RULE 497(c)
Registration No. 33-81920
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PROSPECTUS January 2, 1998
EVERGREEN SHARES OF FLORIDA [NEW GRAPHIC]
DAILY MUNICIPAL INCOME FUND
Florida Daily Municipal Income Fund (the "Fund") is a non-diversified,
open-end management investment company that is a short-term, tax-exempt money
market fund whose investment objectives are to provide Florida residents an
investment that is, to the extent possible, exempt from the Florida intangible
personal property tax and to seek as high a level of current income exempt from
regular Federal income taxes, as is believed to be consistent with preservation
of capital, maintenance of liquidity and stability of principal. No assurance
can be given that the Fund's objectives will be achieved. The Fund is
concentrated in the securities issued by Florida or entities within Florida and
the Fund may invest a significant percentage of its assets in a single issuer.
Therefore an investment in the Fund may be riskier than investment in other
types of money market funds. The Fund offers two classes of shares to the
general public, however only Class A shares are offered by this Prospectus. The
Class A shares of the Fund are subject to a service fee pursuant to the Fund's
Rule 12b-1 Distribution and Service Plan and are sold through financial
intermediaries who provide servicing to Class A shareholders for which they
receive compensation from the Manager and the Distributor. The Class B shares of
the Fund are not subject to a service fee and either are sold directly to the
public or are sold through financial intermediaries that do not receive
compensation from the Manager or the Distributor. In all other respects, the
Class A and Class B shares represent the same interest in the income and assets
of the Fund.
This Prospectus sets forth concisely the information a prospective
investor should know before investing in the Fund. A Statement of Additional
Information about the Fund has been filed with the Securities and Exchange
Commission (the "SEC") and is available upon request and without charge by
calling the Fund at (800)807-2940. The "Statement of Additional Information"
bears the same date as this Prospectus and is incorporated by reference into
this Prospectus in its entirety. Investors should be aware that the Evergreen
shares may not be purchased other than through certain securities dealers with
whom Evergreen Distributor, Inc. ("EDI") has entered into agreements for this
purpose or directly from EDI. Evergreen shares have been created for the primary
purpose of providing a Florida tax-free money market fund product for
shareholders of certain funds distributed by EDI. Shares of the Fund other than
Evergreen shares are offered pursuant to a separate Prospectus. The SEC
maintains a website (http//www.sec.gov.) that contains the Statement of
Additional Information and other reports and information regarding the Fund
which have been filed electronically with the SEC.
Reich & Tang Asset Management L.P. acts as investment manager of the Fund
and Reich & Tang Distributors, Inc. acts as distributor of the Fund's shares.
Reich & Tang Asset Management L.P. is a registered investment adviser. Reich &
Tang Distributors, Inc. is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. The Fund intends to maintain a stable net asset value of $1.00 per
share although there can be no assurance that this value will be maintained.
Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the shares are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT BEING OFFERED VIA THE
INTERNET TO RESIDENTS OF PARTICULAR STATES.
This Prospectus Should Be Read And Retained By Investors For Future Reference.
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TABLE OF CONTENTS
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TABLE OF FEES AND EXPENSES 3 SHAREHOLDER SERVICES 12
FINANCIAL HIGHLIGHTS 4 Effect of Banking Laws 14
INTRODUCTION 5 DISTRIBUTION AND SERVICE PLAN 14
INVESTMENT OBJECTIVES, FEDERAL INCOME TAXES 15
POLICIES AND RISKS 6 FLORIDA TAXES 15
MANAGEMENT OF THE FUND 9 GENERAL INFORMATION 16
Management and Investment Management Contract 9 NET ASSET VALUE 16
DESCRIPTION OF SHARES 10 CUSTODIAN AND TRANSFER AGENT 16
DIVIDENDS AND DISTRIBUTIONS 11
HOW TO PURCHASE AND REDEEM SHARES 11
How to Buy Shares 11
How to Redeem Shares 11
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TABLE OF FEES AND EXPENSES
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Annual Fund Operating Expenses
(as a percentage of average net assets) Class A Class B
Management Fees - After fee waiver 0.33% 0.33%
12b-1 Fees 0.25% 0.00%
Other Expenses - After fee waiver 0.17% 0.13%
Administration Fees - After fee waiver 0.01% 0.01%
------ ------
Total Fund Operating Expenses 0.75% 0.46%
Example 1 year 3 years 5 years 10 years
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You would pay the following on a $1000 investment,
assuming 5% annual return (cumulative through the
end of each year):
Class A $8 $24 $42 $93
Class B $5 $15 $26 $58
The purpose of the above fee table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a further discussion of these fees see "Management of the Fund"
and "Distribution and Service Plan" herein. The Manager has voluntarily waived
the portion of the Management Fee and a portion of the Administration Fee;
absent such waivers, the Management Fee and Administration Fee would have been
.40% and .21%, respectively. In addition, absent fee waivers, total Fund
Operating Expenses would have been 1.02% for Class A and .73% for Class B.
The figures reflected in this example should not be considered as a
representation of past or future expenses. Actual expenses may be greater or
less than those shown above.
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FINANCIAL HIGHLIGHTS
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The following financial highlights of Florida Daily Municipal Income Fund has
been audited by McGladrey & Pullen LLP, Independent Certified Public
Accountants, whose report thereon appears in the Statement of Additional
Information.
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Year Ended Year Ended Period Ended
Class A August 31, 1997 August 31, 1996 August 31, 1995**
- ------- --------------- --------------- -----------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period................ $ 1.00 $ 1.00 $ 1.00
-------------- ------------- ----------
Income from investment operations:
Net investment income............................. 0.030 0.031 0.032
Less distributions:
Dividends from net investment income.............. ( 0.030 ) ( 0.031) ( 0.032)
------------- ----------- -----------
Net asset value, end of period...................... $ 1.00 $ 1.00 $ 1.00
============== ============= ==========
Total Return........................................ 3.08% 3.09% 3.60%*
Ratios/Supplemental Data
Net assets, end of period (000)..................... $ 96,683 $ 36,758 $ 20,974
Ratios to average net assets:
Expenses.......................................... 0.57% 0.56% 0.40%*
Net investment income............................. 3.03% 3.05% 3.54%*
Expenses paid indirectly.......................... -- 0.06% --
Management and Administration fees waived and
expense reimbursed................................ 0.51% 0.67% 0.95%*
Year Ended Year Ended Period Ended
Class B August 31, 1997 August 31, 1996 August 31, 1995**
- ------- --------------- --------------- -----------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period................ $ 1.00 $ 1.00 $ 1.00
-------------- ------------- ----------
Income from investment operations:
Net investment income............................. 0.033 0.033 0.036
Less distributions:
Dividends from net investment income............... ( 0.033 ) ( 0.033) ( 0.036)
------------- ----------- -----------
Net asset value, end of period...................... $ 1.00 $ 1.00 $ 1.00
============== ============= ==========
Total Return........................................ 3.34% 3.35% 3.84%*
Ratios/Supplemental Data
Net assets, end of period (000)..................... $ 11,782 $ 9,611 $ 10,174
Ratios to average net assets:
Expenses.......................................... 0.30% 0.31% 0.14%*
Net investment income............................. 3.27% 3.34% 3.78%*
Expenses paid indirectly.......................... -- 0.06% --
Management and Administration fee waived and
expense reimbursed................................ 0.51% 0.67% 0.95%*
* Annualized
** Class A commenced operations on October 6, 1994 and Class B commenced
operations on September 19, 1994.
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INTRODUCTION
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Florida Daily Municipal Income Fund (the "Fund") is a non-diversified,
open-end management investment company that is a short-term, tax-exempt money
market fund whose investment objectives are, to the extent believed to be
consistent with preservation of capital, maintenance of liquidity and stability
of principal (i) to seek to provide Florida residents with an investment that
is, under current law, exempt from the Florida intangible personal property tax
and (ii) to seek as high a level of current income exempt under current law, in
the opinion of bond counsel to the issuers at the date of issuance, from regular
Federal income tax, by investing principally in short-term, high quality debt
obligations of the State of Florida, Puerto Rico and other United States
territories, and their political subdivisions the interest on which is exempt
from regular federal income tax under Section 103 of the Internal Revenue Code
(the "Code") as described under "Investment Objectives, Policies and Risks"
herein. The Fund also may invest in municipal securities of issuers located in
states other than Florida, the interest income on which will be, in the opinion
of bond counsel to the issuer at the date of issuance, exempt from regular
Federal income tax; however, investment in municipal securities of issuers
located in states other than Florida may, under certain circumstances, subject
Florida residents to the Florida intangible personal property tax. (See "Florida
Taxes" herein.)
Interest on certain municipal securities purchased by the Fund may be a
preference item for purposes of the Federal alternative minimum tax and the Fund
reserves the right to purchase such securities without limitation. 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 of $1.00 per share, although there can be no
assurance that this value will be maintained. The Fund intends to invest all of
its assets in tax-exempt obligations; however, it reserves the right to invest
up to 20% of the value of its total assets in taxable obligations. This is a
summary of the Fund's fundamental investment policies which are set forth in
full under "Investment Objectives, Policies and Risks" herein and in the
Statement of Additional Information and may not be changed without approval of a
majority of the Fund's outstanding shares. Of course, no assurance can be given
that these objectives will be achieved.
The Fund's investment adviser is Reich & Tang Asset Management L.P.
(the "Manager"), which is a registered investment adviser and which currently
acts as investment manager to fifteen other open-end management investment
companies. The Fund's shares are distributed through Reich & Tang Distributors,
Inc. (the "Distributor"), with whom the Fund has entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Class A
Shares of the Fund only) pursuant to the Fund's distribution and service plan
adopted under Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"). (See "Distribution and Service Plan" herein.)
On any day on which the New York Stock Exchange, Inc. is open for
trading ("Fund Business Day"), investors may, without charge by the Fund,
purchase and redeem shares of the Fund at their net asset value next determined
after receipt of the order. An investor's purchase order will be accepted after
the payment is converted into Federal funds, and shares will be issued as of the
Fund's next net asset value determination which is made as of 12 noon, Eastern
time, on each Fund Business Day. (See "How to Purchase and Redeem Shares" and
"Net Asset Value" herein.) Dividends from accumulated net income are declared by
the Fund on each Fund Business Day.
The Fund generally pays interest dividends monthly. Net capital gains,
if any, will be 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 in additional shares of the Fund unless
a shareholder has elected by written notice to the Fund to receive either of
such distributions in cash. (See "Dividends and Distributions" herein.)
The Fund intends that its investment portfolio will be concentrated in
Florida Municipal Obligations and participation certificates therein. A brief
summary of risk factors affecting the State of Florida is set forth under
"Investment Objectives, Policies and Risks" herein and "Florida Risk Factors" in
the Statement of Additional Information. Investment in the Fund should be made
with an understanding of the risks that an investment in Florida Municipal
Obligations may entail. Payment of interest and preservation of capital are
dependent upon the continuing ability of Florida issuers and/or obligors of
state, municipal and public authority debt obligations to meet their obligations
thereunder. Investors should also consider the greater risk of the Fund's
concentration versus the safety that comes with a less concentrated investment
portfolio.
Evergreen shares are identical to other shares of the Fund, which are
offered pursuant to a separate prospectus, with respect to investment objectives
and yield, but differ with respect to certain other matters. See "How to
Purchase and Redeem Shares" and "Shareholder Services."
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INVESTMENT OBJECTIVES,
POLICIES AND RISKS
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The Fund is a non-diversified, open-end management investment company
that is a short-term, tax-exempt money market fund whose investment objectives
are to seek to provide Florida residents an investment that is, to the extent
possible, exempt from the Florida intangible personal property tax and to seek
as high a level of current income exempt from regular Federal income taxes, as
is believed to be consistent with preservation of capital, maintenance of
liquidity and stability of principal. There can be no assurance that the Fund
will achieve its investment objectives.
The Fund's assets will be invested primarily (i.e., at least 80%) in
high quality debt obligations issued by or on behalf of the State of Florida,
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 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. Dividends paid by the Fund which are "exempt-interest
dividends" by virtue of being properly designated by the Fund as derived from
Municipal Obligations and participation certificates in Municipal Obligations
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, interest on such bonds and accordingly
"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 in such
securities), 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.) To the extent the Fund's assets consist exclusively of
obligations (including participation certificates) issued by or on behalf of the
State of Florida or any Florida local governments, or their instrumentalities,
authorities or districts ("Florida Municipal Obligations") or obligations issued
by or on behalf of territories and possessions of the United States and their
authorities, agencies, instrumentalities and political subdivisions on December
31st of each taxable year, shares of the Fund will be exempt from the Florida
intangible personal property tax. To the extent suitable Florida 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 which 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.
However, 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 total assets in Florida Municipal Obligations, although the exact
amount of the Fund's assets invested in such securities will vary from time to
time. 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 in Municipal
Obligations, 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 Florida Municipal Obligations.
In view of this "concentration" in bank participation certificates in
Florida Municipal Obligations, 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 which include 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. The Fund may invest 25% or more of the net
assets of the Fund 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 including, 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. 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
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outstanding shares of the Fund that would be affected by such a change. As used
in this Prospectus, the term "majority of the outstanding shares" of the Fund
means, respectively, 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.
Municipal Obligations includes Municipal Leases. Municipal leases,
which may take the form of a lease or an installment purchase or conditional
sale contract, are issued by state and local governments and authorities to
acquire a wide variety of equipment and facilities such as fire and sanitation
vehicles, telecommunications equipment and other capital assets. Municipal
leases frequently have special risks not normally associated with general
obligation or revenue bonds. Leases and installment purchases or conditional
sale contracts (which normally provide for title to the leased asset to pass
eventually to the government issuer) have evolved as a means for governmental
issuers to acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt-issuance limitations
of many state constitutions and statutes are deemed to be inapplicable because
of the inclusion in many leases or contracts of "non-appropriation" clauses that
provide that the governmental issuer has no obligation to make future payments
under the lease or contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis. These types of
municipal leases may be considered illiquid and subject to the 10% limitation of
the investment restriction set forth under "Investment Restrictions" contained
herein. The Board of Trustees may adopt guidelines and delegate to the Manager
the daily function of determining and monitoring the liquidity of municipal
leases. In making such determination, the Board and the Manager may consider
such factors as the frequency of trades for the obligation, the number of
dealers willing to purchase or sell the obligations, including the time needed
to dispose of the obligations and the method of soliciting offers. If the Board
determines that any municipal leases are illiquid, such leases will be subject
to the 10% limitation on investments in illiquid securities. The Board of
Trustees is also responsible for determining the credit quality of municipal
leases, on an ongoing basis, including an assessment of the likelihood that the
lease will not be canceled.
The Fund may only purchase United States dollar-denominated Municipal
Obligations that have been determined by the Fund's Board of Trustees to present
minimal credit risks and that are Eligible Securities at the time of
acquisition. The term Eligible Securities means (i) Municipal Obligations with
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") (acquisition in
the latter situation must also be ratified by the Board of Trustees); (ii)
Municipal Obligations with 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) and whose issuer has received from the Requisite NRSROs a rating
with respect to comparable short-term debt in the two highest short-term rating
categories and (iii) unrated Municipal Obligations determined by the Fund's
Board of Trustees to be of comparable quality. Where the issuer of a long-term
security with a remaining maturity which would otherwise qualify it as an
Eligible Security does not have rated short-term debt outstanding, the long-term
security is treated as unrated but may not be purchased if it has a long-term
rating from any NRSRO that is below the two highest long-term categories. A
determination of comparability by the Board of Trustees is made on the basis of
its credit evaluation of the issuer, which may include an evaluation of a letter
of credit, guarantee, insurance or other credit facility issued in support of
the Municipal Obligations or participation certificates. (See "Variable Rate
Demand Instruments and Participation Certificates" in the Statement of
Additional Information.) While there are several organizations that currently
qualify as NRSROs, two examples of NRSROs are Standard & Poor's Ratings
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 and "SP-1/AA"
by S&P. Such instruments may produce a lower yield than would be available from
less highly rated instruments. The Fund's Board of Trustees has determined that
obligations which are backed by the credit of the Federal Government will be
considered to have a rating equivalent to Moody's "Aaa."
Subsequent to its purchase by the Fund, the quality of an investment
may cease to be rated or its rating may be reduced below the minimum required
for purchase by the Fund. If this occurs, the Board of Trustees of the Fund
shall reassess promptly whether the security presents minimal credit risks and
shall cause the Fund to take such action as the Board of Trustees determines is
in the best interest of the Fund and its shareholders. However, reassessment is
not required if the security is disposed of or matures within five business days
of the Manager becoming aware of the new rating and provided further that the
Board of Trustees is subsequently notified of the Manager's actions.
In addition, in the event that a security (1) is in default, (2) ceases
to be an eligible investment under Rule 2a-7 or (3) is determined to no longer
present minimal credit risks, the Fund will dispose of the security absent a
determination by the Fund's Board of Trustees that disposal of the security
would not be in the best interests of the Fund. In the event that the security
is disposed of it shall be disposed of as soon as practicable
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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.
The Fund has adopted the following fundamental investment restrictions
which apply to all portfolios and which 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 Fund is subject to further investment
restrictions that are set forth in the Statement of Additional Information. The
Fund may not:
1. Borrow Money. This restriction shall not apply to borrowings from banks for
temporary or emergency (not leveraging) purposes, including 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.
2. 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.
3. 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.
4. Invest more than 25% of its assets in the securities of "issuers" in any
single industry, provided that the Fund may invest more than 25% of its
assets in bank 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. With respect to 75% of the total amortized cost value of
the Fund's assets, not more than 5% of the Fund's assets may be invested in
securities that are subject to underlying puts from the same institution,
and no single bank shall issue its letter of credit and no single financial
institution shall issue a credit enhancement covering more than 5% of the
total assets of the Fund. However, if the puts are exercisable by the Fund
in the event of default on payment of principal and interest on the
underlying security, then the Fund may invest up to 10% of its assets in
securities underlying puts issued or guaranteed by the same institution;
additionally, a single bank can issue its letter of credit or a single
financial institution can issue a credit enhancement covering up to 10% of
the Fund's assets, where the puts offer the Fund such default protection.
5. Invest in securities of other investment companies, except 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.
As a non-diversified investment company, the Fund is not subject to any
statutory restriction under the 1940 Act with respect to investing its assets in
one or relatively few issuers. This non-diversification may present greater
risks than in the case of a diversified company. However, 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
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.)
The primary purpose of investing in a portfolio of Florida Municipal
Obligations is the special tax treatment accorded Florida resident individual
investors. However, payment of interest and preservation of principal are
dependent upon the continuing ability of the Florida 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
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yields available on portfolios of Florida issues with those of more diversified
portfolios including out-of-state issues before making an investment decision.
The Fund's management believes that by maintaining the Fund's investment
portfolio in liquid, short-term, high quality investments, including the
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 Florida Municipal Obligations. For additional information, please
refer to the Statement of Additional Information.
Because the Fund invests in Florida issues, it is susceptible to political,
economic, regulatory or other factors affecting issuers of Florida Municipal
Obligations and participation certificates therein. The following is only a
brief summary of the special risk factors affecting the State of Florida and
does not purport to be a complete or exhaustive description of all adverse
conditions to which issuers of Florida obligations may be subject. See "Florida
Risk Factors" in the Statement of Additional Information for a further
discussion of the special risk factors.
The ability of the State and its local units of government to satisfy the
Debt Obligations may be affected by numerous factors which impact on the
economic vitality of the State in general and the particular region of the State
in which the issuer of the Debt Obligations is located. South Florida is
particularly susceptible to international trade and currency imbalances and to
economic dislocations in Central and South America, due to its geographical
location and its involvement with foreign trade, tourism and investment capital.
South and central Florida are impacted by problems in the agricultural sector,
particularly with regard to the citrus and sugar industries. Short-term adverse
economic conditions may be created in these areas, and in the State as a whole,
due to crop failures, severe weather conditions or other agriculture-related
problems. The State economy also has historically been somewhat dependent on the
tourism and construction industries and is sensitive to trends in those sectors.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
MANAGEMENT AND INVESTMENT MANAGEMENT CONTRACT
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees.
The Fund has retained as its manager Reich & Tang Asset Management L.P., a
Delaware limited partnership and a registered investment adviser with its
principal office at 600 Fifth Avenue, New York, New York 10020 (hereinafter
called the "Manager"), under an Investment Management Contract. The Manager
provides persons satisfactory to the Fund's Board of Trustees to serve as
officers of the Fund. Such officers, as well as certain other employees and
trustees of the Fund, may be 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 full-time to the
affairs of the Fund. The Statement of Additional Information contains general
background information regarding each trustee and principal officer of the Fund.
As of November 30, 1997, the Manager was investment manager, adviser or
supervisor with respect to assets aggregating in excess of $11.1 billion. The
Manager acts as manager or administrator of fifteen other registered investment
companies and also advises pension trusts, profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") is
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"). Reich & Tang Asset Management, Inc. (a wholly-owned
subsidiary of NEICOP) is the sole general partner and owner of the remaining .5%
interest of the Manager. NEIC, a Massachusetts corporation, serves as the
managing general partner of NEICOP.
The Manager is a wholly-owned subsidiary of NEICOP, but Reich & Tang Asset
Management, Inc., its sole general partner, is an indirect subsidiary of
Metropolitan Life Insurance Company ("MetLife"). Also, MetLife directly and
indirectly owns approximately 47% of the outstanding partnership interests of
NEICOP, and may be deemed a "controlling person" of the Manager. Reich & Tang,
Inc. owns directly and indirectly approximately 13.7% of the outstanding
partnership interests of NEICOP.
MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. On August 30, 1996, The New England Mutual Life
Insurance Company ("The New England") and MetLife merged, with MetLife being the
continuing company. 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, which
exceeded $1.6 trillion at December 31, 1996 for MetLife and its insurance
affiliates. MetLife and its affiliates provide insurance or other financial
services to approximately 36 million people worldwide.
NEICOP 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,
9
<PAGE>
L.P., Back Bay Advisors, L.P., Capital Growth Management, Limited Partnership,
Greystone Partners, L.P., Harris Associates, L.P., Jurika & Voyles, L.P.,
Loomis, Sayles & Company, L.P., New England Funds, L.P., New England Investment
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 restructuring of NEICLP did not result in a change in control of
the Manger and has no impact upon the Manager's performance of its
responsibilities and obligations. The merger between The New England and MetLife
resulted in an "assignment" of the Investment Management Contract relating to
the Fund. Under the 1940 Act, such an assignment caused the automatic
termination of this agreement. On November 28, 1995 the Board of Trustees,
including a majority of the trustees who are not interested persons (as defined
in the 1940 Act) of the Fund or the Manager, approved a new Investment
Management Contract effective August 30, 1996, which has a term which extends to
July 31, 1998 and may be continued in force thereafter for successive
twelve-month periods beginning each August 1, provided that such continuance is
specifically approved annually by majority vote of the Fund's outstanding voting
securities or by its Board of Trustees, and in either case by a majority of the
trustees who are not parties to the Investment Management Contract or interested
persons of any such party, by votes cast in person at a meeting called for the
purpose of voting on such matter.
The Investment Management Contract was approved by a majority of the
shareholders of the Fund on April 4, 1996 and contains the same terms and
conditions governing the Manager's investment management responsibilities as the
Fund's previous Investment Management Contract with the Manager, except as to
the date of execution and termination.
Pursuant to the Investment Management Contract, the Manager manages the
Fund's portfolio of securities and makes decisions with respect to the purchase
and sale of investments, subject to the general control of the Board of Trustees
of the Fund. Pursuant to the Investment Management Contract, the Manager
receives from the Fund a fee of .40% per annum of the Fund's average daily net
assets for managing the Fund's investment portfolio and performing related
services. The Manager, at its discretion, may voluntarily waive all or a portion
of the management fee.
Pursuant to the Administrative Services Contract for the Fund, the Manager
performs clerical, accounting, supervision and office service functions for the
Fund and provides the Fund with the personnel to: (i) supervise the performance
of bookkeeping and related services by Investors Fiduciary Trust Company, the
Fund's bookkeeping agent; (ii) prepare reports to and filings with regulatory
authorities; and (iii) perform such other services as the Fund may from time to
time request of the Manager. The personnel rendering such services may be
employees of the Manager or its affiliates. The Manager, at its discretion, may
voluntarily waive all or a portion of the administrative services fee. For its
services under the Administrative Services Contract, the Manager receives a fee
of .21% per annum of the Fund's average daily net assets. Any portion of the
total fees received by the Manager and past profits may be used to provide
shareholder services and for distribution of Fund shares. (See "Distribution and
Service Plan" herein.)
In addition, Reich & Tang Distributors, Inc., the Distributor, receives a
servicing fee of .25% per annum of the average daily net assets of the Class A
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 both Classes of the Fund, will be allocated
daily to each Class share based on the percentage of outstanding shares at the
end of the day.
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DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
The Fund was established as a Massachusetts Business Trust under the laws
of Massachusetts by an Agreement and Declaration of Trust dated August 31, 1994.
The Fund has an unlimited authorized number of shares of beneficial interest.
These shares are entitled to one vote per share with proportional voting for
fractional shares. 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 non-assessable. Shares of the Fund are
redeemable at net asset value, at the option of the shareholders.
The Fund is subdivided into two classes of beneficial interest, Class A and
Class B. Each share, regardless of class, represents an interest in the same
portfolio of investments and has identical voting, dividend, liquidation and
other rights, preferences, powers, restrictions, limitations, qualifications,
designations and terms and conditions, except that: (i) the Class A and Class B
shares have different class designations; (ii) only the Class A shares are
assessed a service fee pursuant to the Rule 12b-1 Distribution and Service Plan
of the Fund of .25% of the average daily net assets of the Class A shares of the
Fund; (iii) only the holders of the Class A shares are 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
shareholders to exchange their shares only for shares of the same class of an
Exchange Fund. Payments that are made under the Plans will be calculated and
charged daily to the appropriate class prior to determining daily net asset
value per share and dividends/distributions.
10
<PAGE>
Generally, all shares will be voted in the aggregate, except if voting by
Class is required by law or the matter involved affects only one Class, in which
case shares will be voted separately by Class. The shares of the Fund have
non-cumulative voting rights, which means that the holders of more than 50% of
the shares outstanding voting for the election of trustees can elect 100% of the
trustees if the holders choose to do so, and, in that event, the holders of the
remaining shares will not be able to elect any person or persons to the Board of
Trustees. The Fund's By-laws provide that the holders of a majority of the
outstanding shares of the Fund present at a meeting in person or by proxy will
constitute a quorum for the transaction of business at all meetings.
The Fund currently has only one portfolio. The Fund's Board of Trustees is
authorized to divide the unissued shares into separate series of beneficial
interest, one for each of the Fund's separate investment portfolios that may be
created in the future.
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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 generally 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 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. The Class A shares will bear the
service fee under the Plan. As a result, the net income of and the dividends
payable to the Class A shares will be lower than the net income of and dividends
payable to the Class B shares of the Fund. Dividends paid to each Class of
shares of the Fund will, however, be declared and paid on the same days at the
same times and, except as noted with respect to the service fees payable under
the Plan, will be determined in the same manner and paid in the same amounts.
- --------------------------------------------------------------------------------
HOW TO PURCHASE AND REDEEM SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of the Fund through broker-dealers, banks or
other financial intermediaries, or directly through 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. Only Evergreen Class A
shares are offered through this Prospectus. Instructions on how to purchase
shares of the Fund are set forth in the Share Purchase Application.
Additional 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
11
<PAGE>
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, 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 Class A
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.
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SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
The Fund offers the following shareholder services. For more
information about these services or your account, contact EDI or the toll-free
number on the front 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.
12
<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 realizable capital gains.
Investments Through Employee Benefit and Savings Plans. 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.
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.
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 immediate settlement in funds of Federal Reserve member
banks on deposit at a Federal Reserve Bank (commonly known as "Federal Funds").
Accordingly, the Fund does not accept a subscription or invest an investor's
payment in portfolio securities until the payment has been converted into
Federal Funds.
Shares will be issued as of the first determination of the Fund's net
asset value per share made upon receipt of the investor's purchase order at the
net asset value next determined after receipt of the purchase order. Shares
begin accruing income dividends on the day they are purchased. The Fund reserves
the right to reject any subscription for its shares. Certificates for Fund
shares will not be issued to an investor.
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
13
<PAGE>
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.
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.
EFFECT OF BANKING LAWS
The Glass-Steagall Act limits the ability of a depository institution
to become an underwriter or distributor of securities. However, it is the Fund
management's position that banks are not prohibited from acting in other
capacities for investment companies, such as providing administrative and
shareholder account maintenance services and receiving compensation from the
Manager for providing such services. However, this is an unsettled area of the
law and if a determination contrary to the Fund management's position is made by
a bank regulatory agency or court concerning shareholder servicing and
administration payments to banks from the Manager, any such payments will be
terminated and any shares registered in the banks' names, for their underlying
customers, will be reregistered in the name of the customers at no cost to the
Fund or its shareholders. In addition, state securities laws on this issue may
differ from the interpretations of Federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
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DISTRIBUTION AND SERVICE PLAN
- --------------------------------------------------------------------------------
Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission has required that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Fund's Board of Trustees has adopted a
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
Class A shares of the Fund only).
Under the Distribution Agreement, the Distributor serves as distributor
of the Fund's shares and, for nominal consideration and as agent for the Fund,
will solicit orders for the purchase of the Fund's shares, provided that any
orders will not be binding on the Fund until accepted by the Fund as principal.
Under the Shareholder Servicing Agreement, the Distributor receives
with respect only to the Class A shares a service fee equal to .25% per annum of
the Fund's average daily net assets of the Class A shares of the Fund (the
"Shareholder Servicing Fee") for providing personal shareholder services and for
the maintenance of shareholder accounts. The fee is accrued daily and paid
monthly and any portion of the fee may be deemed to be used by the Distributor
for payments to Participating Organizations with respect to their provision of
such services to their clients or customers who are shareholders of the Class A
shares of the Fund.
The Plan and the Shareholder Servicing Agreement provide that, in
addition to the Shareholder Servicing Fee, the Fund will pay for (i)
telecommunications expenses including the cost of dedicated lines and CRT
terminals, incurred by the Distributor and Participating Organizations in
carrying out their obligations under the Shareholder Servicing Agreement and
with respect to Class A Shares (ii) preparing, printing and delivering the
Fund's prospectus to existing shareholders of the Fund and preparing and
printing subscription application forms for shareholder accounts.
The Plan provides that the Manager may make payments from time to time
from its own resources, which may include the management fee and past profits
for the following purposes: (i) to defray the costs of, and to compensate
others, including Participating Organizations with whom the Distributor has
entered into written agreements, for performing shareholder servicing on behalf
of the Class A shares of the Fund; (ii) to compensate certain Participating
Organizations for providing assistance in distributing the Class A shares of the
Fund; and (iii) to pay the costs of printing and distributing the Fund's
prospectus to prospective investors, and to defray the cost of the preparation
and printing of brochures and other promotional materials, mailings to
prospective shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Fund's shares. The Distributor may also make payments
from time to time from its own resources, which may include the Shareholder
Servicing Fee (with respect to Class A shares) and past profits, for the
purposes enumerated in (i) above. The Distributor will determine the amount of
such payments made pursuant to the Plan, provided that such payments will not
increase the amount which the Fund is required to pay to the Manager and
Distributor for any fiscal year under either the Investment Management Contract
in effect for that year or under the Shareholder Servicing Agreement in effect
for that year.
For the fiscal year ended August 31, 1997, the total amount spent
pursuant to the Plan for Class A shares was .34% 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 and Administration
Agreement and an amount
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<PAGE>
representing .09% of the average daily net assets was paid by the Manager's
predecessor, $14,034 was utilized for compensation to sales personnel, $5,190 on
Prospectus printing and $1,759 on miscellaneous expenses.
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. However, in
the opinion of the Manager based on the advice of counsel, these laws and
regulations do not prohibit such depository institutions from providing other
services for investment companies such as the shareholder servicing and related
administrative functions referred to above. The Fund's Board of Trustees will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution would result in loss to shareholders or change
in the Fund's net asset value. In addition, state securities laws on this issue
may differ from the interpretations of Federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law.
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FEDERAL INCOME TAXES
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The Fund expects to elect to qualify under the Code as a regulated
investment company that distributes "exempt-interest dividends" as defined in
the Code. The Fund's policy is to distribute as dividends each year 100% (and in
no event less than 90%) of its tax-exempt interest income, net of certain
deductions, and its investment company taxable income (if any). If distributions
are made in this manner, the Fund will not be subject to either Federal income
tax or any excise taxes imposed under the Code. The dividends derived from the
interest earned on Municipal Obligations will be "exempt-interest dividends" and
will not be subject to regular Federal income tax, although as described below,
such "exempt-interest dividends" may be subject to Federal alternative minimum
tax. Dividends paid from taxable income, if any, and distributions of any
realized short-term capital gains (whether from tax-exempt or taxable
obligations) will be taxable to shareholders as ordinary income for Federal
income tax purposes, 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" or having
undistributed capital gain income within the meaning of the Code. The Fund will
inform shareholders of the amount and nature of its income and gains in a
written notice mailed to shareholders not later than 60 days after the close of
the Fund's taxable year. For Social Security recipients, interest on tax-exempt
bonds, including tax-exempt interest dividends paid by the Fund, must 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" (generally, a bond issue in which more than 10% of the proceeds are used
for a non-governmental trade or business and which meets the private security or
payment test, or a bond issue which meets the private loan financing test)
issued after August 7, 1986 will constitute an item of tax preference subject to
the individual alternative minimum tax. Corporations are required to include in
alternative minimum taxable income 75% of the amount by which their adjusted
current earnings (including generally, 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. Investors are urged to consult their own tax
advisors regarding an investment in the Fund.
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 thereof and that the interest on the underlying Municipal
Obligations will be exempt from regular Federal income taxes to the Fund.
Counsel has pointed out that 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.
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 the Court further held 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 the Municipal
Obligations and to tax such bonds in the future. The decision does not, however,
affect the current exemption from taxation of the interest earned on the
Municipal Obligations in accordance with Section 103 of the Code.
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FLORIDA TAXES
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The following is based upon the advice of Gunster, Yoakley,
Valdes-Fauli & Stewart, PA., special Florida counsel to the Fund.
The Fund will not be subject to income, franchise or other taxes of a
similar nature imposed by the State of Florida or its subdivisions, agencies or
instrumentalities. Florida does not currently impose an income tax on
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individuals. Thus, individual shareholders of the Fund will not be subject to
any Florida state income tax on distributions received from the Fund. However,
certain distributions will be taxable to corporate shareholders which are
subject to Florida corporate income tax. Florida currently imposes an
"intangibles tax" at the annual rate of 0.2% on certain securities and other
intangible assets owned by Florida residents. Bonds (including participation
certificates) issued by the State of Florida or its subdivisions ("Florida
Securities"), as well as bonds issued by the government of the United States or
the governments of certain U.S. territories and possessions, including Guam and
Puerto Rico (collectively, "Federal Securities"), are exempt from the Florida
intangibles tax. If, on December 31 of any year, the Fund's portfolio consists
solely of Florida and Federal Securities, the Fund's shares will be exempt from
the Florida intangibles tax. If, however, the Fund's December 31 portfolio
includes any nonexempt securities, then the Fund shares owned by Florida
residents may be subject to the Florida intangibles tax to the extent the Fund's
portfolio includes securities other than Federal Securities. The Fund itself
will not be subject to the Florida intangibles tax.
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GENERAL INFORMATION
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The Fund was established as a Massachusetts Business Trust under the
laws of the State of Massachusetts on August 31, 1994 and it is registered with
the SEC as a non-diversified, open-end management investment company.
The Fund prepares semi-annual unaudited and annual audited reports
which include a list of investment securities held by the Fund and which are
sent to shareholders.
As a general matter, the Fund will not hold annual or other meetings of
the Fund's shareholders. Meetings of shareholders may be called at any time by
the President, and at the request in writing, or by resolution, of a majority of
Trustees, or upon the written request of shareholders to cast not less then 10%
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 such as the removal of Fund trustee(s) and
communication among shareholders, for the election of trustees, for approval of
revised investment advisory contracts with respect to a particular class or
series of shares, for approval of revisions to the Fund's distribution agreement
with respect to a particular class or series of shares, any registration of the
Fund with the SEC or any state, or as the Trustees may consider necessary or
desirable. Each Trustee serves until the next meeting of the shareholders called
for the purpose of considering the election or re-election of such Trustee or of
a successor to such Trustee, and until the election and qualification of his or
her successor, elected at such a meeting, or until such Trustee sooner dies,
resigns, retires or is removed by the vote of the shareholders.
For further information with respect to the Fund and the shares offered
hereby, reference is made to the Fund's registration statement filed with the
SEC, including the exhibits thereto. The registration statement and the exhibits
thereto may be examined at the Commission and copies thereof may be obtained
upon payment of certain duplicating fees.
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NET ASSET VALUE
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The net asset value of the Fund's shares is determined as of 12 noon,
Eastern time, on each Fund Business Day. Fund Business Day means weekdays
(Monday through Friday) except customary business holidays and Good Friday. It
is computed by dividing the value of the Fund's net assets (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.
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, except that if
fluctuating interest rates cause the market value of the Fund's portfolio to
deviate more than 1/2 of 1% from the value determined on the basis of amortized
cost, the Board of Trustees will consider whether any action should be
initiated. 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 intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.
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CUSTODIAN AND TRANSFER AGENT
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Investors Fiduciary Trust Company, 801 Pennsylvania Street, Kansas
City, Missouri 64105 is custodian for the Fund's cash and securities. Evergreen
Service Company, P.O. Box 2121, Boston, Massachusetts 02106-2121 is the
registrar, transfer agent and dividend disbursing agent for the shares of the
Fund. The Fund's transfer agent and custodian do not assist in, and are not
responsible for, investment decisions involving assets of the Fund.
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Distributor
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
537625 (REV02)
1/98
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