RULE 497(b)
                                                      Registration No. 33-81920
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FLORIDA DAILY MUNICIPAL                           600 FIFTH AVENUE
INCOME FUND                                       NEW YORK,  N.Y.  10020
Class A Shares; Class B Shares                    (212) 830-5220
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PROSPECTUS
January 4, 1999



A 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  Federal  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.




TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>                                      <C> <C>                                             <C> 



2 Risk/Return Summary: Investment, Risks       7 Management, Organization and Capital Structure
    and Performance                            7 Shareholder Information
4 Fee Table                                   14 Tax Consequences
5 Investment Objectives, Principal Investment 15  Distribution Arrangements
    Strategies and Related Risks              17  Financial Highlights



</TABLE>

<PAGE>

I.  RISK/RETURN SUMMARY: INVESTMENTS,
     RISKS, AND PERFORMANCE

Investment Objectives

The Fund seeks to provide Florida residents an investment that is, to the extent
possible,  exempt from the Florida intangible personal property tax and seeks to
provide as high a level of current  income exempt from Federal income tax, 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.

Principal Investment Strategies

    The  Fund  intends  to  achieve  its  investment   objectives  by  investing
principally in short-term,  high quality,  debt obligations of:

     (i)   Florida,  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
assets) in Florida municipal obligations,  including participation  certificates
therein.

Principal Risks  

    Although  the Fund seeks to preserve the value of your  investment  at $1.00
per share,  it is possible to lose money by investing in the Fund.  The value of
the Fund's shares and the securities held by the Fund can each decline in value.

    An  investment  in the  Fund is not a bank  deposit  and is not  insured  or
guaranteed by the FDIC or any other governmental agency.

    Because the Fund intends to concentrate  (e.g. 25% or more of the Fund's net
assets) in Florida 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.  In  addition,  investment  in  the  Fund  should  be  made  with  an
understanding of the risks which 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 obligators of state,  municipal
and public  authority debt obligations to meet their payment  obligations.  Risk
factors  affecting  the State of Florida are described in "Florida Risk Factors"
in the Statement of Additional Information.


Risk/Return Bar Chart

The following bar chart and table may assist you in your decision to invest in a
portfolio of the Fund.  The bar chart shows the change in the annual  returns of
the Fund.  The table shows the Fund's  average annual total returns for the last
one year period and 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 Fund's current 7-day yield may be obtained by calling
the Fund toll-free at 1-800- 221-3079.

                                       2
<PAGE>

================================================================================
     Florida Daily Municipal Income Fund - Class A Shares (1) (2) (3) (4)


[GRAPHIC OMITTED]

Calendar Year End        % Total Return
-----------------        --------------

1994                     0.89%
1995                     3.46%
1996                     3.02%
1997                     3.07%

================================================================================

(1) As of September 30, 1998, the Fund had a year-to-date return of 2.12%.

(2) The Fund's highest quarterly return was 0.90% for the quarter ended June
    30, 1995; the lowest quarterly return was 0.65% for the quarter ended March
    31, 1998

(3) Investors purchasing or redeeming shares through a Participating
    Organization may be charged a fee in connection with such service and,
    therefore, the net return to such investors may be less than the net return
    by investing in the Fund directly.

(4) The return for 1994 represents October 6, 1994 (inception) through December
    31, 1994. Past performance is not predictive of future performance.


Average Annual Total Returns -  Florida Daily Municipal Income Fund

For the period ended December 31, 1997       Class A        Class B

One Year                                     3.07%          3.34%

Average Annual Total Return
   since Inception                           3.22%          3.49%

                                       3
<PAGE>
                                    FEE TABLE
--------------------------------------------------------------------------------

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.


Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)

                                              Class A                 Class B

Management Fees.......................        0.40%                  0.40%
Distribution and Service (12b-1) Fees.        0.25%                  0.00%
Other Expenses........................        0.37%                  0.33%
Administration Fees...................  0.21% _____            0.21% _____
Total Annual Fund Operating Expenses..        1.02%                  0.73%

The  Manager   voluntarily   waived  a  portion  of  the  Management   Fees  and
Administration  Fees.  After such waivers,  the  Management  Fees were 0.33% and
Administration  Fees for Class A were .01% and the actual  Total Fund  Operating
Expenses  for Class A were  0.75% and for Class B were  0.46%.  This fee  waiver
arrangement may be terminated 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


        Class A:        $104          $325         $563        $1,248
        Class B:        $75           $233         $406        $906


                                       4
<PAGE>
II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS

Investment Objectives

    The Fund 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 Federal  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)      Florida  Municipal  Obligations  issued by or on behalf of the State of
         Florida or any Florida 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 (i)  Participation
Certificates in Florida  Municipal  Obligations and (ii) other Florida 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.

    The Fund may also purchase  securities and Participation  Certificates whose
interest income may be subject to the Federal  alternative minimum tax and these
investments  would  be  included  in the 20%  that may be  invested  in  taxable
securities.

    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.

    The Fund will invest at least 65% of its total  assets in Florida  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
5% 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 Obligations or Participation Certificates issued by a single
issuerunless 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 
                                       5
<PAGE>
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.

    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  which have been  determined by the Fund's Board of Trustees to be of
comparable quality.

    Subsequent  to its purchase by the Fund,  the quality of an  investment  may
cease to be rated or its rating may be reduced  below the minimum  required  for
purchase by the Fund.  If this occurs,  the Board of Trustees of the Fund shall
reassess the security's credit risks and shall take such action as 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 Trustees 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  associated
with long-term Florida 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.

    Because of the Fund's  concentration  in  investments  in Florida  Municipal
Obligations,  the safety of an investment in the Fund will depend  substantially
upon the financial strength of Florida and its political subdivisions.

    The  primary  purpose of  investing  in a  portfolio  of  Florida  Municipal
Obligations is the special tax treatment  accorded Florida  resident  individual
investors.  Payment of interest and  preservation  of  principal,  however,  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  yields  available on portfolios of Florida 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  
                                       6
<PAGE>
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 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 effect on the Fund's performance.  The
Manager is unable to predict  what  effect,  if any,  the Year 2000 Problem will
have on such issuers.

III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE

    The Fund's  investment  adviser is Reich & Tang Asset  Management  L.P. (the
"Manager").  The  Manager's  principal  business  office is located at 600 Fifth
Avenue,  New York, NY 10020. As of July 31, 1998, the Manager was the investment
manager,  advisor or supervisor with respect to assets  aggregating in excess of
$12.3  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 Trustees
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.  The
Manager,  at its  discretion,  may  voluntarily  waive all or a  portion  of the
management fee.

    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
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 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.

IV. SHAREHOLDER INFORMATION

    The Fund sells and  redeems  its shares on a  continuing  basis at their net
asset value and does not impose a charge for either  sales or  redemptions.  All
transactions in Fund shares are effected  through the Fund's transfer agent, who
accepts orders for 
                                       7
<PAGE>
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 1940 Act.  Amortized cost
valuation  involves valuing an instrument at its cost and thereafter  assuming a
constant  amortization  to maturity of any discount or premium.  If  fluctuating
interest  rates cause the market  value of the Fund's  portfolio to deviate more
than 1/2 of 1% from the value  determined  on the basis of amortized  cost,  the
Board of  Trustees  will  consider  whether  any  action  should be  initiated.
Although the  amortized  cost method  provides  certainty in  valuation,  it may
result in periods  during  which the value of an  instrument  is higher or lower
than the price an investment company would receive if the instrument were sold.

    Shares  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.

Purchase of Fund Shares

    Investors   purchasing   shares  through  an  account  at  a   Participating
Organization become Class A shareholders. All other investors, and investors who
have accounts with Participating  Organizations but do not wish to invest in the
Fund through them,  may invest in the Fund directly as Class B  shareholders  of
the Fund.  Class B  shareholders  do not receive  the  benefit of the  servicing
functions performed by a Participating Organization.  Class B shares may also be
offered  to  investors   who  purchase   their  shares   through   Participating
Organizations  which,  because they may not be legally permitted to receive such
as fiduciaries, do not receive compensation from the Distributor or the Manager.

    The minimum initial investment in the Fund for both classes of shares is (i)
$1,000 for purchases through Participating Organizations - this may be satisfied
by initial  investments  aggregating  $1,000 by a Participating  Organization on
behalf of their customers whose initial  investments are less than $1,000;  (ii)
$1,000  for  securities  brokers,  financial  institutions  and  other  industry
professionals that are not Participating  Organizations and (iii) $5,000 for all
other investors.  Initial investments may be made in any amount in excess of the
applicable  minimums.  The minimum  amount for  subsequent  investments  is $100
unless the investor is a client of a  Participating  Organization  whose clients
have made aggregate subsequent investments of $100.

    Each  shareholder,  except  certain  Participant  Investors,  will receive a
personalized  monthly  statement  from the Fund  listing (i) the total number of
Fund  shares  owned  as  of  the  statement  closing  date,  (ii)  purchase  and
redemptions  of Fund  shares  and  (iii)  the  dividends  paid  on  Fund  shares
(including dividends paid in cash or reinvested in additional Fund shares).

Investments Through Participating Organizations - Purchase of Class A Shares

    Participant  Investors  may,  if they wish,  invest in the Fund  through the
Participating  Organizations  with  
                                       8
<PAGE>
which they have accounts.  "Participating Organizations" are securities brokers,
banks  and  financial   institutions   or  other   industry   professionals   or
organizations which have entered into shareholder  servicing agreements with the
Distributor  with respect to investment of their customer  accounts in the Fund.
When  instructed  by its  customer  to  purchase  or  redeem  Fund  shares,  the
Participating Organization,  on behalf of the customer,  transmits to the Fund's
transfer  agent a purchase or  redemption  order,  and in the case of a purchase
order, payment for the shares being purchased.

    Participating   Organizations   may  confirm  to  their  customers  who  are
shareholders  in the Fund each  purchase and  redemption  of Fund shares for the
customers' accounts. Also, Participating  Organizations may send their customers
periodic  account  statements  showing the total  number of Fund shares owned by
each customer as of the statement  closing date,  purchases and  redemptions  of
Fund shares by each customer  during the period covered by the statement and the
income  earned by Fund  shares of each  customer  during  the  statement  period
(including  dividends  paid in cash or reinvested  in  additional  Fund shares).
Participant  Investors whose Participating  Organizations have not undertaken to
provide such statements will receive them from the Fund directly.

    Participating  Organizations  may  charge  Participant  Investors  a fee  in
connection with their use of specialized purchase and redemption procedures.  In
addition,   Participating   Organizations   offering   purchase  and  redemption
procedures  similar  to those  offered  to  shareholders  who invest in the Fund
directly, may impose charges, limitations, minimums and restrictions in addition
to or different  from those  applicable to  shareholders  who invest in the Fund
directly.   Accordingly,   the  net  yield  to  investors  who  invest   through
Participating  Organizations may be less than by investing in the Fund directly.
A  Participant  Investor  should read this  Prospectus in  conjunction  with the
materials provided by the Participating  Organization  describing the procedures
under which Fund shares may be purchased and redeemed through the  Participating
Organization.

    In the case of qualified Participating Organizations, orders received by the
Fund's  transfer  agent before 12 noon,  New York City time,  on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day only if the Federal Funds  required in  connection  with the orders are
received by the Fund's  transfer  agent before 4:00 p.m., New York City time, on
that day.  Orders for which Federal Funds are received after 4:00 p.m., New York
City time,  will result in share  issuance  the  following  Fund  Business  Day.
Participating Organizations are responsible for instituting procedures to insure
that purchase orders by their respective clients are processed expeditiously.

Initial Direct Purchases of Class B Shares

    Investors  who wish to  invest  in the Fund  directly  may  obtain a current
prospectus  and the  subscription  order  form  necessary  to open an account by
telephoning the Fund at the following numbers:


    Within New York                   212-830-5220
    Outside New York (TOLL FREE)      800-221-3079

Mail

    Investors may send a check made payable to "Florida Daily  Municipal  Income
Fund" along with a completed subscription order form to:


    Florida Daily Municipal Income Fund
    Reich & Tang Funds
    600 Fifth Avenue-8th Floor
    New York, New York 10020

Checks  are  accepted  subject  to  collection  at full  value in United  States
currency.  Payment by a check drawn on any member of the Federal  Reserve System
will  normally be converted  into Federal  Funds within two business  days after
receipt of the check.  Checks drawn on a non-member bank may take  substantially
longer to convert into Federal Funds.  An investor's  purchase order will not be
accepted until the Fund receives Federal Funds.

Bank Wire

    To  purchase  shares of the Fund using the wire  system for  transmittal  of
money  among  banks,  investors  should  first  obtain a new  account  number by
telephoning  the Fund at  212-830-5220  (within  New York) or at  1-800-221-3079
(outside  New York) and then  instruct  a member  commercial  bank to wire money
immediately to:

                                       9
<PAGE>
    Investors Fiduciary Trust Company
    ABA # 101003621
    Reich & Tang Funds
    DDA # 890752-953-8
    For Florida Daily Municipal
      Income Fund
    Account of (Investor's Name)                    
    Fund Account # 0827                             
    SS#/Tax ID#                                     

    The investor should then promptly  complete and mail the subscription  order
form.

    Investors planning to wire funds should instruct their bank early in the day
so the wire transfer can be accomplished  before 12 noon, New York City time, on
the same day. There may be a charge by the investor's bank for  transmitting the
money by bank wire, and there also may be a charge for use of Federal Funds. The
Fund does not charge  investors  in the Fund for its receipt of wire  transfers.
Payment in the form of a "bank wire"  received  prior to 12 noon,  New York City
time, on a Fund Business Day will be treated as a Federal Funds payment received
on that day.

Personal Delivery

    Deliver a check made payable to "Florida Daily Municipal Income Fund", along
with a completed subscription order form to:

    Reich & Tang Mutual Funds
    600 Fifth Avenue  -  8th Floor
    New York, New York 10020


Electronic Funds Transfers (EFT),
Pre- Authorized Credit and Direct
Deposit Privilege

    You may  purchase  shares of the Fund  (minimum  of $100) by having  salary,
dividend  payments,  interest payments or any other payments  designated by you,
federal  salary,  social  security,  or  certain  veteran's,  military  or other
payments from the federal  government,  automatically  deposited  into your Fund
account.  You can also have money debited from your checking account.  To enroll
in any one of these  programs,  you must  file  with  the Fund a  completed  EFT
Application, Pre-authorized Credit Application, or a Direct Deposit Sign-Up Form
for each type of  payment  that you  desire to  include  in the  Privilege.  The
appropriate  form may be obtained from your broker or the Fund. You may elect at
any time to terminate your participation by notifying in writing the appropriate
depositing  entity  and/or  federal  agency.  Death  or  legal  incapacity  will
automatically  terminate your participation in the Privilege.  Further, the Fund
may terminate your participation upon 30 days notice to you.

Subsequent Purchases of Shares

    Subsequent  purchases  can be made by bank wire, as indicated  above,  or by
mailing a check to:

    Florida Daily Municipal Income Fund
    Mutual Funds Group
    P.O. Box 13232
    Newark, New Jersey 07101-3232

    There is a $100 minimum for  subsequent  purchases  of shares.  All payments
should clearly indicate the shareholder's account number.

    Provided that the information on the subscription form on file with the Fund
is still  applicable,  a shareholder  may reopen an account without filing a new
subscription order form at any time during the year the shareholder's account is
closed or during the following calendar year.

Redemption of Shares

A redemption is effected  immediately  following,  and at a price  determined in
accordance  with,  the next  determination  of net asset value per share of each
Class upon receipt by the Fund's transfer agent of the redemption order (and any
supporting documentation which it may require).  Normally,  payment for redeemed
shares is made on the same Fund  Business Day after the  redemption is effected,
provided  the  redemption  request is received  prior to 12 noon,  New York City
time.  However,  redemption  payments  will not be  effected  unless  the  check
(including a certified or cashier's  check) used for investment has been cleared
for  payment  by the  investor's  bank,  which  could  take up to 15 days  after
investment.  Shares  redeemed  are not  entitled  to  participate  in  dividends
declared on the day a redemption becomes effective.

    A shareholder's  original subscription order form permits the shareholder to
redeem by written request
                                       10
<PAGE>
and to  elect  one or more of the  additional  redemption  procedures  described
below. A shareholder may only change the instructions  indicated on his original
subscription  order  form by  transmitting  a written  direction  to the  Fund's
transfer agent. Requests to institute or change any of the additional redemption
procedures will require a signature guarantee.

    When a  signature  guarantee  is called  for,  the  shareholder  should have
"Signature  Guaranteed"  stamped  under his  signature.  It should be signed and
guaranteed by an eligible guarantor  institution which includes a domestic bank,
a domestic savings and loan institution,  a domestic credit union, a member bank
of the  Federal  Reserve  system  or a  member  firm  of a  national  securities
exchange, pursuant to the Fund's transfer agent's standards and procedures.

Written Requests

    Shareholders  may make a  redemption  in any  amount  by  sending  a written
request to the Fund addressed to:

    Florida Daily Municipal Income Fund
    c/o Reich & Tang Funds
    600 Fifth Avenue-8th Floor
    New York, New York 10020

    All previously issued certificates submitted for redemption must be endorsed
by the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with signature guaranteed.

    Normally  the  redemption  proceeds  are paid by  check  and  mailed  to the
shareholder of record.

Checks

    By  making  the  appropriate  election  on their  subscription  order  form,
shareholders  may  request  a  supply  of  checks  which  may be used to  effect
redemptions  from the  Class of  shares of the Fund in which  they  invest.  The
checks,  which will be issued in the shareholder's  name, are drawn on a special
account  maintained by the Fund with the Fund's agent bank.  Checks may be drawn
in any amount of $250 or more.  When a check is  presented  to the Fund's  agent
bank, it instructs the Fund's  transfer  agent to redeem a sufficient  number of
full and fractional shares in the  shareholder's  account to cover the amount of
the check. The use of a check to make a withdrawal  enables a shareholder in the
Fund to receive  dividends on the shares to be redeemed up to the Fund  Business
Day on which the check clears. Checks provided by the Fund may not be certified.
Fund shares  purchased by check may not be redeemed by check until the check has
cleared, which can take up to 15 days following the date of purchase.

    There is no charge to the  shareholder  for checks provided by the Fund. The
Fund  reserves the right to impose a charge or impose a different  minimum check
amount in the future,  if the Board of Trustees  determines that doing so is in
the best interests of the Fund and its shareholders.

    Shareholders  electing  the checking  option are subject to the  procedures,
rules and  regulations  of the Fund's agent bank  governing  checking  accounts.
Checks  drawn on a jointly  owned  account may, at the  shareholder's  election,
require  only one  signature.  Checks  in  amounts  exceeding  the  value of the
shareholder's account at the time the check is presented for payment will not be
honored. Since the dollar value of the account changes daily, the total value of
the account may not be determined in advance and the account may not be entirely
redeemed  by check.  In  addition,  the Fund  reserves  the right to charge  the
shareholder's  account a fee up to $20 for checks not  honored as a result of an
insufficient  account value,  a check deemed not negotiable  because it has been
held longer than six months, an unsigned check and/or a post-dated check.

     Corporations and other entities electing the checking option are required
to  furnish  a  certified  resolution  or other  evidence  of  authorization  in
accordance with the Fund's normal  practices.  Individuals and joint tenants are
not required to furnish any supporting documentation.  Appropriate authorization
forms  will  be sent  by the  Fund  or its  agents  to  corporations  and  other
shareholders  who select this  option.  As soon as the  authorization  forms are
filed in good order with the Fund's agent bank, it will provide the  shareholder
with a supply of checks.

    The Fund  reserves  the right to  terminate  or modify the check  redemption
procedure at any time or to impose additional fees following notification to the
Fund's shareholders.
                                       11
<PAGE>
Telephone

    The Fund accepts  telephone  requests for redemption from  shareholders  who
elect this option on their  subscription order form. The proceeds of a telephone
redemption may be sent to the  shareholders  at their addresses or, if in excess
of $1,000, to their bank accounts,  both as set forth in the subscription  order
form or in a subsequent  written  authorization.  The Fund may accept  telephone
redemption instructions from any person with respect to accounts of shareholders
who  elect  this  service  and thus  such  shareholders  risk  possible  loss of
principal and interest in the event of a telephone  redemption not authorized by
them.  The Fund will employ  reasonable  procedures  to confirm  that  telephone
redemption instructions are genuine, and will require that shareholders electing
such option  provide a form of personal  identification.  Failure by the Fund to
employ such reasonable procedures may cause the Fund to be liable for the losses
incurred by investors due to unauthorized or fraudulent telephone redemptions.

    A  shareholder  making  a  telephone  withdrawal  should  call  the  Fund at
212-830-5220; outside New York at 1-800-241-3263, and state: (i) the name of the
shareholder  appearing on the Fund's  records;  (ii) the  shareholder's  account
number with the Fund; (iii) the amount to be withdrawn; (iv) whether such amount
is to be forwarded to the shareholder's  designated bank account or address; and
(v) the name of the person  requesting the redemption.  Usually the proceeds are
sent to the designated bank account or address on the same Fund Business Day the
redemption is effected,  provided the redemption  request is received  before 12
noon,  New York City time.  Proceeds are sent the next Fund  Business Day if the
redemption  request is  received  after 12 noon,  New York City  time.  The Fund
reserves the right to terminate or modify the  telephone  redemption  service in
whole or in part at any time and will notify shareholders accordingly.

    There is no redemption  charge, no minimum period of investment,  no minimum
amount  for a  redemption,  and no  restriction  on  frequency  of  withdrawals.
Proceeds of redemptions are paid by check.  Unless other  instructions are given
in proper  form to the Fund's  transfer  agent,  a check for the  proceeds  of a
redemption will be sent to the shareholders' address of record. If a shareholder
elects to redeem all the shares of the Fund he owns,  all  dividends  accrued to
the  date of such  redemption  will be paid to the  shareholder  along  with the
proceeds of the redemption.

    The right of  redemption  may not be  suspended  or the date of payment upon
redemption  postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than  customary  weekend and holiday  closings) or during which
the SEC determines  that trading  thereon is restricted.  Additional  exceptions
include any period during which an emergency  (as  determined by the SEC) exists
as a result of which  disposal by the Fund of its  portfolio  securities  is not
reasonably  practicable or as a result of which it is not reasonably practicable
for the Fund fairly to determine the value of its net assets,  or for such other
period as the SEC may by order permit for the protection of the  shareholders of
the Fund.

    The Fund has reserved the right to redeem the shares of any  shareholder  if
the net asset  value of all the  remaining  shares in the  shareholder's  or his
Participating  Organization's  account  after a  withdrawal  is less than  $500.
Written notice of a proposed mandatory redemption will be given at least 30 days
in advance to any  shareholder  whose  account is to be redeemed or the Fund may
impose  a  monthly  service  charge  of $10 on such  accounts.  For  Participant
Investor accounts,  notice of a proposed mandatory redemption will be given only
to the appropriate Participating  Organization.  The Participating  Organization
will be  responsible  for  notifying  the  Participant  Investor of the proposed
mandatory  redemption.  During the notice period a shareholder or  Participating
Organization  who  receives  such a notice  may avoid  mandatory  redemption  by
purchasing sufficient additional shares to increase his total net asset value to
the minimum amount.

Specified Amount Automatic Withdrawal Plan

    Shareholders  may elect to withdraw shares and receive payment from the Fund
of a specified  amount of $50 or more  automatically  on a monthly or  quarterly
basis. The monthly or quarterly  withdrawal payments of the specified amount are
made by the Fund on the 23rd day of the month. Whenever such 23rd day of a 
                                       12
<PAGE>
month is not a Fund  Business  Day,  the payment  date is the Fund  Business Day
preceding  the 23rd day of the month.  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.

    The  election to receive  automatic  withdrawal  payments may be made at the
time of the original  subscription  by so indicating on the  subscription  order
form. The election may also be made,  changed or terminated at any later time by
sending a signature  guaranteed  written request to the transfer agent.  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.

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 Class A shares bear the service fee under the Fund's 12b-1 Plan, the
net income of and the dividends payable to the Class A shares will be lower than
the net  income  of and  dividends  payable  to the  Class B shares of the Fund.
Dividends  paid to each Class of shares of the Fund will,  however,  be declared
and paid on the same days at the same times and, except as noted with respect to
the service fees payable  under the Plan,  will be determined in the same manner
and paid in the same amounts.

Exchange Privilege

Shareholders  of the Fund are entitled to exchange some or all of their Class of
shares in the Fund for  shares of the same  Class of  certain  other  investment
companies which retain Reich & Tang Asset Management L.P. as investment  adviser
and which participate in the exchange  privilege program with the Fund. [If only
one Class of shares is available in a particular  exchange fund, the shareholder
of the Fund is entitled to exchange  their  shares for the shares  available  in
that  exchange  fund.]  Currently  the  exchange   privilege  program  has  been
established  between the Fund and California  Daily Tax Free Income Fund,  Inc.,
Connecticut  Daily Tax Free Income Fund, Inc.,  Cortland Trust,  Inc., Daily Tax
Free Income Fund,  Inc.,  Michigan Daily Tax Free Income Fund,  Inc., New Jersey
Daily Municipal  Income Fund,  Inc., New York Daily Tax Free Income Fund,  Inc.,
North Carolina Daily Municipal Income Fund, Inc.,  Pennsylvania  Daily Municipal
Income Fund,  Reich & Tang Equity Fund, Inc. and Short Term Income Fund, Inc. In
the future,  the exchange  privilege program may be extended to other investment
companies which retain Reich & Tang Asset Management L.P. as investment  adviser
or manager.

    There is no charge for the exchange  privilege or limitation as to frequency
of exchange. The minimum amount for an exchange is $1,000. However, shareholders
who are  establishing  a new  account  with an  investment  company  through the
exchange  privilege must ensure that a sufficient number of shares are exchanged
to meet the minimum initial investment  required for the investment company into
which the exchange  is being  made.  Each Class of shares is  exchanged  at its
respective net asset value.

    The exchange privilege  provides  shareholders of the Fund with a convenient
method to shift their investment among different  investment companies when they
feel  such a  shift  is  desirable.  The  exchange  privilege  is  available  to
shareholders  resident in any state in which  shares of the  investment  company
being  acquired  may legally be sold.  Shares of the same 
                                       13
<PAGE>
Class may be exchanged only between  investment  company accounts  registered in
identical  names.  Before  making an exchange,  the investor  should  review the
current  prospectus of the  investment  company into which the exchange is to be
made.

    Instructions  for  exchanges  may be made by sending a signature  guaranteed
written request to:

    Florida Daily Municipal Income Fund
    c/o Reich & Tang Funds
    600 Fifth Avenue-8th Floor
    New York, New York 10020

or, for  shareholders  who have elected that option,  by telephoning the Fund at
212-830-5220  (within New York) or  1-800-221-3079  (outside New York). The Fund
reserves  the right to reject any  exchange  request and may modify or terminate
the exchange privilege at any time.

Tax Consequences

    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,  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"). 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.

Federal  Income  Taxes

The Fund has elected 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,  dividends derived from the interest earned on Municipal Obligations are
"exempt-interest  dividends" and are not 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)  are 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 "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" (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  will be 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.  Although
the Fund  intends to maintain a $1.00 per share net asset value,  a  shareholder
may realize a taxable gain or loss upon the disposition of shares.

    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 
                                       14
<PAGE>
from regular Federal income taxes to the Fund to the same extent as the interest
on the  underlying  Municipal  Obligations.  Counsel  has  pointed  out that the
Internal  Revenue  Service has  announced 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.  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.

    The Fund may  invest a portion  of its assets in  securities  that  generate
income that is not exempt from Federal or state income tax.  Income  exempt from
Federal  income tax may be subject to state and local income tax.  Capital gains
distributed by the Fund may be taxable.

    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.

    An exchange pursuant to the exchange privilege is treated for Federal income
tax  purposes as a sale on which a  shareholder  may  realize a taxable  gain or
loss.

Florida  Taxes

The  following  is based upon the advice of  Gunster,  Yoakley,  Valdes-Fauli  &
Stewart, P.A., 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
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.

    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 the Class A shareholders. The Fund pays these fees from its
assets on an ongoing basis and  therefore,  over time, the payment of these fees
will  increase  the cost of your  investment  and may cost you more than  paying
other types of sales charges.

    The Fund's  Board of  Trustees  has adopted a Rule 12b-1  distribution  and
service plan (the "Plan") and,  pursuant to the Plan,  the Fund and Reich & Tang
Distributors,   Inc.  (the  "Distributor")  have  entered  into  a  Distribution
Agreement and a  Shareholder  Servicing  Agreement  (with respect to the Class A
shares of the Fund only).
                                       15
<PAGE>
    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 only to the Class A shares, a service fee equal to .25% per annum of the
Class A 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 Class A 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, in addition
to the Shareholder  Servicing Fee, the Fund will pay for (i)  telecommunications
expenses  including the cost of dedicated  lines and CRT terminals,  incurred by
the  Distributor  and   Participating   Organizations   in  carrying  out  their
obligations  under the Shareholder  Servicing  Agreement with respect to Class A
shares,  and (ii)  preparing,  printing and delivering the Fund's  prospectus to
existing  shareholders  of the  Fund and  preparing  and  printing  subscription
application  forms for  shareholder  accounts.  These  payments are limited to a
maximum of .05% per annum of each Class' shares' average daily net assets.

    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  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.

    For the fiscal year ended August 31, 1998,  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 Agreement.

                                       16
<PAGE>
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 total  returns  in the table
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming  reinvestment  of all dividends and  distributions).  This
information has been audited by McGladrey and Pullen,  LLP, whose report,  along
with the Fund's financial statements, is included in the annual report, which is
available upon request.

<TABLE>
<CAPTION>
<S>                                        <C>             <C>           <C>            <C> 

                                                                                               October 6, 1994
                                                                                        (Commencement of Operations)
                                                                                                  to
                                                      Year ended August 31,                    August 31,


CLASS A                                        1998           1997            1996                 1995
-------                                        ----           ----            ----                 ----


Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period....    $   1.00        $  1.00        $   1.00              $  1.00  
                                            =========       =========      =========             =========
Income from investment operations:
  Net investment income.................        0.029          0.030           0.031                0.032
   
Dividends from net investment income....       (0.029)        (0.030)         (0.031)              (0.032)
                                             --------       -----------     ----------             --------
    
Net asset value, end of period..........    $   1.00        $  1.00        $   1.00              $  1.00  
                                            =========       =========      =========             =========
Total Return............................        2.92%          3.08%           3.09%                3.60%*
Ratios/Supplemental Data
Net assets, end of period (000).........    $ 119,754       $  96,683      $  36,758             $  20,974
Ratios to average net assets:
  Expenses..............................        0.75%           0.57%          0.56%                0.40%*
  Net investment income.................        2.86%           3.03%          3.05%                3.54%*
  Expenses paid indirectly..............        ---              ---           0.06%                    --
  Management and administration fees waived
      and expenses reimbursed...........        0.27%           0.51%          0.67%                0.95%*
</TABLE>

<TABLE>
<CAPTION>
<S>                                         <C>         <C>           <C>          <C>

                                                                                       September 19, 1994
                                                                                   (Commencement of Operations)
                                                                                               to
                                                      Year ended August 31,               August 31,


CLASS B                                        1998        1997        1996                  1995
-------                                        ----        ----        ----                  ----
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period....    $   1.00     $  1.00    $   1.00               $  1.00  
                                            =========    =========  =========              =========
Income from investment operations:
  Net investment income.................        0.032     0.033        0.033                  0.036
Dividends from net investment income....    (   0.032 )  (0.033)      (0.033)                (0.036)
                                             --------    -------   ------                     -----
Net asset value, end of period..........    $   1.00    $  1.00      $ 1.00                $  1.00  
                                            =========   =========  =========                =========
Total Return............................        3.22%      3.34%       3.35%                  3.84%*
Ratios/Supplemental Data
Net assets, end of period (000).........    $  25,050   $  11,782  $   9,611               $  10,174
Ratios to average net assets:
  Expenses..............................        0.46%       0.30%       0.31%                 0.14%*
  Net investment income.................        3.16%       3.27%       3.34%                 3.78%*
  Expenses paid indirectly..............         --         --          0.06%                  --
  Management and administration fees waived
      and expenses reimbursed...........        0.27%       0.51%       0.67%                  0.95%*

  *      Annualized

</TABLE>
                                       17
<PAGE>


A Statement  of  Additional  Information  (SAI) dated
January 4, 1999,  and the Fund's  Annual  Report                FLORIDA
include  additional  information  about the Fund and            DAILY
its investments  and are  incorporated  by reference            MUNICIPAL
into this  prospectus.  You may obtain the SAI and              INCOME
the Annual  Report and  material  incorporated  by              FUND
reference without  charge  by  calling  the  Fund  at
1-800-221-3079.  To  request  other information,
please call your financial intermediary or the Fund.

======================================================





======================================================          PROSPECTUS
                                                                January 4, 1999
A current SAI has been filed with the  Securities
and Exchange  Commission.  You may  visit  the
Securities   and  Exchange   Commission's   Internet            Reich & Tang
website (www.sec.gov)  to view the SAI,  material             Distributors, Inc.
incorporated  by reference  and other information.            600 Fifth Avenue
These materials can also be reviewed and copied               New York, NY 10020
at the Commission's Public  Reference  Room in                  212) 830-5220
Washington  D.C.  Information on the operation of
the Public Reference Room may be obtained  by
calling the Commission  at 1-800-SEC-0330.  In
addition, copies of these materials may be
obtained, upon payment of a  duplicating  fee, by
writing the Public  Reference  Section of the
Commission, Washington, D.C. 20549-6009.



811-8654




<PAGE>
FLORIDA
DAILY MUNICIPAL                         600 Fifth Avenue, New York,  NY  10020
INCOME FUND                             (212) 830-5220
================================================================================
                    STATEMENT OF ADDITIONAL INFORMATION
                              January 4, 1999

               RELATING TO THE FLORIDA DAILY MUNICIPAL INCOME FUND
                       PROSPECTUS DATED JANUARY 4, 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 Florida Daily Municipal Income Fund ( the "Fund"),  dated January 4, 1999 and
should be read in conjunction with the Fund's Prospectus.


A Prospectus may be obtained from any  Participating  Organization or by writing
or calling the Fund toll-free at 1-(800) 221-3079.  The Financial  Statements of
the Fund have been  incorporated  by reference to the Fund's Annual Report.  The
Annual  Report is  available,  without  charge,  upon  request  by  calling  the
toll-free number provided.


This Statement of Additional  Information is  incorporated by reference into the
respective Prospectus in its entirety.

<TABLE>
<CAPTION>
<S>                                                  <C>    <C>                                                    <C> 

                                                  Table of Contents
----------------------------------------------------------------------------------------------------------------------
Fund History.......................................... 2    Purchase, Redemption
Description of the Fund and its Investments and                and Pricing Shares...................................20
  Risks............................................... 2    Taxation of the Fund....................................25
Management of the Fund................................14    Underwriters............................................27
Control Persons and Principal Holders of                    Calculation of Performance Data.........................27
  Securities..........................................15    Financial Statements....................................28
Investment Advisory and Other Services................16    Description of Ratings..................................29
Brokerage Allocation and Other Practices..............19    Corporate Taxable Equivalent Yield Table................30
Capital Stock and Other Securities....................19    Individual Taxable Equivalent Yield Table...............31
</TABLE>


<PAGE>
I.  FUND HISTORY

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.

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 to
provide Florida  residents with 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 tax, as is believed
to be 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  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 (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.) 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 territories and possessions of the United
States  and  their  authorities,   agencies,   instrumentalities  and  political
subdivisions  on December  31st of each taxable year,  shareholders  of the Fund
will be exempt from the Florida intangible  personal property tax. (See "Florida
Taxes" herein.) To the extent that 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 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
Florida  intangible  personal  property  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 Florida  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  Florida  Municipal  Obligations.  In  view  of  this
"concentration"  in  bank   participation   certificates  in  Florida  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.
                                       2
<PAGE>
As used herein, 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.

The Fund may only purchase United States dollar-denominated securities that have
been determined by the Fund's Board of Trustees to present minimal credit risks
and that are Eligible  Securities at the time of acquisition.  The term Eligible
Securities  means:  (i)  securities  which have or are deemed to have  remaining
maturities  of 397 days or less and rated in the two highest  short-term  rating
categories by any two nationally  recognized  statistical  rating  organizations
("NRSROs") or in such  categories by the only NRSRO that has rated the Municipal
Obligations  (collectively,  the "Requisite NRSROs"); or (ii) unrated securities
determined  by the Fund's  Board of Trustees to be of  comparable  quality.  In
addition,  securities  which have or are deemed to have remaining  maturities of
397  days or less but that at the time of  issuance  were  long-term  securities
(i.e.  with  maturities  greater  than 366 days) are deemed  unrated  and may be
purchased if such had received a long-term  rating from the Requisite  NRSROs in
one of the three highest rating categories. Provided, however, that such may not
be purchased if it (i) does not satisfy the rating requirements set forth in the
preceding  sentence and (ii) has received a long-term rating from any NRSRO that
is not within the three highest long-term rating categories.  A determination of
comparability  by the  Board of  Trustees  is made on the  basis of its  credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee,  insurance  or  other  credit  facility  issued  in  support  of  the
securities.  While there are several  organizations  that  currently  qualify as
NRSROs, two examples of NRSROs are Standard & Poor's Rating Services, a division
of The  McGraw-Hill  Companies,  ("S&P") and  Moody's  Investors  Service,  Inc.
("Moody's").  The two  highest  ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in the
case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in the
case of notes;  "A-1" and "A-2" by S&P or "Prime-1"  and "Prime-2" by Moody's in
the case of  tax-exempt  commercial  paper.  The  highest  rating in the case of
variable and  floating  demand notes is "VMIG-1" by Moody's or "SP-1/AA" by S&P.
Such  instruments  may produce a lower yield than would be  available  from less
highly rated instruments.

All  investments  by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition  and the average  maturity of the Fund
portfolio (on a  dollar-weighted  basis) will be 90 days or less. The maturities
of variable rate demand  instruments held in the Fund's portfolio will be deemed
to be the longer of the period  required  before the Fund is entitled to receive
payment of the principal amount of the instrument  through demand, or the period
remaining  until  the  next  interest  rate  adjustment,   although  the  stated
maturities may be in excess of 397 days.

Subsequent  to its purchase by the Fund, a rated  security may cease to be rated
or its rating may be reduced  below the  minimum  required  for  purchase by the
Fund. If this occurs, the Board of Trustees of the Fund shall promptly reassess
whether the security  presents  minimal credit risks and shall cause the Fund to
take such action as the Board of Trustees determines is in the best interest of
the Fund and its  shareholders.  However,  reassessment  is not  required if the
security  is disposed of or matures  within  five  business  days of the Manager
becoming  aware  of the new  rating  and  provided  further  that  the  Board of
Trustees is subsequently notified of the Manager's actions.

In addition,  in the event that a security (i) is in default,  (ii) ceases to be
an Eligible  Security  under Rule 2a-7 of the 1940 Act or (iii) is determined to
no longer present  minimal credit risks,  or an event of insolvency  occurs with
respect to the issues of a  portfolio  security  or the  provider  of any Demand
Feature  or  Guarantee,   the  Fund  will  dispose  of  the  security  absent  a
determination  by the Fund's  Board of Trustees  that  disposal of the security
would not be in the best  interests of the Fund.  Disposal of the security shall
occur as soon as practicable consistent with achieving an orderly disposition by
sale,  exercise of any demand  feature or  otherwise.  In the event of a default
with respect to a security 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.

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.

The Fund has  elected  and  intends  to  continue  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. In satisfying this test, the
Fund can include  securities  of any one issuer only if such  securities  do not
exceed  5% in value of the total  assets of the Fund and 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 Florida 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
                                        4
<PAGE>
     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  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  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 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,  Florida
     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 will be consistent with
     the  Fund's  "Description  of the Fund and its  Investments  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 Trustees 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 Trustees 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 Trustees 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 Trustees 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 Trustees.  The Fund's Board of Trustees may determine  that an
unrated  variable rate demand  instrument meets the
____________________________
* The  prime  rate  is  generally  the  rate  charged  by a  bank  to  its  most
creditworthy customers for Short-Term bans. 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.
                                       5
<PAGE>
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 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 Trustees 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 the  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  liguidity  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  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
Florida 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 net 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

                                       6
<PAGE>
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.

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.
                                       7
<PAGE>
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.

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 Trustees. 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 income tax and the Florida  intangible
personal property 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
                                       8
<PAGE>
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  whendistributed by the Fund. The Fund will not
invest in a  repurchase  agreement  maturing in more 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.

Florida Risk Factors

Because the Fund invests in Florida  issues,  it is  susceptible  to  political,
economic,  regulatory or other factors  affecting  issuers of Florida  Municipal
Obligations and bank participant  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.

The State  Economy.  In 1980 the State of Florida (the "State")  ranked  seventh
among the fifty states with a population  of 9.7 million  people.  The State has
grown  dramatically since then and, as of April 1, 1997, ranked fourth among the
fifty states with an estimated  population of 14.7 million,  an overall increase
of approximately 51.5% since 1980. Because of the national recession,  Florida's
net-migration  declined to 138,000 in 1992, but migration has since recovered to
255,000 in 1996.  Since 1987 the prime working age population  (18-44) has grown
at an average  annual rate of 2.1%.  The share of  Florida's  total  working age
population  (18-64) to total state  population is  approximately  60%.  Non-farm
employment  has grown by  approximately  21.2% since 1991. The service sector is
Florida's largest  employment  sector,  presently  accounting for 34.9% of total
non-farm employment.  Manufacturing jobs in Florida are concentrated in the area
of high-tech and high  value-added  sectors,  such as electrical  and electronic
equipment  as well as printing and  publishing.  Foreign  trade has  contributed
significantly to Florida's  employment  growth.  Florida's  dependence on highly
cyclical construction and construction-related manufacturing has declined. Total
contract  construction  employment as a share of total  non-farm  employment has
fallen  from a peak of over  10% in  1973,  to  approximately  7.5% in the  late
1980's,  to  approximately  5% in 1996.  Although the job creation  rate for the
State  since  1987 is almost  over two times the rate for the nation as a whole,
since 1995,  the  unemployment  rate for the State  tracked  below the  national
average. The average rate of unemployment for Florida since 1987 is 5.96%, while
the national  average is 5.89%.  Because Florida has a  proportionately  greater
retirement age population,  property income  (dividends,  interest and rent) and
transfer  payments (social security and pension  benefits) are a relatively more
important source of income.

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.

The State Budget.  Florida  prepares an annual  budget which is formulated  each
year  and  presented  to  the  Government  and  Legislature.   Under  the  State
Constitution  and  applicable  statutes,  the State budget as a whole,  and each
separate  fund within the State budget,  must be kept in balance from  currently
available  revenues during each State fiscal year. (The State's fiscal year runs
from July 1 through June 30.) The Governor and the  Comptroller of the State are
charged  with the  responsibility  of  ensuring  that  sufficient  revenues  are
collected to meet appropriations and that no deficit occurs in any State fund.

The financial operations of the State covering all receipts and expenditures are
maintained  through the use of four types of funds:  the General  Revenue  Fund,
Trust Funds,  the Working  Capital Fund and the Budget  Stabilization  Fund. The
majority of the State's tax revenues are  deposited in the General  Revenue Fund
and moneys in the General Revenue Fund are expended  pursuant to  appropriations
acts. In fiscal year 1996-97,  appropriations for education,  health and welfare
and public safety represented  approximately 53%, 26% and 14%, respectively,  of
funds available from the General Revenue Fund. The Trust Funds consist of moneys
received by the State which under law or trust  agreement are  segregated  for a
purpose  authorized  by law.  Revenues in the General  Revenue Fund which are in
excess of the amount needed to meet  appropriations  may be  transferred  to the
Working Capital Fund.
                                       9
<PAGE>
State Revenues.  Estimated  General  Revenues,  Working Capital Fund revenue and
Budget  Stabilization  funds of  $18,621.8  million for the fiscal year June 30,
1998 represent an increase of 11.2% over revenues for fiscal year ended June 30,
1997.  Estimated  Revenue for the fiscal year June 30, 1997 of $15,568.7 million
represents  an increase of 6.3% over the fiscal year ended June 30,  1996.  With
combined General Revenues,  Working Capital Fund and Budget  Stabilization  Fund
appropriations at $18,023.9  million,  unencumbered  reserves at fiscal year end
June 30, 1999 are estimated at $1,089.3 million.

In the fiscal year ended June 30, 1997, the State derived  approximately  67% of
its total direct revenues for deposit in the General Revenue Fund,  Trust Funds,
Working Capital Fund and Budget  Stabilization  funds from State taxes and fees.
Federal Funds and other special revenues  accounted for the remaining  revenues.
The greatest  single source of tax receipts in the State is the 6% sales and use
tax.  For the fiscal year ended June 30, 1997,  receipts  from the sales and use
tax totaled $11,031.2 million, an increase of approximately 7.4% over the fiscal
year  ended  June 30,  1995.  In  addition  to the 6%  State  sales  tax,  local
governments may (by referendum)  assess a 0.5% or 1% discretionary  sales surtax
within their county. Proceeds from this local option sales tax are earmarked for
funding local infrastructure  programs and acquiring land for public recreation,
or the protection or  conservation  of local  resources in accordance with State
law. In  addition,  non-consolidated  counties  with a  population  in excess of
800,000 may levy a local option sales tax to fund indigent  health care. The tax
rate of this health care  surtax may not exceed  0.5% and the  combined  levy of
this  surtax  with the  infrastructure  surtax may not  exceed 1%.  Furthermore,
charter  counties  which adopted a charter prior to June 1, 1976 and each county
with a consolidated county/municipal government may (by referendum) assess up to
a 1%  discretionary  sales surtax within their  county,  to be earmarked for the
development,  construction,  maintenance and operation of a fixed guideway rapid
transit system or may be remitted to an expressway or  transportation  authority
for use on county roads,  bridges or bus systems,  or to service bonds financing
roads or bridges,  in accordance  with State law. The second  largest  source of
State  tax  receipts  is the tax on  motor  fuels  including  the  tax  receipts
distributed  to local  governments.  Receipts  from the taxes on motor fuels are
almost entirely dedicated to trust funds for specific purposes or transferred to
local  governments  and are not included in the General  Revenue  Fund.  For the
fiscal  year ended  June 30,  1996,  collections  of this tax  totaled  $2,012.0
million.

The State  currently does not impose a personal income tax.  However,  the State
does  impose  a  corporate  income  tax  on  the  net  income  of  corporations,
organizations,  associations and other artificial  entities for the privilege of
conducting  business,  deriving  income or  existing  within the State.  For the
fiscal year ended June 30, 1997,  receipts from the corporate income tax totaled
$1,362.3 million,  an increase of approximately 17.2% from the fiscal year ended
June 30, 1996.  The  Documentary  Stamp Tax  collections  totaled $844.2 million
during the fiscal year ended June 30, 1997,  or  approximately  an 8.9% increase
from the fiscal year ended June 30, 1996 The  Alcoholic  Beverage Tax, an excise
tax on beer,  wine and liquor and a major source of state funds,  totaled $447.2
million in the  fiscal  year June 30,  1997.  Additionally,  the State  levies a
surcharge on alcoholic  beverages sold for  consumption on the premises.  In the
fiscal year ended June 30, 1997, a total of $106.6  million was  collected  from
these  surcharges.  Collections of the Intangible  Personal  Property Tax raised
$952.4  million in the fiscal year ended June 30, 1997, a 6.3% increase from the
previous fiscal year. The Florida lottery produced sales of $2.09 billion in the
fiscal year ended June 30, 1997 of which $792.3 million was used for education.

While the State  does not levy ad valorem  taxes on real  property  or  tangible
personal property, counties,  municipalities and school districts are authorized
by law,  and  special  districts  may be  authorized  by law, to levy ad valorem
taxes.  Under  the State  Constitution,  ad  valorem  taxes may not be levied by
counties,  municipalities,  school districts and water  management  districts in
excess of the  following  respective  millages  upon the assessed  value of real
estate and tangible personal  property:  for all county purposes,  10 mills; for
all municipal  purposes,  10 mills; for all school  purposes,  10 mills; and for
water  management  purposes,  either  0.05  mill  or 1.0  mill,  depending  upon
geographic location.  These millage limitations do not apply to taxes levied for
payment of bonds and taxes  levied for  periods  not longer  than two years when
authorized by a vote of the electors.  (Note:  one mill equals  one-tenth of one
cent.)

The State Constitution and statutes provide for the exemption of homesteads from
certain taxes. The homestead exemption is an exemption from all taxation, except
for  assessments for special  benefits,  up to a specific amount of the assessed
valuation of the homestead.  This exemption is available to every person who has
the legal or  equitable  title to real estate and  maintains  thereon his or her
permanent home. All permanent residents of the State are currently entitled to a
$25,000 homestead exemption from levies by all taxing authorities; however, such
exemption is subject to change upon voter approval.

As of  January 1,  1994,  the  annual  increase  in the  assessed  valuation  of
homestead  property  is  constitutionally  limited  to the  lesser  of 3% or the
increase in the Consumer  Price Index during the  relevant  year,  except in the
event of a sale thereof during such year, and except as to improvements  thereto
during such year.

                                       10
<PAGE>
Since municipalities, counties, school districts and other special purpose units
of local governments with power to issue general obligation bonds have authority
to increase the millage levy for voter approved  general  obligation debt to the
amount  necessary  to  satisfy  the  related  debt  service  requirements,   the
constitutional  valuation cap is not expected to adversely affect the ability of
these  entities to pay the  principal of or interest on such general  obligation
bonds. However, in periods of high inflation, those local government units whose
operating  millage levies are approaching the  constitutional  cap and whose tax
base  consists  largely of  residential  real  estate,  may,  as a result of the
constitutional  valuation cap, need to place greater  reliance on non-ad valorem
revenue sources to meet their operating budget needs.

State General  Obligation Bonds and State Revenue Bonds. The State  Constitution
does not  permit  the  State  to issue  debt  obligations  to fund  governmental
operations.  Generally,  the State Constitution  authorizes State bonds pledging
the full faith and credit of the State only to finance or refinance  the cost of
State fixed capital  outlay  projects,  upon approval by a vote of the electors,
and provided that the total outstanding  principal amount of such bonds does not
exceed 50% of the total tax revenues of the State for the two  preceding  fiscal
years.  Revenue bonds may be issued by the State or its agencies  without a vote
of the  electors  only to finance or refinance  the cost of State fixed  capital
outlay projects or higher education  student loans which are payable solely from
funds derived directly from sources other than State tax revenues.

Exceptions to the general provisions  regarding the full faith and credit pledge
of the State are  contained  in specific  provisions  of the State  Constitution
which  authorize  the pledge of the full faith and credit of the State,  without
electorate approval, but subject to specific coverage requirements, for: certain
road and bridge projects (including the actual and incidental costs of acquiring
real property or the rights thereto for state roads), county education projects,
State  higher  education   projects,   State  system  of  Public  Education  and
construction of air and water pollution control and abatement facilities,  solid
waste disposal facilities and certain other water facilities.

Local Bonds. The State  Constitution  provides that counties,  school districts,
municipalities,  special  districts  and local  governmental  bodies with taxing
powers may issue debt obligations  payable from ad valorem taxation and maturing
more than 12 months after  issuance,  only (i) to finance or  refinance  capital
projects  authorized by law, provided that electorate  approval is obtained;  or
(ii) to refund  outstanding debt obligations and interest and redemption premium
thereon at a lower net average interest cost rate.

Counties,  municipalities  and special districts are authorized to issue revenue
bonds to finance a variety of self-liquidating  projects pursuant to the laws of
the State, such revenue bonds to be secured by and payable from the rates, fees,
tolls,  rentals and other charges for the services and  facilities  furnished by
the  financed  projects.  Under  State  law,  counties  and  municipalities  are
permitted  to issue  bonds  payable  from  special  tax sources for a variety of
purposes,  and municipalities and special districts may issue special assessment
bonds.

Bond Ratings.  General  obligation bonds of the State are currently rated Aa by
Moody's and AA by S&P's.

Florida Retirement System

This system was created in 1970 to provide a  retirement  and  survivor  benefit
program for participating  public  employees.  Although  retirement  coverage is
employee   noncontributory  and  there  are  cost-of-living   adjustments,   the
Constitution  does not allow any increase in the  benefits  unless that unit has
made provision for the funding of the increase on a sound actuarial  basis.  The
latest actuarial update of the Florida  Retirement System prepared as of July 1,
1996 indicated that the value of the assets  available for benefits funded 86.4%
of the pension benefit obligation.

Florida Hurricane Catastrophe Fund

The  Florida  Hurricane  Catastrophe  Fund (FHCF) was created in 1993 as a State
trust fund to provide reimbursement to qualified insurers for a portion of their
catastrophic hurricane losses; thereby creating additional insurance capacity to
ensure that covered  structures (and their  contents)  damaged or destroyed in a
hurricane may be repaired or reconstructed as soon as possible. Payments made to
insurers  shall not  exceed the monies in the fund,  together  with the  maximum
amount of revenue bonds that may be issued by a county or municipality.

Litigation.  Due to its size and its broad range of  activities,  the State (and
its  officers and  employees)  are involved in numerous  routine  lawsuits.  The
managers  of the  departments  of the State  involved in such  routine  lawsuits
believe that the results of such pending  litigation will not materially  affect
the State's financial  position.  In addition to the routine  litigation pending
against the State, its officers and employees, the following lawsuits and claims
are also pending:

      (a) The Florida  Department of  Transportation  (FDOT) filed an action
          against the adjoining  property owners seeking a declaratory  judgment
          from the Dade County  Circuit  Court that the FDOT is not the owner of
          the
                                       11
<PAGE>
          property subject to a claim by the U.S.  Environmental  Protection
          Agency  (EPA).  The EPA is seeking  clean-up  costs,  pursuant  to the
          Comprehensive  Environmental  Response Compensation and Liability Act,
          regarding  property  which the EPA  alleges  is owned by the FDOT (and
          formerly owned by CSX  Transportation,  Inc.).  The case was dismissed
          and the FDOT's  appeal of the order of dismissal  is pending.  The EPA
          has  agreed to await the  outcome  of the  FDOT's  Declaratory  Action
          before proceeding further. If the FDOT is unsuccessful in its actions,
          the possible clean-up costs could exceed $25 million.

      (b) In a class action suit,  clients of residential  placement for the
          placement  of the  developmentally  disabled  are seeking  refunds for
          services  where  children  were entitled to free  education  under the
          Education for Handicapped Act (EHA).  The District Court held that the
          State did not charge maintenance fees for children between the ages of
          5 and 17  based on the EHA.  All  appeals  have  been  exhausted.  The
          State's  potential  cost of refunding  these  charges could exceed $42
          million.  However,  attorneys  are in the process of  negotiating  the
          settlement amount.

      (c) Plaintiffs  have  challenged the  constitutionality  of the Public
          Medical Assistance Trust annual assessment of net operating revenue of
          free-standing  out-patient facilities offering sophisticated radiology
          services. A trial has not been scheduled. If the State is unsuccessful
          in its  actions,  the  potential  refund  liability  could  amount  to
          approximately $70 million.

      (d) An action has been  brought by one captain and one  lieutenant  in
          the Department of Corrections seeking  declaratory  judgment that they
          (and  potentially  700  similarly  situated  others)  are  not  exempt
          employees  under the Fair Labor  Standards Act (FLSA) and,  therefore,
          are entitled to overtime  compensation  at a rate of not less than one
          and one-half times their regular rate of pay for overtime hours worked
          since April 1, 1992, including liquidated damages. A court has entered
          final summary  judgment  awarding the  plaintiff's  attorneys fees and
          costs but not overtime pay or liquidated damages.

      (e) In an inverse  condemnation  case  claiming that the action of the
          State  constitutes  a  taking  of the  plaintiff's  leases  for  which
          compensation  is due,  final  judgment  has been  made in favor of the
          State.  However,  the  plaintiff has filed for a review by the Florida
          Supreme Court and the State is awaiting the decision by the Court.

      (f) An action has been brought to  determine  the issue of whether the
          State's  Refund  Statute  for  dealer  repossessions   authorizes  the
          Department of Revenue to grant a refund to a financial  institution as
          the assignee of numerous  security  agreements  governing  the sale of
          automobiles  and other  property  sold by dealers.  The issue turns on
          whether the Legislature  intended the Statute only to provide a refund
          or a credit to the  dealer who  actually  sold the  tangible  personal
          property and  collected and remitted the tax or intended that right to
          be  assignable.  Several  banks  have  applied  for  refunds  and  the
          potential refund to financial institutions exceeds $30 million.

      (g) The  following  information  concerning  litigation  involving the
          State of Florida has been provided by the State of Florida  Department
          of Legal Affairs.  Plaintiffs have challenged the constitutionality of
          a portion of Chapter  88-555,  Laws of  Florida,  whereby  the Florida
          Legislature  amended  the  annual  and sick  leave  benefits  of State
          employees,  decreasing the former and  increasing the latter.  Several
          employees' unions challenged the Legislature's actions, asserting that
          the Legislature had abridged their right to collectively  bargain,  as
          guaranteed  by Article I, Section 6 of the Florida  Constitution.  The
          Florida  Supreme  Court ordered the State to pay annual and sick leave
          for  the  year  1998-89  at the  levels  contained  in the  collective
          bargaining agreement.

      (h) The state of Florida  settled  its lawsuit  against  The  American
          Tobacco Co., et al. on August 18, 1997.  The $11.3 billion  settlement
          requires  an  initial  payment  of $1  billion to the State of Florida
          within one year and the  remainder of the  settlement  OT be paid over
          the next 24 years.

Summary.  Many factors including  national,  economic,  social and environmental
policies and  conditions,  most of which are not within the control of the State
or its local units of  government,  could affect or could have an adverse impact
on the financial condition of the State. Additionally, the limitations placed by
the State  Constitution  on the State and its  local  units of  government  with
respect to income taxation,  ad valorem  taxation,  bond  indebtedness and other
matters discussed above, as well as other applicable statutory limitations,  may
constrain  the  revenue-generating  capacity of the State and its local units of
government  and,  therefore,  the ability of the issuers of the Bonds to satisfy
their obligations thereunder.

There can be no assurance that general  economic  difficulties  or the financial
circumstances of Florida or its counties and  municipalities  will not adversely
affect the market value of Florida  Municipal  Obligations or the ability of the
obligors to pay debt service on such obligations.
                             12
<PAGE>
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  thelesser  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  "Description 
     of the Fund and its  Investments  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  "Description of
     the Fund and its Investments 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.

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  "
     Description of the Fund and its Investments 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).
                                       13
<PAGE>
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 Trustees,  which is responsible  for the overall  management
and  supervision  of the Fund,  has employs  the Manager to serve as  investment
manager of the Fund. The Manager  provides  persons  satisfactory  to the Fund's
Board of Trustees to serve as officers of the Fund.  Such  officers,  as well as
certain other  employees and Trustees of the Fund, may be 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 Trustees and Officers of the Fund and their principal occupations during the
past five years are set forth below. Unless otherwise specified,  the address of
each of the following persons is 600 Fifth Avenue, New York, New York 10020. Mr.
Duff may be deemed an  "interested  person" of the Fund,  as defined in the 1940
Act, on the basis of his affiliation with Reich & Tang Asset Management L.P.

Steven W. Duff,  45 - President and Trustee of the Fund,  has been  President of
the Mutual Funds  Division of the Manager  since  September  1994.  Mr. Duff was
formerly  Director of Mutual Fund  Administration  at  NationsBank  which he was
associated  with from June 1981 to August 1994. Mr. Duff is also President and a
Director/Trustee of 13 other funds in the Reich & Tang Fund Complex, Director of
Pax World Money  Market Fund,  Inc.,  Executive  Vice  President of Reich & Tang
Equity Fund,  Inc.,  and  President  and Chief  Executive  Officer of Tax Exempt
Proceeds Fund, Inc. and President of Back Bay Funds, Inc.

Dr.  W.  Giles  Mellon,  67 - Trustee  of the Fund,  is  Professor  of  Business
Administration  and  Area  Chairman  of  Economics  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 14 other
funds in the Reich & Tang Fund Complex and a Director of Pax World Money Market
Fund, Inc.

Robert  Straniere,  57 - Trustee of the Fund,  has been a member of the New York
State Assembly and a partner with The Straniere Law Firm since 1981. His address
is 182 Rose  Avenue,  Staten  Island,  New York 10306.  Mr.  Straniere is also a
Director/Trustee  of 14  other  funds in the  Reich & Tang  Fund  Complex  and a
Director of Life Cycle Mutual Funds, Inc.

Dr.  Yung  Wong,  60 - Trustee  of the Fund,  was  Director  of Shaw  Investment
Management  (UK) Limited from 1994 to October 1995 and formerly  General Partner
of Abacus Partners  Limited  Partnership (a general partner of a venture capital
investment  firm) from 1984 to 1994.  His address is 29 Alden  Road,  Greenwich,
Connecticut  06831.  Dr. Wong has been a Director of  Republic  Telecom  Systems
Corporation (a provider of telecommunications  equipment) since January 1989 and
of TelWatch, Inc. (a provider of network management software) since August 1989.
Dr. Wong is also a  Director/Trustee  of 14 other funds in the Reich & Tang Fund
Complex and a Director of Pax World Money Market  Fund,  Inc. 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 16
other funds in the Reich & Tang Fund  Complex and a Vice  President of Pax World
Money Market Fund, Inc..

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.
                                       14
<PAGE>
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
Secretary of 13 other funds and a Vice  President  and Secretary of 5 additional
funds  in the  Reich  & Tang  Fund  Complex.  In  addition,  Ms.  Finn is also a
Secretary of Pax World Money Market Fund, Inc.

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 16 other
funds in the Reich & Tang Fund  Complex,  a Treasurer  of Pax World Money Market
Fund, Inc. 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 16
other funds in the Reich & Tang Fund  Complex  and  Assistant  Treasurer  of Pax
World Money Market Fund, Inc.

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 trustees'  fees
paid  to  the  three  disinterested  directors,  pursuant  to the  terms  of the
Investment Management Contract (see "Manager" herein.)

Trustees 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 Trustees  meeting
attended  and  are  reimbursed  for  all  out-of-pocket   expenses  relating  to
attendance at such meetings. Trustees who are affiliated with the Manager do not
receive compensation from the Fund. See Compensation Table.

                                  Compensation Table

<TABLE>
<CAPTION>
<S>                      <C>                       <C>                      <C>                       <C>

                                                                                                      Total Compensation from
                                                                                                      Fund and Fund Complex Paid
                                                                                                      to Trustees*
                          Aggregate Compensation   Pension or Retirement     Estimated Annual
                          from the Fund            Benefits Accrued as Part  Benefits upon Retirement
                                                   of Fund Expenses
Name of Person,
Position


Dr. W. Giles Mellon,      $2,000                   0                         0                        $53,750 (15 Funds)
Trustee

Robert Straniere,         $2,000                   0                         0                        $53,750 (15 Funds)
Trustee


Dr. Yung Wong,            $2,000                   0                         0                        $53,750 (15 Funds)
Trustee
</TABLE>
*    The total  compensation  paid to such persons by the Fund and Fund Complex
     for the fiscal year ending August 31, 1998 (and, with respect to certain of
     the funds in the Fund Complex,  estimated to be paid during 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  November  30,  1998 there  were  54,704,194  shares of Class A common  stock
outstanding  and 22,043,930  shares of Class B Common Stock  outstanding.  As of
November  30,  1998,  the amount of shares owned by all officers and Trustees of
the Fund as a group were 6.32% of the outstanding  shares of the Fund. Set forth
below is certain  information  as to persons  who owned 5% or more of the Fund's
outstanding shares as of November 30, 1998:


CLASS A

                                          % of                 Nature of
Name and Address                          Class                Ownership

Judith A. McNamara                        9.74%               Individual
335 Edgemere                                                     
Way East, Naples,  FL  34105-7151


CLASS B

No persons own 5% or more of outstanding common stock of Class B Shares
                                       15
<PAGE>
V.  INVESTMENT ADVISORY AND OTHER SERVICES

The  Investment  Manager for the Fund is Reich & Tang Asset  Management  L.P., a
Delaware  limited  partnership with principal  offices at 600 Fifth Avenue,  New
York,  New York 10020.  The Manager  was, as of November  30,  1998,  investment
manager,  adviser, or supervisor with respect to assets aggregating in excess of
$12.3 billion.  In addition to the Fund, the Manager acts as investment  manager
and administrator of 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
(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  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 had a term  which  extended  to July 31,  1999.  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  trustees  who  are  not  parties  to the
Investment Management Contract or interested persons of any such party, by votes
cast in person at a meeting called for the purpose of voting on such matter.

Pursuant to the Investment  Management Contract,  the Manager manages the Fund's
portfolio of  securities  and makes  decisions  with respect to the purchase and
sale of investments,  subject to the general control of the Board of Trustees of
the Fund.

The Manager provides  persons  satisfactory to the Board of Trustees of the Fund
to serve as  officers  of the Fund.  Such  officers,  as well as  certain  other
employees  and  trustees of the Fund,  may be trustees or officers of NEIC,  the
sole  general  partner  of the  Manager,  or  employees  of the  Manager  or its
affiliates.

The Investment  Management Contract is terminable without penalty by the Fund on
sixty days'  written  notice  when  authorized  either by  majority  vote of its
outstanding  voting  shares or by a vote of a majority of its Board of Trustees,
or by the Manager on sixty days written notice, and will automatically terminate
in the event of its assignment. The 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.
                                       16
<PAGE>
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  $284,259,
$179,993 and $88,338 of which  $270,723,  $171,422  and $85,011 was  voluntarily
waived.

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 $541,446,  $342,844, and $170,022,  respectively of which $94,753,  $262,474
and  $170,022  was  voluntarily  waived.  The  Fund's net assets at the close of
business  on August 31,  1998  totaled  $144,804,106.  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 both
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
shareholder  servicing  fee,  the Manager from its  management  fee 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 Trustees, officers and employees of the Fund and costs of other
personnel  performing  services for the Fund who are not officers of the Manager
or its  affiliates,  costs  of  investor  services,  shareholders'  reports  and
corporate  meetings,  SEC registration fees and expenses,  state securities laws
registration  fees and  expenses,  expenses of preparing and printing the Fund's
prospectus  for delivery to existing  shareholders  and of printing  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
                                       17
<PAGE>
accordance  with a plan  permitted by the Rule. The Fund's Board of Trustees has
adopted a distribution and service plan (the "Plan") and,  pursuant to the Plan,
the Fund has entered into a Distribution  Agreement and a Shareholder  Servicing
Agreement (with respect to Class A shares only) with Reich & Tang  Distributors,
Inc., (the "Distributor"), as distributor of the Fund's shares.

The Class A 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 shares only), 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 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 shares and for  payments to  Participating  Organizations
with  respect  to  servicing   their  clients  or  customers  who  are  Class  A
shareholders of the Fund. The Class B shareholders  will not receive the benefit
of such services from Participating  Organizations and,  therefore,  will not be
assessed a 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,  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 $285,729,
none of which was voluntarily  waived.  During the same period,  the Manager and
Distributor  made total payments under the Plan to or on behalf of Participating
Organizations  of $372,666.  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 Manager from its own resources  including
the management  fee. Of the total amount paid pursuant to the Plan,  $10,334 was
utilized for compensation to sales personnel,  $3,331 on Prospectus printing and
$455 on miscellaneous expenses.

Under the Distribution  Agreement,  the Distributor,  for nominal  consideration
(i.e., $1.00) and as agent for the Fund, will solicit orders for the purchase of
the Fund's  shares,  provided  that any  subscriptions  and  orders  will not be
binding on the Fund until accepted by the Fund as principal.

The Plan and the Shareholder  Servicing  Agreement  provide that, in addition to
the  Shareholder  Servicing  Fee,  the Fund will pay for (i)  telecommunications
expenses,  including the cost of dedicated lines and CRT terminals,  incurred by
the   Participating   Organizations   and  Distributor  in  carrying  out  their
obligations under the Shareholder  Servicing Agreement with respect to the Class
A shares and (ii)  preparing,  printing and delivering the Fund's  prospectus to
existing  shareholders  of the  Fund and  preparing  and  printing  subscription
application forms for shareholder accounts.

The Plan  provides that the Manager may make payments from time to time from 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   and  related
administrative  functions  on behalf of the Class A shares of the Fund;  (ii) to
compensate  certain  Participating  Organizations  for  providing  assistance in
distributing  the  Fund's  shares;  and (iii) to pay the costs of  printing  and
distributing the Fund's prospectus to prospective  investors,  and to defray the
cost  of the  preparation  and  printing  of  brochures  and  other  promotional
materials,   mailings  to  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  purpose  enumerated  in (i) above.  The  Distributor
determines the amount of such payments made pursuant to the Plan,  provided that
such  payments will not increase the amount which the Fund is required to pay to
the  Manager  or the  Distributor  for any  fiscal  year  under  the  Investment
Management  Contract or the Shareholder  Servicing  Agreement in effect for that
year.

In  accordance  with the Rule,  the Plan  provides  that all written  agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating   Organizations  or  other   organizations   must  be  in  a  form
satisfactory  to the Fund's Board of 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 was  approved by the  shareholders  of the Fund at their  first  annual
meeting on September 1, 1994. The Board of Trustees  approved the Plan effective
September 8, 1994.  The Plan provides that it will remain in effect until August
31, 1999.  Thereafter it may continue in effect for  successive  annual  periods
commencing  September 1, provided it is approved by the Class A shareholders  or
by the Board of  Trustees.  This  includes a majority  of  trustees  who are not
interested  persons of the Fund and who have no direct or  indirect  interest in
the  operation of the Plan or in the  agreements  related to the Plan.  The Plan
further  provides  that it may not be amended to increase  materially
                                       18
<PAGE>
the costs which may be spent by the Fund for  distribution  pursuant to the Plan
without Class A shareholder approval,  and the other material amendments must be
approved by the Trustees in the manner described in the preceding sentence.  The
Plan may be terminated at any time by a vote of a majority of the  disinterested
trustees of the Fund or the Fund's Class A shareholders.

Custodian And Transfer Agent

Investors  Fiduciary  Trust Company,  801  Pennsylvania,  Kansas City,  Missouri
64105, is custodian for the Fund's cash and  securities.  Reich & Tang Services,
Inc., an affiliate of the Fund's Manager, located at 600 Fifth Avenue, New York,
NY 10020,  is transfer  agent and dividend agent for the shares of the Fund. The
custodian  and transfer  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  Florida law are passed  upon by Gunster,  Yoakley,
Valdes - Fauli & Stewart,  P.A., 777 South Flagler Drive,  Suite 500 East,  West
Palm Beach, FL 33401-6194.

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 are 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 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  nonassessable.  Shares  are
redeemable  at net asset value,  at the option of the  shareholder.  The Fund is
subdivided  into two classes of common  stock,  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:  (i) the Class A and Class B shares  have  different  class
designations;  (ii) only the Class A shares are  assessed a service
                                       19
<PAGE>
fee pursuant to the Rule 12b-1 Distribution and Service Plan of the Fund of .25%
of the Class A shares'  average daily net assets;  and (iii) only the holders of
the Class A shares will be entitled  to vote on matters  pertaining  to the Plan
and any related  agreements in  accordance  with  provisions of Rule 12b-1.  The
exchange privilege permits 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. Payments made under the Plan are calculated and
charged  daily to the  appropriate  class prior to  determining  daily net asset
value per share and dividends/distributions.

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  Trustees  if the holders  choose to do so. In
that event,  the holders of the  remaining  shares will not be able to elect any
person or persons to the Board of 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.  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 holders of shares entitled to cast not
less than 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 for the  election  of
Trustees, for approval of the revised investment advisory contracts with respect
to a  particular  class  or  series  of  shares,  for  approval  of  the  Fund's
distribution  agreement  with respect to a particular  class or series of shares
and the removal of Fund Trustee(s) and  communication  among  shareholders,  any
registration  of the Fund with the  Securities  and Exchange  Commission  or any
state,  or as the  Trustees may consider  necessary or  desirable.  Each Trustee
serves  until his  successor  is elected and  qualified,  or until such  Trustee
sooner dies, resigns, retires or is removed by the vote of the shareholders.

VIII.  PURCHASE, REDEMPTION AND PRICING SHARES

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 1940 Act.  Amortized  cost valuation
involves  valuing an instrument at its cost and  thereafter  assuming a constant
amortization  to maturity of any discount or premium.  If  fluctuating  interest
rates cause the market value of the Fund's portfolio to deviate more than 1/2 of
1% from the  value  determined  on the  basis of  amortized  cost,  the Board of
Trustees  will consider  whether any action  should be initiated.  Although the
amortized cost method provides certainty in valuation,  it may result in periods
during  which the value of an  instrument  is higher or lower  than the price an
investment company would receive if the instrument were sold.

Shares 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.

Purchase of Fund Shares

Investors  purchasing shares through an account at a Participating  Organization
become  Class A  shareholders.  All  other  investors,  and  investors  who have
accounts with Participating  Organizations but do not wish to invest in the Fund
through  them,  may invest in the Fund directly as Class B  shareholders  of the
Fund. Class B shareholders do not receive the benefit of the servicing functions
performed by a Participating Organization. Class B shares may also be offered to
investors who purchase their shares through  Participating  Organizations which,
because they may not be legally permitted to receive such as fiduciaries, do not
receive compensation from the Distributor or the Manager.
                                       20
<PAGE>
The minimum  initial  investment  in the Fund for both  classes of shares is (i)
$1,000 for purchases through Participating Organizations - this may be satisfied
by initial  investments  aggregating  $1,000 by a Participating  Organization on
behalf of their customers whose initial  investments are less than $1,000;  (ii)
$1,000  for  securities  brokers,  financial  institutions  and  other  industry
professionals that are not Participating  Organizations and (iii) $5,000 for all
other investors.  Initial investments may be made in any amount in excess of the
applicable  minimums.  The minimum  amount for  subsequent  investments  is $100
unless the investor is a client of a  Participating  Organization  whose clients
have made aggregate subsequent investments of $100.

Each  shareholder,   except  certain  Participant  Investors,   will  receive  a
personalized  monthly  statement  from the Fund  listing (i) the total number of
Fund  shares  owned  as  of  the  statement  closing  date,  (ii)  purchase  and
redemptions  of Fund  shares  and  (iii)  the  dividends  paid  on  Fund  shares
(including dividends paid in cash or reinvested in additional Fund shares).

Investments Through Participating
Organizations - Purchase of Class A Shares

Participant  Investors  may,  if they  wish,  invest  in the  Fund  through  the
Participating  Organizations  with  which  they  have  accounts.  "Participating
Organizations" are securities brokers, banks and financial institutions or other
industry  professionals  or  organizations  which have entered into  shareholder
servicing  agreements with the  Distributor  with respect to investment of their
customer  accounts in the Fund.  When  instructed by its customer to purchase or
redeem Fund shares, the Participating  Organization,  on behalf of the customer,
transmits to the Fund's  transfer agent a purchase or redemption  order,  and in
the case of a purchase order, payment for the shares being purchased.

Participating  Organizations may confirm to their customers who are shareholders
in the Fund each  purchase  and  redemption  of Fund  shares for the  customers'
accounts.  Also,  Participating  Organizations may send their customers periodic
account  statements  showing  the  total  number  of Fund  shares  owned by each
customer as of the statement  closing date,  purchases and  redemptions  of Fund
shares by each  customer  during the period  covered  by the  statement  and the
income  earned by Fund  shares of each  customer  during  the  statement  period
(including  dividends  paid in cash or reinvested  in  additional  Fund shares).
Participant  Investors whose Participating  Organizations have not undertaken to
provide such statements will receive them from the Fund directly.

Participating Organizations may charge Participant Investors a fee in connection
with their use of specialized purchase and redemption  procedures.  In addition,
Participating  Organizations offering purchase and redemption procedures similar
to those offered to  shareholders  who invest in the Fund  directly,  may impose
charges, limitations, minimums and restrictions in addition to or different from
those applicable to shareholders  who invest in the Fund directly.  Accordingly,
the net yield to investors who invest through Participating Organizations may be
less than by investing in the Fund directly.  A Participant Investor should read
this Prospectus in conjunction with the materials  provided by the Participating
Organization  describing the procedures under which Fund shares may be purchased
and redeemed through the Participating Organization.

In the case of qualified  Participating  Organizations,  orders  received by the
Fund's  transfer  agent before 12 noon,  New York City time,  on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day only if the Federal Funds  required in  connection  with the orders are
received by the Fund's  transfer  agent before 4:00 p.m., New York City time, on
that day.  Orders for which Federal Funds are received after 4:00 p.m., New York
City time,  will result in share  issuance  the  following  Fund  Business  Day.
Participating Organizations are responsible for instituting procedures to insure
that purchase orders by their respective clients are processed expeditiously.

Initial Direct Purchases of Class B Shares

Investors  who  wish to  invest  in the  Fund  directly  may  obtain  a  current
prospectus  and the  subscription  order  form  necessary  to open an account by
telephoning the Fund at the following numbers:

Within New York              212-830-5220
Outside New York (TOLL FREE) 800-221-3079

Mail

Investors may send a check made payable to "Florida Daily Municipal Income Fund"
along with a completed subscription order form to:

    Florida Daily Municipal Income Fund
    Reich & Tang Funds
    600 Fifth Avenue-8th Floor
    New York, New York 10020
                                       21
<PAGE>
Checks  are  accepted  subject  to  collection  at full  value in United  States
currency.  Payment by a check drawn on any member of the Federal  Reserve System
will  normally be converted  into Federal  Funds within two business  days after
receipt of the check.  Checks drawn on a non-member bank may take  substantially
longer to convert into Federal Funds.  An investor's  purchase order will not be
accepted until the Fund receives Federal Funds.

Bank Wire

To purchase  shares of the Fund using the wire system for  transmittal  of money
among banks,  investors  should first obtain a new account number by telephoning
the Fund at  212-830-5220  (within New York) or at  1-800-221-3079  (outside New
York) and then instruct a member commercial bank to wire money immediately to:


    Investors Fiduciary Trust Company
    ABA # 101003621
    Reich & Tang Funds
    DDA # 890752-953-8
    For Florida Daily Municipal
       Income Fund
    Account of (Investor's Name)                    
    Fund Account #                                  
    SS#/Tax ID#                                     


The investor should then promptly complete and mail the subscription order form.

Investors  planning to wire funds should instruct their bank early in the day so
the wire transfer can be accomplished before 12 noon, New York City time, on the
same day.  There may be a charge by the  investor's  bank for  transmitting  the
money by bank wire, and there also may be a charge for use of Federal Funds. The
Fund does not charge  investors  in the Fund for its receipt of wire  transfers.
Payment in the form of a "bank wire"  received  prior to 12 noon,  New York City
time, on a Fund Business Day will be treated as a Federal Funds payment received
on that day.

Personal Delivery

Deliver a check made payable to "Florida  Daily  Municipal  Income Fund",  along
with a completed subscription order form to:

    Reich & Tang Mutual Funds
    600 Fifth Avenue  -  8th Floor
    New York, New York 10020


Electronic Funds Transfers(EFT),Pre-authorized Credit and Direct Deposit
Privilege

You may purchase shares of the Fund (minimum of $100) by having salary, dividend
payments,  interest  payments or any other payments  designated by you,  federal
salary, social security,  or certain veteran's,  military or other payments from
the federal government,  automatically deposited into your Fund account. You can
also have money  debited  from your  checking  account.  To enroll in any one of
these  programs,  you  must  file  with the Fund a  completed  EFT  Application,
Pre-authorized  Credit  Application,  or a Direct Deposit  Sign-Up Form for each
type of payment  that you desire to include in the  Privilege.  The  appropriate
form may be obtained from your broker or the Fund.  You may elect at any time to
terminate your participation by notifying in writing the appropriate  depositing
entity and/or  federal  agency.  Death or legal  incapacity  will  automatically
terminate your participation in the Privilege.  Further,  the Fund may terminate
your participation upon 30 days notice to you.

Subsequent Purchases of Shares

Subsequent purchases can be made by bank wire, as indicated above, or by mailing
a check to:

Florida Daily Municipal Income Fund
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 07101-3232

There is a $100 minimum for subsequent  purchases of shares. All payments should
clearly indicate the shareholder's account number.

Provided that the information on the subscription  form on file with the Fund is
still  applicable,  a  shareholder  may reopen an account  without  filing a new
subscription order form at any time during the year the shareholder's account is
closed or during the following calendar year.
                                       22
<PAGE>
Redemption of Shares

A redemption is effected  immediately  following,  and at a price  determined in
accordance  with,  the next  determination  of net asset value per share of each
Class upon receipt by the Fund's transfer agent of the redemption order (and any
supporting documentation which it may require).  Normally,  payment for redeemed
shares is made on the same Fund  Business Day after the  redemption is effected,
provided  the  redemption  request is received  prior to 12 noon,  New York City
time.  However,  redemption  payments  will not be  effected  unless  the  check
(including a certified or cashier's  check) used for investment has been cleared
for  payment  by the  investor's  bank,  which  could  take up to 15 days  after
investment.  Shares  redeemed  are not  entitled  to  participate  in  dividends
declared on the day a redemption becomes effective.

A  shareholder's  original  subscription  order form permits the  shareholder to
redeem by written request and to elect one or more of the additional  redemption
procedures  described  below.  A  shareholder  may only change the  instructions
indicated  on his original  subscription  order form by  transmitting  a written
direction to the Fund's transfer  agent.  Requests to institute or change any of
the additional redemption procedures will require a signature guarantee.

When a signature guarantee is called for, the shareholder should have "Signature
Guaranteed"  stamped under his signature.  It should be signed and guaranteed by
an eligible  guarantor  institution  which  includes a domestic bank, a domestic
savings and loan  institution,  a domestic  credit  union,  a member bank of the
Federal  Reserve  system or a member  firm of a  national  securities  exchange,
pursuant to the Fund's transfer agent's standards and procedures.

Written Requests

Shareholders may make a redemption in any amount by sending a written request to
the Fund addressed to:

    Florida Daily Municipal Income Fund
    c/o Reich & Tang Funds
    600 Fifth Avenue-8th Floor
    New York, New York 10020

All previously issued certificates  submitted for redemption must be endorsed by
the  shareholder  and all written  requests for redemption must be signed by the
shareholder, in each case with signature guaranteed.

Normally the redemption proceeds are paid by check and mailed to the shareholder
of record.

Checks

By  making  the  appropriate   election  on  their   subscription   order  form,
shareholders  may  request  a  supply  of  checks  which  may be used to  effect
redemptions  from the  Class of  shares of the Fund in which  they  invest.  The
checks,  which will be issued in the shareholder's  name, are drawn on a special
account  maintained by the Fund with the Fund's agent bank.  Checks may be drawn
in any amount of $250 or more.  When a check is  presented  to the Fund's  agent
bank, it instructs the Fund's  transfer  agent to redeem a sufficient  number of
full and fractional shares in the  shareholder's  account to cover the amount of
the check. The use of a check to make a withdrawal  enables a shareholder in the
Fund to receive  dividends on the shares to be redeemed up to the Fund  Business
Day on which the check clears. Checks provided by the Fund may not be certified.
Fund shares  purchased by check may not be redeemed by check until the check has
cleared, which can take up to 15 days following the date of purchase.

There is no charge to the  shareholder for checks provided by the Fund. The Fund
reserves the right to impose a charge or impose a different minimum check amount
in the future, if the Board of Trustees determines that doing so is in the best
interests of the Fund and its shareholders.

Shareholders  electing the checking option are subject to the procedures,  rules
and  regulations of the Fund's agent bank governing  checking  accounts.  Checks
drawn on a jointly owned  account may, at the  shareholder's  election,  require
only one signature.  Checks in amounts  exceeding the value of the shareholder's
account at the time the check is  presented  for  payment  will not be  honored.
Since the dollar  value of the  account  changes  daily,  the total value of the
account  may not be  determined  in advance  and the account may not be entirely
redeemed  by check.  In  addition,  the Fund  reserves  the right to charge  the
shareholder's  account a fee up to $20 for checks not  honored as a result of an
insufficient  account value,  a check deemed not negotiable  because it has been
held longer than six months, an unsigned check and/or a post-dated check.

Corporations  and other  entities  electing the checking  option are required to
furnish a certified  resolution or other evidence of authorization in accordance
with the Fund's normal practices. Individuals and joint tenants are not required
to furnish any supporting documentation. Appropriate authorization forms will be
sent by the Fund or its agents to corporations and other shareholders who select
this option. As soon as the authorization forms are filed in good order with the
Fund's agent bank, it will provide the shareholder with a supply of checks.
                                       23
<PAGE>
The Fund  reserves  the  right to  terminate  or  modify  the  check  redemption
procedure at any time or to impose additional fees following notification to the
Fund's shareholders.

Telephone

The Fund accepts  telephone  requests for redemption from shareholders who elect
this  option on their  subscription  order  form.  The  proceeds  of a telephone
redemption may be sent to the  shareholders  at their addresses or, if in excess
of $1,000, to their bank accounts,  both as set forth in the subscription  order
form or in a subsequent  written  authorization.  The Fund may accept  telephone
redemption instructions from any person with respect to accounts of shareholders
who  elect  this  service  and thus  such  shareholders  risk  possible  loss of
principal and interest in the event of a telephone  redemption not authorized by
them.  The Fund will employ  reasonable  procedures  to confirm  that  telephone
redemption instructions are genuine, and will require that shareholders electing
such option  provide a form of personal  identification.  Failure by the Fund to
employ such reasonable procedures may cause the Fund to be liable for the losses
incurred by investors due to unauthorized or fraudulent telephone redemptions.

A  shareholder   making  a  telephone   withdrawal   should  call  the  Fund  at
212-830-5220; outside New York at 1-800-241-3263, and state: (i) the name of the
shareholder  appearing on the Fund's  records;  (ii) the  shareholder's  account
number with the Fund; (iii) the amount to be withdrawn; (iv) whether such amount
is to be forwarded to the shareholder's  designated bank account or address; and
(v) the name of the person  requesting the redemption.  Usually the proceeds are
sent to the designated bank account or address on the same Fund Business Day the
redemption is effected,  provided the redemption  request is received  before 12
noon,  New York City time.  Proceeds are sent the next Fund  Business Day if the
redemption  request is  received  after 12 noon,  New York City  time.  The Fund
reserves the right to terminate or modify the  telephone  redemption  service in
whole or in part at any time and will notify shareholders accordingly.

There is no  redemption  charge,  no minimum  period of  investment,  no minimum
amount  for a  redemption,  and no  restriction  on  frequency  of  withdrawals.
Proceeds of redemptions are paid by check.  Unless other  instructions are given
in proper  form to the Fund's  transfer  agent,  a check for the  proceeds  of a
redemption will be sent to the shareholders' address of record. If a shareholder
elects to redeem all the shares of the Fund he owns,  all  dividends  accrued to
the  date of such  redemption  will be paid to the  shareholder  along  with the
proceeds of the redemption.

The  right  of  redemption  may not be  suspended  or the date of  payment  upon
redemption  postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than  customary  weekend and holiday  closings) or during which
the SEC determines  that trading  thereon is restricted.  Additional  exceptions
include any period during which an emergency  (as  determined by the SEC) exists
as a result of which  disposal by the Fund of its  portfolio  securities  is not
reasonably  practicable or as a result of which it is not reasonably practicable
for the Fund fairly to determine the value of its net assets,  or for such other
period as the SEC may by order permit for the protection of the  shareholders of
the Fund.

The Fund has reserved the right to redeem the shares of any  shareholder  if the
net  asset  value  of all  the  remaining  shares  in the  shareholder's  or his
Participating  Organization's  account  after a  withdrawal  is less than  $500.
Written notice of a proposed mandatory redemption will be given at least 30 days
in advance to any  shareholder  whose  account is to be redeemed or the Fund may
impose  a  monthly  service  charge  of $10 on such  accounts.  For  Participant
Investor accounts,  notice of a proposed mandatory redemption will be given only
to the appropriate Participating  Organization.  The Participating  Organization
will be  responsible  for  notifying  the  Participant  Investor of the proposed
mandatory  redemption.  During the notice period a shareholder or  Participating
Organization  who  receives  such a notice  may avoid  mandatory  redemption  by
purchasing sufficient additional shares to increase his total net asset value to
the minimum amount.

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
Trustees will consider  whether any action should be initiated,  as described in
the following  paragraph.
                                       24
<PAGE>
Although the  amortized  cost method  provides  certainty in  valuation,  it may
result in periods  during  which the value of an  instrument  is higher or lower
than the price an investment company would receive if the instrument were sold.

The Fund's Board of Trustees has established  procedures to stabilize the Fund's
net asset value at $1.00 per share of each  Class.  These  procedures  include a
review of the extent of any  deviation  of net asset  value per share,  based on
available  market rates,  from the Fund's $1.00 amortized cost per share of each
Class.  Should that deviation  exceed 1/2 of 1%, the Board will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders.  Such action may include redemption of shares in
kind,  selling portfolio  securities prior to maturity,  reducing or withholding
dividends  and  utilizing  a net asset  value per share as  determined  by using
available market  quotations.  The Fund will maintain a dollar-weighted  average
portfolio  maturity of 90 days or less,  will not purchase any instrument with a
remaining  maturity  greater than 397 days,  will limit  portfolio  investments,
including  repurchase  agreements,  to those  United  States  dollar-denominated
instruments that the Fund's Board of Trustees  determines present minimal credit
risks, and will comply with certain reporting and record keeping procedures. The
Fund has also established  procedures to ensure  compliance with the requirement
that portfolio securities are Eligible Securities. (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 Code,  and under  Florida  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 interests of its  shareholders.  Such
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 dividends  each year 100% and in no event
less than 90% of its  tax-exempt  interest  income,  net of certain  deductions.
Exempt-interest  dividends,  as defined in the Code,  are  dividends or any part
thereof  (other  than  capital  gain  dividends)  paid  by  the  Fund  that  are
attributable  to interest on  obligations,  the interest on which is exempt from
regular  Federal  income  tax,  and  designated  by the Fund as  exempt-interest
dividends in a written notice mailed to the Fund's  shareholders  not later than
60 days  after  the  close of its  taxable  year.  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.
However,  a  shareholder  is advised to consult his tax advisors with respect to
whether exempt-interest  dividends retain the exclusion under Section 103 of the
Code if such  shareholder  will 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 added to adjusted gross
income  for  purposes  of  computing  the  amount  of social  security  benefits
includible in gross income. The amount of such interest received will have to be
disclosed  on the  shareholders'  Federal  income  tax  returns.  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
(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) issued
after  August 7, 1986.  Thus,  this  provision  will apply to the portion of the
exempt-interest  dividends from the Fund's assets that are  attributable to such
post-August 7, 1986 private activity bonds, if any of such bonds are acquired by
the Fund.  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 the 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 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  upon the  maturity  or
disposition   of  securities   acquired  at  discounts   resulting  from  market
fluctuations.  Short-term  capital gains are taxable
                                       25
<PAGE>
to shareholders as ordinary  income when they are  distributed.  Any net capital
gains  (the  excess  of its net  realized  long-term  capital  gain over its net
realized  short-term  capital loss) will be  distributed  annually to the Fund's
shareholders.  The Fund will have no tax liability  with respect to  distributed
net capital gains and the distributions are taxable to shareholders as long-term
capital  gains  regardless of how long the  shareholders  have held Fund shares.
However,  Fund  shareholders  who  at  the  time  of  such  a net  capital  gain
distribution  have not held  their Fund  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  not later
than 60 days after the close of the Fund's taxable year.  Capital gains realized
by  corporations  are  generally  taxed at the  same  rate as  ordinary  income.
Generally,  capital gains are taxable at a maximum rate of 20% to  non-corporate
shareholders  who have a holding  period of more than 12  months.  Corresponding
maximum  rate and  holding  period  rules  apply with  respect to capital  gains
distributed  by the Fund  without  regard to the length of time shares have been
held by the holder.

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.   The  Fund  will  be  subject  to  Federal  income  tax  on  any
undistributed  investment  company taxable income.  To the extent such income is
distributed it will be taxable to shareholders as ordinary 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 same manner
for  Federal  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 the
interest thereon will be exempt from regular Federal income taxes to the Fund to
the same extent as interest on the underlying Municipal Obligation.  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.

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.

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.

Florida Taxes

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
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
                                       26
<PAGE>
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.

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.

The Glass-Steagall Act and other applicable laws and regulations  prohibit banks
and other depository institutions from engaging in the business of underwriting,
selling or distributing most types of securities. In the opinion of the Manager,
however,  based on the  advice of  counsel,  these laws and  regulations  do not
prohibit  such  depository   institutions  from  providing  other  services  for
investment   companies   such  as  the   shareholder   servicing   and   related
administrative  functions  referred to above.  The Fund's Board of Trustees will
consider   appropriate   modifications  to  the  Fund's  operations,   including
discontinuance of any payments then being made under the Plan to banks and other
depository  institutions,  in the  event of any  future  change  in such laws or
regulations  which may affect the  ability of such  institutions  to provide the
above-mentioned  services.  It is not  anticipated  that the  discontinuance  of
payments to such an institution  would result in loss to  shareholders or change
in the Fund's net asset value. In addition,  state securities laws on this issue
may differ from the  interpretations  of Federal law expressed  herein and banks
and financial  institutions  may be required to register as 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  needs  to  receive  from a  taxable
investment in order to equal a tax-free yield from the Fund.  This is calculated
by
                                       27
<PAGE>
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  November 30,
1998 was 2.59% which is equivalent to an effective yield of 2.63%.

XII.  FINANCIAL STATEMENTS

The audited  financial  statements for the Fund 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  Annual  Report.  The Annual  Report is
available upon request and without charge.
                                       28
<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. ( ... ) 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 are
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 are 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  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.
                                       29
<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
Tax Rate             25.00%        34.00%          39.00%         34.00%         35.00%          38.00%        35.00%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
State
Tax Rate              5.50%         5.50%           5.50%          5.50%          5.50%           5.50%         5.50%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
Combined
Marginal
Tax Rate             29.13%        37.63%          42.36%         37.63%         38.58%          41.41%        38.58%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
--------------------------------------------------------------------------------------------------------------------------
      3. Now Compare Your Tax Free Income Yields With Taxable Income Yields
--------------------------------------------------------------------------------------------------------------------------
----------------- --------------------------------------------------------------------------------------------------------
Tax                
Exempt                                         Equivalent Taxable Investment Yield
Yield                                          Required to Match Tax Exempt Yield
----------------- --------------------------------------------------------------------------------------------------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
      2.00%           2.82%         3.21%           3.47%          3.21%          3.26%          3.41%          3.26%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
      2.50%           3.53%         4.01%           4.34%          4.01%          4.07%          4.27%          4.07%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
      3.00%           4.23%         4.81%           5.20%          4.81%          4.88%          5.12%          4.88%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
      3.50%           4.94%         5.61%           6.07%          5.61%          5.70%          5.97%          5.70%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
      4.00%           5.64%         6.41%           6.94%          6.41%          6.51%          6.83%          6.51%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
      4.50%           6.35%         7.22%           7.81%          7.22%          7.33%          7.68%          7.33%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
      5.00%           7.05%         8.02%           8.67%          8.02%          8.14%          8.53%          8.14%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
      5.50%           7.76%         8.82%           9.54%          8.82%          8.95%          9.39%          8.95%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
      6.00%           8.47%         9.62%          10.41%          9.62%          9.77%         10.24%          9.77%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
      6.50%           9.17%        10.42%          11.28%         10.42%         10.58%         11.09%         10.58%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------
      7.00%           9.88%        11.22%          12.14%         11.22%         11.40%         11.95%         11.40%
----------------- -------------- -------------- -------------- -------------- -------------- -------------- --------------

To use this chart, find the applicable level of taxable income based on your tax
filing  status in section one.  Then read down to section two to determine  your
combined tax bracket and, to section three, to see the equivalent taxable yields
for each of the tax free income yields given.
</TABLE>
                                       30
<PAGE>

<TABLE>
<CAPTION>
<S>                   <C>             <C>           <C>            <C>            <C>

                    INDIVIDUAL TAXABLE EQUIVALENT YIELD TABLE
             (Based on Tax Rates Effective Until December 31, 1999)

 -------------------------------------------------------------------------------------------------
                    1. If Your Taxable Income Bracket is ...
 -------------------------------------------------------------------------------------------------
 Single                 $0-           25,751-       62,451-        130,251-       283,151
 Return               25,750          62,450        130,250        283,150        and over
 ------------------ ------------- -------------- --------------- -------------- ------------------
 Joint                  $0-           43,051-       104,051-       158,551-       283,151
 Return               43,050          104,050       158,550        283,150        and over
 ------------------ ------------- -------------- --------------- -------------- ------------------
 -------------------------------------------------------------------------------------------------
                     2. Then Your Combined Income Tax Bracket Is ...
 ------------------ ------------- -------------- --------------- -------------- ------------------
 Federal
 Tax Bracket          15.00%       28.00%          31.00%          36.00%         39.60%
 ------------------ ------------- -------------- --------------- -------------- ------------------
 -------------------------------------------------------------------------------------------------
            3. Now Compare Your Tax Fee Income Yields with Taxable Income Yields
 -------------------------------------------------------------------------------------------------
 ------------------ ------------------------------------------------------------------------------
 Tax
 Exempt                            Equivalent Taxable Investment Yield
 Yield                             Required to Match Tax Exempt Yield
 ------------------ ------------------------------------------------------------------------------
 ------------------ ------------- -------------- --------------- -------------- ------------------
       2.00%            2.35%        2.78%           2.90%           3.13%          3.31%
 ------------------ ------------- -------------- --------------- -------------- ------------------
 ------------------ ------------- -------------- --------------- -------------- ------------------
       2.50%            2.94%        3.47%           3.62%           3.91%          4.14%
 ------------------ ------------- -------------- --------------- -------------- ------------------
 ------------------ ------------- -------------- --------------- -------------- ------------------
       3.00%            3.53%        4.17%           4.35%           4.69%          4.97%
 ------------------ ------------- -------------- --------------- -------------- ------------------
 ------------------ ------------- -------------- --------------- -------------- ------------------
       3.50%            4.12%        4.86%           5.07%           5.47%          5.79%
 ------------------ ------------- -------------- --------------- -------------- ------------------
 ------------------ ------------- -------------- --------------- -------------- ------------------
       4.00%            4.71%        5.56%           5.80%           6.25%          6.62%
 ------------------ ------------- -------------- --------------- -------------- ------------------
 ------------------ ------------- -------------- --------------- -------------- ------------------
       4.50%            5.29%        6.25%           6.52%           7.03%          7.45%
 ------------------ ------------- -------------- --------------- -------------- ------------------
 ------------------ ------------- -------------- --------------- -------------- ------------------
       5.00%            5.88%        6.94%           7.25%           7.81%          8.28%
 ------------------ ------------- -------------- --------------- -------------- ------------------
 ------------------ ------------- -------------- --------------- -------------- ------------------
       5.50%            6.47%        7.64%           7.97%           8.59%          9.11%
 ------------------ ------------- -------------- --------------- -------------- ------------------
 ------------------ ------------- -------------- --------------- -------------- ------------------
       6.00%            7.06%        8.33%           8.70%           9.38%          9.93%
 ------------------ ------------- -------------- --------------- -------------- ------------------
 ------------------ ------------- -------------- --------------- -------------- ------------------
       6.50%            7.65%        9.03%           9.42%          10.16%         10.76%
 ------------------ ------------- -------------- --------------- -------------- ------------------
 ------------------ ------------- -------------- --------------- -------------- ------------------
       7.00%            8.24%        9.72%          10.14%          10.94%         11.59%
 ------------------ ------------- -------------- --------------- -------------- ------------------
</TABLE>
   To use this chart,  find the applicable level of taxable income based on your
   tax filing  status in section one. Then read down to section two to determine
   your  combined tax bracket and, to in section  three,  to see the  equivalent
   taxable yields for each of the tax free income yields given.
                                       31
<PAGE>