Shareholder Servicing Fee.
The Plan and the Shareholder Servicing Agreement provide that the Fund will pay
for (i) telecommunications expenses including the cost of dedicated lines and
CRT terminals, incurred by the Distributor and participating organizations in
carrying out their obligations under the Shareholder Servicing Agreement with
respect to Class A shares, and (ii) preparing, printing and delivering the
Fund's prospectus to existing shareholders of the Fund and preparing and
printing subscription application forms for shareholder accounts.
The Plan and the Shareholder Servicing Agreement provide that the Manager may
make payments from time to time from its own resources, which may include the
management fee and past profits for the following purposes: (i) to defray costs,
and to compensate others, including Participating Organizations with whom the
Distributor has entered into written agreements, for performing shareholder
servicing on behalf of the Class A shares of the
13
<PAGE>
Fund; (ii) to compensate certain Participating Organizations for providing
assistance in distributing the Class A shares of the Fund; and (iii) to pay the
costs of printing and distributing the Fund's prospectus to prospective
investors, and to defray the cost of the preparation and printing of brochures
and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
Class A shares. The Distributor may also make payments from time to time from
its own resources, which may include the Shareholding Servicing Fee (with
respect to Class A shares) and past profits, for the purposes enumerated in (i)
above. The Distributor will determine the amount of such payments made pursuant
to the Plan, provided that such payments will not increase the amount which the
Fund is required to pay to the Manager and Distributor for any fiscal year under
either the Investment Management Contract in effect for that year or under the
Shareholder Servicing Agreement in effect for that year.
- --------------------------------------------------------------------------------
VI. FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
This financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The highlights reflect an investment
in the Class A shares of the Fund since there were no Evergreen shares issued
during the periods covered by this table. The total returns in the table
represent the rate that an investor would have earned on an investment in the
Fund (assuming reinvestment of all dividends and distributions). This
information, except for the six months ended February 28, 1999, has been audited
by McGladrey and Pullen, LLP, whose report, along with the Fund's financial
statements, is included in the annual report, which is available upon request.
<TABLE>
<CAPTION>
Six
Months
Ended Year Ended August 31,
Class A February 28, ------------------------------------------------------------
1999 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income................... 0.012 0.028 0.028 0.029 0.030 0.018
Less distributions:
Dividends from net investment
income............................... ( 0.012) ( 0.028) ( 0.028) ( 0.029) ( 0.030) ( 0.018)
-------- -------- -------- -------- -------- --------
Net asset value, end of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return............................... 2.42%* 2.82% 2.82% 2.87% 3.04% 1.86%
Ratios/Supplemental Data
Net assets, end of period (000)............ $ 266,437 $ 230,673 $ 197,353 $ 172,385 $ 164,256 $ 122,820
Ratios to average net assets:
Expenses (Net of fees waived)........... 0.87%* 0.85% 0.80% 0.80% 0.78% 0.75%
Net investment income................... 2.38%* 2.77% 2.78% 2.82% 3.01% 1.85%
Management, shareholder servicing
and Administration fees waived 0.12%* 0.13% 0.18% 0.20% 0.24% 0.29%
* Annualized
</TABLE>
14
<PAGE>
A Statement of Additional Information (SAI) dated July 9, 1999, and the Fund's
Annual and Semi-Annual Reports include additional information about the Fund and
its investments and are incorporated by reference into this prospectus. You may
obtain the SAI, the Annual and Semi-Annual Reports and material incorporated by
reference without charge by calling the Fund at 1-800-221-3079. To request other
information, call your financial intermediary or the Fund.
A current SAI has been filed with the Securities and Exchange Commission. You
may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
Distributor
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
811-6344 537624 (REV03)
7/99
<PAGE>
NORTH CAROLINA
DAILY MUNICIPAL 600 Fifth Avenue, New York, NY 10020
INCOME FUND, INC. (212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
July 9, 1999
RELATING TO THE NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
PROSPECTUS DATED JANUARY 4, 1999
AND THE
EVERGREEN SHARES OF NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
PROSPECTUS DATED JULY 9, 1999
This Statement of Additional Information (SAI) is not a Prospectus. The SAI
expands upon and supplements the information contained in the current Prospectus
of North Carolina Daily Municipal Income Fund, Inc. and Evergreen Shares of
North Carolina Daily Municipal Income Fund, Inc. (each, the "Fund"), dated
January 4, 1999 and should be read in conjunction with each Fund's Prospectus.
A Prospectus may be obtained from any Participating Organization or by writing
or calling the Fund toll-free at 1-(800) 221-3079. The Financial Statements of
the Fund have been incorporated by reference into the SAI from the Fund's Annual
Report. The Annual Report is available, without charge, upon request by calling
the toll-free number provided.
If you wish to invest in Evergreen Shares of the Fund, you should obtain a
separate Prospectus by writing to State Street Bank and Trust Company, P.O. Box
9021, Boston, Massachusetts 02205-9827 or by calling toll free 1-(800) 807-2840.
This Statement of Additional Information is incorporated by reference into the
respective Prospectus in its entirety.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Table of Contents
- -----------------------------------------------------------------------------------------------------------------------
Fund History........................................ 2 Capital Stock and Other Securities......................16
Description of the Fund and its Investments and Purchase, Redemption and Pricing of Shares..............17
Risks............................................. 2 Taxation of the Fund....................................18
Management of the Fund..............................10 Underwriters............................................19
Control Persons and Principal Holders of Calculation of Performance Data.........................20
Securities........................................12 Financial Statements....................................20
Investment Advisory and Other Services..............12 Description of Ratings..................................21
Brokerage Allocation and Other Practices............16 Taxable Equivalent Yield Tables.........................22
</TABLE>
<PAGE>
I. FUND HISTORY
The Fund was incorporated on April 18, 1990 in the state of Maryland.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The Fund is an open-end, management investment company that is a short-term,
tax-exempt money market fund. The Fund's investment objectives are to seek a
high level of current income exempt from regular Federal tax and North Carolina
State income tax consistent with preserving capital, maintaining liquidity and
stabilizing principal. No assurance can be given that these objectives will be
achieved.
The following discussion expands upon the description of the Fund's investment
objectives and policies in the Prospectus.
The Fund's assets will be invested primarily in (i) high quality debt
obligations issued by or on behalf of the State of North Carolina, other states,
territories and possessions of the United States and their authorities,
agencies, instrumentalities and political subdivisions, the interest on which
is, in the opinion of bond counsel to the issuer at the date of issuance,
currently exempt from regular Federal income taxation ("Municipal Obligations")
and in (ii) participation certificates (which, in the opinion of Battle Fowler
LLP, counsel to the Fund, cause the Fund to be treated as the owner of the
underlying Municipal Obligations for Federal income tax purposes) in Municipal
Obligations purchased from banks, insurance companies or other financial
institutions ("Participation Certificates"). Dividends paid by the Fund are
"exempt-interest dividends" by virtue of being properly designated by the Fund
as derived from Municipal Obligations and Participation Certificates. They will
be exempt from regular Federal income tax provided the Fund complies with
Section 852(b)(5) of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). Although the Supreme Court has determined that Congress
has the authority to subject the interest on bonds such as the Municipal
Obligations to regular Federal income taxation, existing law excludes such
interest from regular Federal income tax. However, such interest, including
"exempt-interest dividends" may be subject to the Federal alternative minimum
tax.
Securities, the interest income on which may be subject to the Federal
alternative minimum tax (including Participation Certificates), may be purchased
by the Fund without limit. Securities, the interest income on which is subject
to regular Federal, state and local income tax, will not exceed 20% of the value
of the Fund's total assets. (See "Federal Income Taxes" herein.) Exempt-interest
dividends paid by the Fund that are correctly identified by the Fund as derived
from obligations issued by or on behalf of the State of North Carolina or any
North Carolina local governments, or their instrumentalities, authorities or
districts ("North Carolina Municipal Obligations") will be exempt from the North
Carolina Income Tax. Exempt-interest dividends correctly identified by the Fund
as derived from obligations of Puerto Rico and the Virgin Islands, as well as
any other types of obligations that North Carolina is prohibited from taxing
under the Constitution, the laws of the United States of America or the North
Carolina Constitution ("Territorial Municipal Obligations"), also should be
exempt from North Carolina Income Tax provided the Fund complies with applicable
North Carolina laws. (See "North Carolina Income Taxes" herein.) To the extent
that suitable North Carolina Municipal Obligations are not available for
investment by the Fund, the Fund may purchase Municipal Obligations issued by
other states, their agencies and instrumentalities. The dividends on these will
be designated by the Fund as derived from interest income which will be, in the
opinion of bond counsel to the issuer at the date of issuance, exempt from
regular Federal Income Tax but will be subject to the North Carolina Income Tax.
Except as a temporary defensive measure during periods of adverse market
conditions as determined by the Manager, the Fund will invest at least 65% of
its assets in North Carolina Municipal Obligations, although the exact amount of
the Fund's assets invested in such securities will vary from time to time. The
Fund seeks to maintain an investment portfolio with a dollar-weighted average
maturity of 90 days or less and to value its investment portfolio at amortized
cost and maintain a net asset value at $1.00 per share of each Class. There can
be no assurance that this value will be maintained.
The Fund may hold uninvested cash reserves pending investment. The Fund's
investments may include "when-issued" Municipal Obligations, stand-by
commitments and taxable repurchase agreements. Although the Fund will attempt to
invest 100% of its assets in Municipal Obligations and in Participation
Certificates, the Fund reserves the right to invest up to 20% of the value of
its total assets in securities, the interest income on which is subject to
regular Federal, state and local income tax. The Fund will invest more than 25%
of its assets in participation certificates purchased from banks in industrial
revenue bonds and other North Carolina Municipal Obligations. In view of this
"concentration" in bank participation certificates in North Carolina Municipal
Obligations, an investment in Fund shares should be made with an understanding
of the characteristics of the banking industry and the risks which such an
investment may entail. (See "Variable Rate Demand Instruments and Participation
Certificates" herein.) The investment objectives of the Fund described in the
preceding paragraphs of this section may not be changed unless approved by the
holders of a majority of the outstanding shares of the Fund that would be
affected by such a change. As used herein, the term "majority of the outstanding
shares" of the Fund means, respectively,
2
<PAGE>
the vote of the lesser of (i) 67% or more of the shares of the Fund present at a
meeting, if the holders of more than 50% of the outstanding shares of the Fund
are present or represented by proxy, or (ii) more than 50% of the outstanding
shares of the Fund.
The Fund may only purchase United States dollar-denominated securities that have
been determined by the Fund's Board of Directors to present minimal credit risks
and that are Eligible Securities at the time of acquisition. The term Eligible
Securities means: (i) securities which have or are deemed to have remaining
maturities of 397 days or less and rated in the two highest short-term rating
categories by any two nationally recognized statistical rating organizations
("NRSROs") or in such categories by the only NRSRO that has rated the Municipal
Obligations (collectively, the "Requisite NRSROs"); or (ii) unrated securities
determined by the Fund's Board of Directors to be of comparable quality. In
addition, securities which have or are deemed to have remaining maturities of
397 days or less but that at the time of issuance were long-term securities
(i.e. with maturities greater than 366 days) are deemed unrated and may be
purchased if such had received a long-term rating from the Requisite NRSROs in
one of the three highest rating categories. Provided, however, that such may not
be purchased if it (i) does not satisfy the rating requirements set forth in the
preceding sentence and (ii) has received a long-term rating from any NRSRO that
is not within the three highest long-term rating categories. A determination of
comparability by the Board of Directors is made on the basis of its credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support of the
securities. While there are several organizations that currently qualify as
NRSROs, two examples of NRSROs are Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies, ("S&P") and Moody's Investors Service, Inc.
("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in the
case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in the
case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's in
the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "VMIG-1" by Moody's or "SP-1/AA" by S&P.
Such instruments may produce a lower yield than would be available from less
highly rated instruments.
Subsequent to its purchase by the Fund, a rated security may cease to be rated
or its rating may be reduced below the minimum required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall promptly reassess
whether the security presents minimal credit risks and shall cause the Fund to
take such action as the Board of Directors determines is in the best interest of
the Fund and its shareholders. However, reassessment is not required if the
security is disposed of or matures within five business days of the Manager
becoming aware of the new rating and provided further that the Board of
Directors is subsequently notified of the Manager's actions.
In addition, in the event that a security (i) is in default, (ii) ceases to be
an Eligible Security under Rule 2a-7 of the 1940 Act or (iii) is determined to
no longer present minimal credit risks, or an event of insolvency occurs with
respect to the issues of a portfolio security or the provider of any Demand
Feature or Guarantee, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Fund. Disposal of the security shall
occur as soon as practicable consistent with achieving an orderly disposition by
sale, exercise of any demand feature or otherwise. In the event of a default
with respect to a security which immediately before default accounted for 1/2 of
1% or more of the Fund's total assets, the Fund shall promptly notify the SEC of
such fact and of the actions that the Fund intends to take in response to the
situation.
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations or Participation Certificates
issued by a single issuer. However, the Fund shall not invest more than 5% of
its total assets in Municipal Obligations or Participation Certificates issued
by a single issuer, unless the Municipal Obligations are of the highest quality.
The Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Code. The Fund will be restricted in that at the close of each quarter
of the taxable year, at least 50% of the value of its total assets must be
represented by cash, government securities, investment company securities and
other securities. They must be limited in respect of any one issuer to not more
than 5% in value of the total assets of the Fund and to not more than 10% of the
outstanding voting securities of such issuer. In addition, at the close of each
quarter of its taxable year, not more than 25% in value of the Fund's total
assets may be invested in securities of one issuer other than Government
securities. The limitations described in this paragraph regarding qualification
as a "regulated investment company" are not fundamental policies and may be
revised to the extent applicable Federal income tax requirements are revised.
(See "Federal Income Taxes" herein.)
3
<PAGE>
Description Of Municipal Obligations
As used herein, "Municipal Obligations" include the following as well as
"Variable Rate Demand Instruments and Participation Certificates".
1. Municipal Bonds with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. Municipal Bonds are debt
obligations of states, cities, counties, municipalities and municipal
agencies (all of which are generally referred to as "municipalities"). They
generally have a maturity at the time of issue of one year or more and are
issued to raise funds for various public purposes such as construction of a
wide range of public facilities, to refund outstanding obligations and to
obtain funds for institutions and facilities.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by
the issuer's pledge of its faith, credit and taxing power for the payment
of principal and interest. Issuers of general obligation bonds include
states, counties, cities, towns and other governmental units. The principal
of, and interest on revenue bonds are payable from the income of specific
projects or authorities and generally are not supported by the issuer's
general power to levy taxes. In some cases, revenues derived from specific
taxes are pledged to support payments on a revenue bond.
In addition, certain kinds of "private activity bonds" are issued by public
authorities to provide funding for various privately operated industrial
facilities (hereinafter referred to as "industrial revenue bonds" or
"IRBs"). Interest on IRBs is generally exempt, with certain exceptions,
from regular Federal income tax pursuant to Section 103(a) of the Code,
provided the issuer and corporate obligor thereof continue to meet certain
conditions. (See "Federal Income Taxes" herein.) IRBs are, in most cases,
revenue bonds and do not generally constitute the pledge of the credit of
the issuer of such bonds. The payment of the principal and interest on IRBs
usually depends solely on the ability of the user of the facilities
financed by the bonds or other guarantor to meet its financial obligations
and, in certain instances, the pledge of real and personal property as
security for payment. If there is no established secondary market for the
IRBs, the IRBs or the Participation Certificates in IRBs purchased by the
Fund will be supported by letters of credit, guarantees or insurance that
meet the definition of Eligible Securities at the time of acquisition and
provide the demand feature which may be exercised by the Fund at any time
to provide liquidity. Shareholders should note that the Fund may invest in
IRBs acquired in transactions involving a Participating Organization. In
accordance with Investment Restriction 6 herein, the Fund is permitted to
invest up to 10% of the portfolio in high quality, short-term Municipal
Obligations (including IRBs) meeting the definition of Eligible Securities
at the time of acquisition that may not be readily marketable or have a
liquidity feature.
2. Municipal Notes with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. The principal kinds of
Municipal Notes include tax anticipation notes, bond anticipation notes,
revenue anticipation notes and project notes. Notes sold in anticipation of
collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuing municipality or agency. Project notes
are issued by local agencies and are guaranteed by the United States
Department of Housing and Urban Development. Project notes are also secured
by the full faith and credit of the United States. The Fund's investments
may be concentrated in Municipal Notes of North Carolina issuers.
3. Municipal Commercial Paper that is an Eligible Security at the time of
acquisition. Issues of Municipal Commercial Paper typically represent very
short-term, unsecured, negotiable promissory notes. These obligations are
often issued to meet seasonal working capital needs of municipalities or to
provide interim construction financing. They are paid from general revenues
of municipalities or are refinanced with long-term debt. In most cases
Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions which may be called upon in the
event of default by the issuer of the commercial paper.
4. Municipal Leases, which may take the form of a lease or an installment
purchase or conditional sale contract, issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications
equipment and other capital assets. Municipal Leases frequently have
special risks not normally associated with general obligation or revenue
bonds. Leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass eventually to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt-issuance
limitations of many state constitutions and statutes are deemed to be
inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses. These clauses provide that the governmental
issuer has no obligation to make future payments under the lease or
contract unless money is appropriated for such purpose by the appropriate
legislative body on a yearly or other periodic basis. To reduce this risk,
the Fund will only purchase Municipal Leases subject to a non-appropriation
clause where the payment of principal and accrued interest is backed by an
unconditional irrevocable letter of credit, a guarantee, insurance or other
comparable undertaking of an approved financial institution. These types of
Municipal
4
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Leases may be considered illiquid and subject to the 10% limitation of
investments in illiquid securities set forth under "Investment
Restrictions" contained herein. The Board of Directors may adopt guidelines
and delegate to the Manager the daily function of determining and
monitoring the liquidity of Municipal Leases. In making such determination,
the Board and the Manager may consider such factors as the frequency of
trades for the obligation, the number of dealers willing to purchase or
sell the obligations and the number of other potential buyers and the
nature of the marketplace for the obligations, including the time needed to
dispose of the obligations and the method of soliciting offers. If the
Board determines that any Municipal Leases are illiquid, such lease will be
subject to the 10% limitation on investments in illiquid securities.
5. Any other Federal tax-exempt, and to the extent possible, North Carolina
Income tax-exempt obligations issued by or on behalf of states and
municipal governments and their authorities, agencies, instrumentalities
and political subdivisions, whose inclusion in the Fund would be consistent
with the Fund's "Investment Objectives, Policies and Risks" and permissible
under Rule 2a-7 under the 1940 Act.
Subsequent to its purchase by the Fund, a rated Municipal Obligation may cease
to be rated or its rating may be reduced below the minimum required for purchase
by the Fund. If this occurs, the Board of Directors of the Fund shall promptly
reassess whether the Municipal Obligation presents minimal credit risks and
shall cause the Fund to take such action as the Board of Directors determines is
in the best interest of the Fund and its shareholders. However, reassessment is
not required if the Municipal Obligation is disposed of or matures within five
business days of the Manager becoming aware of the new rating and provided
further that the Board of Directors is subsequently notified of the Manager's
actions.
In addition, in the event that a Municipal Obligation (i) is in default, (ii)
ceases to be an Eligible Security under Rule 2a-7 of the 1940 Act or (iii) is
determined to no longer present minimal credit risks, or an event of insolvency
occurs with respect to the issues of a portfolio security or the provider of any
Demand Feature or Guarantee, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Fund. Disposal of the security shall
occur as soon as practicable consistent with achieving an orderly disposition by
sale, exercise of any demand feature or otherwise. In the event of a default
with respect to a security which immediately before default accounted for 1/2 of
1% or more of the Fund's total assets, the Fund shall promptly notify the SEC of
such fact and of the actions that the Fund intends to take in response to the
situation.
Variable Rate Demand Instruments and Participation Certificates
Variable rate demand instruments that the Fund will purchase are tax-exempt
Municipal Obligations. They provide for a periodic adjustment in the interest
rate paid on the instrument and permit the holder to demand payment of the
unpaid principal balance plus accrued interest at specified intervals upon a
specified number of days notice either from the issuer or by drawing on a bank
letter of credit, a guarantee or insurance issued with respect to such
instrument.
The variable rate demand instruments in which the Fund may invest are payable on
demand on not more than thirty calendar days' notice and may be exercised at any
time or at specified intervals not exceeding 397 days depending upon the terms
of the instrument. Variable rate demand instruments that can not be disposed of
properly within seven days in the ordinary course of business are illiquid
securities. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily to up to 397 days. The adjustments
are based upon the "prime rate"* of a bank or other appropriate interest rate
adjustment index as provided in the respective instruments. The Fund decides
which variable rate demand instruments it will purchase in accordance with
procedures prescribed by its Board of Directors to minimize credit risks. A fund
utilizing the amortized cost method of valuation under Rule 2a-7 of the 1940 Act
may purchase variable rate demand instruments only if (i) the instrument is
subject to an unconditional demand feature, exercisable by the Fund in the event
of a default in the payment of principal or interest on the underlying
securities, that is an Eligible Security or (ii) the instrument is not subject
to an unconditional demand feature but does qualify as an Eligible Security and
has a long-term rating by the Requisite NRSROs in one of the two highest rating
categories, or if unrated, is determined to be of comparable quality by the
Fund's Board of Directors. The Fund's Board of Directors may determine that an
unrated variable rate demand instrument meets the Fund's high quality criteria
if it is backed by a letter of credit or guarantee or is insured by an insurer
that meets the quality criteria for the Fund stated herein or on the basis of a
credit evaluation of the underlying obligor. If an instrument is ever not deemed
to be an Eligible Security, the Fund either will sell it in the market or
exercise the demand feature.
The variable rate demand instruments that the Fund may invest in include
Participation Certificates purchased by the Fund from banks, insurance companies
or other financial institutions in fixed or variable rate, tax-exempt
- ----------
* The prime rate is generally the rate charged by a bank to its mst creditworthy
customers for short-term loans. The prime rate of a particular bank may differ
from other banks and will be the rate announced by each bank on a particular
day. Changes in the prime rate may occur with great frequency and generally
become effective on the date announced.
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<PAGE>
Municipal Obligations (expected to be concentrated in IRBs) owned by such
institutions or affiliated organizations. The Fund will not purchase
Participation Certificates in fixed rate tax-exempt Municipal Obligations
without obtaining an opinion of counsel that the Fund will be treated as the
owner thereof for Federal income tax purposes. A participation certificate gives
the Fund an undivided interest in the Municipal Obligation in the proportion
that the Fund's participation interest bears to the total principal amount of
the Municipal Obligation and provides the demand repurchase feature described
below. Where the institution issuing the participation does not meet the Fund's
eligibility criteria, the participation is backed by an irrevocable letter of
credit or guaranty of a bank (which may be the bank issuing the participation
certificate, a bank issuing a confirming letter of credit to that of the issuing
bank, or a bank serving as agent of the issuing bank with respect to the
possible repurchase of the certificate of participation) or insurance policy of
an insurance company that the Board of Directors of the Fund has determined
meets the prescribed quality standards for the Fund. The Fund has the right to
sell the participation certificate back to the institution. Where applicable,
the Fund can draw on the letter of credit or insurance after no more than 30
days notice either at any time or at specified intervals not exceeding 397 days
(depending on the terms of the participation), for all or any part of the full
principal amount of the Fund's participation interest in the security plus
accrued interest. The Fund intends to exercise the demand only (i) upon a
default under the terms of the bond documents, (ii) as needed to provide
liquidity to the Fund in order to make redemptions of Fund shares or (iii) to
maintain a high quality investment portfolio. The institutions issuing the
participation certificates will retain a service and letter of credit fee (where
applicable) and a fee for providing the demand repurchase feature, in an amount
equal to the excess of the interest paid on the instruments over the negotiated
yield at which the participations were purchased by the Fund. The total fees
generally range from 5% to 15% of the applicable prime rate, or other interest
rate index. With respect to insurance, the Fund will attempt to have the issuer
of the participation certificate bear the cost of the insurance. However, the
Fund retains the option to purchase insurance if necessary, in which case the
cost of insurance will be an expense of the Fund subject to the expense
limitation (see "Expense Limitation" herein). The Manager has been instructed by
the Fund's Board of Directors to continually monitor the pricing, quality and
liquidity of the variable rate demand instruments held by the Fund, including
the participation certificates, on the basis of published financial information
and reports of the rating agencies and other bank analytical services to which
the Fund may subscribe. Although these instruments may be sold by the Fund, the
Fund intends to hold them until maturity, except under the circumstances stated
above (see "Federal Income Taxes" herein).
In view of the "concentration" of the Fund in Participation Certificates in
North Carolina Municipal Obligations, which may be secured by bank letters of
credit or guarantees, an investment in the Fund should be made with an
understanding of the characteristics of the banking industry and the risks which
such an investment may entail. Banks are subject to extensive governmental
regulations which may limit both the amounts and types of loans and other
financial commitments which may be made and interest rates and fees which 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 under a letter
of credit. The Fund may invest 25% or more of the assets of any portfolio in
securities that are related in such a way that an economic, business or
political development or change affecting one of the securities would also
affect the other securities. This includes, for example, securities the interest
upon which is paid from revenues of similar type projects, or securities the
issuers of which are located in the same state.
While the value of the underlying variable rate demand instruments may change
with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The portfolio may contain variable maximum rates set by state law,
which limit the degree to which interest on such variable rate demand
instruments may fluctuate; to the extent state law contains such limits,
increases or decreases in value may be somewhat greater than would be the case
without such limits. Additionally, the portfolio may contain variable rate
demand participation certificates in fixed rate Municipal Obligations. The fixed
rate of interest on these Municipal Obligations will be a ceiling on the
variable rate of the participation certificate. In the event that interest rates
increase so that the variable rate exceeds the fixed rate on the Municipal
Obligations, the Municipal Obligations can no longer be valued at par and may
cause the Fund to take corrective action, including the elimination of the
instruments from the portfolio. Because the adjustment of interest rates on the
variable rate demand instruments is made in relation to movements of the
applicable banks' "prime rates", or other interest rate adjustment index, the
variable rate demand instruments are not comparable to long-term fixed rate
securities. Accordingly, interest rates on the variable rate demand instruments
may be higher or lower than current market rates for fixed rate obligations of
comparable quality with similar maturities.
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<PAGE>
Because of the variable rate nature of the instruments, the Fund's yield will
decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined. On the
other hand, during periods where prevailing interest rates have increased, the
Fund's yield will increase and its shareholders will have reduced risk of
capital depreciation.
For purposes of determining whether a variable rate demand instrument held by
the Fund matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (i) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (ii) the period remaining until the instrument's next interest
rate adjustment. The maturity of a variable rate demand instrument will be
determined in the same manner for purposes of computing the Fund's
dollar-weighted average portfolio maturity. If a variable rate demand instrument
ceases to be an Eligible Security it will be sold in the market or through
exercise of the repurchase demand feature to the issuer.
When-Issued Securities
New issues of certain Municipal Obligations frequently are offered on a
when-issued basis. The payment obligation and the interest rate that will be
received on these Municipal Obligations are each fixed at the time the buyer
enters into the commitment although delivery and payment of the Municipal
Obligations normally take place within 45 days after the date of the Fund's
commitment to purchase. Although the Fund will only make commitments to purchase
when-issued Municipal Obligations with the intention of actually acquiring them,
the Fund may sell these securities before the settlement date if deemed
advisable by the Manager.
Municipal Obligations purchased on a when-issued basis and the securities held
in the Fund's portfolio are subject to changes in value (both generally changing
in the same way; that is, both experiencing appreciation when interest rates
decline and depreciation when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Purchasing Municipal Obligations on
a when-issued basis can involve a risk that the yields available in the market
when the delivery takes place may actually be higher or lower than those
obtained in the transaction itself. A separate account of the Fund consisting of
cash or liquid debt securities equal to the amount of the when-issued
commitments will be established at the Fund's custodian bank. For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market value. If the market or fair value of such
securities declines, additional cash or highly liquid securities will be placed
in the account daily so that the value of the account will equal the amount of
such commitments by the Fund. On the settlement date of the when-issued
securities, the Fund will meet its obligations from then-available cash flow,
sale of securities held in the separate account, sale of other securities or,
although it would not normally expect to do so, from sale of the when-issued
securities themselves (which may have a value greater or lesser than the Fund's
payment obligations). Sale of securities to meet such obligations may result in
the realization of capital gains or losses, which are not exempt from Federal
income tax.
Stand-by Commitments
When the Fund purchases Municipal Obligations, it may also acquire stand-by
commitments from banks and other financial institutions. Under a stand-by
commitment, a bank or broker-dealer agrees to purchase at the Fund's option a
specified Municipal Obligation at a specified price with same day settlement. A
stand-by commitment is the equivalent of a "put" option acquired by the Fund
with respect to a particular Municipal Obligation held in its portfolio.
The amount payable to the Fund upon its exercise of a stand-by commitment
normally would be (i) the acquisition cost of the Municipal Obligation
(excluding any accrued interest that the Fund paid on the acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the security, plus (ii) all interest accrued on
the security since the last interest payment date during the period the security
was owned by the Fund. Absent unusual circumstances relating to a change in
market value, the Fund would value the underlying Municipal Obligation at
amortized cost. Accordingly, the amount payable by a bank or dealer during the
time a stand-by commitment is exercisable would be substantially the same as the
market value of the underlying Municipal Obligation.
The Fund's right to exercise a stand-by commitment would be unconditional and
unqualified. A stand-by commitment would not be transferable by the Fund,
although it could sell the underlying Municipal Obligation to a third party at
any time.
The Fund expects stand-by commitments to generally be available without the
payment of any direct or indirect consideration. However, if necessary and
advisable, the Fund may pay for stand-by commitments either separately in cash
or by paying a higher price for portfolio securities which are acquired subject
to such a commitment (thus reducing the yield to maturity otherwise available
for the same securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Fund's portfolio will not exceed 1/2 of 1% of
the value of the Fund's total assets calculated immediately after the
acquisition of each stand-by commitment.
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<PAGE>
The Fund will enter into stand-by commitments only with banks and other
financial institutions that, in the Manager's opinion, present minimal credit
risks. If the issuer of the Municipal Obligation does not meet the eligibility
criteria, the issuer of the stand-by commitment will have received a rating
which meets the eligibility criteria or, if not rated, will present a minimal
risk of default as determined by the Board of Directors. The Fund's reliance
upon the credit of these banks and broker-dealers will be supported by the value
of the underlying Municipal Obligations held by the Fund that were subject to
the commitment.
The Fund intends to acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The purpose of this practice is to permit the Fund to be fully
invested in securities the interest on which is exempt from Federal income tax
while preserving the necessary liquidity to purchase securities on a when-issued
basis, to meet unusually large redemptions and to purchase at a later date
securities other than those subject to the stand-by commitment. The acquisition
of a stand-by commitment would not affect the valuation or assumed maturity of
the underlying Municipal Obligations which will continue to be valued in
accordance with the amortized cost method. Stand-by commitments acquired by the
Fund will be valued at zero in determining net asset value. In those cases in
which the Fund pays directly or indirectly for a stand-by commitment, its cost
will be reflected as unrealized depreciation for the period during which the
commitment is held by the Fund. Stand-by commitments will not affect the
dollar-weighted average maturity of the Fund's portfolio. The maturity of a
security subject to a stand-by commitment is longer than the stand-by repurchase
date.
The stand-by commitments the Fund may enter into are subject to certain risks.
These include the ability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, the fact that the commitment
is not marketable by the Fund, and that the maturity of the underlying security
will generally be different from that of the commitment.
In addition, the Fund may apply to the Internal Revenue Service for a ruling, or
seek from its counsel an opinion, that interest on Municipal Obligations subject
to stand-by commitments will be exempt from Federal income taxation (see
"Federal Income Taxes" herein). In the absence of a favorable tax ruling or
opinion of counsel, the Fund will not engage in the purchase of securities
subject to stand-by commitments.
Taxable Securities
Although the Fund will attempt to invest 100% of its net assets in tax-exempt
Municipal Obligations, the Fund may invest up to 20% of the value of its total
assets in securities of the kind described below. The interest income from such
securities is subject to regular Federal or North Carolina state income tax,
under any one or more of the following circumstances: (i) pending investment of
proceeds of sales of Fund shares or of portfolio securities; (ii) pending
settlement of purchases of portfolio securities; and (iii) to maintain liquidity
for the purpose of meeting anticipated redemptions. In addition, the Fund may
temporarily invest more than 20% in such taxable securities when, in the opinion
of the Manager, it is advisable to do so because of adverse market conditions
affecting the market for Municipal Obligations. The kinds of taxable securities
in which the Fund may invest are limited to the following short-term,
fixed-income securities (maturing in 397 days or less from the time of
purchase): (i) obligations of the United States Government or its agencies,
instrumentalities or authorities; (ii) commercial paper meeting the definition
of Eligible Securities at the time of acquisition; (iii) certificates of deposit
of domestic banks with assets of $1 billion or more; and (iv) repurchase
agreements with respect to any Municipal Obligations or other securities which
the Fund is permitted to own. (See "Federal Income Taxes" herein.)
Repurchase Agreements
The Fund may invest in instruments subject to repurchase agreements with
securities dealers or member banks of the Federal Reserve System. Under the
terms of a typical repurchase agreement, the Fund will acquire an underlying
debt instrument for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase and the Fund to resell the
instrument at a fixed price and time, thereby determining the yield during the
Fund's holding period. This results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement is subject to the
risk that the seller may fail to repurchase the security. Repurchase agreements
may be deemed to be loans under the 1940 Act. All repurchase agreements entered
into by the Fund shall be fully collateralized at all times during the period of
the agreement in that the value of the underlying security shall be at least
equal to the amount of the loan, including the accrued interest thereon.
Additionally, the Fund or its custodian shall have possession of the collateral,
which the Fund's Board believes will give it a valid, perfected security
interest in the collateral. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Fund but only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, the Fund may suffer
time delays and incur costs in connection with the disposition of the
collateral. The Fund's Board believes that the collateral underlying repurchase
agreements may be more susceptible to claims of the seller's creditors than
would be the case with securities owned by the Fund. It is expected that
repurchase agreements will give rise to income which will not qualify as
tax-exempt income when distributed by the Fund. The Fund will not invest in a
repurchase agreement maturing in more
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<PAGE>
than seven days if any such investment, together with illiquid securities held
by the Fund, exceeds 10% of the Fund's total net assets. (See Investment
Restriction Number 6 herein.) Repurchase agreements are subject to the same
risks described herein for stand-by commitments.
North Carolina Risk Factors
Because of the Fund's concentration in investments in North Carolina Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of North Carolina and its political subdivisions.
The North Carolina economy relies in part on activities that may be subject to
cyclical change.
The North Carolina Constitution provides that total expenditures for a fiscal
year shall not exceed the total of receipts and the surplus at the beginning of
the year. In 1998, the North Carolina General Assembly eliminated the State's
remaining 2% sales tax on food, effective May 1, 1999. The State's inheritance
tax was repealed, effective January 1, 1999. The maximum corporate income tax
rate for corporations with taxable years was reduced to 7.25% for corporations
with taxable years beginning in 1998 with further reductions in the following
two years to a maximum rate of 6.9% for corporations with taxable years
beginning in 2000.
For its fiscal year ended June 30, 1998, the State ended the year with a fund
balance of $1,459.4 million based on unaudited results. The budget adopted for
the fiscal year ending June 30, 1998 projects an ending fund balance of $115.2
million from total available funds of $12,519.4 million. The budget for the
fiscal year ending June 30, 1999 includes increases of $987.2 million which are
primarily for increases in teachers' salaries, compensation increases for State
employees, bonuses for teachers at public schools that exceed academic
expectations, increased funding for universities and community colleges,
expanded early childhood education and capital construction projects, mostly at
public universities. Funds totaling $400 million were reserved for refunds to
certain taxpayers for income taxes paid on governmental retirement benefits.
The obligations of the State of North Carolina are currently rated in the
highest category by the principal rating agencies.
North Carolina county and municipal governments are likewise required to have a
balanced budget. Many political subdivisions have been under increasing
financial pressure resulting from increased taxes and expenditure reductions.
There can be no assurance that general economic difficulties or the financial
circumstances of North Carolina or its counties and municipalities will not
adversely affect the market value of North Carolina Municipal Obligations or the
ability of the obligors to pay debt service on such obligations.
Investment Restrictions
The Fund has adopted the following fundamental investment restrictions which
apply to all portfolios. They may not be changed unless approved by a majority
of the outstanding shares "of each series of the Fund's shares that would be
affected by such a change. " The term "majority of the outstanding shares" of
the Fund means the vote of the lesser of (i) 67% or more of the shares of the
Fund present at a meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the outstanding shares of the Fund. The Fund may not:
1. Make portfolio investments other than as described under "Investment
Objectives, Policies and Risks. " Any other form of Federal tax-exempt
investment must meet the Fund's high quality criteria, as determined by the
Board of Directors, and be consistent with the Fund's objectives and
policies.
2. Borrow money. This restriction shall not apply to borrowings from banks for
temporary or emergency (not leveraging) purposes. This includes the meeting
of redemption requests that might otherwise require the untimely
disposition of securities, in an amount up to 15% of the value of the
Fund's total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the borrowing
was made. While borrowings exceed 5% of the value of the Fund's total
assets, the Fund will not make any investments. Interest paid on borrowings
will reduce net income.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except in
an amount up to 15% of the value of its total assets and only to secure
borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin, or engage in the
purchase and sale of put, call, straddle or spread options or in writing
such options. However, securities subject to a demand obligation and
stand-by commitments may be purchased as set forth under "Investment
Objectives, Policies and Risks" herein.
5. Underwrite the securities of other issuers, except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933 in disposing of a
portfolio security.
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6. Purchase securities subject to restrictions on disposition under the
Securities Act of 1933 ("restricted securities"), except the Fund may
purchase variable rate demand instruments which contain a demand feature.
The Fund will not invest in a repurchase agreement maturing in more than
seven days if any such investment together with securities that are not
readily marketable held by the Fund exceed 10% of the Fund's net assets.
7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests. This shall
not prevent the Fund from investing in Municipal Obligations secured by
real estate or interests in real estate.
8. Make loans to others, except through the purchase of portfolio investments,
including repurchase agreements, as described under "Investment Objectives,
Policies and Risks" herein.
9. Purchase more than 10% of all outstanding voting securities of any one
issuer or invest in companies for the purpose of exercising control.
10. Invest more than 25% of its assets in the securities of "issuers" in any
single industry. The Fund may invest more than 25% of its assets in
Participation Certificates and there shall be no limitation on the purchase
of those Municipal Obligations and other obligations issued or guaranteed
by the United States Government, its agencies or instrumentalities. When
the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating
the issuing entity and a security is backed only by the assets and revenues
of the entity, the entity would be deemed to be the sole issuer of the
security. Similarly, in the case of an industrial revenue bond, if that
bond is backed only by the assets and revenues of the non-government user,
then such non-government user would be deemed to be the sole issuer. If,
however, in either case, the creating government or some other entity, such
as an insurance company or other corporate obligor, guarantees a security
or a bank issues a letter of credit, such a guarantee or letter of credit
would be considered a separate security and would be treated as an issue of
such government, other entity or bank. Immediately after the acquisition of
any securities subject to a Demand Feature or Guarantee (as such terms are
defined in Rule 2a-7 of the 1940 Act), with respect to 75% of the total
assets of the Fund, not more than 10% of the Fund's assets may be invested
in securities that are subject to a Guarantee or Demand Feature from the
same institution. However, the Fund may only invest more than 10% of its
assets in securities subject to a Guarantee or Demand Feature issued by a
Non-Controlled Person (as such term is defined in Rule 2a-7 of the 1940
Act).
11. Invest in securities of other investment companies. The Fund may purchase
unit investment trust securities where such unit trusts meet the investment
objectives of the Fund and then only up to 5% of the Fund's net assets,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets.
12. Issue senior securities, except insofar as the Fund may be deemed to have
issued a senior security in connection with a permitted borrowing.
If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of the Fund's assets will not constitute a
violation of such restriction.
III. MANAGEMENT OF THE FUND
The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, has employed the Manager to serve as investment
manager of the Fund. The Manager provides persons satisfactory to the Fund's
Board of Directors to serve as officers of the Fund. Such officers, as well as
certain other employees and directors of the Fund, may be directors or officers
of Reich & Tang Asset Management, Inc., the sole general partner of the Manager
or employees of the Manager or its affiliates. Due to the services performed by
the Manager, the Fund currently has no employees and its officers are not
required to devote their full-time to the affairs of the Fund.
The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below. Unless otherwise specified, the address
of each of the following persons is 600 Fifth Avenue, New York, New York 10020.
Mr. Duff may be deemed an "interested person" of the Fund, as defined in the
1940 Act, on the basis of his affiliation with Reich & Tang Asset Management
L.P.
Steven W. Duff, 45 - President and Director of the Fund, has been President of
the Mutual Funds Division of the Manager since September 1994. Mr. Duff was
formerly Director of Mutual Fund Administration at NationsBank which he was
associated with from June 1981 to August 1994. Mr. Duff is also President and a
Director /Trustee of 13 other funds in the Reich & Tang Fund Complex, President
of Back Bay Funds, Inc., Director of Pax World Money Market Fund, Inc.,
Executive Vice President of Reich & Tang Equity Fund, Inc., and President and
Chief Executive Officer of Tax Exempt Proceeds Fund, Inc.
10
<PAGE>
Dr. W. Giles Mellon, 67 - Director of the Fund, is Professor of Business
Administration in the Graduate School of Management, Rutgers University which he
has been associated with since 1966. His address is Rutgers University Graduate
School of Management, 92 New Street, Newark, New Jersey 07102. Dr. Mellon is
also a Director/Trustee of 15 other funds in the Reich & Tang Fund Complex.
Robert Straniere, 57 - Director of the Fund, has been a member of the New York
State Assembly and a partner with The Straniere Law Firm since 1981. His address
is 182 Rose Avenue, Staten Island, New York 10306. Mr. Straniere is also a
Director/Trustee of 15 other funds in the Reich & Tang Fund Complex, and a
Director of Life Cycle Mutual Funds, Inc.
Dr. Yung Wong, 60 - Director of the Fund, was Director of Shaw Investment
Management (UK) Limited from 1994 to October 1995 and formerly General Partner
of Abacus Partners Limited Partnership (a general partner of a venture capital
investment firm) from 1984 to 1994. His address is 29 Alden Road, Greenwich,
Connecticut 06831. Dr. Wong has been a Director of Republic Telecom Systems
Corporation (a provider of telecommunications equipment) since January 1989 and
of TelWatch, Inc. (a provider of network management software) since August 1989.
Dr. Wong is also a Director/Trustee of 15 other funds in the Reich & Tang Fund
Complex. Dr. Wong is also a Trustee of Eclipse Financial Asset Trust.
Molly Flewharty, 47 - Vice President of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. which she was associated with from
December 1977 to September 1993. Ms. Flewharty is also Vice President of 18
other funds in the Reich & Tang Fund Complex.
Lesley M. Jones, 50 - Vice President of the Fund, has been Senior Vice President
of the Mutual Funds Division of the Manager since September 1993. Ms. Jones was
formerly Senior Vice President of Reich & Tang, Inc. which she was associated
with from April 1973 to September 1993. Ms. Jones is also a Vice President of 14
other funds in the Reich & Tang Fund Complex.
Dana E. Messina, 42 - Vice President of the Fund, has been Executive Vice
President of the Mutual Funds Division of the Manager since January 1995 and was
Vice President from September 1993 to January 1995. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. with which she was associated with from
December 1980 to September 1993. Ms. Messina is also Vice President of 15 other
funds in the Reich & Tang Fund Complex.
Bernadette N. Finn, 51 - Secretary of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Finn was formerly
Vice President and Assistant Secretary of Reich & Tang, Inc. which she was
associated with from September 1970 to September 1993. Ms. Finn is also a
Secretary of 14 other funds, and a Vice President and Secretary of five
additional funds in the Reich & Tang Fund Complex.
Richard De Sanctis, 42 - Treasurer of the Fund, has been Assistant Treasurer of
NEIC since September 1993. Mr. De Sanctis was formerly Controller of Reich &
Tang, Inc., from January 1991 to September 1993 and Vice President and Treasurer
of Cortland Financial Group, Inc. and Vice President of Cortland Distributors,
Inc. from 1989 to December 1990. Mr. De Sanctis is also Treasurer of 17 other
funds in the Reich & Tang Fund Complex, and is Vice President and Treasurer of
Cortland Trust, Inc.
Rosanne Holtzer, 34 - Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly Manager of Fund Accounting for the Manager with which she was
associated with from June 1986. Ms. Holtzer is also Assistant Treasurer of 18
other funds in the Reich & Tang Fund Complex.
The Fund paid an aggregate remuneration of $6,000 to its directors with respect
to the period ended August 31, 1998, all of which consisted of directors' fees
paid to the three disinterested directors, pursuant to the terms of the
Investment Management Contract (see "Manager" herein.)
Directors of the Fund not affiliated with the Manager receive from the Fund an
annual retainer of $1,000 and a fee of $250 for each Board of Directors meeting
attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Directors who are affiliated with the Manager do
not receive compensation from the Fund. See Compensation Table.
11
<PAGE>
Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Aggregate Pension or Retirement Estimated Annual Total Compensation from
Name of Person, Compensation from Benefits Accrued as Benefits upon Fund and Fund Complex
Position the Fund Part of Fund Expenses Retirement Paid to Directors*
Dr. W. Giles Mellon, $2,000 0 0 $57,750 (16 Funds)
Director
Robert Straniere, $2,000 0 0 $57,750 (16 Funds)
Director
Dr. Yung Wong, $2,000 0 0 $57,750 (16 Funds)
Director
</TABLE>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending August 31, 1998. The parenthetical number represents the
number of investment companies (including the Fund) from which such person
receives compensation that are considered part of the same Fund complex as the
Fund, because, among other things, they have a common investment advisor.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On June 30, 1999 there were 246,886,747 Class A shares outstanding, no Class B
shares, and no Evergreen shares outstanding. As of June 30, 1999, the amount of
shares owned by all officers and directors of the Fund, as a group, was less
than 1% of the outstanding shares. Set forth below is certain information as to
persons who owned 5% or more of the Fund's outstanding shares as of June 30,
1999:
Nature of
Name and address % of Class Ownership
- ---------------- ---------- ---------
Class A
- -------
Wachovia Bank of 47.31% Record
North Carolina, N.A.
P.O. Box 3099
Winston-Salem, N.C. 27102
Evergreen Investment Services 8.29% Record
230 Park Avenue
New York, N.Y. 10169
Class B
- -------
None
Evergreen
- ---------
None
V. INVESTMENT ADVISORY AND OTHER SERVICES
The Investment Manager for the Fund is Reich & Tang Asset Management L.P., a
Delaware limited partnership with principal offices at 600 Fifth Avenue, New
York, New York 10020. The Manager was as of May 31, 1999, investment manager,
adviser, or supervisor with respect to assets aggregating in excess of $13.4
billion. In addition to the Fund, the Manager acts as investment manager and
administrator of fifteen other investment companies and also advises pension
trusts, profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager due to a restructuring by New England Investment
Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998, Nvest
Companies, L.P. ("Nvest Companies") due to a change in name of NEICOP, replaces
NEICOP as the limited partner and owner of a 99.5% interest in the Manager.
Reich & Tang Asset Management, Inc. (an indirect wholly-owned subsidiary of
Nvest Companies) is the sole general partner and owner of the remaining 0.5%
interest of the Manager. Nvest Corporation, a Massachusetts Corporation
12
<PAGE>
(formerly known as New England Investment Companies, Inc.), serves as the
managing general partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
MetLife is a mutual life insurance company and is the second largest life
insurance company in the United States in terms of total assets. MetLife
provides a wide range of insurance and investment products and services to
individuals and groups and is the leader among United States life insurance
companies in terms of total life insurance in force. MetLife and its affiliates
provide insurance or other financial services to approximately 36 million people
worldwide.
Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through thirteen subsidiaries, divisions
and affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the manager, include
AEW Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth Management
Limited Partnerships; Greystone Partners; L.P. Harris Associates; L.P. Jurika &
Voyles, L.P., Loomis, Sayles & Company, L.P., New England Funds, L.P., Nvest
Associates, Inc., Snyder Capital Management, L.P., Vaughan, Nelson, Scarborough
& McCullough, L.P., and Westpeak Investment Advisors, L.P. These affiliates in
the aggregate are investment advisors or managers to 80 other registered
investment companies.
The recent name change did not result in a change of control of the Manager and
has no impact upon the Manager's performance of its responsibilities and
obligations.
On November 28, 1995, the Board of Directors, including a majority of the
directors who are not interested persons (as defined in the 1940 Act) of the
Fund or the Manager, approved a new Investment Management Contract effective
August 30, 1996, which had a term which extended to July 31, 1998. It is
continued in force thereafter for successive twelve-month periods beginning each
August 1, provided that such majority vote of the Fund's outstanding voting
securities or by a majority of the directors who are not parties to the
Investment Management Contract or interested persons of any such party, by votes
cast in person at a meeting called for the purpose of voting on such matter.
Pursuant to the Investment Management Contract, the Manager manages the Fund's
portfolio of securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board of Directors of
the Fund.
The Manager provides persons satisfactory to the Board of Directors of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of NEIC, the
sole general partner of the Manager, or employees of the Manager or its
affiliates.
The Investment Management Contract is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or by the Manager on sixty days written notice, and will automatically terminate
in the event of its assignment. The Investment Management Contract provides that
in the absence of willful misfeasance, bad faith or gross negligence on the part
of the Manager, or of reckless disregard of its obligations thereunder, the
Manager shall not be liable for any action or failure to act in accordance with
its duties thereunder.
Under the Investment Management Contract, the Manager receives from the Fund a
fee equal to .40% per annum of the Fund's average daily net assets. The fees are
accrued daily and paid monthly. The Manager at its discretion may voluntarily
waive all or a portion of the management fee.
Pursuant to the Administrative Services Contract with the Fund, the Manager also
performs clerical, accounting supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of accounting related services by Investors Fiduciary Trust Company,
the Fund's bookkeeping or recordkeeping agent, (ii) prepare reports to and
filings with regulatory authorities and (iii) perform such other services as the
Fund may from time to time request of the Manager. The personnel rendering such
services may be employees of the Manager, of its affiliates or of other
organizations. For its services under the Administrative Services Contract, the
Manager receives from the Fund a fee equal to .21% per annum of the Fund's
average daily net assets. For the Funds' fiscal years ended August 31, 1998,
August 31, 1997 and August 31, 1996, the Manager received a fee of $481,880,
$406,136 and $383,707, respectively of which $298,307, $356,429 and $350,316 was
voluntarily waived.
13
<PAGE>
For the Fund's fiscal years ended August 31, 1998, August 31, 1997 and August
31, 1996, the fee paid to the Manager under the Investment Management Contract
was $917,866, $773,593, and $738,885, respectively of which $0, $0 and $21,971
was voluntarily waived. The Fund's net assets at the close of business on August
31, 1998 totaled $230,672,578. The Manager may waive its rights to any portion
of the management fee and may use any portion of the Management fee for purposes
of shareholder and administrative services and distribution of the Fund's
shares.
The Manager at its discretion may waive its rights to any portion of the
management fee or the administrative services fee and may use any portion of the
management fee for purposes of shareholder and administrative services and
distribution of the Fund's shares. There can be no assurance that such fees will
be waived in the future (see "Distribution and Service Plan" herein).
Investment management fees and operating expenses which are attributable to all
Classes of the Fund will be allocated daily to each Class based on the
percentage of outstanding shares at the end of the day. Additional shareholder
services provided by Participating Organizations to Class A shareholders
pursuant to the Plan shall be compensated by the Distributor from its own
resources which includes the shareholder servicing fee and past profits, and the
Manager from its own resources which includes the management fee and past
profits and the Fund itself. Expenses incurred in the distribution of Class B
shares and the servicing of Class B shares shall be paid by the Manager.
Expense Limitation
The Manager has agreed, pursuant to the Investment Management Contract, (See
"Distribution and Service Plan" herein), to reimburse the Fund for its expenses
(exclusive of interest, taxes, brokerage and extraordinary expenses) which in
any year exceed the limits on investment company expenses prescribed by any
state in which the Fund's shares are qualified for sale. For the purpose of this
obligation to reimburse expenses, the Fund's annual expenses are estimated and
accrued daily, and any appropriate estimated payments are made to it on a
monthly basis. Subject to the obligations of the Manager to reimburse the Fund
for its excess expenses as described above, the Fund has, under the Investment
Management Contract, confirmed its obligation for payment of all its other
expenses. This includes all operating expenses, taxes, brokerage fees and
commissions, commitment fees, certain insurance premiums, interest charges and
expenses of the custodian, transfer agent and dividend disbursing agent's fees,
telecommunications expenses, auditing and legal expenses, bookkeeping agent
fees, costs of forming the corporation and maintaining corporate existence,
compensation of directors, officers and employees of the Fund and costs of other
personnel performing services for the Fund who are not officers of the Manager
or its affiliates, costs of investor services, shareholders' reports and
corporate meetings, SEC registration fees and expenses, state securities laws
registration fees and expenses, expenses of preparing and printing the Fund's
prospectus for delivery to existing shareholders and of printing application
forms for shareholder accounts, and the fees and reimbursements payable to the
Manager under the Investment Management Contract and the Distributor under the
Shareholder Servicing Agreement.
The Fund may from time to time hire its own employees or contract to have
management services performed by third parties (including Participating
Organizations) as discussed herein. The management of the Fund intends to do so
whenever it appears advantageous to the Fund. The Fund's expenses for employees
and for such services are among the expenses subject to the expense limitation
described above.
Distribution And Service Plan
The Fund's distributor is Reich & Tang Distributors, Inc., a Delaware
corporation with principal officers at 600 Fifth Avenue, New York, New York
10020. Pursuant to Rule 12b-1 under the 1940 Act, the SEC has required that an
investment company which bears any direct or indirect expense of distributing
its shares must do so only in accordance with a plan permitted by the Rule. The
Fund's Board of Directors has adopted a distribution and service plan (the
"Plan") and, pursuant to the Plan, the Fund has entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to Class A and
Evergreen shares) with Reich & Tang Distributors, Inc., (the "Distributor"), as
distributor of the Fund's shares.
The Class A and Evergreen shares will be offered to investors who desire certain
additional shareholder services from Participating Organizations that are
compensated by the Fund's Manager and Distributor for such services. For its
services under the Shareholder Servicing Agreement (with respect to the Class A
and Evergreen shares), the Distributor receives from the Fund a fee equal to
.25% per annum of the Fund's average daily net assets of the Class A and
Evergreen shares of the Fund (the "Shareholder Servicing Fee"). The fee is
accrued daily and paid monthly and any portion of the fee may be deemed to be
used by the Distributor for purposes of distribution of the Fund's Class A and
Evergreen shares and for payments to Participating Organizations with respect to
servicing their clients or customers who are Class A and Evergreen shareholders
of the Fund. The Class B shareholders will not
14
<PAGE>
receive the benefit of such services from Participating Organizations and,
therefore, will not be assessed a Shareholder Servicing Fee.
The following information applies only to the Class A shares of the Fund. For
the Fund's fiscal year ended August 31, 1996, the amount payable to the
Distributor under the Distribution Plan and Shareholder Servicing Agreement
adopted thereunder pursuant to Rule 12b-1 under the 1940 Act, totaled $461,803,
none of which was voluntarily waived. During the same period, the Manager made
total payments under the plan to or on behalf of Participating Organizations of
$736,751. For the Fund's fiscal year ended August 31, 1997, the amount payable
to the Distributor under the Distribution Plan and Shareholder Servicing
Agreement adopted thereunder pursuant to Rule 12b-1 under the 1940 Act, totaled
$483,495, none of which was voluntarily waived. During the same period, the
Manager made total payments under the plan to or on behalf of Participating
Organizations of $744,502. For the Fund's fiscal year ended August 31, 1998, the
amount payable to the Distributor under the Distribution Plan and Shareholder
Servicing Agreement adopted thereunder pursuant to Rule 12b-1 under the 1940
Act, totaled $573,667, none of which was voluntarily waived. During the same
period, the Manager made total payments under the Plan to or on behalf of
Participating Organizations of $980,407. The excess of such payments over the
total payments the Distributor received from the Fund under the Plan represents
distribution and servicing expenses funded by the Distributor from its own
resources, or the Manager from its own resources(which may be deemed to be an
indirect payment by the Fund). For the fiscal year ended August 31, 1998, the
total amount spent pursuant to the Plan for Class A shares was .44% of the
average daily net assets of the Fund, of which .25% of the average daily net
assets was paid by the Fund to the Distributor, pursuant to the Shareholder
Servicing Agreement.
Under the Distribution Agreement, the Distributor, for nominal consideration
(i.e., $1.00) and as agent for the Fund, will solicit orders for the purchase of
the Fund's shares, provided that any subscriptions and orders will not be
binding on the Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreement provide that the Distributor
will pay for (i) telecommunications expenses, including the cost of dedicated
lines and CRT terminals, incurred by the Participating Organizations and
Distributor in carrying out their obligations under the Shareholder Servicing
Agreement with respect to the Class A shares and (ii) preparing, printing and
delivering the Fund's prospectus to existing shareholders of the Fund and
preparing and printing subscription application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time from
their own resources, which may include the management fee, and past profits for
the following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements for performing shareholder servicing and related
administrative functions on behalf of the Class A and Evergreen shares of the
Fund; (ii) to compensate certain Participating Organizations for providing
assistance in distributing the Fund's shares; and (iii) to pay the costs of
printing and distributing the Fund's prospectus to prospective investors, and to
defray the cost of the preparation and printing of brochures and other
promotional materials, mailings to prospective shareholders, advertising, and
other promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Shareholder Servicing Fee and past profits for the purpose
enumerated in (i) above. The Distributor will determine the amount of such
payments made pursuant to the Plan, provided that such payments will not
increase the amount which the Fund is required to pay to the Manager or the
Distributor for any fiscal year under the Investment Management Contract or the
Shareholder Servicing Agreement in effect for that year.
In accordance with Rule 12b-1, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the Plan requires
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
The Plan provides that it will remain in effect until August 31, 1998.
Thereafter it may continue in effect for successive annual periods commencing
September 1, provided it is approved by the Fund's shareholders or by the Board
of Directors. This includes a majority of directors who are not interested
persons of the Fund and who have no direct or indirect interest in the operation
of the Plan or in the agreements related to the Plan. The Plan further provides
that it may not be amended to increase materially the costs which may be spent
by the Fund for distribution pursuant to the Plan without shareholder approval,
and the other material amendments must be approved by the directors in the
manner described in the preceding sentence. The Plan may be terminated at any
time by a vote of a majority of the disinterested directors of the Fund or the
Fund's shareholders.
15
<PAGE>
Custodian And Transfer Agents
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities. Reich & Tang Services,
Inc., an affiliate of the Fund's Manager, located at 600 Fifth Avenue, New York,
NY 10020, is transfer agent and dividend agent for the shares of the Fund. State
Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827
is the registrar, transfer agent and dividend disbursing agent for the Evergreen
Shares of the Fund. The custodian and transfer agents do not assist in, and are
not responsible for, investment decisions involving assets of the Fund.
Counsel and Auditors
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Battle Fowler LLP, 75 East 55th Street, New York, New York 10022.
Matters in connection with North Carolina law are passed upon by Kennedy
Covington Lobdell and Hickman, L.L.P., NationsBank Corporate Center, Suite 4200,
Charlotte, North Carolina 28202.
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, have been selected as auditors for the Fund.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its formation.
Any transaction for which the Fund pays a brokerage commission will be effected
at the best price and execution available. Thus, the Fund will select a broker
for such a transaction based upon which broker can effect the trade at the best
price and execution available. Purchases from underwriters of portfolio
securities include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price. The Fund purchases participation
certificates in variable rate Municipal Obligations with a demand feature from
banks or other financial institutions at a negotiated yield to the Fund based on
the applicable interest rate adjustment index for the security. The interest
received by the Fund is net of a fee charged by the issuing institution for
servicing the underlying obligation and issuing the participation certificate,
letter of credit, guarantee or insurance and providing the demand repurchase
feature.
Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed in the
best interest of shareholders of the Fund rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price. No preference in purchasing portfolio securities will
be given to banks or dealers that are Participating Organizations.
Investment decisions for the Fund will be made independently from those for any
other investment companies or accounts that may be or become managed by the
Manager or its affiliates. If, however, the Fund and other investment companies
or accounts managed by the Manager are simultaneously engaged in the purchase or
sale of the same security, the transactions may be averaged as to price and
allocated equitably to each account. In some cases, this policy might adversely
affect the price paid or received by the Fund or the size of the position
obtainable for the Fund. In addition, when purchases or sales of the same
security for the Fund and for other investment companies managed by the Manager
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantage available to large denomination purchasers or
sellers.
No portfolio transactions are executed with the Manager or its affiliates acting
as principal. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Manager or its affiliates.
VII. CAPITAL STOCK AND OTHER SECURITIES
The authorized capital stock of the Fund consists of twenty billion shares of
stock having a par value of one tenth of one cent ($.001) per share. The Fund's
Board of Directors is authorized to divide the shares into separate series of
stock, one for each of the portfolios that may be created. Each share of any
series of shares when issued will have equal dividend, distribution and
liquidation rights within the series for which it was issued and each fractional
share has those rights in proportion to the percentage that the fractional share
represents of a whole share. Shares of all series have identical voting rights,
except where, by law, certain matters must be approved by a majority of the
shares of the unaffected series. Shares will be voted in the aggregate. There
are no conversion or preemptive rights in connection with any shares of the
Fund. All shares, when issued in accordance with the terms of the offering, will
be fully paid and nonassessable. Shares are redeemable at net asset value, at
the option of the shareholder. The Fund is subdivided into three classes of
common stock, Class A, Class B, and Evergreen Class. Each share, regardless of
class, will represent an interest in the same portfolio of investments and will
have identical voting,
16
<PAGE>
dividend, liquidation and other rights, preferences, powers, restrictions,
limitations, qualifications, designations and terms and conditions, except that:
(i) the Class A, Class B, and Evergreen shares will have different class
designations; (ii) only the Class A and Evergreen shares will be assessed a
service fee pursuant to the Rule 12b-1 Distribution and Service Plan of the Fund
of .25% of each Classes shares' average daily net assets; (iii) only the holders
of the Class A and Evergreen shares will be entitled to vote on matters
pertaining to the Plan and any related agreements in accordance with provisions
of Rule 12b-1; and (iv) the exchange privilege will permit stockholders to
exchange their shares only for shares of the same class of an investment company
that participates on an exchange privilege program with the Fund (except for the
Evergreen Class which does not currently offer an exchange privilege). Payments
that are made under the Plan will be calculated and charged daily to the
appropriate class prior to determining daily net asset value per share and
dividends/distributions.
Under its amended Articles of Incorporation, the Fund has the right to redeem
for cash shares of stock owned by any shareholder to the extent and at such
times as the Fund's Board of Directors determines to be necessary or appropriate
to prevent an undue concentration of stock ownership which would cause the Fund
to become a "personal holding company" for Federal income tax purposes. In this
regard, the Fund may also exercise its right to reject purchase orders.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so. In
that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. Unless specifically requested by an
investor, the Fund will not issue certificates evidencing Fund shares.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
or special meetings only (i) for the election (or re-election) of directors,
(ii) for approval of the revised investment advisory contracts with respect to a
particular class or series of stock, (iii) for approval of the Fund's
distribution agreement with respect to a particular class or series of stock,
and (iv) upon the written request of shareholders entitled to cast not less than
25% of all the votes entitled to be cast at such meeting. Annual and other
meetings may be required with respect to such additional matters relating to the
Fund as may be required by the 1940 Act, including the removal of Fund
director(s) and communication among shareholders, any registration of the Fund
with the SEC or any state, or as the Directors may consider necessary or
desirable. Each Director serves until his successor is elected or qualified, or
until such Director sooner dies, resigns, retires or is removed by the vote of
the shareholders.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
The material relating to the purchase, redemption, and pricing of shares for
each Class of shares is located in the Shareholder Information section of each
prospectus and is hereby incorporated by reference.
Net Asset Value
The Fund does not determine net asset value per share of each Class on any day
in which the New York Stock Exchange is closed for trading. Those days include:
New Year's Day, Martin Luther King Jr.'s Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The net asset value of the Fund's shares is determined as of 12 noon, New York
City time, on each Fund Business Day. The net asset value of a Class is computed
by dividing the value of the Fund's net assets for such Class (i.e., the value
of its securities and other assets less its liabilities, including expenses
payable or accrued but excluding capital stock and surplus) by the total number
of shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. If fluctuating interest
rates cause the market value of the Fund's portfolio to deviate more than 1/2 of
1% from the value determined on the basis of amortized cost, the Board of
Directors will consider whether any action should be initiated, as described in
the following paragraph. Although the amortized cost method provides certainty
in valuation, it may result in periods during which the value of an instrument
is higher or lower than the price an investment company would receive if the
instrument were sold.
The Fund's Board of Directors has established procedures to stabilize the Fund's
net asset value at $1.00 per share of each Class. These procedures include a
review of the extent of any deviation of net asset value per share, based on
available market rates, from the Fund's $1.00 amortized cost per share of each
Class. Should that deviation exceed 1/2 of 1%, the Board will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redemption of shares in
kind, selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument with a
remaining maturity greater than 397 days, will limit portfolio investments,
including repurchase agreements, to those United States dollar-denominated
instruments
17
<PAGE>
that the Fund's Board of Directors determines present minimal credit risks, and
will comply with certain reporting and record keeping procedures. The Fund has
also established procedures to ensure compliance with the requirement that
portfolio securities are Eligible Securities. (See "Description of the Fund and
its Investments and Risks" herein.)
IX. TAXATION OF THE FUND
Federal Income Taxes
The Fund has elected to qualify under the Internal Revenue Code of 1986, as
amended (the "Code"), and under North Carolina law as a "regulated investment
company" that distributes "exempt-interest dividends". The Fund intends to
continue to qualify for regulated investment company status so long as such
qualification is in the best interest of its shareholders, because qualification
relieves the Fund of liability for Federal income taxes to the extent its
earnings are distributed in accordance with the applicable provisions of the
Code.
The Fund's policy is to distribute as exempt-interest dividends each year 100%,
and in no event less than 90%, of its tax-exempt interest income, net of certain
deductions. Exempt-interest dividends are dividends paid by the Fund that are
attributable to interest that is exempt from regular Federal income tax, and are
designated by the Fund as exempt-interest dividends in a written notice mailed
to the Fund's shareholders. The percentage of the total dividends paid by the
Fund during any taxable year that qualifies as exempt-interest dividends will be
the same for all shareholders receiving dividends during the year.
Exempt-interest dividends are to be treated by the Fund's shareholders as items
of interest excludable from their gross income under Section 103(a) of the Code.
The amount of such interest received will have to be disclosed on the
shareholders' Federal income tax returns. A shareholder is advised to consult
its tax advisors with respect to whether exempt-interest dividends retain the
exclusion under Section 103 of the Code if such shareholder would be treated as
a "substantial user" or "related person" under Section 147(a) of the Code with
respect to some or all of the "private activity bonds", if any, held by the
Fund. If a shareholder receives an exempt-interest dividend with respect to any
share and such share has been held for six months or less, then any loss on the
sale or exchange of such share will be disallowed to the extent of the amount of
such exempt-interest dividend. The Code provides that interest on indebtedness
incurred, or continued, to purchase or carry certain tax-exempt securities, such
as shares of the Fund, is not deductible. Therefore, among other consequences, a
certain proportion of interest on indebtedness incurred, or continued, to
purchase or carry securities on margin may not be deductible during the period
an investor holds shares of the Fund. For Social Security recipients, interest
on tax-exempt bonds, including exempt-interest dividends paid by the Fund, is to
be added to adjusted gross income for purposes of computing the amount of social
security benefits includible in gross income. Taxpayers are required to include
as an item of tax preference for purposes of the Federal alternative minimum tax
all tax-exempt interest on "private activity" bonds, issued after August 7, 1986
(generally, a bond issue in which more than 10% of the proceeds are used in a
non-governmental trade or business, other than Section 501(c)(3) bonds). This
provision will apply to any portion of the exempt-interest dividends from the
Fund's assets that are attributable to such post-August 7, 1986 private activity
bonds. Certain corporations are required to increase their alternative minimum
taxable income for purposes of calculating their alternative minimum tax
liability by 75% of the amount by which the adjusted current earnings (which
will include tax-exempt interest) of the corporation exceeds its alternative
minimum taxable income (determined without this item). In addition, in certain
cases, Subchapter S corporations with accumulated earnings and profits from
Subchapter C years are subject to a minimum tax on excess "passive investment
income", which includes tax-exempt interest.
Although it is not intended, it is possible that the Fund may realize short-term
or long-term capital gains or losses from its portfolio transactions. The Fund
may also realize short-term or long-term capital gains or accrued market
discount upon the maturity or disposition of securities acquired at discounts
resulting from market fluctuations. Short-term capital gains and accrued market
discount will be taxable to shareholders as ordinary income. Any net capital
gains (the excess of net realized long-term capital gain over net realized
short-term capital loss) will be distributed annually to shareholders. The Fund
will have no tax liability with respect to distributed net capital gains and the
distributions will be taxable to shareholders as long-term capital gains
regardless of how long the shareholders have held their shares. However,
shareholders who at the time of such a net capital gain distribution have not
held their shares for more than 6 months, and who subsequently dispose of those
shares at a loss, will be required to treat such loss as a long-term capital
loss to the extent of the net capital gain distribution. Distributions of net
capital gain will be designated as a "capital gain dividend" in a written notice
mailed to the Fund's shareholders after the close of the Fund's taxable year.
Capital gains realized by corporations are generally taxed at the same rate as
ordinary income. However, long-term capital gains realized by non-corporate
shareholders who have a holding period of more than 12 months are taxable at a
maximum rate of 20%. Corresponding maximum rate and rules apply with respect to
capital gains dividends distributed by the Fund, without regard to the length of
time shares have been held by the shareholder.
18
<PAGE>
The Fund intends to distribute at least 90% of its investment company taxable
income (taxable income subject to certain adjustments exclusive of the excess of
its net long-term capital gain over its net short-term capital loss) for each
taxable year. These distributions will be taxable to shareholders as ordinary
income. The Fund will be subject to Federal income tax on any undistributed
investment company taxable income. Expenses paid or incurred by the Fund will be
allocated between tax-exempt and taxable income in the same proportion as the
amount of the Fund's tax-exempt income bears to the total of such exempt income
and its gross income (excluding from gross income the excess of capital gains
over capital losses). If the Fund does not distribute at least 98% of its
ordinary income and 98% of its capital gain net income for a taxable year, the
Fund will be subject to a nondeductible 4% excise tax on the excess of such
amounts over the amounts actually distributed.
If a shareholder fails to provide the Fund with a current taxpayer
identification number, the Fund generally is required to withhold 31% of taxable
interest, dividend payments, and proceeds from the redemption of shares of the
Fund.
Dividends and distributions to shareholders will be treated in the manner
described herein for Federal and North Carolina income tax purposes whether
received in cash or reinvested in additional shares of the Fund.
With respect to the variable rate demand instruments, including participation
certificates therein, the Fund has obtained and is relying on the opinion of
Battle Fowler LLP, counsel to the Fund, that it will be treated for Federal
income tax purposes as the owner of the underlying Municipal Obligations and
that the interest thereon will be exempt from regular federal income taxes to
the Fund and its shareholders to the same extent as interest on the underlying
Municipal Obligations. Counsel has pointed out that the Internal Revenue Service
has announced that it will not ordinarily issue advance rulings on the question
of ownership of securities or participation interests therein subject to a put
and, as a result, the Internal Revenue Service could reach a conclusion
different from that reached by counsel.
In South Carolina v. Baker, the United States Supreme Court held that the
Federal government may constitutionally require states to register bonds they
issue and may subject the interest on such bonds to Federal tax if not
registered, and that there is no constitutional prohibition against the Federal
government's taxing the interest earned on state or other municipal bonds. The
Supreme Court decision affirms the authority of the Federal government to
regulate and control bonds such as Municipal Obligations and to tax such bonds
in the future. The decision does not, however, affect the current exemption from
regular income taxation of the interest earned on the Municipal Obligations in
accordance with Section 103 of the Code.
From time to time, proposals have been introduced before Congress to restrict or
eliminate the Federal income tax exemption for interest on Municipal
Obligations. If such a proposal were introduced and enacted in the future, the
ability of the Fund to pay exempt-interest dividends would be adversely affected
and the Fund would reevaluate its investment objective and policies and consider
changes in the structure.
North Carolina Income Taxes
The designation of all or a portion of a dividend paid by the Fund as an
"exempt-interest dividend" under the Code does not necessarily result in the
exemption of such amount from tax under the laws of any state or local taxing
authority. However, assuming that the Fund is a regulated investment company
within the meaning of Section 851 of the Code and has filed with the North
Carolina Department of Revenue its election to be treated as a regulated
investment company, exempt interest dividends received from the Fund and
correctly identified by the Fund as derived from obligations issued by or on
behalf of the state of North Carolina or any political subdivisions need not be
included in North Carolina taxable income by shareholders of the Fund subject to
North Carolina taxation. Exempt-interest dividends correctly identified by the
Fund as derived from obligations of Puerto Rico and the Virgin Islands, as well
as other types of obligations that North Carolina is prohibited from taxing
under the Constitution or laws of the United States of America or the
constitution or laws of North Carolina ("Territorial Municipal Obligations")
should be exempt from North Carolina income taxation provided the Fund complies
with applicable North Carolina law. Dividends with respect to interest on
obligations from states other than North Carolina and its political subdivisions
are required to be added to Federal taxable income in calculating North Carolina
taxable income. The portion of distributions from the Fund that represents
capital gain is reportable for North Carolina income tax purposes as capital
gain income and not dividend income.
X. UNDERWRITERS
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a sales charge. The Distributor does not receive an
underwriting commission. In effecting sales of Fund shares under the
Distribution Agreement, the Distributor, for nominal consideration (i.e., $1.00)
and as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
19
<PAGE>
The Glass-Steagall Act and other applicable laws and regulations prohibit banks
and other depository institutions from engaging in the business of underwriting,
selling or distributing most types of securities. In the opinion of the Manager,
however, based on the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing other services for
investment companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of Directors will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution would result in loss to shareholders or change
in the Fund's net asset value. In addition, state securities laws on this issue
may differ from the interpretations of Federal law expressed herein and banks
and financial institutions may be required to register ad dealers pursuant to
state law.
XI. CALCULATION OF PERFORMANCE DATA
The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the SEC. Under that method, the Fund's yield figure,
which is based on a chosen seven-day period, is computed as follows: the Fund's
return for the seven-day period is obtained by dividing the net change in the
value of a hypothetical account having a balance of one share at the beginning
of the period by the value of such account at the beginning of the period
(expected to always be $1.00). This is multiplied by (365/7) with the resulting
annualized figure carried to the nearest hundredth of one percent. For purposes
of the foregoing computation, the determination of the net change in account
value during the seven-day period reflects (i) dividends declared on the
original share and on any additional shares, including the value of any
additional shares purchased with dividends paid on the original share, and (ii)
fees charged to all shareholder accounts. Realized capital gains or losses and
unrealized appreciation or depreciation of the Fund's portfolio securities are
not included in the computation. Therefore annualized yields may be different
from effective yields quoted for the same period.
The Fund's "effective yield" for each Class is obtained by adjusting its
"current yield" to give effect to the compounding nature of the Fund's
portfolio, as follows: the unannualized base period return is compounded and
brought out to the nearest one hundredth of one percent by adding one to the
base period return, raising the sum to a power equal to 365 divided by 7, and
subtracting one from the result, i.e., effective yield = [(base period return +
1)365/7] - 1.
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day. The Fund's yield for any given period is not an indication, or
representation by the Fund, of future yields or rates of return on the Fund's
shares, and may not provide a basis for comparison with bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors who
purchase the Fund's shares directly may realize a higher yield than Participant
Investors because they will not be subject to any fees or charges that may be
imposed by Participating Organizations.
The Fund may from time to time advertise its tax equivalent current yield. The
tax equivalent yield for each Class is computed based upon a 30-day (or one
month) period ended on the date of the most recent balance sheet included in
this Statement of Additional Information. It is computed by dividing that
portion of the yield of the Fund (as computed pursuant to the formulae
previously discussed) which is tax exempt by one minus a stated income tax rate
and adding the quotient to that portion, if any, of the yield of the Fund that
is not tax exempt. The tax equivalent yield for the Fund may also fluctuate
daily and does not provide a basis for determining future yields.
The Fund may from time to time advertise a tax equivalent effective yield table
which shows the yield that an investor would need to receive from a taxable
investment in order to equal a tax-free yield from the Fund. This is calculated
by dividing that portion of the Fund's effective yield that is tax-exempt by 1
minus a stated income tax rate and adding the quotient to that portion, if any,
of the Fund's effective yield that is not tax-exempt. See "Taxable Equivalent
Yield Table" herein.
The Fund's Class A shares' yield for the seven day period ended February 28,
1999 was 2.09% which is equivalent to an effective yield of 2.11%. The Fund's
Class A shares' yield for the seven day period ended November 30, 1998 was 2.47%
which is equivalent to an effective yield of 2.50%. There is no seven day yield
available for the Evergreen shares since these shares were not in existence
prior to July 9, 1999.
XII. FINANCIAL STATEMENTS
The interim, unaudited financial statements for the Fund for the six months
ended February 28, 1999 and the audited financial statements for the fiscal year
ended August 31, 1998 and the report therein of McGladrey & Pullen, LLP, are
herein incorporated by reference to the Fund's Semi-Annual and Annual Reports,
respectively. The Semi-Annual and Annual Reports are available upon request and
without charge.
20
<PAGE>
DESCRIPTION OF RATINGS*
Description of Moody's Investors Service, Inc.'s Two Highest Municipal Bond
Ratings:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Con. (c) Bonds for which the security depends upon the completion of some act or
the fulfillment of some condition are rated conditionally. These are bonds
secured by (i) earnings of projects under construction, (ii) earnings of
projects unseasoned in operating experience, (iii) rentals which begin when
facilities are completed, or (iv) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Description of Moody's Investors Service, Inc.'s Two Highest Ratings of State
and Municipal Notes and Other Short-Term Loans:
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Symbols used will be as follows:
MIG-1: Loans bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2: Loans bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
Description of Standard & Poor's Rating Services Two Highest Debt Ratings:
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only to a small degree.
Plus ( + ) or Minus ( - ): The AA rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Standard & Poor's does not provide ratings for state and municipal notes.
Description of Standard & Poor's Rating Services Two Highest Commercial Paper
Ratings:
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Description of Moody's Investors Service, Inc.'s Two Highest Commercial Paper
Ratings:
Moody's employs the following designations, both judged to be investment grade,
to indicate the relative repayment capacity of rated issues: Prime-1, highest
quality; Prime-2, higher quality.
- ----------
* As described by the rating agencies.
21
<PAGE>
CORPORATE TAXABLE EQUIVALENT YIELD TABLE
(Based on Tax Rates Effective Until December 31, 1999)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
1. If Your Taxable Income Bracket is . . .
- --------------------------------------------------------------------------------------------------------------------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Corporate 50,001- 75,001- 100,001- 335,001- 10,000,001- 15,000,001- 18,333,334-
75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 and over
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------------------
2. Then Your Combined Income Tax Bracket Is . . .
- --------------------------------------------------------------------------------------------------------------------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Federal 25.00% 34.00% 39.00% 34.00% 35.0% 38.0% 35.0%
Tax Rate
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
State 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
Tax Rate
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
State Tax 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Surcharge
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Combined 30.25% 38.62% 43.27% 38.62% 39.55% 42.34% 39.55%
Marginal
Tax Rate
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------------------
3. Now Compare Your Tax Free Income Yields With Taxable Income Yields
- --------------------------------------------------------------------------------------------------------------------------
- ----------------- --------------------------------------------------------------------------------------------------------
Tax Equivalent Taxable Investment Yield
Exempt Required to Match Tax Exempt Yield
Yield
- ----------------- --------------------------------------------------------------------------------------------------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
2.00% 2.87% 3.26% 3.53% 3.26% 3.31% 3.47% 3.31%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
2.50% 3.58% 4.07% 4.41% 4.07% 4.14% 4.34% 4.14%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
3.00% 4.30% 4.89% 5.29% 4.89% 4.96% 5.20% 4.96%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
3.50% 5.02% 5.70% 6.17% 5.70% 5.79% 6.07% 5.79%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
4.00% 5.73% 6.52% 7.05% 6.52% 6.62% 6.94% 6.62%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
4.50% 6.45% 7.33% 7.93% 7.33% 7.44% 7.80% 7.44%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
5.00% 7.17% 8.15% 8.81% 8.15% 8.27% 8.67% 8.27%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
5.50% 8.89% 8.96% 9.70% 8.96% 9.10% 9.54% 9.10%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
6.00% 8.60% 9.78% 10.58% 9.78% 9.93% 10.41% 9.93%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
6.50% 9.32% 10.59% 11.46% 10.59% 10.75% 11.27% 10.75%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
7.00% 10.04% 11.40% 12.34% 11.40% 11.58% 12.14% 11.58%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
To use this chart, find the applicable level of taxable income based on your tax
filling status in section one. Then read down to section two to determine your
combined tax bracket and, in section three, to see the equivalent taxable yields
for each of the tax free income yields given.
22
<PAGE>
INDIVIDUAL TAXABLE EQUIVALENT YIELD TABLE
(Based on Tax Rates Effective Until December 31, 1999)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
1. If Your Taxable Income Bracket is . . .
- -------------------------------------------------------------------------------------------------------------------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
Single $0- $12,751 - 25,751- 60,001- 61,451- 130,251- 283,151
Return 12,750 25,750 60,000 62,450 130,250 283,150 and over
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
Joint $0- $21,251 - 43,051- 100,001- 104,050- 158,551- 283,151
Return 21,250 43,050 100,000 104,050 158,550 283,150 and over
- -------------------------------------------------------------------------------------------------------------------------
2. Then Your Combined Income Tax Bracket Is . . .
- -------------------------------------------------------------------------------------------------------------------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
Federal 15.00% 15.00% 28.00% 28.00% 31.00% 36.00% 39.60%
Tax Bracket
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
State 6.00% 7.0% 7.0% 7.75% 7.75% 7.75% 7.75%
Tax Bracket
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
Combined 20.10% 20.95% 33.04% 33.58% 36.35% 40.96% 44.28%
Tax Bracket
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- -------------------------------------------------------------------------------------------------------------------------
3. Now Compare Your Tax Free Income Yields With Taxable Income Yields
- -------------------------------------------------------------------------------------------------------------------------
- ----------------- -------------------------------------------------------------------------------------------------------
Tax Equivalent Taxable Investment Yield
Exempt Required to Match Tax Exempt Yield
Yield
- ----------------- -------------------------------------------------------------------------------------------------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
2.00% 2.50% 2.53% 2.99% 3.01% 3.14% 3.39% 3.59%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
2.50% 3.13% 3.16% 3.73% 3.76% 3.93% 4.23% 4.49%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
3.00% 3.75% 3.80% 4.48% 4.52% 4.71% 5.08% 5.38%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
3.50% 4.38% 4.43% 5.23% 5.27% 5.50% 5.93% 6.28%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
4.00% 5.01% 5.06% 5.97% 6.02% 6.28% 6.78% 7.18%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
4.50% 5.63% 5.69% 6.72% 6.78% 7.07% 7.62% 8.08%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
5.00% 6.26% 6.33% 7.47% 7.53% 7.86% 8.47% 8.97%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
5.50% 6.88% 6.96% 8.21% 8.28% 8.64% 9.32% 9.87%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
6.00% 7.51% 7.59% 8.96% 9.03% 9.43% 10.16% 10.77%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
6.50% 8.14% 8.22% 9.71% 9.79% 10.21% 11.01% 11.67%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
7.00% 8.76% 8.86% 10.45% 10.54% 11.00% 11.86% 12.56%
- ----------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------
</TABLE>
To use this chart, find the applicable level of taxable income based on your tax
filling status in section one. Then read down to section two to determine your
combined tax bracket and, in section three, to see the equivalent taxable yields
for each of the tax free income yields given.
23
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits.
Exhibits.
(a) Articles of Incorporation of the Registrant. (originally filed as
Exhibit 1 with the original Registration Statement on Form N-1A on
June 28, 1991, and re-filed herein for Edgar purposes only).
(a.1) Articles of Amendment of Registrant, filed with the State
Department of Assessments and Taxation on January 1, 1994.
(b) By-laws of the Registrant. (originally filed as Exhibit 2 to
Pre-Effective Amendment No. 1 to Registration Statement on Form
N-1A, and re-filed herein for Edgar purposes only).
(c) Form of certificate for shares of Common Stock, par value $.001
per share, of the Registrant. (originally filed as Exhibit 4 with
the original Registration Statement on Form N-1A on June 28, 1991,
and re-filed herein for Edgar purposes only).
* (d) Investment Management Contract between the Registrant and
Reich & Tang Asset Management, L.P.
* (e) Distribution Agreement between the Registrant and Reich & Tang
Distributors, Inc.
(e.1) Form of Distribution Agreement for Evergreen Class of shares
between the Registrant and Reich & Tang Distributors, Inc.
(f) Not applicable
(g) Custody Agreement between the Registrant and Investors Fiduciary
Trust Company. (originally filed as Exhibit 2 to Post-Effective
Amendment No. 8 to Registration Statement on Form N-1A, and
re-filed herein for Edgar purposes only).
(h) Transfer Agency Agreement and Addendum to the Transfer Agency
Agreement between the Registrant and Reich & Tang Services L.P.
(i) Opinion of Messrs. Battle Fowler LLP, as to the legality of the
securities being registered, including their consent to the filing
thereof and to the use of their name under the heading "Federal
Income Taxes" in the Prospectus and in the Statement of Additional
Information, and under "Counsel and Auditors" in the Statement of
Additional Information as to certain federal tax matters.
(originally filed as Exhibit 10 to Pre-Effective Amendment No. 1
to Registration Statement on Form N-1A, and re-filed herein for
Edgar purposes only).
(i.1) Opinion of Kennedy Covington Lobdell & Hickman as to North
Carolina law, including their consent to the filing thereof and to
the use of their name under the heading "North Carolina Income
Taxes" in the Prospectus and in the Statement of Additional
Information, and under "Counsel and Auditors" in the Statement of
Additional Information as to certain federal tax matters.
(originally filed as Exhibit 10.1 to Pre-Effective Amendment No. 1
to Registration Statement on Form N-1A, and re-filed herein for
Edgar purposes only).
* Filed with Post-Effective Amendment No. 6 to said Registration Statement
December 16, 1996, and incorporated herein by reference.
C-1
<PAGE>
(j) Consent of Independent Auditor.
* (k) Unaudited Financial Statements for the six months ended
February 28, 1999 and audited Financial Statements, for fiscal
year ended August 31, 1998. These unaudited Financial Statements
reflect all adjustments that are, in the opinion of Management,
necessary to a fair statement of the results for the interim
period presented.
(l) Written assurance of Reich & Tang L.P. that its purchase of shares
of the Registrant was for investment purposes without any present
intention of redeeming or reselling. (originally filed as Exhibit
14 to Pre-Effective Amendment No. 1 to Registration Statement on
Form N-1A, and re-filed herein for Edgar purposes only).
** (m) Distribution and Service Plan Pursuant to Rule 12b-1 under the
Investment Company Act of 1940. (see exhibit (e) above).
(m.1) Form of Distribution and Service Plan Pursuant to Rule 12b-1 under
the Investment Company Act of 1940 for the Evergreen Class of
shares.
** (m.2) Distribution Agreement between Registrant and Reich & Tang
Distributors, Inc.
(m.3) Form of Distribution Agreement for the Evergreen Class of shares
between Registrant and Reich & Tang Distributors, Inc.
** (m.4) Shareholder Servicing Agreement between the Registrant and Reich &
Tang Distributors, Inc.
(m.5) Form of Shareholder Servicing Agreement for the Evergreen Class of
shares between the Registrant and Reich & Tang Distributors, Inc.
(m.6) Administrative Services Contract, dated as of December 1, 1995,
between the Registrant and Reich & Tang Distributors, Inc.
(n) Financial Data Schedule (for Edgar filing only).
(o) Form of Amendment No. 4 to Rule 18f-3 Multi-Class Plan.
(p) Powers of Attorney.
Item 24. Persons Controlled by or Under Common Control with the Fund.
None.
Item 25. Indemnification.
Filed as Item 27 to Form N-1A Registration Statement No. 33-41462
on June 28, 1991 and incorporated herein by reference.
* Filed with the Semi-Annual and Annual Reports and incorporated herein by
reference.
** Filed with Post-Effective Amendment No. 6 to said Registration Statement
on December 16, 1996, and incorporated herein by reference.
C-2
<PAGE>
Item 26. Business and Other Connections of Investment Adviser.
The description of Reich & Tang Asset Management L.P. ("RTAMLP") under
the caption "Management of the Fund" in the Prospectus and "Manager" and
"Management of the Fund" in the Statement of Additional Information constituting
parts A and B, respectively, of the Registration Statement are incorporated
herein by reference.
The Registrant's investment adviser, Reich & Tang Asset Management L.P.
is a registered investment adviser. Reich & Tang Asset Management L.P.'s
investment advisory clients include California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax
Free Income Fund, Inc., Florida Daily Municipal Income Fund, Georgia Daily
Municipal Income Fund, Inc., Institutional Daily Income Fund, Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., Pax World Money Market Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Short Term Income Fund, Inc., Tax
Exempt Proceeds Fund, Inc., and Virginia Daily Municipal Income Fund, Inc.,
registered investment companies whose addresses are 600 Fifth Avenue, New York,
New York 10020, which invest principally in money market instruments; Delafield
Fund, Inc. and Reich & Tang Equity Fund, Inc. are registered investment
companies whose address is 600 Fifth Avenue, New York, New York 10020, which
invests principally in equity securities. In addition, RTAMLP is the sole
general partner of Alpha Associates L.P., August Associates L.P., Reich & Tang
Minutus I, L.P., Reich & Tang Minutus II, L.P., Reich & Tang Equity Partners
L.P., Tucek Partners L.P., Reich & Tang Micro Cap L.P., and Reich & Tang
Concentrated Portfolio L.P., private investment partnerships organized as
limited partnerships.
Peter S. Voss, President, Chief Executive Officer and a Director of
Nvest Corporation (Formerly New England Investment Companies, Inc.) since
October 1992, Chairman of the Board of Nvest Corporation since December 1992,
Group Executive Vice President, Bank of America, responsible for the global
asset management private banking businesses, from April 1992 to October 1992,
Executive Vice President of Security Pacific Bank, and Chief Executive Officer
of Security Pacific Hoare Govett Companies a wholly-owned subsidiary of Security
Pacific Corporation, from April 1988 to April 1992, Director of The New England
since March 1993, Chairman of the Board of Directors of Nvest Corporation's
subsidiaries other than Loomis, Sayles & Company, L.P. ("Loomis") and Back Bay
Advisors, L.P. ("Back Bay"), where he serves as a Director, and Chairman of the
Board of Trustees of all of the mutual funds in the TNE Fund Group and the
Zenith Funds. G. Neal Ryland, Executive Vice President, Treasurer and Chief
Financial Officer since July 1993, Executive Vice President and Chief Financial
Officer of The Boston Company, a diversified financial services company, from
March 1989 until July 1993, from September 1985 to December 1988, Mr. Ryland was
employed by Kenner Parker Toys, Inc. as Senior Vice President and Chief
Financial Officer. Edward N. Wadsworth, Executive Vice President, General
Counsel, Clerk and Secretary of Nvest Corporation since December 1989, Senior
Vice President and Associate General Counsel of The New England from 1984 until
December 1992, and Secretary of Westpeak and Draycott and the Treasurer of Nvest
Corporation. Lorraine C. Hysler has been Secretary of RTAM since July 1994,
Assistant Secretary since September 1993, Vice President of the Mutual Funds
Group of NEICLP from September 1993 until July 1994, and Vice President of Reich
& Tang Mutual Funds since July 1994. Ms. Hysler joined Reich & Tang, Inc. in May
1977 and served as Secretary from April 1987 until September 1993. Richard E.
Smith, III has been a Director of RTAM since July 1994, President and Chief
Operating Officer of the Capital Management Group of NEICLP from May 1994 until
July 1994, President and Chief Operating Officer of the Reich & Tang Capital
Management Group since July 1994, Executive Vice President and Director of Rhode
Island Hospital Trust from March 1993 to May 1994, President, Chief Executive
Officer and Director of USF&G Review Management Corp. from January 1988 until
September 1992. Steven W. Duff has been a Director of RTAM since October 1994,
President and Chief Executive Officer of Reich & Tang Mutual Funds since August
1994, Senior Vice
C-3
<PAGE>
President of NationsBank from June 1981 until August 1994, Mr. Duff is President
and a Director of Back Bay Funds, Inc., California Daily Tax Free Income Fund,
Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund,
Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina
Daily Municipal Income Fund, Inc., Pax World Money Market Fund, Inc., Short Term
Income Fund, Inc. and Virginia Daily Municipal Income Fund, Inc. President and
Trustee of Institutional Daily Municipal Income Fund, Pennsylvania Daily
Municipal Income Fund, President and Chief Executive Officer of Tax Exempt
Proceeds Fund, Inc., and Executive Vice President of Reich & Tang Equity Fund,
Inc. Bernadette N. Finn has been Vice President/Compliance of RTAM since July
1994, Vice President of Mutual Funds Division of NEICLP from September 1993
until July 1994, Vice President of Reich & Tang Mutual Funds since July 1994.
Ms. Finn joined Reich & Tang, Inc. in September 1970 and served as Vice
President from September 1982 until May 1987 and as Vice President and Assistant
Secretary from May 1987 until September 1993. Ms. Finn is also Secretary of Back
Bay Funds, Inc., California Daily Tax Free Income Fund, Inc., Connecticut Daily
Tax Free Income Fund, Inc., Cortland Trust, Inc., Delafield Fund, Inc., Daily
Tax Free Income Fund, Inc., Institutional Daily Municipal Income Fund, Michigan
Daily Tax Free Income Funds, Inc., New Jersey Daily Municipal Income Fund, Inc.,
New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Pax World Money Market Fund, Inc., Pennsylvania Daily Municipal
Income Fund, Tax Exempt Proceeds Fund, Inc., and Virginia Daily Municipal Income
Fund, Inc. a Vice President and Secretary of Reich & Tang Equity Fund, Inc., and
Short Term Income Fund, Inc. Richard DeSanctis has been Treasurer of RTAM since
July 1994, Assistant Treasurer since September 1993 and Treasurer of the Mutual
Funds Group of NEICLP from September 1993 until July 1994, Treasurer of the
Reich & Tang Mutual Funds since July 1994. Mr. DeSanctis joined Reich & Tang,
Inc. in December 1990 and served as Controller of Reich & Tang, Inc., from
January 1991 to September 1993. Mr. DeSanctis was Vice President and Treasurer
of Cortland Financial Group, Inc. and Vice President of Cortland Distributors,
Inc. from 1989 to December 1990. Mr. DeSanctis is also Treasurer of Back Bay
Funds, Inc., California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Institutional Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund,
Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pax World
Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang
Equity Fund, Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc.
and Virginia Daily Municipal Income Fund, Inc., and is Vice President and
Treasurer of Cortland Trust, Inc. Richard I. Weiner has been Vice President of
RTAM since July 1994, has been Vice President of Nvest Corporation since
September 1993, Vice President of the Capital Management Group of NEIC from
September 1993 until July 1994, Vice President of Reich & Tang Asset Management
L.P. Capital Management Group since July 1994. Mr. Weiner joined Reich & Tang,
Inc. in August 1970 and has served as a Vice President since September 1982.
Rosanne D. Holtzer has been Vice President of the Mutual Funds division of the
Manager since December 1997. Ms. Holtzer was formerly Manager of Fund Accounting
for the Manager with which she was associated with from June 1986. She is also
Assistant Treasurer of Back Bay Funds, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida
Daily Municipal Income Fund, Institutional Daily Income Fund, Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc. Pax World Money Market Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Virginia
Daily Municipal Income Fund, Inc. and is Vice President and Assistant Treasurer
of Cortland Trust, Inc.
C-4
<PAGE>
Item 27. Principal Underwriters.
(a) Reich & Tang Distributors, Inc. is also distributor for Back Bay
Funds, Inc., California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Georgia Daily
Municipal Income Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund,
Inc., North Carolina Daily Municipal Income Fund, Inc., Pax World Money Market
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund,
Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Virginia
Daily Municipal Income Fund, Inc.
(b) The following are the directors and officers of Reich & Tang
Distributors, Inc.. The principal business address of Messrs. Voss, Ryland and
Wadsworth is 399 Boylston Street, Boston, Massachusetts 02116. For all other
persons, the principal business address is 600 Fifth Avenue, New York, New York
10020.
Positions and Offices Positions and Offices
Name of the Distributor With Registrant
Peter S. Voss President and Director None
G. Neal Ryland Director None
Edward N. Wadsworth Executive Officer None
Richard E. Smith III Director None
Steven W. Duff Director None
Bernadette N. Finn Vice President Secretary
Lorraine C. Hysler Secretary None
Richard De Sanctis Treasurer Treasurer
Richard I. Weiner Vice President None
Peter J. De Marco Executive Vice President None
(c) Not applicable
Item 28. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained in the physical possession of the Registrant at 600
Fifth Avenue, New York, New York 10020, the Registrants Manager, and at
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri
64105, Registrant's custodian and transfer agent.
Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
Not applicable.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has met all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, and State of New York, on the 9th day of July, 1999.
NORTH CAROLINA DAILY MUNICIPAL
INCOME FUND, INC.
By:/s/ Bernadette N. Finn
Bernadette N. Finn
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.
Signature Capacity Date
(1) Principal Executive Officer
By: /s/ Steven W. Duff 7/9/99
Steven W. Duff President and
Director
(2) Principal Financial and
Accounting Officer
By: /s/ Richard De Sanctis Treasurer 7/9/99
Richard De Sanctis
(3) Majority of Directors
Steven W. Duff President and Director
Yung Wong Director
W. Giles Mellon Director
Robert Straniere Director
By: /s/ Bernadette N. Finn 7/9/99
Bernadette N. Finn
Attorney-in-Fact*
* See exhibit (p) herein for the Powers of Attorney.
ARTICLES OF RESTATEMENT
OF
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND
To the State Department
of Assessments and Taxation
State of Maryland
Pursuant to the provisions of Section 2-608 of the Maryland General
Corporation Law, North Carolina Daily Municipal Income Fund, Inc. (the
"Corporation"), a Maryland corporation having its principal office in Baltimore
City, hereby certifies that:
FIRST: The corporation desires to restate its character as currently in
effect.
SECOND: The provisions hereinafter set forth in the Articles of
Restatement are all the provisions of the charter of the Corporation as
currently in effect.
THIRD: The restatement of the charter of the Corporation has been
approved by the entire Board of Directors of the Corporation.
FOURTH: The charter of the Corporation is not amended by these Articles
of Restatement.
FIFTH: The current address of the principal office of the Corporation in
the State of Maryland is 1123 North Eutaw Street, Baltimore, Maryland 21201.
SIXTH: The name and the address of the current resident agent of the
Corporation in the State of Maryland is Prentice Hall Corporation System,
Maryland.
<PAGE>
SEVENTH: The number of directors of the corporation is two, and the names
of the directors of the corporation currently in office are:
Bernadette Finn
William Berkowitz
ARTICLES OF RESTATEMENT
OF
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
FIRST: (1) The name of the incorporator is Rachelle I. Rehner.
(2) The incorporator's post office address is 280 Park Avenue, New
York, New York 10017.
(3) The incorporator is over eighteen years of age.
(4) The incorporator is forming the corporation named in these
Articles of Incorporation under the General Corporation Law of the State
of Maryland.
SECOND: The name of the corporation (hereinafter called the
"Corporation") is North Carolina Daily Municipal Income Fund, Inc.
THIRD: The purposes for which the Corporation is formed are:
(a) to conduct, operate and carry on the business of an investment
company;
(b) to subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange,
distribute or otherwise dispose of notes, bills, bonds, debentures and
other negotiable or non-negotiable instruments, obligations and evidences
of indebtedness issued or guaranteed as to principal and interest by the
United States Government, or any agency or instrumentality thereof, any
State or local government, or any agency or instrumentality thereof, or
any other securities of any kind issued by any corporation or other
issuer organized under the laws of the United States or any State,
territory or possession thereof or any foreign country or any subdivision
thereof or otherwise, to pay for the same in cash or by the issue of
stock, including treasury stock, bonds and notes of the Corporation or
otherwise; and to exercise any and all rights, powers and privileges of
ownership or interest in
2
<PAGE>
respect of any and all such investments of every kind and description,
including and without limitation, the right to consent and otherwise act
with respect thereto, with power to designate one or more persons, firms,
associations or corporations to exercise any of said rights, powers and
privileges in respect of any said investments;
(c) to conduct research and investigations in respect of
securities, organizations, business and general business and financial
conditions in the United States of America and elsewhere for the purpose
of obtaining information pertinent to the investment and employment of
the assets of the Corporation and to procure any and all of the foregoing
to be done by others as independent contractors and to pay compensation
therefor;
(d) to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the
assets of the Corporation, and to endorse, guarantee or undertake the
performance of any obligation, contract or engagement of any other
person, firm, association or corporation;
(e) to issue, sell, distribute, repurchase, redeem, retire cancel,
acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal
in, shares of stock of the Corporation, including shares of stock of the
Corporation in fractional denominations, and to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of shares
of stock of the Corporation, any funds or property of the Corporation,
whether capital or surplus or otherwise, to the full extent now or
hereafter permitted by the laws of the State of Maryland and by these
Articles of Incorporation;
(f) to conduct its business, promote its purposes, and carry on
its operations in any and all of its branches and maintain offices both
within and without the State of Maryland, in any and all States of the
United States of America, in the District of Columbia, and in any or all
commonwealths, territories, dependencies, colonies, possessions,
agencies, or instrumentalities of the United States of America and of
foreign governments;
(g) to carry out all or any part of the foregoing purposes or
objects as principal or agent, or in conjunction with any other person,
firm, association, corporation or other entity, or as a partner or member
of a partnership, syndicate or joint venture or otherwise, and in any
part of the world to the same extent and as fully as natural persons
might or could do;
3
<PAGE>
(h) to have and exercise all of the powers and privileges
conferred by the laws of the State of Maryland upon corporations formed
under the laws of such State; and
(i) to do any and all such further acts and things and to exercise
any and all such further powers and privileges as may be necessary,
incidental, relative, conducive, appropriate or desirable for the
foregoing purposes.
The enumeration herein of the objects and purposes of the Corporation
shall be construed as powers as well as objects and purposes and shall not be
deemed to exclude by inference any powers, objects or purposes which the
Corporation is empowered to exercise, whether expressly by force of the laws of
the State of Maryland now or hereafter in effect, or impliedly by the reasonable
construction of the said law.
FOURTH: The post office address of the principal office of the
Corporation within the State of Maryland is 1123 North Eutaw Street, Baltimore,
Maryland 21201.
The resident agent of the Corporation in the State of Maryland is
Prentice-Hall Corporation System, Maryland, at 1123 North Eutaw Street,
Baltimore, Maryland 21201.
FIFTH: (1) The total number of shares of stock of all classes which the
Corporation shall have authority to issue is twenty billion (20,000,000,000),
all of which stock shall have a par value of One Tenth of One Cent ($.001) per
share. The aggregate par value of all authorized shares of stock of the
corporation is Twenty Million Dollars ($20,000,000).
(2)(a) The Board of Directors of the Corporation is authorized to
classify or to reclassify, from time to time, any unissued shares of
stock of the Corporation, whether now or hereafter authorized, by
setting, changing or eliminating the preference, conversion or other
rights, voting powers, restrictions, limitations as to dividends, and
qualifications or terms and conditions of or rights to require redemption
of the stock and, pursuant to such classification or reclassification, to
increase or decrease the number of authorized shares of any class, but
the number of shares of any class shall not be reduced by the Board of
Directors below the number of shares thereof then outstanding.
(b) Without limiting the generality of the foregoing, the
dividends and distributions of investment income and capital gains with
respect to the stock of the Corporation, and with respect to each class
that hereafter may be created, shall be in such amount as may be declared
from time to time by the Board of Directors, and such dividends and
distributions may vary from class to class to such extent and for such
purposes as the Board of Directors may deem appropriate, including but
not limited to, the purpose of complying with requirements of regulatory
or legislative authorities.
4
<PAGE>
(3) Until such time as the Board of Directors shall provide otherwise in
accordance with section (2) of this Article FIFTH, all of the authorized shares
of stock of the Corporation are designated as Common Stock.
(a) As more fully set forth hereafter, the assets and liabilities
and the income and expenses of each class of the Corporation's stock
shall be determined separately and, accordingly, the net asset value, the
dividends payable to holders, and the amounts distributable in the event
of dissolution of the Corporation to holders of shares of the
Corporation's stock may vary from class to class. Except for these
differences and certain other differences hereafter set forth, each class
of the Corporation's stock shall have the same preference, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of and rights to require
redemption.
(b) All consideration received by the Corporation for the issue or
sale of shares of a class of the Corporation's stock, together with all
income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any funds or
payments derived from any reinvestment of such proceeds in whatever form
the same may be, shall irrevocably belong to that class 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, income,
earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation thereof, and any funds or payments
derived from any reinvestment of such proceeds, in whatever form the same
may be, are herein referred, to as "assets belonging to" that class.
(c) The assets belonging to a class of the Corporation's stock,
shall be charged with the liabilities of the Corporation with respect to
that class and with that class's share of the liabilities of the
Corporation not attributable to any particular class, in the latter case
in the proportion that the net asset value of that class bears to the net
asset value of all classes of the Corporation's stock as determined in
accordance with Article NINTH of these Articles of Incorporation. The
determination of the Board of Directors shall be conclusive as to the
allocation of liabilities, including accrued expenses and reserves, and
assets to a particular class or classes.
(d) Each holder of stock of the Corporation, upon request to the
Corporation (accompanied by surrender of the appropriate stock
certificate or certificates in proper form for transfer, if any
certificates have been issued to represent such shares) shall be entitled
to require the Corporation to redeem, to the extent that the Corporation
may lawfully effect such redemption under the laws of the State of
Maryland, all or any part of the shares of stock standing in the name of
such holder on the books of the Corporation at a price per share equal to
the net asset value per share computed in accordance with Article NINTH
hereof.
(e)(i) The term "Minimum Amount" when used herein shall mean One
Thousand Dollars ($1,000) unless otherwise fixed by the Board of
Directors from
5
<PAGE>
time to time, provided that the Minimum Amount may not in any event
exceed Twenty-Five Thousand Dollars ($25,000). The Board of Directors may
establish differing Minimum Amounts for each class of the Corporation's
stock and for holders of shares of each class of stock based on such
criteria as the Board of Directors may deem appropriate.
(ii) If the net asset value of the shares of a class of the
Corporation's stock held by a stockholder shall be less than the Minimum
Amount then in effect with respect to shares of that class or with
respect to shares of that class held by the stockholders in the same
category as that stockholder, the Corporation may redeem all of those
shares, given in accordance with paragraph (iv) of this subsection (e) to
the extent that the Corporation may lawfully effect such redemption under
the laws of the State of Maryland.
(iii) The Corporation shall be entitled but not required to redeem
shares of stock from any stockholder or stockholders, to the extent and
at such times as the Board of Directors shall, in its absolute
discretion, determine to be necessary or advisable to prevent the
Corporation from qualifying as a "personal holding company", within the
meaning of the Internal Revenue Code of 1986, as amended from time to
time. Notice shall be given in accordance with paragraph (iv) of this
subsection (e).
(iv) The notice referred to in paragraphs (ii) and (iii) of this
subsection (e) shall be in writing personally delivered or deposited in
the mail, at least thirty days (or such other number of days as may be
specified from time to time by the Board of Directors) prior to such
redemption. If mailed, the notice shall be addressed to the stockholder
at his post office address as shown on the books of the Corporation, and
sent by certified or registered mail, postage prepaid. The price for
shares acquired by the Corporation pursuant to this subsection (e) shall
be an amount equal to the net asset value of such shares, computed in
accordance with Article NINTH hereof.
(f) Payment by the Corporation for shares of stock of the Corporation
surrendered to it for redemption shall be made by the Corporation within seven
business days of such surrender out of the funds legally available therefor,
provided that the Corporation may suspend the right of the holders of stock of
the Corporation to redeem shares of stock and may postpone the right of such
holders to receive payment for any shares when permitted or required to do so by
applicable statutes or regulations. Payment of the aggregate of such price may
be made in cash or, at the option of the Corporation, wholly or partly in such
portfolio securities of the Corporation as the Corporation shall select.
(g) The right of any holder of stock of the Corporation redeemed by the
Corporation as provided in subsection (d) or (e) of this section (3) to receive
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dividends thereon and all other rights of such holder with respect to such
shares shall terminate at the time as of which the purchase or redemption price
of such shares is determined, except the right of such holder to receive (i) the
redemption price of such shares from the Corporation or its designated agent and
(ii) any dividend or distribution to which such holder has previously become
entitled as the record holder of such shares on the record date for such
dividend or distribution. If shares of stock are redeemed by the Corporation
pursuant to subsection (e) of this section (3) and certificates representing the
redeemed shares have been issued, the redemption price need not be paid by the
Corporation until the certificates have been received by the Corporation or its
agent duly endorsed for transfer.
(h) The Corporation shall be entitled to purchase shares of its stock, to
the extent that the Corporation may lawfully effect such purchase under the laws
of the State of Maryland, upon such terms and conditions and for such
consideration as the Board of Directors shall deem advisable, by agreement with
the stockholder at a price not exceeding the net asset value per share computed
in accordance with Article NINTH hereof.
(i) The net asset value of each share of a class of the Corporation's
stock issued and sold or redeemed or purchased at net asset value shall be the
net asset value per share of the shares of that class determined in accordance
with Article NINTH hereof based on the assets belonging to that class less the
liabilities charged to that class.
(j) In the absence of any specification as to the purpose for which
shares of stock of the Corporation are redeemed or purchased by it, all shares
so redeemed or purchased shall be deemed to be retired in the sense contemplated
by the laws of the State of Maryland and the number of the authorized shares of
stock of the Corporation shall not be reduced by the number of any shares
redeemed or purchased by it.
(k) Shares of each class of stock shall be entitled to such dividends or
distributions, in stock or cash or both, as may be declared from time to time by
the Board of Directors, acting in its sole discretion, with respect to such
class, provided that dividends or distributions shall be paid on shares of a
class of stock only out of lawfully available assets belonging to that class.
(l) For the purpose of allowing the net asset value per share of a class
of the Corporation's stock to remain constant, the Corporation shall be entitled
to declare, pay and credit as dividends daily the net income (which may include
or give effect to realized and unrealized gains and losses, as determined in
accordance with the Corporation's accounting and portfolio valuation policies)
of the Corporation allocated to that class. If the amount so determined for any
day is negative, the Corporation shall be entitled, without the payment of
monetary compensation but in consideration of the interest of the Corporation
and its stockholders in maintaining a constant net asset value per share of the
class, to redeem pro rata from all the stockholders of record of shares of the
class at the time of such redemption (in
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proportion to their respective holdings thereof) such number of outstanding
shares of the class, or fractions thereof, as shall be required to permit the
net asset value per share of the class to remain constant.
(m) In the event of the liquidation or dissolution of the Corporation,
the stockholders of a class of the Corporation's stock shall be entitled to
receive, as a class, out of the assets of the Corporation available for
distribution to stockholders, the assets belonging to that class. The assets so
distributable to the stockholders of a 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. In the event that there are any
assets available for distribution that are not attributable to any particular
class of stock, such assets shall be allocated to all classes in proportion to
the net asset value of the respective classes and then distributed to the
holders of stock of each class in proportion to the net asset value of the
shares of that class held by the respective holders.
(n) on each matter submitted to a vote of the stockholders, each holder
of a share of stock shall be entitled to one vote for each such share standing
in his name on the books of the Corporation irrespective of the class thereof;
provided, however, that to the extent class voting is required by the Investment
Company Act of 1940 or regulations thereunder, as from time to time amended, or
the laws of the State of Maryland as to any such matter, those requirements
shall apply.
(o) The Corporation may issue shares of stock in fractional denominations
to the same extent as its whole shares, and shares in fractional denominations
shall be shares of stock having proportionately to the respective fractions
represented thereby all the rights of whole shares, including without
limitation, the right to vote, the right to receive dividends and distributions,
and the right to participate upon liquidation of the Corporation, but excluding
the right to receive a stock certificate representing fractional shares.
(4) No holder of any shares of stock of the Corporation shall be entitled
as of right to subscribe for, purchase, or otherwise acquire any such shares
which the Corporation shall issue or propose to issue; and any and all of the
shares of stock of the Corporation, whether now or hereafter authorized, may be
issued, or may be reissued or transferred if the same have been reacquired and
have treasury status, by the Board of Directors to such persons, firms,
corporations and associations, and for such lawful consideration, and on such
terms, as the Board of Directors in its discretion may determine, without first
offering same, or any thereof, to any said holder.
(5) All persons who shall acquire stock or other securities of the
Corporation shall acquire the same subject to the provisions of these Articles
of Incorporation, as from time to time amended.
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SIXTH: The number of directors of the Corporation, until such
number shall be increased pursuant to the By-Laws of the Corporation, shall be
two. The number of directors shall never be less than the number prescribed by
the General Corporation Law of the State of Maryland and shall never be more
than twenty. The names of the persons who shall act as directors of the
Corporation until the first annual meeting or until their successors are duly
chosen and qualify are Bernadette Finn and William Berkowitz.
SEVENTH: The following provisions are inserted for the
purpose of defining, limiting and regulating the powers of the Corporation and
of the Board of Directors and stockholders.
(a) The business and affairs of the Corporation shall be managed under
the direction of the Board of Directors which shall have and may exercise all
powers of the Corporation except those powers which are by law, by these
Articles of Incorporation or by the By-Laws conferred upon or reserved to the
stockholders. In furtherance and not in limitation of the powers conferred by
law, the Board of Directors shall have power:
(i) to make, alter and repeal the By-Laws of the Corporation;
(ii) to issue and sell, from time to time, shares of any class of
the Corporation's stock in such amounts and on such terms and conditions,
and for such amount and kind of consideration, as the Board of Directors
shall determine, provided that the consideration per share to be received
by the Corporation shall be not less than the greater of the net asset
value per share of that class of stock at such time computed in
accordance with Article NINTH hereof or the par value thereof;
(iii) from time to time to set apart out of any assets of the
Corporation otherwise available for dividends a reserve or reserves for
working capital or for any other proper purpose or purposes, and to
reduce, abolish or add to any such reserve or reserves from time to time
as said Board of Directors may deem to be in the best interests of the
Corporation; and to determine in its discretion what part of the assets
of the Corporation available for dividends in excess of such reserve or
reserves shall be declared in dividends and paid to the stockholders of
the Corporation; and
(iv) from time to time to determine to what extent and at what
times and places and under what conditions and regulations the accounts,
books and records of the Corporation, or any of them, shall be open to
the inspection of the stockholders; and no stockholder shall have any
right to inspect any account or book or document of the Corporation,
except as conferred by the
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laws of the State of Maryland, unless and until authorized to do so by
resolution of the Board of Directors or of the stockholders of the
Corporation.
(b) Notwithstanding any provision of the General Corporation Law of the
State of Maryland requiring a greater proportion than a majority of the votes of
all classes or of any class of the Corporation's stock entitled to be cast in
order to take or authorize any action, any such action may be taken or
authorized upon the concurrence of a majority of the aggregate number of votes
entitled to be cast thereon subject to any applicable requirements of the
Investment Company Act of 1940, as from time to time in effect, or rules or
orders of the Securities and Exchange Commission or any successor thereto.
(c) Except as may otherwise be expressly provided by applicable statutes
or regulatory requirements, the presence in person or by proxy of the holders of
one-third of the shares of stock of the Corporation entitled to vote shall
constitute a quorum at any meeting of the stockholders.
(d) Any determination made in good faith and, so far as accounting
matters are involved, in accordance with generally accepted accounting
principles by or pursuant to the discretion of the Board of Directors, as to the
amount of the assets, debts, obligations, or liabilities of the Corporation, as
to the amount of any reserves or charges set up and the propriety thereof, as to
the time of or purposes for creating such reserves or charges, as to the use,
alteration or cancellation of any reserves or charges (whether or not any debt,
obligation or liability for which such reserves or charges shall have been
created shall have been paid or discharged or shall by then or thereafter
required to be paid or discharged), as to the value of or the method of valuing
any investment owned or held by the Corporation, as to the market value or fair
value of any investment or fair value of any other asset of the Corporation, as
to the allocation of any asset of the Corporation to a particular class or
classes of the Corporation's stock, as to the charging of any liability of the
Corporation to a particular class or classes of the Corporation's stock, as to
the number of shares of the Corporation outstanding, as to the estimated expense
to the Corporation in connection with purchases of its shares, as to the ability
to liquidate investments in orderly fashion, or as to any other matters relating
to the issue, sale, purchase and/or other acquisition or disposition of
investments or shares of the Corporation, shall be final and conclusive and
shall be binding upon the Corporation and all holders of its shares, past,
present and future, and shares of the Corporation are issued and sold on the
condition and understanding that any and all such determinations shall be
binding as aforesaid.
(e) Except to the extent prohibited by the Investment Company Act of
1940, as amended, or rules, regulations or orders thereunder promulgated by the
Securities and Exchange Commission or any successor thereto or by the By-Laws of
the Corporation, a director, officer or employee of the Corporation shall not be
disqualified by his position from dealing or contracting with the Corporation,
nor shall any transaction or contract of the Corporation be void or voidable by
reason of the fact that any director, officer or
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employee or any firm of which any director, officer or employee is a member or
any corporation of which any director, officer or employee is a stockholder,
officer or director, is in any way interested in such transaction or contract;
provided that in case a director, or a firm or corporation of which a director
is a member, stockholder, officer or director, is so interested, such fact shall
be disclosed to or shall have been known by the Board of Directors or a majority
thereof; and any director of the Corporation who is so interested, or who is a
member, stockholder, officer or director of such firm or corporation, may be
counted in determining the existence of a quorum at any meeting of the Board of
Directors of the Corporation which shall authorize any such transaction or
contract, with like force and effect as if he were not such director, or member,
stockholder, officer or director of such firm or corporation.
(f) Specifically and without limitation of the foregoing subsection (e)
but subject to the exception therein prescribed, the Corporation may enter into
management or advisory, underwriting, distribution and administration contracts
and other contracts, and may otherwise do business, with Reich & Tang L.P., and
any parent, subsidiary, partner, or affiliate of such firm or any affiliates of
any such affiliate, or the stockholders, directors, officers, partners and
employees thereof, and may deal freely with one another notwithstanding that the
Board of Directors of the Corporation may be composed in part of directors,
officers, partners or employees of such firm and/or its parents, subsidiaries or
affiliates and that officers of the Corporation may have been, be or become
directors, officers, or employees of such firm, and/or its parents, subsidiaries
or affiliates, and neither such management or advisory, underwriting,
distribution or administration contracts nor any other contract or transaction
between the Corporation and such firm and/or its parents, subsidiaries or
affiliates shall be invalidated or in any way affected thereby, nor shall any
director or officer of the Corporation be liable to the Corporation or to any
stockholder or creditor thereof or to any person for any loss incurred by it or
him under or by reason of such contract or transaction; provided that nothing
herein shall protect any director or officer of the Corporation against any
liability to the Corporation or to its security holders to which he 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
office; and provided always that such contract or transaction shall have been on
terms that were not unfair to the Corporation at the time at which it was
entered into.
EIGHTH: Subject to the requirements of the Investment Company Act of 1940
and rules promulgated thereunder, as from time to time amended, to the maximum
extent permitted by the General Corporation Law of the State of Maryland as from
time to time amended, the Corporation shall indemnify its currently acting and
its former directors and officers and those persons who, at the request of the
Corporation, serve or have served another corporation, partnership, joint
venture, trust or other enterprise in one or more of such capacities.
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NINTH: For the purpose of the computation of net asset value referred to
in these Articles of Incorporation, the following rules shall apply:
(a) The net asset value of each share of a class of the Corporation's
stock issued or sold at its net asset value shall be the net asset value per
share of that class when next determined as provided in paragraph (d) of this
Article NINTH following acceptance by the Corporation of the subscription or
other agreement with respect to the issue or sale of such share.
(b) The net asset value of each share of a class of the Corporation's
stock redeemed by the Corporation at the request of its holder shall be the net
asset value per share of that class when next determined as provided in
paragraph (d) of this Article NINTH following the time the Corporation receives
a request for redemption of such share in good order with all appropriate
documentation, including stock certificates, if any, duly endorsed for transfer.
(c) The net asset value of each share of a class of the Corporation's
stock purchased or redeemed by it otherwise than upon request for redemption by
its holder shall be the net asset value per share of that class of the
Corporation's stock when next determined as provided in paragraph (d) of this
Article NINTH following the Corporation's determination or agreement to purchase
or redeem such share, the expiration of any notice period fulfillment of any
other conditions precedent to such purchase or redemption, or such lower price
per share as may be specified in the agreement, if any, with the stockholder for
the purchase or redemption of his shares.
(d) The net asset value of a share of a class of the Corporation's stock
as at the time of a particular determination shall be the quotient obtained by
dividing the value at such time of the net asset of that class (i.e., the value
of the assets belonging to that class less the liabilities charged to that class
exclusive of capital stock and surplus) by the total number of shares of that
class outstanding at such time, all determined and computed as provided in the
Corporation's By-Laws or by or pursuant to the direction of the Board of
Directors.
(e) The Corporation shall determine the net asset value per share of a
class of its stock on such days and at such times as prescribed by the rules and
regulations of the Securities and Exchange Commission or any successor thereto.
The Corporation may also determine such net asset value at other times.
(f) The Corporation may suspend the determination of the net asset value
of a class of its stock during any period when it may suspend the right of the
holders of shares of that class to require the Corporation to redeem their
shares.
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TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation or in any
amendment hereto in the manner now or hereafter prescribed by the laws of the
State of Maryland and all rights conferred upon stockholders herein are granted
subject to this reservation.
IN WITNESS WHEREOF: NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC., has
caused these presents to be signed in its name and on its behalf by its
President and attested by its Secretary on June __________, 1991.
NORTH CAROLINA DAILY MUNICIPAL
INCOME FUND, INC.
By: /s/ Bernadette N. Finn
President
ATTEST:
By: /s/ Dana E. Messina
Secretary
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THE UNDERSIGNED, President of NORTH CAROLINA DAILY MUNICIPAL INCOME
FUND, INC., who executed on behalf of said corporation, the foregoing Restated
Articles of Incorporation, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said corporation, the foregoing
Restated Articles of Incorporation to be the corporate act of said corporation
and further certifies that, to the best of his knowledge, information, and
belief, the matters and facts set forth therein with respect to the approval
thereof are true in all material respects, under the penalties of perjury.
By: /s/ Bernadette N. Finn
President
14
ARTICLES OF AMENDMENT
OF
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
North Carolina Daily Municipal Income Fund, Inc., a Maryland Corporation
having its principal office in the State of Maryland in the City of Baltimore
(hereinafter called the "Corporation"), the total number of shares of stock of
all classes and series which the Corporation presently has authority to issue is
20,000,000,000 shares of capital stock (par value $.001 per share), amounting in
aggregate par value to $20,000,000, certifies to the Department of Assessments
and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended as follows:
1. Article FIFTH of the charter of the Corporation is hereby amended by
striking out Article FIFTH and inserting in lieu thereof the following:
FIFTH: "(a) The total number of shares of stock of all classes and
series which the Corporation has authority to issue is 20,000,000,000
shares of capital stock (par value $.001 per share), amounting in aggregate
par value to $20,000,000. All of such shares are classified as "Common
Stock". The Board of Directors may classify or reclassify any unissued
shares of capital stock (whether or not such shares have been previously
classified or reclassified) from time to time by setting or changing in any
one or more respects the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms
or conditions of redemption of such shares of stock.
(b) Unless otherwise prohibited by law, so long as the
Corporation is registered as an open-end company under the Investment
Company Act, the Board of Directors shall have the power and authority,
without the approval of the holders of any outstanding shares, to
increase or decrease the number of shares of capital stock or the
number of shares of capital stock of any class or series that the
Corporation has authority to issue.
(c) Any series of Common Stock shall be referred to herein
individually as a "Series" and collectively, together with any further
series from time to time established, as the "Series".
(d) The following is a description of the preferences,
conversion and other rights, voting powers, restrictions, limitations
as to dividends, qualifications, and terms and conditions of redemption
of the shares of any additional Series of Common Stock of the
Corporation (unless provided otherwise by the Board of Directors with
respect to any such additional Series at the time it is established and
<PAGE>
designated):
(1) Asset Belonging to Series. All consideration received by the
Corporation from the issue or sale of shares of a particular Series,
together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any investment
or 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, together with any General Items
allocated to that Series as provided in the following sentence, are
herein referred to collectively as "assets belonging to" that Series.
In the event that there are any assets, income, earnings, profits or
proceeds which are not readily identifiable as belonging to any
particular Series (collectively, "General Items"), such General Items
shall be allocated by or under the supervision of the Board of
Directors to and among any one or more of the Series established and
designated from time to time in such manner and on such basis as the
Board of Directors, in its sole discretion, deems fair and equitable;
and any General 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 for all purposes.
(2) Liabilities of Series. The assets belonging to each
particular Series shall be charged with the liabilities of the
Corporation in respect of that Series and all expenses, costs, charges
and reserves attributable to that Series, and any general liabilities,
expenses, costs, charges or reserves of the Corporation which are not
readily identifiable as pertaining to any particular Series, shall be
allocated and charged by or under the supervision of the Board of
Directors to and among any one or more of the Series established and
designated from time to time in such manner and on such basis as the
Board of Directors, in its sole discretion, deems fair and equitable.
The liabilities, expenses, costs, charges and reserves allocated and
so charged to a Series are herein referred to collectively as
"liabilities of" that Series. Each allocation of liabilities,
expenses, costs, charges and reserves by or under the supervision of
the Board of Directors shall be conclusive and binding for all
purposes.
(3) Dividends and Distributions. Dividends and
<PAGE>
capital gains distributions on shares of a particular Series may be
paid with such frequency, in such form and in such amount as the Board
of Directors may determine by resolution adopted from time to time, or
pursuant to a standing resolution or resolutions adopted only once or
with such frequency as the Board of Directors may determine, after
providing for actual and accrued liabilities of that Series. All
dividends on shares of a particular Series shall be paid only out of
the income belonging to that Series and all capital gains
distributions on shares of a particular Series shall be paid only out
of the capital gains belonging to that Series. All dividends and
distributions on shares of a particular Series shall be distributed
pro rata to the holders of that Series in proportion to the number of
shares of that Series held by such holders at the date and time of
record established for the payment of such dividends or distributions,
except that in connection with any dividend or distribution program or
procedure, the Board of Directors may determine that no dividend or
distribution shall be payable on shares as to which the stockholder's
purchase order and/or payment have not been received by the time or
times established by the Board of Directors under such program or
procedure.
Dividends and distributions may be paid in cash, property or
additional shares of the same or another Series, or a combination
thereof, as determined by the Board of Directors or pursuant to any
program that the Board of Directors may have in effect at the time for
the election by stockholders of the form in which dividends or
distributions are to be paid. Any such dividend or distribution paid
in shares shall be paid at the current net asset value thereof.
(4) Voting. On each matter submitted to a vote of the
stockholders, each holder of shares shall be entitled to one vote for
each share standing in his name on the books of the Corporation,
irrespective of the Series thereof, and all shares of all Series shall
vote as a single class ("Single Class Voting"); provided, however,
that (i) as to any matter with respect to which a separate vote of any
Series is required by the Investment Company Act or by the Maryland
General Corporation Law, such requirement as to a separate vote by
that Series shall apply in lieu of Single Class Voting; (ii) in the
event that the separate vote requirement referred to in clause (i)
above applies with respect to one or more Series, then, subject to
clause (iii) below, the shares of all other Series shall vote as a
single class; and (iii) as to any matter which does not affect the
interest of a particular Series, including liquidation of another
Series as described in subsection (7) below, only the
<PAGE>
holders of shares of the one or more affected Series shall be entitled
to vote.
(5) Redemption by Stockholders. Each holder of shares of a
particular Series shall have the right at such times as may be
permitted by the Corporation to require the Corporation to redeem all
or any part of his shares of that Series, at a redemption price per
share equal to the net asset value per share of that Series next
determined after the shares are properly tendered for redemption, less
such redemption fee or sales charge, if any, as may be established
from time to time by the Board of Directors in its sole discretion.
Payment of the redemption price shall be in cash; provided, however,
that if the Board of Directors determines, which determination shall
be conclusive, that conditions exist which make payment wholly in cash
unwise or undesirable, the Corporation may, to the extent and in the
manner permitted by the Investment Company Act, make payment wholly or
partly in securities or other assets belonging to the Series of which
the shares being redeemed are a part, at the value of such securities
or assets used in such determination of net asset value.
Payment by the Corporation for shares of stock of the Corporation
surrendered to it for redemption shall be made by the Corporation
within such period from surrender as may be required under the
Investment Company Act and the rules and regulations thereunder.
Notwithstanding the foregoing, the Corporation may postpone payment of
the redemption price and may suspend the right of the holders of
shares of any Series to require the Corporation to redeem shares of
that Series during any period or at any time when and to the extent
permissible under the Investment Company Act.
(6) Redemption by Corporation. The Board of Directors may cause
the Corporation to redeem at their net asset value the shares of any
Series held in an account having, because of redemptions or exchanges,
a net asset value on the date of the notice of redemption less than
the Minimum Amount, as defined below, in that Series specified by the
Board of Directors from time to time in its sole discretion, provided
that at least 30 days prior written notice of the proposed redemption
has been given to the holder of any such account by first class mail,
postage prepaid, at the address contained in the books and records of
the Corporation and such holder has been given an opportunity to
purchase the required value of additional shares.
(i) the term "Minimum Amount" when used herein shall mean One
Thousand Dollars ($1,000) unless
<PAGE>
otherwise fixed by the Board of Directors from time to time, provided
that the Minimum Amount may not in any event exceed Twenty-Five
Thousand Dollars ($25,000). The Board of Directors may establish
differing Minimum Amounts for each class and series of the
Corporation's stock and for holders of shares of each such class and
series of stock based on such criteria as the Board of Directors may
deem appropriate.
(ii) the Corporation shall be entitled but not required to redeem
shares of stock from any stockholder or stockholders, as provided in
this subsection (6), to the extent and at such times as the Board of
Directors shall, in its absolute discretion, determine to be necessary
or advisable to prevent the Corporation from qualifying as a "personal
holding company", within the meaning of the Internal Revenue Code of
1986, as amended from time to time.
(7) Liquidation. In the event of the liquidation of a particular
Series, the stockholders of the Series that is being liquidated 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 Series over
the liabilities of that Series. The holders of shares of any
particular Series shall not be entitled thereby to any distribution
upon liquidation of any other Series. The assets so distributable to
the stockholders of any particular Series shall be distributed among
such stockholders in proportion to the number of shares of that Series
held by them and recorded on the books of the Corporation. The
liquidation of any particular Series in which there are shares then
outstanding may be authorized by vote of a majority of the Board of
Directors then in office, subject to the approval of a majority of the
outstanding voting securities of that Series, as defined in the
Investment Company Act, and without the vote of the holders of shares
of any other Series. The liquidation of a particular Series may be
accomplished, in whole or in part, by the transfer of assets of such
Series to another Series or by the exchange of shares of Series for
the shares of another Series.
(8) Net Asset Value Per Share. The net asset value per share of
any Series shall be the quotient obtained by dividing the value of the
net assets of that Series (being the value of the assets belonging to
that Series less the liabilities of that Series) by the total number
of shares of that Series outstanding, all as determined by or under
the direction of the Board of Directors in accordance with generally
accepted accounting principles and the Investment Company Act. Subject
to the applicable provisions of the Investment Company Act, the Board
of Directors, in its sole
<PAGE>
discretion, may prescribe and shall set forth in the By-Laws of the
Corporation or in a duly adopted resolution of the Board of Directors
such bases and times for determining the value of the assets belonging
to, and the net asset value per share of outstanding shares of, each
Series, or the net income attributable to such shares, as the Board of
Directors deems necessary or desirable. The Board of Directors shall
have full discretion, to the extent not inconsistent with the Maryland
General Corporation Law and the Investment Company Act, to determine
which item shall be treated as income and which items as capital and
whether any item of expense shall be charged to income or capital.
Each such determination and allocation shall be conclusive and binding
for all purposes.
The Board of Directors may determine to maintain the net asset
value per share of any Series at a designated constant dollar amount
and in connection therewith may adopt procedures not inconsistent with
the Investment Company Act for the continuing declaration of income
attributable to that Series as dividends and for the handling of any
losses attributable to that Series. Such procedures may provide that
in the event of any loss, each stockholder shall be deemed to have
contributed to the capital of the Corporation attributable to that
Series his pro rata portion of the total number of shares required to
be canceled in order to permit the net asset value per share of that
Series to be maintained, after reflecting such loss, at the designated
constant dollar amount. Each stockholder of the Corporation shall be
deemed to have agreed, by his investment in any Series with respect to
which the Board of Directors shall have adopted any such procedure, to
make the contribution referred to in the preceding sentence in the
event of any such loss.
(9) Equality. All shares of each particular Series shall
represent an equal proportionate interest in the assets belonging to
that Series (subject to the liabilities of that Series), and each
share of any particular Series shall be equal to each other share of
that Series. The Board of Directors may from time to time divide or
combine the shares of any particular Series into a greater or lesser
number of shares of that Series without thereby changing the
proportionate interest in the assets belonging to that Series or in
any way affecting the rights of holders of shares of any other Series.
(10) Conversion or Exchange Rights. Subject to compliance with
the requirements of the Investment Company Act, the Board of Directors
shall have the authority to provide that holders of shares of any
<PAGE>
Series shall have the right to convert or exchange said shares into
shares of one or more other Series of shares in accordance with such
requirements and procedures as may be established by the Board of
Directors.
(e) 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
common stock of that Series to the extent provided in Articles
Supplementary for such additional class, such Articles to be filed for
record with the appropriate authorities of the State of Maryland. Each
class so created shall consist, until further changed, of the lesser
of (x) the number of shares classified in Section (c) of this Article
FIFTH or (y) the number of shares that could be issued by issuing all
of the shares of that Series currently or hereafter classified less
the total number of shares of all classes of such Series then issued
and outstanding. Any class of a Series of Common Stock shall be
referred to herein individually as a "Class" and collectively,
together with any further class or classes of such Series from time to
time established, as the "Classes".
(f) All Classes of a particular Series of Common Stock of the
Corporation shall represent the same interest in the Corporation and
have identical voting, dividend, liquidation and other rights with any
other shares of Common Stock of that Series; provided, however, that
notwithstanding anything in the charter of the Corporation to the
contrary:
(1) Any class of shares 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 by the Board of
Directors from time to time in accordance with the Investment
Company Act.
(2) Expenses related solely to a particular Class of a
Series (including, without limitation, distribution expenses
under a Rule 12b-1 plan and administrative expenses under an
administration 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.
(3) As to any matter with respect to which a separate vote
of any Class of a Series is required by the Investment Company
Act or by the Maryland General Corporation Law (including,
without limitation, approval of any plan, agreement or other
arrangement
<PAGE>
referred to in subsection (2) above), such requirement as to a
separate vote by that Class shall apply in lieu of Single Class
Voting, and if permitted by the Investment Company Act or the
Maryland General Corporation Law, the Classes of more than one
Series shall vote together as a single class on any such matter
which shall have the same effect on each such Class. As to any
matter which does not affect the interest of a particular Class
of a Series, only the holders of shares of the affected Classes
of that Series shall be entitled to vote.
(g) The Corporation may issue and sell fractions of shares of capital
stock having pro rata all the rights of full shares, including, without
limitation, the right to vote and to receive dividends, and wherever the
words "share" or "shares" are used in the charter or By-Laws of the
Corporation, they shall be deemed to include fractions of shares where the
context does not clearly indicate that only full shares are intended.
(h) The Corporation shall not be obligated to issue certificates
representing shares of any Class or Series of capital stock. At the time of
issue or transfer of shares without certificates, the Corporation shall
provide the stockholder with such information as may be required under the
Maryland General Corporation Law.
(i) No holder of any shares of stock of the Corporation shall be
entitled as of right to subscribe for, purchase, or otherwise acquire any
such shares which the Corporation shall issue or propose to issue; and any
and all of the shares of stock of the Corporation, whether now or hereafter
authorized, may be issued, or may be reissued or transferred if the same
have been reacquired and have treasury status, by the Board of Directors to
such persons, firms, corporations and associations, and for such lawful
consideration, and on such terms, as Board of Directors in its discretion
may determine, without first offering same, or any thereof, to any said
holder.
(j) All persons who shall acquire stock or other securities of the
Corporation shall acquire the same subject to the provisions of these
Articles of Incorporation, as from time to time amended."
2. Article SEVENTH subsection (a)(ii) of the charter of the Corporation is
hereby amended by striking out the language on line two which states "of any
class of the Corporation's stock" and inserting in lieu thereof the following:
"of any class or series of the Corporation's stock"
3. Article SEVENTH subsection (a)(ii) of the charter of the Coporation is
hereby amended by changing the reference
<PAGE>
to Article NINTH in line eight to Article FIFTH.
4. The charter of the Corporation is hereby amended by striking out Article
EIGHTH and inserting in lieu thereof the following:
EIGHTH: "(1) The Corporation shall indemnify (i) its currently acting
and former directors and officers, whether serving the Corporation or at
its request any other entity, to the fullest extent required or permitted
by the General Laws of the State of Maryland now or hereafter in force,
including the advance of expenses under the procedures and to the fullest
extent permitted by law, and (ii) other employees and agents to such extent
as shall be authorized by the Board of Directors or the By-Laws and as
permitted by law. Nothing contained herein shall be construed to protect
any director or officer of the Corporation against any liability to the
Corporation or its security holders to which he 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 office. The
foregoing rights of indemnification shall not be exclusive of any other
rights to which those seeking indemnification may be entitled. The Board of
Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such by-laws, resolutions or contracts implementing
such provisions or such indemnification arrangements as may be permitted by
law. No amendment of the charter of the Corporation or repeal of any of its
provisions shall limit or eliminate the right of indemnification provided
hereunder with respect to acts or omissions occurring prior to such
amendment or repeal.
(2) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, and the Investment Company Act,
no director or officer of the Corporation shall be personally liable to the
Corporation or its stockholders for money damages; provided, however, that
nothing herein shall be construed to protect any director or officer of the
Corporation against any liability to the Corporation or its security
holders to which he 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 office. No amendment of the charter
of the Corporation or repeal of any of its provisions shall limit or
eliminate the limitation of liability provided to directors and officers
hereunder with respect to any act or omission occurring prior to such
amendment or repeal."
5. The charter of the Corporation is hereby amended by striking out Article
NINTH (as the language therein is already contained in new Article FIFTH of
these Articles of Amendment).
<PAGE>
SECOND: The amendments of the charter of the Corporation as herein set
forth have been duly advised by the Board of Directors and approved by the
stockholders of the Corporation.
IN WITNESS WHEREOF, North Carolina Daily Municipal Income Fund, Inc.
has caused these presents to be signed in its name and on its behalf by its
President or one of its Vice Presidents and attested by its Secretary or one of
its Assistant Secretaries, on December , 1993.
NORTH CAROLINA DAILY MUNICIPAL
INCOME FUND, INC.
By: /s/ William Berkowitz
---------------------
William Berkowitz
President
Attest:
/s/ Bernadette N. Finn
------------------
Bernadette N. Finn
Secretary
<PAGE>
THE UNDERSIGNED, President of NORTH CAROLINA DAILY MUNICIPAL INCOME
FUND, INC., who executed on behalf of said corporation, the foregoing Articles
of Amendment, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said corporation, the foregoing Articles of Amendment
to be the corporate act of said corporation and further certifies that, to the
best of his knowledge, information, and in all material respects, under the
penalties of perjury.
NORTH CAROLINA DAILY MUNICIPAL
INCOME FUND, INC.
By: /s/ William Berkowitz
---------------------
William Berkowitz
President
BY-LAWS
OF
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
a Maryland corporation
ARTICLE 1
Offices
Section 1. Principal Office in Maryland. The Corporation shall have a
principal office in the City of Baltimore, State of Maryland.
Section 2. Other Offices. The Corporation may have offices also at such
other places within and without the State of Maryland as the Board of Directors
may from time to time determine or as the business of the Corporation may
require.
ARTICLE 2
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of stockholders shall be held at
such place, either within the State of Maryland or at such other place within
the United States, as shall be fixed from time to time by the Board of
Directors.
Section 2. Annual Meetings. The Corporation shall not be required to hold
an annual meeting of its stockholders in any year in which none of the following
is required to be acted on by the holders of any class or series of stock under
the Investment Company Act of 1940: (a) election of the directors, (b) approval
of the Corporation's investment advisory agreement with respect to a particular
class or series; (c) ratification of the selection of independent public
accountants; and (d) approval of the Corporation's distribution agreement with
respect to a particular class or series. In the event that the Corporation shall
be required to hold an annual meeting of stockholders by the Investment Company
Act of 1940, such meeting of stockholders shall be held on a date fixed from
time to time by the Board of Directors not less than ninety nor more than one
hundred twenty days following the end of such fiscal year of the Corporation.
Section 3. Notice of Annual Meeting. Written or printed notice of an
annual meeting, stating the place, date and hour thereof, shall be given to each
stockholder
<PAGE>
entitled to vote thereat not less than ten nor more than ninety days before the
date of the meeting.
Section 4. Special Meetings. Special meetings of stockholders may be
called by the chairman, the president or by the Board of Directors and shall be
called by the secretary upon the written request of holders of shares entitled
to cast not less than twenty-five percent of all the votes entitled to be cast
at such meeting. Such request shall state the purpose or purposes of such
meeting and the matters proposed to be acted on thereat. In the case of such
request for a special meeting, upon payment by such stockholders to the
Corporation of the estimated reasonable cost of preparing and mailing a notice
of such meeting, the secretary shall give the notice of such meeting. The
secretary shall not be required to call a special meeting to consider any matter
which is substantially the same as a matter acted upon at any special meeting of
stockholders held within the preceding twelve months unless requested to do so
by the holders of shares entitled to cast not less than a majority of all votes
entitled to be cast at such meeting.
Section 5. Notice of Special Meeting. Written or printed notice of a
special meeting of stockholders, stating the place, date, hour and purpose
thereof, shall be given by the secretary to each stockholder entitled to vote
thereat not less than ten nor more than ninety days before the date fixed for
the meeting.
Section 6. Business of Special Meetings. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice thereof.
Section 7. Quorum. Except as may otherwise be expressly provided by
applicable statutes or regulations, the holders of one-third of the stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business.
Section 8. Voting. When a quorum is present at any meeting, the
affirmative vote of a majority of the votes cast shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of the Investment Company Act of 1940, as from time to time in effect,
or other statutes or rules or orders of the Securities and Exchange Commission
or any successor thereto or of the Articles of Incorporation, a different vote
is required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Proxies. Each stockholder shall at every meeting of
stockholders be entitled to one vote in person or by proxy for each share of the
stock having voting power held by such stockholder, but no proxy shall be voted
after eleven months from its date, unless otherwise provided in the proxy.
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<PAGE>
Section 10. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date which shall be
not more than ninety days and, in the case of a meeting of stockholders, not
less than ten days prior to the date on which the particular action requiring
such determination of stockholders is to be taken. In lieu of fixing a record
date, the Board of Directors may provide that the stock transfer books shall be
closed for a stated period, but not to exceed, in any case, twenty days. If the
stock transfer books are closed for the purpose of determining stockholders
entitled to notice of or to vote at a meeting of stockholders, such books shall
be closed for at least ten days immediately preceding such meeting. If no record
date is fixed and the stock transfer books are not closed for the determination
of stockholders: (1) the record date for the determination of stockholders
entitled to notice of, or to vote at, a meeting of stockholders shall be at the
close of business on the day on which notice of the meeting of stockholders is
mailed or the day thirty days before the meeting, whichever is the closer date
to the meeting; and (2) the record date for the determination of stockholders
entitled to receive payment of a dividend or an allotment of any rights shall be
at the close of business on the day on which the resolution of the Board of
Directors, declaring the dividend or allotment of rights, is adopted, provided
that the payment or allotment date shall not be more than ninety days after the
date of the adoption of such resolution.
Section 11. Inspectors of Election. The directors, in advance of any
meeting, may, but need not, appoint one or more inspectors to act at the meeting
or any adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his or her
ability. The inspectors, if any, shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting or any stockholder, the inspector or
inspectors, if any, shall make a report in writing of any challenge, question or
matter determined by him or her or them and execute a certificate of any fact
found by him or her or them.
Section 12. Informal Action by Stockholders. Except to the extent
prohibited by the Investment Company Act of 1940, as from time to time in
effect, or rules or orders of
3
<PAGE>
the Securities and Exchange Commission or any successor thereto, any
action required or permitted to be taken at any meeting of stockholders may be
taken without a meeting if a consent in writing, setting forth such action, is
signed by all the stockholders entitled to vote on the subject matter thereof
and any other stockholders entitled to notice of a meeting of stockholders (but
not to vote thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed with the records
of the Corporation.
ARTICLE 3
Board of Directors
Section 1. Number of Directors. The number of directors shall be fixed at
no less than two nor more than twenty. Within the limits specified above, the
number of directors shall be fixed from time to time by the Board of Directors,
but the tenure of office of a director in office at the time of any decrease in
the number of directors shall not be affected as a result thereof. The directors
shall be elected to hold office at the annual meeting of stockholders, except as
provided in Section 2 of this Article, and each director shall hold office until
the next annual meeting of stockholders or until his successor is elected and
qualified. Any director may resign at any time upon written notice to the
Corporation. Any director may be removed, either with or without cause, at any
meeting of stockholders duly called and at which a quorum is present by the
affirmative vote of the majority of the votes entitled to be cast thereon, and
the vacancy in the Board of Directors caused by such removal may be filled by
the stockholders at the time of such removal. Directors need not be
stockholders.
Section 2. Vacancies and Newly Created Directorships. Any vacancy
occurring in the Board of Directors for any cause, including an increase in the
number of directors, may be filled by the stockholders or by a majority of the
remaining members of the Board of Directors even if such majority is less than a
quorum. So long as the Corporation is a registered investment company under the
Investment Company Act of 1940, vacancies in the Board of Directors may be
filled by a majority of the remaining members of the Board of Directors only if,
immediately after filing any such vacancy, at least two-thirds of the directors
then holding office shall have been elected to such office at a meeting of
stockholders. A director elected by the Board of Directors to fill a vacancy
shall be elected to hold office until the next annual meeting of stockholders or
until his successor is elected and qualifies.
Section 3. Powers. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors which shall exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by statute or by the Articles of Incorporation or by these By-Laws conferred
upon or reserved to the stockholders.
4
<PAGE>
Section 4. Annual Meeting. The first meeting of each newly elected Board
of Directors shall be held immediately following the adjournment of the annual
meeting of stockholders and at the place thereof. No notice of such meeting to
the directors shall be necessary in order legally to constitute the meeting,
provided a quorum shall be present. In the event such meeting is not so held,
the meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the Board of Directors.
Section 5. Other Meetings. The Board of Directors of the Corporation or
any committee thereof may hold meetings, both regular and special, either within
or without the State of Maryland. Regular meetings of the Board of Directors may
be held without notice at such time and at such place as shall from time to time
be determined by the Board of Directors. Special meetings of the Board of
Directors may be called by the chairman, the president or by two or more
directors. Notice of special meetings of the Board of Directors shall be given
by the secretary to each director at least three days before the meeting if by
mail or at least 24 hours before the meeting if given in person or by telephone
or by telegraph. The notice need not specify the business to be transacted.
Section 6. Quorum and Voting. At meetings of the Board of Directors, two
of the directors in office at the time, but in no event less than one-third of
the entire Board of Directors, shall constitute a quorum for the transaction of
business. When required pursuant to Section 15(c) under the Investment Company
Act of 1940 or Rule 12b-1 thereunder a quorum shall also require the presence in
person of a majority of directors who are not parties to a contract or agreement
to be voted upon or interested persons of any such party. The action of a
majority of the directors present at a meeting at which a quorum is present
shall be the action of the Board of Directors. If a quorum shall not be present
at any meeting of the Board of Directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 7. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, appoint from among its members
an executive committee and other committees of the Board of Directors, each
committee to be composed of two or more of the directors of the Corporation. The
Board of Directors may, to the extent provided in the resolution, delegate to
such committees, in the intervals between meetings of the Board of Directors,
any or all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation, except the power to declare dividends,
to issue stock, to recommend to stockholders any action requiring stockholders'
approval, to amend the By-Laws or to approve any merger or share exchange which
does not require stockholders' approval. Such committee or committees shall have
the name or names as may be determined from time to time by resolution adopted
by the Board of Directors. Unless the Board of Directors designates one or more
directors as alternate members of any committee, who may replace an absent or
disqualified member at any meeting of the committee, the members of any such
committee present at any meeting and not disqualified from voting may, whether
or not
5
<PAGE>
they constitute a quorum, unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member of such committee. At meetings of any such committee, a majority of the
members or alternate members of such committee shall constitute a quorum for the
transaction of business and the act of a majority of the members or alternate
members present at any meeting at which a quorum is present shall be the act of
the committee.
Section 8. Minutes of Committee Meetings. The committees shall keep
regular minutes of their proceedings.
Section 9. Informal Action by Board of Directors and Committees. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if a
written consent thereto is signed by all members of the Board of Directors or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or committee.
Section 10. Meetings by Conference Telephone. Except to the extent
prohibited by the Investment Company Act of 1940, as from time to time in
effect, or rules or orders of the Securities and Exchange Commission or any
successor thereto, the members of the Board of Directors or any committee
thereof may participate in a meeting of the Board of Directors or committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time and such participation shall constitute presence in person at such meeting.
Section 11. Fees and Expenses. The directors may be paid their expenses
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like reimbursement and
compensation for attending committee meetings.
ARTICLE 4
Notices
Section 1. General. Notices to directors and stockholders mailed to them
at their post office addresses appearing on the books of the Corporation shall
be deemed to be given at the time when deposited in the United States mail.
Section 2. Waiver of Notice. Whenever any notice is required to be given
under the provisions of the statutes, of the Article of Incorporation or of
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether
6
<PAGE>
before or after the time stated therein, shall be deemed the equivalent of
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
ARTICLE 5
Officers
Section 1. General. The officers of the Corporation shall be chosen by
the Board of Directors at its first meeting after each annual meeting of
stockholders and shall be a chairman of the Board of Directors, a president, a
secretary and a treasurer. The Board of Directors may also choose such vice
presidents and additional officers or assistant officers as it may deem
advisable. Any number of offices, except the offices of president and vice
president, may be held by the same person. No officer shall execute, acknowledge
or verify any instrument in more than one capacity if such instrument is
required by law to be executed, acknowledged or verified by two or more
officers.
Section 2. Other Officers and Agents. The Board of Directors may appoint
such other officers and agents as it desires who shall hold their offices for
such terms and shall exercise such power and perform such duties as shall be
determined from time to time by the Board of Directors.
Section 3. Tenure of Officers. The officers of the Corporation shall hold
office at the pleasure of the Board of Directors. Each officer shall hold his or
her office until his or her successor is elected and qualifies or until his or
her earlier resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors when, in its
judgment, the best interests of the Corporation will be served thereby. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
Section 4. Chairman of the Board of Directors. The chairman of the Board
of Directors shall be the chief executive officer of the Corporation, shall
preside at all meetings of the stockholders and of the Board of Directors, shall
have general and active management of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. The chairman shall execute on behalf of the Corporation, and may affix
the seal or cause the seal to be affixed to, all instruments requiring such
execution except to the extent that signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation.
7
<PAGE>
Section 5. President. The president shall, in the absence of the chairman
of the Board of Directors, preside at all meetings of the stockholders or of the
Board of Directors. The president shall have general and active management of
the business of the Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect. The president shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation.
Section 6. Vice Presidents. The vice presidents shall act under the
direction of the president and in the absence or disability of the president
shall perform the duties and exercise the power of the president. They shall
perform such other duties and have such other powers as the president or the
Board of Directors may from time to time prescribe. The Board of Directors may
designate one or more executive vice presidents or may otherwise specify the
order of seniority of the vice presidents and, in that event, the duties and
powers of the president shall descend to the vice presidents in the specified
order of seniority.
Section 7. Secretary. The secretary shall act under the direction of the
president. Subject to the direction of the president, the secretary shall attend
all meetings of the Board of Directors and all meetings of stockholders and
record the proceedings in a book to be kept for that purpose and shall perform
like duties for the committees designated by the Board of Directors when
required. The secretary shall give, or cause to be given, notice of all meetings
of stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the president or the Board of
Directors. The secretary shall keep in safe custody the seal of the Corporation
and shall affix the seal or cause it to be affixed to any instrument requiring
it.
Section 8. Assistant Secretaries. The assistant secretaries in the order
of their seniority, unless otherwise determined by the president or the Board of
Directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary. They shall perform such other
duties and have such other powers as the president or the Board of Directors may
from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under the direction of the
president. Subject to the direction of the president he shall have the custody
of the corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The treasurer shall disburse the funds of the corporation as may be
ordered by the president or the Board of Directors, taking proper vouchers for
such disbursements, and shall render to the president and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his or her transactions as treasurer and of the financial
condition of the Corporation.
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<PAGE>
Section 10. Assistant Treasurers. The assistant treasurers in the order
of their seniority, unless otherwise determined by the president or the Board of
Directors, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer. They shall perform such other
duties and have such other powers as the president or the Board of Directors may
from time to time prescribe.
ARTICLE 6
Certificates of Stock
Section 1. General. Every holder of stock of the Corporation who has made
full payment of the consideration for such stock shall be entitled upon request
to have a certificate, signed by, or in the name of the Corporation by, the
president or a vice president and countersigned by the treasurer or an assistant
treasurer or the secretary or an assistant secretary of the Corporation,
certifying the number and class of whole shares of stock owned by such holder in
the Corporation.
Section 2. Fractional Share Interests or Scrip. The Corporation may, but
shall not be obliged to, issue fractions of a share of stock, arrange for the
disposition of fractional interests by those entitled thereto, pay in cash the
fair value of fractions of a share of stock as of the time when those entitled
to receive such fractions are determined, or issue scrip or other evidence of
ownership which shall entitle the holder to receive a certificate for a full
share of stock upon the surrender of such scrip or other evidence of ownership
aggregating a full share. Fractional shares of stock shall have proportionately
to the respective fractions represented thereby all the rights of whole shares,
including the right to vote, the right to receive dividends and distributions
and the right to participate upon liquidation of the Corporation, excluding,
however, the right to receive a stock certificate representing such fractional
shares. The Board of Directors may cause such scrip or evidence of ownership to
be issued subject to the condition that it shall become void if not exchanged
for certificates representing full shares of stock before a specified date or
subject to the condition that the shares of stock for which such scrip or
evidence of ownership is exchangeable may be sold by the Corporation and the
proceeds thereof distributed to the holders of such scrip or evidence of
ownership, or subject to any other reasonable conditions which the Board of
Director shall deem advisable, including provision for forfeiture of such
proceeds to the Corporation if not claimed within a period of not less than
three years after the date of the original issuance of scrip certificates.
Section 3. Signatures on Certificates. Any of or all the signatures on a
certificate may be a facsimile. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall cease to be such
officer before such certificate is issued, it may be issued with the same effect
as if he or she were such officer at the date of
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issue. The seal of the Corporation or a facsimile thereof may, but need not, be
affixed to certificates of stock.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of Directors
may direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of any affidavit of that
fact by the person claiming the certificate or certificates to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his or her legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate or
certificates alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the registered owner of
shares, and if a certificate has been issued to represent such shares upon
surrender to the Corporation or a transfer agent of the Corporation of a
certificate for shares of stock duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, subject to the Corporation's
rights to redeem or purchase such shares, it shall be the duty of the
Corporation, if it is satisfied that all provisions of the Articles of
Incorporation, of the By-Laws and of the law regarding the transfer of shares
have been duly complied with, to record the transactions upon its books, issue a
new certificate to the person entitled thereto upon request for such
certificate, and cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation shall be entitled to
recognize the person registered on its books as the owner of shares to be the
exclusive owner for all purposes including, redemption, voting and dividends,
and the Corporation shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by the laws of Maryland.
ARTICLE 7
Miscellaneous
Section 1. Reserves. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for repairing or maintaining any property of
the Corporation, or for the purchase of additional property, or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any such reserve.
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Section 2. Dividends. Dividends upon the stock of the Corporation may,
subject to the provisions of the Articles of Incorporation and of the provisions
of applicable law, be declared by the Board of Directors at any time. Dividends
may be paid in cash, in property or in shares of the Corporation's stock,
subject to the provisions of the Articles of Incorporation and of applicable
law.
Section 1. Capital Gains Distributions. The amount and number of capital
gains distributions paid to the stockholders during each fiscal year shall be
determined by the Board of Directors. Each such payment shall be accompanied by
a statement as to the source of such payment, to the extent required by law.
Section 3. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 5. Seal. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words, "Corporate Seal,
Maryland". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in another manner reproduced.
Section 6. Filing of By-Laws. A certified copy of the By-Laws, including
all amendments, shall be kept at the principal office of the Corporation in the
State of Maryland.
Section 7. Annual Report. The books of account of the Corporation shall
be examined by an independent firm of public accountants at the close of each
annual fiscal period of the Corporation and at such other times, if any, as may
be directed by the Board of Directors of the Corporation. Within one hundred and
twenty days of the close of each annual fiscal period a report based upon such
examination at the close of that fiscal period shall be mailed to each
stockholder of the Corporation of record at the close of such annual fiscal
period, unless the Board of Directors shall set another record date, at his
address as the same appears on the books of the Corporation. Each such report
shall contain such information as is required to be set forth therein by the
Investment Company Act of 1940 and the rules and regulations promulgated by the
Securities and Exchange Commission thereunder. Such report shall also be
submitted at the annual meeting of the stockholders and filed within twenty days
thereafter at the principal office of the Corporation in the State of Maryland.
Section 8. Stock Ledger. The Corporation shall maintain at its principal
office outside of the State of Maryland an original or duplicate stock ledger
containing the
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names and addresses of all stockholders and the number of shares of stock hold
by each stockholder. Such stock ledger may be in written form or in any other
form capable of being converted into written form within a reasonable time for
visual inspection.
Section 9. Ratification of Accountants by Stockholders. At every annual
meeting of the stockholders of the Corporation otherwise called there shall be
submitted for ratification or rejection the name of the firm of independent
public accountants which has been selected for the current fiscal year in which
such annual meeting is held by a majority of those members of the Board of
Directors who are not investment advisers of, or interested person (as defined
in the Investment Company Act of 1940) of an investment adviser of, or officers
or employees of, the Corporation.
Section 10. Custodian. All securities and similar investments owned by
the Corporation shall be held by a custodian which shall be either a trust
company or a national bank of good standing, having a capital surplus and
undivided profits aggregating not less than two million dollars ($2,000,000), or
a member firm of the New York Stock Exchange, Inc. The terms of custody of such
securities and cash shall include such provisions required to be contained
therein by the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder by the Securities and Exchange Commission.
Upon the resignation or inability to serve of any such custodian the
Corporation shall (a) use its best efforts to obtain a successor custodian, (b)
require the cash and securities of the Corporation held by the custodian to be
delivered directly to the successor custodian, and (c) in the event that no
successor custodian can be found, submit to the stockholders of the Corporation,
before permitting delivery of such cash and securities to anyone other than a
successor custodian, the question whether the Corporation shall be dissolved or
shall function without a custodian; provided, however, that nothing herein
contained shall prevent the termination of any agreement between the Corporation
and any such custodian by the affirmative vote of the holders of a majority of
all the stock of the Corporation at the time outstanding and entitled to vote.
Upon its resignation or inability to serve and pending action by the Corporation
as set forth in this section, the custodian may deliver any assets of the
Corporation held by it to a qualified bank or trust company in the City of New
York, or to a member firm of the New York Stock Exchange, Inc. selected by it,
such assets to be held subject to the terms of custody which governed such
retiring custodian.
Section 11. Investment Advisers. The Corporation may enter into one or
more management or advisory, underwriting, distribution or administration
contract with any person, firm, partnership, association or corporation but such
contract or contracts shall continue in effect only so long as such continuance
is specifically approved annually by a majority of the Board of Directors or by
vote of the holders of a majority of the voting securities of the Corporation,
and in either case by vote of a majority of the directors who are not parties to
such contracts or interested persons (as defined in the Investment Company Act
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of 1940) of any such party cast in person at a meeting called for the purpose of
voting on such approval.
ARTICLE VIII
Amendments
The Board of Directors shall have the power, by a majority vote of the
entire Board of Directors at any meeting thereof, to make, alter and repeal
By-Laws of the Corporation.
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INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
The Corporation is authorized to issue 20,000,000,000 Common Shares - Par Value
$.001 each
THIS CERTIFIES THAT [ SPECIMEN ] IS THE OWNER OF [ ]
FULLY PAID AND NON-ASSESABLE SHARES OF THE ABOVE CORPORATION TRANSFERABLE ONLY
ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEROF IN PERSON OR BY DULY
AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERIFICATE PROPERLY ENDORSED.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE
SIGNED BY ITS DULY AUTHORIZED OFFICERS AND TO BE SEALED WITH THE SEAL OF THE
CORPORATION.
DATED [ ]
CUSTODY AGREEMENT
THIS AGREEMENT made the 1st day of April , 1994, by and between INVESTORS
FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of the state
of Missouri, having its trust office located at 127 West 10th Street, Kansas
City, Missouri 64105 ("Custodian"), and The Funds listed in Exhibit A , a
_______________ corporation, having its principal office and place of business
at 600 Fifth Avenue; New York, New York 10020 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of Fund's investment portfolio; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian as
custodian of the securities and monies at any time owned by the Fund.
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to Custodian:
1. That it is a corporation or trust (as specified above) duly
organized and existing and in good standing under the laws of its
state of organization, and that it is registered under the
Investment Company Act of 1940 (the "1940 Act"); and
2. That it has the requisite power and authority under applicable
law, its articles of incorporation and its bylaws to enter into
this Agreement; that it has taken all requisite action necessary
to appoint Custodian as custodian for the Fund; that this
Agreement has been duly executed and delivered by Fund; and that
this Agreement constitutes a legal, valid and binding obligation
of Fund, enforceable in accordance with its terms.
<PAGE>
B. Custodian hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and in
good standing under the laws of the State of Missouri; and
2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; that this Agreement has been duly executed and
delivered by Custodian; and that this Agreement constitutes a
legal, valid and binding obligation of Custodian, enforceable in
accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Except as permitted by the 1940 Act, Fund will deliver or cause to be
delivered to Custodian on the effective date of this Agreement, or as
soon thereafter as practicable, and from time to time thereafter, all
portfolio securities acquired by it and monies then owned by it or
from time to time coming into its possession during the time this
Agreement shall continue in effect. Custodian shall have no
responsibility or liability whatsoever for or on account of securities
or monies not so delivered.
B. Delivery of Accounts and Records
Fund shall turn over or cause to be turned over to Custodian all of
the Fund's relevant accounts and records previously maintained.
Custodian shall be entitled to rely conclusively on the completeness
and correctness of the accounts and records turned over to it, and
Fund shall indemnify and hold Custodian harmless of and from any and
all expenses, damages and losses whatsoever arising out of or in
connection with any error, omission, inaccuracy or other deficiency of
such accounts and records or in the failure of Fund to provide, or to
provide in a timely manner, any accounts, records or information
needed by the Custodian to perform its functions hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets of Fund
delivered to it from time to time segregated in a separate account,
and if Fund
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is comprised of more than one portfolio of investment securities (each
a "Portfolio") Custodian shall keep the assets of each Portfolio
segregated in a separate account. Custodian will not deliver, assign,
pledge or hypothecate any such assets to any person except as
permitted by the provisions of this Agreement or any agreement
executed by it according to the terms of Section 3.S. of this
Agreement. Upon delivery of any such assets to a subcustodian pursuant
to Section 3.S. of this Agreement, Custo-dian will create and maintain
records identifying those assets which have been delivered to the
subcustodian as belonging to the Fund, by Portfolio if applicable. The
Custodian is responsible for the safekeeping of the securities and
monies of Fund only until they have been transmitted to and received
by other persons as permitted under the terms of this Agreement,
except for securities and monies transmitted to subcustodians
appointed under Section 3.S. of this Agreement, for which Custodian
remains responsible to the extent provided in Section 3.S. hereof.
Custodian may participate directly or indirectly through a
subcustodian in the Depository Trust Company (DTC), Treasury/Federal
Reserve Book Entry System (Fed System), Participant Trust Company
(PTC) or other depository approved by the Fund (as such entities are
defined at 17 CFR Section 270.17f-4(b)) (each a "Depository" and
collectively, the "Depositories").
D. Registration of Securities
The Custodian shall at all times hold registered securities of the
Fund in the name of the Custodian, the Fund, or a nominee of either of
them, unless specifically directed by instructions to hold such
registered securities in so-called "street name," provided that, in
any event, all such securities and other assets shall be held in an
account of the Custodian containing only assets of the Fund, or only
assets held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the Custodian at
all time shall indicate the Fund or other customer for which such
securities and other assets are held in such account and the
respective interests therein. If,
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however, the Fund directs the
Custodian to maintain securities in "street name", notwithstanding
anything contained herein to the contrary, the Custodian shall be
obligated only to utilize its best efforts to timely collect income
due the Fund on such securities and to notify the Fund of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers. All securities, and the
ownership thereof by Fund, which are held by Custodian hereunder,
however, shall at all times be identifiable on the records of the
Custodian. The Fund agrees to hold Custodian and its nominee harmless
for any liability as a shareholder of record of securities held in
custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other securities or
cash issued or paid in connection with any reorganization,
recapitalization, merger, consolidation, split-up of shares, change of
par value, conversion or otherwise, and will deposit any such
securities in accordance with the terms of any reorganization or
protective plan. Without instructions, Custodian is authorized to
exchange securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par value of
the stock is changed, and, upon receiving payment therefor, to
surrender bonds or other securities held by it at maturity or when
advised of earlier call for redemption, except that Custodian shall
receive instructions prior to surrendering any convertible security.
F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of securities
shall be made by it, deliver to Custodian instructions which shall
specify with respect to each such purchase:
1. If applicable, the name of the Portfolio making such purchase;
2. The name of the issuer and description of the security;
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3. The number of shares and the principal amount purchased, and accrued
interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes and
other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase; and
8. The name of the person from whom or the broker or dealer through whom
the purchase was made.
9. Whether the security is to be received in certificated form or via a
specified Depository.
In accordance with such instructions, Custodian will pay for out of
monies held for the account of Fund, but only insofar as such monies
are available for such purpose, and receive the portfolio securities
so purchased by or for the account of Fund, except that Custodian may
in its sole discretion advance funds to the Fund which may result in
an overdraft because the monies held by the Custodian on behalf of the
Fund are insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, such payment shall
be made by the Custodian only upon receipt of securities: (a) by the
Custodian; (b) by a clearing corporation of a national exchange of
which the Custodian is a member; or (c) by a Depository.
Notwithstanding the foregoing, (i) in the case of a repurchase
agreement, the Custodian may release funds to a Depository prior to
the receipt of advice from the Depository that the securities
underlying such repurchase agreement have been transferred by
book-entry into the account maintained with such Depository by the
Custodian, on behalf of its customers, provided that the Custodian's
instructions to the Depository require that the Depository make
payment of such funds only upon transfer by book-entry of the
securities underlying the repurchase agreement in such account; (ii)
in the case of time deposits, call account deposits, currency deposits
and other deposits, foreign
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exchange transactions, futures contracts or options, the Custodian may
make payment therefor before receipt of an advice or confirmation
evidencing said deposit or entry into such transaction; and (iii) in
the case of the purchase of securities, the settlement of which occurs
outside of the United States of America, the Custodian may make, or
cause a subcustodian appointed pursuant to Section 3.S.2. of this
Agreement to make, payment therefor in accordance with generally
accepted local custom and market practice.
G. Sales and Deliveries of Investments of the Fund - Other than Options
and Futures
Fund will, on each business day on which a sale of investment
securities (other than options and futures) of Fund has been made,
deliver to Custodian instructions specifying with respect to each such
sale:
1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the securities;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by Fund upon such sale; and
9. The name and address of the broker or dealer through whom or person
to whom the sale was made. 1.
In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of Fund to the broker or other person specified in the instructions
relating to such sale. Except as otherwise instructed by Fund, such
delivery shall be made upon receipt of payment therefor: (a) in such
form as is satisfactory to the
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Custodian; (b) credit to the account of the Custodian with a clearing
corporation of a national securities exchange of which the Custodian
is a member; or (c) credit to the account of the Custodian, on behalf
of its customers, with a Depository. Notwithstanding the foregoing:
(i) in the case of securities held in physical form, such securities
shall be delivered in accordance with "street delivery custom" to a
broker or its clearing agent; or (ii) in the case of the sale of
securities, the settlement of which occurs outside of the United
States of America, the Custodian may make, or cause a subcustodian
appointed pursuant to Section 3.S.2. of this Agreement to make,
payment therefor in accordance with generally accepted local custom
and market practice.
H. Purchases or Sales of Options and Futures
Fund will, on each business day on which a purchase or sale of the
following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:
1. If applicable, the name of the Portfolio making such purchase or
sale;
2. Security Options
A. The underlying security;
B. The price at which purchased or sold;
C. The expiration date;
D. The number of contracts;
E. The exercise price;
F. Whether the transaction is an opening, exercising, expiring
or closing transaction;
G. Whether the transaction involves a put or call;
H. Whether the option is written or purchased;
I. Market on which option traded; and
J. Name and address of the broker or dealer through whom the
sale or purchase was made.
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3. Options on Indices
A. The index;
B. The price at which purchased or sold;
C. The exercise price;
D. The premium;
E. The multiple;
F. The expiration date;
G. Whether the transaction is an opening, exercising, expiring
or closing transaction;
H. Whether the transaction involves a put or call;
I. Whether the option is written or purchased; and
J. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions.
4. Security Index Futures Contracts
A. The last trading date specified in the contract and, when
available, the closing level, thereof;
B. The index level on the date the contract is entered into;
C. The multiple;
D. Any margin requirements;
E. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of
Custodian, Fund shall deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement which shall be incorporated by reference into this
Custody Agreement); and
F. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions. 1.
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5. Options on Index Future Contracts
A. The underlying index future contract;
B. The premium;
C. The expiration date;
D. The number of options;
E. The exercise price;
F. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
G. Whether the transaction involves a put or call;
H. Whether the option is written or purchased; and
I. The market on which the option is traded.
I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of Fund, and subject to
such additional terms and conditions as Custodian may require:
1. Upon receipt of instructions, Custodian will release or cause to
be released securities held in custody to the pledgee designated
in such instructions by way of pledge or hypothecation to secure
any loan incurred by Fund; provided, however, that the securities
shall be released only upon payment to Custodian of the monies
borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, further securities
may be released or caused to be released for that purpose upon
receipt of instructions. Upon receipt of instructions, Custodian
will pay, but only from funds available for such purpose, any
such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing such loan.
2. Upon receipt of instructions, Custodian will release securities
held in custody to the borrower designated in such instructions;
provided, however, that the securities will be released only upon
deposit with Custodian of full cash collateral as specified in
such instructions, and
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that Fund will retain the right to any dividends, interest or
distribution on such loaned securities. Upon receipt of
instructions and the loaned securities, Custodian will release
the cash collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with securities or other property of Fund
except as may be otherwise provided in this Agreement or directed from
time to time by the Fund in writing.
K. Deposit Accounts
Custodian will open and maintain one or more special purpose deposit
accounts in the name of Custodian ("Accounts"), subject only to draft
or order by Custodian upon receipt of instructions. All monies
received by Custodian from or for the account of Fund shall be
deposited in said Accounts. Barring events not in the control of the
Custodian such as strikes, lockouts or labor disputes, riots, war or
equipment or transmission failure or damage, fire, flood, earthquake
or other natural disaster, action or inaction of governmental
authority or other causes beyond its control, at 9:00 a.m., Kansas
City time, on the second business day after deposit of any check into
an Account, Custodian agrees to make Fed Funds available to the Fund
in the amount of the check. Deposits made by Federal Reserve wire will
be available to the Fund immediately and ACH wires will be available
to the Fund on the next business day. Income earned on the portfolio
securities will be credited to the Fund based on the schedule attached
as Exhibit A. The Custodian will be entitled to reverse any credited
amounts where credits have been made and monies are not finally
collected. If monies are collected after such reversal, the Custodian
will credit the Fund in that amount. Custodian may open and maintain
Accounts in its own banking department, or in such other banks or
trust companies as may be designated by it or by Fund in writing, all
such Accounts, however, to be in the name of Custodian and subject
only to its
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draft or order. Funds received and held for the account of different
Portfolios shall be maintained in separate Accounts established for
each Portfolio.
L. Income and other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the account of Fund
all income and other payments which become due and payable on or
after the effective date of this Agreement with respect to the
securities deposited under this Agreement, and credit the account
of Fund in accordance with the schedule attached hereto as
Exhibit A. If, for any reason, the Fund is credited with income
that is not subsequently collected, Custodian may reverse that
credited amount.
2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
a. the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for
payment of:
1. all coupons and other income items requiring
presentation; and
2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the Custodian has actual knowledge, or
should reasonably be expected to have knowledge; and
b. the endorsement for collection, in the name of Fund, of all
checks, drafts or other negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfaction against
the costs and expenses
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of such suit or other actions. Custodian will receive, claim and
collect all stock dividends, rights and other similar items and will
deal with the same pursuant to instructions. Unless prior instructions
have been received to the contrary, Custodian will, without further
instructions, sell any rights held for the account of Fund on the last
trade date prior to the date of expiration of such rights.
M. Payment of Dividends and other Distributions
On the declaration of any dividend or other distribution on the shares
of capital stock of Fund ("Fund Shares") by the Board of Directors of
Fund, Fund shall deliver to Custodian instructions with respect
thereto. On the date specified in such instructions for the payment of
such dividend or other distribution, Custodian will pay out of the
monies held for the account of Fund, insofar as the same shall be
available for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be necessary to pay the
amount per share payable in cash on Fund Shares issued and outstanding
on the record date established by such resolution.
N. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund, Fund or
its agent shall advise Custodian of the aggregate dollar amount to be
paid for such shares and shall confirm such advice in writing. Upon
receipt of such advice, Custodian shall charge such aggregate dollar
amount to the account of Fund and either deposit the same in the
account maintained for the purpose of paying for the repurchase or
redemption of Fund Shares or deliver the same in accordance with such
advice. Custodian shall not have any duty or responsibility to
determine that Fund Shares have been removed from the proper
shareholder account or accounts or that the proper number of Fund
Shares have been cancelled and removed from the shareholder records.
O. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will deposit or
cause to be deposited with Custodian the amount received for such
shares.
12
<PAGE>
Custodian shall not have any duty or responsibility to determine that
Fund Shares purchased from Fund have been added to the proper
shareholder account or accounts or that the proper number of such
shares have been added to the shareholder records.
P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or mailed to
Fund all proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements affecting or
relating to securities held by Custodian for Fund and will, upon
receipt of instructions, execute and deliver or cause its nominee to
execute and deliver or mail or have delivered or mailed such proxies
or other authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by Custodian,
neither it nor its nominee will exercise any power inherent in any
such securities, including any power to vote the same, or execute any
proxy, power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver with respect
thereto, or take any other similar action.
Q. Disbursements
Custodian will pay or cause to be paid, insofar as funds are available
for the purpose, bills, statements and other obligations of Fund
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by Fund,
interest charges, dividend disbursements, taxes, management fees,
custodian fees, legal fees, auditors' fees, transfer agents' fees,
brokerage commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting forth the
name of the person to whom payment is to be made, the amount of the
payment, and the purpose of the payment.
R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund a detailed
statement of the amounts received or paid and of securities received
or delivered for
13
<PAGE>
the account of Fund during each business day. Custodian will, from
time to time, upon request by Fund, render a detailed statement of the
securities and monies held for Fund under this Agreement, and
Custodian will maintain such books and records as are necessary to
enable it to do so. Custodian will permit such persons as are
authorized by Fund, including Fund's independent public accountants,
reasonable access to such records or will provide reasonable
confirmation of the contents of such records, and if demanded,
Custodian will permit federal and state regulatory agencies to examine
the securities, books and records. Upon the written instruc-tions of
Fund or as demanded by federal or state regulatory agencies, Custodian
will instruct any subcustodian to permit such persons as are
authorized by Fund, including Fund's independent public accountants,
reasonable access to such records or to provide reasonable
confirmation of the contents of such records, and to permit such
agencies to examine the books, records and securities held by such
subcustodian which relate to Fund.
S. Appointment of Subcustodians
1. Notwithstanding any other provisions of this Agreement, all or
any of the monies or securities of Fund may be held in
Custodian's own custody or in the custody of one or more other
banks or trust companies acting subcustodians as may be selected
by Custodian. Any such subcustodian selected by the Custodian
must have the qualifications required for a custodian under the
1940 Act, as amended. It is understood that Custodian initially
intends to appoint United Missouri Bank, N.A. (UMB) and United
Missouri Trust Company of New York (UMTCNY) as subcustodians.
Custodian shall be responsible to the Fund for any loss, damage
or expense suffered or incurred by the Fund resulting from the
actions or omissions of UMB, UMTCNY and any other subcustodians
selected and appointed by Custodian (except subcustodians
appointed at the request of Fund and as provided in Subsection 2
below) to the same extent Custodian
14
<PAGE>
would be responsible to the Fund under Section 5. of this
Agreement if it committed the act or omission itself. Upon
request of the Fund, Custodian shall be willing to contract with
other subcustodians reasonably acceptable to the Custodian for
purposes of (i) effecting third-party repurchase transactions
with banks, brokers, dealers, or other entities through the use
of a common custodian or subcustodian, or (ii) providing
depository and clearing agency services with respect to certain
variable rate demand note securities, or (iii) for other
reasonable purposes specified by Fund; provided, however, that
the Custodian shall be responsible to the Fund for any loss,
damage or expense suffered or incurred by the Fund resulting from
the actions or omissions of any such subcustodian only to the
same extent such subcustodian is responsible to the Custodian.
The Fund shall be entitled to review the Custodian's contracts
with any such subcustodians appointed at the request of Fund.
Custodian shall be responsible to the Fund for any loss, damage
or expense suffered or incurred by the Fund resulting from the
actions or omissions of any Depository only to the same extent
such Depository is responsible to Custodian.
2. Notwithstanding any other provisions of this Agreement, Fund's
foreign securities (as defined in Rule 17f-5(c)(1) under the 1940
Act) and Fund's cash or cash equivalents, in amounts deemed by
the Fund to be reasonably necessary to effect Fund's foreign
securities transactions, may be held in the custody of one or
more banks or trust companies acting as subcustodians, and
thereafter, pursuant to a written contract or contracts as
approved by Fund's Board of Directors, may be transferred to
accounts maintained by any such subcustodian with eligible
foreign custodians, as defined in Rule 17f-5(c)(2). Custodian
shall be responsible to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from the actions or
15
<PAGE>
omissions of any foreign subcustodians or a domestic subcustodian
contracting with such foreign subcustodians only to the same
extent such domestic subcustodian is responsible to the
Custodian.
T. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records maintained
by Custodian pursuant to this Agreement are the property of Fund, and
will be made available to Fund for inspection or reproduction within a
reasonable period of time, upon demand. Custodian will assist Fund's
independent auditors, or upon approval of Fund, or upon demand, any
regulatory body, in any requested review of Fund's accounts and
records but shall be reimbursed by Fund for all expenses and employee
time invested in any such review outside of routine and normal
periodic reviews. Upon receipt from Fund of the necessary information
or instructions, Custodian will supply information from the books and
records it maintains for Fund that Fund needs for tax returns,
questionnaires, periodic reports to shareholders and such other
reports and information requests as Fund and Custodian shall agree
upon from time to time.
U. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no procedure
approved or directed by Fund or its accountants or other advisors
conflicts with or violates any requirements of its prospectus,
articles of incorporation, bylaws, any applicable law, rule or
regulation, or any order, decree or agreement by which Fund may be
bound. Fund will be responsible to notify Custodian of any changes in
statutes, regulations, rules, requirements or policies which might
necessitate changes in Custodian's responsibilities or procedures.
V. Overdrafts
If Custodian shall in its sole discretion advance funds to the account
of the Fund which results in an overdraft in any Account because the
monies held therein by Custodian on behalf of the Fund are
insufficient to pay the total
16
<PAGE>
amount payable upon a purchase of securities as specified in Fund's
instructions or for some other reason, the amount of the overdraft
shall be payable by the Fund to Custodian upon demand together with
the overdraft charge set forth on the then-current Fee Schedule from
the date advanced until the date of payment. Fund hereby grants
Custodian a lien on and security interest in the assets of the Fund to
secure the full amount of any outstanding overdraft and related
overdraft charges.
W. Exercise of Rights; Tender Offers
Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to the agent of such issuer or trustee, for the
purpose of exercise or sale, provided that the new securities, cash or
other assets, if any, are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that
the consideration for such securities is to be paid or delivered to
the Custodian or the tendered securities are to be returned to the
Custodian.
4. INSTRUCTIONS.
A. The term "instructions", as used herein, means written (including
telecopied or telexed) or oral instructions which Custodian reasonably
believes were given by a designated representative of Fund. Fund shall
deliver to Custodian, prior to delivery of any assets to Custodian and
thereafter from time to time as changes therein are necessary, written
instructions naming one or more designated representatives to give
instructions in the name and on behalf of Fund, which instructions may
be received and accepted by Custodian as conclusive evidence of the
authority of any designated representative to act for Fund and may be
considered to be in full force and effect (and Custodian will be
fully), protected in acting in reliance thereon) until receipt by
Custodian of notice to the contrary. Unless such written instructions
delegating authority to any person to give instructions specifically
limit such authority to specific matters or require that the approval
of anyone else will first have been
17
<PAGE>
obtained, Custodian will be under no obligation to inquire into the
right of such person, acting alone, to give any instructions
whatsoever which Custodian may receive from such person. If Fund fails
to provide Custodian any such instructions naming designated
representatives, any instructions received by Custodian from a person
reasonably believed to be an appropriate representative of Fund shall
constitute valid and proper instructions hereunder.
B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such
oral instruction. At Custodian's sole discretion, Custodian may record
on tape, or otherwise, any oral instruction whether given in person or
via telephone, each such recording identifying the parties, the date
and the time of the beginning and ending of such oral instruction.
5. LIMITATION OF LIABILITY OF CUSTODIAN
A. Custodian shall at all times use reasonable care and due diligence and
act in good faith in performing its duties under this Agreement.
Custodian shall not be responsible for, and the Fund shall indemnify
and hold Custodian harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability which may be asserted against Custodian, incurred by
Custodian or for which Custodian may be held to be liable, arising out
of or attributable to:
1. All actions taken by Custodian pursuant to this Agreement or any
instructions provided to it hereunder, provided that Custodian
has acted in good faith and with due diligence and reasonable
care; and
2. The Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to pay
or reimburse Custodian under this indemnification provision), the
Fund's negligence or willful misconduct, or the failure of any
representation or warranty of the Fund hereunder to be and remain
true and correct in all respects at all times.
18
<PAGE>
B. Custodian may request and obtain at the expense of Fund the advice and
opinion of counsel for Fund or of its own counsel with respect to
questions or matters of law, and it shall be without liability to Fund
for any action taken or omitted by it in good faith, in conformity
with such advice or opinion. If Custodian reasonably believes that it
could not prudently act according to the instructions of the Fund or
the Fund's accountants or counsel, it may in its discretion, with
notice to the Fund, not act according to such instructions.
C. Custodian may rely upon the advice and statements of Fund, Fund's
accountants and officers or other authorized individuals, and other
persons believed by it in good faith to be expert in matters upon
which they are consulted, and Custodian shall not be liable for any
actions taken, in good faith, upon such advice and statements.
D. If Fund requests Custodian in any capacity to take any action which
involves the payment of money by Custodian, or which might make it or
its nominee liable for payment of monies or in any other way,
Custodian shall be indemnified and held harmless by Fund against any
liability on account of such action; provided, however, that nothing
herein shall obligate Custodian to take any such action except in its
sole discretion.
E. Custodian shall be protected in acting as custodian hereunder upon any
instruc-tions, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed and shall be entitled to receive upon request as
conclusive proof of any fact or matter required to be ascertained from
Fund hereunder a certificate signed by an officer or designated
representative of Fund.
F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased by or for
Fund, the legality of the purchase of any securities or foreign
currency positions or evidence of ownership required by Fund to
be received by
19
<PAGE>
Custodian, or the propriety of the decision to purchase or amount
paid therefor;
2. The legality of the sale of any securities or foreign currency
positions by or for Fund, or the propriety of the amount for
which the same are sold;
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the repurchase or redemption of any Fund Shares,
or the propriety of the amount to be paid therefor; or
5. The legality of the declaration of any dividend by Fund, or the
legality of the issue of any Fund Shares in payment of any stock
dividend.
G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the payment
of money to be received by it on behalf of Fund until Custodian
actually receives such money; provided, however, that it shall advise
Fund promptly if it fails to receive any such money in the ordinary
course of business and shall cooperate with Fund toward the end that
such money shall be received.
H. Except as provided in Section 3.S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.
I. Custodian shall not be responsible or liable for the failure or delay
in performance of its obligations under this Agreement, or those of
any entity for which it is responsible hereunder, arising out of or
caused, directly or indirectly, by circumstances beyond the affected
entity's reasonable control, including, without limitation: any
interruption, loss or malfunction of any utility, transportation,
computer (hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance,
20
<PAGE>
terrorism, vandalism, explosions, labor disputes,
freezes, floods, fires, tornados, acts of God or public enemy,
revolutions, or insurrection.
J. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS
AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE
OTHER PARTY, FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY
ACT OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF
ADVISED OF THIS POSSIBILITY THEREOF.
6. COMPENSATION. In consideration for its services hereunder, Fund will pay to
Custodian such compensation as shall be set forth in a separate fee
schedule to be agreed to by Fund and Custodian from time to time. A copy of
the initial fee schedule is attached hereto and incorporated herein by
reference. Custodian shall also be entitled to receive, and Fund agrees to
pay to Custodian, on demand, reimbursement for Custodian's cash
disbursements and reasonable out-of-pocket costs and expenses, including
attorney's fees, incurred by Custodian in connection with the performance
of services hereunder. Custodian may charge such compensation against
monies held by it for the account of Fund. Custodian will also be entitled
to charge against any monies held by it for the account of Fund the amount
of any loss, damage, liability, advance, overdraft or expense for which it
shall be entitled to reimbursement from Fund, including but not limited to
fees and expenses due to Custodian for other services provided to the Fund
by Custodian. Custodian will be entitled to reimbursement by the Fund for
the losses, damages, liabilities, advances, overdrafts and expenses of
subcustodians only to the extent that (i) Custodian would have been
entitled to reimbursement hereunder if it had incurred the same itself
directly, and (ii) Custodian is obligated to reimburse the subcustodian
therefor.
7. TERM AND TERMINATION. The initial term of this Agreement shall be for a
period of _____. Thereafter, either party to this Agreement may terminate
the same by notice in writing, delivered or mailed, postage prepaid, to the
other party hereto and received not less than ninety (90) days prior to the
date upon which such termination will take effect. Upon termination of this
Agreement, Fund will pay
21
<PAGE>
Custodian its fees and compensation due hereunder and its reimbursable
disbursements, costs and expenses paid or incurred to such date and Fund
shall designate a successor custodian by notice in writing to Custodian by
the termination date. In the event no written order designating a successor
custodian has been delivered to Custodian on or before the date when such
termination becomes effective, then Custodian may, at its option, deliver
the securities, funds and properties of Fund to a bank or trust company at
the selection of Custodian, and meeting the qualifications for custodian
set forth in the 1940 Act and having not less than Two Million Dollars
($2,000,000) aggregate capital, surplus and undivided profits, as shown by
its last published report, or apply to a court of competent jurisdiction
for the appointment of a successor custodian or other proper relief, or
take any other lawful action under the circumstances; provided, however,
that Fund shall reimburse Custodian for its costs and expenses, including
reasonable attorney's fees, incurred in connection therewith. Custodian
will, upon termination of this Agreement and payment of all sums due to
Custodian from Fund hereunder or otherwise, deliver to the successor
custodian so specified or appointed, or as specified by the court, at
Custodian's office, all securities then held by Custodian hereunder, duly
endorsed and in form for transfer, and all funds and other properties of
Fund deposited with or held by Custodian hereunder, and Custodian will
co-operate in effecting changes in book-entries at all Depositories. Upon
delivery to a successor custodian or as specified by the court, Custodian
will have no further obligations or liabilities under this Agreement.
Thereafter such successor will be the successor custodian under this
Agreement and will be entitled to reasonable compensation for its services.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to appoint a successor custodian, the Custodian shall
be entitled to compensation as provided in the then-current fee schedule
hereunder for its services during such period as the Custodian retains
possession of such securities, funds and other properties, and the
provisions of this Agreement relating to the duties and obligations of the
Custodian shall remain in full force and effect.
22
<PAGE>
8. NOTICES. Notices, requests, instructions and other writings addressed to
Fund at __________________, or at such other address as Fund may have
designated to Custodian in writing, will be deemed to have been properly
given to Fund hereunder; and notices, requests, instructions and other
writings addressed to Custodian at its offices at 127 West 10th Street,
Kansas City, Missouri 64105, Attention: Custody Department, or to such
other address as it may have designated to Fund in writing, will be deemed
to have been properly given to Custodian hereunder.
9. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio:
A. Each Portfolio shall be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered by this
Agreement, every reference herein to the Fund shall be deemed to
relate solely to the particular Portfolio to which such transaction
relates. Under no circumstances shall the rights, obligations or
remedies with respect to a particular Portfolio constitute a right,
obligation or remedy applicable to any other Portfolio. The use of
this single document to memorialize the separate agreement of each
Portfolio is understood to be for clerical convenience only and shall
not constitute any basis for joining the Portfolios for any reason.
B. Additional Portfolios may be added to this Agreement, provided that
Custodian consents to such addition. Rates or charges for each
additional Portfolio shall be as agreed upon by Custodian and Fund in
writing.
10. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of Missouri, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
23
<PAGE>
C. The representations and warranties and the indemnifications extended
hereunder are intended to and shall continue after and survive the
expiration, termination or cancellation of this Agreement. 1.
D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by each party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed as
a continuing or permanent waiver of any such terms, conditions, rights
or privileges, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred. No
waiver, release or discharge of any party's rights hereunder shall be
effective unless contained in a written instrument signed by the party
sought to be charged.
F. The captions in the Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
H. If any part, term or provision of this Agreement is determined by the
courts or any regulatory authority to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held
to be illegal or invalid.
I. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party.
24
<PAGE>
J. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
Custodian and Fund.
K. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by either party hereunder shall not
affect any rights or obligations of the other party hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers. INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ Allen A. Straun?
Title: EVP
FUND
By: /s/ Bernadette N. Finn
Title: Secretary
25
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
INVESTORS FIDUCIARY TRUST COMPANY
AVAILABILITY SCHEDULE BY TRANSACTION TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSACTION DTC PHYSICAL FED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE
- ---- ----------- ---------- ----------- ---------- ----------- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
Calls Put As Received C or F* As Received C or F*
- ------------------------------------------------------------------------------------------------------------------------------------
Maturities As Received C or F* Mat. Date C or F* Mat. Date F
- ------------------------------------------------------------------------------------------------------------------------------------
Tender Reorgs. As Received C As Received C N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends Paydate C Paydate C N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Floating Rate Int. Paydate C Paydate C N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Floating Rate Int. N/A As Rate Received C N/A
(No Rate)
- ------------------------------------------------------------------------------------------------------------------------------------
Mtg. Backed P&I Paydate C Paydate + 1 Bus. Day C Paydate F
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Int. Paydate C Paydate C Paydate F
- ------------------------------------------------------------------------------------------------------------------------------------
Euroclear N/A C Paydate C
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Legend
C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
* Availability based on how received.
26
<PAGE>
EXHIBIT A
Name of Fund
California Daily Tax Free Income Fund, Inc.*
Connecticut Daily Tax Free Income Fund, Inc.*
Cortland Trust, Inc.*
Daily Tax Free Income Fund, Inc.*
Delafield Fund, Inc.*
Florida Daily Municipal Income Fund+
Institutional Daily Income Fund+
Michigan Daily Tax Free Income Fund, Inc.*
New Jersey Daily Municipal Income Fund, Inc.*
New York Daily Tax Free Income Fund, Inc.*
North Carolina Daily Municipal Income Fund, Inc.*
Pennsylvania Daily Municipal Income Fund+
Reich & Tang Equity Fund, Inc.*
Reich & Tang Government Securities Trust+
Short Term Income Fund, Inc.*
Tax Exempt Proceeds Fund, Inc.*
* Maryland Corporation
+ Massachusetts Business Trust
Dated: August 30, 1994
TRANSFER AGENCY AGREEMENT
Agreement made as of the 22 day of April, 1999,
between each fund listed on the attached Schedule A having its principal office
and place of business at 600 Fifth Avenue, New York, New York 10020 (each fund
hereinafter referred to as the "Fund"), and Reich & Tang Services L.P., a
Delaware limited partnership, having its principal office and place of business
at 600 Fifth Avenue NYC, NY 10020 (hereinafter referred to
as the "Transfer Agent").
W I T N E S S E T H
That for and in consideration of the mutual promises
hereinafter set forth, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases shall have the following meanings:
1. "Approved Institution" shall mean an entity so named in a
Certificate. From time to time the Find may amend a previously delivered
Certificate by delivering to the Transfer Agent a Certificate naming an
additional entity or deleting any entity named in a previously delivered
Certificate.
2. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Transfer Agent by the Fund which is signed by any Officer, as hereinafter
defined, and actually received by the Transfer Agent.
3. "Custodian" shall mean The Bank of New York, as custodian
under the terms and conditions of the Custody Agreement between The Bank of New
York and the Fund, or its successor(s).
4. "Fund Business Day" shall be deemed to be each day on which
the New York Stock Exchange, Inc. is open for trading.
5. "Officer" shall be deemed to be the Fund's Chairman of the
Board, the Fund's President, any Vice President of the Fund, the Fund's
Secretary, the Fund's Treasurer, the Fund's Controller, any Assistant Controller
of the Fund, any Assistant to the Board of Directors of the Fund to execute any
Certificate, instruction, notice or other instrument on behalf of the Fund and
named in the Certificate annexed hereto as Appendix
<PAGE>
A, as such Certificate may be amended from time to time, and any person
reasonably believed by the Transfer Agent to be such a person.
6. "Series" shall mean the various portfolios of the
Fund as described from time to time in the current and effective
Prospectus.
7. "Shares: shall mean all or any part of each class of the
shares of capital stock of the Fund and of any Series of the Fund listed in the
Certificate annexed hereto as Appendix B, as may be amended from time to time,
which from time to time are authorized and/or issued by the Fund.
8. "Prospectus" shall mean the last Fund prospectus actually
received by the Transfer Agent from the Fund with respect to which the Fund has
indicated a registration statement under the Federal Securities Act of 1933 has
become effective, including the statement of Additional Information incorporated
by reference therein.
9. "Transfer Agent" shall mean Reich & Tang Services L.P., as
transfer agent and divided disbursing agent under the terms and conditions of
this Agreement, its successor(s) or assign(s).
ARTICLE II
APPOINTMENT OF TRANSFER AGENT
1. The Fund hereby constitutes and appoints the Transfer Agent
as transfer agent of all the Shares of the Fund and as dividend disbursing agent
during the period of this Agreement.
2. The Transfer Agent hereby accepts appointment as transfer
agent and dividend disbursing agent and agrees to perform the duties thereof as
hereinafter set forth.
3. In connection with such appointment, the Fund shall deliver
the following documents to the Transfer Agent:
(a) A certified copy of the Articles of Incorporation
of the Fund and all amendments thereto;
(b) A certified copy of the By-Laws of the Fund;
(c) A certified copy of a resolution of the Board of Directors
of the Fund appointing the Transfer Agent and authorizing the execution of this
Transfer Agency Agreement;
<PAGE>
(d) A Certificate signed by the Secretary of the Fund
specifying with respect to each Series: the number of authorized Shares, the
number of authorized Shares issued, and the number of such authorized Shares
issued and currently outstanding, the names and specimen signatures of the
Officers of the Fund, and the name and address of the legal counsel for the
Fund;
(e) Specimen Share certificates for each class of Shares in
the form approved by the Board of Directors of the Fund, together with a
certificate signed by the Secretary of the Fund as to such approval;
(f) Copies of the Fund's Registration Statement, as amended to
date, and the most recently filed Post-Effective Amendment thereto, filed by the
Fund with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended,
together with any applications filed in connection therewith; and
(g) Opinion of counsel for the Fund with respect to the
validity of the authorized and outstanding Shares, whether such Shares are fully
paid and non-assessable and the status of such Shares under the Securities Act
of 1933, as amended, and any other applicable federal law or regulation (i.e.,
if subject to registration, that they have been registered and that the
Registration Statement has become effective or, if exempt, the specific grounds
therefor).
4. To the extent that the Fund issues certificates to its shareholders
pursuant to its current prospectus, the Fund shall furnish the Transfer Agent
with a sufficient supply of blank Share certificates and from time to time will
renew such supply upon request of the Transfer Agent. Such blank Share
certificates shall be properly signed, by facsimile or otherwise, by Officers of
the Fund authorized by law or by the by-laws to sign Share certificates, and, if
required, shall bear the corporate seal or facsimile thereof.
ARTICLE III
AUTHORIZATION AND ISSUANCE OF SHARES
1. The Fund shall deliver to the Transfer Agent the following documents
on or before the effective date of any increase or decrease in the total number
of Shares authorized to be issued:
(a) A certified copy of the amendment to the Articles
of Incorporation giving effect to such increase or decrease;
(b) In the case of an increase, an opinion of counsel for the
Fund with respect to the validity of the Shares of the
<PAGE>
Fund and the status of such Shares under the Securities Act of 1933, as amended,
and any other appropriate federal law or regulation (i.e., if subject to
registration, that they have been registered and that the Registration Statement
has become effective or, if exempt, the specific grounds therefor); and
(c) In the case of an increase, if the appointment of the
Transfer Agent was theretofore expressly limited, if the appointment of the
Transfer Agent was theretofore expressly limited, a certified copy of a
resolution of the Board of Directors of the Fund increasing the authority of the
Transfer Agent.
2. Prior to the issuance of any additional Shares of the Fund pursuant
to stock dividends or stock splits, etc., and prior to any reduction in the
number of shares outstanding, the Fund shall deliver the following documents to
the Transfer Agent:
(a) A certified copy of the resolution(s) adopted by the Board
of Directors and/or the shareholders of the Fund authorizing such issuance of
additional Shares of the Fund or such reduction, as the case may be, and
(b) An opinion of counsel for the Fund with respect to the
validity of the Shares of the Fund and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that they have been registered and
that the Registration Statement has become effective, or, if exempt, the
specific grounds therefor).
ARTICLE IV
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or other
capital adjustment requiring a change in the form of Share certificates, the
Transfer Agent will issue Share certificates in the new form in exchange for, or
upon transfer of, outstanding Share certificates in the old form, upon
receiving:
(a) A Certificate authorizing the issuance of Share
certificates in the new form;
(b) A certified copy of any amendment to the Articles of
Incorporation with respect to the change;
(c) Specimen Share certificates for each class of Shares in
the new form approved by the Board of Directors of the Fund, with a Certificate
signed by the Secretary of the Fund as to such approval; and
<PAGE>
(d) An opinion of counsel for the Fund with respect to the
validity of the Shares in the new form and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that the Shares have been
registered and that the Registration Statement has become effective or, if
exempt, the specific grounds therefor).
2. To the extent that the Fund issues certificates to its shareholders
pursuant to its current prospectus, the Fund shall furnish the Transfer Agent
with a sufficient supply of blank Share certificates in the new form, and from
time to time will replenish such supply upon the request of the Transfer Agent.
Such blank Share certificates shall be properly signed by Officers of the Fund
authorized by law or by the by-laws to sign Share certificates and, if required,
shall bear the corporate seal or facsimile thereof. The Fund agrees to indemnify
and exonerate, save and hold the Transfer Agent harmless, from and against any
and all claims or demands that may be asserted against the Transfer Agent with
respect to the genuineness of any Share certificate supplied to the Transfer
Agent pursuant to this section.
ARTICLE V
ISSUANCE, REDEMPTION, EXCHANGE AND TRANSFER OF SHARES
1. (a) The Transfer Agent shall accept with respect to each Fund
Business Day, at such times as are agreed upon from time to time by the Transfer
Agent and the Fund, each (i) purchase order received from a purchaser, or
shareholder, whether or not an Approved Institution, (ii) exchange request
involving shares of certain other investment companies listed in the Fund's
prospectus, and (iii) redemption request either received from a shareholder,
whether or not an Approved Institution, or contained in a Certificate, provided,
that (A) such purchase order or redemption request, as the case may be, is
reasonably believed by the Transfer Agent to be in conformity with the Fund's
purchase and redemption procedures described in the Prospectus, (B) where such
redemption request states redemption instructions which vary from the
instructions indicated on the shareholder's original subscription order form,
such request contains a signature guarantee, (C) such exchange request contains
a signature guarantee and instructs exchange into a fund that is listed in the
Fund's current prospectus, and (D) the Transfer Agent has agreed to accept and
act in accordance with such type of purchase order or redemption request, as the
case may be.
(b) The Transfer Agent shall also accept with respect to each
Fund Business Day, at such times as are agreed upon from time to time by the
Transfer Agent and the Fund, a computer tape consistent in all respects with the
Transfer Agent's tape layout
<PAGE>
package, as amended from time to time, which is believed by the Transfer Agent
to be furnished by or on behalf of any Approved Institution.
2. On each Fund Business Day the Transfer Agent shall, as of the time
at which the Fund computes the net asset value of each Series, issue to, and
redeem from, the accounts specified in a purchase order, redemption request, or
computer tape which in accordance with the Prospectus is effective on such Fund
Business Day the appropriate number of full and fractional Shares based on the
net asset value per Share of such Series specified in an advice received on such
Fund Business Day from the Fund. Notwithstanding the foregoing, if a redemption
specified in a computer tape is for a dollar value of Shares in excess of the
dollar value of uncertificated Shares in the specified account, the Transfer
Agent shall not effect such redemption in whole or in part, and shall orally
advise both the Fund and the Approved Institution which supplied such tape of
such discrepancy.
3. The Transfer Agent shall, as of each Fund Business Day specified in
a Certificate or resolution described in paragraph 1 of succeeding Article VI,
issue Shares of a Series, based on the net asset value per Share of such Series
specified in an advice received from the Fund on such Fund Business Day, in
connection with a reinvestment of a dividend or distribution on Shares of such
Series.
4. On each Fund Business Day the Transfer Agent shall supply the Fund
with a statement specifying with respect to the immediately preceding Fund
Business Day: the total number of Shares of each Series (including fractional
Shares) issued and outstanding at the opening of business on such day; the total
number of Shares of each Series sold to Reich & Tang Services L.P., as agent for
the purchasers, on such day, pursuant to preceding paragraph 2 of this Article;
the total number of Shares of each Series redeemed by Reich & Tang Services
L.P., as agent for the respective redeeming shareholders, on such day; the total
number of Shares of each Series, if any, sold to Reich & Tang Services L.P., as
agent for shareholders, on such day pursuant to preceding paragraph 3 of this
Article, and the total number of Shares of each Series issued and outstanding.
On the same day such statement is received by the Fund, the Fund shall confirm
the information contained therein by delivering to the Transfer Agent a
Certificate with respect to the same.
5. In connection with each purchase, each exchange and each redemption
of Shares, the Transfer Agent shall send such statements as are described in the
Prospectus. If the Prospectus indicates that certificates for Shares are
available, and if specifically requested in writing by any shareholder, or if
otherwise required hereunder, the Transfer Agent will countersign, issue and
mail by not less than first class insured
<PAGE>
mail, to such shareholder at the address set forth in the records of the
Transfer Agent, a Share certificate for any full Shares requested.
6. As of each Fund Business Day the Transfer Agent shall furnish the
Custodian with an advice setting forth the number and dollar amount of Shares to
be redeemed on such Fund Business Day in accordance with paragraph 2 of this
Article.
7. Upon receipt of moneys paid to it by the Custodian in connection
with a redemption of Shares, the Transfer Agent shall cancel the redeemed Shares
and after making appropriate deduction for any withholding of taxes required of
it by applicable law (a) in the case of a redemption of Shares pursuant to a
redemption described in preceding paragraph 1(a) of this Article, make payment
in accordance with the Fund's redemption and payment procedures described in the
Prospectus, and (b) in the case of a redemption of Shares pursuant to a computer
tape described in preceding paragraph 1(b) of the Article, make payment by
directing a federal funds wire order to the account previously designated by the
Approved Institution specified in said computer tape.
8. The Transfer Agent shall not be required to issue any Shares after
it has received from an Officer of the Fund or from an appropriate federal or
state authority written notification that the sale of Shares has been suspended
or discontinued, and the Transfer Agent shall be entitled to rely upon such
written notification.
9. Upon the issuance of any Shares in accordance with this Agreement
the Transfer Agent shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Fund in connection with such
issuance of any Shares.
10. Shares which are subject to restriction on transfer or redemption
(including, without limitation, Shares acquired pursuant to a restrictive
investment representation, Shares held by controlling persons, Shares subject to
shareholder's agreements, etc.), other than the general restrictions on the
transferability of the shares described in the Prospectus, must be issued in
Share certificate form and must be stamped on the face thereof with a legend
describing the extent and conditions of the restriction or referring to the
source of such restriction, and shall be so issued and so legended by the
Transfer Agent only if the Fund so directs in a Certificate. Legended Shares may
not be transferred or redeemed except upon receipt by the Transfer Agent of an
opinion of counsel for the Fund stating that such transfer or redemption is in
accordance with applicable law, and may be properly effected. The Transfer Agent
shall be entitled to rely upon such opinion and shall be
<PAGE>
indemnified by the Fund for any transfer or redemption made in
reliance upon any such opinion.
11. The Transfer Agent shall accept a computer tape consistent with the
Transfer Agent's tape layout package, as amended from time to time, which is
reasonably believed by the Transfer Agent to be furnished by or on behalf of any
Approved Institution and is represented to be instructions with respect to the
transfer of Shares from one account of such Approved Institution to another such
account, and shall effect the transfers specified in said computer tape.
12. (a) Except as otherwise provided in sub-paragraph (b) of this
paragraph and in paragraph 13 of this Article, Shares will be transferred,
exchanged or redeemed upon presentation to the Transfer Agent of Share
certificates, telephone redemption requests where such requests are authorized
in the subscription order form or in a subsequent written authorization or
instructions properly endorsed for transfer, exchange or redemption, and bearing
satisfactory evidence of the payment of stock transfer taxes. In the case of
small estates, where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate surety bond, and without further approval of
the Fund, transfer, exchange or redeem Shares registered in the name of a
decedent where the current market value of the Shares being transferred does not
exceed such amount as may from time to time be prescribed by various states. The
Transfer Agent reserves the right to refuse to transfer, exchange or redeem
Shares until it is satisfied that the endorsement on the stock certificate or
instructions is valid and genuine, and for that purpose it will require, unless
otherwise instructed by an authorized officer of the Fund, a guarantee of
signature by an eligible guarantor institution which includes a domestic bank, a
domestic credit union, a member bank of the Federal Reserve System or a member
firm of a national securities exchange; pursuant to the Transfer Agent's
standards and procedures. The Transfer Agent also reserves the right to refuse
the transfer, exchange or redeem Shares until it is satisfied that the requested
transfer or redemption is legally authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers, exchanges or redemptions
which the Transfer Agent, in its judgment, deems improper or unauthorized, or
until it is satisfied that there is no basis to any claims adverse to such
transfer, exchange or redemption. The Transfer Agent may, in effecting
transfers, exchanges and redemptions of Shares, rely upon those provisions of
the Uniform Act for the Simplification of Fiduciary Security Transfers or the
Uniform Commercial Code, as the same may be amended from time to time,
applicable to the transfer of securities, and the Fund shall indemnify the
Transfer Agent for any act done or omitted by it in good faith in reliance upon
such laws except where such laws conflict with the
<PAGE>
Securities Act of 1933, the Securities Exchange Act of 1934 or the Investment
Company Act of 1940.
(b) Notwithstanding the foregoing or any other provisions
contained in this Agreement to the contrary, the Transfer Agent shall be fully
protected by the Fund in not requiring any instruments, documents, assurances,
endorsements or guarantees, including, without limitation, any signature
guarantees, in connection with a redemption, or transfer, of Shares whenever the
Transfer Agent reasonably believes that requiring the same would be inconsistent
with the transfer and redemption procedures as described in the Prospectus.
13. Notwithstanding any provision contained in this Agreement to the
contrary, the Transfer Agent shall not be required or expected to require, as a
condition to any transfer of any Shares pursuant to paragraph 11 of this Article
or any exchange or redemption of any Shares pursuant to a computer tape
described in this Article, any documents, including, without limitation, any
documents of the kind described in sub-paragraph (a) of paragraph 12 of this
Article, to evidence the authority of the person requesting the transfer or
redemption and/or the payment of any stock transfer taxes, and shall be fully
protected in acting in accordance with the applicable provisions of this
Article.
14. (a) As used in this Agreement, the terms "computer tape" and
"computer tape believed by the Transfer Agent to be furnished by an Approved
Institution", shall include any tapes generated by the Transfer Agent to reflect
information believed by the Transfer Agent to have been inputted by an Approved
Institution, via a remote terminal or other similar link, into a data
processing, storage, or collection system, or similar system (the "System"),
located on the Transfer Agent's premises. For purposes of paragraph 1 of this
Article, such a computer tape shall be deemed to have been furnished at such
times as are agreed upon from time to time by the Transfer Agent and Fund only
if the information reflected thereon was inputted into the System at such times
as are agreed upon from time to time by the Transfer Agent and the Fund.
(b) Nothing contained in this Agreement shall constitute any
agreement or representation by the Transfer Agent to permit, or to agree to
permit, any Approved Institution to input information into a System.
<PAGE>
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
1. The Fund shall furnish to the Transfer Agent a copy of a resolution
of its Board of Directors, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to a Series the date of the
declaration of a dividend or distribution, the date of accrual or payment, as
the case may be, thereof, the record date as of which Shareholders entitled to
payment, or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution, the payment date on which all previously
accrued and unpaid dividends are to be paid, and the total amount, if any,
payable to the Transfer Agent on such payment date, or (ii) authorizing the
declaration of dividends and distributions on a daily or other periodic basis
and authorizing the Transfer Agent to rely on a Certificate setting forth the
information described in subsection (i) of this paragraph.
2. Upon the payment date specified in such Certificate or resolution,
as the case may be, the Fund shall, in the case of a cash dividend or
distribution, cause the Custodian to pay to the Transfer Agent an amount of
cash, if any, sufficient for the Transfer Agent to make the payment, if any,
specified in such Certificate or resolution, as the case may be, to the
Shareholders of record as of such payment date. The Transfer Agent will, upon
receipt of any such cash, make payment of such cash dividends or distributions
to the Shareholders of record as of the record date by: (i) mailing a check,
payable to the registered shareholder, to the address of record or dividend
mailing address, or (ii) wiring such amounts to the accounts previously
designated by an Approved Institution, as the case may be. The Transfer Agent
shall not be liable for any improper payments made in accordance with a
Certificate or resolution described in the preceding paragraph. If the Transfer
Agent shall not receive from the Custodian sufficient cash to make payments of
any cash dividend or distribution to all shareholders of the Fund as of the
record date, the Transfer Agent shall, upon notifying the Fund, withhold payment
to all shareholders of record as of the record date until sufficient cash is
provided to the Transfer Agent.
3. It is understood that the Transfer Agent shall in no way be
responsible for the determination of the rate or form of dividends or capital
gain distributions due to the shareholders.
4. It is understood that the Transfer Agent shall file such appropriate
information returns concerning the payment of dividends and capital gain
distributions with the proper federal, state and local authorities as are
required by law to be filed by the Fund but shall in no way be responsible for
the collection or
<PAGE>
withholding of taxes due on such dividends or distributions due to shareholders,
except and only to the extent, required of it by applicable law.
ARTICLE VII
CONCERNING THE FUND
1. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign Share certificates,
Certificates, notifications or requests, together with a specimen signature of
each new Officer. In the event any Officer who shall have signed manually or
whose facsimile signature shall have been affixed to blank Share certificates
shall die, resign or be removed prior to issuance of such Share certificates,
the Transfer Agent may issue such Share certificates of the Fund notwithstanding
such death, resignation or removal, and the Fund shall promptly deliver to the
Transfer Agent such approval, adoption or ratification as may be required by
law.
2. Each copy of the Articles of Incorporation of the Fund and copies of
all amendments thereto shall be certified by the Secretary of State (or other
appropriate official) of the state of organization, and if such Articles of
Incorporation and/or amendments are required by law also to be filed with a
county or other officer or official body, a certificate of such filing shall be
filed with a certified copy submitted to the Transfer Agent. Each copy of the
By-Laws and copies of all amendments thereto, and copies of resolutions of the
Board of Directors of the Fund, shall be certified by the Secretary of the Fund
under the corporate seal.
3. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent the Fund's currently effective Prospectus.
ARTICLE VIII
CONCERNING THE TRANSFER AGENT
1. The Transfer Agent shall not be liable and shall be fully protected
in acting upon any computer tape, writing or document reasonably believed by it
to be genuine and to have been signed or made by the proper person or persons
and shall not be held to have any notice of any change or authority of any
person until receipt of written notice thereof from the Fund or such person. It
shall also be protected in processing Share certificates which it reasonably
believes to bear the proper manual or facsimile signatures of the Officers of
the Fund and the property countersignature of the Transfer Agent.
<PAGE>
2. The Transfer Agent may establish such additional procedures, rules
and regulations governing the transfer or registration of certificates of stock
as it may deem advisable and consistent with such rules and regulations
generally adopted by bank transfer agents.
3. The Transfer Agent shall keep such records as are specified in
Appendix C hereto in the form and manner, and for such period, as it may deem
advisable but not inconsistent with the rules and regulations of appropriate
government authorities, in particular Rules 31a-2 and 31a-3 under the federal
Investment Company Act of 1940 as amended from time to time. The Transfer Agent
may deliver to the Fund from time to time at its discretion, for safekeeping or
disposition by the Fund in accordance with law, such records, papers, Share
certificates which have been canceled in transfer, exchange or redemption, or
other documents accumulated in the execution of its duties as such Transfer
Agent, as the Transfer Agent may deem expedient, other than those which the
Transfer Agent is itself required to maintain pursuant to applicable laws and
regulations, and the Fund shall assume all responsibility for any failure
thereafter to produce any record, paper, canceled Share certificate, or other
document so returned, if and when required. The records specified in Appendix C
hereto maintained by the Transfer Agent pursuant to this paragraph 3 shall be
considered to be the property of the Fund, shall be made available upon request
for inspection by the officers, employees, and auditors of the Fund, and records
shall be delivered to the Fund upon request and in any event upon the date of
termination of this Agreement, as specified in Article IX of this Agreement, in
the form and manner kept by the Transfer Agent on such date of termination or
such earlier date as may be requested by the Fund.
4. The Transfer Agent may employ agents or attorneys-in-fact at the
expense of the Fund, and shall not be liable for any loss or expense arising out
of, or in connection with, the actions or omissions to act of its agents or
attorneys-in-fact so long as the Transfer Agent acts in good faith and without
negligence or willful misconduct in connection with the selection of such agents
or attorneys-in-fact.
5. The Transfer Agent shall not be liable for any loss or damage,
including counsel fees, resulting from its actions or omissions to act or
otherwise, except for any loss or damage arising out of its own failure to act
in good faith, negligence or willful misconduct.
6. The Fund shall indemnify and exonerate, save and hold harmless the
Transfer Agent from and against any and all claims (whether with or without
basis in fact or law), demands, expenses (including attorney's fees) and
liabilities of any and every nature which the Transfer Agent may sustain or
incur or which may
<PAGE>
be asserted against the Transfer Agent by any person by reason of or as a result
of any action taken or omitted to be taken by the Transfer Agent in good faith
and without negligence or willful misconduct or in reliance upon (i) any
provision of this Agreement; (ii) the Prospectus; (iii) any instruction or order
including, without limitation, any computer tape reasonably believed by the
Transfer Agent to have been received from an Approved Institution; (iv) any
instrument, order or Share certificate reasonably believed by it to be genuine
and to be signed, countersigned or executed by any duly authorized Officer of
the Fund; (v) any Certificate or other instructions of an Officer; or (vi) any
opinion of legal counsel for the Fund or the Transfer Agent. The Fund shall
indemnify and exonerate, save and hold the Transfer Agent harmless from and
against any and all claims (whether with or without basis in fact or law),
demands, expenses (including attorney's fees) and liabilities of any and every
nature which the Transfer Agent may sustain or incur or which may be asserted
against the Transfer Agent by any person by reason of or as a result of any
action taken or omitted to be taken by the Transfer Agent in good faith and
without negligence or willful misconduct in connection with its appointment or
in reliance upon any law, act, regulation or any interpretation of the same even
though such law, act or regulation may thereafter have been altered, changed,
amended or repealed.
7. Specifically, but not by way of limitation, the Fund shall indemnify
and exonerate, save and hold the Transfer Agent harmless from and against any
and all claims (whether with or without basis in fact or law), demands, expenses
(including attorney's fees) and liabilities of any and every nature which the
Transfer Agent may sustain or incur or which may be asserted against the
Transfer Agent by any person in connection with the Transfer Agent's capacity
and authorization to issue Shares and the form and amount of authorized Shares.
8. Notwithstanding the foregoing, the Transfer Agent shall be liable to
the Fund with respect to any redemption check which the Transfer Agent pays on
which the signature of the drawer is forged, but only to the extent of the
lesser of (a) the amount of such redemption check minus $2,500.00 and (b) the
amount of insurance proceeds received by the Transfer Agent with respect to such
redemption check, and only if, and for so long as each of the following
conditions is satisfied: (i) insurance with respect to Fund redemption checks is
maintained by the Transfer Agent, and (ii) the Fund pays to the Transfer Agent
monthly the amount which the Transfer Agent determines to be the Fund's pro rata
share of the cost of such insurance coverage. The Fund agrees that the insurance
may be discontinued or canceled without any prior notice, and that the Transfer
Agent shall at all times have the absolute right, without any prior notice to
the Fund, to cease to maintain such insurance, and the Transfer Agent agrees to
notify the Fund promptly upon canceling or discontinuing any
<PAGE>
such insurance or upon learning of any such cancellation or discontinuance. In
the event such insurance is not maintained, or in the event the Fund does not
pay monthly to the Transfer Agent the amount which the Transfer Agent determines
to be the Fund's pro rata share of the cost of such insurance coverage, the
Transfer Agent shall not be liable for any loss or damage, including counsel
fees, resulting from its paying or not paying any redemption check, unless such
loss or damage arises out of the Transfer Agent's failure to use good faith,
negligence or willful misconduct.
9. At any time the Transfer Agent may apply to an Officer of the Fund
for written instructions with respect to any matter arising in connection with
the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or permitted by it in
good faith in accordance with such written instructions. Such application by the
Transfer Agent for written instructions from an Officer of the Fund may, at the
option of the Transfer Agent, set forth in writing any action proposed to be
taken or omitted by the Transfer Agent with respect to its duties or obligations
under this Agreement and the date on and/or after which such action shall be
taken, and the Transfer Agent shall not be liable for any action taken or
omitted in accordance with a proposal included in any such application on or
after the date specified therein unless, prior to taking or omitting any such
action, the Transfer Agent has received written instructions in response to such
application specifying the action to be taken or omitted. The Transfer Agent may
consult counsel to the Fund, or its own counsel, at the expense of the Fund and
shall be fully protected with respect to anything done or omitted by it in good
faith in accordance with the advice or opinion of counsel to the Fund or its own
counsel.
10. When mail is used for delivery of non-negotiable Share
certificates, the value of which does not exceed the limits of the Transfer
Agent's Blanket Bond, the Transfer Agent shall send such non-negotiable Share
certificates by first class mail, and such deliveries will be covered while in
transit by the Transfer Agent's Blanket Bond. Non-negotiable Share certificates,
the value of which exceed the limits of the Transfer Agent's Blanket Bond, will
be sent by insured registered mail. Negotiable Share certificates will be sent
by insured registered mail. The Transfer Agent shall advise the Fund of any
Share certificates returned as undelivered after being mailed as herein provided
for.
11. To the extent that the Fund issues certificates to its shareholders
pursuant to its current propspectus, the Transfer Agent may issue new Share
certificates in place of Share certificates represented to have been lost,
stolen, or destroyed upon receiving instructions in writing from an Officer and
<PAGE>
indemnity satisfactory to the Transfer Agent. Such instructions from the Fund
shall be in such form as approved by the Board of Directors of the Fund in
accordance with the provisions of law or of the By-Laws of the Fund governing
such matters. If the Transfer Agent receives written notification from the owner
of the lost, destroyed or stolen Share certificate within a reasonable time
after he has notice of it, the Transfer Agent shall promptly notify the Fund and
shall act pursuant to written instructions signed by an Officer. If the Fund
receives such written notification from the owner of the lost, destroyed or
stolen Share certificate within a reasonable time after he has notice of it, the
Fund shall promptly notify the Transfer Agent and the Transfer Agent shall act
pursuant to written instructions signed by an Officer. The Transfer Agent shall
not be liable for any act done or omitted by it pursuant to the written
instructions described herein. The Transfer Agent may issue new Share
certificates in exchange for, and upon surrender of, mutilated Share
certificates.
12. The Transfer Agent will issue and mail subscription warrants for
Shares of capital stock, Shares representing stock dividends, exchange or
splits, or act as conversion agent upon receiving written instructions from an
Officer and such other documents as the Transfer Agent may deem necessary.
13. The Transfer Agent will supply shareholder lists to the Fund from
time to time upon receiving a request therefor from an Officer of the Fund.
14. In case of any requests or demands for the inspection of the
shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund and to secure instructions from an Officer as to such inspection. The
Transfer Agent reserves the right, however, to exhibit the Shareholder records
to any person whenever it receives an opinion from its counsel that there is a
reasonable likelihood that the Transfer Agent will be held liable for the
failure to exhibit the shareholder records to such person.
15. At the request of an Officer, the Transfer Agent will address and
mail such appropriate notices to shareholders as the Fund may direct.
16. Notwithstanding any of the foregoing provisions of this Agreement,
the Transfer Agent shall be under no duty or obligation to inquire into, and
shall not be liable for:
(a) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of the
Approved Institution or of the Fund, as the case may be, to request such sale or
issuance;
<PAGE>
(b) The legality of a transfer of Shares or of a redemption of
any Shares, the propriety of the amount to be paid therefor, or the authority of
the Approved Institution or of the Fund, as the case may be, to request such
transfer or redemption;
(c) The legality of the declaration of any dividend by the
Fund, or the legality of the issue of any Shares in payment of any stock
dividend; or
(d) The legality of any recapitalization or readjustment of
the Shares.
17. The Transfer Agent shall be entitled to receive and the Fund hereby
agrees to pay to the Transfer Agent for its performance hereunder, including its
performance of the duties and functions set forth in Appendix C hereto, (i) its
reasonable out-of-pocket expenses (including legal expenses and attorney's fees)
incurred in connection with this Agreement and its performance hereunder and
(ii) such compensation as may be agreed upon in writing from time to time by the
Transfer Agent and the Fund.
18. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
ARTICLE IX
TERMINATION
Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than 90 days after the date of receipt of
such notice. In the event such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Directors of the Fund,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement and designating a successor transfer agent or transfer agents. In
the event such notice is given by the Transfer Agent, the Fund shall, on or
before the termination date, deliver to the Transfer Agent a copy of a
resolution of its Board of Directors certified by the Secretary or any Assistant
Secretary designating a successor transfer agent. If the Fund fails to designate
a successor transfer agent and if the Transfer Agent is unable to find a
successor transfer agent, the Fund shall, upon the date specified in the notice
of termination of this Agreement and delivery of the records maintained
hereunder, be deemed to be its own transfer agent and the Transfer Agent shall
thereby be relieved of all duties and responsibilities pursuant to this
Agreement.
<PAGE>
ARTICLE X
MISCELLANEOUS
1. The Fund agrees that, prior to effecting any change in the
Prospectus which would increase or alter the duties and obligations of the
Transfer Agent hereunder, it shall advise the Transfer Agent of such proposed
change at least 30 days prior to the intended date of the same, and shall
proceed with such change only if it shall have received the written consent of
the Transfer Agent thereto.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address first
above written, or at such other place as the Fund may from time to time
designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent and mailed or delivered to it at its office as
indicated on page 1 of this Agreement or at such other place as the Transfer
Agent may from time to time designate in writing.
4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the formality of this
Agreement, and, except for an amendment to Appendix B or Appendix C hereto,
authorized or approved by a resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Transfer Agent.
6. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
7. This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
Attest:
/s/ Christine A. Bivetto By: /s/ Bernadette N. Finn
Attest: REICH & TANG SERVICES INC.
by Reich & Tang Asset Management, Inc.
as General Partner
/s/ Christine A. Bivetto By: /s/ Lorraine C. Hylser
<PAGE>
Schedule A
California Daily Tax Free Income Fund, Inc.
Connecticut Daily Tax Free Income Fund, Inc.
Cortland Trust, Inc.
Daily Dollar International, Ltd.
Daily Tax Free Income Fund, Inc.
Delafield Fund, Inc.
Florida Daily Municipal Income Fund
Institutional Daily Income Fund
Mexico Dollar Income Fund, Ltd.
Michigan Daily Tax Free Income Fund, Inc.
New Jersey Daily Municipal Income Fund, Inc.
New York Daily Tax Free Income Fund, Inc.
North Carolina Daily Municipal Income Fund, Inc.
Pennsylvania Daily Municipal Income Fund
Reich & Tang Equity Fund, Inc.
Short Term Income Fund, Inc.
Tax Exempt Proceeds Fund, Inc.
<PAGE>
ADDENDUM
TO THE
TRANSFER AGENCY AGREEMENT
Addendum ("Addendum") to the Transfer Agency Agreement (the
"TA Agreement"), made as of the 22nd day of April, 1996, between each fund
listed in the Schedule A attached to the TA Agreement having its principal
office and place of business at 600 Fifth Avenue, New York, NY 10020 (each fund
hereinafter referred to as the "Fund"), and Reich & Tang Services L.P., a
Delaware limited partnership, having its principal office and place of business
at 600 Fifth Avenue, New York, New York 10020 (the "Transfer Agent").
W I T N E S S E T H
WHEREAS, all defined terms in the TA Agreement shall have the
same meaning with respect to this Addendum,
WHEREAS, Article V, Section 7 of the TA Agreement authorizes
the Transfer Agent to honor check cashing redemptions as described in the Fund's
Prospectus and to process such redemptions upon receipt of moneys paid to it by
Investors Fiduciary Trust Company, the Funds' custodian (the "Custodian");
WHEREAS, the Transfer Agent has entered into a cash management
agreement (the "Delaware Express Agreement"), a copy of which is attached hereto
as Exhibit A, with Bankers Trust Company, a New York banking corporation
("BTCo") and Bankers Trust (Delaware), a Delaware state bank ("BT Delaware"),
together sometimes referred to hereinafter as "BT", to facilitate check
redemptions by each Fund's shareholders and, in accordance with the terms of the
Delaware Express Agreement, BT serves as the "paying agent";
WHEREAS, pursuant to the Delaware Express Agreement, BT
Delaware has established a zero-balance account (the "Account") for the Transfer
agent on behalf of the Fund;
WHEREAS, pursuant to the Delaware Express Agreement, the
Account is funded from a deposit account maintained by the Transfer Agent on
behalf of the Fund with BTCo (the "Source Account");
WHEREAS, from time to time the Transfer Agent makes payment or
transfer of monies on behalf of the Fund for which there would be, at the close
of business on the date of such payment or transfer, insufficient monies held by
the Transfer
<PAGE>
Agent in the Account or Source Account to allow the completion of
such payment or transfer;
WHEREAS, the Fund acknowledges that it is necessary and
appropriate to authorize the Transfer Agent on the Fund's behalf to request that
the Custodian process certain daily anticipatory redemptions effected in
accordance with such Fund's check cashing privilege with BT,
WHEREAS, the Transfer Agent desires to have available funds
deposited by the Custodian with BT in order to meet such anticipatory redemption
requests upon the exercise of the check cashing privilege,
WHEREAS, from time to time, pursuant to the Express Agreement,
BTCo may permit overdrafts (each an "Overdraft") on the Source Account;
WHEREAS, the purpose of such Overdrafts is to provide
temporary liquidity for redemptions on behalf of the Fund;
That for and in consideration of the mutual promises hereinafter set
forth, the parties hereto covenant and agree as follows:
Notwithstanding the provisions of Article V, Section 7 of the
TA Agreement, the Transfer Agent may honor the payment of redemption requests
through the use of certain anticipatory redemptions for the Fund prior to its
receipt of proper instructions from a redeeming shareholder in accordance with
the terms of the current prospectus and the receipt of the full redemption
proceeds from the Custodian.
The Transfer Agent shall notify the Fund upon receiving
written notification from BT of an overdraft of the Source Account.
The Fund hereby authorizes the Transfer Agent to instruct the
Custodian to advance additional monies immediately to BT to cover any shortage
in the Source Account upon receipt of such written notice of such overdraft from
BT.
The Fund shall notify its Custodian in writing that 1% of
its net assets shall be held by the Custodian in a segregated account solely for
the benefit of BT to cover any potential shortage in the Source Account as a
result of an Overdraft created by BT honoring the check redemption privilege.
The Transfer Agent will deliver to BT, within five
days of the end of each calendar month, certification in a form reasonably
acceptable to BT of (i) the amount held in such segregated account on behalf of
the Fund, (ii) the net assets of
<PAGE>
the Fund, (iii) the average Overdraft activity for the fund for such month and
(iv) evidence that the segregated account is being maintained as required by
this Addendum, each as of the end of such month.
The Fund agrees that upon notice from BT that the
agreed-upon percentage set forth in Section 4 of this Addendum is more or less
than the historical Overdraft rate incurred by the Fund over the previous two
calendar months, the Fund shall immediately direct its Custodian in writing to
withdraw or deposit, as the case may be, sufficient assets from or into, as the
case may be, such segregated account to cause the amount held in such segregated
account to equal the percentage so indicated by the Fund.
Notwithstanding Article X, Section 8 of the TA
Agreement, the provisions of this Addendum to the Transfer Agent may be relied
upon by and shall inure to the benefit of BT, its successors and assigns, and
all rights granted to the Transfer Agent hereunder, shall be exercisable by BT
as if granted directly to BT by this Addendum.
8. In the event of the addition or deletion of any Fund to the
TA Agreement, the Transfer Agent shall notify BT of any such changes prior to
such change and shall provide BT with a re-executed copy of this Addendum, as
may be amended from time to time.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Addendum to be executed in counterpart as of November , 1996.
Attest: Daily Tax Free Income Fund, Inc.
Florida Daily Municipal Income Fund
Short Term Income Fund, Inc.
California Daily Tax Free Income Fund, Inc.
New York Daily Tax Free Income Fund, Inc.
North Carolina Daily Municipal Income Fund, Inc.
Michigan Daily Tax Free Income Fund, Inc.
New Jersey Daily Municipal Income Fund, Inc.
Tax Exempt Proceeds Fund, Inc.
Pennsylvania Daily Municipal Income Fund
Cortland Trust, Inc.
Connecticut Daily Tax Free Income Fund, Inc.
/s/ Christine Bivetto By:/s/ Bernadette N. Finn
Name: Bernadette N. Finn
Title: Secretary
Attest: REICH & TANG SERVICES L.P.
By: REICH & TANG ASSET MANAGEMENT,
INC., as General Partner
/s/ Christine Bivetto By:/s/ Richard DeSanctis
Name: Richard DeSanctis
Title: Treasurer
AGREED AND ACCEPTED:
Bankers Trust Company
By: /s/ John P. Zori
Name: John P. Zori
Title: Vice President
Bankers Trust (Delaware)
By: /s/ Edward A. Reznick
Name: Edward A. Reznick
Title: Vice President & COO
BATTLE FOWLER
A PARTNERHSIP INCLUDING PROFESSIONAL CORPORATION
280 PARK AVENUE
NEW YORK, NY 10017
(212) 856-7000
Cable Address
"Counsellor"
______________
TELEX 127053
______________
Facsimile
(212) 986-5135
August 15, 1991
North Carolina Daily
Municipal Income Fund, Inc.
100 Park Avenue
New York, New York 10017
Gentlemen:
We have acted as counsel to North Carolina Daily Municipal Income Fund,
Inc., a Maryland corporation (the "Fund"), in connection with the preparation
and filing of Registration Statement No. 33-1462 on Form N-1A and all amendments
thereto (the "Registration Statement") covering shares of Common Stock, par
value $.001 per share, of the Fund.
We have examined copies of the Amended Articles of Incorporation and
By-Laws of the Fund, the Registration Statement, and such other corporate
records, proceedings and documents, including the consent of the Board of
Directors and the minutes of the meeting of the Board of Directors of the Fund,
as we have deemed necessary for the purpose of this opinion. We have also
examined such other documents, papers, statutes and authorities as we deemed
necessary to form a basis for the opinion hereinafter expressed. In our
examination of such material, we have assumed the genuineness of all signatures
and the conformity ot original documents of all copies submitted to us. As to
various questions of fact material to such opinion, we have relied upon
statements and certificates of officers and representatives of the Fund and
others.
Based upon the foregoing, we are of the opinion that the shares of Common
Stock, par value $.001 per share, of the Fund, to be issued in accordance with
the terms of the offering, as set forth in the Prospectus and Statment of
Additional Information included as part of the Registration statement, and Iin
accordance with applicable state securities laws, when so issued and paid for,
will constitute validly authorized and legally issued shares of Common Stock,
fully paid and non-assessable.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Registration Statement
under the heading "Federal Income Taxes" in the Prospectus and in the Statment
of Additional Information, and under the heading "Counsel and Auditors" in the
Statement of Additional Information.
Very truly yours,
\s\ Battle Fowler
KENNEDY COVINGTON LOBDELL & HICKMAN
ATTORNEYS AT LAW
3300 NCNB PLAZA
CHARLOTTE, NORTH CAROLINA 28280-8082
TELEPHONE 704/377-6000
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MARCUS T. HICKMAN JOSEPH B.C. KLUTTZ DENNARD LINDSEY TEAGUE BARBARA R. FRITH
CLARENCE W. WALKER JONATHAN A. BARRETT ________ DEAN A. WARREN J. ANDRE HALL
JAMES E. (BILL) WALKER EUGENE C. PRIDGEN JOSEPH R. McCOREY** A. LEE HOGEWOOD III
HENRY C. LOMAX STEPHEN K. RHYNE SOUTH CAROLINA OFFICE WALTER D. FISHER, JR.* CORY HOHNBAUM
EDGAR LOVE III E. ALLEN PRICHARD THE GUARDIAN BUILDING LISA HYMAN LANE* C. CORLEY HOLT
CHARLES V. TOMPKINS, JR. RAYMOND E. OWENS, JR. ONE LAW PLACE - SUITE 301 STEPHEN R. McCRAE, FELICIA A.
JR.** WASHINGTON
GLEN B. HARDYMON HENRY W. FLINT P.O. BOX 11429 ALICE CARMICHAEL RICHEY ________
J. DONNELL LASSITER DAVID H. JONES ROCK HILL, S.C. 29731-1429 H. WILLIAM PALMER, JR. FRANK H. KENNEDY
ROSS J. SMYTH NANCY BLACK NORELLI TELEPHONE 803/327-6171 BOBBY D. HINSON* 1893-1975
A. ZACHARY SMITH III JAMES C. HARDIN III* WILLIAM B. KIRK, JR. HUGH L. LOBDELL
WILLIAM F. DREW, JR. PETER MCLEAN III ________ MICHELLE C. LANDERS 1908-1982
CHARLES O. DuBOSE MYLES E. STANDISH DAVID M. LEDBETTER
RALEIGH A. SHOEMAKER KIRAN H. MEHTA W. HENRY SIPE III** ________
JOHN M. MURCHISON, JR. MICHAEL S. HAWLEY LESLEE K. DAUGHERTY
STEPHEN M.S. COURTLAND JAMES P. COONEY III LEROY P. HUTCHINSON OF COUNSEL
RICHARD D. STEPHENS CAROL NASH NORMAN* FACSIMILES BRIAN C. REEVE W.T. COVINGTON, JR.
F. FINCHER JARRELL BRIAN P. EVANS CHARLOTTE 704/331-7598 RANDALL W. LEE DAVID GRIER MARTIN,
JR.
MAYNARD E. TIPPS JEFFERSON W. BROWN ROCK HILL 803/324-4737 WILLIAM N. HARRIS ________
WAYNE P. HUCKEL LYNN OLIVER WENIGE JENNIFER A. MORRIS
J. NORFLEET PRUDEN III GEORGE C. COVINGTON * LEA A. BAILIS SPEC IAL COUNSEL
WILLIAM C. LIVINGSTON DANIEL L. JOHNSON, WRITER'S DIRECT DIAL ALLISON R. BARNHILL THOMAS R. PAYNE
JR. NUMBER
LEE WEST MOVIUS
EXCEPT AS NOTED ATTORNEYS ADMITTED IN N.C. ONLY 704/331-7438
*ADMITTED IN N.C. AND S.C.
**ADMITTED IN S.C. ONLY
- ------------------------------------------------- --------------------------- ------------------------ ---------------------
</TABLE>
August 14, 1991
North Carolina Daily Municipal
Income Fund, Inc.
c/o Reich & Tang, L.P.
100 Park Avenue
New York, New York 10017
Re: North Carolina Income Taxation
Dear Sirs:
In conjunction with the proposed public offering of shares of the North
Carolina Daily Municipal Income Fund, Inc. (the "Fund"), you have requested that
we provide the opinion set forth below. For purposes of rendering this opinion,
we have examined and relied upon the information about the Fund contained in the
draft Registration Statement for the Fund provided to us (the "Registration
Statement"). Terms which appear in this opinion letter, unless otherwise
indicated, shall have the same meaning as set forth in the North Carolina
General Statutes and regulations thereunder. We have conducted informal
discussions with representatives of the North Carolina Department of Revenue
concerning appropriate interpretations of the statutes and regulations
referenced herein and rely on such discussions in rendering this opinion.
<PAGE>
North Carolina Daily Municipal
Income Fund, Inc.
August 14, 1991
Page 6
DISCUSSION
(1) North Carolina Corporation Income Tax. North Carolina General Statute
("NCGS") ss. 105-130.3 provides with respect to the North Carolina Corporation
Income Tax that the net income or net loss of a corporation subject to North
Carolina income taxation shall be the same as "taxable income" as defined in the
Internal Revenue Code as enacted as of January 1, 1991 (the "Code"), subject to
the adjustments provided in NCGS ss.105-130.5. NCGS ss.105-130.5(a)(4) provides
that the following addition to federal taxable income shall be made in
determining North Carolina net income:
"Interest income earned on bonds and other obligations of other states
or their political subdivisions, less allowable amortization on any
bond acquired on or after January 1, 1963 ...."
NCGS ss.105-130.5(b)(1), (9) provide that the following deductions from federal
taxable income shall be made in determining North Carolina net income:
"(1) Interest upon the obligations of the United States or its
possessions, to the extent included in federal taxable income:
Provided, interest upon the obligations of the United States shall
not be an allowable deduction unless interest upon obligations of
the State of North Carolina or any of its political subdivisions
is exempt from income taxes imposed by the United States....
"(2) With respect to a shareholder of a regulated investment company
the portion of undistributed capital gains of such regulated
investment company included in such shareholder's federal taxable
income and on which the federal tax paid by the regulated
investment company is allowed as a credit or refund to the
shareholder under Section 852 of the Code...."
NCGS ss.105-130.7(3) provides as follows:
"A corporation shall be allowed to deduct such proportionate part of
dividends received by it from a regulated investment company or a real
estate investment trust, as defined in G.S. 105-130.12, as represents
and corresponds to income received by such regulated investment company
or real estate investment trust which would not be taxed by this State
if received directly by the corporation."
<PAGE>
NCGS ss.105-130.12 defines a "regulated investment company" as an organization
which, in the opinion of the Secretary of Revenue of North Carolina qualifies as
a "regulated investment company" under Section 851 of the Code and which files
with the North Carolina Department of Revenue its election to be treated as a
"regulated investment company".
(2) North Carolina Individual Income Tax. For purposes of the North
Carolina Individual Income Tax, NCGS ss.105-134.2 provides that a tax is imposed
upon the North Carolina taxable income of every individual computed at specified
percentages of the taxpayer's North Carolina taxable income. NCGS ss.105-134.5
provides that for residents of North Carolina the term "North Carolina taxable
income" means taxable income as calculated under the Code with certain
adjustments. NCGS ss.105-134.6(b)(1), (2) provide that the following deductions
from taxable income shall be made in calculating North Carolina taxable income,
to the extent such item is included in gross income:
"(1) Interest upon the obligations of (i) the United States or its
possessions, (ii) this State or a political subdivision of this State, or
(iii) a nonprofit educational institution organized or chartered under
the laws of this State....
"(2) Interest upon obligations and gain from the disposition of
obligations to the extent the interest or gain is exempt from tax under
the laws of this State...."
NCGS ss.105-134.6 provides that the following addition to taxable income shall
be made in calculating North Carolina taxable income, to the extent such item is
not included in gross income:
"Interest upon the obligations of states, other than this State,
and their political subdivisions...."
North Carolina Administrative Code Title 17, Subchapter 6B, Section .4101
provides as follows:
"(1) Distributions received from regulated investment companies
(mutual funds) by a shareholder who was a North Carolina resident must be
included in his North Carolina taxable income to the same extent included
in his Federal taxable income; except, an amount not included in his
Federal gross income which was determined to be an "exempt interest
dividend" for Federal income tax purposes, must be added to Federal
taxable income to the extent it represents interest on obligations of
states other than North Carolina and their political subdivisions. "(1)
<PAGE>
"(2) Distributions from a regulated investment company other than
"capital gain distributions" and "exempt interest dividends" are included
in Federal taxable income in the same manner as distributions of other
corporations. Distributions from earnings and profits are ordinary
dividends (taxable dividends) unless the mutual fund notifies the
taxpayer to the contrary.
"(3) Capital gain distributions are paid by mutual funds from
their net realized long-term capital gains. The individual receiving a
capital gain distribution must report the distribution as a long-term
capital gain on his Federal income tax return."
North Carolina Administrative Code Title 17, Subchapter 6B, Section .4102
provides further as follows:
"(4) A mutual fund is qualified to pay exempt interest dividends
only if at the close of each quarter of its taxable year at least 50
percent of the value of the total assets of the company consist of state
and local bonds, the interest from which is exempt from Federal income
tax and certain other obligations on which the interest is exempt from
Federal income tax under provisions of Federal law other than the
Internal Revenue Code, as those provisions of the law were in effect on
January 6, 1983. A mutual fund paying exempt interest dividends to its
shareholders must send its shareholders a statement within 60 days after
the close of the taxable year showing the amount of exempt interest
dividends. The exempt interest dividends are not required to be included
in Federal taxable income.
"(5) Since interest from states other than North Carolina and
their political subdivisions is required to be added to Federal taxable
income in calculating North Carolina taxable income, the exempt interest
dividends received from mutual funds must be added to Federal taxable
income to the extent such dividends do not represent interest from bonds
issued by North Carolina and political subdivisions of North Carolina
provided the mutual fund furnishes a supporting statement to the
taxpayer. In the absence of such statement, the total amount designated
as exempt interest must be added to Federal taxable income in computing
the taxpayer's North Carolina taxable income."
<PAGE>
North Carolina Administrative Code Title 17, Subchapter 6B, Section .4103
provides further as follows:
"(6) Interest received in the form of dividends from regulated
investment companies (mutual funds, investment funds, etc.) is deductible
from an individual's federal taxable income to the extent the
distributions represent interest on direct obligations of the United
States Government. The fund must furnish the taxpayer a statement
verifying the amount of interest paid to him which accrued from direct
obligations of the United States Government. Interest earned on
obligations that are merely backed or guaranteed by the United States
Government will not qualify for the deduction. Further, this deduction
does not apply to distributions which represent gain from the sale or
other disposition of the securities nor to interest paid in connection
with repurchase agreements issued by banks and savings and loan
associations.
"(7) The taxpayer may not deduct mutual fund dividends on the
basis of a percentage of investments held by the fund (i.e., a fund has
75 percent of its investment in United States Treasury Notes). The
statement to support the deduction must specify the amount received by
the taxpayer which represents interests on direct obligations of the
United States Government.
"(8) The procedure in this Rule will also apply with respect to
interest on obligations of the State of North Carolina and any of its
political subdivisions to the extent included in federal taxable income.
"(9) This Rule applies to taxable years beginning on or after
January 1, 1989."
A representative of the North Carolina Department of Revenue has indicated in
informal discussions that the term "direct obligations of the United States
Government" includes obligations of Puerto Rico, the Virgin Islands and United
States possessions. North Carolina Administrative Code Title 17, Subchapter 6B,
Section .4104 provides further as follows:
"The portion of distributions from a regulated investment company that
represents capital gain is reportable on the federal income tax return
as capital gain income and not dividend income. Therefore, under G.S.
105-134.6(b)(2) capital gains distributable to a shareholder who is a
resident of North Carolina and attributable to the sale of an
obligation the profit from which is exempt by North Carolina statute is
deductible from federal taxable income in determining the North
Carolina taxable income of an individual, trust and estate."
<PAGE>
OPINION
Based upon and subject to the foregoing and provided that the Fund has
filed with the North Carolina Department of Revenue its election to be treated
as a "regulated investment company," otherwise has complied with applicable
North Carolina laws and in the opinion of the Secretary of Revenue of North
Carolina qualifies as a "regulated investment company," it is our opinion that:
(1) "exempt interest dividends" received from the Fund need not be
included in North Carolina taxable income by individual or corporate
shareholders of the Fund subject to North Carolina income taxation to the
extent such dividends represent interest from obligations issued by North
Carolina and political subdivisions of North Carolina;
(2) for such purposes, dividends with respect to interest on
obligations from states other than North Carolina and its political
subdivisions are required to be added to federal taxable income in
calculating North Carolina taxable income;
(3) the portion of distributions from the Fund that represents
capital gain is reportable for North Carolina income tax purposes as
capital gain income and not dividend income; and
(4) dividends correctly identified by the Fund as derived from
obligations of Puerto Rico and the Virgin Islands, as well as other types
of obligations that North Carolina is prohibited from taxing under the
Constitution or laws of the United States of America or the Constitution
or laws of North Carolina should be exempt from North Carolina income
taxation provided the Fund complies with North Carolina laws.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, and amendments thereto, filed in accordance with the
securities laws of the several states in which shares of the Fund are offered,
and we further consent to the use of our name in such Registration Statement.
Kennedy Covington Lobdell & Hickman
EXHIBIT j
McGLADREY & PULLEN, L.L.P. RSM
-------------------------- ---
Certified Public Accountants & Consultants international
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated September 25, 1998, on the
financial statements referred to therein, in Post-Effective Amendment No. 10 to
the Registration Statement on Form N1-A, File No. 33-41462 of North Carolina
Daily Municipal Income Fund, Inc. as filed with the Securities and Exchange
Commission.
We also consent to the reference to our Firm in the Prospectus under the
caption "Financial Highlights" and in the Statement of Additional Information
under the captions "Counsel and Auditors" and "Financial Statements".
\s\ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 8, 1999
August 12, 1991
Board of Directors of North
Carolina Daily Municipal
Income Fund, Inc.
Gentlemen:
We hereby subscribe for 100,000 shares of the Common Stock, $.001 par value
per shares, of North Carolina Daily Municipal Income Fund, Inc., a Maryland
corporation (the "Corporation"), at $1.00 per share for an aggregate purchase
price of $100,000. Our payment in full is confirmed.
We hereby represent and agree that we are purchasing these shares of stock
for investment purposes, for our own account and risk and not with a view to any
sale, division or other distribution thereof within the meaning of the
Securities Act of 1933 as amended, nor with any present intention of
distributing or selling such shares. We further agree that if any of such shares
are redeemed during the period that the deferred organizational expenses of the
Corporation are being amortized, we will reimburse the Corporation the then
unamortized organizational expenses in the same ratio as the number of shares
redeemed bears to the number of such share held at the time of redemption.
Very truly yours,
REICH & TANG L.P.
By: REICH & TANG L.P.,
General Partner
By:________________________
Confirmed and Accepted:
NORTH CAROLINA DAILY MUNICIPAL
INCOME FUND, INC.
By:___________________________
NORTH CAROLINA DAILY TAX FREE INCOME FUND, INC.
EVERGREEN CLASS OF SHARES
Distribution and Service Plan Pursuant to Rule
12b-1 Under the Investment Company Act of 1940
The Distribution and Service Plan (the "Plan") is adopted by
North Carolina Daily Tax Free Income Fund, Inc. (the "Fund"), on behalf of the
Evergreen Class of Shares of the Fund, in accordance with the provisions of Rule
12b-1 under the Investment Company Act of 1940 (the "Act").
The Plan
1. The Fund and Reich & Tang Distributors, Inc. (the
"Distributor"), have entered into a Distribution Agreement, in a form
satisfactory to the Fund's Board of Directors, under which the Distributor will
act as distributor of the Fund's Evergreen Class of Shares. Pursuant to the
Distribution Agreement with respect to the Evergreen Class of Shares, the
Distributor, as agent of the Fund, will solicit orders for the purchase of the
Fund's Evergreen Class of Shares, provided that any subscriptions and orders for
the purchase of the Fund's Evergreen Class of Shares will not be binding on the
Fund until accepted by the Fund as principal.
2. The Fund and the Distributor have entered into a
Shareholder Servicing Agreement with respect to the Evergreen Class of Shares of
the Fund, in a form satisfactory to the Fund's Board of Directors, which
provides that the Distributor will be paid a service fee for providing or for
arranging for others to
<PAGE>
provide all personal shareholder servicing and related maintenance of
shareholder account functions not performed by us or our transfer agent.
3. The Manager may make payments from time to time from its
own resources, which may include the management fees and administrative services
fees received by the Manager from the Fund and from other companies, and past
profits for the following purposes:
(i) to pay the costs of, and to compensate others, including
organizations whose customers or clients are Evergreen Class
Shareholders of the Fund ("Participating Organizations"), for
performing personal shareholder servicing and related maintenance of
shareholder account functions on behalf of the Fund;
(ii) to compensate Participating Organizations for providing
assistance in distributing the Fund's Evergreen Class of Shares; and
(iii) to pay the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including
salaries and/or commissions of sales personnel of the Distributor and
other persons, in connection with the distribution of the Fund's
Evergreen Class of Shares.
<PAGE>
The Distributor may also make payments from time to time from its own resources,
which may include the service fee and past profits for the purpose enumerated in
(i) above. Further, the Distributor may determine the amount of such payments
made pursuant to the Plan, provided that such payments will not increase the
amount which the Fund is required to pay to (1) the Manager for any fiscal year
under the Investment Management Contract or the Administrative Services Contract
in effect for that year or otherwise or (2) to the Distributor under the
Shareholder Servicing Agreement in effect for that year or otherwise. The
Investment Management Contract will also require the Manager to reimburse the
Fund for any amounts by which the Fund's annual operating expenses, including
distribution expenses, exceed in the aggregate in any fiscal year the limits
prescribed by any state in which the Fund's shares are qualified for sale.
4. The Fund will pay for (i) telecommunications expenses,
including the cost of dedicated lines and CRT terminals, incurred by the
Distributor in carrying out its obligations under the Shareholder Servicing
Agreement with respect to the Evergreen Class of Shares of the Fund and (ii)
preparing, printing and delivering the Fund's prospectus to existing
shareholders of the Fund and preparing and printing subscription application
forms for shareholder accounts.
5. Payments by the Distributor or Manager to Participating
Organizations as set forth herein are subject to
<PAGE>
compliance by them with the terms of written agreements in a form satisfactory
to the Fund's Board of Directors to be entered into between the Distributor and
the Participating Organizations.
6. The Fund and the Distributor will prepare and furnish to
the Fund's Board of Directors, at least quarterly, written reports setting forth
all amounts expended for servicing and distribution purposes by the Fund, the
Distributor and the Manager, pursuant to the Plan and identifying the servicing
and distribution activities for which such expenditures were made.
7. The Plan became effective upon approval by (i) a majority
of the outstanding voting securities of the Evergreen Class of Shares of the
Fund (as defined in the Act), and (ii) a majority of the Board of Directors of
the Fund, including a majority of the Directors who are not interested persons
(as defined in the Act) of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement entered into in
connection with the Plan, pursuant to a vote cast in person at a meeting called
for the purpose of voting on the approval of the Plan.
8. The Plan will remain in effect until ______________ unless
earlier terminated in accordance with its terms, and thereafter may continue in
effect for successive annual periods if approved each year in the manner
described in clause (ii) of paragraph 7 hereof.
9. The Plan may be amended at any time with the approval of
the Board of Directors of the Fund, provided that (i)
<PAGE>
any material amendments of the terms of the Plan will be effective only upon
approval as provided in clause (ii) of paragraph 7 hereof, and (ii) any
amendment which increases materially the amount which may be spent by the Fund
pursuant to the Plan will be effective only upon the additional approval as
provided in clause (i) of paragraph 7 hereof (with each Class of the Fund voting
separately).
10. The Plan may be terminated without penalty at any time (i)
by a vote of the majority of the entire Board of Directors of the Fund and by a
vote of a majority of the Directors of the Fund who are not interested persons
(as defined in the Act) of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreement related to the Plan,
or (ii) by a vote of a majority of the outstanding voting securities of the Fund
(with each Class of the Fund voting separately) (as defined in the Act).
DISTRIBUTION AGREEMENT
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
(the "Fund")
EVERGREEN SHARES
600 Fifth Avenue
New York, New York 10020
________________, 1999
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, New York 10020
Ladies and Gentlemen:
We hereby confirm our agreement with you as follows:
1. In consideration of the agreements on your part herein
contained and of the payment by us to you of a fee of $1 per year and on the
terms and conditions set forth herein, on behalf of our Fund, we have agreed
that you shall be, for the period of this agreement, a distributor, as our
agent, for the unsold portion of such number of shares of our common stock,
$.001 par value per share, as may be effectively registered from time to time
under the Securities Act of 1933, as amended (the "1933 Act"). This agreement is
being entered into pursuant to the Distribution and Service Plan (the "Plan")
adopted by us in accordance with Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act").
2. We hereby agree that you will act as our agent, and hereby
appoint you our agent, to offer, and to solicit offers to subscribe to, the
unsold balance of shares of our common stock as shall then be effectively
registered under the Act. All subscriptions for shares of our common stock
obtained by you shall be directed to us for acceptance and shall not be binding
on us until accepted by us. You shall have no authority to make binding
subscriptions on our behalf. We reserve the right to sell shares of our common
stock through other distributors or directly to investors through subscriptions
received by us at our principal office in New York, New York. The right given to
you under this agreement shall not apply to shares of our common stock issued in
connection with (a) the merger or consolidation of any other investment company
with us, (b) our acquisition by purchase or otherwise of all or substantially
all of the assets or stock of any other investment company, or (c) the
reinvestment in shares of our common stock by our stockholders of dividends or
<PAGE>
other distributions or any other offering by us of securities to our
stockholders.
3. You will use your best efforts to obtain subscriptions to
shares of our common stock upon the terms and conditions contained herein and in
our Prospectus, as in effect from time to time. You will send to us promptly all
subscriptions placed with you. We shall furnish you from time to time, for use
in connection with the offering of shares of our common stock, such other
information with respect to us and shares of our common stock as you may
reasonably request. We shall supply you with such copies of our Registration
Statement and Prospectus, as in effect from time to time, as you may request.
Except as we may authorize in writing, you are not authorized to give any
information or to make any representation that is not contained in the
Registration Statement or Prospectus, as then in effect. You may use employees,
agents and other persons, at your cost and expense, to assist you in carrying
out your obligations hereunder, but no such employee, agent or other person
shall be deemed to be our agent or have any rights under this agreement. You may
sell our shares to or through qualified brokers, dealers and financial
institutions under selling and servicing agreements provided that no dealer,
financial institution or other person shall be appointed or authorized to act as
our agent without our written consent.
With respect to the Evergreen Class of Shares of the Fund, you
will arrange for organizations whose customers or clients are shareholders of
our corporation ("Participating Organizations") to enter into agreements with
you for the performance of shareholder servicing and related administrative
functions not performed by you or the Transfer Agent. Pursuant to our
Shareholder Servicing Agreement with you with respect to the Evergreen Class of
Shares of the Fund, you may make payments to Participating Organizations for
performing shareholder servicing and related administrative functions with
respect to the Evergreen Class of Shares. Such payments will be made only
pursuant to written agreements approved in form and substance by our Board of
Directors to be entered into by you and the Participating Organizations. It is
recognized that we shall have no obligation or liability to you or any
Participating Organization for any such payments under the agreements with
Participating Organizations. Our obligation is solely to make payments to you
under the Shareholder Servicing Agreement (with respect to the Evergreen Class
of Shares) and to the Manager under the Investment Management Contract and the
Administrative Services Contract. All sales of our shares effected through you
will be made in compliance with all applicable federal securities laws and
regulations and the Constitution, rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD").
2
<PAGE>
4. We reserve the right to suspend the offering of shares of
our common stock at any time, in the absolute discretion of our Board of
Directors, and upon notice of such suspension you shall cease to offer shares of
our common stock hereunder.
5. Both of us will cooperate with each other in taking such
action as may be necessary to qualify shares of our common stock for sale under
the securities laws of such states as we may designate, provided, that you shall
not be required to register as a broker-dealer or file a consent to service of
process in any such state where you are not now so registered. Pursuant to the
Investment Management Contract in effect between us and the Manager, we will pay
all fees and expenses of registering shares of our common stock under the Act
and of qualification of shares of our common stock, and to the extent necessary,
our qualification under applicable state securities laws. You will pay all
expenses relating to your broker-dealer qualification.
6. We represent to you that our Registration Statement and
Prospectus have been carefully prepared to date in conformity with the
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Securities and Exchange Commission (the "SEC") thereunder. We represent and
warrant to you, as of the date hereof, that our Registration Statement and
Prospectus contain all statements required to be stated therein in accordance
with the 1933 Act and the 1940 Act and the SEC's rules and regulations
thereunder; that all statements of fact contained therein are or will be true
and correct at the time indicated or the effective date as the case may be; and
that neither our Registration Statement nor our Prospectus, when they shall
become effective or be authorized for use, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of shares
of our common stock. We will from time to time file such amendment or amendments
to our Registration Statement and Prospectus as, in the light of future
development, shall, in the opinion of our counsel, be necessary in order to have
our Registration Statement and Prospectus at all times contain all material
facts required to be stated therein or necessary to make any statements therein
not misleading to a purchaser of shares of our common stock. If we shall not
file such amendment or amendments within fifteen days after our receipt of a
written request from you to do so, you may, at your option, terminate this
agreement immediately. We will not file any amendment to our Registration
Statement or Prospectus without giving you reasonable notice thereof in advance;
provided, however, that nothing in this agreement shall in any way limit our
right to file such amendments to our Registration Statement or Prospectus, of
whatever character, as we may deem advisable, such right being in all respects
absolute
3
<PAGE>
and unconditional. We represent and warrant to you that any amendment to our
Registration Statement or Prospectus hereafter filed by us will be carefully
prepared in conformity within the requirements of the 1933 Act and the 1940 Act
and the SEC's rules and regulations thereunder and will, when it becomes
effective, contain all statements required to be stated therein in accordance
with the 1933 Act and the 1940 Act and the SEC's rules and regulations
thereunder; that all statements of fact contained therein will, when the same
shall become effective, be true and correct; and that no such amendment, when it
becomes effective, will include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of our shares.
7. We agree to indemnify, defend and hold you, and any person
who controls you within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which you or
any such controlling person may incur, under the 1933 Act or the 1940 Act, or
under common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in our Registration Statement or
Prospectus in effect from time to time or arising out of or based upon any
alleged omission to state a material fact required to be stated in either of
them or necessary to make the statements in either of them not misleading;
provided, however, that in no event shall anything herein contained be so
construed as to protect you against any liability to us or our security holders
to which you would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of your duties, or by reason of
your reckless disregard of your obligations and duties under this agreement. Our
agreement to indemnify you and any such controlling person is expressly
conditioned upon our being notified of any action brought against you or any
such controlling person, such notification to be given by letter or by telegram
addressed to us at our principal office in New York, New York, and sent to us by
the person against whom such action is brought within ten days after the summons
or other first legal process shall have been served. The failure so to notify us
of any such action shall not relieve us from any liability which we may have to
the person against whom such action is brought other than on account of our
indemnity agreement contained in this paragraph 7. We will be entitled to assume
the defense of any suit brought to enforce any such claim, and to retain counsel
of good standing chosen by us and approved by you. In the event we do elect to
assume the defense of any such suit and retain counsel of good standing approved
by you, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case we do
not
4
<PAGE>
elect to assume the defense of any such suit, or in case you, in good faith, do
not approve of counsel chosen by us, we will reimburse you or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by you or them. Our indemnification
agreement contained in this paragraph 7 and our representations and warranties
in this agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of you or any controlling person and shall
survive the sale of any shares of our common stock made pursuant to
subscriptions obtained by you. This agreement of indemnity will inure
exclusively to your benefit, to the benefit of your successors and assigns, and
to the benefit of any of your controlling persons and their successors and
assigns. We agree promptly to notify you of the commencement of any litigation
or proceeding against us in connection with the issue and sale of any shares of
our common stock.
8. You agree to indemnify, defend and hold us, our several
officers and directors, and any person who controls us within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any reasonable counsel fees
incurred in connection therewith) which we, our officers or directors, or any
such controlling person may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement or Prospectus as in effect from time to time, or shall arise out of or
be based upon any alleged omission to state a material fact in connection with
such information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. Your agreement
to indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process shall
have been served. You shall have a right to control the defense of such action,
with counsel of your own choosing, satisfactory to us, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event you and we, our officers or directors or such controlling person shall
each have the right to participate in the defense or preparation of the defense
of any such action. The failure so to notify you of any such action shall not
relieve
5
<PAGE>
you from any liability which you may have to us, to our officers or directors,
or to such controlling person other than on account of your indemnity agreement
contained in this paragraph 8.
9. We agree to advise you immediately:
a. of any request by the SEC for amendments to our
Registration Statement or Prospectus or for additional information,
b. of the issuance by the SEC of any stop order suspending
the effectiveness of our Registration Statement or Prospectus or the initiation
of any proceedings for that purpose,
c. of the happening of any material event which makes untrue
any statement made in our Registration Statement or Prospectus or which requires
the making of a change in either of them in order to make the statements therein
not misleading, and
d. of all action of the SEC with respect to any amendments
to our Registration Statement or Prospectus.
10. This Agreement (which was re-executed on the date hereof)
became effective on __________ and will remain in effect thereafter for
successive twelve-month periods (computed from each ____________), provided that
such continuation is specifically approved at least annually by vote of our
Board of Directors and of a majority of those of our directors who are not
interested persons (as defined in the 1940 Act) and have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan, cast in person at a meeting called for the purpose of voting on this
agreement. This agreement may be terminated at any time, without the payment of
any penalty, (a) on sixty days' written notice to you (i) by vote of a majority
of our entire Board of Directors, and by a vote of a majority of our Directors
who are not interested persons (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, or (ii) by vote of a majority of our outstanding
voting securities, as defined in the Act, or (b) by you on sixty days' written
notice to us.
11. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the SEC thereunder.
6
<PAGE>
12. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees, officers or directors, who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the 1940 Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
NORTH CAROLINA DAILY MUNICIPAL
INCOME FUND, INC.
EVERGREEN CLASS OF SHARES
By
Accepted: _________________, 1999
REICH & TANG DISTRIBUTORS, INC.
By: ____________________________
7
SHAREHOLDER SERVICING
AGREEMENT
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
(the "Fund")
EVERGREEN CLASS OF SHARES
600 Fifth Avenue
New York, New York 10020
, 1999
Reich & Tang Distributors, Inc. ("Distributor")
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and
Service Plan, as amended, adopted by us in accordance with Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended (the "Act"), to
provide the services listed below on behalf of the Evergreen Class of Shares of
the Fund. You will perform, or arrange for others including organizations whose
customers or clients are shareholders of our corporation (the "Participating
Organizations") to perform, all personal shareholder servicing and related
maintenance of shareholder account functions ("Shareholder Services") not
performed by us or our transfer agent.
2. You will be responsible for the payment of all expenses
incurred by you in rendering the foregoing services, except that we will pay for
(i) telecommunications expenses, including the cost of dedicated lines and CRT
terminals, incurred by the Distributor and Participating Organizations in
rendering such services to the Evergreen Class of Shareholders, and (ii)
preparing, printing and delivering our prospectus to existing shareholders and
preparing and printing subscription application forms for shareholder accounts.
3. You may make payments from time to time from your own
resources, including the fees payable hereunder and past profits to compensate
Participating Organizations, for providing Shareholder Services to the Evergreen
Class of Shareholders of
<PAGE>
the Fund. Payments to Participating Organizations to compensate them for
providing Shareholder Services are subject to compliance by them with the terms
of written agreements satisfactory to our Board of Directors to be entered into
between the Distributor and the Participating Organizations. The Distributor
will in its sole discretion determine the amount of any payments made by the
Distributor pursuant to this Agreement, provided, however, that no such payment
will increase the amount which we are required to pay either to the Distributor
under this Agreement or to the Manager under the Investment Management Contract,
the Administrative Services Agreement, or otherwise.
4. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. In consideration of your performance, the Fund will pay you
a service fee, as defined by Article III, Section 26(b)(9) of the Rules of Fair
Practice, as amended, of the National Association of Securities Dealers, Inc. at
the annual rate of one quarter of one percent (0.25%) of the Evergreen Class of
Shares average daily net assets. Your fee will be accrued by us daily, and will
be payable on the last day of each calendar month for services performed
hereunder during that month or on such other schedule as you shall request of us
in writing. You may waive your right to any fee to which you are entitled
hereunder, provided such waiver is delivered to us in writing.
6. This Agreement (which was re-executed on the date hereof)
became effective on ___________ and will remain in effect thereafter for
successive twelve-month periods (computed from each ___________), provided that
such continuation is specifically approved at least annually by vote of our
Board of Directors and of a majority of those of our directors who are not
interested persons (as defined in the Act) and have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan, cast in person at a meeting called for the purpose of voting on this
Agreement. This Agreement may be terminated at any time, without the payment of
any penalty, (a) on sixty days' written notice to you (i) by vote of a majority
of our entire Board of Directors, and by a vote of a majority of our Directors
who are not interested persons (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan, or (ii) by vote of a majority of the outstanding
2
<PAGE>
voting securities of the Fund's Evergreen Class of shares, as defined in the
Act, or (b) by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission
thereunder.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees, officers or directors, who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
NORTH CAROLINA DAILY MUNICIPAL
INCOME FUND, INC.
EVERGREEN CLASS OF SHARES
By:
ACCEPTED: , 1999
REICH & TANG DISTRIBUTORS, INC.
By:
3
ADMINISTRATIVE SERVICES CONTRACT
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
the "Fund"
New York, New York
December 1, 1995
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10022
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and
reinvesting our assets in securities of the type, and in accordance with the
limitations, specified in our Amended Articles of Incorporation, By-Laws and
Registration Statement filed with the Securities and Exchange Commission under
the Investment Company Act of 1940 (the "1940 Act") and the Securities Act of
1933, including the Prospectus forming a part thereof (the "Registration
Statement"), all as from time to time in effect, and in such manner and to such
extent as may from time to time be authorized by our Board of Directors. We
enclose copies of the documents listed above and will furnish you such
amendments thereto as may be made from time to time.
2. a. We hereby employ you as our administrator (the
"Administrator") to provide all management and administrative services
reasonably necessary for our operation, other than those services you provide to
us pursuant to the Investment Management Contract. The services to be provided
by you shall include but not be limited to those enumerated on Exhibit A hereto.
The personnel providing these services may be your employees or employees of
your affiliates or of other organizations. You shall make periodic reports to
the Fund's Board of Directors in the performance of your obligations under this
Agreement and the execution of your duties hereunder is subject to the general
control of the Board of Directors.
b. It is understood that you will from time to time employ,
subcontract with or otherwise associate with yourself, entirely at your expense,
such persons as you believe to be particularly fitted to assist you in the
execution of your duties hereunder. While this agreement is in effect, you or
persons affiliated with you, other than us ("your affiliates"),
<PAGE>
will provide persons satisfactory to our Board of Directors to be elected or
appointed officers or employees of the Fund. These shall be a president, a
secretary, a treasurer, and such additional officers and employees as may
reasonably be necessary for the conduct of our business.
c. You or your affiliates will also provide persons, who may
be our officers, to (i) supervise the performance of bookkeeping and related
services and calculation of net asset value and yield by our bookkeeping agent
and (ii) prepare reports to and the filings with regulatory authorities, and
(iii) perform such clerical, other office and shareholder services for us as we
may from time to time request of you. Such personnel may be your employees or
employees of your affiliates or of other organizations. Notwithstanding the
preceding, you shall not be required to perform any accounting services not
expressly provided for herein.
d. You or your affiliates will also furnish us such
administrative and management supervision and assistance and such office
facilities as you may believe appropriate or as we may reasonably request
subject to the requirements of any regulatory authority to which you may be
subject. You or your affiliates will also pay the expenses of promoting the sale
of our shares (other than the costs of preparing, printing and filing our
Registration Statement, printing copies of the prospectus contained therein and
complying with other applicable regulatory requirements), except to the extent
that we are permitted to bear such expenses under a plan adopted pursuant to
Rule 12b-1 under the 1940 Act or a similar rule.
3. We will expect of you, and you will give us the benefit of,
your best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our security
holders by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your reckless disregard of
your obligations and duties hereunder.
4. In consideration of the foregoing we will pay you a fee of
.21% of the Fund's average daily net assets. Your fee will be accrued by us
daily, and will be payable on the last day of each calendar month for services
performed hereunder during
2
<PAGE>
that month or on such other schedule as we may agree in writing. You may use any
portion of this fee for distribution of our shares, or for making servicing
payments to organizations whose customers or clients are our shareholders. You
may waive your right to any fee to which you are entitled hereunder, provided
such waiver is delivered to us in writing.
5. This Agreement will become effective on the date hereof
and shall continue in effect until November 30, 1996 and thereafter for
successive twelve-month periods (computed from each Dec. 1st), provided that
such continuation is specifically approved at least annually by our Board of
Directors and by a majority of those of our directors who are neither party to
this Agreement nor, other than by their service as directors of the corporation,
interested persons, as defined in the 1940 Act, of any such person who is party
to this Agreement. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of a majority of our outstanding voting
securities, as defined in the 1940 Act, or by a vote of a majority of our entire
Board of Directors on sixty days' written notice to you, or by you on sixty
days' written notice to us.
6. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission.
7. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
8. This Agreement shall be construed in accordance with the
laws of the State of New York and the applicable provisions of the 1940 Act.
3
<PAGE>
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
By: \s\ Bernadette N. Finn
ACCEPTED: December 1, 1995
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT, INC., General Partner
By: \s\ Lorraine C. Hysler
4
<PAGE>
Exhibit A
Administration Services To Be Performed
By Reich & Tang Asset Management L.P.
Administration Services
1. In conjunction with Fund counsel, prepare and file all Post-Effective
Amendments to the Registration Statement, all state and federal tax
returns and all other required regulatory filings.
2. In conjunction with Fund counsel, prepare and file all Blue Sky
filings, reports and renewals.
3. Coordinate, but not pay for, required Fidelity Bond and Directors and
Officers Insurance (if any) and monitor their compliance with
Investment Company Act.
4. Coordinate the preparation and distribution of all materials for
Directors, including the agenda for meetings and all exhibits thereto,
and actual and projected quarterly summaries.
5. Coordinate the activities of the Fund's Manager, Custodian, Legal
Counsel and Independent Accountants.
6. Prepare and file all periodic reports to shareholders and proxies and
provide support for shareholder meetings.
7. Monitor daily and periodic compliance with respect to all requirements
and restrictions of the Investment Company Act, the Internal Revenue
Code and the Prospectus.
8. Monitor daily the Fund's bookkeeping services agent's calculation of
all income and expense accruals, sales and redemptions of capital
shares outstanding.
9. Evaluate expenses, project future expenses, and process payments of
expenses.
10. Monitor and evaluate performance of accounting and accounting related
services by Fund's bookkeeping services agent. Nothing herein shall be
construed to require you to perform any accounting services not
expressly provided for in this Agreement.
REICH & TANG ASSET MANAGEMENT, L.P.
AMENDMENT NO. 4
TO
RULE 18f-3 MULTI-CLASS PLAN
July __ , 1999
I. Introduction.
Pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), the following sets forth the method for
allocating fees and expenses among each class of shares of the underlying
investment funds sponsored by Reich & Tang Asset Management, L.P. as set forth
in Exhibit A (each Fund referred to herein as the "Company") that issues
multiple classes of shares (the "Multi-Class Funds"). In addition, this Rule
18f-3 Multi-Class Plan (the "Plan") sets forth the shareholder servicing
arrangements, distribution arrangements, conversion features, exchange
privileges and other shareholder services of each class of shares in the
Multi-Class Funds.
The Company is an open-end series investment company
registered under the 1940 Act and the shares of which are registered on Form
N-1A under the Securities Act of 1933 (see Exhibit A for each Company's
registration number). Upon the effective date of this Plan, the Company hereby
elects to offer multiple classes of shares in the Multi-Class Funds pursuant to
the provisions of Rule 18f-3 and this Plan. This Plan does not make any material
changes to the class arrangements and expense allocations previously approved by
the Board of Directors of the Company pursuant to the exemptive order issued by
the Securities and Exchange Commission to California Daily Tax Free Income Fund,
et al. under Section 6(c) of the 1940 Act on November 18, 1992 (1940 Act Release
No. 812-7852).
The Company currently consists of the following separate
Funds:
California Daily Tax Free Income Fund, Inc., Connecticut Daily
Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Florida Daily
Municipal Income Fund, Georgia Daily Municipal Income Fund, Inc., Kentucky Daily
Municipal Income Fund, Inc., Institutional Daily Income Fund, Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Short Term Income Fund, Inc., Tennessee Daily Municipal Income Fund, Inc.,
Texas Daily Municipal Income Fund, Inc., and Virginia Daily Municipal Income
Fund, Inc.
<PAGE>
This Amendment No. 4 serves to create: (i) an Evergreen
Class of Shares of the Multi-Class Funds for the purpose of accommodating
clients of Evergreen Funds; (ii) a Chase Vista Select Class of Shares for the
purpose of accommodating clients of Chase Vista Funds; and (iii) a Pinnacle
Class of Shares for the purpose of accommodating clients of Cowles, Sabol & Co.
Amendment No.3 served to create a Total Resource Account ("TRA") Class of Shares
of the Multi-Class Funds for the purpose of accommodating clients and customers
of MetLife Securities, Inc. Amendment No. 2 served to include the following
Funds in the definition of Multi-Class Funds: Georgia Daily Municipal Income
Fund, Inc., Kentucky Daily Municipal Income Fund, Inc., Tennessee Daily
Municipal Income Fund, Inc. and Texas Daily Municipal Income Fund, Inc.
Amendment No. 1 served to create a Class C of shares of the Multi-Class Funds
for the purpose of accommodating clients and customers of Schroeder & Co.
("Schroeder"). All investors in Class C shares are clients of Schroeder whose
shares are maintained in omnibus account on the books of each Multi-Class Fund
with all sub-accounting performed by Schroeder.
II. Allocation of Expenses.
Pursuant to Rule 18f-3 under the 1940 Act, the Company shall
allocate to each class of shares in a Multi-Class Fund (i) any fees and expenses
incurred by the Company in connection with the distribution of such class of
shares under a distribution and service plan adopted for such class of shares
pursuant to Rule 12b-1, and (ii) any fees and expenses incurred by the Company
under a shareholder servicing plan in connection with the provision of
shareholder services to the holders of such class of shares. In addition,
pursuant to Rule 18f-3, the Company may allocate the following fees and expenses
to a particular class of shares in a single Multi-Class Fund:
(i) transfer agent fees and related expenses
identified by the transfer agent as being
attributable to such class of shares;
(ii) printing and postage expenses related to preparing
and distributing materials such as shareholder
reports, prospectuses, reports, and proxies to
current shareholder of such class of shares or to
regulatory agencies with respect to such class of
shares;
(iii) blue sky registration or qualification fees
incurred by such class of shares;
(iv) Securities and Exchange Commission registration
fees incurred by such class of shares;
(v) the expense of administrative personnel and
services (including, but not limited to, those of
a fund accountant, [custodian]1 or
- --------
1. Rule 18f-3 requires that services related to the management of the
portfolio's assets, such as custodial fees, be borne by the fund and
not by class.
<PAGE>
divided paying agent charged with calculating net
asset values or determining or paying dividends)
as required to support the shareholders of such
class of shares;
(vi) litigation or other legal expenses relating solely
to such class of shares;
(vii) fees of the Company's Directors incurred as a
result of issues relating to such class of shares;
and
(viii) independent accountants' fees relating solely to
such class of shares.
The initial determination of the class expenses that will be
allocated by the Company to a particular class of shares and any subsequent
changes thereto will be reviewed by the Board of Directors and approved by a
vote of the Directors of the Company, including a majority of the Directors who
are not interested persons of the Company.
Income, realized and unrealized capital gains and losses, and
any expenses of the Multi-Class Funds not allocated to a particular class of any
such Fund pursuant to this Plan shall be allocated to each class of the Fund on
the basis of the net asset value of that class in relation to the net asset of
the Fund.
III. Class Arrangements.
The following summarizes the Rule 12b-1 distribution fees,
shareholder servicing fees, exchange privileges and other shareholder services
applicable to each class of shares of the Multi-Class Funds. Additional details
regarding such fees and services are set forth in each Fund's current Prospectus
and Statement of Additional Information.
A. Class A Shares -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees:
Up to .25% per annum of average daily
net assets.
<PAGE>
6. Conversion Features: None.
7. Exchange Privileges: Subject to
restrictions and conditions set forth in
the Prospectus, Class A Shares may be
exchanged for Class A shares of any
other Fund.
8. Other Incidental Shareholder Services:
As provided in the Prospectus.
B. Class B Shares -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees:
None.
6. Conversion Features: None.
7. Exchange Privileges: Subject to
restrictions and conditions set forth in
the Prospectus, Class B shares may be
exchanged for Class B shares of other
Multi-Class Funds.
8. Other Incidental Shareholder Services:
As provided in the Prospectus.
C. Class C Shares (created for all funds which are
purchased by Schroeder & Co. clients)
1. Maximum Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees:
.25% per annum of the average daily net
assets.
<PAGE>
6. Sub-Accounting/Transfer Agent Fee: .20%
per annum of the average daily net
assets.
7. Conversion Features: None.
8. Exchange Privileges: Subject to
restrictions and conditions set forth in
the Prospectus, Class C Shares may be
exchanged for Class C shares of any
other Fund.
9. Other Incidental Shareholder Services:
As provided in the Prospectus.
D. TRA Class of Shares (created for all funds which are purchased
by MetLife Securities, Inc. clients)
1. Maximum Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees:
.25% per annum of the average daily net
assets.
6. Sub-Accounting/Transfer Agent Fee:
[.20%] per annum of the average daily
net assets.
7. Conversion Features: None.
8. Exchange Privileges: Subject to
restrictions and conditions set forth in
the Prospectus, TRA Class of Shares may
be exchanged for TRA Class of Shares of
any other Fund.
9. Other Incidental Shareholder Services:
As provided in the Prospectus.
E. Evergreen Class of Shares (created for all funds which are
purchased by clients of Evergreen Funds)
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
<PAGE>
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees:
Up to .25% per annum of average daily
net assets.
6. Conversion Features: None.
7. Exchange Privileges: Subject to
restrictions and conditions set forth in
the Prospectus, Evergreen shares may be
exchanged for Evergreen shares of any
other Fund.
8. Other Incidental Shareholder Services:
As provided in the Prospectus.
F. Chase Vista Select Class of Shares (created for all funds
which are purchased by clients of Chase Vista Funds)
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees:
Up to .25% per annum of average daily
net assets.
6. Conversion Features: None.
7. Exchange Privileges: Subject to
restrictions and conditions set forth in
the Prospectus, Chase Vista Select
shares may be exchanged for Chase Vista
Select shares of any other Fund.
8. Other Incidental Shareholder Services:
As provided in the Prospectus.
G. Pinnacle Class of Shares (created for all funds which are
purchased by clients of Cowles, Sabol & Co.)
1. Initial Sales Load: None.
<PAGE>
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees:
None.
6. Conversion Features: None.
7. Exchange Privileges: Subject to
restrictions and conditions set forth in
the Prospectus, Class B shares may be
exchanged for Class B shares of other
Multi-Class Funds.
8. Other Incidental Shareholder Services:
As provided in the Prospectus.
IV. Board Review.
The Board of Directors of the Company shall review this Plan
as frequently as it deems necessary. Prior to any material amendments to this
Plan, the Company's Board of Directors, including a majority of the Directors
that are not interested persons of the Company, shall find that the Plan, as
proposed to be amended (including any proposed amendments to the method of
allocating class and/or fund expenses) is in the best interest of each class of
shares of a Multi-Class Fund individually and the Fund as a whole. In
considering whether to approve any proposed amendments(s) to the Plan, the
Directors of the Company shall request and evaluate such information as they
consider reasonably necessary to evaluate the proposed amendments(s) to the
Plan.
In making its determination to approve this amendment to the
Plan, the Board focused on, among other things, the relationship between or
among the classes and examined potential conflicts of interest between classes
regarding the allocation of fees, services, waivers and reimbursement of
expenses, and voting rights. The Board evaluated the level of services provided
to each class and the cost of those services to ensure that the services are
appropriate and the allocation of expenses is reasonable. In approving any
subsequent amendments to this Plan, the Board shall focus on and evaluate such
factors as well as any others deemed necessary by the Board.
<PAGE>
EXHIBIT A
California Daily Tax Free Income Fund, Inc.
Connecticut Daily Tax Free Income Fund, Inc.
Daily Tax Free Income Fund, Inc.
Florida Daily Municipal Income Fund
Georgia Daily Municipal Income Fund, Inc.
Institutional Daily Income Fund
Kentucky Daily Municipal Income Fund, Inc.
Michigan Daily Tax Free Income Fund, Inc.
New Jersey Daily Tax Free Income Fund, Inc.
North Carolina Daily Municipal Income Fund, Inc.
Pennsylvania Daily Municipal Income Fund
Short Term Income Fund, Inc.
Tennessee Daily Municipal Income Fund, Inc.
Texas Daily Municipal Income Fund, Inc.
Virginia Daily Municipal Income Fund, Inc.
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Dana E. Messina and Bernadette N. Finn, and each of them, with full
power of substitution, as his true and lawful attorney and agent to execute in
his name and on his behalf, in any and all capacities, the Registration
Statement on Form N-1A, and any and all amendments thereto (including
pre-effective amendments) filed by North Carolina Daily Municipal Income fund,
Inc. (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ Robert Straniere
Robert Straniere
<PAGE>
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Dana E. Messina and Bernadette N. Finn, and each of them, with full
power of substitution, as his true and lawful attorney and agent to execute in
his name and on his behalf, in any and all capacities, the Registration
Statement on Form N-1A, and any and all amendments thereto (including
pre-effective amendments) filed by North Carolina Daily Municipal Income fund,
Inc. (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ Steven W. Duff
Steven W. Duff
<PAGE>
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Dana E. Messina and Bernadette N. Finn, and each of them, with full
power of substitution, as his true and lawful attorney and agent to execute in
his name and on his behalf, in any and all capacities, the Registration
Statement on Form N-1A, and any and all amendments thereto (including
pre-effective amendments) filed by North Carolina Daily Municipal Income fund,
Inc. (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ Yung Wong
Dr. Yung Wong
<PAGE>
KNOW ALL PEOPLE BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints Dana E. Messina and Bernadette N. Finn, and each of them, with full
power of substitution, as his true and lawful attorney and agent to execute in
his name and on his behalf, in any and all capacities, the Registration
Statement on Form N-1A, and any and all amendments thereto (including
pre-effective amendments) filed by North Carolina Daily Municipal Income fund,
Inc. (the "Fund") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorney and
agent deems necessary or advisable to enable the Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, the rules, regulations and requirements of the Securities and Exchange
Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorney and agent shall do or cause to be done
by virtue hereof.
/s/ W. Giles Mellon
Dr. W. Giles Mellon
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000876895
<NAME> North Carolina Daily Municipal Income Fund, Inc.
<S> <C>
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<PERIOD-START> Sep-01-1998
<PERIOD-END> Feb-28-1999
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