NEW YORK DAILY TAX FREE INCOME FUND INC, 485BPOS, 1997-08-27

NEW YORK DAILY TAX FREE INCOME FUND INC
485BPOS, 1997-08-27

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As filed with the Securities and Exchange Commission on August 27, 1997
Registration No. 2-89264

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]

Post-Effective Amendment No. 22 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 20 [X]
(Check appropriate box or boxes)

NEW YORK DAILY TAX FREE INCOME FUND, INC.
(formerly Empire Tax Free Money Market, Inc.)
(Exact Name of Registrant as Specified in Charter)

c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code (212) 830-5220

BERNADETTE N. FINN
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Name and Address of Agent for Service)

Copy to:MICHAEL R. ROSELLA, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022

It is proposed that this filing will become effective: (check appropriate box):

[ ] immediately upon filing pursuant to paragraph (b)
[X] on September 1, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on [date] pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485

The Registrant has registered an indefinite number of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940, as amended, and Rule 24f-2 thereunder, and the Registrant filed a
Rule 24f-2 Notice for its fiscal year ended April 30, 1997 on June 19, 1997.

<PAGE>
NEW YORK DAILY TAX FREE INCOME FUND, INC.

Registration Statement on Form N-1A

CROSS-REFERENCE SHEET
Pursuant to Rule 404(c)

Part A
Item No. Prospectus Heading

1. Cover Page. . . . . . . . . . . . . Cover Page

2. Synopsis. . . . . . . . . . . . . Introduction; Table of Fees and Expenses

3. Condensed Financial
Information . . . . . . . . . . . Financial Highlights

4. General Description General Information; Investment
of Registrant and Policies. . . Objectives, Policies and Risks;

5. Management of the Fund . . . . . Management of the Fund; Custodian,
Transfer Agent and Dividend Agent;
Distribution and Service Plan

5A. Management's Discussion of
Fund Performance . . . . . . Not Applicable

6. Capital Stock and Description of Common Stock; How to
Other Securities. . . . . . . . . Purchase and Redeem Shares; General
Information; Dividends and
Distributions; Federal Income Taxes

7. Purchase of Securities How to Purchase and Redeem Shares;
Being Offered . . . . . . . . . . . Net Asset Value; Distribution and
Service Plan

8. Redemption or Repurchase. . . . . . How to Purchase and Redeem Shares

9. Legal Proceedings . . . . . . . . . Not Applicable
<PAGE>
Part B Caption in Statement of
Item No. Additional Information

10. Cover Page. . . . . . . . . . . . .Cover Page

11. Table of Contents . . . . . . . . .Table of Contents

12. General Information and History . .Not Applicable

13. Investment Objectives Investment Objectives, Policies
and Policies. . . . . . . . . . . .and Risks

14. Management of the Registrant. . . .Management of the Fund

15. Control Persons and Principal
Holders of Securities . . . . . . .Management of the Fund

16. Investment Advisory Management of the Fund;
and Other Services . . . . . . . . Distribution and Service Plan;
Custodian, Transfer Agent and
Dividend Agent; Expense Limitation

17. Brokerage Allocation Investment Objectives, Policies
and Other Practices . . . . . . . .and Risks

18. Capital Stock and
Other Securities. . . . . . . . . .Description of Common Stock

19. Purchase, Redemption and Pricing How to Purchase and Redeem Shares;
of Securities Being Offered . . . .Net Asset Value

20. Tax Status. . . . . . . . . . . . .Federal Income Taxes;

21. Underwriters. . . . . . . . . . . .Not Applicable

22. Calculations of Yield Quotations
of Money Market Funds. . . . . . . Yield Quotations

23. Financial Statements. . . . . . . . Statement of Net Assets as of April 30,
1997; Statement of Operations for the
year ended April 30, 1997; Statement of
Changes in Net Assets years ended April
30, 1996, and April 30, 1997; Notes to
Financial Statements (audited), dated
April 30, 1997.

<PAGE>
- --------------------------------------------------------------------------------
NEW YORK DAILY TAX FREE 600 FIFTH AVENUE
INCOME FUND, INC. NEW YORK, NY 10020
(212) 830-5220
================================================================================
PROSPECTUS
September 1, 1997

New York Daily Tax Free Income Fund, Inc. (the "Fund") is a money market fund
designed for investors who desire interest income exempt from regular Federal,
and to the extent possible, New York State and New York City income taxes and
preservation of capital, liquidity and stability of principal by investing in a
professionally managed, non-diversified portfolio of high quality, short-term
municipal obligations. No assurance can be given that these objectives will be
achieved. The Fund offers two classes of shares to the general public. The Class
A shares of the Fund are subject to a service fee pursuant to the Fund's Rule
12b-1 Distribution and Service Plan and are sold through financial
intermediaries who provide servicing to Class A shareholders for which they
receive compensation from the Manager and the Distributor. The Class B shares of
the Fund are not subject to a service fee and either are sold directly to the
public or are sold through financial intermediaries that do not receive
compensation from the Manager or the Distributor. In all other respects, the
Class A and Class B shares represent the same interest in the income and assets
of the Fund. See "Description of Common Stock". The Fund is concentrated in the
securities issued by the State of New York (the "State") or entities within the
State and may invest a significant percentage of its assets in a single issuer,
therefore an investment in the Fund may be riskier than an investment in other
types of money market funds.

This Prospectus sets forth concisely the information about the Fund that
prospective investors will find helpful in making their investment decisions.
Additional Information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC") and is available upon request and without charge
by calling or writing the Fund at the above address. The Statement of Additional
Information bears the same date as this Prospectus and is incorporated by
reference into this Prospectus in its entirety. The SEC maintains a website
(http.//www.sec.gov.) that contains the Statement of Additional Information and
other reports and information regarding the Fund which have been filed
electronically with the SEC.

Reich & Tang Asset Management L.P. acts as the investment manager of the Fund
and Reich & Tang Distributors L.P. acts as distributor of the Fund's shares.
Reich & Tang Asset Management L.P. is a registered investment adviser. Reich &
Tang Distributors L.P. is a registered broker-dealer and member of the National
Association of Securities Dealers, Inc.

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND INTENDS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE ALTHOUGH THERE CAN BE NO ASSURANCE THAT THIS VALUE WILL BE MAINTAINED.

SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.

THIS PROSPECTUS SHOULD BE READ AND RETAINED BY INVESTORS FOR FUTURE REFERENCE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT BEING OFFERED VIA THE INTERNET TO
RESIDENTS OF PARTICULAR STATES.

<PAGE>
TABLE OF FEES AND EXPENSES

Annual Fund Operating Expenses
(as a percentage of average net assets) Class A Shares Class B Shares
Management Fees .30% .30%
12b-1 Fees .20% --
Other Expenses .32% .32%
Administrative Services Fee .21% .21%
----- -----
Total Fund Operating Expenses .82% .62%

You would pay the following expenses
on a $1,000 investment, assuming
5% annual return (cumulative through the end of each year):

1 year 3 years 5 years 10 years
------ ------- ------- --------

Class A $8 $26 $46 $101
Class B $6 $20 $35 $77

The purpose of the above table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a further discussion of these fees see "Management of the Fund"
and "Distribution and Service Plan" herein. THE FIGURES REFLECTED IN THIS
EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN ABOVE.

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<PAGE>

FINANCIAL HIGHLIGHTS

The following selected financial information of New York Daily Tax Free Income
Fund, Inc. has been audited by McGladrey & Pullen, LLP, Independent Certified
Public Accountants, whose report thereon appears in the Statement of Additional
Information.
<TABLE>
<CAPTION>
Class A Year Ended April 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----

Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ----- ------ ----- ----- ----- ------ ------
Income from investment operations:
Net investment income......... 0.028 0.030 0.027 0.018 0.023 0.037 0.048 0.053 0.047 0.040
Less distributions:
Dividends from net investment income 0.028 0.030 0.027 0.018 0.023 0.037 0.048 0.053 0.047 0.040
------ ------ ----- ------ ----- ----- ------ ------ ------ ------
Net asset value, end of year.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ===== ====== ====== ====== ====== ======
Total Return.................... 2.80% 3.08% 2.74% 1.84% 2.28% 3.73% 4.92% 5.48% 4.86% 4.01%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $323,746 $283,368 $254,422 $218,348 $210,486 $202,291 $191,622 $211,662 $181,060 $226,115
Ratios to average net assets:
Expenses.................... 0.82% 0.84%* 0.87% 0.89% 0.89% 0.87% 0.82%+ 0.77%+ 0.80%+ 0.79%+
Net investment income....... 2.76% 3.02% 2.71% 1.82% 2.25% 3.63% 4.82%+ 5.32%+ 4.73%+ 3.96%+

* Includes expense offsets.

+ Net of management and shareholder servicing fees waived equivalent to .07%,
.10%, .02%, and .02% of average net assets.

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

October 10, 1996
CLASS B (Commencement of Sales) to
April 30, 1997
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $ 1.00
------
Income from investment operations:
Net investment income................... 0.017
Less distributions:
Dividends from net investment income.... ( 0.017)
------
Net asset value, end of period............ $ 1.00
=======
Total Return.............................. 3.02%*
Ratios/Supplemental Data
Net assets, end of period (000)........... 7
Ratios to average net assets:
Expenses ............................... 0.62%*
Net investment income................... 2.99%*
* Annualized
</TABLE>

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<PAGE>
INTRODUCTION

New York Daily Tax Free Income Fund, Inc. (the "Fund") is a no-load,
non-diversified, open-end, management investment company that seeks to provide
its investors with a liquid money market portfolio from which the interest
income is, under current law, exempt from regular Federal, and to the extent
possible, New York State and New York City personal income taxes, preservation
of capital, liquidity and stability of principal by investing principally in
short-term, high quality debt obligations of the State of New York and its
political subdivisions and of Puerto Rico or other U.S. territories, and their
political subdivisions, the interest on which is exempt from regular Federal
income tax under Section 103 of the Internal Revenue Code (the "Code") and
cannot be taxed by any state under Federal law as described under "Investment
Objectives, Policies and Risks" herein. The Fund also will invest in municipal
securities of issuers located in states other than New York, the interest income
on which will be exempt from regular Federal income tax, but will be subject to
New York State and New York City personal income tax for New York residents.
Although the Fund does not intend to do so, it reserves the right to invest up
to 20% of the value of its net assets in taxable obligations. This is a summary
of the Fund's fundamental investment policies which are set forth in full under
"Investment Objectives, Policies and Risks" herein and in the Statement of
Additional Information and may not be changed without approval of a majority of
the Fund's outstanding shares. No assurance can be given that these objectives
will be achieved.

The Fund's investment manager, Reich & Tang Asset Management L.P. (the
"Manager"), is a registered investment adviser and currently acts as manager or
administrator to fifteen other open-end management investment companies. The
Fund's shares are distributed through Reich & Tang Distributors L.P. (the
"Distributor") with whom the Fund has entered into a Distribution Agreement and
a Shareholder Servicing Agreement (with respect to Class A Shares only) pursuant
to the Fund's distribution and service plan adopted under Rule 12b-1 under the
Investment Company Act of 1940, as amended, (the "1940 Act"). (See "Distribution
and Service Plan".)

The Fund intends that its investment portfolio will be concentrated in New York
Municipal Obligations and bank participation certificates therein. A summary of
recent financial and credit developments and special risk factors affecting New
York State and New York City is set forth under "Special Factors Affecting New
York" in the Statement of Additional Information. Investment in the Fund should
be made with an understanding of the risks which an investment in New York
Municipal Obligations may entail. Payment of interest and preservation of
capital are dependent upon the continuing ability of New York issuers and/or
obligors of state, municipal and public authority debt obligations to meet their
obligations hereunder. Investors should consider the greater risk of the Fund's
concentration versus the safety that comes with a less concentrated portfolio
and should compare yields available on portfolios of New York issues with those
of more diversified portfolios including out-of-state issues before making an
investment decision. The Fund's Board of Directors is authorized to divide the
unissued shares into separate series of stock, one for each of the Fund's
separate investment portfolios that may be created in the future.

MANAGEMENT OF THE FUND

The Fund's Board of Directors which is responsible for the overall management
and supervision of the Fund, has employed the Manager to serve as investment
manager of the Fund. The Manager provides persons satisfactory to the Fund's
Board of Directors to serve as officers of the Fund. Such officers, as well as
certain other employees and directors of the Fund, may be directors or officers
of Reich & Tang Asset Management, Inc., the sole

4
<PAGE>
general partner of the Manager, or employees of the Manager or its affiliates.
Due to the services performed by the Manager, the Fund currently has no
employees and its officers are not required to devote full-time to the affairs
of the Fund. The Statement of Additional Information contains general background
information regarding each Director and principal officer of the Fund.

The Manager is a Delaware limited partnership with its principal offices at 600
Fifth Avenue, New York, New York 10020. The Manager was at July 31, 1997,
investment manager, adviser or supervisor with respect to assets aggregating in
excess of $10.67 billion. The Manager acts as manager or administrator of
fifteen other investment companies and also advises pension trusts,
profit-sharing trusts and endowments.

New England Investment Companies, L.P. ("NEICLP") is the limited partner and
owner of a 99.5% interest in the Manager. Reich & Tang Asset Management, Inc. (a
wholly-owned subsidiary of NEICLP) is the general partner and owner of the
remaining .5% interest of the Manager. New England Investment Companies, Inc.
("NEIC"), a Massachusetts corporation, serves as the sole general partner of
NEICLP. Reich & Tang Asset Management L.P. succeeded NEICLP as the Manager of
the Fund.

On August 30, 1996, The New England Mutual Life Insurance Company ("The New
England") and Metropolitan Life Insurance Company ("MetLife") merged, with
MetLife being the continuing company. The Manager remains an indirect
wholly-owned subsidiary of NEICLP, but Reich & Tang Asset Management, Inc., its
sole general partner, is now an indirect subsidiary of MetLife. Also, MetLife
New England Holdings, Inc., a wholly-owned subsidiary of MetLife, owns
approximately 48.5% of the outstanding limited partnership interest of NEICLP
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc. owns
approximately 16% of the outstanding partnership units of NEICLP.

MetLife is a mutual life insurance company with assets of $297.6 billion at
December 31, 1996. It is the second largest life insurance company in the United
States in terms of total assets. MetLife provides a wide range of insurance and
investment products and services to individuals and groups and is the leader
among United States life insurance companies in terms of total life insurance in
force, which exceeded $1.6 trillion at December 31, 1996 for MetLife and its
insurance affiliates. MetLife and its affiliates provide insurance or other
financial services to approximately 36 million people worldwide.

NEIC is a holding company offering a broad array of investment styles across a
wide range of asset categories through fifteen 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, Graystone Partners, L.P., Harris Associates, L.P., Jurika & Voyles,
L.P., Loomis, Sayles & Company, L.P., New England Funds, L.P., New England
Investment Associates, Inc., Reich & Tang Capital Management, Reich & Tang
Funds, Snyder Capital Management, Vaughan, Nelson, Scarborough & McConnell, Inc.
and Westpeak Investment Advisors, L.P. These affiliates in the aggregate are
investment advisors or managers to 80 other registered investment companies.

5
<PAGE>
not interested persons (as defined in the 1940 Act) of the Fund or the Manager,
approved a new Investment Management Contract effective August 30, 1996, which
has a term which extends to February 28, 1998 and may be continued in force
thereafter for successive twelve-month periods beginning each March 1, provided
that such majority vote of the Fund's outstanding voting securities or by a
majority of the directors who are not parties to the Investment Management
Contract or interested persons of any such party, by votes cast in person at a
meeting called for the purpose of voting on such matter.

The Investment Management Contract was approved by a majority of the
shareholders of the Fund on April 4, 1996 and contains the same terms and
conditions governing the Manager's investment management responsibilities as the
Fund's previous Investment Management Contract with the Manager, except as to
the date of execution and termination.

The merger and the change in control of the Manager is not expected to have any
impact upon the Manager's performance of its responsibilities and obligations
under the Investment Management Contract.

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

Pursuant to the new Investment Management Contract, the Manager receives from
the Fund a fee equal to .30% per annum of the Fund's average daily net assets
for managing the Fund's investment portfolio and performing related services. In
addition to its fees under the new Investment Management Contract, the
Distributor receives a service fee equal to .20% per annum of the Fund's average
daily net assets for the Class A shares of the Fund under the Shareholder
Servicing Agreement. The fees are accrued daily and paid monthly. Investment
management fees and operating expenses, which are attributable to both classes
of the Fund will be allocated daily to each class share based on the percentage
of outstanding shares at the end of the day. Any portion of the total fees
received by the Manager and the Distributor may be used to provide shareholder
and administrative services and for distribution of Fund shares. (See
"Distribution and Service Plan" herein.)

Pursuant to the Administrative Services Contract for the Fund, the Manager
performs clerical, accounting supervision and office service functions for the
Fund and provides the Fund with personnel to (i) supervise the performance of
bookkeeping and related services by Investors Fiduciary Trust Company, the
Fund's bookkeeping agent, (ii) prepare reports to and filings with regulatory
authorities and, (iii) perform such other services as the Fund may from time to
time request of the Manager. The personnel rendering such services may be
employees of the Manager or its affiliates. The Fund pays the Manager the costs
of such personnel at rates which must be agreed upon between the Fund and the
Manager and provided that no payments shall be made for any services performed
by any officer of the general partner of the Manager or its affiliates. The
Manager at its discretion may voluntarily waive all or a portion of the
administrative services fee. For its services under the Administrative Services
Contract, the Manager receives a fee equal to .21% per annum of the Fund's
average daily net assets. Any portion of the total fees received by the Manager
may be used to provide shareholder services and for distribution of Fund shares.
(See "Distribution and Service Plan" herein.)

DESCRIPTION OF COMMON STOCK

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<PAGE>
series for which it was issued, and each fractional share has those rights in
proportion to the percentage that the fractional share represents of a whole
share. Generally, all shares will be voted on in the aggregate except if voting
by Class is required by law or the matter involved affects only one class, in
which case shares will be voted on separately by Class. 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 stock, Class A and Class B. Each
share, regardless of class, will represent an interest in the same portfolio of
investments and will have identical voting, dividend, liquidation and other
rights, preferences, powers, restrictions, limitations, qualifications,
designations and terms and conditions, except that: (i) the Class A and Class B
shares will have different class designations; (ii) only the Class A shares will
be assessed a service fee pursuant to the Rule 12b-1 Distribution and Service
Plan of the Fund of .20% of the Fund's average daily net assets; (iii) only the
holders of the Class A shares would be entitled to vote on matters pertaining to
the Plan and any related agreements in accordance with provisions of Rule 12b-1;
and (iv) the exchange privilege will permit shareholders to exchange their
shares only for shares of the same Class of a Fund that participates in an
exchange privilege with the Fund. (See "Exchange Privilege" herein.) Payments
that are made under the Plans will be calculated and charged daily to the
appropriate Class prior to determining daily net asset value per share and
dividends/distributions.

Under its Articles of Incorporation, the Fund has the right to redeem for cash
shares of stock owned by any shareholder to the extent and at such times as the
Fund's Board of Directors determines to be necessary or appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes. In this regard, the
Fund may also exercise its right to reject purchase orders.

INVESTMENT OBJECTIVES,
POLICIES AND RISKS

The Fund is a no-load, open-end, non-diversified, management investment company
whose investment objectives are to provide investors with a money market
portfolio from which the interest income is exempt from regular Federal, and to
the extent possible, New York State and New York City income taxes, preservation
of capital, maintenance of liquidity and relative stability of principal. There
can be, of course, no assurance that the Fund will achieve its investment
objectives.

The Fund's assets will be invested primarily in high quality debt obligations
issued by or on behalf of the State of New York, other states, territories and
possessions of the U.S., and their authorities, agencies, instrumentalities and
political subdivisions ("Municipal Obligations") and in participation
certificates in such obligations purchased from banks, insurance companies or
other financial institutions. Dividends paid by the Fund which are attributable
to interest income on tax-exempt obligations of the State of New York and its
political subdivisions, or by or on behalf of Puerto Rico or other U.S.
possessions or territories or their political subdivisions, the interest on
which is exempt from regular Federal income tax under Section 103 of the Code
and cannot be taxed by any state under Federal law, ("New York Municipal

7
<PAGE>
Obligations"), will be exempt under current law from regular Federal, New York
State and New York City personal income taxes.

Although the Supreme Court has determined that Congress has the authority to
subject the interest on bonds such as the Municipal Obligations to Federal
income taxation, existing law excludes such interest from regular Federal income
tax. "Exempt-interest" dividends, however, may be subject to the Federal
alternative minimum tax. To the extent suitable New York Municipal Obligations
are not available for investment by the Fund, the Fund may purchase Municipal
Obligations issued by other states, their agencies and instrumentalities, the
interest income on which will be exempt from Federal income tax but will be
subject to New York State and New York City personal income taxes. Except when
acceptable securities are unavailable for investment by the Fund as determined
by the Manager, the Fund will invest at least 65% of its total assets in New
York Municipal Obligations, although the exact amount of the Fund's assets
invested in such securities will vary from time to time. The Fund may hold
uninvested cash reserves pending investment and reserves the right to borrow up
to 15% of the Fund's total assets for temporary purposes from banks. 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 tax-exempt Municipal Obligations, the Fund reserves
the right to invest up to 20% of the value of its net assets in securities, the
interest income on which is subject to Federal, state and local income tax,
including securities the interest of which is subject to the federal alternative
minimum tax. The Fund expects to invest more than 25% of its assets in
participation certificates purchased from banks in New York Municipal
Obligations, including industrial revenue bonds. In view of this "concentration"
in bank participation certificates in New York Municipal Obligations, an
investment in the Fund should be made with an understanding of the
characteristics of the banking industry and the risks which such an investment
may entail. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) The investment
objectives of the Fund described in this paragraph may not be changed unless
approved by the holders of a majority of the outstanding shares of the Fund that
would be affected by such a change. As used in this Prospectus, the term
"majority of the outstanding shares" of the Fund means, respectively, the vote
of the lesser of (i) 67% or more of the shares of the Fund present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (ii) more than 50% of the outstanding shares
of the Fund.

8
<PAGE>
purchased if it has a long-term rating from any NRSRO that is below the two
highest long-term categories. A determination of comparability by the Board of
Directors is made on the basis of its credit evaluation of the issuer, which may
include an evaluation of a letter of credit, guarantee, insurance or other
credit facility issued in support of the Municipal Obligations or participation
certificates. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) While there are
several organizations that currently qualify as NRSROs, two examples of NRSROs
are Standard & Poor's 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
"SP-1AA" by S&P and "VMIG-1" by Moody's. Such instruments may produce a lower
yield than would be available from less highly rated instruments. The Fund's
Board of Directors has determined that Municipal Obligations which are backed by
the credit of the Federal government (the interest on which is not exempt from
Federal income taxation) will be considered to have a rating equivalent to
Moody's "Aaa."

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

In addition, in the event that a security (1) is in default, (2) ceases to be an
eligible investment under Rule 2a-7, or (3) is determined to no longer present
minimal credit risks, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Fund. In the event that the security
is disposed of it shall be disposed of as soon as practicable 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 Securities and Exchange Commission of
such fact and of the actions that the Fund intends to take in response to the
situation.

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

9
<PAGE>
Statement of Additional Information) which may limit both the amounts and types
of loans and other financial commitments which may be made and interest rates
and fees which may be charged. The profitability of this industry is largely
dependent upon the availability and cost of capital funds for the purpose of
financing lending operations under prevailing money market conditions. Also,
general economic conditions play an important part in the operations of this
industry and exposure to credit losses arising from possible financial
difficulties of borrowers might affect a bank's ability to meet its obligations
under a letter of credit. The Fund may invest 25% or more of the net assets of
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 including, for example, securities the
interest upon which is paid from revenues of similar type projects, or
securities the issuers of which are located in the same state.

As a non-diversified investment company, the Fund is not subject to any
statutory restriction under the 1940 Act with respect to investing its assets in
one or relatively few issuers. This non-diversification may present greater
risks than in the case of a diversified company. The Fund intends, however, to
qualify as a "regulated investment company" under Subchapter M of the Code. The
Fund will be restricted in that at the close of each quarter of the taxable
year, at least 50% of the value of its total assets must be represented by cash,
government securities, investment company securities and other securities
limited in respect of any one issuer to not more than 5% in value of the total
assets of the Fund and to not more than 10% of the outstanding voting securities
of each 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 are not fundamental policies and may be revised to
the extent applicable Federal income tax requirements are revised. (See "Federal
Income Taxes" herein.)

The primary purpose of investing in a portfolio of New York Municipal
Obligations is the special tax treatment accorded New York resident individual
investors. Payment of interest and preservation of principal, however, is
dependent upon the continuing ability of the New York issuers and/or obligors of
state, municipal and public authority debt obligations to meet their obligations
thereunder. Over the long term, New York State and New York City face serious
potential economic problems. The State has long been one of the wealthiest
states in the nation. For decades, however, the state economy has grown more
slowly than that of the nation as a whole, resulting in the gradual erosion of
its relative economic affluence. The causes of this relative decline are varied
and complex, in many cases involving national and international developments
beyond the State's control. For additional information, please refer to "Special
Factors Affecting New York" in the Statement of Additional Information.
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 New York issues with those of more
diversified portfolios including out-of-state issues before making an investment
decision. The Fund's management believes that by maintaining the Fund's
investment portfolio in liquid, short-term, high quality investments, including
the participation certificates and other variable rate demand instruments that
have high quality credit support from banks, insurance companies or other
financial institutions, the Fund is largely insulated from the credit risks that
may exist on long-term New York Municipal Obligations. For additional
information, please refer to the Statement of Additional Information.

DIVIDENDS AND DISTRIBUTIONS

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<PAGE>
The Fund declares dividends equal to all its net investment income (excluding
capital gains and losses, if any, and amortization of market discount) on each
Fund Business Day and generally pays dividends monthly. There is no fixed
dividend rate. In computing these dividends, interest earned and expenses are
accrued daily.

Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year. All dividends
and distributions of capital gains are automatically invested in additional Fund
shares of the same Class of shares immediately upon payment thereof unless a
shareholder has elected by written notice to the Fund to receive either of such
distributions in cash.

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

HOW TO PURCHASE AND REDEEM SHARES

Investors who have accounts with Participating Organizations may invest in the
Fund through their Participating Organizations. Certain Participating
Organizations are compensated by the Distributor from its shareholder servicing
fee and by the Manager from its management fee for the performance of these
services. An investor who purchases shares through a Participating Organization
that receives payment from the Manager or the Distributor will become a Class A
shareholder. (See "Investment Through Participating Organizations" herein.) All
other investors, and investors who have accounts with Participating
Organizations but who do not wish to invest in the Fund through their
Participating Organizations, may invest in the Fund directly as Class B
shareholders of the Fund and 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 who do
not receive compensation from the Distributor or the Manager because they may
not be legally permitted to receive such as fiduciaries. The Manager pays the
expenses incurred in the distribution of Class B shares. Participating
Organizations whose clients become Class B shareholders will not receive
compensation from the Manager or Distributor for the servicing they may provide
to their clients. (See "Direct Purchase and Redemption Procedures" herein.) With
respect to both Classes of shares, the minimum initial investment in the Fund by
Participating Organizations is $1,000 which may be satisfied by initial
investments aggregating $1,000 by a Participating Organization on behalf of
customers whose initial investments are less than $1,000. The minimum initial
investment for all other investors is $5,000. 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.

The Fund sells and redeems its shares on a continuing basis at net asset value
and does not impose a sales charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent which
accepts orders for purchases and redemptions from Participating Organizations
and from investors directly.

11
<PAGE>
"Federal Funds"). Accordingly, the Fund does not accept a subscription or invest
an investor's payment in portfolio securities until the payment is converted
into Federal Funds.

Shares will be issued as of the first determination of the Fund's net asset
value per share for each Class made after receipt of the investor's purchase
order. The Fund reserves the right to reject any purchase order for its shares.
Certificates for Fund shares will not be issued to an investor.

Shares are issued as of 12 noon, New York City time, on any Fund Business Day on
which an order for the shares and accompanying Federal Funds are received by the
Fund's transfer agent before 12 noon. Orders accompanied by Federal Funds and
received after 12 noon on a Fund Business Day will not result in share issuance
until the following Fund Business Day. Fund shares begin accruing income on the
day on which shares are issued to an investor.

There is no redemption charge, no minimum period of investment, no minimum
amount for 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 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 Securities and Exchange Commission determines that trading thereon is
restricted, or for any period during which an emergency (as determined by the
Securities and Exchange Commission) exists as a result of which disposal by the
Fund of its 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 Securities and Exchange Commission
may by order permit for the protection of the shareholders of the Fund.

Redemption requests received by the Fund's transfer agent before 12 noon, New
York City time, on any day on which the New York Stock Exchange, Inc. is open
for trading become effective at the net asset value per share determined at 12
noon that day. Shares redeemed are not entitled to participate in dividends
declared on the day a redemption becomes effective. Redemption requests received
after 12 noon will result in a share redemption on the following Fund Business
Day.

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, and 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 the total net
asset value to the minimum amount and thereby avoid such mandatory redemption.

The redemption of shares may result in the investor's receipt of more or less
than he paid for his

12
<PAGE>
shares and, thus, in a taxable gain or loss to the investor.

INVESTMENT THROUGH PARTICIPATING ORGANIZATIONS

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 Manager 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 confirmations and 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 offered to
Participant Investors by the Participating Organizations. 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.

The Glass-Steagall Act limits the ability of a depository institution to become
an underwriter or distributor of securities. It is the Fund management's
position, however, that banks are not prohibited from acting in other capacities
for investment companies, such as providing administrative and shareholder
account maintenance services and receiving compensation from the Manager for
providing such services. This is an unsettled area of the law, however, and if a
determination contrary to the Fund management's position is made by a bank
regulatory agency or court concerning shareholder servicing and administration
payments to banks from the Manager, any such payments will be terminated and any
shares registered in the banks' names, for their underlying customers, will be
re-registered in the name of the customers at no cost to the Fund or its
shareholders. In addition, state securities laws on this issue may differ from
the interpretations of Federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.

Orders received by the Fund's transfer agent before 12 noon, New York City time,
on a Fund Business Day, with accompanying Federal Funds will result in the
issuance of shares on that day. Orders received by the Fund's transfer agent
after 12 noon with accompanying Federal Funds will result in the issuance of
shares on the following

13
<PAGE>
Fund Business Day. Participating Organizations are responsible for instituting
procedures to insure that purchase orders by their respective clients are
processed expeditiously.

DIRECT PURCHASE AND
REDEMPTION PROCEDURES

The following purchase and redemption procedures apply to investors who wish to
invest in the Fund directly and not through Participating Organizations. These
investors 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 State 212-830-5220
Outside New York State (TOLL FREE) 800-221-3079

All shareholders, other than certain Participant Investors, will receive from
the Fund individual confirmations of each purchase and redemption of Fund shares
(other than draft check redemptions) and a monthly statement listing the total
number of Fund shares owned as of the statement closing date, purchase and
redemptions of Fund shares during the month covered by the statement and the
dividends paid on Fund shares of each shareholder during the statement period
(including dividends paid in cash or reinvested in additional Fund shares).

INITIAL PURCHASES OF SHARES

Mail

Investors may send a check made payable to "New York Daily Tax Free Income Fund,
Inc." along with a completed subscription order form to:

New York Daily Tax Free Income Fund, Inc.
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
can 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 subscription 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 State) or 800-221-3079 (outside New
York State) and then instruct a member commercial bank to wire their money
immediately to:

Investors Fiduciary Trust Company
ABA # 101003621
DDA # 890752-953-8
For New York Daily Tax Free
Income Fund, Inc.
Account of (Investor's Name)
Fund Account #0948
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
that 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 "New York Daily Tax Free Income Fund, Inc."
along with a completed subscription order form to:

14
<PAGE>

Reich & Tang Funds
600 Fifth Avenue - 9th 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, or by
having 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. Death or legal
incapacity will automatically terminate your participation in the Privilege. You
may elect at any time to terminate your participation by notifying in writing
the appropriate depositing entity and/or federal agency. 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 or personal delivery, as indicated
above, or by mailing a check to:

New York Daily Tax Free Income Fund, Inc.
Mutual Funds Group
Post Office 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 order 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 following receipt by the Fund's transfer agent of the redemption order.
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
made unless the check (including a certified or cashier's check) used to
purchase the shares has been cleared for payment by the investor's bank and
converted into Federal Funds. A bank check is currently considered by the Fund
to have cleared within 15 days after it is deposited by the Fund.

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 and 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, accompanied by any certificate that may have been previously issued to
the shareholder, addressed to:

15
<PAGE>

New York Daily Tax Free Income Fund, Inc.
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 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 for 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 Directors 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, a postdated check and a check
written for an amount below the Fund minimum of $250. The Fund reserves the
right to terminate or modify the check redemption procedure at any time or to
impose additional fees.

Investors wishing to avail themselves of this method of redemption should elect
it on their subscription order form. Individuals and joint tenants are not
required to furnish any supporting documentation. Corporations and other
entities making this election, however, are required to furnish a certified
resolution or other evidence of authorization in accordance with the Fund's
normal practices. 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. This checking
service may be terminated or modified at any time.

Telephone

The Fund accepts telephone requests for redemption from shareholders who elect
this option. 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 requests from
any

16
<PAGE>
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. The failure by the Fund to employ such procedures
may cause the Fund to be liable for any losses incurred by investors due to
telephone redemptions based upon unauthorized or fraudulent instructions.

A shareholder making a telephone withdrawal should call the Fund at
212-830-5220; outside New York State at 800-221-3079, 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 and on 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.

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., Daily Tax Free Income Fund, Inc.,
Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund, Inc.,
New Jersey Daily Municipal 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, manager or
administrator.

There is no charge for the exchange privilege or limitation as to frequency of
exchange. The minimum amount for an exchange is $1,000, except that 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 are exchanged at their
respective net asset values.

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 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. Prospectuses may be
obtained by contacting Reich & Tang Funds at the address or telephone number set
forth on the cover page of this Prospectus.

17
<PAGE>
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.

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

New York Daily Tax Free Income Fund, Inc.
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; outside New York State at (800) 221-5079. The Fund reserves the
right to reject any exchange request and may modify or terminate the exchange
privilege at any time upon notice to shareholders.

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, quarterly,
semi-annual, or annual basis in an amount approved and confirmed by the Manager.
The monthly withdrawal payments of the specified amount are made on the 23rd day
of each month and the quarterly payments are made on the 23rd day of March,
June, September and December. Whenever such 23rd day of a month is not a
business day, the payment date is the 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 the
participant. Because the withdrawal plan involves the redemption of Fund shares,
such withdrawals may constitute taxable events to the shareholder but the Fund
does not expect that there will be any realizable capital gains.

DISTRIBUTION AND SERVICE PLAN

Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission has required that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Fund's Board of Directors has adopted a
Distribution and Service Plan (the "Plan") and, pursuant to the Plan, the Fund
has entered into a Distribution Agreement with Reich & Tang Distributors L.P.
(the "Distributor") and a Shareholder Servicing Agreement (with respect to Class
A shares of the Fund only) with the Distributor and the Manager.

Under the Distribution Agreement, the Distributor for nominal consideration 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.

Under the Shareholder Servicing Agreement, the Distributor receives (with
respect only to the Class A shares) a service fee equal to .20% 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

18
<PAGE>
paid monthly and any portion of the fee may be deemed to be used by the
Distributor for payments to Participating Organizations with respect to their
provision of such services to their clients or customers who are shareholders of
the Class A shares of the Fund. The 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 provides that, in addition to
the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses not to exceed in the aggregate .05% per annum of the Fund's average
daily net assets, including the cost of dedicated lines and CRT terminals,
incurred by the Manager, Distributor and Participating Organizations in carrying
out their respective obligations under the Shareholder Servicing Agreement with
respect to Class A shares, and (ii) preparing, printing and delivering the
Fund's Prospectus to existing shareholders of the Fund and preparing and
printing subscription application forms for shareholder accounts.

The Plan and the Shareholder Servicing Agreement 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 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
Shareholder Servicing Fee (with respect to Class A shares) and past profits, for
the purposes enumerated in (i) above. The Distributor, in its sole discretion,
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 the new Investment
Management Contract, the Shareholder Servicing Agreement or the Administrative
Services Contract in effect for that year.

For the fiscal year ended April 30, 1997, the total amount spent pursuant to the
Plan for the Class A shares was .35% of the average daily net assets of the
Fund, of which .20% of the average daily net assets was paid by the Fund to the
Manager, pursuant to the Shareholder Servicing Agreement and an amount
representing .15% of the average daily net assets was paid by the Manager (which
may be deemed an indirect payment by the Fund). Of the total amount paid by the
Distributor, $974,724 was utilized for Broker assistance payments, $12,996 for
compensation to sales personnel, $2,885 for travel and expenses, $15,581 for
Prospectus printing and $232 on miscellaneous expenses.

FEDERAL INCOME TAXES

19
<PAGE>
as described below, such "exempt-interest dividends" may be subject to the
Federal alternative minimum tax. (See "Federal Income Taxes" in the Statement of
Additional Information.) 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 gains
dividends" or having undistributed capital gain income within the meaning of the
Code. The Fund will inform shareholders of the amount and nature of its income
and gains in a written notice mailed to shareholders not later than 60 days
after the close of the Fund's taxable year. For Social Security recipients,
interest on tax-exempt bonds, including tax-exempt interest dividends paid by
the Fund, 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. Further a
corporation will be required to include in alternative minimum taxable income
75% of the amount by which its adjusted current earnings (including generally,
tax-exempt interest) exceeds its alternative minimum taxable income (determined
without this tax item). In addition, 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 the variable rate demand instruments, including participation
certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner thereof and the interest on the underlying Municipal Obligations will
be exempt from regular Federal income taxes to the Fund. Counsel has pointed out
that the Internal Revenue Service has announced that it will not ordinarily
issue advance rulings on the question of ownership of securities or
participation interests therein subject to a put and could reach a conclusion
different from that reached by counsel.

The exemption of interest income for Federal income tax purposes does not
necessarily result in an exemption under the income or other tax laws of any
state or local taxing authority. However, to the extent that dividends are
derived from interest on New York Municipal Obligations, the dividends will also
be excluded from a New York resident shareholder's gross income for New York
State and New York City personal income tax purposes. This exclusion does not
result in a corporate shareholder being exempt for New York State and New York
City franchise tax purposes. Shareholders should consult their own tax advisors
about the status of distributions from the Fund in their own states and
localities.

GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on January 31,
1984 and it is registered with the Securities and Exchange Commission as a
non-diversified, open-end, management investment company.

The Fund prepares semi-annual unaudited and annual audited reports which include
a list of investment securities held by the Fund and which are sent to
shareholders.

20
<PAGE>

As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-Laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of the revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of shareholders entitled to cast not less than 67% in interest of all
the votes entitled to be cast at such meeting. Annual and other meetings may be
required with respect to such additional matters relating to the Fund as may be
required by the 1940 Act including the removal of Fund director(s) and
communication among shareholders, any registration of the Fund with the
Securities and Exchange Commission or any state, or as the Directors may
consider necessary or desirable. Each Director serves until the next meeting of
the shareholders called for the purpose of considering the election or
reelection of such Director or of a successor to such Director, and until the
election and qualification of his or her successor, elected at such a meeting,
or until such Director sooner dies, resigns, retires or is removed by the vote
of the shareholders.

NET ASSET VALUE

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 customary business holidays and Good
Friday. The net asset value of a Class is computed by dividing the value of the
Fund's net assets (i.e., the value of its securities and other assets less its
liabilities, including expenses payable or accrued but excluding capital stock
and surplus) for such Class 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, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.

CUSTODIAN, TRANSFER AGENT
AND DIVIDEND AGENT

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities. Reich & Tang Services
L.P., 600 Fifth Avenue, New York, New York 10020, is transfer agent and dividend
agent for the shares of the Fund. The Fund's custodian and transfer agent do not
assist in, and are not responsible for, investment decisions involving assets of
the Fund.

21
<PAGE>
TABLE OF CONTENTS

Table of Fees and Expenses........................
Selected Financial Information....................
Introduction......................................
Management of the Fund............................
Description of Common Stock....................... NEW YORK
Investment Objectives, Policies and Risks......... DAILY
Dividends and Distributions....................... TAX
How to Purchase and Redeem Shares................. FREE
Investment through INCOME
Participating Organizations............... FUND, INC.
Direct Purchase and
Redemption Procedures.....................
Initial Purchases of Shares..................
Electronic Funds Transfers (EFT), Pre-
authorized Credit and Direct Deposit
Privilege
Subsequent Purchases of Shares............... PROSPECTUS
Redemption of Shares......................... September 1, 1997
Exchange Privilege...........................
Specified Amount Automatic
Withdrawal Plan..............................
Distribution and Service Plan.....................
Federal Income Taxes..............................
General Information...............................
Net Asset Value...................................
Custodian, Transfer Agent
and Dividend Agent..........................

<PAGE>
EVERGREEN SHARES OF
NEW YORK DAILY TAX FREE
INCOME FUND, INC.
[GRAPHIC OMITTED]

PROSPECTUS
September 1, 1997

New York Daily Tax Free Income Fund, Inc. (the "Fund") is a money market fund
designed for investors who desire interest income exempt from regular Federal,
and to the extent possible, New York State and New York City income taxes and
preservation of capital, liquidity and stability of principal by investing in a
professionally managed, non-diversified portfolio of high quality, short-term
municipal obligations. No assurance can be given that these objectives will be
achieved. The Fund offers two classes of shares to the general public, however
only Class A shares are offered by this Prospectus ("The Evergreen Shares"). The
Class A shares of the Fund are subject to a service fee pursuant to the Fund's
Rule 12b-1 Distribution and Service Plan and are sold through financial
intermediaries who provide servicing to Class A shareholders for which they
receive compensation from the Manager and the Distributor. The Class B shares of
the Fund are not subject to a service fee and either are sold directly to the
public or are sold through financial intermediaries that do not receive
compensation from the Manager or Distributor. In all other respects, the Class A
and Class B shares represent the same interests in the income and assets of the
Fund. See "Description of Common Stock". The Fund is concentrated in the
securities issued by the State of New York (the "State") or entities within the
State and may invest a significant percentage of its assets in a single issuer,
therefore, an investment in the Fund may be riskier than an investment in other
types of money market funds. Only Evergreen shares are offered by this
Prospectus.

This Prospectus sets forth concisely the information about the Fund that
prospective investors will find helpful in making their investment decisions.
Additional information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC") and is available upon request and without charge
by calling the Fund at (800) 807-2940. The "Statement of Additional Information"
bears the same date as this Prospectus and is incorporated by reference into
this Prospectus in its entirety. The SEC maintains a website
(http.//www.sec.gov.) that contains the Statement of Additional Information and
other reports and information regarding the Fund which have been filed
electronically with the SEC.

Investors should be aware that the Evergreen shares may not be purchased other
than through certain securities dealers with whom Evergreen Keystone
Distributor, Inc. ("EKD") has entered into agreements for this purpose or
directly from EKD. Evergreen shares have been created for the primary purpose of
providing a New York tax-free money market fund product for shareholders of
certain funds distributed by EKD. Shares of the Fund other than Evergreen shares
are offered pursuant to a separate Prospectus.

THIS PROSPECTUS SHOULD BE READ AND RETAINED BY INVESTORS FOR FUTURE REFERENCE.

<PAGE>

TABLE OF CONTENTS

TABLE OF FEES AND EXPENSES HOW TO PURCHASE AND REDEEM SHARES
FINANCIAL HIGHLIGHTS How to Buy Shares
INTRODUCTION How to Redeem Shares
MANAGEMENT OF THE FUND SHAREHOLDER SERVICES
DESCRIPTION OF COMMON STOCK Effect of Banking Laws
INVESTMENT OBJECTIVES, DISTRIBUTION AND SERVICE PLAN
POLICIES AND RISKS FEDERAL INCOME TAXES
DIVIDENDS AND DISTRIBUTIONS GENERAL INFORMATION
NET ASSET VALUE
CUSTODIAN AND TRANSFER AGENT

2
<PAGE>
TABLE OF FEES AND EXPENSES

You would pay the following expenses
on a $1,000 investment, assuming
5% annual return (cumulative through the end of each year):

1 year 3 years 5 years 10 years
------ ------- ------- --------
Class A $8 $26 $46 $101
Class B $6 $20 $35 $77

FINANCIAL HIGHLIGHTS

* Includes expense offsets.

+ Net of management and shareholder servicing fees waived equivalent to .07%,
.10%, .02%, and .02% of average net assets.

</TABLE>
<TABLE>
<CAPTION>
<S> <C>
October 10, 1996
CLASS B (Commencement of Sales) to
April 30, 1997
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $ 1.00
------
Income from investment operations:
Net investment income................... 0.017
Less distributions:
Dividends from net investment income.... ( 0.017)
------
Net asset value, end of period............ $ 1.00
=======
Total Return.............................. 3.02%*
Ratios/Supplemental Data
Net assets, end of period (000)........... 7
Ratios to average net assets:
Expenses ............................... 0.62%*
Net investment income................... 2.99%*
* Annualized
</TABLE>

3
<PAGE>

- --------------------------------------------------------------------------------
INTRODUCTION
- --------------------------------------------------------------------------------

The Fund's investment manager is Reich & Tang Asset Management L.P. (the
"Manager") which is a registered investment adviser and which currently acts as
manager or administrator to fifteen other open-end management investment
companies. The Fund's shares are distributed through Reich & Tang Distributors
L.P. (the "Distributor"), with whom the Fund has entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to Class A shares
only) pursuant to the Fund's distribution and service plan adopted under Rule
12b-1 under the Investment Company Act of 1940, as amended, (the "1940 Act").
(See "Distribution and Service Plan".)

The Fund intends that its investment portfolio will be concentrated in New
York Municipal Obligations and bank participation certificates therein. A
summary of recent financial and credit developments and special risk factors
affecting New York State and New York City is set forth under "Special Factors
Affecting New York" in the Statement of Additional Information. Investment in
the Fund should be made with an understanding of the risks which an investment
in New York Municipal Obligations may entail. Payment of interest and
preservation of capital are dependent upon the continuing ability of New York
issuers and/or obligors of state, municipal and public authority debt
obligations to meet their obligations hereunder. Investors should consider the
greater risk of the Fund's concentration versus the safety that comes with a
less concentrated portfolio and should compare yields available on portfolios of
New York issues with those of more diversified portfolios including out-of-state
issues before making an investment decision. The Fund's Board of Directors is
authorized to divide the unissued shares into separate series of stock, one for
each of the Fund's separate investment portfolios that may be created in the
future.

Evergreen shares are identical to other shares of the Fund, which are
offered pursuant to a separate prospectus, with respect to investment objectives
and yield, but differ with respect to certain other matters. See "How to
Purchase and Redeem Shares" and "Shareholder Services."
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The Fund's Board of Directors which is responsible for the overall
management and supervision of the Fund, has employed the Manager to serve as
investment manager of the Fund. The Manager provides persons satisfactory to the
Fund's Board of Directors to serve as officers of the Fund. Such officers, as
well as certain other employees and directors of the Fund, may be directors or
officers of Reich & Tang Asset Management, Inc., the sole general partner of the
Manager, or employees of the Manager or its affiliates. Due to the services
performed by the Manager, the Fund currently has no employees and its officers
are not required to devote full-time to the affairs of the Fund. The Statement
of Additional Information contains general background information regarding each
Director and principal officer of the Fund.

The Manager is a Delaware limited partnership with its principal offices at
600 Fifth Avenue, New York, New York 10020. The Manager was at July 31, 1997
investment manager, adviser or supervisor with respect to assets aggregating in
excess of $10.67 billion. The Manager acts as manager or administrator of
fifteen other investment companies and also advises pension trusts,
profit-sharing trusts and endowments.

New England Investment Companies, L.P. ("NEICLP") is the limited partner
and owner of a 99.5% interest in the Manager. Reich & Tang Asset Management,
Inc. (a wholly-owned subsidiary of NEICLP) is the

4
<PAGE>
general partner and owner of the remaining .5% interest of the Manager. New
England Investment Companies, Inc. ("NEIC"), a Massachusetts corporation, serves
as the sole general partner of NEICLP. Reich & Tang Asset Management L.P.
succeeded NEICLP as the Manager of the Fund

NEIC is a holding company offering a broad array of investment styles
across a wide range of asset categories through fifteen 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, Graystone Partners, L.P., Harris Associates, L.P., Jurika & Voyles,
L.P., Loomis, Sayles & Company, L.P., New England Funds, L.P., New England
Investment Associates, Inc., Reich & Tang Capital Management, Reich & Tang
Funds, Snyder Capital Management, Vaughan, Nelson, Scarborough & McConnell, Inc.
and Westpeak Investment Advisors, L.P. These affiliates in the aggregate are
investment advisors or managers to 80 other registered investment companies.

The merger between The New England and MetLife resulted in an "Assignment"
of the Investment Management Contract relating to the Fund. Under the 1940 Act,
such an Assignment caused the automatic termination of this agreement. On
November 28, 1995, the Board of Directors, including a majority of the directors
who are not interested persons (as defined in the 1940 Act) of the Fund or the
Manager, approved a new Investment Management Contract effective August 30,
1996, which has a term which extends to February 28, 1998 and may be continued
in force thereafter for successive twelve-month periods beginning each March 1,
provided that such majority vote of the Fund's outstanding voting securities or
by a majority of the directors who are not parties to the Investment Management
Contract or interested persons of any such party, by votes cast in person at a
meeting called for the purpose of voting on such matter.

The merger and the change in control of the Manager is not expected to have
any impact upon the Manager's performance of its responsibilities and
obligations under the Investment Management Contract.

Pursuant to the new Investment Management Contract, the Manager receives
from the Fund a fee equal to .30% per annum of the Fund's average daily net
assets for managing the Fund's investment portfolio and performing related
services. In addition to its fees under the new Investment Management Contract,
Reich & Tang Distributors L.P., the Distributor, receives a service fee equal to
.20% per annum of the Fund's average daily net assets under the Shareholder
Servicing Agreement. The fees are accrued daily and paid monthly. Any portion of
the total fees received by the Manager and the Distributor may be used to
provide shareholder and administrative services and for distribution of Fund
shares. (See "Distribution and Service Plan" herein.)

Pursuant to the Administrative Services Contract for the Fund, the Manager
performs clerical, accounting supervision and office service functions for the
Fund and provides the Fund with personnel to: (i) supervise the performance of
bookkeeping and related services by Investors Fiduciary Trust Company, the
Fund's bookkeeping agent; (ii) prepare reports to and filings with regulatory
authorities; and (iii) perform such other services as the Fund may from time to
time request of the Manager. The personnel rendering such services may be
employees of the Manager or its affiliates. The Manager at its discretion may
voluntarily waive all or a portion of the administrative services fee. For its
services under the Administrative Services Contract, the Manager receives a fee
equal to .21% per annum of the Fund's average daily net assets. Any portion of
the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares. (See "Distribution and Service
Plan" herein.)

5
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF COMMON STOCK
- --------------------------------------------------------------------------------

Under its Articles of Incorporation the Fund has the right to redeem for
cash shares of stock owned by any shareholder to the extent and at such times as
the Fund's Board of Directors determines to be necessary or appropriate to
prevent an undue concentration of stock ownership which would cause the Fund to
become a "personal holding company" for Federal income tax purposes. In this
regard, the Fund may also exercise its right to reject purchase orders.

The shares of the Fund have non-cumulative voting rights, which means that
the holders of more than 50% of the shares outstanding voting for the election
of directors can elect 100% of the directors if the holders choose to do so,
and, 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 who is a shareholder of record, the Fund does not issue
certificates evidencing Fund shares.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES,
POLICIES AND RISKS
- --------------------------------------------------------------------------------
The Fund is a no-load, open-end, non-diversified, management investment
company whose investment objectives are to provide investors with a money market
portfolio from which the interest income is exempt from regular Federal, and to
the extent possible, New York State and New York City income taxes, preservation
of capital, maintenance of liquidity and relative stability of principal. There
can be, of course, no assurance that the Fund will achieve its investment
objectives.

The Fund's assets will be invested primarily in high quality debt
obligations issued by or on behalf of the State of New York, other states,
territories and possessions of the U.S., and their authorities, agencies,
instrumentalities and political subdivisions ("Municipal Obligations") and in
participation certificates in such obligations purchased from banks, insurance
companies or other financial institutions. Dividends paid by the Fund which are
attributable to interest income on tax-exempt obligations of the State of New
York and its political subdivisions, or by or on behalf of Puerto Rico or other
U.S. possessions or territories or their political subdivisions, the interest on
which is exempt from regular Federal income tax under section 103 of the Code
and cannot be taxed by any state under Federal law, ("New York Municipal
Obligations"), will be exempt under current law from regular Federal, New York
State and New York City personal income taxes.

6
<PAGE>
Fund, the Fund may purchase Municipal Obligations issued by other states, their
agencies and instrumentalities, the interest income on which will be exempt from
Federal income tax but will be subject to New York State and New York City
personal income taxes. Except when acceptable securities are unavailable for
investment by the Fund as determined by the Manager, the Fund will invest at
least 65% of its total assets New York Municipal Obligations, although the exact
amount of the Fund's assets invested in such securities will vary from time to
time. The Fund may hold uninvested cash reserves pending investment and reserves
the right to borrow up to 15% of the Fund's total assets for temporary purposes
from banks. 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 tax-exempt Municipal
Obligations, the Fund reserves the right to invest up to 20% of the value of its
net assets in securities, the interest income on which is subject to Federal,
state and local income tax, including securities the interest of which is
subject to the federal alternative minimum tax. The Fund expects to invest more
than 25% of its assets in participation certificates purchased from banks in New
York Municipal Obligations, including industrial revenue bonds. In view of this
"concentration" in bank participation certificates in New York Municipal
Obligations, an investment in the Fund should be made with an understanding of
the characteristics of the banking industry and the risks which such an
investment may entail. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) The investment
objectives of the Fund described in this paragraph may not be changed unless
approved by the holders of a majority of the outstanding shares of the Fund that
would be affected by such a change. As used in this Prospectus, the term
"majority of the outstanding shares" of the Fund means, respectively, the vote
of the lesser of (i) 67% or more of the shares of the Fund present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (ii) more than 50% of the outstanding shares
of the Fund.

The Fund may only purchase Municipal Obligations that have been determined
by the Fund's Board of Directors to present minimal credit risks and that are
Eligible Securities at the time of acquisition. The term Eligible Securities
means (i) Municipal Obligations with remaining maturities of 397 days or less
and rated in the two highest short-term rating categories by any two nationally
recognized statistical rating organizations ("NRSROs") or in such categories by
the only NRSRO that has rated the Municipal Obligations (collectively, the
"Requisite NRSROs") (acquisition in the latter situation must also be ratified
by the Board of Directors), (ii) Municipal Obligations with remaining maturities
of 397 days or less but that at the time of issuance were long-term securities
(i.e., with maturities greater than 366 days) and whose issuer has received from
the Requisite NRSROs a rating with respect to comparable short-term debt in the
two highest short-term rating categories, and (iii) unrated Municipal
Obligations determined by the Fund's Board of Directors to be of comparable
quality. Where the issuer of a long-term security with a remaining maturity
which would otherwise qualify it as an Eligible Security, does not have rated
short-term debt outstanding, the long-term security is treated as unrated but
may not be purchased if it has a long-term rating from any NRSRO that is below
the two highest long-term categories. A determination of comparability by the
Board of Directors is made on the basis of its credit evaluation of the issuer,
which may include an evaluation of a letter of credit, guarantee, insurance or
other credit facility issued in support of the Municipal Obligations or
participation certificates. (See "Variable Rate Demand Instruments and
Participation Certificates" in the Statement of Additional Information.) While
there are several organizations that currently qualify as NRSROs, two examples
of NRSROs are Standard & Poor's 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 "SP-1AA" by S&P and "VMIG-1" by Moody's. Such
instruments may produce a lower yield than would be available from less highly
rated instruments. The Fund's Board of Directors has determined that Municipal
Obligations which are backed by the credit of the Federal government (the
interest on which is not exempt from Federal income taxation) will be considered
to have a rating equivalent to Moody's "Aaa."

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

7
<PAGE>
interests of the Fund. In the event that the security is disposed of it shall be
disposed of 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 Securities and Exchange Commission of such fact and of the
actions that the Fund intends to take in response to the situation.

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

In view of the "concentration" of the Fund in bank participation
certificates in New York 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 which include extensive governmental
regulations, changes in the availability and cost of capital funds, and general
economic conditions (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information) which may limit both
the amounts and types of loans and other financial commitments which may be made
and interest rates and fees which may be charged. The profitability of this
industry is largely dependent upon the availability and cost of capital funds
for the purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an important part in the
operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations under a letter of credit. The Fund may invest 25% or more of the net
assets of 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 including, for example,
securities the interest upon which is paid from revenues of similar type
projects, or securities the issuers of which are located in the same state.

As a non-diversified investment company, the Fund is not subject to any
statutory restriction under the 1940 Act with respect to investing its assets in
one or relatively few issuers. This non-diversification may present greater
risks than in the case of a diversified company. However, the Fund intends to
qualify as a "regulated investment company" under Subchapter M of the Code. The
Fund will be restricted in that at the close of each quarter of the taxable
year, at least 50% of the value of its total assets must be represented by cash,
government securities, investment company securities and other securities
limited in respect of any one issuer to not more than 5% in value of the total
assets of the Fund and to not more than 10% of the outstanding voting securities
of each 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 are not fundamental policies and may be revised to
the extent applicable Federal income tax requirements are revised. (See "Federal
Income Taxes" herein.)

The primary purpose of investing in a portfolio of New York Municipal
Obligations is the special tax treatment accorded New York resident individual
investors. However, payment of interest and preservation of principal is
dependent upon the continuing ability of the New York issuers and/or obligors of
state, municipal and public authority debt obligations to meet their obligations
thereunder. Over the long term, New York State and New York City face serious
potential economic problems. The State has long been one of the wealthiest
states in the nation. For decades, however, the state economy has grown more
slowly than that of the nation as a whole, resulting in the gradual erosion of
its relative economic affluence. The causes of this relative decline are varied
and complex, in many cases involving national and international developments
beyond the State's control. For additional information, please refer to "Special
Factors Affecting New York" in the Statement of Additional Information.
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 New York issues with those of more
diversified portfolios including out-of-state issues before making an investment
decision. The Fund's management believes that by maintaining the Fund's
investment portfolio in liquid, short-term, high quality investments, including
the participation certificates and other variable rate demand instruments that
have high quality credit support from banks, insurance companies or other
financial institutions, the Fund is largely insulated from the credit risks that
may exist on long-term New York Municipal Obligations. For additional
information, please refer to the Statement of Additional Information.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
8
<PAGE>
The Fund declares dividends equal to all its net investment income
(excluding capital gains and losses, if any, and amortization of market
discount) on each Fund Business Day and generally pays dividends monthly. There
is no fixed dividend rate. In computing these dividends, interest earned and
expenses are accrued daily.

Net realized capital gains, if any, are distributed at least annually and
in no event later than 60 days after the end of the Fund's fiscal year. All
dividends and distributions of capital gains are automatically invested in
additional Fund shares of the same Class immediately upon payment thereof unless
a shareholder has elected by written notice to the Fund to receive either of
such distributions in cash.

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

- --------------------------------------------------------------------------------
HOW TO PURCHASE AND REDEEM SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES

You can purchase shares of the Fund through broker-dealers, banks or other
financial intermediaries, or directly through EKD. The minimum initial
investment is $1,000 which may be waived in certain situations. There is no
minimum for subsequent investments. In states where EKD is not registered as a
broker-dealer, shares of the Fund will only be sold through other broker-dealers
or other financial institutions that are registered. Only Evergreen Shares are
offered through this Prospectus. Instructions on how to purchase shares of the
Fund are set forth in the Share Purchase Application.

Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss the Fund or the Fund's Manager incurs.
If such investor is an existing shareholder, the Fund may redeem shares from his
or her account to reimburse the Fund or the Fund's Manager for any loss. In
addition, such investors may be prohibited or restricted from making further
purchase in any of the Evergreen mutual funds.

HOW TO REDEEM SHARES

You may "redeem", i.e., sell your shares in the Fund to the Fund on any
Fund Business Day, either directly or through your financial intermediary. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, the Fund
will not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to ten days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.

Redeeming Shares Through Your Financial Intermediary. The Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to the Fund and may
charge you for this service. Certain financial intermediaries may require that
you give instructions earlier than 4:00 p.m. (Eastern time).

Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend disbursing agent
for the Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.

Shareholders may withdraw amounts of $1,000 or more from their accounts by
calling State Street at 800-423-2615 between the hours of 8:00 a.m. to 5:30 p.m.
(Eastern time) each Fund Business Day. Redemption requests made after 4:00 p.m.
(Eastern time) will be processed using the net asset value determined on the
next business day. Such redemption requests must include the shareholder's
account name, as registered with the Fund, and the account number. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone redemptions. Shareholders who are unable to
reach State Street by telephone should follow the procedures outlined above for
redemption by mail.

9
<PAGE>
The telephone redemption service is not available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in
the Fund at a designated commercial bank. State Street currently deducts a $5.00
wire charge from all redemption proceeds wired. This charge is subject to change
without notice. Redemption proceeds will be wired on the same day if the request
is made prior to 12 noon (Eastern time). Such shares, however, will not earn
dividends for that day. Redemption requests received after 12 noon will earn
dividends for that day, and the proceeds will be wired on the following business
day. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a Shareholder Services Form and send
it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827, with such shareholder's signature guaranteed by a bank or trust
company (not a Notary Public), a member firm of a domestic stock exchange or by
other financial institutions whose guarantees are acceptable to State Street.
Shareholders should allow approximately ten days for such form to be processed.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures include requiring some
form of personal identification prior to acting upon instructions and tape
recording of telephone instructions. If the Fund fails to follow such
procedures, it may be liable for any losses due to unauthorized or fraudulent
instructions. The Fund will not be liable for following telephone instructions
reasonably believed to be genuine. The Fund reserves the right to refuse a
telephone redemption if it is believed advisable to do so. Financial
intermediaries may charge a fee for handling telephone requests. Procedures for
redeeming Fund shares by telephone may be modified or terminated without notice
at any time.

Redemptions by Check. Upon request, the Fund will provide holders of Evergreen
shares, without charge, with checks drawn on the Fund that will clear through
State Street. Shareholders will be subject to State Street's rules and
regulations governing such checking accounts. Checks will be sent usually within
ten business days following the date the account is established. Checks may be
made payable to the order of any payee in an amount of $250 or more. The payee
of the check may cash or deposit it like a check drawn on a bank. (Investors
should be aware that, as in the case with regular bank checks, certain banks may
not provide cash at the time of deposit, but will wait until they have received
payment from State Street.) When such a check is presented to State Street for
payment, State Street, as the shareholder's agent, causes the Fund to redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. Checks will be returned by State Street if there
are insufficient or uncollectable shares to meet the withdrawal amount. The
check writing procedure for withdrawal enables shareholders to continue earning
income on the shares to be redeemed up to but not including the date the
redemption check is presented to State Street for payment.

Shareholders wishing to use this method of redemption should fill out the
appropriate part of the Share Purchase Application (including the Signature
Card) and mail the completed form to State Street Bank and Trust Company, P.O.
Box 9021, Boston, Massachusetts 02205-9827. Shareholders requesting this service
after an account has been opened must contact State Street since additional
documentation will be required. Currently there is no charge either for checks
or for the clearance of any checks. This service may be terminated or altered at
any time.

- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------

The Fund offers the following shareholder services. For more information
about these services or your account, contact EKD or the toll-free number on the
front of this Prospectus. Some services are described in more detail in the
Share Purchase Application.

Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.

Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $25,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account two business days after the request
is received.

Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designated a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically. In order to make a payment, a number of
shares equal in aggregate net asset value to the payment amount are redeemed at
their net asset value on the Fund Business

10
<PAGE>
Day immediately preceding the date of payment. To the extent that the
redemptions to make plan payments exceed the number of shares purchased through
reinvestment of dividends and distributions, the redemptions reduce the number
of shares purchased on original investment, and may ultimately liquidate a
shareholder's investment. Because the withdrawal plan involves the redemption of
Fund shares, such withdrawals may constitute taxable events to the shareholder
but the Fund does not expect that there will be any realizable capital gains.

Investments Through Employee Benefit and Savings Plan. Certain qualified and
non-qualified benefit and savings plans may make shares of the Fund and the
other Evergreen mutual funds available to their participants. Each Fund's
investment adviser may provide compensation to organizations providing
administrative and recordkeeping services to plans which make shares of the
Evergreen mutual funds available to their participants.

Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the last
business day of each month, unless otherwise requested by a shareholder in
writing. If the transfer agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.

Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.

The Fund sells and redeems its shares on a continuing basis at their net
asset value and does not impose a charge for either sales or redemptions.

In order to maximize earnings on its portfolio, the Fund normally has its
assets as fully invested as is practicable. Many securities in which the Fund
invests require immediate settlement in funds of Federal Reserve member banks on
deposit at a Federal Reserve Bank (commonly known as "Federal Funds").
Accordingly, the Fund does not accept a subscription or invest an investor's
payment in portfolio securities until the payment has been converted into
Federal Funds.

Shares will be issued as of the first determination of the Fund's net asset
value per share made after acceptance of the investor's purchase order at the
net asset value per share next determined after receipt of the purchase order.
Shares begin accruing income dividends on the day they are purchased. The Fund
reserves the right to reject any subscription for its shares.

Shares are issued as of 12 noon, Eastern time, on any Fund Business Day as
defined herein on which an order for the shares and accompanying Federal Funds
are received by the Fund's transfer agent before 12 noon. Orders accompanied by
Federal Funds and received after 12 noon, Eastern time, on a Fund Business Day
will not result in share issuance until the following Fund Business Day. Fund
shares begin accruing income on the day the shares are issued to an investor.

There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals. 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 shareholder's 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 Securities and Exchange Commission determines that trading thereon is
restricted, or for any period during which an emergency (as determined by the
Securities and Exchange Commission) 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 Securities and Exchange
Commission may by order permit for the protection of the shareholders of the
Fund.

11
<PAGE>
share determined at 12 noon that day. Shares redeemed are not entitled to
participate in dividends declared on the day a redemption becomes effective.
Redemption requests received after 12 noon will result in a share redemption on
the following Fund Business Day.

The Fund has reserved the right to close an account that through
redemptions has remained below $1,000 for 30 days. Shareholders will receive 60
days' written notice to increase the account value before the account is closed.

The redemption of shares may result in the investor's receipt of more or
less than he paid for his shares and, thus, in a taxable gain or loss to the
investor.

EFFECT OF BANKING LAWS

The Glass-Steagall Act limits the ability of a depository institution to
become an underwriter or distributor of securities. It is the Fund management's
position, however, that banks are not prohibited from acting in other capacities
for investment companies, such as providing administrative and shareholder
account maintenance services and receiving compensation from the Manager for
providing such services. This is an unsettled area of the law, however, and if a
determination contrary to the Fund management's position is made by a bank
regulatory agency or court concerning shareholder servicing and administration
payments to banks from the Manager, any such payments will be terminated and any
shares registered in the banks' names, for their underlying customers, will be
re-registered in the name of the customers at no cost to the Fund or its
shareholders. In addition, state securities laws on this issue may differ from
the interpretations of Federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN
- --------------------------------------------------------------------------------

Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission has required that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Fund's Board of Directors has adopted a
Distribution and Service Plan (the "Plan") and, pursuant to the Plan, the Fund
has entered into a Distribution Agreement with Reich & Tang Distributors L.P.
(the "Distributor") and a Shareholder Servicing Agreement with the Distributor
and the Manager (with respect to Class A shares only).

Under the Distribution Agreement, the Distributor for nominal consideration
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.

For its services under the Shareholder Servicing Agreement, the Distributor
receives from the Fund a service fee equal to .20% per annum of the Class A
shares average daily net assets (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 Fund shares and for
payments to Participating Organizations with respect to servicing 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 provides that, in addition
to the Shareholder Servicing Fee, the Fund will pay for (i) telecommunications
expenses not to exceed in the aggregate .05% per annum of the Fund's average
daily net assets, including the cost of dedicated lines and CRT terminals,
incurred by the Manager, Distributor and Participating Organizations in carrying
out their respective 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.

12
<PAGE>
and printing of brochures and other promotional materials, mailings to
prospective shareholders, advertising and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Fund's shares. The Distributor may also make payments
from time to time from its own resources, which may include the Shareholder
Servicing Fee and past profits, for the purposes enumerated in (i) above. The
Distributor, in its sole discretion, 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 the new Investment Management Contract, the Shareholder
Servicing Agreement or the Administrative Services Contract in effect for that
year.

For the fiscal year ended April 30, 1997, the total amount spent pursuant
to the Plan was .35% of the average daily net assets of the Fund, of which .20%
of the average daily net assets was paid by the Fund to the Manager, pursuant to
the Shareholder Servicing Agreement and an amount representing .15% of the
average daily net assets was paid by the Manager (which may be deemed an
indirect payment by the Fund). Of the total amount paid by the Distributor,
$974,724 was utilized for Broker assistance payments, $12,996 for compensation
to sales personnel, $2,885 for travel and expenses, $15,581 for Prospectus
printing and $232 on miscellaneous expenses.

- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
- --------------------------------------------------------------------------------

The Fund has elected to qualify under the Code and under New York law 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 the Federal alternative minimum tax. (See "Federal
Income Taxes" in the Statement of Additional Information.) 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 gains dividends" or having undistributed capital gain
income within the meaning of the Code. The Fund will inform shareholders of the
amount and nature of its income and gains in a written notice mailed to
shareholders not later than 60 days after the close of the Fund's taxable year.
For Social Security recipients, interest on tax-exempt bonds, including
tax-exempt interest dividends paid by the Fund, 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. Further, a corporation will be required
to include in alternative minimum taxable income 75% of the amount by which its
adjusted current earnings (including generally, tax-exempt interest) exceeds its
alternative minimum taxable income (determined without this tax item). In
addition, 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 the variable rate demand instruments, including
participation certificates therein, the Fund is relying on the opinion of Battle
Fowler LLP, counsel to the Fund, that it will be treated for Federal income tax
purposes as the owner thereof and the interest on the underlying Municipal
Obligations will be exempt from regular Federal income taxes to the Fund.
Counsel has pointed out that the Internal Revenue Service has announced that it
will not ordinarily issue advance rulings on the question of ownership of
securities or participation interests therein subject to a put and could reach a
conclusion different from that reached by counsel.

13
<PAGE>
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Fund was incorporated under the laws of the State of Maryland on
January 31, 1984 and it is registered with the Securities and Exchange
Commission as a non-diversified, open-end, management investment company.

The Fund prepares semi-annual unaudited and annual audited reports which
include a list of investment securities held by the Fund and which are sent to
shareholders.

For further information with respect to the Fund and the shares offered
hereby, reference is made to the Fund's registration statement filed with the
Securities and Exchange Commission, including the exhibits thereto. The
registration statement and the exhibits thereto may be examined at the
Securities and Exchange Commission and copies thereof may be obtained upon
payment of certain duplicating fees.
- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------

The net asset value of each Class of the Fund's shares is determined as of
12 noon, Eastern time, on each Fund Business Day. Fund Business Day means
weekdays (Monday through Friday) except customary business holidays and Good
Friday. 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, except that if
fluctuating interest rates cause the market value of the Fund's portfolio to
deviate more than 1/2 of 1% from the value determined on the basis of amortized
cost, the Board of Directors will consider whether any action should be
initiated. Although the amortized cost method provides certainty in valuation,
it may result in periods during which the value of an instrument is higher or
lower than the price an investment company would receive if the instrument were
sold. The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.

- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, is custodian for the Fund's cash and securities. State Street
Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 is the
registrar, transfer agent and dividend disbursing agent for the Evergreen shares
of the Fund. The Fund's transfer agent and the Fund's custodian do not assist
in, and are not responsible for, investment decisions involving assets of the
Fund.

14
<PAGE>
Distributor
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10169

For further information, contact the Fund at 2500 Westchester Avenue Purchase,
New York 10577

537623 (REV01)
9/97

<PAGE>
- --------------------------------------------------------------------------------
VICTORY SHARES OF For current yield, purchase, and
NEW YORK DAILY TAX FREE redemption information call
INCOME FUND, INC. 800-KEY-FUND (800-539-3863)
================================================================================
PROSPECTUS
September 1, 1997

New York Daily Tax Free Income Fund, Inc. (the "Fund") is a money market fund
designed for investors who desire interest income exempt from regular Federal,
and to the extent possible, New York State and New York City income taxes and
preservation of capital, liquidity and stability of principal by investing in a
professionally managed, non-diversified portfolio of high quality, short-term
municipal obligations. No assurance can be given that these objectives will be
achieved. The Fund offers two classes of shares to the general public, however
only Class A shares are offered by this Prospectus ("The Victory Shares"). The
Class A shares of the Fund are subject to a service fee pursuant to the Fund's
Rule 12b-1 Distribution and Service Plan and are sold through financial
intermediaries who provide servicing to Class A shareholders for which they
receive compensation from the Manager and the Distributor. The Class B shares of
the Fund are not subject to a service fee and either are sold directly to the
public or are sold through financial intermediaries that do not receive
compensation from the Manager or Distributor. In all other respects, the Class A
and Class B shares represent the same interests in the income and assets of the
Fund. See "Description of Common Stock". The Fund is concentrated in the
securities issued by the State of New York (the "State") or entities within the
State and may invest a significant percentage of its assets in a single issuer,
therefore an investment in the Fund may be riskier than an investment in other
types of money market funds. This Prospectus relates exclusively to the Victory
Shares class of the Fund.

This Prospectus sets forth concisely the information about the Fund that
prospective investors will find helpful in making their investment decisions.
Additional Information about the Fund has been filed with the Securities and
Exchange Commission (the "SEC") and is available upon request and without charge
by calling or writing the Fund. The Statement of Additional Information bears
the same date as this Prospectus and is incorporated by reference into this
Prospectus in its entirety. The SEC maintains a website (http.//www.sec.gov.)
that contains the Statement of Additional Information and other reports and
information regarding the Fund which have been filed electronically with the
SEC.

Investors should be aware that the Victory Shares may not be purchased other
than through certain securities dealers with whom Key Trust Company ("Key
Trust"), or its affiliates, have entered into agreements for this purpose,
directly from Key Trust, or its affiliates or through "Participating
Organizations" (see "Investments through Participating Organizations") with whom
they have accounts. Victory Shares have been created for the primary purpose of
providing a New York tax-free money market fund product for shareholders of The
Victory Portfolios ("The Victory Fund's") and clients of KeyCorp., and its
affiliates. Shares of the Fund other than the Victory Shares are offered
pursuant to a separate prospectus.

SHARES OF THE FUND ARE:
NOT INSURED BY THE FDIC;
NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY KEYCORP
BANK, ANY OF ITS AFFILIATES, OR ANY OTHER BANK; AND
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED. THIS PROSPECTUS SHOULD BE
READ AND RETAINED BY INVESTORS FOR FUTURE REFERENCE.

Table of Contents
<S> <C> <C> <C>

Table of Fees and Expenses............................. Subsequent Purchases of Shares.........................
Financial Highlights................................... Redemption of Shares...................................
Introduction........................................... Exchange Privilege.....................................
Management of The Fund................................. Distribution and Service Plan.............................
Description of Common Stock............................ Federal Income Taxes......................................
Investment Objectives, Policies and Risks.............. General Information.......................................
Dividends and Distributions............................ Net Asset Value...........................................
How to Purchase and Redeem Shares...................... Custodian and Transfer Agent..............................
Investment Through Participating Organizations......
Initial Purchases of Victory Shares.................

</TABLE>
2
<PAGE>
TABLE OF FEES AND EXPENSES

You would pay the following expenses
on a $1,000 investment, assuming
5% annual return (cumulative through the end of each year):

1 year 3 years 5 years 10 years
------ ------- ------- --------
Class A $8 $26 $46 $101
Class B $6 $20 $35 $77

3
<PAGE>

FINANCIAL HIGHLIGHTS

* Includes expense offsets.

+ Net of management and shareholder servicing fees waived equivalent to .07%,
.10%, .02%, and .02% of average net assets.

4
<PAGE>
INTRODUCTION

The Fund's investment manager is Reich & Tang Asset Management L.P. (the
"Manager") which is a registered investment adviser and which currently acts as
manager or administrator to fifteen other open-end management investment
companies. The Fund's shares are distributed through Reich & Tang Distributors
L.P. (the "Distributor"), and the Fund has entered into a Distribution Agreement
and a Shareholder Servicing Agreement (with respect to Class A shares only)
pursuant to the Fund's distribution and service plan adopted under Rule 12b-1
under the Investment Company Act of 1940, as amended (the "1940 Act"). (See
"Distribution and Service Plan".)

Victory Shares have been created for the primary purpose of providing a New York
tax-free money market fund product for shareholders or persons qualified to buy
shares of The Victory Funds (see "Investments in Participating Organizations"
herein.) Victory Shares are identical to other shares of the Fund, which are
offered pursuant to a series of prospectuses, with respect to investment
objectives and yield, but differ with respect to certain other matters. For
example, shareholders who hold other shares of the Fund may not participate in
the exchange privilege described herein and have different arrangements for
redemptions by check.

MANAGEMENT OF THE FUND

The Fund's Board of Directors which is responsible for the overall management
and supervision of the Fund, has employed Reich & Tang Asset Management L.P.
(the "Manager") to serve as investment manager of the Fund. The Manager provides
persons satisfactory to the Fund's Board of Directors to serve as officers of
the Fund. Such officers, as well as certain other employees and directors of the
Fund, may be directors or officers of Reich & Tang Asset Management, Inc., the
sole general partner of the Manager, or employees of the Manager or its
affiliates. Due to the services performed by the Manager, the Fund currently has
no employees and its officers are not required to devote full-time to the
affairs of the Fund. The Statement of Additional Information contains general
background information regarding each Director and principal officer of the
Fund.

5
<PAGE>
Massachusetts corporation, serves as the sole general partner of NEICLP. Reich &
Tang Asset Management L.P. succeeded NEICLP as the Manager of the Fund.

The merger between The New England and MetLife resulted in an "Assignment" of
the Investment Management Contract relating to the Fund. Under the 1940 Act,
such an Assignment caused the automatic termination of this agreement. On
November 28, 1995, the Board of Directors, including a majority of the directors
who are not interested persons (as defined in the 1940 Act) of the Fund or the
Manager, approved a new Investment Management Contract effective August 30,
1996, which has a term which extends to February 28, 1998 and may be continued
in force thereafter for successive twelve-month periods beginning each March 1,
provided that such majority vote of the Fund's outstanding voting securities or
by a majority of the directors who are not parties to the Investment Management
Contract or interested persons of any such party, by votes cast in person at a
meeting called for the purpose of voting on such matter.

The merger and the change in control of the Manager is not expected to have any
impact upon the Manager's performance of its responsibilities and obligations
under the Investment Management Contract.

Pursuant to the new Investment Management Contract, the Manager receives from
the Fund a fee equal to .30% per annum of the Fund's average daily net assets
for managing the Fund's investment portfolio and performing related services. In
addition to its fees under the new Investment Management Contract, Reich & Tang
Distributors L.P., the Distributor, receives a service fee equal to .20% per
annum of the Fund's average daily net assets under the Shareholder Servicing
Agreement. The fees are accrued daily and paid monthly. Any portion of the total
fees received by the Manager and the Distributor may be used to provide
shareholder and administrative services and for distribution of Fund shares.
(See "Distribution and Service Plan" herein.)

Pursuant to the Administrative Services Contract for the Fund, the Manager
performs clerical, accounting supervision and office service functions for the
Fund and provides the Fund with personnel to: (i) supervise the performance of
bookkeeping and related services by Investors Fiduciary Trust Company, the
Fund's bookkeeping agent; (ii) prepare reports to and filings with regulatory
authorities; and (iii) perform such other services as the Fund may from time to
time request of the Manager. The personnel rendering such services may be
employees of the Manager or its affiliates. The Fund pays the Manager the costs
of such personnel at rates which must be agreed upon between the Fund and the
Manager and provided that no payments shall be made for any services performed
by any officer of the general partner of the Manager or its affiliates. The
Manager at its discretion may voluntarily waive all or a portion of the
administrative services fee. For its services under the Administrative Services
Contract, the Manager receives a fee equal to .21% per annum of the Fund's
average daily net assets. Any portion of the total fees received by the Manager
may be used to provide shareholder services and for distribution of Fund shares
(See "Distribution and Service Plan" herein).

DESCRIPTION OF COMMON STOCK

6
<PAGE>

The authorized capital stock of the Fund consists of twenty billion shares of
stock having a par value of one tenth of one cent ($.001) per share. The Fund's
Board of Directors is authorized to divide the unissued shares into separate
series of stock, each series representing a separate, additional investment
portfolio. Shares of all series will have identical voting rights, except where,
by law, certain matters must be approved by a majority of the shares of the
affected series. Each share of any series of shares when issued has equal
dividend, distribution, liquidation and voting rights within the series for
which it was issued, and each fractional share has those rights in proportion to
the percentage that the fractional share represents of a whole share. Generally,
all shares will be voted on in the aggregate except if voting by Class is
required by law or the matter involved affects only one class, in which case
shares will be voted on separately by Class. 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 stock, Class A and Class
B. Each share, regardless of class, will represent an interest in the same
portfolio of investments and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares will be assessed a service fee pursuant to the Rule 12b-1
Distribution and Service Plan of the Fund of .20% of the Fund's average daily
net assets; (iii) only the holders of the Class A shares would be entitled to
vote on matters pertaining to the Plan and any related agreements in accordance
with provisions of Rule 12b-1; and (iv) the exchange privilege will permit
shareholders to exchange their shares only for shares of the same Class of a
Fund that participates in an exchange privilege with the Fund. (See "Exchange
Privilege" herein.) Payments that are made under the Plans will be calculated
and charged daily to the appropriate Class prior to determining daily net asset
value per share and dividends/distributions.

Under its Articles of Incorporation the Fund has the right to redeem for cash
shares of stock owned by any shareholder to the extent and at such times as the
Fund's Board of Directors determines to be necessary or appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes. In this regard, the
Fund may also exercise its right to reject purchase orders.

Victory Shares have been created for the primary purpose of providing a New York
tax-free money market fund product for shareholders or persons qualified to buy
shares of The Victory Funds (see "Investments in Participating Organizations"
herein). Victory Shares are identical to other shares of the Fund, which are
offered pursuant to a series of prospectuses, with respect to investment
objectives and yield, but differ with respect to certain other matters. For
example, shareholders who hold other shares of the Fund may not participate in
the exchange privilege described herein and have different arrangements for
redemptions by check.

INVESTMENT OBJECTIVES, POLICIES AND RISKS

7
<PAGE>
its total assets in New York Municipal Obligations, although the exact amount of
the Fund's assets invested in such securities will vary from time to time. The
Fund may hold uninvested cash reserves pending investment and reserves the right
to borrow up to 15% of the Fund's total assets for temporary purposes from
banks. 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 tax-exempt Municipal Obligations, the
Fund reserves the right to invest up to 20% of the value of its net assets in
securities, the interest income on which is subject to Federal, state and local
income tax, including securities the interest of which is subject to the federal
alternative minimum tax. The Fund expects to invest more than 25% of its assets
in participation certificates purchased from banks in New York Municipal
Obligations, including industrial revenue bonds. In view of this "concentration"
in bank participation certificates in New York Municipal Obligations, an
investment in the Fund should be made with an understanding of the
characteristics of the banking industry and the risks which such an investment
may entail. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) The investment
objectives of the Fund described in this paragraph may not be changed unless
approved by the holders of a majority of the outstanding shares of the Fund that
would be affected by such a change. As used in this Prospectus, the term
"majority of the outstanding shares" of the Fund means, respectively, the vote
of the lesser of (i) 67% or more of the shares of the Fund present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy or (ii) more than 50% of the outstanding shares
of the Fund.

The Fund may only purchase Municipal Obligations that have been determined by
the Fund's Board of Directors to present minimal credit risks and that are
Eligible Securities at the time of acquisition. The term Eligible Securities
means (i) Municipal Obligations with remaining maturities of 397 days or less
and rated in the two highest short-term rating categories by any two nationally
recognized statistical rating organizations ("NRSROs") or in such categories by
the only NRSRO that has rated the Municipal Obligations (collectively, the
"Requisite NRSROs") (acquisition in the latter situation must also be ratified
by the Board of Directors); (ii) Municipal Obligations with remaining maturities
of 397 days or less but that at the time of issuance were long-term securities
(i.e., with maturities greater than 366 days) and whose issuer has received from
the Requisite NRSROs a rating with respect to comparable short-term debt in the
two highest short-term rating categories; and (iii) unrated Municipal
Obligations determined by the Fund's Board of Directors to be of comparable
quality. Where the issuer of a long-term security with a remaining maturity
which would otherwise qualify it as an Eligible Security, does not have rated
short-term debt outstanding, the long-term security is treated as unrated but
may not be purchased if it has a long-term rating from any NRSRO that is below
the two highest long-term categories. A determination of comparability by the
Board of Directors is made on the basis of its credit evaluation of the issuer,
which may include an evaluation of a letter of credit, guarantee, insurance or
other credit facility issued in support of the Municipal Obligations or
participation certificates. (See "Variable Rate Demand Instruments and
Participation Certificates" in the Statement of Additional Information.) While
there are several organizations that currently qualify as NRSROs, two examples
of NRSROs are Standard & Poor's 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 "SP-1AA" by S&P and "VMIG-1" by Moody's. Such
instruments may produce a lower yield than would be available from less highly
rated instruments. The Fund's Board of Directors has determined that Municipal
Obligations which are backed by the credit of the Federal government (the
interest on which is not exempt from Federal income taxation) will be considered
to have a rating equivalent to Moody's "Aaa."

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

8
<PAGE>
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.

In view of the "concentration" of the Fund in bank participation certificates in
New York 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 which include extensive governmental regulations, changes
in the availability and cost of capital funds, and general economic conditions
(see "Variable Rate Demand Instruments and Participation Certificates" in the
Statement of Additional Information) which may limit both the amounts and types
of loans and other financial commitments which may be made and interest rates
and fees which may be charged. The profitability of this industry is largely
dependent upon the availability and cost of capital funds for the purpose of
financing lending operations under prevailing money market conditions. Also,
general economic conditions play an important part in the operations of this
industry and exposure to credit losses arising from possible financial
difficulties of borrowers might affect a bank's ability to meet its obligations
under a letter of credit. The Fund may invest 25% or more of the net assets of
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 including, for example, securities the
interest upon which is paid from revenues of similar type projects, or
securities the issuers of which are located in the same state.

As a non-diversified investment company, the Fund is not subject to any
statutory restriction under the 1940 Act with respect to investing its assets in
one or relatively few issuers. This non-diversification may present greater
risks than in the case of a diversified company. However, the Fund intends to
qualify as a "regulated investment company" under Subchapter M of the Code. The
Fund will be restricted in that at the close of each quarter of the taxable
year, at least 50% of the value of its total assets must be represented by cash,
government securities, investment company securities and other securities
limited in respect of any one issuer to not more than 5% in value of the total
assets of the Fund and to not more than 10% of the outstanding voting securities
of each 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 are not fundamental policies and may be revised to
the extent applicable Federal income tax requirements are revised. (See "Federal
Income Taxes" herein.)

The primary purpose of investing in a portfolio of New York Municipal
Obligations is the special tax treatment accorded New York resident individual
investors. Payment of interest and preservation of principal, however, is
dependent upon the continuing ability of the New York issuers and/or obligors of
state, municipal and public authority debt obligations to meet their obligations
thereunder. Over the long term, New York State and New York City face serious
potential economic problems. The State has long been one of the wealthiest
States in the nation. For decades, however, the state economy has grown more
slowly than that of the nation as a whole, resulting in the gradual erosion of
its relative economic affluence. The causes of this relative decline are varied
and complex, in many cases involving national and international developments
beyond the State's control. For additional information, please refer to "Special
Factors Affecting New York" in the Statement of Additional Information.
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 New York issues with those of more
diversified portfolios including out-of-state issues before making an investment
decision. The Fund's management believes that by maintaining the Fund's
investment portfolio in liquid, short-term, high quality investments, including
the participation certificates and other variable rate demand instruments that
have high quality credit support from banks, insurance companies or other
financial institutions, the Fund is largely insulated from the credit risks that
may exist on long-term New York Municipal Obligations. For additional
information, please refer to the Statement of Additional Information.

DIVIDENDS AND DISTRIBUTIONS

The Fund declares dividends equal to all its net investment income (excluding
capital gains and losses, if any, and amortization of market discount) on each
Fund Business Day and generally pays dividends monthly. There is no fixed
dividend rate. In computing these dividends, interest earned and expenses are
accrued daily.

Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year. All dividends
and distributions of capital gains are automatically invested in additional Fund
shares of the same Class immediately upon payment thereof unless a shareholder
has elected by written notice to the Fund to receive either of such
distributions in cash or has elected to reinvest distributions in shares of The
Victory Funds.

9
<PAGE>
times and, except as noted with respect to the service fees payable under the
Plan, will be determined in the same manner and paid in the same amounts.

HOW TO PURCHASE AND REDEEM SHARES

Investors may invest in Victory Shares through Key Trust, its affiliates, or
through dealers with whom Key Trust or its affiliates have entered into
agreements for this purpose as described herein and those who have accounts with
Participating Organizations may invest in Victory Shares through their
Participating Organizations. (See "Investment Through Participating
Organizations" herein.) The minimum initial investment in Victory Shares is
$500. The minimum amount for subsequent investments is $25 unless the investor
is a client of a Participating Organization whose clients have made aggregate
subsequent investments of $100.

In order to maximize earnings on its Portfolio, the Fund normally has its assets
as fully invested as is practicable. Many securities in which the Fund invests
require immediate settlement in funds of Federal Reserve member banks on deposit
at a Federal Reserve bank (commonly known as "Federal Funds"). Accordingly, the
Fund does not accept an account application or invest an investor's payment in
portfolio securities until the payment is converted into Federal Funds.

Shares will be issued as of the first determination of the Fund's net asset
value per share made after receipt of the investor's account application. The
Fund reserves the right to reject any purchase order for its shares.
Certificates for Fund shares will not be issued to an investor.

Shares are issued as of 12 noon, Eastern time, on any Fund Business Day on which
an order for the shares and accompanying Federal Funds are received by the
Fund's transfer agent before 12 noon. Orders accompanied by Federal Funds and
received after 12 noon on a Fund Business Day will not result in share issuance
until the following Fund Business Day. Fund shares begin accruing income on the
day on which shares are issued to an investor.

There is no redemption charge, no minimum period of investment, no minimum
amount for redemption and no restriction on frequency of withdrawals. Proceeds
of redemptions are paid by check unless specified otherwise. 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, only if the account was coded "reinvest" otherwise
dividends are paid out the next time the normal distribution date occurs.

Redemption requests received by the Fund's transfer agent before 12 noon,
Eastern time, on any day on which the New York Stock Exchange, Inc. is open for
trading become effective at the net asset value per share determined at 12 noon
that day. Shares redeemed are not entitled to participate in dividends declared
on the day a redemption becomes effective. Redemption requests received after 12
noon will result in a share redemption on the following Fund Business Day.

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 60 days
in advance to any shareholder whose account is to be redeemed. For Participant
Investor accounts, notice of a proposed mandatory redemption will be given only
to the appropriate Participating Organization, and 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 the total net
asset value to the minimum amount and thereby avoid such mandatory redemption.

The redemption of shares may result in the investor's receipt of more or less
than he paid for his shares and, thus, is a taxable gain or loss to the
investor.

INVESTMENT THROUGH PARTICIPATING ORGANIZATIONS

10
<PAGE>
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 Manager 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 Victory Shares for the customers'
accounts. Also, Participating Organizations may send their customers periodic
account statements showing the total number of Victory Shares owned by each
customer as of the statement closing date, purchases and redemptions of Victory
Shares by each customer during the period covered by the statement and the
income earned by Victory Shares of each customer during the statement period
(including dividends paid in cash or reinvested in additional Victory Shares).

Participating Organizations may charge Participant Investors a fee in connection
with their use of specialized purchase and redemption procedures offered to
Participant Investors by the Participating Organizations. 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 Victory Shares may be
purchased and redeemed through the Participating Organization.

Orders received by the Fund's transfer agent before 12 noon, Eastern time, on a
Fund Business Day, with accompanying Federal Funds will result in the issuance
of shares on that day. Orders received by the Fund's transfer agent after 12
noon with accompanying Federal Funds will result in the issuance of shares on
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 Purchases of Victory Shares

Mail

A completed and signed application is required to invest in Victory Shares.
Additional paperwork may be required from corporations, associations and certain
fiduciaries. Contact the Fund's Servicing Agent, Boston Financial Data Services
toll free at 1-800-539-3863 for instructions and to obtain an account
application and other materials.

Investors may send a check made payable to "The Victory Funds" along with a
completed application to:

The Victory Funds
c/o Boston Financial Data Services
P.O. Box 8527
Boston, MA 02266-8527

Checks are accepted subject to collection at full value in United States
currency. Third party checks will not be accepted. Payment by a check drawn on
any member of the Federal Reserve System can 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 will not be accepted until the Fund receives Federal Funds.

11
<PAGE>
Bank Wire

To purchase shares of Victory Shares using the wire system for transmittal of
money among banks, investors should first obtain a new account number (initial
purchase only) and a wire control number by calling the Fund's Servicing Agent,
at 1-800-539-3863 and then instruct a member commercial bank to wire their money
immediately to:

State Street Bank & Trust Co.
ABA # 011000028
for credit to DDA# 9905-201-1
for further credit to:
Victory Account #
wire control #

The investor should then promptly complete and mail the account application.

Investors planning to wire funds should instruct their bank early in the day so
the wire transfer can be accomplished before 12 noon, Eastern time, on that 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, Eastern time, on a Fund
Business Day will be treated as a Federal Funds payment received on that day.
YOU MUST CALL THE TRANSFER AGENT BEFORE WIRING FUNDS AT 1-800-539-3863 TO OBTAIN
A WIRE CONTROL NUMBER.

Subsequent Purchases of Shares

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

The Victory Funds
c/o Boston Financial Data Services
P.O. Box 8527
Boston, MA 02266-8527

There is a $25 minimum for subsequent purchases of shares. All payments should
clearly indicate the shareholder's account number and name. Provided that the
information on the account application on file with the Fund is still
applicable, a shareholder may reopen an account without filing a new account
application 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 following
receipt by the Fund's transfer agent of the redemption order. 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,
Eastern time. However, redemption payments will not be made unless the check
(including a certified or cashier's check) used to purchase the shares has been
cleared for payment by the investor's bank and converted into Federal Funds. A
bank check is currently considered by the Fund to have cleared within 15 days
after it is deposited by the Fund.

A shareholder's original account application 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 account application 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.

Written Requests

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

The Victory Funds
c/o Boston Financial Data Services
P.O. Box 8527
Boston, MA 02266-8527

All written requests for redemption must be signed by the shareholder. A
signature guaranteed is required if you wish to redeem more than $25,000 worth
of shares; if your account registration has changed within the last 60 days; if
the check is not being mailed to the address on your account; if the check is
not being made out to the account owner(s); or if the redemption proceeds are
being transferred to another account of The Victory Funds with a different
registration. A signature guarantee may not be provided by a Notary Public.
Banks, brokers, dealers, credit unions (if authorized under state law),
securities exchanges and associations, clearing agencies and savings
associations should be able to provide a signature guarantee. Normally the
redemption proceeds are paid by check mailed to the shareholder of record.

Telephone

12
<PAGE>
the Fund account or in a subsequent written authorization. The Fund may accept
telephone redemption requests 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 and its agents will employ reasonable procedures to
confirm that telephone redemption instructions are genuine, and may require that
shareholders electing such option provide a form of personal identification. The
failure by the Fund to employ such procedures may cause the Fund to be liable
for any losses incurred by investors due to telephone redemptions based upon
unauthorized or fraudulent instructions.

A shareholder making a telephone withdrawal should call the Fund's Servicing
Agent at 1-800-539-3863 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, Eastern time and on
the next Fund Business Day if the redemption request is received after 12 noon,
Eastern 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.

Exchange Privilege

Shareholders of Victory Shares are entitled to exchange some or all of their
shares in the Fund for shares of The Victory Funds. Currently the exchange
privilege program has been established between the Fund and The Victory Funds.

There is presently no administrative charge for the exchange privilege or
limitation as to frequency of exchange, but the right to impose such a charge is
reserved. Shares are exchanged at their respective net asset values, and any
applicable sales charge.

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 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. When an exchange of all the
Victory Fund shareholder's shares is made, all declared but unpaid distributions
shall also be invested in the fund exchanged into, unless the shareholder
otherwise specifies at the time the exchange is requested or unless cash payment
has been elected under the dividend payment options.

Investors should note that exchange transactions actually involve the redemption
of Victory Shares in one fund and an investment of the redemption proceeds into
the other fund.

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.

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

The Victory Funds
c/o Boston Financial Data Services
P.O. Box 8527
Boston, MA 02266-8527

or, for shareholders who have elected that option, by telephone. The Fund
reserves the right to reject any exchange request and may modify or terminate
the exchange privilege upon 60 days notice.

DISTRIBUTION AND SERVICE PLAN

Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission has required that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Fund's Board of Directors has adopted a
Distribution and Service Plan (the "Plan") and, pursuant to the Plan, the Fund
has entered into a Distribution Agreement with Reich & Tang Distributors L.P.
(the "Distributor") and a Shareholder Servicing Agreement with the Distributor
and the Manager (with respect to Class A shares only).

13
<PAGE>
Under the Distribution Agreement, the Distributor for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any applications and orders will not be binding on the
Fund until accepted by the Fund as principal.

For its services under the Shareholder Servicing Agreement, the Distributor
receives from the Fund a service fee equal to .20% per annum of the Class A
shares' average daily net assets (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 Fund shares and for
payments to Participating Organizations with respect to servicing 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 and Administration Agreement provides
that, in addition to the Shareholder Servicing Fee, the Fund will pay for (i)
telecommunications expenses not to exceed in the aggregate .05% per annum of the
Fund's average daily net assets, including the cost of dedicated lines and CRT
terminals, incurred by the Manager, Distributor and Participating Organizations
in carrying out their respective obligations under the Shareholder Servicing and
Administration Agreement and the Shareholder Servicing Agreements 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
account application forms for shareholder accounts.

The Plan and the Shareholder Servicing Agreement 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 Class A
shares; (iii) to pay the costs of printing and distributing the Fund's
prospectus to prospective investors; and (iv) to defray the cost of the
preparation and printing of brochures and other promotional materials, mailings
to prospective shareholders, advertising and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Fund's shares. The Distributor may also make payments
from time to time from its own resources, which may include the Shareholder
Servicing Fee and past profits, for the purposes enumerated in (i) above. The
Distributor, in its sole discretion, 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 the new Investment Management Contract the Shareholder
Servicing Agreement or the Administrative Services Contract in effect for that
year.

For the fiscal year ended April 30, 1997, the total amount spent pursuant to the
Plan was .35% of the average daily net assets of the Fund, of which .20% of the
average daily net assets was paid by the Fund to the Manager, pursuant to the
Shareholder Servicing Agreement and an amount representing .15% of the average
daily net assets was paid by the Manager (which may be deemed an indirect
payment by the Fund). Of the total amount paid by the Distributor, $974,724 was
utilized for Broker assistance payments, $12,996 for compensation to sales
personnel, $2,885 for travel and expenses, $15,581 for Prospectus printing and
$232 on miscellaneous expenses.

FEDERAL INCOME TAXES

14
<PAGE>
required to include in alternative minimum taxable income 75% of the amount by
which its adjusted current earnings (including generally, tax-exempt interest)
exceeds its alternative minimum taxable income (determined without this tax
item). In addition, 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.

GENERAL INFORMATION

The Fund prepares semi-annual unaudited and annual audited reports which include
a list of investment securities held by the Fund and which are sent to
shareholders.

As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-Laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of the revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of shareholders entitled to cast not less than 67% in interest of all
votes entitled to be cast at such meeting. Annual and other meetings may be
required with respect to such additional matters relating to the Fund as may be
required by the 1940 Act including the removal of Fund director(s) and
communication among shareholders, any registration of the Fund with the
Securities and Exchange Commission or any state, or as the Directors may
consider necessary or desirable. Each Director serves until the next meeting of
the shareholders called for the purpose of considering the election or
reelection of such Director or of a successor to such Director, and until the
election and qualification of his or her successor, elected at such a meeting,
or until such Director sooner dies, resigns, retires or is removed by the vote
of the shareholders.

NET ASSET VALUE

The net asset value of each Class of the Fund's shares is determined as of 12
noon, Eastern time, on each Fund Business Day. Fund Business Day means weekdays
(Monday through Friday) except customary business holidays and Good Friday. 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.

15
<PAGE>

CUSTODIAN, TRANSFER AGENT AND SERVICING AGENT

State Street Bank and Trust Company, the Fund's transfer agent, subcontracts all
services to Boston Financial Data Services. Boston Financial Data Services, P.O.
Box 8527, Boston, Massachusetts 02266-8527 is the Fund's servicing agent for the
Victory shares of the Fund. Investors Fiduciary Trust Company, 127 West 10th
Street, Kansas City, Missouri 64105 is custodian for its cash and securities.
The Fund's transfer agent, servicing agent and custodian do not assist in, and
are not responsible for, investment decisions involving assets of the Fund.

16
<PAGE>
- --------------------------------------------------------------------------------
NEW YORK
DAILY TAX FREE 600 FIFTH AVENUE, NEW YORK, NY 10020
INCOME FUND, INC. (212) 830-5220
================================================================================

STATEMENT OF ADDITIONAL INFORMATION
Relating to the New York Daily Tax Free Income Fund, Inc.
and the
Victory Shares of New York Daily Tax Free Income Fund, Inc.
and the

Evergreen Shares of New York Daily Tax Free Income Fund, Inc.
Prospectuses dated September 1, 1997

This Statement of Additional Information, although not in itself a Prospectus,
expands upon and supplements the information contained in the current Prospectus
of New York Daily Tax Free Income Fund, Inc., Victory Shares of New York Daily
Tax Free Income Fund, Inc., and Evergreen Shares of New York Daily Tax Free
Income Fund, Inc., (each the "Fund") and should be read in conjunction with the
respective Prospectus. The Fund's Prospectus may be obtained from any
Participating Organization or by writing or calling the Fund. This Statement of
Additional Information is incorporated by reference into the respective
Prospectus in its entirety.

If you wish to invest in Victory Shares of the Fund you should obtain a separate
prospectus by writing to The Victory Funds, c/o Boston Financial Data Services,
P.O. Box 8527, Boston, Massachusetts 02266-8527 or by calling (800) KEY-FUND.

If you wish to invest in Evergreen Shares of the Fund you should obtain a
separate prospectus by writing to State Street Bank and Trust Company, P.O. Box
9021, Boston, Massachusetts 02205-9827 or by calling (800) 807-2840.

<TABLE>
<CAPTION>
Table of Contents
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

Investment Objectives................................ Yield Quotations.......................................
Policies and Risks................................ Manager ..................................................
Description of Municipal Obligations.................. Management of the Fund....................................
Variable Rate Demand Instruments Compensation Table............................
and Participation Certificates............... Counsel and Auditors..................................
When-Issued Securities............................ Distribution and Service Plan.............................
Stand-by Commitments.............................. Description of Common Stock...............................
Taxable Securities.................................... Expense Limitation........................................
Repurchase Agreements............................. Federal Income Taxes......................................
Special Factors Affecting New York.................... Custodian, Transfer Agent and Dividend Agent..............
Investment Restrictions................................ Description of Ratings....................................
Portfolio Transactions................................. Taxable Equivalent Yield Table............................
How to Purchase and Redeem Shares...................... Independent Auditors Report...............................
Net Asset Value........................................ Financial Statements......................................

- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RISKS
- --------------------------------------------------------------------------------
As stated in the Prospectus, the Fund is a no-load, open-end, non-diversified,
management investment company whose investment objective is to provide investors
with a liquid, money market portfolio from which the interest income is exempt
from regular Federal, and to the extent possible, New York State and New York
City income taxes along with preservation of capital, maintenance of liquidity
and relative stability of principal. 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 high quality debt obligations
issued by or on behalf of the State of New York, other states, territories and
possessions of the United States, and their authorities, agencies,
instrumentalities and political subdivisions ("Municipal Obligations") and in
participation certificates in such obligations purchased from banks, insurance
companies or other financial institutions. Dividends paid by the Fund which are
attributable to interest income on tax-exempt obligations of the State of New
York and its political subdivisions, or by or on behalf of Puerto Rico or other
U.S. possessions or territories and their political subdivisions, the interest
on which is exempt from regular Federal income tax under Section 103 of the
Internal Revenue Code (the "Code") and cannot be taxed by any state under
Federal law ("New York Municipal Obligations"), will be exempt from regular
Federal, New York State and New York City personal income taxes. Although the
Supreme Court has determined that Congress has the authority to subject the
interest on bonds such as the Municipal Obligations to Federal income taxation,
existing law excludes such interest from regular Federal income tax. However,
"exempt-interest" dividends may be subject to the Federal alternative minimum
tax. To the extent suitable New York Municipal Obligations are not available for
investment by the Fund, the Fund may purchase Municipal Obligations issued by
other states, their agencies and instrumentalities, the interest income on which
will be exempt from regular Federal income tax but will be subject to New York
State and New York City personal income taxes. Except when acceptable securities
are unavailable for investment by the Fund as determined by the Manager, the
Fund will invest at least 65% of its assets in New York 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 a $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 tax-exempt
Municipal Obligations, the Fund reserves the right to invest up to 20% of the
value of its net assets in securities, the interest income on which is subject
to Federal, state and local income tax. The Fund expects to invest more than 25%
of its assets in participation certificates purchased from banks in industrial
revenue bonds and other New York Municipal Obligations. In view of this
"concentration" in bank participation certificates in New York 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 this
paragraph may not be changed unless approved by the holders of a majority of the
outstanding shares of the Fund that would be affected by such a change. As used
in this Statement of Additional Information, 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 Municipal Obligations that have been determined by
the Fund's Board of Directors to present minimal credit risks and that are
Eligible Securities at the time of acquisition. The term Eligible Securities
means (i) Municipal Obligations with remaining maturities of 397 days or less
and rated in the two highest short-term rating categories by any two nationally
recognized statistical rating organizations ("NRSROs") or in such categories by
the only NRSRO that has rated the Municipal Obligations (collectively, the
"Requisite NRSROs") (acquisition in the latter situation must also be ratified
by the Board of Directors), (ii) Municipal Obligations with remaining maturities
of 397 days or less but that at the time of issuance were long-term securities
(i.e., with maturities greater than 366 days) and whose issuer has received from
the Requisite NRSROs a rating with respect to comparable short-term debt in the
two highest short-term rating categories, and (iii) unrated Municipal
Obligations determined by the Fund's Board of Directors to be of comparable
quality. Where the issuer of a long-term security with a remaining maturity
which would otherwise qualify it as an Eligible Security, does not have rated
short-term debt outstanding, the long-term security is treated as unrated but
may not be purchased if it has a long-term rating from any NRSRO that is below
the two highest long-term categories. A determination of comparability by the
Board of Directors is made on the basis of its credit evaluation of the issuer,
which may include an evaluation of a letter of credit, guarantee, insurance or
other credit facility issued in support of the Municipal Obligations or
participation certificates. (See "Variable Rate Demand Instruments and
Participation Certificates" herein.) 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

2
<PAGE>
S&P's 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 "SP-1/A" by S&P and "VMIG-1" by Moody's. Such instruments may produce a
lower yield than would be available from less highly rated instruments. The
Fund's Board of Directors has determined that Municipal Obligations which are
backed by the credit of the Federal government will be considered to have a
rating equivalent to Moody's "Aaa". (See "Description of Ratings" herein.)

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's
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.

As a non-diversified investment company, the Fund is not subject to any
statutory restriction under the Investment Company Act of 1940, as amended (the
"1940 Act") with respect to investing its assets in one or relatively few
issuers. This non-diversification may present greater risks than in the case of
a diversified company. However, the Fund intends to qualify as a "regulated
investment company" under Subchapter M of the Code. The Fund will be restricted
in that at the close of each quarter of the taxable year, at least 50% of the
value of its total assets must be represented by cash, government securities,
investment company securities and other securities limited in respect of any one
issuer to not more than 5% in value of the total assets of the Fund and to not
more than 10% of the outstanding voting securities of each 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.)

DESCRIPTION OF MUNICIPAL OBLIGATIONS

As used in this Statement of Additional Information, "Municipal Obligations"
include the following as well as "Variable Rate Demand Instruments and
Participation Certificates" herein.

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") which generally
have a maturity at the time of issue of one year or more and which 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 the IRBs is generally exempt, with certain exceptions, from 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
anytime 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 number 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 New York issuers.

3
<PAGE>
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 and 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, are issued by state and local governments
and authorities to acquire a wide variety of equipment and facilities such as
fire and sanitation vehicles, telecommunications equipment and other capital
assets. Municipal Leases frequently have special risks not normally associated
with general obligation or revenue bonds. Leases and installment 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 that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. 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 Directors may
adopt guidelines and delegate to the Manager the daily function of determining
and monitoring the liquidity of municipal leases. In making such determination,
the Board and the Manager may consider such factors as the frequency of trades
for the obligation, the number of dealers willing to purchase or sell the
obligations and the number of other potential buyers and the nature of the
marketplace for the obligations, including the time needed to dispose of the
obligations and the method of soliciting offers. If the Board determines that
any municipal leases are illiquid, such lease will be subject to the 10%
limitation on investments in illiquid securities.

5. Any other Federal tax-exempt, and to the extent possible, New York State and
New York City tax-exempt obligations issued by or on behalf of states and
municipal governments and their authorities, agencies, instrumentalities and
political subdivisions, whose inclusion in the Fund would be consistent with the
Fund's "Investment Objectives, Policies and Risks" and permissible under Rule
2a-7 under the 1940 Act.

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

In addition, in the event that a Municipal Obligation (1) is in default, (2)
ceases to be an Eligible Security, or (3) there is a determination that it no
longer presents minimal credit risks, the Fund will dispose of the Municipal
Obligation absent a determination by the Fund's Board of Directors that disposal
of the Municipal Obligation would not be in the best interests of the Fund. In
the event that the Municipal Obligation is disposed of it shall be disposed of
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 Municipal Obligation which immediately before default accounted for
1/2 of 1% or more of the Fund's total assets, the Fund shall promptly notify the
Securities and Exchange Commission of such fact and of the actions that the Fund
intends to take in response to the situation. Certain Municipal Obligations
issued by instrumentalities of the United States Government are not backed by
the full faith and credit of the United States Treasury but only by the
creditworthiness of the instrumentality. The Fund's Board of Directors has
determined that any Municipal Obligation that depends directly, or indirectly
through a government insurance program or other guarantee, on the full faith and
credit of the United States Government will be considered to have a rating in
the highest category. Where necessary to ensure that the Municipal Obligations
are Eligible Securities, or where the obligations are not freely transferable,
the Fund will require that the obligation to pay the principal and accrued
interest be backed by an unconditional irrevocable bank letter of credit, a
guarantee, insurance or other comparable undertaking of an approved financial
institution that would qualify the investment as an Eligible Security.

Variable Rate Demand Instruments
and Participation Certificates

Variable rate demand instruments that the Fund will purchase are tax-exempt
Municipal Obligations that provide for a periodic adjustment in the interest
rate paid on the instrument and permit the holder to demand payment of the
unpaid

4
<PAGE>
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 either
at any time or at specified intervals not exceeding 397 days depending upon the
terms of the instrument. The terms of the instruments provide that interest
rates are adjustable at intervals ranging from daily to up to 397 days and 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 will decide which variable rate demand instruments it will purchase in
accordance with procedures prescribed by its Board of Directors to minimize
credit risk. A fund utilizing the amortized cost method of valuation under Rule
2a-7 of the 1940 Act may only purchase variable rate demand instruments only if
(i) the instrument is subject to an unconditional demand feature, exercisable by
the Fund in the event of a default in the payment of principal or interest on
the underlying securities, that is an Eligible Security, or (ii) the instrument
is not subject to an unconditional demand feature but does qualify as an
Eligible Security and has a long-term rating by the Requisite NRSROs in one of
the two highest rating categories, or if unrated, is determined to be of
comparable quality by the Fund's Board of Directors. The Fund's Board of
Directors may determine that an unrated variable rate demand instrument meets
the Fund's 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 Directors of the Fund has determined meets the prescribed quality
standards for the Fund. The Fund has the right to sell the participation
certificate back to the institution and 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 terms of 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 (1) upon a default under the terms of the bond documents, (2) as needed to
provide liquidity to the Fund in order to make redemptions of Fund shares, or
(3) 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,
although the Fund retains the option to purchase insurance if necessary, in
which case the cost of insurance will be an expense of the Fund subject to the
Fund's expense limitation (see "Expense Limitation" herein). The Manager has
been instructed by the Fund's Board of Directors to continually monitor the
pricing, quality and liquidity of the variable rate demand instruments held by
the Fund, including the participation certificates, on the basis of published
financial information and reports of the rating agencies and other bank
analytical services to which the Fund may subscribe. Although these instruments
may be sold by the Fund, the Fund intends to hold them until maturity, except
under the circumstances stated above. (See "Federal Income Taxes" herein.)

In view of the "concentration" of the Fund in bank participation certificates in
New York Municipal Obligations, 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
- --------------------------------------------------------------------------------
* Prime rate is generally the rate charged by a bank to its most creditworthy
customers for short-term loans. The prime rate of a particular bank may differ
from other banks and will be the rate announced by each bank on a particular
day. Changes in the prime rate may occur with great frequency and generally
become effective on the date announced.

5
<PAGE>
including, for example, securities the interest upon which is paid from revenues
of similar type projects, or securities the issuers of which are located in the
same state.

The recent period has seen wide fluctuations in interest rates, particularly
"prime rates" charged by banks. 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 limit the degree to which interest on such variable rate demand
instruments may fluctuate; to the extent it does, 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 increased so that
the variable rate exceeded the fixed rate on the Municipal Obligations, the
Municipal Obligations could no longer be valued at par and may cause the Fund to
take corrective action, including the elimination of the instruments from the
portfolio. Because the adjustment of interest rates on the variable rate demand
instruments is made in relation to movements of the applicable banks' "prime
rates", or other interest rate adjustment index, the variable rate demand
instruments are not comparable to long-term fixed rate securities. Accordingly,
interest rates on the variable rate demand instruments may be higher or lower
than current market rates for fixed rate obligations of comparable quality with
similar maturities.

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 (1) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (2) 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 the 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 with respect to such
Municipal Obligations. 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

6
<PAGE>
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 (1) 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 (2) all interest accrued on
the security since the last interest payment date during the period the security
was owned by the Fund. Absent unusual circumstances relating to a change in
market value, the Fund would value the underlying Municipal Obligation at
amortized cost. Accordingly, the amount payable by a bank or dealer during the
time a stand-by commitment is exercisable would be substantially the same as the
market value of the underlying Municipal Obligation.

The Fund's right to exercise a stand-by commitment would be unconditional and
unqualified. A stand-by commitment would not be transferable by the Fund,
although it could sell the underlying Municipal Obligation to a third party at
any time.

The Fund expects that stand-by commitments generally will 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 would not exceed 1/2 of 1% of
the value of the Fund's total assets calculated immediately after each stand-by
commitment was acquired.

The Fund would enter into stand-by commitments only with banks and other
financial institutions that, in the Manager's opinion, present minimal credit
risks and, where the issuer of the Municipal Obligation does not meet the
eligibility criteria, only where the issuer of the stand-by commitment has
received a rating which meets the eligibility criteria or, if not rated,
presents a minimal risk of default as determined by the Board of Directors. The
Fund's reliance upon the credit of these banks and broker-dealers would 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 taxes
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 would be valued at zero in determining net asset value. In
those cases in which the Fund paid directly or indirectly for a stand-by
commitment, its cost would be reflected as unrealized depreciation for the
period during which the commitment is held by the Fund. Stand-by commitments
would 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 that the Fund may enter into are subject to certain
risks, which 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 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 on which is subject
to Federal income tax, under any one or more of the following circumstances: (a)
pending investment of proceeds of sales of Fund shares or of portfolio
securities, (b) pending settlement of purchases of portfolio securities and (c)
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): (1) obligations of the United States Government or its
agencies, instrumentalities or authorities; (2) commercial paper meeting the
definition of Eligible Security at the time of acquisition; (3) certificates of
deposit of domestic banks with assets of $1 billion or more;

7
<PAGE>
and (4) 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 would 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, and the
Fund or its custodian shall have possession of the collateral, which the Fund's
Board believes will give it a valid, perfected security interest in the
collateral. In the event of default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying securities are not owned
by the Fund but only constitute collateral for the seller's obligation to pay
the repurchase price. Therefore, the Fund may suffer time delays and incur costs
in connection with the disposition of the collateral. The Fund's Board believes
that the collateral underlying repurchase agreements may be more susceptible to
claims of the seller's creditors than would be the case with securities owned by
the Fund. It is expected that repurchase agreements will give rise to income
which will not qualify as tax-exempt income when distributed by the Fund. The
Fund will not invest in a repurchase agreement maturing in more than seven days
if any such investment together with illiquid securities held by the Fund exceed
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.

SPECIAL FACTORS AFFECTING NEW YORK

This summary is included for the purpose of providing a general description of
New York State and New York City credit and financial conditions. The
information set forth below is derived from the official statements and/or
preliminary drafts of preliminary statements prepared in connection with the
issuance of New York State and New York City municipal bonds. As stated
previously, the Fund will invest only in securities that are rated high quality
by either of the major rating services or that are unrated but are determined to
be of comparable quality by the Fund's Board of Directors on the basis of credit
enhancement features such as letters of credit, guarantees or insurance.

Economic Trends. Over the long term, the State of New York (the "State") and the
City of New York (the "City") face serious potential economic problems. The City
accounts for approximately 41% of the State's population and personal income,
and the City's financial health affects the State in numerous ways. The State
historically has been one of the wealthiest states in the nation. For decades,
however, the State has grown more slowly than the nation as a whole, gradually
eroding its relative economic affluence. Statewide, urban centers have
experienced significant changes involving migration of the more affluent to the
suburbs and an influx of generally less affluent residents. Regionally, the
older Northeast cities have suffered because of the relative success that the
South and the West have had in attracting people and business. The City has also
had to face greater competition as other major cities have developed financial
and business capabilities which make them less dependent on the specialized
services traditionally available almost exclusively in the City.

The State has for many years had a very high State and local tax burden relative
to other states. The State and its localities have used these taxes to develop
and maintain their transportation networks, public schools and colleges, public
health systems, other social services and recreational facilities. Despite these
benefits, the burden of State and local taxation, in combination with the many
other causes of regional economic dislocation, has contributed to the decisions
of some businesses and individuals to relocate outside, or to not locate within,
the State.

Notwithstanding the numerous initiatives that the State and its localities may
take to encourage economic growth and achieve balanced budgets, reductions in
Federal spending could materially and adversely affect the financial condition
and budget projections of the State and its localities.

New York City. The City, with a population of approximately 7.3 million, is an
international center of business and culture. Its non-manufacturing economy is
broadly based, with the banking and securities, life insurance, communications,
publishing, fashion design, retailing and construction industries accounting for
a significant portion of the City's total employment earnings. Additionally, the
City is the nation's leading tourist destination. The City's manufacturing
activity is conducted primarily in apparel and publishing.

The national economic downturn which began in July 1990 adversely affected the
local economy, which had been declining since late 1989. As a result, the City
experienced job losses in 1990 and 1991 and real Gross City Product (GCP) fell
in those two years. Beginning in calendar year 1992, the improvement in the
national economy helped stabilize conditions in the City. Employment losses
moderated toward year-end and real GCP increased, boosted by strong wage gains.
After

8
<PAGE>
noticeable improvements in the City's economy during calendar year 1994,
however, economic growth slowed in calendar year 1995, and thereafter improved
during calendar year 1996, reflecting improved securities industry earnings and
employment in other sectors. The City's current four-year financial plan assumes
that moderate economic growth will continue through calendar year 2000, with
moderating job growth and wage increases.

For each of the 1981 through 1996 fiscal years, the City achieved balanced
operating results as reported in accordance with generally accepted accounting
principles ("GAAP"). The City was required to close substantial budget gaps in
recent years in order to maintain balanced operating results. There can be no
assurance that the City will continue to maintain a balanced budget as required
by State law without additional tax or other revenue increases or reductions in
City services, which could adversely affect the City's economic base.

The City depends on the State for State aid both to enable the City to balance
its budget and to meet its cash requirements. The State's 1996-1997 Financial
Plan projects a balanced General Fund. There can be no assurance that there will
not be reductions in State aid to the City from amounts currently projected or
that State budgets in future fiscal years will be adopted and that such
reductions or delays will not have adverse effects on the City's cash flow or
expenditures.

New York State and its Authorities. The State Financial Plan is based on a
projection by the State Division of the Budget ("DOB") of national and State
economic activity. The national economy has resumed a more robust rate of growth
after a "soft landing" in 1995, with over 11 million jobs added nationally since
early 1992. The State economy has continued to expand, but growth remains
somewhat slower than in the nation. Although the State has added approximately
240,000 jobs since late 1992, employment growth in the State has been hindered
during recent years by significant cutbacks in the computer and instrument
manufacturing, utility, defense, and banking industries. Government downsizing
has also moderated these job gains.

In its Mid-Year Update the State revised its forecast of national and State
economic activity through the end of calendar year 1997 to reflect the
stronger-than-expected growth in the first half of 1996. The national economic
forecast has been changed slightly from the initial forecast on which the
original 1996-97 State Financial Plan was based. The revised forecast projects
real Gross Domestic Product growth in the nation of 2.5 percent for 1996 and 2.4
percent in 1997. The inflation rate is expected to be 3.0 percent in 1996 and
2.9 percent in 1997. The annual rate of job growth is expected to slow gradually
to about 1.8 percent in 1997, down from 2.2 percent in 1996. Growth in personal
income and wages are expected to slow accordingly.

The State economic forecast has been changed slightly from the one formulated
with the July 1996-97 State Financial Plan. Moderate growth is projected to
continue through the second half of 1996, with employment, wages and incomes
continuing their modest rise. Personal income is projected to increase by 5.2
percent in 1996 and 4.7 percent in 1997, reflecting robust projected wage growth
fueled in part by financial sector bonus payments. Overall employment growth
will continue at a modest rate, reflecting the slowdown in the national economy,
continued spending restraint in government, and restructuring in the health and
financial sectors.

The forecast for continued moderate growth, and any resultant impact on the
State's 1996-97 Financial Plan, contains some uncertainties.
Stronger-than-expected gains in employment could lead to a significant
improvement in consumption spending. Investments could also remain robust.
Conversely, the prospect of a continuing deadlock on federal budget deficit
reduction or fears of excessively rapid economic growth could create upward
pressures on interest rates. In addition, the State economic forecast could
over- or underestimate the level of future bonus payments or inflation growth,
resulting in forecasted average wage growth that could differ significantly from
actual growth. Similarly, the State forecast could fail to correctly account for
expected declines in government and banking employment and the direction of
employment change that is likely to accompany telecommunications deregulation.

The DOB believes that its projections of receipts and disbursements relating to
the current State Financial Plan, and the assumptions on which they are based,
are reasonable. Actual results, however, could differ materially and adversely
from the projections set forth below, and those projections may be changed
materially and adversely form time to time.

The economic and financial condition of the State may be affected by various
financial, social, economic and political factors. Those factors can be very
complex, may vary from fiscal year to fiscal year, and are frequently the result
of actions taken not only by the State and its agencies and instrumentalities,
but also by entities, such as the Federal government, that are not under the
control of the State. Because of the uncertainty and unpredictability of changes
in these factors, their impact cannot be fully included in the assumptions
underlying the State's projections. There can be no assurance that the State
economy will not experience results that are worse than predicted, with
corresponding material and adverse effects on the State's financial projection.

The General Fund is the principal operating fund of the State and is used to
account for all financial transactions, except those required to be accounted
for in another fund. It is the State's largest fund and receives almost all
State taxes and other resources not dedicated to particular purposes. In the
State's 1996-97 fiscal year, the General Fund is expected to account for
approximately 47 percent of total governmental-fund receipts and 71 percent of
total governmental-fund

9
<PAGE>
disbursements. General Fund moneys are also transferred to other funds,
primarily to support certain capital projects and debt service payments in other
fund types.

The General Fund is projected to be balanced on a cash basis for the 1996-97
fiscal year. Actual receipts through the first two quarters of the 1996-97 State
fiscal year reflect stronger-than-expected growth in most taxes, with actual
receipts exceeding expectations by $276 million. Based on the revised economic
outlook and actual receipts for the first six months of 1996-97, projected
General Fund receipts for the 1996-97 State fiscal year have been increased by
$420 million. Most of this projected increase is in the yield of the personal
income tax ($241 million), with additional increases now expected in business
taxes ($124 million) and other tax receipts ($49 million). Projected collections
from user taxes and fees have been revised downward slightly ($5 million).
Revisions were also made to both miscellaneous receipts and in transfers from
other funds (an $11 million combined projected increase).

Disbursements through the first six months of the fiscal year were $415 million
less than projected, primarily because of delays in processing payments
following delayed enactment of the State budget. As a result, no savings are
included in the Mid-Year Update from this slower-than-expected spending.
Projections of 1996-97 General Fund disbursements are increased by $120 million,
since increased General Fund disbursements for education are required to replace
a projected decrease in lottery receipts. This modification is shown in the form
of an increased transfer of General Fund monies to the Lottery Fund in the
Special Revenue fund type. The projected closing fund balance in the General
Fund of $337 million reflects a balance of $252 million in the Tax Stabilization
Reserve Fund (following a payment of $15 million during the current fiscal year)
and a deposit of $85 million to the Contingency Reserve Fund.

Ratings. On January 13, 1992, Standard & Poor's reduced its ratings on the
State's general obligation bonds from A to A- and, in addition, reduced it's
ratings on the State's moral obligation, lease purchase, guaranteed and
contractual obligation debt. Standard & Poor's also continued it's negative
rating outlook assessment on State general obligation debt. On April 26, 1993,
Standard & Poor's revised the rating outlook assessment to stable. On February
14, 1994, Standard & Poor's raised its outlook to positive and, on August 5,
1996, confirmed its A- rating. On January 6, 1992, Moody's reduced it's ratings
on outstanding limited-liability State lease purchase and contractual
obligations from A to Baa1. On July 26, 1996, Moody's reconfirmed its A rating
on the State's general obligation long- term indebtedness.

INVESTMENT RESTRICTIONS

The Fund has adopted the following fundamental investment restrictions which
apply to all portfolios and which may not be changed unless approved by a
majority of the outstanding shares of each series of the Fund's shares that
would be affected by such a change. The Fund may not:

1. Make portfolio investments other than as described under "Investment
Objectives, Policies and Risks" or any other form of Federal tax-exempt
investment which meets the Fund's quality criteria, as determined by the Board
of Directors and which is 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, including the meeting of
redemption requests that might otherwise require the untimely disposition of
securities, in an amount up to 15% of the value of the Fund's total assets
(including the amount borrowed) valued at market less liabilities (not including
the amount borrowed) at the time the borrowing was made. While borrowings exceed
5% of the value of the Fund's total assets, the Fund will not make any
investments. Interest paid on borrowings will reduce net income.

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, except to the extent that securities subject to a demand obligation and
stand-by commitments may be purchased as set forth under "Investment Objectives,
Policies and Risks" herein.

5. Underwrite the securities of other issuers, except insofar as the Fund may be
deemed an underwriter under the Securities Act of 1933 in disposing of a
portfolio security.

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 total net assets.

7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests, but this shall not
prevent the Fund from investing in Municipal Obligations secured by real estate
or interests in real estate.

8. Make loans to others, except through the purchase of portfolio investments,
including repurchase agreements, as described under "Investment Objectives,
Policies and Risks" herein.

10
<PAGE>

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, provided that the Fund may invest more than 25% of its assets
in bank participation certificates and there shall be no limitation on the
purchase of those Municipal Obligations and other obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities.
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-governmental user, then such
non-governmental 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. With respect to 75% of the total amortized cost value of the
Fund's assets, not more than 5% of the Fund's assets may be invested in
securities that are subject to underlying puts from the same institution, and no
single bank shall issue its letter of credit and no single financial institution
shall issue a credit enhancement covering more than 5% of the total assets of
the Fund. However, if the puts are exercisable by the Fund in the event of
default on payment of principal and interest on the underlying security, then
the Fund may invest up to 10% of its assets in securities underlying puts issued
or guaranteed by the same institution; additionally, a single bank can issue its
letter of credit or a single financial institution can issue a credit
enhancement covering up to 10% of the Fund's assets, where the puts offer the
Fund such default protection.

11. Invest in securities of other investment companies, except the Fund (i) 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 and (ii) may purchase securities as permitted by section
12(d) of the 1940 Act.

12. Issue senior securities, except insofar as the Fund may be deemed to have
issued a senior security in connection with any 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.

PORTFOLIO TRANSACTIONS

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. Purchases from underwriters of
portfolio securities include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price. The Fund purchases participation
certificates in variable rate Municipal Obligations with a demand feature from
banks or other financial institutions at a negotiated yield to the Fund based on
the applicable interest rate adjustment index for the security. The interest
received by the Fund is net of a fee charged by the issuing institution for
servicing the underlying obligation and issuing the participation certificate,
letter of credit, guarantee or insurance and providing the demand repurchase
feature.

Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed in the
best interest of shareholders of the Fund rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price. No preference in purchasing portfolio securities will
be given to banks or dealers that are Participating Organizations.

Investment decisions for the Fund will be made independently from those for any
other investment companies or accounts that may be or become managed by the
Manager or its affiliates. If, however, the Fund and other investment companies
or accounts managed by the Manager are simultaneously engaged in the purchase or
sale of the same security, the transactions may be averaged as to price and
allocated equitably to each account. In some cases, this policy might adversely
affect the price paid or received by the Fund or the size of the position
obtainable for the Fund. In addition, when purchases or sales of the same
security for the Fund and for other investment companies managed by the Manager
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantage available to large denomination purchasers or
sellers.

No portfolio transactions are executed with the Manager or its affiliates acting
as principal underwriter. In addition, the Fund will not buy bankers'
acceptances, certificates of deposit or commercial paper from the Manager or its
affiliates.

11
<PAGE>
HOW TO PURCHASE AND REDEEM SHARES

The material relating to the purchase and redemption of shares in the Prospectus
is herein incorporated by reference. The national and local holidays on which
the Fund will be closed and shares may not be purchased or redeemed are the
following: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.

NET ASSET VALUE

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. The net asset value of a
Class is computed by dividing the value of the Fund's net assets (i.e., the
value of its securities and other assets less its liabilities, including
expenses payable or accrued but excluding capital stock and surplus) for such
Class by the total number of shares outstanding.

The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated, as
described in the following paragraph. Although the amortized cost method
provides certainty in valuation, it may result in periods during which the value
of an instrument is higher or lower than the price an investment company would
receive if the instrument were sold.

The Fund's Board of Directors has established procedures to stabilize the Fund's
net asset value at $1.00 per share of each Class. These procedures include a
review of the extent of any deviation of net asset value per share, based on
available market rates, from the Fund's $1.00 amortized cost per share of each
Class. Should that deviation exceed 1/2 of 1%, the Board will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redemption of shares in
kind, selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The Fund will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument with a
remaining maturity greater than 397 days, will limit portfolio investments,
including repurchase agreements, to those United States dollar-denominated
instruments that the Fund's Board of Directors determines present minimal credit
risks, and will comply with certain reporting and record keeping procedures. The
Fund has also established procedures to ensure compliance with the requirement
that portfolio securities are Eligible Securities. (See "Investment Objectives,
Policies and Risks" herein.)

YIELD QUOTATIONS

The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the Securities and Exchange Commission. 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 (which 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) 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" 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 taxable equivalent yield. The tax
equivalent yield 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, 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 product to that
portion, if any, of the

12
<PAGE>
yield of the Fund that is not tax exempt. The taxable 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 taxable equivalent yield table which
shows the yield that an investor would need to receive from a taxable investment
in order to equal a tax-free yield from the Fund. (See "Taxable Equivalent Yield
Table" herein.)

The Fund's Class A shares yield for the seven day period ended July 31, 1997 was
2.93%, which is equivalent to an effective yield of 2.97%. The Fund's Class B
shares yield for the seven-day period ended July 31, 1997 was 3.15% which is
equivalent to an effective yield of 3.20%.

MANAGER

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 at July 31, 1997, investment manager,
adviser, or supervisor with respect to assets aggregating in excess of $10.67
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.

New England Investment Companies, L.P. ("NEICLP") is the limited partner and
owner of a 99.5% interest in the Manager. Reich & Tang Asset Management, Inc. (a
wholly-owned subsidiary of NEICLP) is the general partner and owner of the
remaining .5% interest of the Manager. Reich & Tang Asset Management L.P. has
succeeded NEICLP as the Manager of the Fund.

On August 30, 1996, The New England Mutual Life Insurance Company ("The New
England") and Metropolitan Life Insurance Company ("MetLife") merged, with
MetLife being the continuing company. The Manager remains an indirect
wholly-owned subsidiary of NEICLP, but Reich & Tang Asset Management, Inc., its
sole general partner, is now an indirect subsidiary of MetLife. Also, MetLife
New England Holdings, Inc. a wholly-owned subsidiary of MetLife, owns
approximately 48.5% of the outstanding limited partnership interest of NEICLP
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc. owns
approximately 16% of the outstanding partnership units of NEICLP.

NEIC is a holding company offering a broad array of investment styles across a
wide range of asset categories through fifteen 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, Graystone Partners, L.P., Harris Associates, L.P., Jurika & Voyles,
L.P., Loomis, Sayles & Company, L.P., New England Funds, L.P., New England
Investment Associates, Inc., Reich & Tang Capital Management, Reich & Tang
Funds, Snyder Capital Management., Vaughan, Nelson, Scarborough & McConnell,
Inc. and Westpeak Investment Advisors, L.P. These affiliates in the aggregate
are investment advisors or managers to 80 other registered investment companies.

The merger between The New England and MetLife resulted in an "assignment" of
the Investment Management Contract relating to the Fund. Under the 1940 Act,
such an assignment caused the automatic termination of this agreement. On
November 28, 1995, the Board of Directors, including a majority of the directors
who are not interested persons (as defined in the 1940 Act) of the Fund or the
Manager, approved a new Investment Management Contract effective August 30,
1996, which has a term which extends to February 28, 1998 and may be continued
in force thereafter for successive twelve-month periods beginning each March 1,
provided that such majority vote of the Fund's outstanding voting securities or
by a majority of the directors who are not parties to the Investment Management
Contract or interested persons of any such party, by votes cast in person at a
meeting called for the purpose of voting on such matter.

The new Investment Management Contract was approved by a majority of the
shareholders of the Fund on April 4, 1996 and contains the same terms and
conditions governing the Manager's investment management responsibilities as the
Fund's previous Investment Management Contract with the Manager, except as to
the date of execution and termination.

The merger and the change in control of the Manager is not expected to have any
impact upon the Manager's performance of its responsibilities and obligations
under the new Investment Management Contract.

13
<PAGE>
The Manager provides persons satisfactory to the Board of Directors of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of NEIC, the
sole general partner of the Manager, or employees of the Manager or its
affiliates.

The 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 bookkeeping and 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. The Fund pays the Manager for such
personnel and for rendering such services at rates which must be agreed upon by
the Fund and the Manager, provided that the Fund does not pay for services
performed by any such persons who are also officers of Reich & Tang, Inc. It is
intended that such rates will be the actual costs of the Manager.

The new Investment Management Contract was most recently approved on March 5,
1996 by the Board of Directors, including a majority of directors who are not
interested persons (as defined in the 1940 Act), of the Fund or the Manager and
became effective on August 30, 1996. The Investment Management Contract has a
term which extends to April 30, 1998 and may be continued in force thereafter
for successive twelve-month periods beginning each May 1, provided that such
continuance is specifically approved annually by a majority vote of the Fund's
outstanding voting securities or by its Board of Directors, and in either case
by a majority of the directors who are not parties to the Investment Management
Contract or interested persons of any such party, by votes cast in person at a
meeting called for the purpose of voting on such matter.

The new Investment Management Contract is terminable without penalty by the Fund
on sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or by the Manager on sixty days' written notice, and will automatically
terminate in the event of its assignment. The Investment Management Contract
provides that in the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or of reckless disregard of its
obligations thereunder, the Manager shall not be liable for any action or
failure to act in accordance with its duties thereunder.

For its services under the new Investment Management Contract, the Manager
receives from the Fund a fee equal to .30% per annum of the Fund's average daily
net assets for managing the Fund's investment portfolio and performing related
administrative and clerical services. The fees are accrued daily and paid
monthly. Any portion of the total fees received by the Manager may be used by
the Manager to provide shareholder and administrative services. (See
"Distribution and Service Plan" herein.)

For the Fund's fiscal years ended April 30, 1997, April 30, 1996, and April 30,
1995, the fee paid to the Manager under the Investment Management Contract was
$865,046, $819,852, and $702,867, respectively. The Fund's net assets at the
close of business on April 30, 1997 totaled $323,752,895. 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.

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.

Pursuant to the Administrative Services Contract with the Fund, the Manager
performs clerical, accounting supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of bookkeeping and related services by Investors Fiduciary Trust
Company, the Fund's bookkeeping agent, (ii) prepare reports to and filings with
regulatory authorities and (iii) perform such other services as the Fund may
from time to time request of the Manager. The personnel rendering such services
may be employees of the Manager, 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 Fund's fiscal year ended April 30, 1997, the Manager
received a fee of $605,532.

MANAGEMENT OF THE FUND

The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below. The address of each such person unless
otherwise indicated is 600 Fifth Avenue, New York, N.Y. 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 the Manager.

Steven W. Duff, 43 - President 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 President and a Director of
California Daily Tax Free Income Fund, Inc.,

14
<PAGE>
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. and Short Term Income Fund,
Inc., President and a Trustee of Florida Daily Municipal Income Fund,
Institutional Daily Income Fund, and Pennsylvania Daily Municipal Income Fund,
President of Cortland Trust, Inc., Executive Vice President of Reich & Tang
Equity Fund, Inc., and President and Chief Executive Officer of Tax Exempt
Proceeds Fund, Inc.

Edward A. Kuczmarski, 47 - Director of the Fund, Trustee of The Empire Builder
Tax Free Bond Fund; Certified Public Accountant and Partner of Hays & Company
since 1980. His address is 477 Madison Avenue, New York, N.Y. 10022-5892.

Caroline E. Newell, 57 - Director of the Fund, Trustee of The Empire Builder Tax
Free Bond Fund; Director, International Preschools, Inc. Her address is
International Preschools, Inc., 330 East 45th Street, New York, N.Y. 10017.

John P. Steines, 48 - Director of the Fund, Trustee of The Empire Builder Tax
Free Bond Fund; Professor of Law, New York University School of Law. His address
is New York University School of Law, 40 Washington Square South, New York, N.Y.
10012.

Lesley M. Jones, 48 - 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. with which she was
associated with from April 1973 to September 1993. Ms. Jones is also a Vice
President of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, Institutional Daily Income Fund, Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal
Income Fund, Reich & Tang Equity Fund, Inc., and Short Term Income Fund, Inc.

Bernadette N. Finn, 49 - 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. with which she was
associated with from September 1970 to September 1993. Ms. Finn is also
Secretary of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc.,
Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund, Inc.,
New Jersey Daily Municipal Income Fund, Inc., North Carolina Daily Municipal
Income Fund, Inc., Pennsylvania Daily Municipal Income Fund and Tax Exempt
Proceeds Fund, Inc., a Vice President and Secretary of Delafield Fund, Inc.,
Institutional Daily Income Fund, Reich & Tang Equity Fund, Inc., Reich & Tang
Government Securities Trust and Short Term Income Fund, Inc.

Molly Flewharty, 46 - 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. with which she was associated with
from December 1977 to September 1993. Ms. Flewharty is also Vice President of
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield
Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily Income
Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short
Term Income Fund, Inc., and Tax Exempt Proceeds Fund, Inc.

Dana E. Messina, 40 - 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 Vice President of California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, Institutional Daily Income Fund, Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal
Income Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc., and
Tax Exempt Proceeds Fund, Inc.

Richard De Sanctis, 40 - 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 Treasurer of California Daily
Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily
Tax Free Income Fund, Inc. Delafield Fund, Inc., Florida Daily Municipal Income
Fund, Institutional Daily Income Fund, Michigan Daily Tax Free Income Fund,
Inc., New Jersey Daily Municipal Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich &
Tang Equity Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Short Term Income
Fund, Inc. and Vice President and Treasurer of Cortland Trust, Inc.

The Fund paid an aggregate remuneration of $15,000 to its directors with respect
to the period ended April 30, 1997, all of which consisted of aggregate
directors' fees paid to the four disinterested directors, pursuant to the terms
of the Investment Management Contract. (See "Manager" herein.)

15
<PAGE>
<TABLE>

COMPENSATION TABLE

(1) (2) (3) (4) (5)

Aggregate Pension or Total Compensation
Name of Person, Compensation from Retirement Benefits Estimated Annual from Fund and Fund
Position Registrant for Fiscal Accrued as Part of Benefits upon Complex Paid to
-------- Year Fund Expenses Retirement Directors*
---- ------------- ---------- ----------
Edward A.
Kuczmarski, $5,000 0 0 $5,000 (1 Fund)
Director

Caroline E. Newell, $5,000 0 0 $5,000 (1 Fund)
Director

John P. Steines, $5,000 0 0 $5,000 (1 Fund)
Director
</TABLE>

* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending April 30, 1997 and, with respect to certain of the funds
in the Fund Complex, estimated to be paid during the fiscal year ending April
30, 1997. 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.

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, N.Y. 10022.

McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, N.Y. 10017, independent
certified public accountants, have been selected as auditors for the Fund.

DISTRIBUTION AND SERVICE PLAN

Pursuant to Rule 12b-1 (the "Rule") under the 1940 Act, the Securities and
Exchange Commission has required that an investment company which bears any
direct or indirect expense of distributing its shares must do so only in
accordance with a plan permitted by the Rule. The Fund's Board of Directors has
adopted a distribution and service plan (the "Plan") and, pursuant to the Plan,
the Fund has entered into a Distribution Agreement and a Shareholder Servicing
Agreement (with respect to Class A shares only) with Reich & Tang Distributors
L.P., (the "Distributor") as distributor of the Fund's shares.

Reich & Tang Asset Management, Inc. serves as the sole general partner for both
Reich & Tang Asset Management L.P. and Reich & Tang Distributors L.P., and Reich
& Tang Asset Management L.P. serves as the sole limited partner of the
Distributor. The Board of Directors approved the re-execution of the
Distribution Agreement and the execution of the Shareholder Servicing Agreement.

Effective October 3, 1996, a majority of the Fund's Board of Directors including
independent directors, approved the creation of a second class of shares of the
Fund's outstanding common stock. In furtherance of this action, the Board of
Directors has reclassified the common stock of the Fund into Class A and Class B
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 Class
A shares only, the Manager receives from the Fund a service fee equal to .20%
per annum of the Fund's average daily net assets of Class A shares (the
"Shareholder Servicing Fee") for providing personal shareholder services and for
the maintenance of shareholder accounts. The fee is accrued daily and paid
monthly and any portion of the fee may be deemed to be used by the Distributor
for 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. For its services
under the Shareholder Servicing Agreement, the Manager receives from the Fund a
service fee equal to .20% per annum of the Fund's average daily net assets (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 Fund shares and for payments to Participating Organizations with
respect to servicing their clients or customers who are shareholders of the
Fund. For the Fund's fiscal year ended April 30, 1997, the amount payable to the
Distributor under the

16
<PAGE>
Distribution Plan and Shareholder Servicing Agreement adopted thereunder
pursuant to Rule 12b-1 under the 1940 Act, totaled $576,689 of which $12,996 was
spent on sales personnel and related expenses, $2,885 was spent on travel and
entertainment, $15,581 was spent on prospectus, application and miscellaneous
printing and $232 was spent on miscellaneous expenses. During the same period,
the Manager made total payments under the Plan to or on behalf of Participating
Organizations of $974,724. For the Fund's fiscal year ended April 30, 1996, the
amount payable to the Distributor under the Distribution Plan and Shareholder
Servicing Agreement adopted thereunder pursuant to Rule 12b-1 under the 1940
Act, totaled $546,568 of which $19,946 was spent on sales personnel and related
expenses, $4,668 was spent on travel and entertainment, $22,527 was spent on
prospectus, application and miscellaneous printing and $1,116 was spent on
miscellaneous expenses. During the same period, the Manager made total payments
under the Plan to or on behalf of Participating Organizations of $906,744. For
the Fund's fiscal year ended April 30, 1995, 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 $468,578
of which $22,126 was spent on sales personnel and related expenses, $2,612 was
spent on travel and entertainment, $8,447 was spent on prospectus, application
and miscellaneous printing and $1,042 was spent on miscellaneous expenses.
During the same period, the Manager made total payments under the Plan to or on
behalf of Participating Organizations of $660,683. The excess of such payments
over the total payments the Manager and Distributor received from the Fund under
the Plan represents distribution expenses funded by the Manager from its own
resources including the Management Fee.

Under the Distribution Agreement, the Distributor, 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 Manager, Distributor and Participating Organizations in carrying out their
obligations under the Shareholder Servicing Agreement with respect to Class A
shares only, and (ii) preparing, printing and delivering the Fund's prospectus
to existing shareholders of the Fund and preparing and printing subscription
application forms for shareholder accounts.

The Plan and the Shareholder Servicing Agreement 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 Manager 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 Class A shares; (iii) to pay the
costs of printing and distributing the Fund's prospectus to prospective
investors; and (iv) to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
shares. The Distributor may also make payments from time to time from its own
resources, which may include the Shareholder Servicing Fee with respect to Class
A shares and past profits for the purposes enumerated in (i) above. The
Distributor, in its sole discretion, 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, the Shareholder
Servicing Agreement or the Administrative Services Contract 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 provides that it may continue in effect for successive annual periods
provided it is approved by the Class A shareholders or by the Board of
Directors, including a majority of directors who are not interested persons of
the Fund and who have no direct or indirect interest in the operation of the
Plan or in the agreements related to the Plan. The Board of Directors has
approved the continuance of the Plan until May 1, 1997. The Plan was approved by
a majority of the Fund's shareholders at the Annual Meeting on November 13,
1985. The Plan further provides that it may not be amended to increase
materially the costs which may be spent by the Fund for distribution pursuant to
the Plan without Class A shareholder approval, and the other material amendments
must be approved by the directors in the manner described in the preceding
sentence. The Plan may be terminated at any time by a vote of a majority of the
disinterested directors of the Fund or the Fund's Class A shareholders.

DESCRIPTION OF COMMON STOCK

The authorized capital stock of the Fund, which was incorporated on January 31,
1984 in Maryland, consists of twenty billion shares of stock having a par value
of one tenth of one cent ($.001) per share. Each share has equal dividend,
distribution, liquidation and voting rights and a fractional share has those
rights in proportion to the percentage that the fractional share represents of a
whole share. Generally, all shares will be voted on in the aggregate except if
voting by

17
<PAGE>
Class is required by law or the matter involved affects only one class, in which
case shares will be voted on separately by Class. 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
nonaccessible. Shares are redeemable at net asset value, at the option of the
shareholder. The Fund is subdivided into two classes of stock, Class A and Class
B. Each share, regardless of class, will represent an interest in the same
portfolio of investments and will have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except that: (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares will be assessed a service fee pursuant to the Rule 12b-1
Distribution and Service Plan of the Fund of .20% of the Fund's average daily
net assets; (iii) only the holders of the Class A shares would be entitled to
vote on matters pertaining to the Plan and any related agreements in accordance
with provisions of Rule 12b-1; and (iv) the exchange privilege will permit
shareholders to exchange their shares only for shares of the same class of a
Fund that participates in an exchange privilege with the Fund. Payments that are
made under the Plans will be calculated and charged daily to the appropriate
class prior to determining daily net asset value per share and
dividends/distributions. A fractional share has those rights in proportion to
the percentage that the fractional share represents of a whole share. On July
31, 1997 there were 380,172,810 shares of the Fund's Class A shares outstanding
and 6,889 Class B shares outstanding. As of July 31, 1997, the amount of shares
owned by all officers and directors of the Fund, as a group, was less than 1% of
the outstanding shares. Set forth below is certain information as to persons who
owned 5% or more of the Fund's outstanding shares as of July 31, 1997:

Nature of
Name and address % of Class Ownership

Class A Shares:

Reich & Tang Services L.P. 63.90% Record
agent for various beneficial owners
600 Fifth Avenue
New York, N.Y. 10020

Neuberger & Berman 15.98% Record
as agent for customer
11 Broadway Operations Con
New York, N.Y. 10004

CMP Publications Inc. 9.21% Record
as agent
600 Community Drive
Manhasset, N.Y. 11030

Class B Shares:

Reich & Tang Asset Management L.P. 74.40% Record
agent for various beneficial owners
600 Fifth Avenue
New York, N.Y. 10020

Scott S. Hignett 15.49% Beneficial
600 Fifth Avenue
New York, N.Y. 10020

Christine A. Bivetto 7.36% Beneficial
600 Fifth Avenue
New York, N.Y. 10020

</TABLE>

Under its Articles of Incorporation the Fund has the right to redeem for cash
shares of stock owned by any shareholder to the extent and at such times as the
Fund's Board of Directors determines to be necessary or appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes. In this regard, the
Fund may also exercise its right to reject purchase orders.

18
<PAGE>

As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of the Fund's
revised investment advisory agreement with respect to a particular class or
series of stock, (c) for approval of the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of holders of shares entitled to cast not less than 25% of all the votes
entitled to be cast at such meeting. Annual and other meetings may be required
with respect to such additional matters relating to the Fund as may be required
by the 1940 Act, any registration of the Fund with the Securities and Exchange
Commission or any state, or as the Directors may consider necessary or
desirable. Each Director serves until the next meeting of the shareholders
called for the purpose of considering the election or re-election of such
Director or a successor to such Director, and until the election and
qualification of his or her successor, elected at such a meeting or until such
Director sooner dies, resigns, retires or is removed by the vote of the
shareholders. On August 31, 1990 the Fund's shareholders voted to amend the
Fund's Articles of Incorporation to change the name of the Fund to the New York
Daily Tax Free Income Fund, Inc.

EXPENSE LIMITATION

The Manager has agreed to reimburse the Fund for its expenses (exclusive of
interest, taxes, brokerage, and extraordinary expenses) which in any year exceed
the lesser of (i) 1 1/2% of the Fund's average annual net assets or (ii) 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,
including taxes, brokerage fees and commissions, commitment fees, certain
insurance premiums, interest charges and expenses of the custodian, transfer
agent and dividend disbursing agent's fees, telecommunications expenses,
auditing and legal expenses, bookkeeping agent fees, costs of forming the
corporation and maintaining corporate existence, compensation of directors,
officers and employees of the Fund and costs of other personnel performing
services for the Fund who are not officers of New England Investment Companies,
Inc., the general partner of the Manager or its affiliates, costs of investor
services, shareholders' reports and corporate meetings, Securities and Exchange
Commission 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, the fees payable to the Distributor under the Shareholder
Servicing Agreement and the Distribution Agreement and all other costs borne by
the Fund pursuant to the Distribution Plan.

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, and 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. As a result of the recent passage of the National
Securities Market Improvement Act of 1996, all state expense limitations have
been eliminated at this time.

FEDERAL INCOME TAXES

The Fund has elected to qualify under the Code, as amended, and under New York
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 and other 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 excludible from their gross income under Section 103(a) of the Code.
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. P.L. 99-514 expands the application of
this rule as it applies to financial institutions, effective with respect to
taxable years ending after December 31, 1986. 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

19
<PAGE>
includible in gross income. The amount of such interest received will have to be
disclosed on the shareholders' Federal income tax returns. Taxpayers other than
corporations 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, if any, that
are attributable to such post-August 7, 1986 private activity bonds, if any such
bonds are acquired by the Fund. Corporations are required to increase their
alternative minimum tax 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. The Fund may realize
ordinary income upon the maturity or disposition of securities acquired at
discounts resulting from market fluctuations. A shareholder is advised to
consult his tax adviser with respect to whether exempt-interest dividends retain
the exclusion under Section 103(a) of the Code if such shareholder would be
treated as a "substantial user" or "related person" under Section 147(a) of the
Code with respect to some or all of the "private activity bonds," if any, held
by the Fund.

Although it is not intended, it is possible that the Fund may realize short-term
or long-term capital gains or losses from its portfolio transactions. Short-term
capital gains will be taxable 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 will be 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 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 net
capital gain distribution. Distributions of net capital gains 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.

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 non-deductable 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 and 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 is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner thereof and the interest on the underlying Municipal Obligations will
be tax-exempt to the Fund. Counsel has pointed out that the Internal Revenue
Service has announced that it will not ordinarily issue advance rulings on the
question of 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 re-evaluate its investment objectives and policies and
consider changes in the structure.

In South Carolina vs. Baker, the U.S. 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 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 exemption for Federal income tax purposes of dividends derived from interest
on Municipal Obligations does not necessarily result in an exemption under the
income or other tax laws of any state or local taxing authority. However, to the
extent that dividends are derived from interest on New York Municipal
Obligations, the dividends will also be excluded from

20
<PAGE>
a New York shareholder's gross income for New York State and New York City
personal income tax purposes. This exclusion will not result in a corporate
shareholder being exempt for New York Sate and New York City franchise tax
purposes. Shareholders are advised to consult with their tax advisers concerning
the application of state and local taxes to investments in the Portfolio which
may differ from the Federal income tax consequences described above.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105 is custodian for the Fund's cash and securities. Reich & Tang Services
L.P., 600 Fifth Avenue, New York, New York 10020 is transfer agent and dividend
agent for the shares of the Fund. State Street Bank and Trust Company, the
transfer agent for Victory Shares of the Fund, subcontracts all services to
Boston Financial Data Services at P.O. Box 8527, Boston, Massachusetts
02266-8527. Boston Financial Data Services is also the servicing agent for the
Victory shares of the Fund. State Street Bank and Trust Company, P.O. Box 9021,
Boston, Massachusetts 02205-9827 is the registrar, transfer agent and dividend
disbursing agent for the Evergreen Shares of the Fund. The custodian and
transfer agents do not assist in, and are not responsible for, investment
decisions involving assets of the Fund.

<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 (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.

Description of Moody's Investors Service, Inc.'s two highest ratings of state
and municipal notes and other short-term loans:

Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Symbols used will be as follows:

MIG-1 - Loans bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.

MIG-2 - Loans bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.

Description of Standard & Poor's Rating Services two highest debt ratings:

AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

Plus ( + ) or Minus (-): The AA rating may be modified by the addition of a plus
or minus sign to show relative standing within the AA rating category.

Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.

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.

* As described by the rating agencies.

22
<PAGE>
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.

Description of Standard & Poor's Corporation's two highest municipal note
ratings:

SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.

SP-2 - Satisfactory capacity to pay principal and interest.

23
<PAGE>
<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD TABLE
(Based on Tax Rates Effective Until December 31, 1997)
_______________________________________________________________________________

1. If Your Taxable Income Bracket Is . . .
_______________________________________________________________________________

<S> <C> <C> <C> <C> <C> <C>
Single 24,651- 25,001- 59,751- 60,101- 124,651- 271,051
Return 25,000 59,750 60,000 124,650 271,050 and over

Single 40,201- 45,001- 99,601- 108,801- 151,751- 271,051
Return 45,000 99,600 108,000 151,750 271,050 and over

________________________________________________________________________________

2. Then Your Combined Income Tax Bracket Is . . .
________________________________________________________________________________

Federal 28.00% 28.00% 31.00% 31.0% 36.0% 39.6
Tax Bracket
________________________________________________________________________________
State 6.85% 6.85% 6.85% 6.85% 6.85% 6.85%
Tax Bracket
________________________________________________________________________________
City 4.39% 4.40% 4.40% 4.46% 4.46% 4.46
Tax Bracket
________________________________________________________________________________
Combined 36.093% 36.100% 38.763% 38.804% 43.238% 46.431
Tax Bracket
________________________________________________________________________________

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
________________________________________________________________________________

2.0% 3.13% 3.13% 3.27% 3.27% 3.52% 3.73%
________________________________________________________________________________
2.5% 3.91% 3.91% 4.08% 4.09% 4.40% 4.67%
________________________________________________________________________________
3.0% 4.69% 4.69% 4.90% 4.90% 5.29% 5.60%
________________________________________________________________________________
3.5% 5.48% 5.48% 5.72% 5.72% 6.17% 6.53%
________________________________________________________________________________
4.0% 6.26% 6.26% 6.53% 6.54% 7.05% 7.47%
________________________________________________________________________________
4.5% 7.04% 7.04% 7.35% 7.35% 7.93% 8.40%
________________________________________________________________________________
5.0% 7.82% 7.82% 8.16% 8.17% 8.81% 9.33%
________________________________________________________________________________

</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, in section three, to see the equivalent taxable yields
for each of the tax free income yields given.

23
<PAGE>

- -------------------------------------------------------------------------------

NEW YORK DAILY TAX FREE INCOME FUND, INC.
INDEPENDENT AUDITOR'S REPORT

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

The Board of Directors and Shareholders
New York Daily Tax Free Income Fund, Inc.

We have audited the accompanying statement of net assets of New York Daily Tax
Free Income Fund, Inc. as of April 30, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and the selected financial
information for each of the five years in the period then ended. These financial
statements and selected financial information are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and selected financial information based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of April 30, 1997, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of New York Daily Tax Free Income Fund, Inc. as of April 30, 1997, the
results of its operations, the changes in its net assets and the selected
financial information for the periods indicated, in conformity with generally
accepted accounting principles.

\s\McGladrey & Pullen

New York, New York
May 23, 1997

24
- -------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------

NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS
APRIL 30, 1997
================================================================================
<TABLE>
<CAPTION>

Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Tax Exempt Investments (c) (17.75%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 7,450,000 Averill Park, NY CSD 05/08/97 3.70% $ 7,450,343
4,500,000 Central Islip,UFSD TAN (Suffolk County) 06/30/97 3.99 4,503,197
3,450,000 Cuba-Rushford CSD Allegheny County, NY BAN 01/07/98 3.73 3,455,006
1,700,000 Dutchess County, NY BAN City of Beacon 06/05/97 3.75 1,700,078
5,000,000 Freeport, NY CSD
LOC State Street Bank & Trust Co. 06/30/97 3.94 5,003,907
4,127,700 Lansing CSD, Tompkins County, NY 02/12/98 3.70 4,143,311
3,740,000 Oakfield - Alabama, NY CSD RAN 09/30/97 3.67 3,746,476
2,000,000 Potsdam St. Lawrence County, NY CSD 01/28/98 3.75 2,005,349
3,640,000 South Jefferson CSD
(Jefferson, Lewis & Oswego Counties, NY) 06/20/97 4.00 3,640,955
10,000,000 Suffolk County, NY Brentwood UFSD TAN 06/30/97 4.04 10,006,305
2,500,000 Sullivan County TAN Custodial Receipts
LOC State Street Bank & Trust Co. 03/19/98 3.66 2,506,214
4,463,000 Syracuse, NY BAN - Series A 12/19/97 3.61 4,476,127
2,500,000 Ulster County, NY TAN Custodial Receipts
LOC State Street Bank & Trust Co. 03/18/98 3.66 2,506,166
1,140,000 Village of Limestone Cattaraugus County, NY Water System BAN 07/25/97 4.04 1,140,745
1,200,000 Village of Mineola Town of North Hempstead Nassau County, NY 09/16/97 3.46 1,201,656
------------ -----------
57,410,700 Total Other Tax Exempt Investments 57,485,835
------------ -----------
<CAPTION>
Other Variable Rate Demand Instruments (b) (66.31%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,000,000 Counties of Warren & Washington IDA IDRB
(Griffith Micro Science Inc. Project) - Series 1994
LOC First National Bank of Chicago 12/01/14 4.60% $ 5,000,000 A1
3,000,000 Franklin County, NY IDA IDRB (Kes Chatauqua Project)
LOC Bank of Tokyo - Mitsubishi Bank, Ltd. 07/01/21 4.40 3,000,000 A1
1,065,000 Glen Falls, NY IDA IDRB (Broad Street Plaza)
LOC Fleet National Bank 12/01/06 4.65 1,065,000 P1 A1
1,000,000 Islip, NY IDA Brentwood (c)
LOC Fleet National Bank 05/01/09 3.90 1,000,000
1,580,000 Metropolitan Museum of Art
(Dormitory Authority of New York) RB - Series 1993A 07/01/15 4.30 1,580,000 VMIG-1 A1+
6,800,000 Metropolitan Transportation Authority - Series 1991A
LOC Morgan Guaranty/Bank of Tokyo-Mitsubishi Bank/
Sumitomo Bank/Industrial Bank of Japan/NatWest 07/01/21 4.50 6,800,000 VMIG-1 A1

</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
25
<PAGE>
- -------------------------------------------------------------------------------

===============================================================================
<TABLE>
<CAPTION>

Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Variable Rate Demand Instruments (b) (Continued)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 420,000 Monroe County, NY IDA IDRB (Brazil Merk Partnership)
LOC Fleet National Bank 01/01/06 3.60% $ 420,000 P1 A1
1,000,000 Nassau County, Manhassett (c)
LOC Bankers Trust Company 12/01/99 4.50 1,000,000
15,600,000 New York City GO 1993 - Series E-3
LOC Morgan Guaranty Trust Company 08/01/23 4.00 15,600,000 P1 A1+
4,400,000 New York City HDC Residential RB (Montefiore Medical Center)
LOC Chase Manhattan Bank, N.A. 05/01/30 4.45 4,400,000 A1
2,300,000 New York City Trust Cultural Resource RB (Jewish Museum) 12/01/21 4.60 2,300,000 VMIG-1 A1
2,300,000 New York City Trust Cultural Resource RB (Museum of Broadcasting)
LOC Sumitomo Bank, Ltd. 05/01/14 4.60 2,300,000 VMIG-1 A1
1,100,000 New York City Water Finance Authority
Water & Sewer System RB - Series C Bonds
FGIC Insured 06/15/23 4.05 1,100,000 VMIG-1 A1+
7,300,000 New York City, NY - Subseries E-4
LOC State Street Bank & Trust Co. 08/01/21 4.00 7,300,000 VMIG-1 A1+
4,000,000 New York City, NY GO - Series B-5
MBIA Insured 08/15/22 3.95 4,000,000 VMIG-1 A1+
4,750,000 New York City, NY GO - Series E-4
LOC State Street Bank & Trust Co. 08/01/22 4.00 4,750,000 VMIG-1 A1+
15,600,000 New York City, NY GO - Subseries E-6
FGIC Insured 08/01/19 4.00 15,600,000 VMIG-1 A1+
2,500,000 New York City, NY GO - Series E-5
LOC Morgan Guaranty Trust Company 08/01/18 4.00 2,500,000 VMIG-1 A1+
3,400,000 New York City, NY HDC (East 17th St.) - Series A
LOC Chase Manhattan Bank, N.A. 01/01/23 3.95 3,400,000 A1
6,500,000 New York City, NY HDC (East 96th St.) - Series 1990A
LOC Bank of Tokyo - Mitsubishi Bank, Ltd. 08/01/15 4.00 6,500,000 VMIG-1
3,000,000 New York City, NY HDC
(Upper Fifth Avenue Project) - Series 1989A
LOC Bankers Trust Company 01/01/16 4.35 3,000,000 VMIG-1
10,800,000 New York City, NY IDA (Nippon Cargo Airlines Company)
LOC Industrial Bank of Japan, Ltd. 11/01/15 4.30 10,800,000 A1
5,200,000 New York City, NY IDRB (Airport Project) - Series 1985
LOC Bayerische Landesbank Girozentrale 04/01/00 4.50 5,200,000 P1 A1+

</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
26
<PAGE>
- -------------------------------------------------------------------------------

NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
APRIL 30, 1997
===============================================================================
<TABLE>
<CAPTION>

Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Variable Rate Demand Instruments (b) (Continued)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,075,000 New York JDA Special Purpose RB
LOC Fuji Bank, Ltd. 03/01/02 4.15% $ 2,075,000 VMIG-1
5,000,000 New York State Dormitory Authority RB (Oxford University Press)
LOC Landesbank Hessen 07/01/25 4.30 5,000,000 VMIG-1
2,000,000 New York State ERDA PCRB
(Central Hudson Gas & Electric) - Series B
LOC Deutsche Bank A.G. 11/01/20 3.75 2,000,000 P1
4,800,000 New York State ERDA PCRB (Niagara Mohawk Power Corp.)
LOC Toronto-Dominion Bank 12/01/25 4.00 4,800,000 P1
2,000,000 New York State ERDA PCRB
(Niagara Mohawk Power Corp.) - Series 1988A
LOC Morgan Guaranty Trust Company 12/01/23 4.05 2,000,000 A1+
11,550,000 New York State ERDA PCRB
(Niagara Mohawk Power Corporation) - Series 1985C
LOC Canadian Imperial Bank of Commerce 12/01/25 4.00 11,550,000 P1
2,400,000 New York State ERDA PCRB
(Niagara Mohawk Power Corporation) - Series 1987A (c)
LOC Toronto-Dominion Bank 03/01/27 4.05 2,400,000
10,700,000 New York State ERDA PCRB
(Niagara Mohawk Power Corporation) - Series B
LOC Toronto-Dominion Bank 12/01/26 4.05 10,700,000 P1
2,700,000 New York State ERDA PCRB
(Rochester Gas & Electric) - Series 1984
LOC The Bank of New York 10/01/14 3.40 2,700,000 P1
470,000 New York State JDA 03/01/05 4.15 470,000 VMIG-1
4,310,000 New York State JDA - Series 1989 03/01/05 4.15 4,310,000 VMIG-1
590,000 New York State JDA - Series D
LOC Sumitomo Bank, Ltd. 03/01/99 3.75 590,000 VMIG-1 A1
685,000 New York State JDA - Series G
LOC Sumitomo Bank, Ltd. 03/01/99 3.75 685,000 VMIG-1 A1
2,900,000 New York State JDA Special Purpose RB 03/01/02 4.15 2,900,000 VMIG-1 A2
12,200,000 New York State LGAC
LOC Credit Suisse/Union Bank of Switzerland 04/01/22 4.35 12,200,000 VMIG-1 A1+
4,900,000 New York State LGAC - Series E
LOC Canadian Imperial Bank of Commerce 04/01/25 4.50 4,900,000 VMIG-1 A1+

</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
27
<PAGE>
- -------------------------------------------------------------------------------

===============================================================================
<TABLE>
<CAPTION>

Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Variable Rate Demand Instruments (b) (Continued)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,900,000 New York State LGAC - Series G
LOC National Westminster Bank PLC 04/01/25 4.40% $ 4,900,000 VMIG-1 A1+
5,700,000 New York State LGAC RB - Series 1994B
LOC Swiss Bank Corp. 04/01/23 4.40 5,700,000 VMIG-1 A1+
8,000,000 New York State Medical Care Facilities Financial Authority
LOC Chase Manhattan Bank, N.A. 11/01/15 4.50 8,000,000 VMIG-1
1,300,000 New York State Medical Care
Pooled Equipment Authority - Series 1994A
LOC Chase Manhattan Bank, N.A. 11/01/03 4.40 1,300,000 VMIG-1
3,400,000 New York, NY - Series B Subseries B-6
MBIA Insured 08/15/05 3.95 3,400,000 VMIG-1 A1+
500,000 Puerto Rico Industrial Medical & Environmental PCFA PCRB
(Ana Mendez Foundation)
LOC Bank of Tokyo - Mitsubishi Bank, Ltd. 12/01/15 4.15 500,000 A1
500,000 Southeast, NY IDA (1989 Unilock, NY)
LOC First National Bank of Chicago 11/01/97 4.60 500,000 P1 A1+
500,000 Southeast, NY IDA (1989 Unilock, NY)
LOC First National Bank of Chicago 11/01/98 4.60 500,000 P1 A1+
500,000 Southeast, NY IDA (1989 Unilock, NY)
LOC First National Bank of Chicago 11/01/99 4.60 500,000 P1 A1+
500,000 Southeast, NY IDA (1989 Unilock, NY)
LOC First National Bank of Chicago 11/01/00 4.60 500,000 P1 A1+
200,000 Southeast, NY IDA (1989 Unilock, NY)
LOC First National Bank of Chicago 11/01/01 4.60 200,000 P1 A1+
6,800,000 Suffolk County, NY IDA
(Nissequogue Cogen Partners) - Series 1993
LOC Toronto-Dominion Bank 12/15/23 4.45 6,800,000 VMIG-1 A1+
4,000,000 Suffolk County, NY Water Authority BAN 12/21/99 4.40 4,000,000 VMIG-1
------------ ------------
214,695,000 Total Other Variable Rate Demand Instruments 214,695,000
------------ ------------
<CAPTION>
Put Bonds (d) (2.23%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 350,000 Fulton County, NY IDA (LCM Properties Realty Trust) (c)
LOC The Bank of New York 06/15/97 3.95% $ 350,000
6,865,000 New York State ERDA PCRB (Long Island Lighting Co.)
LOC Deutsche Bank A.G. 03/01/98 3.60 6,865,000 VMIG-1
----------- ------------
7,215,000 Total Put Bonds 7,215,000
----------- ------------

</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
28
<PAGE>
- -------------------------------------------------------------------------------

NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
APRIL 30, 1997
===============================================================================
<TABLE>
<CAPTION>

Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Tax Exempt Commercial Paper (7.88%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,500,000 New York State Dormitory Authority
(Memorial Sloan Kettering Cancer Center) - Series 1994C
LOC Chase Manhattan Bank, N.A. 06/12/97 3.70% $ 5,500,000 VMIG-1 A1+
6,000,000 New York City Water Finance Authority
LOC Canadian Imperial Bank of Commerce 07/31/97 3.65 6,000,000 P1 A1+
5,000,000 New York State Environmental Quality - Series 1997A
LOC Bayerische Landesbank/Landesbank Hessen 06/24/97 3.45 5,000,000 VMIG-1 A1+
9,000,000 Puerto Rico Government Development Bank 05/07/97 3.35 9,000,000 A1+
----------- ------------
25,500,000 Total Tax Exempt Commercial Paper 25,500,000
----------- ------------
<CAPTION>
Variable Rate Demand Instruments - Participations (b) (2.28%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 156,682 Auburn, NY IDA IDRB
(Bo-Mer Manufacturing Company Incorporated)
LOC Chase Manhattan Bank, N.A. 10/01/00 5.53% $ 156,682 P1 A1
255,000 BSE Corporation Project
LOC Chase Manhattan Bank, N.A. 07/01/01 5.53 255,000 P1 A1
279,955 Centennial Associates/W & H Stampings, Incorporated
LOC Chase Manhattan Bank, N.A. 10/01/00 5.53 279,955 P1 A1
206,897 Datagraphic Incorporated
LOC Chase Manhattan Bank, N.A. 10/01/98 5.53 206,897 P1 A1
1,365,000 Executive Square Business Park
LOC Chase Manhattan Bank, N.A. 06/01/01 5.53 1,365,000 P1 A1
189,655 Faden Paper Supply Company
LOC Chase Manhattan Bank, N.A. 01/01/00 5.53 189,655 P1 A1
592,200 GL II Associates
LOC Chase Manhattan Bank, N.A. 01/01/99 5.53 592,200 P1 A1
1,522,500 Giaquinto Joint Venture
LOC Chase Manhattan Bank, N.A. 07/01/02 5.53 1,522,500 P1 A1
236,789 I.G. Federal Electric Supply Corporation 1984
LOC Chase Manhattan Bank, N.A. 11/01/99 5.53 236,789 P1 A1
429,680 Metro Seliger Industries, Incorporated 1984
LOC Chase Manhattan Bank, N.A. 08/10/99 5.53 429,680 P1 A1
169,516 Nassau County, NY IDA IDRB
(Steven Klein/Normandie Metal Fabricators)
LOC Chase Manhattan Bank, N.A. 11/01/99 5.53 169,516 P1 A1

</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
29
<PAGE>
- -------------------------------------------------------------------------------
==============================================================================
<TABLE>
<CAPTION>

Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Variable Rate Demand Instruments - Participations (b) (Continued)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 332,257 New York City, NY
(Seybert-Nicholas Printing Corporation/Kenner Printing)
LOC Chase Manhattan Bank, N.A. 06/01/00 5.53% $ 332,257 P1 A1
122,222 New York City, NY IDA IDRB (Abigail Press, Incorporated Project)
LOC Chase Manhattan Bank, N.A. 02/01/99 5.53 122,222 P1 A1
149,916 One Crouse Medical Plaza
LOC Chase Manhattan Bank, N.A. 12/10/98 5.53 149,916 P1 A1
935,000 Penn-Plax Plastics, Nassau County
LOC Dai-Ichi Kangyo Bank, Ltd. 01/01/00 5.53 935,000 P1 A1
34,999 Ram Realty Company Project
LOC The Bank of New York 02/01/99 5.10 34,999 P1 A1
349,970 Texpak Incorporated Project
LOC Chase Manhattan Bank, N.A. 01/01/01 5.53 349,970 P1 A1
59,995 Ulster County, NY IDA IDRB (Fin Pan Incorporated Project)
LOC Chase Manhattan Bank, N.A. 11/01/99 5.53 59,995 P1 A1
----------- ------------
7,388,233 Total Variable Rate Demand Instruments - Participations 7,388,233
----------- ------------
<CAPTION>
Variable Rate Demand Instruments - Private Placements (b) (2.62%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 514,776 Adirondack Transit Lines
LOC Key Bank, N.A. 02/01/01 5.10% $ 514,776 P1 A1
6,500,000 Blazer Real Estate 1990
LOC Union Bank of Switzerland 09/01/21 5.53 6,500,000 P1 A1
239,250 J. Treffiletti & Sons
LOC Key Bank, N.A. 09/01/00 5.10 239,250 P1 A1
295,416 Troy Mall Associates - Series 1985B
LOC Key Bank, N.A. 07/01/15 5.10 295,416 P1 A1
923,750 Troy Mall Associates - Series 1985C
LOC Key Bank, N.A. 04/01/16 5.10 923,750 P1 A1
----------- ------------
8,473,192 Total Variable Rate Demand Instruments - Private Placements 8,473,192
----------- ------------
Total Investments (99.07%) (Cost $320,757,260+) 320,757,260
Cash and Other Assets, Net of Liabilities (0.93%) 2,995,635
-------------
Net Assets (100%) $323,752,895
=============
Class A Shares, 323,757,128 Shares Outstanding (Note 3) $ 1.00
=============
Class B Shares, 6,693 Shares Outstanding (Note 3) $ 1.00
=============

+ Aggregate cost for federal income tax purposes is identical.

</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
30
<PAGE>
- -------------------------------------------------------------------------------

NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
APRIL 30, 1997
===============================================================================

FOOTNOTES:

(a) The ratings noted for variable rate demand instruments are those of the
bank whose letter of credit secures such instruments or the guarantor of
the bond. P1 and A1+ are the highest ratings assigned for tax exempt
commercial paper.

(b) Securities payable on demand at par including accrued interest (usually
with seven days notice) and where indicated are unconditionally secured as
to principal and interest by a bank letter of credit. The interest rates
are adjustable and are based on bank prime rates or other interest rate
adjustment indices. The rate shown is the rate in effect at the date of
this statement.

(c) Securities that are not rated which the Fund's Board of Directors has
determined to be of comparable quality to those rated securities in which
the Fund invests.

(d) The maturity date indicated is the next put date.

KEY:
<TABLE>
<S> <C> <C> <C> <C> <C>
BAN = Bond Anticipation Note LGAC = Local Government Assistance Corporation
CSD = Central School District PCFA = Pollution Control Financial Authority
ERDA = Energy and Research Development Authority PCRB = Pollution Control Revenue Bond
GO = General Obligation RAN = Revenue Anticipation Note
HDC = Housing Development Corporation RB = Revenue Bond
IDA = Industrial Development Authority TAN = Tax Anticipation Note
IDRB = Industrial Development Revenue Bond UFSD = Unified School District
JDA = Job Development Authority
</TABLE>

- -------------------------------------------------------------------------------
See Notes to Financial Statements.
31
<PAGE>
- -------------------------------------------------------------------------------

NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1997
===============================================================================
<TABLE>
<CAPTION>

INVESTMENT INCOME

<S> <C>
Income:
Interest............................................................. $ 10,333,834
-----------
Expenses: (Note 2)
Investment management fee............................................. 865,046
Administration fee.................................................... 605,532
Shareholder servicing fee............................................. 576,689
Custodian expenses.................................................... 22,762
Shareholder servicing and
related shareholder expenses....................................... 188,254
Legal, compliance and filing fees..................................... 32,086
Audit and accounting.................................................. 59,448
Directors' fees and expenses.......................................... 15,386
Other expenses........................................................ 11,695
-----------
Total expenses.................................................... 2,376,898
Less: Expenses paid indirectly.................................... ( 12,105)
-----------
Net expenses............................................. 2,364,793
-----------
Net investment income.................................................. 7,969,041

<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments................................ ( 8,672)
-----------
Increase in net assets from operations................................. $ 7,960,369
===========

</TABLE>
- --------------------------------------------------------------------------------

See Notes to Financial Statements.
31
<PAGE>

- -------------------------------------------------------------------------------

NEW YORK DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED APRIL 30, 1997 AND 1996
===============================================================================
<TABLE>
<CAPTION>

1997 1996
------------ -------------

INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>

Operations:
Net investment income....................................... $ 7,969,041 $ 8,266,259
Net realized gain (loss) on investments..................... ( 8,672) --
------------ -------------
Increase in net assets from operations.......................... 7,960,369 8,266,259
Dividends to shareholders from net investment income
Class A..................................................... ( 7,968,922)* ( 8,266,259)*
Class B..................................................... ( 119)* --
Capital share transactions (Note 3)
Class A..................................................... 40,386,831 28,946,430
Class B..................................................... 6,693 --
------------ -------------
Total increase (decrease)............................... 40,384,852 28,946,430
Net assets:
Beginning of year........................................... 283,368,043 254,421,613
------------ -------------
End of year................................................. $ 323,752,895 $ 283,368,043
============ =============

* Designated as exempt-interest dividends for federal income tax purposes.

</TABLE>

- --------------------------------------------------------------------------------

See Notes to Financial Statements.
32
<PAGE>
- -------------------------------------------------------------------------------

NEW YORK DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
===============================================================================

1. Summary of Accounting Policies

New York Daily Tax Free Income Fund, Inc. is a no-load, non-diversified,
open-end management investment company registered under the Investment Company
Act of 1940. The Fund is a short-term, tax exempt money market fund. The Fund
has two classes of stock authorized, Class A and Class B. The Class A shares are
subject to a service fee pursuant to the Distribution Plan. The Class B shares
are not subject to a service fee. Additionally, the Fund may allocate among its
classes certain expenses to the extent allowable to specific classes, including
transfer agent fees, government registration fees, certain printing and postage
costs, and administrative and legal expenses. Class specific expenses of the
Fund were limited to distribution fees and minor transfer agent expenses. In all
other respects, Class A and Class B shares represent the same interest in the
income and assets of the Fund. Distribution of Class B shares commenced October
10, 1996. The Fund's financial statements are prepared in accordance with
generally accepted accounting principles for investment companies as follows:

a) Valuation of Securities -
Investments are valued at amortized cost. Under this valuation method, a
portfolio instrument is valued at cost and any discount or premium is
amortized on a constant basis to the maturity of the instrument. The
maturity of variable rate demand instruments is deemed to be the longer of
the period required before the Fund is entitled to receive payment of the
principal amount or the period remaining until the next interest rate
adjustment.

b) Federal Income Taxes -
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its tax exempt and taxable income to its shareholders. Therefore, no
provision for federal income tax is required.

c) Dividends and Distributions -
Dividends from investment income (excluding capital gains and losses, if
any, and amortization of market discount) are declared daily and paid
monthly. Distributions of net capital gains, if any, realized on sales of
investments are made after the close of the Fund's fiscal year, as declared
by the Fund's Board of Directors.

d) Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.

e) General -
Securities transactions are recorded on a trade date basis. Interest income
is accrued as earned. Realized gains and losses from securities
transactions are recorded on the identified cost basis.

2. Investment Management Fees and Other Transactions with Affiliates

Under the Investment Management Contract, the Fund pays an investment management
fee to Reich & Tang Asset Management L.P. (Manager), equal to .30% of the Fund's
average daily net assets.

Pursuant to an Administrative Services Agreement, the Fund pays to the Manager
an annual fee of .21% of the Fund's average daily net assets.

Pursuant to a Distribution Plan adopted under Securities and Exchange Commission
Rule 12b-1, the Fund and Reich & Tang Distributors L.P. (the Distributor) have
entered into a Distribution Agreement and a Shareholder Servicing Agreement,

- --------------------------------------------------------------------------------
33
<PAGE>
- -------------------------------------------------------------------------------

NEW YORK DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
2. Investment Management Fees and Other Transactions with Affiliates (Continued)

only with respect to the Class A shares of the Fund. For its services under the
Shareholder Servicing Agreement, the Distributor receives from the Fund a fee
equal to .20% of the Fund's average daily net assets. There were no additional
expenses borne by the Fund pursuant to the Distribution Plan.

Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $134,900 paid to Reich & Tang
Services L.P., an affiliate of the Manager as servicing agent for the Fund.

Included in the Statement of Operations under the captions "Shareholder
servicing and related shareholder expenses" are expense offsets of $12,105.

Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$3,000 per annum plus $500 per meeting attended.

3. Capital Stock

At April 30, 1997, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $323,762,132. Transactions in capital
stock, all at $1.00 per share, were as follows:

Year Year
Class A Ended Ended
-------
April 30, 1997 April 30, 1996
---------------- --------------
<S> <C> <C>
Sold................................... 498,357,444 452,103,464
Issued on reinvestment of dividends.... 7,175,397 7,544,314
Redeemed............................... ( 465,146,010) ( 430,701,348)
------------- ------------
Net increase (decrease)................ 40,386,831 28,946,430
============= ============
<CAPTION>
October 10, 1996
Class B (Commencement of Sales) to
-------
April 30, 1997
----------------
<S> <C>
Sold................................... 12,177
Issued on reinvestment of dividends.... 108
Redeemed............................... ( 5,592)
--------------
Net increase (decrease)................ 6,693
==============
</TABLE>
4. Sales of Securities

Accumulated undistributed realized losses at April 30, 1997 amounted to $9,237.
Such losses represent tax basis net capital losses which may be carried forward
to offset future capital gains. Such losses expire through April 30, 2005.

5. Concentration of Credit Risk

The Fund invests primarily in obligations of political subdivisions of the State
of New York and, accordingly, is subject to the credit risk associated with the
non-performance of such issuers. Approximately 70% of these investments are
further secured, as to principal and interest, by letters of credit issued by
financial institutions. The Fund maintains a policy of monitoring its exposure
by reviewing the credit worthiness of the issuers, as well as that of the
financial institutions issuing the letters of credit, and by limiting the amount
of holdings with letters of credit from one financial institution.
- -------------------------------------------------------------------------------
34

<PAGE>
- -------------------------------------------------------------------------------

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

6. Selected Financial Information
Reference is made to page 2 of the prospectus under Financial Highlights.

PART C - OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

(a) Financial Statements

Included in Prospectus Part A:
(1) Table of Fees and Expenses
(2) Selected Financial Information

Included in Statement of Additional Information Part B:

(1) Report of McGladrey & Pullen, LLP independent
certified public accountants, dated May 23, 1997;
(2) Statement of Net Assets, April 30, 1997 (audited);
(3) Statement of Operations, year ended April 30, 1997
(4) Statement of Changes in Net Assets, years ended
April 30, 1997, and April 30, 1996 (audited);
(5) Notes to Financial Statements;

(b) Exhibits.

(1) Amended Articles of Incorporation of the Registrant filed with
Post-Effective Amendment No. 9 to said Registration Statement on August 31,
1990 and incorporated herein by reference.

(2) By-Laws of the Registrant filed with the initial Registration Statement No.
2-89264 on February 6, 1984, and incorporated herein by reference.

(4) Form of certificate for shares of Common Stock, par value $.001 per share,
of the Registrant filed with Pre-Effective Amendment No. 1 to said
Registration Statement on May 8, 1984 and incorporated herein by reference.

(5) Form of Investment Management Contract between the Registrant and Reich &
Tang Asset Management L.P. filed herewith.

(6) Form of Distribution Agreement between the Registrant and Reich & Tang
Distributors L.P. filed herewith.

(7) Not applicable.

(8) Custody Agreement between the Registrant and Investors Fiduciary Trust
Company filed with Post-Effective Amendment No. 9 to said Registration
Statement on August 31, 1990 and incorporated herein by reference.

C-1
<PAGE>

(9) Transfer Agent Agreement between Registrant and American Transtech Inc.
filed with Post-Effective Amendment No. 9 to said Registration Statement on
August 31, 1990 and incorporated herein by reference.

(10) Opinion of Messrs. Battle Fowler LLP as to the legality of the Securities
being registered, including their consent to the filing thereof and to the
use of their name under the heading "Federal Income Taxes" in the
Prospectus and in the Statement of Additional Information, and under the
heading "Counsel and Auditors" in the Statement of Additional Information
filed with Pre-Effective Amendment No. 1 to said Registration Statement on
May 8, 1984 and incorporated herein by reference.

(11) Consent of Independent Certified Public Accountants filed herewith.

(12) Not applicable.

(13) Written assurance of Empire Group, Inc. that its purchase of shares of the
registrant was for investment purposes without any present intention of
redeeming or reselling filed with Pre-Effective Amendment No. 1 to said
Registration Statement on May 8, 1984 and incorporated herein by reference.

(14) Not applicable.

(15.1) Form of Distribution Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940 filed herewith.

(15.2) Form of Distribution Agreement between the Registrant and Reich & Tang
Distributors L.P. filed as exhibit 6 herein.

(15.3) Form of Shareholder Servicing Agreement between the Registrant and Reich
& Tang Distributors L.P. filed herewith.

(15.4) Form of Shareholder Servicing Agreements between the Manager and
Participating Organizations filed with Post-Effective Amendment No. 2 to
said Registration Statement on July 13, 1985 and incorporated herein by
reference.

(15.5) Amended Administrative Services Contract between the Registrant and Reich
& Tang Distributors L.P. filed with Post-Effective Amendment No.17 to said
Registration Statement No. 2-89264 on June 30, 1994 and incorporated herein
by reference.

(16) Power of Attorney of the Registrant, its Principal Officers and Directors
filed with Post-Effective Amendment No. 3 to said Registration Statement on
August 25, 1986 and incorporated herein by reference.

(17) Financial Data Schedule filed herewith for EDGAR purposes.

Item 25. Persons controlled by or Under Common Control with Registrant.
None.

Item 26. Number of Holders of Securities.

Number of Record Holders
Title of Class as of July 31, 1997
-------------- ---------------------
Common Stock
(par value $.001)
Class A 2610
Class B 5

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<PAGE>
Item 27. Indemnification.
Registrant incorporates herein by reference the response to Item 27 of
Post-Effective Amendment No. 2 to the Registration Statement filed with the
Commission on July 3, 1985.

Item 28. Business and Other Connections of Investment Adviser.

The description of Reich & Tang Asset Management L.P. ("RTAMLP") under the
caption "Management of the Fund" in the Prospectus and "Manager" and "Management
of the Fund" in the Statement of Additional Information constituting parts A and
B, respectively, of the Registration Statement are incorporated herein by
reference.

New England Investment Companies, L.P. ("NEICLP") is the limited partner
and owner of 99.5% interest in Reich & Tang Asset Management L.P. (the
"Manager"). Reich & Tang Asset Management, Inc. ( a wholly-owned subsidiary of
NEICLP) is the sole general partner and owner of the remaining .5% interest of
the Manager. New England Investment Companies, Inc. ("NEIC"), a Massachusetts
corporation, serves as sole general partner of NEICLP. Reich & Tang Asset
Management L.P. succeeded NEICLP as the Manager of the Fund.

On August 30, 1996, The New England Mutual Life Insurance Company ("The
New England") and Metropolitan Life Insurance Company ("MetLife") merged, with
MetLife being the continuing company. The Manager remains a wholly-owned
subsidiary of NEICLP, but Reich & Tang Asset Management, Inc., its sole general
partner, is now an indirect subsidiary of MetLife. Also, MetLife New England
Holdings, Inc., a wholly-owned subsidiary of MetLife, owns approximately 48.5%
of the outstanding limited partnership interest of NEICLP and may be deemed a
"controlling person" of the Manager. Reich & Tang, Inc. owns approximately 16%
of the outstanding partnership units of NEICLP.

Registrant's investment adviser, Reich & Tang Asset Management L.P. is a
registered investment adviser. Reich & Tang Asset Management L.P.'s investment
advisory clients include California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax
Free Income Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily
Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Short Term Income Fund, Inc., and Tax
Exempt Proceeds Fund, Inc., registered investment companies whose addresses are
600 Fifth Avenue, New York, New York 10020,which invest principally in money
market instruments; Delafield Fund, Inc. and Reich & Tang Equity Fund, Inc., are
registered investment companies whose address is 600 Fifth Avenue, New York, New
York 10020, which invests principally in equity securities. In addition, RTAMLP
is the sole general partner of Alpha Associates L.P., August Associates L.P.,
Reich & Tang Minutus L.P., Reich & Tang Minutus II, L.P., Reich & Tang Equity
Partnerships L.P. and Tucek Partners L.P., private investment partnerships
organized as limited partnerships.

Peter S. Voss, President, Chief Executive Officer and a Director of NEIC
since October 1992, Chairman of the Board of NEIC since December 1992, Group
Executive Vice President, Bank of America, responsible for the global asset
management private banking businesses, from April 1992 to October 1992,
Executive Vice President of Security Pacific Bank, and Chief Executive Officer
of Security Pacific Hoare Govett Companies a wholly-owned subsidiary of Security
Pacific Corporation, from April 1988 to April 1992, Director of The New England
since March 1993, Chairman of the Board of Directors of NEIC's subsidiaries
other than Loomis, Sayles & Company, L.P. ("Loomis") and Back Bay Advisors, L.P.
("Back Bay"), where he serves as a Director, and Chairman of the Board of
Trustees of all of the mutual funds in the TNE Fund Group and the Zenith Funds.
G. Neal Ryland, Executive Vice President, Treasurer and Chief Financial Officer
of NEIC since July 1993, Executive Vice President and Chief Financial Officer of
The Boston Company, a diversified financial services company, from March 1989
until July 1993, from September 1985 to December 1988, Mr. Ryland was employed
by Kenner Parker Toys, Inc. as Senior Vice President and Chief Financial
Officer. Edward N. Wadsworth, Executive Vice President, General Counsel, Clerk
and Secretary of NEIC since

C-3
<PAGE>
December 1989, Senior Vice President and Associate General Counsel of The New
England from 1984 until December 1992, and Secretary of Westpeak and Draycott
and the Treasurer of NEIC. Lorraine C. Hysler has been Secretary of RTAM since
July 1994, Assistant Secretary of NEIC since September 1993, Vice President of
the Mutual Funds Group of NEICLP from September 1993 until July 1994, and Vice
President of Reich & Tang Funds since July 1994. Ms. Hysler joined Reich & Tang,
Inc. in May 1977 and served as Secretary from April 1987 until September 1993.
Richard E. Smith, III has been a Director of RTAM since July 1994, President and
Chief Operating Officer of the Capital Management Group of NEICLP from May 1994
until July 1994, President and Chief Operating Officer of the Reich & Tang
Capital Management Group since July 1994, Executive Vice President and Director
of Rhode Island Hospital Trust from March 1993 to May 1994, President, Chief
Executive Officer and Director of USF&G Review Management Corp. from January
1988 until September 1992. Steven W. Duff has been a Director of RTAM since
October 1994, President and Chief Executive Officer of Reich & Tang Mutual Funds
since August 1994, Senior Vice President of NationsBank from June 1981 until
August 1994, Mr. Duff is President and a Director of California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free
Income Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc. and Short Term Income Fund, Inc.,
President and Chairman of Florida Daily Municipal Income Fund, Institutional
Daily Income Fund, Pennsylvania Daily Municipal Income Fund, President and Chief
Executive Officer of Tax Exempt Proceeds Fund, Inc., Executive Vice President of
Reich & Tang Equity Fund, Inc., and Vice President of Cortland Trust, Inc.
Bernadette N. Finn has been Vice President - Compliance of RTAM since July 1994,
Vice President of Mutual Funds Division of NEICLP from September 1993 until July
1994, Vice President of Reich & Tang Funds since July 1994. Ms. Finn joined
Reich & Tang, Inc. in September 1970 and served as Vice President from September
1982 until May 1987 and as Vice President and Assistant Secretary from May 1987
until September 1993. Ms. Finn is also Secretary of California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust,
Inc., Daily Tax Free Income Fund, Inc., Florida Daily Municipal Income Fund,
Michigan Daily Tax Free Income Funds, Inc., New Jersey Daily Municipal Income
Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income Fund and Tax
Exempt Proceeds Fund, Inc., a Vice President and Secretary of Delafield Fund,
Inc., Reich & Tang Equity Fund, Inc., and Short Term Income Fund, Inc. Richard
De Sanctis has been Treasurer of RTAM since July 1994, Assistant Treasurer of
NEIC since September 1993 and Treasurer of the Mutual Funds Group of NEICLP from
September 1993 until July 1994, Treasurer of the Reich & Tang Mutual Funds since
July 1994. Mr. De Sanctis joined Reich & Tang, Inc. in December 1990 and served
as Controller of Reich & Tang, Inc., from January 1991 to September 1993. Mr. De
Sanctis was 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 California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc.,
Tax Exempt Proceeds Fund, Inc. and Short Term Income Fund, Inc. and is Vice
President and Treasurer of Cortland Trust, Inc.

C-4
<PAGE>
Item 29. Principal Underwriters.

(a) Reich & Tang Distributors L.P. is also distributor for California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, Institutional Daily Income Fund, Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal
Income Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc. and
Tax Exempt Proceeds Fund, Inc.

(b) The following are the directors and officers of Reich & Tang Asset
Management, Inc., the general partner of Reich & Tang Distributors L.P. Reich &
Tang Distributors L.P. does not have any officers. The principal business
address of Messrs. Voss, Ryland, and Wadsworth is 399 Boylston Street, Boston,
Massachusetts 02116. For all other persons, the principal business address is
600 Fifth Avenue, New York, New York 10020.

Positions and Offices
With General Partner Positions and Offices
Name Of the Distributor With Registrant

Peter S. Voss President, CEO, and Director None
G. Neil Ryland Director None
Edward N. Wadsworth Clerk None
Richard E. Smith III Director None
Steven W. Duff Director President and Director
Bernadette N. Finn Vice President Vice President and Secretary
Lorraine C. Hysler Secretary None
Richard De Sanctis Vice President and Treasurer
Treasurer
Richard I. Weiner Vice President None
and Treasurer

Item 30. Location of Accounts and Records.

Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are maintained in the physical possession of Registrant at Reich &
Tang Asset Management L.P., 600 Fifth Avenue, New York, New York 10020, the
Registrant's Manager; Reich & Tang Services L.P., the Registrant's transfer
agent and dividend disbursing agent; and at Investors Fiduciary Trust Company,
127 West 10th Street, Kansas City, Missouri, 64105, the Registrant's custodian.

Item 31. Management Services.
Not applicable.

Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.

C-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has met all the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, and State of New York, on the 27th day of August, 1997

NEW YORK DAILY TAX FREE INCOME FUND, INC.

By: /s/Steven W. Duff
Steven W. Duff
President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities indicated and on August 27, 1997.

SIGNATURE TITLE
(1) Principal Executive Officer

/s/Steven W. Duff
Steven W. Duff President and Director

(2) Principal Financial and
Accounting Officer

/s/Richard De Sanctis
Richard De Sanctis Treasurer

(3) Majority of The Board of Directors

/s/Steven W. Duff
Steven W. Duff Director

Edward A. Kuczmarski (Director )
Caroline E. Newell (Director )
John P. Steines (Director )

By: /s/Bernadette N. Finn
* Bernadette N. Finn
Attorney-in-Fact

* An executed copy of the Power of Attorney is filed with Post Effective
Amendment No. 3 to the Registration Statement on August 25, 1986 and
incorporated herein by reference.

Exhibit 5
INVESTMENT MANAGEMENT CONTRACT

NEW YORK DAILY TAX FREE INCOME FUND, INC.
the "Fund"

New York, New York

______________, 1996

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

Gentlemen:

We herewith confirm our agreement with you as follows:

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

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

(b) Subject to the general control of our Board of Directors, you will make
decisions with respect to all purchases and sales of the portfolio securities.
To carry out such decisions, you are hereby authorized, as our agent and
attorney-in-fact for our account and at our risk and in our name, to place
orders for the investment and reinvestment of our assets. In all purchases,
sales and other transactions in our portfolio securities you are authorized to
exercise full discretion and act for us in the same manner and with the same
force and effect as the Fund itself might or could do with respect to such
purchases, sales or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of such purchases,
sales or other transactions.
<PAGE>
(c) You will report to our Board of Directors at each meeting thereof all
changes in our portfolio since your prior report, and will also keep us in touch
with important developments affecting our portfolio and, on your initiative,
will furnish us from time to time with such information as you may believe
appropriate for this purpose, whether concerning the individual entities whose
securities are included in our portfolio, the activities in which such entities
engage, Federal income tax policies applicable to our investments, or the
conditions prevailing in the money market or the economy generally. You will
also furnish us with such statistical and analytical information with respect to
our portfolio securities as you may believe appropriate or as we may reasonably
request. In making such purchases and sales of our portfolio securities, you
will comply with the policies set from time to time by our Board of Directors as
well as the limitations imposed by our Amended Articles of Incorporation and by
the provisions of the Internal Revenue Code and the 1940 Act relating to
regulated investment companies and the limitations contained in the Registration
Statement.

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

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

3. We agree, subject to the limitations described below, to be responsible
for, and hereby assume the obligation for payment of, all our expenses,
including: (a) brokerage and commission expenses, (b) Federal, state or local
taxes, including issue and transfer taxes incurred by or levied on us, (c)
commitment fees and certain insurance premiums, (d) interest charges on
borrowings, (e) charges and expenses of our custodian, (f) charges, expenses and
payments relating to the issuance, redemption, transfer and dividend disbursing
functions for us, (g) recurring and nonrecurring legal and accounting expenses,
including those of the bookkeeping agent, (h) telecommunications expenses, (i)
the costs of organizing and maintaining our

2
<PAGE>
existence as a corporation, (j) compensation, including directors' fees, of any
of our directors, officers or employees who are not your officers or officers of
your affiliates, and costs of other personnel providing clerical, accounting
supervision and other office services to us as we may request, (k) costs of
stockholders' services including, charges and expenses of persons providing
confirmations of transactions in our shares, periodic statements to
stockholders, and recordkeeping and stockholders' services, (l) costs of
stockholders' reports, proxy solicitations, and corporate meetings, (m) fees and
expenses of registering our shares under the appropriate Federal securities laws
and of qualifying such shares under applicable state securities laws, including
expenses attendant upon the initial registration and qualification of such
shares and attendant upon renewals of, or amendments to, those registrations and
qualifications, (n) expenses of preparing, printing and delivering our
prospectus to existing stockholders and of printing stockholder application
forms for stockholder accounts, (o) payment of the fees and expenses provided
for herein, under the Administrative Services Agreement and under the
Shareholder Servicing Agreement and Distribution Agreement and (p) any other
distribution or promotional expenses contemplated by an effective plan adopted
by us pursuant to Rule 12b-1 under the Act. Our obligation for the foregoing
expenses is limited by your agreement to be responsible, while this Agreement is
in effect, for any amount by which our annual operating expenses (excluding
taxes, brokerage, interest and extraordinary expenses) exceed the limits on
investment company expenses prescribed by any state in which our shares are
qualified for sale.

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

5. In consideration of the foregoing we will pay you a fee at the annual
rate of .30 of 1% of the Fund's average daily net assets. Your fee will be
accrued by us daily, and will be payable on the last day of each calendar month
for services performed hereunder during that month or on such other schedule as
you shall request of us in writing. You may use any portion of this fee for
distribution of our shares, or for making servicing payments to organizations
whose customers or clients are our shareholders. You may waive your right to any
fee to which you are entitled hereunder, provided such waiver is delivered to us
in writing. Any reimbursement of our expenses,

3
<PAGE>
to which we may become entitled pursuant to paragraph 3 hereof, will be paid to
us at the same time as we pay you.

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

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

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

4
<PAGE>

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

Very truly yours,

NEW YORK DAILY TAX FREE INCOME FUND, INC.

By:

ACCEPTED: _____________, 1996

REICH & TANG ASSET MANAGEMENT L.P.

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

By: ___________________________________

Exhibit 6

DISTRIBUTION AGREEMENT

NEW YORK DAILY TAX FREE INCOME FUND, INC.
the "Fund"

600 Fifth Avenue
New York, New York 10020

________________, 1996

Reich & Tang Distributors L.P.
600 Fifth Avenue
New York, New York 10020

Ladies and Gentlemen:

1. In consideration of the agreements on your part herein contained and of
the payment by us to you of a fee of $1 per year and on the terms and conditions
set forth herein, on behalf of our Fund, we have agreed that you shall be, for
the period of this agreement, a distributor, as our agent, for the unsold
portion of such number of shares of our common stock, $.001 par value per share,
as may be effectively registered from time to time under the Securities Act of
1933, as amended (the "1933 Act"). This agreement is being entered into pursuant
to the Distribution and Service Plan (the "Plan") adopted by us in accordance
with Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act").

2. We hereby agree that you will act as our agent, and hereby appoint you
our agent, to offer, and to solicit offers to subscribe to, the unsold balance
of shares of our common stock as shall then be effectively registered under the
Act. All subscriptions for shares of our common stock obtained by you shall be
directed to us for acceptance and shall not be binding on us until accepted by
us. You shall have no authority to make binding subscriptions on our behalf. We
reserve the right to sell shares of our common stock through other distributors
or directly to investors through subscriptions received by us at our principal
office in New York, New York. The right given to you under this agreement shall
not apply to shares of our common stock issued in connection with (a) the merger
or consolidation of any other investment company with us, (b) our acquisition by
purchase or otherwise of all or substantially all of the assets or stock of any
other investment company, or (c) the reinvestment in shares of our common stock
by our stockholders of dividends or other distributions or any other offering by
us of securities to our stockholders.
<PAGE>

3. You will use your best efforts to obtain subscriptions to shares of our
common stock upon the terms and conditions contained herein and in our
Prospectus, as in effect from time to time. You will send to us promptly all
subscriptions placed with you. We shall furnish you from time to time, for use
in connection with the offering of shares of our common stock, such other
information with respect to us and shares of our common stock as you may
reasonably request. We shall supply you with such copies of our Registration
Statement and Prospectus, as in effect from time to time, as you may request.
Except as we may authorize in writing, you are not authorized to give any
information or to make any representation that is not contained in the
Registration Statement or Prospectus, as then in effect. You may use employees,
agents and other persons, at your cost and expense, to assist you in carrying
out your obligations hereunder, but no such employee, agent or other person
shall be deemed to be our agent or have any rights under this agreement. You may
sell our shares to or through qualified brokers, dealers and financial
institutions under selling and servicing agreements provided that no dealer,
financial institution or other person shall be appointed or authorized to act as
our agent without our written consent. You will arrange for organizations whose
customers or clients are shareholders of our corporation ("Participating
Organizations") to enter into agreements with you for the performance of
shareholder servicing and related administrative functions not performed by you
or the Transfer Agent. Pursuant to our Shareholder Servicing Agreement with you,
you may make payments to Participating Organizations for performing shareholder
servicing and related administrative functions. Such payments will be made only
pursuant to written agreements approved in form and substance by our Board of
Directors to be entered into by you and the Participating Organizations. It is
recognized that we shall have no obligation or liability to you or any
Participating Organization for any such payments under the agreements with
Participating Organizations. Our obligation is solely to make payments to you
under the Shareholder Servicing Agreement and to the Manager under the
Investment Management Contract and the Administrative Services Contract. All
sales of our shares effected through you will be made in compliance with all
applicable federal securities laws and regulations and the Constitution, rules
and regulations of the National Association of Securities Dealers, Inc.
("NASD").

4. We reserve the right to suspend the offering of shares of our common
stock at any time, in the absolute discretion of our Board of Directors, and
upon notice of such suspension you shall cease to offer shares of our common
stock hereunder.

5. Both of us will cooperate with each other in taking such action as may
be necessary to qualify shares of our

2
<PAGE>
common stock for sale under the securities laws of such states as we may
designate, provided, that you shall not be required to register as a
broker-dealer or file a consent to service of process in any such state where
you are not now so registered. Pursuant to the Investment Management Contract in
effect between us and the Manager, we will pay all fees and expenses of
registering shares of our common stock under the Act and of qualification of
shares of our common stock, and to the extent necessary, our qualification under
applicable state securities laws. You will pay all expenses relating to your
broker-dealer qualification.

6. We represent to you that our Registration Statement and Prospectus have
been carefully prepared to date in conformity with the requirements of the 1933
Act and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "SEC") thereunder. We represent and warrant to you, as
of the date hereof, that our Registration Statement and Prospectus contain all
statements required to be stated therein in accordance with the 1933 Act and the
1940 Act and the SEC's rules and regulations thereunder; that all statements of
fact contained therein are or will be true and correct at the time indicated or
the effective date as the case may be; and that neither our Registration
Statement nor our Prospectus, when they shall become effective or be authorized
for use, will include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of shares of our common stock. We will
from time to time file such amendment or amendments to our Registration
Statement and Prospectus as, in the light of future development, shall, in the
opinion of our counsel, be necessary in order to have our Registration Statement
and Prospectus at all times contain all material facts required to be stated
therein or necessary to make any statements therein not misleading to a
purchaser of shares of our common stock. If we shall not file such amendment or
amendments within fifteen days after our receipt of a written request from you
to do so, you may, at your option, terminate this agreement immediately. We will
not file any amendment to our Registration Statement or Prospectus without
giving you reasonable notice thereof in advance; provided, however, that nothing
in this agreement shall in any way limit our right to file such amendments to
our Registration Statement or Prospectus, of whatever character, as we may deem
advisable, such right being in all respects absolute and unconditional. We
represent and warrant to you that any amendment to our Registration Statement or
Prospectus hereafter filed by us will be carefully prepared in conformity within
the requirements of the 1933 Act and the 1940 Act and the SEC's rules and
regulations thereunder and will, when it becomes effective, contain all
statements required to be stated therein in accordance with the 1933 Act and the
1940 Act and the SEC's rules and regulations thereunder; that all statements of
fact contained

3
<PAGE>
therein will, when the same shall become effective, be true and correct; and
that no such amendment, when it becomes effective, will include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading to a
purchaser of our shares.

7. We agree to indemnify, defend and hold you, and any person who controls
you within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which you or any such controlling person
may incur, under the 1933 Act or the 1940 Act, or under common law or otherwise,
arising out of or based upon any alleged untrue statement of a material fact
contained in our Registration Statement or Prospectus in effect from time to
time or arising out of or based upon any alleged omission to state a material
fact required to be stated in either of them or necessary to make the statements
in either of them not misleading; provided, however, that in no event shall
anything herein contained be so construed as to protect you against any
liability to us or our security holders to which you would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties under this agreement. Our agreement to indemnify you and
any such controlling person is expressly conditioned upon our being notified of
any action brought against you or any such controlling person, such notification
to be given by letter or by telegram addressed to us at our principal office in
New York, New York, and sent to us by the person against whom such action is
brought within ten days after the summons or other first legal process shall
have been served. The failure so to notify us of any such action shall not
relieve us from any liability which we may have to the person against whom such
action is brought other than on account of our indemnity agreement contained in
this paragraph 7. We will be entitled to assume the defense of any suit brought
to enforce any such claim, and to retain counsel of good standing chosen by us
and approved by you. In the event we do elect to assume the defense of any such
suit and retain counsel of good standing approved by you, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case we do not elect to assume the
defense of any such suit, or in case you, in good faith, do not approve of
counsel chosen by us, we will reimburse you or the controlling person or persons
named as defendant or defendants in such suit, for the fees and expenses of any
counsel retained by you or them. Our indemnification agreement contained in this
paragraph 7 and our representations and warranties in this agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of

4
<PAGE>
you or any controlling person and shall survive the sale of any shares of our
common stock made pursuant to subscriptions obtained by you. This agreement of
indemnity will inure exclusively to your benefit, to the benefit of your
successors and assigns, and to the benefit of any of your controlling persons
and their successors and assigns. We agree promptly to notify you of the
commencement of any litigation or proceeding against us in connection with the
issue and sale of any shares of our common stock.

8. You agree to indemnify, defend and hold us, our several officers and
directors, and any person who controls us within the meaning of Section 15 of
the 1933 Act, free and harmless from and against any and all claims, demands,
liabilities, and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which we, our officers or directors, or any such
controlling person may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement or Prospectus as in effect from time to time, or shall arise out of or
be based upon any alleged omission to state a material fact in connection with
such information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. Your agreement
to indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process shall
have been served. You shall have a right to control the defense of such action,
with counsel of your own choosing, satisfactory to us, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event you and we, our officers or directors or such controlling person shall
each have the right to participate in the defense or preparation of the defense
of any such action. The failure so to notify you of any such action shall not
relieve you from any liability which you may have to us, to our officers or
directors, or to such controlling person other than on account of your indemnity
agreement contained in this paragraph 8.

9. We agree to advise you immediately:
5
<PAGE>
a. of any request by the SEC for amendments to our Registration
Statement or Prospectus or for additional information,

b. of the issuance by the SEC of any stop order suspending the
effectiveness of our Registration Statement or Prospectus or the initiation
of any proceedings for that purpose,

c. of the happening of any material event which makes untrue any
statement made in our Registration Statement or Prospectus or which
requires the making of a change in either of them in order to make the
statements therein not misleading, and

d. of all action of the SEC with respect to any amendments to our
Registration Statement or Prospectus.

10. This agreement will become effective on the date hereof and will remain
in effect thereafter for successive twelve-month periods (computed from each
____________), provided that such continuation is specifically approved at least
annually by vote of our Board of Directors and of a majority of those of our
directors who are not interested persons (as defined in the 1940 Act) and have
no direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan, cast in person at a meeting called for the
purpose of voting on this agreement. This agreement may be terminated at any
time, without the payment of any penalty, (i) by vote of a majority of our
entire Board of Directors, and by a vote of a majority of our Directors who are
not interested persons (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan, or (ii) by vote of a majority of our outstanding voting
securities, as defined in the Act, on sixty days' written notice to you, or by
you on sixty days' written notice to us.

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

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

6
<PAGE>
other aspects of any other business, whether of a similar or dissimilar nature,
or to render services of any kind to another corporation, firm, individual or
association.

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

Very truly yours,

NEW YORK DAILY TAX FREE INCOME
FUND, INC.

Accepted: ___________________, 1996

REICH & TANG DISTRIBUTORS L.P.

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

By: ___________________________

EXHIBIT 11
McGLADREY & PULLEN LLP
Certified Public Accountants and Consultants

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use of our report dated May 23, 1997, on the
financial statements of New York Daily Tax Free Income Fund, Inc., referred to
therein in Post-Effective Amendment No. 22 to the Registration Statement on Form
N-1A, File No. 2-89264 as filed with the Securities and Exchange Commission.

We also consent to the reference to our Firm in the Prospectus under the
caption "Financial Highlights" and in the Statement of Additional Information
under the caption "Counsel and Auditors."

/s/McGLADREY & PULLEN, LLP
McGladrey & Pullen, LLP

New York, New York
August 21, 1997

Exhibit 15.1
NEW YORK DAILY TAX FREE INCOME FUND, INC.

Distribution and Service Plan Pursuant to Rule
12b-1 Under the Investment Company Act of 1940

This Distribution and Service Plan (the "Plan") is hereby
amended to reflect that Reich & Tang Asset Management, Inc. has succeeded as
sole general partner of Reich & Tang Distributors L.P. (the "Distributor") and
Reich & Tang Asset Management L.P. has succeeded as sole limited partner of the
Distributor. The Board of Directors of the Fund has approved unanimously this
amendment to the Plan and has authorized the Fund to re-execute the Distribution
Agreement and Shareholder Servicing Agreement with the Distributor to reflect
the foregoing. The Plan is hereby amended in its entirety as set forth herein
and as authorized under Section 9 of the previous Plan.
The Plan is adopted by New York Daily Tax Free Income Fund,
Inc. (the "Fund") in accordance with the provisions of Rule 12b-1 under the
Investment Company Act of 1940 (the "Act").

The Plan

1. The Fund and the Distributor, have entered into a Distribution
Agreement, in a form satisfactory to the Fund's Board of Directors, under which
the Distributor will act as distributor of the Fund's shares. Pursuant to the
Distribution Agreement, the Distributor, as agent of the Fund, will solicit
orders for the purchase of the Fund's shares, provided that any subscriptions
and orders for the purchase of the Fund's shares will not be binding on the Fund
until accepted by the Fund as principal.
<PAGE>

2. The Fund and the Distributor have entered into a Shareholder Servicing
Agreement in a form satisfactory to the Fund's Board of Directors, which
provides that the Distributor will be paid a service fee for providing or for
arranging for others to provide all personal shareholder servicing and related
maintenance of shareholder account functions not performed by us or our transfer
agent.

3. The Manager may make payments from time to time from its own resources,
which may include the management fees and administrative services fees received
by the Manager from the Fund and from other companies, and past profits for the
following purposes:

(i) to pay the costs of, and to compensate others, including
organizations whose customers or clients are Fund Shareholders
("Participating Organizations"), for performing personal shareholder
servicing and related maintenance of shareholder account functions on
behalf of the Fund;

(ii) to compensate Participating Organizations for providing
assistance in distributing the Fund's Shares; and

(iii) to pay the cost of the preparation and printing of brochures and
other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including salaries and/or
commissions of sales

<PAGE>
personnel of the Distributor and other persons, 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 service fee and past profits for the purpose enumerated in
(i) above. Further, the Distributor may determine the amount of such payments
made pursuant to the Plan, provided that such payments will not increase the
amount which the Fund is required to pay to (1) the Manager for any fiscal year
under the Investment Management Contract or the Administrative Services
Agreement in effect for that year or otherwise or (2) to the Distributor under
the Shareholder Servicing Agreement in effect for that year or otherwise. The
Investment Management Contract will also require the Manager to reimburse the
Fund for any amounts by which the Fund's annual operating expenses, including
distribution expenses, exceed in the aggregate in any fiscal year the limits
prescribed by any state in which the Fund's shares are qualified for sale.

4. The Fund will pay for (i) telecommunications expenses, including the
cost of dedicated lines and CRT terminals, incurred by the Distributor in
carrying out its obligations under the Shareholder Servicing Agreement 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.
<PAGE>

5. Payments by the Distributor or Manager to Participating Organizations as
set forth herein are subject to compliance by them with the terms of written
agreements in a form satisfactory to the Fund's Board of Directors to be entered
into between the Distributor and the Participating Organizations.

6. The Fund and the Distributor will prepare and furnish to the Fund's
Board of Directors, at least quarterly, written reports setting forth all
amounts expended for servicing and distribution purposes by the Fund, the
Distributor and the Manager, pursuant to the Plan and identifying the servicing
and distribution activities for which such expenditures were made.

7. The Plan became effective upon approval by (i) a majority of the
outstanding voting securities of the Fund (as defined in the Act), and (ii) a
majority of the Board of Directors of the Fund, including a majority of the
Directors who are not interested persons (as defined in the Act) of the Fund and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreement entered into in connection with the Plan, pursuant to a vote
cast in person at a meeting called for the purpose of voting on the approval of
the Plan.

8. The Plan will remain in effect until ______________ unless earlier
terminated in accordance with its terms, and thereafter may continue in effect
for successive annual periods if approved each year in the manner described in
clause (ii) of paragraph 7 hereof.

<PAGE>

9. The Plan may be amended at any time with the approval of the Board of
Directors of the Fund, provided that (i) any material amendments of the terms of
the Plan will be effective only upon approval as provided in clause (ii) of
paragraph 7 hereof, and (ii) any amendment which increases materially the amount
which may be spent by the Fund pursuant to the Plan will be effective only upon
the additional approval as provided in clause (i) of paragraph 7 hereof.

10. The Plan may be terminated without penalty at any time (i) by a vote of
the majority of the entire Board of Directors of the Fund and by a vote of a
majority of the Directors of the Fund who are not interested persons (as defined
in the Act) of the Fund and who have no direct or indirect financial interest in
the operation of the Plan or in any agreement related to the Plan, or (ii) by a
vote of a majority of the outstanding voting securities of the Fund (as defined
in the Act).

Exhibit 15.3

SHAREHOLDER SERVICING
AGREEMENT

NEW YORK DAILY TAX FREE INCOME FUND, INC.

(the "Fund")

600 Fifth Avenue
New York, New York 10020

, 1996

Reich & Tang Distributors L.P. ("Distributor")
600 Fifth Avenue
New York, New York 10020

Gentlemen:

We herewith confirm our agreement with you as follows:

1. We hereby employ you, pursuant to the Distribution and
Service Plan, as amended, adopted by us in accordance with Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended (the "Act"), to
provide the services listed below. You will perform, or arrange for others
including organizations whose customers or clients are shareholders of our
corporation (the "Participating Organizations") to perform, all personal
shareholder servicing and related maintenance of shareholder account functions
("Shareholder Services") not performed by us or our transfer agent.

2. You will be responsible for the payment of all expenses
incurred by you in rendering the foregoing services, except that we will pay for
(i) telecommunications expenses not to exceed in the aggregate .05% per annum of
the Fund's average daily net assets, including the cost of dedicated lines and
CRT terminals, incurred by the Distributor and Participating Organizations in
rendering such services under this Agreement, and (ii) preparing, printing and
delivering our prospectus to existing shareholders and preparing and printing
subscription application forms for shareholder accounts.

<PAGE>

3. You may make payments from time to time from your own
resources, including the fees payable hereunder and past profits to compensate
Participating Organizations for providing Shareholder Services. Payments to
Participating Organizations to compensate them for providing Shareholder
Services are subject to compliance by them with the terms of written agreements
satisfactory to our Board of Directors to be entered into between the
Distributor and the Participating Organizations. The Distributor will in its
sole discretion determine the amount of any payments made by the Distributor
pursuant to this Agreement, provided, however, that no such payment will
increase the amount which we are required to pay either to the Distributor under
this Agreement or to the Manager under the Investment Management Contract, the
Administrative Services Agreement, or otherwise.

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

5. In consideration of your performance, the Fund will pay you
a service fee, as defined by Article III, Section 26(b)(9) of the Rules of Fair
Practice, as amended, of the National Association of Securities Dealers, Inc. at
the annual rate of two-tenths of one percent (0.20%) of the Fund's average daily
net assets. Your fee will be accrued by us daily, and will be payable on the
last day of each calendar month for services performed hereunder during that
month or on such other schedule as you shall request of us in writing. You may
waive your right to any fee to which you are entitled hereunder, provided such
waiver is delivered to us in writing.

6. This Agreement will become effective on the date hereof and
thereafter for successive twelve-month periods (computed from each ___________),
provided that such continuation is specifically approved at least annually by
vote of our Board of Directors and of a majority of those of our directors who
are not interested persons (as defined in the Act) and have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to the Plan, cast in person at a meeting called for the purpose of
voting on this Agreement. With respect to each Portfolio, this Agreement may be
terminated at any time, without the payment of any penalty, (i) by vote of a
majority of our entire Board of Directors, and by a vote of a majority of our
Directors who are not interested persons (as defined in the Act) and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, or (ii) by vote of a majority of the outstanding
voting securities, as defined in the Act, on sixty days' written notice to you,
or by you on sixty days' written notice to us.
<PAGE>

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

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

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

Very truly yours,

NEW YORK DAILY TAX FREE INCOME
FUND, INC.

By:

ACCEPTED:

REICH & TANG DISTRIBUTORS L.P.

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

By:

<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000740372
<NAME> New York Daily Tax Free Income Fund, Inc.

<S> <C>
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 320757260
<INVESTMENTS-AT-VALUE> 320757260
<RECEIVABLES> 2424483
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1369328
<TOTAL-ASSETS> 324550071
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 798176
<TOTAL-LIABILITIES> 798176
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 323762132
<SHARES-COMMON-STOCK> 323763821
<SHARES-COMMON-PRIOR> 283370297
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9237)
<OVERDISTRIBUTION-GAINS> 0
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<INTEREST-INCOME> 10333834
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<NET-INVESTMENT-INCOME> 7969041
<REALIZED-GAINS-CURRENT> (8672)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7960369
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7969041
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 498369621
<NUMBER-OF-SHARES-REDEEMED> 465151602
<SHARES-REINVESTED> 7175505
<NET-CHANGE-IN-ASSETS> 40384852
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (565)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 865046
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2376898
<AVERAGE-NET-ASSETS> 288348530
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>