REICH & TANG EQUITY FUND INC, 485BPOS, 1995-04-27

REICH & TANG EQUITY FUND INC
485BPOS, 1995-04-27

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As filed with the Securities and Exchange Commission on April 27, 1995

Securities Act File No. 2-94184
Investment Company File No. 811-4148

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. 20 [X]

and/or

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

Amendment No. 16 [X]

REICH & TANG EQUITY FUND, INC.
(Exact Name of Registrant as Specified in Charter)

600 Fifth Avenue, New York, New York 10020
(Address of Principal Executive Office) (Zip Code)

Registrant's Telephone Number, including Area Code: (212) 830-5200

Bernadette N. Finn
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020

(Name and address of agent for service)

Copy to: Michael R. Rosella, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
(212) 856-6858

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

[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1,1995 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) 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 December 31, 1994 on or about
February 28, 1995.

<PAGE>

CROSS REFERENCE SHEET
(as required by Rule 404 (c))

Part A Location in Prospectus
Item No. (Caption)

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

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

3. Condensed Financial Information . . . . . . . .Selected Financial
Information

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

5. Management of the Fund. . . . . . . . . . . . . The Manager

5A. Management's Discussion
of Fund Performance . . . . . . . . . . . . . . The Manager

6. Capital Stock and Other Securities. . . . . . General Information;
Dividends, Distributions
and Taxes

7. Purchase of Securities Being Offered. . . . . . Purchase of Shares

8. Redemption or Repurchase. . . . . . . . . . . . Redemption of Shares

9. Pending Legal Proceedings . . . . . . . . . . . Not Applicable

<PAGE>

Part B Caption in Statement of
Item No. Additional Information

PART B

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

11. Table of Contents . . . . . . . . . . . . . Cover Page

12. General Information and Management;
History . . . . . . . . . . . . . . . . . . Investment Management Contract

13. Investment Objectives and Policies. . . . . Investment Policies; Investment
Restrictions

14. Management of the Fund. . . . . . . . Management; Investment
Management Contract

15. Control Persons and Principal Management; Description
Holders of Securities . . . . . . . . . . . of Common Stock

16. Investment Advisory and Other Services. . . Management; Investment
Management Contract

17. Brokerage Allocation. . . . . . . . . . . . Portfolio Transactions

18. Capital Stock and Other Securities. . . . . Net Asset Value

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

20. Tax Status. . . . . . . . . . . . . . . . . Not Applicable

21. Underwriters. . . . . . . . . . . . . . . . Distribution and Service Plan

22. Calculation of Performance Data . . . . . . Performance

23. Financial Statements. . . . . . . . . . . Independent Auditor's Report;
Financial Statements
<PAGE>

================================================================================
[LOGO GRAPHIC HERE] 600 FIFTH AVENUE
NEW YORK, NY 10020
(212) 830-5220

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

PROSPECTUS

May 1, 1995

Reich & Tang Equity Fund, Inc. (the "Fund") is a no-load, open-end diversified
management investment company. The Fund's investment objective is to seek growth
of capital and investments will be made based upon their potential for capital
growth. The Fund's investment philosophy is that of investment in equity
securities of companies which, based on fundamental research, the management of
the Fund believes to be undervalued. Current income will be secondary to the
objective of capital growth.

Reich & Tang Asset Management L.P. acts as 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 advisor. Reich & Tang Distributors
L.P. is a registered broker-dealer and member of the National Association of
Securities Dealers, Inc.

This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
dated May 1, 1995, containing additional and more detailed information about the
Fund (the "Statement of Additional Information"), has been filed with the
Securities and Exchange Commission and is hereby incorporated by reference into
this Prospectus. It is available without charge and can be obtained by writing
or calling the Fund at the address and telephone number set forth above.

Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the shares are not federally 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.

________________________________________________________________________________

<PAGE>

<TABLE>
<CAPTION>
TABLE OF FEES AND EXPENSES

Annual Fund Operating Expenses
(as a percentage of average net assets)

<S> <C> <C>
Management Fees 0.80%
Other Expenses 0.37%
Administration Fees 0.20%
Total Fund Operating Expenses 1.17%

<S> <C> <C> <C> <C>
Example 1 year 3 years 5 years 10 years

You would pay the following expenses on a $1,000 investment, assuming
5% annual return (cumulative through the end of each year): $12 $37 $64 $142

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 "The Manager" and
"Distribution and Service Plan" herein.

THE FIQURES REFLECTED IN THE EXAMPLE SHOULD NO BE CONSIDERED AS A REPRESENTATION
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN ABOVE.
</TABLE>

________________________________________________________________________________

<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION

The following selected financial information of Reich & Tang Equity Fund, Inc.
has been audited by McGladrey & Pullen LLP, Independent Certified Public
Accountants, whose report thereon appears in the Statement of Additional
Information.

January 4, 1985
(Inception) to
Year Ended December 31, December 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Per Share Operating Performance:
(for a share outstanding throughout the period)

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.61 $16.92 $15.64 $13.05 $14.24 $14.11 $13.11 $14.50 $13.44 $10.00
Income from investment operations:
Net investment income .24 0.21 0.23 0.36 0.35 0.43 0.44 0.34 0.35 0.31
Net realized and unrealized
gains (losses) on investments .05 2.12 2.31 2.63 ( 1.18) 2.08 2.53 0.45 1.62 3.43
Total from investment operations .29 2.33 2.54 2.99 ( 0.83) 2.51 2.97 0.79 1.97 3.74
Less distributions:
Dividends from net investment income ( .24) ( 0.21) ( 0.23) ( 0.37) ( 0.36) ( 0.45) ( 0.44) ( 0.40) ( 0.28)
( 0.30)
Dividends from net realized
gains on investments ( 2.27) ( 1.43) ( 1.03) ( 0.03) --- ( 1.93) ( 1.53) ( 1.78) ( 0.63) ---
Total distributions ( 2.51) ( 1.64) ( 1.26) ( 0.04) ( 0.36) ( 2.38) ( 1.97) ( 2.18) ( 0.91) ( 0.30)
Net asset value, end of period $15.39 $17.61 $16.92 $15.64 $13.05 $14.24 $14.11 $13.11 $14.50 $13.44
Total Return 1.70% 13.8% 16.3% 23.1% ( 5.8%) 17.9% 22.8% 5.1% 14.7% 37.7%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted $90,639 $105,181 $92,702 $83,151 $97,085 $111,992 $102,391 $101,650 $110,516 $54,180
Ratios to average net assets:
Expenses 1.17% 1.15% 1.15% 1.14% 1.12% 1.10% 1.11% 1.11% 1.21% 0.99%*+
Net investment income 1.35% 1.15% 1.35% 2.33% 2.56% 2.68% 2.87% 2.07% 2.51% 3.70%*+
Portfolio turnover rate 25.80% 26.69% 27.37% 43.41% 27.48% 47.90% 27.04% 42.53% 34.57% 20.18%*+
<FN>
* Annualized
+ Net of Management fee waived equivalent to $0.03 per share and .40% of average
net assets.
</FN>

</TABLE>

2
<PAGE>

INVESTMENT OBJECTIVES,
POLICIES AND RISKS

The investment objective of the Fund is to seek growth of capital and
investments will be made based upon their potential for capital appreciation.
Therefore, current income will be secondary to the objective of capital growth.
The Fund's investment objective of capital growth is fundamental and may not be
changed without stockholder approval.

There obviously can be no assurance that the Fund's investment objective will be
achieved. The nature of the Fund's investment objective and policies may involve
a somewhat greater degree of short-term risk than would be present under other
investment approaches.

The Fund will under normal circumstances have substantially all of its assets
(i.e., more than 65%) invested in a diversified portfolio of equity securities
(common stocks or securities convertible into common stocks or rights or
warrants to subscribe for or purchase common stocks). The Fund at times may also
invest not more than 35% of its total assets in debt securities and preferred
stocks offering a significant opportunity for price appreciation. When the
Manager determines that adverse conditions warrant, the Fund may take a
defensive position and invest temporarily without limit in investment grade debt
securities or preferred stocks or in money market instruments. Low investment
grade debt securities may have speculative characteristics and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with other
debt security. The Fund will not necessarily dispose of a security that falls
below investment grade based upon the Manager's determination as to whether
retention of such a security is consistent with the Fund's investment
objectives. Money market instruments for this purpose include obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities
(including such obligations subject to repurchase agreements), commercial paper
rated in the highest grade by any nationally recognized rating agency and
certificates of deposit and bankers' acceptances issued by domestic banks having
total assets in excess of one billion dollars. A repurchase agreement is an
instrument under which an investor (e.g., the Fund) purchases a U.S. government
security from a vendor, with an agreement by the vendor to repurchase the
security at the same price, plus interest at a specified rate. Repurchase
agreements may be entered into with member banks of the Federal Reserve System
or "primary dealers" (as designated by the Federal Reserve Bank of New York) in
U.S. government securities. Repurchase agreements usually have a short duration,
often less than one week. In the event that a vendor defaulted on its repurchase
obligation, the Fund might suffer a loss to the extent that the proceeds from
the sale of the collateral were less than the repurchase price. If the vendor
becomes bankrupt, the Fund might be delayed, or may incur costs or possible
losses of principal and income, in selling the collateral.

The Fund will invest in both listed and unlisted securities and in foreign as
well as domestic securities. While the Fund has no present intention of
investing any significant portion of its assets in foreign securities, it
reserves the right to invest in foreign securities if purchase thereof at the
time of purchase would not cause more than 15% of the value of the Fund's total
assets to be invested in foreign securities. Investments in foreign securities
involve certain risk considerations which are not typically associated with
investments in domestic securities. These considerations include changes in
exchange rates and exchange control regulation, political and social
instability, expropriation, less liquid markets and less available information
than are generally the case in the United States, less government supervision of
exchanges and brokers and issuers, lack of uniform accounting and auditing
standards and greater price volatility. See

3
<PAGE>

Statement of Additional Information, "Investment Policies."

The Fund may invest in warrants which entitle the holder to buy equity
securities at a specific price for a specific period of time. The Fund will not,
however, purchase any warrant if, as a result of such purchase, 5% or more of
the Fund's total assets would be invested in warrants. Included within that
amount, but not to exceed 2% of the value of the Fund's total assets, may be
warrants which are not listed on the New York Stock or American Stock Exchange.
Warrants acquired by the Fund in units or attached to securities may be deemed
to be without value. The Fund will not invest more than 5% of its total assets
in securities of issuers which together with their predecessors have a record of
less than three years continuous operations.

The Fund may invest in restricted securities and in other assets having no ready
market if such purchases at the time thereof would not cause more than 10% of
the value of the Fund's net assets to be invested in all such restricted or not
readily marketable assets. Restricted securities may be sold only in privately
negotiated transactions, in a public offering with respect to which a
registration statement is in effect under the Securities Act of 1933 or pursuant
to Rule 144 promulgated under such Act. Where registration is required, the Fund
may be obligated to pay all or part of the registration expense, and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If during such a period adverse market conditions were
to develop, the Fund might obtain a less favorable price than prevailed when it
decided to sell. Restricted securities will be valued in such manner as the
Board of Directors of the Fund in good faith deems appropriate to reflect their
fair market value.

Within this basic framework, the policy of the Fund will emphasize flexibility
in arranging its portfolio to seek the desired results. The Fund's investment
philosophy is that of investment in equity securities of companies which, based
on fundamental research, the management of the Fund believes to be undervalued.

Critical factors which will be considered in the selection of securities will
include the values of individual securities relative to other investment
alternatives, trends in the determinants of corporate profits, corporate cash
flow, balance sheet changes, management capability and practices, and the
economic and political outlook. Generally speaking, disposal of a security will
be based upon factors such as (i) increases in the price level of the security
or of securities generally which the Fund believes reflect earnings growth too
far in advance, (ii) changes in the relative opportunities offered by various
securities and (iii) actual or potential deterioration of the issuer's earning
power which the Fund believes may adversely affect the price of its securities.
Turnover will be influenced by sound investment practices, the Fund's investment
objective, and the need of funds for the redemption of the Fund's shares.

The Fund will not seek to realize profits by anticipating short-term market
movements and intends to purchase securities for long-term capital appreciation
under ordinary circumstances. While the rate of portfolio turnover will not be a
limiting factor when the investment advisor deems changes appropriate, it is
anticipated that given the Fund's investment objectives, its annual portfolio
turnover should not generally exceed 75%. (A portfolio turnover rate of 75%
would occur, for example, if three-fourths of the stocks in the Fund's portfolio
were replaced in a period of one year.)

The Fund's investment policies (unlike its investment objective) are not
fundamental and may be changed by the Fund's Board of Directors without
stockholder approval.

4
<PAGE>

INVESTMENT RESTRICTIONS

The Fund has adopted certain investment restrictions which may not be changed
without the approval of the Fund's stockholders. Briefly, these restrictions
provide that the Fund may not:

1. Purchase the securities of any one issuer, other than the U.S. government
or any of its agencies or instrumentalities, if immediately after such
purchase more than 5% of the value of its total assets would be invested in
such issuer or the Fund would own more than 10% of the outstanding voting
securities of such issuer, except that up to 25% of the value of the Fund's
total assets may be invested without regard to such 5% and 10% limitations;

2. Invest more than 25% of the value of its total assets in any particular
industry;

3. Purchase securities on margin, but it may obtain such short-term credits
from banks as may be necessary for the clearance of purchases and sales of
securities;

4. Make loans of its assets to any person, except for the purchase of debt
securities as discussed under "Investment Objective, Policies and Risks"
herein;

5. Borrow money except for (i) the short-term credits from banks referred to
in paragraph 3 above and (ii) borrowings from banks for temporary or
emergency purposes, including the meeting of redemption requests which
might require the untimely disposition of securities. Borrowing in the
aggregate may not exceed 15%, and borrowing for purposes other than meeting
redemptions may not exceed 5%, of the value of the Fund's total assets
(including the amount borrowed) less liabilities (not including the amount
borrowed) at the time the borrowing is made. Outstanding borrowings in
excess of 5% of the value of the Fund's total assets will be repaid before
any subsequent investments are made;

6. Mortgage, pledge or hypothecate any of its assets, except as may be
necessary in connection with permissible borrowings mentioned in paragraph
5 above;

7. Purchase the securities of any other investment company, except by purchase
in the open market where to the best information of the Fund no commission
or profit to a sponsor or dealer (other than the customary broker's
commission) results from such purchase, or except when such purchase is
part of a merger, consolidation or acquisition of assets; and

8. Act as an underwriter of securities of other issuers, except that the Fund
may acquire restricted or not readily marketable securities under
circumstances where, if such securities were sold, the Fund might be deemed
to be an underwriter for purposes of the Securities Act of 1933. The Fund
will not, however, invest more than 10% of the value of its net assets in
restricted securities and not readily marketable securities.

If a percentage restriction is adhered to at the time an investment is made, a
later change in percentage resulting from changes in the value of the Fund's
portfolio securities will not be considered a violation of the Fund's policies
or restrictions.

THE MANAGER

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

5
<PAGE>

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 office at 600
Fifth Avenue, New York, New York 10020. The Manager was at March 31, 1995
investment manager, advisor or supervisor with respect to assets aggregating in
excess of $7.1 billion. The Manager acts as manager or administrator of eighteen
other registered investment companies and also advises pension trusts,
profit-sharing trusts and endowments.

Effective October 1, 1994, the Board of Directors of the Fund approved the
re-execution of the Investment Management Contract and Administrative Services
Contract with the Manager. The Manager's predecessor, New England Investment
Companies, L.P. ("NEICLP") is the limited partner and owner of a 99.5% interest
in the newly created limited partnership, Reich & Tang Asset Management L.P.,
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. The re-execution of the Investment Management Contract did not
result in "assignment" of the Investment Management Contract with NEICLP under
the 1940 Act, since there was no change in actual control or management of the
Manager caused by the re-execution.

In addition, NEIC is a wholly-owned subsidiary of The New England which may be
deemed a "controlling person" of the Manager. NEIC is a holding company offering
a broad array of investment styles across a wide range of asset categories
through eight investment advisory/management affiliates and three distribution
subsidiaries. These include Loomis, Sayles & Company, L.P., Copley Real Estate
Advisors, Inc., Back Bay Advisors, L.P., Marlborough Capital Advisors, L.P.,
Westpeak Investment Advisors, L.P., Draycott Partners, Ltd., TNE Investment
Services, L.P., New England Investment Associates, Inc., and an affiliate,
Capital Growth Management Limited Partnership. These affiliates in the aggregate
are investment advisors or managers to 57 other registered investment companies

The re-executed Investment Management Contract and Administrative Services
Contract contain the same terms and conditions governing the Manager's
investment management responsibilities as the Fund's previous Investment
Management Contract and Administrative Services Contract except for (i) the
dates of execution and (ii) the identity of the Manager.

Robert F. Hoerle and Steven M. Wilson are primarily responsible for the
day-to-day investment management of the Fund. Mr. Hoerle is Chairman, President
and a Director of the Fund and is a Managing Director of the Capital Management
Division of the Manager, with which he has been associated since September 1993.
From July 1989 to September 1993, Mr. Hoerle was Chairman of the Board, a
Director and an officer of Reich & Tang, Inc. with which he was associated with
from February 1971 to September 1993. Mr. Wilson is a Senior Vice President of
the Fund and is a Senior Vice President of the Reich & Tang Capital Management
Division of the Manager, with which

6
<PAGE>

he has been associated since September 1993. From August 1990 to September 1993,
Mr. Wilson was a Senior Vice President of Reich & Tang, Inc. with which he was
associated with from July 1986 to September 1993. The Fund's annual report, as
supplemented, contains information regarding the Fund's performance and will be
provided, without charge, upon request.

Pursuant to the Investment Management Contract, the Manager is responsible for
the investment management of the Fund's assets, including the responsibility for
making investment decisions and placing orders for the purchase and sale of the
Fund's investments with the issuers or with brokers or dealers selected by it in
its discretion. Subject to the Fund's policy of seeking the most favorable
commission and the best price on each transaction, the Manager may effect
transactions in the Fund's portfolio securities through Reich & Tang
Distributors L.P. (the "Distributor"). In addition, consistent with the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., and
subject to seeking best execution, the Manager may consider sales of shares of
the Fund as a factor in the selection of brokers to execute portfolio
transactions for the Fund. The Manager also furnishes to the Board of Directors
periodic reports on the composition of the Fund's portfolio securities.

The Manager may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with the Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price. It is the policy
of the Manager to allocate advisory recommendations and the placing of orders in
a manner which is deemed equitable by the Manager to the accounts involved,
including the Fund. When two or more of the clients of the Manager, including
the Fund, are purchasing the same security in a given day from the same
broker-dealer, such transactions may be averaged as to price.

For its services under the Investment Management Contract, the Manager receives
from the Fund a fee, payable monthly, at the annual rate of .80% of the Fund's
average daily net assets (the "Management Fee"). The rate of the advisory fee to
be paid by the Fund is higher than the rate paid by most similar registered
investment companies. In addition to management services with respect to the
purchase and sale of securities, the fee includes compensation for overall
management of the Fund. Pursuant to a distribution and service plan, the Manager
may use the management fee for distribution purposes including defraying the
costs of performing stockholder servicing functions on behalf of the Fund,
compensating others, including banks, broker-dealers and other organizations
whose customers or clients are Fund stockholders for providing assistance in
distributing the Fund's shares and defraying the costs of other promotional
activities. (See "Distribution and Service Plan" herein.)

The Manager's responsibilities and fees under the re-executed Investment
Management Contract and Administrative Services Contract are, in the aggregate,
identical to the responsibilities and fees under the previous Investment
Management Contract. For its services under the Administrative Services
Contract, the Manager receives a fee equal to .20% 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.)

Pursuant to the Administrative Services Contract for the Fund, the Manager
performs clerical, accounting supervision and related office service functions
for the Fund and provides the Fund the personnel to (i) supervise the
performance of bookkeeping and related services by Investors

7
<PAGE>

Fiduciary Trust Company, the Fund's bookkeeping agent, (ii) prepare reports to
and filings with regulatory authorities and (iii) perform such other
non-advisory services as the Fund may from time to time request of the Manager.
The personnel rendering those services, who may act as officers of the Fund, 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 amounts of such reimbursements must be agreed upon between the
Fund and the Manager. The Manager, at its discretion, may voluntarily waive all
or a portion of the administrative services fee.

For the year ended December 31, 1994, the Manager for its services under the
Investment Management Contract received an amount equal to 1.0% of the Fund's
average daily net assets. For the year ended December 31, 1994, the total
expenses for the Fund, including the management fee, were 1.17% of the Fund's
average daily net assets.

DISTRIBUTION AND SERVICE PLAN

Rule 12b-1 (the "Rule") under the Investment Company Act of 1940 (the "Act")
regulates the circumstances under which an investment company may, directly or
indirectly, bear the expenses of distributing its shares. The Rule defines
distribution expenses to include the cost of "any activity which is primarily
intended to result in the sale of [fund] shares." The Rule provides, among other
things, that an investment company may bear distribution expenses only pursuant
to a plan adopted in accordance with the Rule. Because certain proposed
expenditures, described below, by the Fund, the Manager and the Distributor may
be deemed to involve payment of distribution expenses by the Fund, the Fund's
Board of Directors has adopted a distribution and service plan (the "Plan") and,
pursuant to the Plan, the Fund and the Distributor have entered into a
Distribution Agreement and the Fund and the Manager have entered into the
Investment Management Contract.

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

Under the Distribution Agreement, the Distributor serves as distributor of the
Fund's shares and, for the nominal consideration of $1 per year and as agent for
the Fund, will solicit orders for the purchase of the Fund's shares, provided
that any orders will not be binding on the Fund until accepted by the Fund as
principal.

The Investment Management Contract includes provisions allowing the Manager to
defray the cost of, or compensate other persons, including banks, broker-dealers
and other organizations whose customers or clients are Fund stockholders
("Intermediaries"), for performing stockholder, administrative and accounting
services to the Fund. Under the Investment Management Contract, the Manager may
also compensate the foregoing persons and organizations for providing assistance
in distributing the Fund's shares. The Investment Management Contract further
contemplates that the Manager may compensate sales personnel and pay for the
preparation and printing of brochures and other promotional materials, mailings
to prospective stockholders, advertising and other activities in connection with
the distribution of the Fund's shares. The Manager is not subject to any
percentage limitation with respect to the amounts it may expend for the
activities described in this paragraph.

The Glass-Steagall Act and other applicable laws and regulations prohibit banks
and other depository institutions from engaging in the business of underwriting,

8
<PAGE>

selling or distributing most types of securities. However, in the opinion of the
Manager based on the advice of counsel, these laws and regulations do not
prohibit such depository institutions from providing other services for
investment companies such as the stockholder servicing and related
administrative functions referred to above. The Fund's Board of Directors will
consider appropriate modifications to the Fund's operations, including
discontinuance of any payments then being made under the Plan to banks and other
depository institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to provide the
above-mentioned services. It is not anticipated that the discontinuance of
payments to such an institution would result in loss to stockholders or change
in the Fund's net asset value. In addition, state securities laws on this issue
may differ from the interpretations of Federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law.

Under the Plan, the Manager may make payments in connection with the
distribution of the Fund's shares from the Management Fee received from the
Fund, from the Manager's revenues (which may include management or advisory fees
received from other investment companies) and past profits. The Manager, in its
sole discretion, will determine the amount of its payments made pursuant to the
Plan, but no such payment will increase the amount which the Fund is required to
pay to the Manager for any fiscal year under the Investment Management Contract.

Under the Plan, the Fund may pay the costs of preparing and printing the Fund's
prospectus, statement of additional information and subscription order form and
of delivering them to existing and prospective stockholders of the Fund. The
payments made by the Fund for the expenses referred to in this paragraph will
not exceed in any year .05% of the Fund's average daily net assets for the year.

For the year ended December 31, 1994, the Fund incurred no expenses pursuant to
the Plan. During such year, the Manager spent pursuant to the Plan an amount
equal to 0.001% of the average daily net assets of the Fund for the year.

PURCHASE OF SHARES

Shares of the Fund are offered at the next determined net asset value without
any sales charge by the Distributor as an investment vehicle for individuals,
institutions, fiduciaries and retirement plans. Prospectuses, sales material and
applications can be obtained from the Distributor.

The minimum for an initial investment is $5,000, except that the minimum initial
investment for an Individual Retirement Account is $250. There is no minimum for
subsequent investments. All purchase payments will be invested in full and
fractional shares. The Fund or the Distributor is authorized to reject any
purchase order.

For each stockholder of record, the Fund's transfer agent, Fundtech Services
L.P., an affiliate of the Manager and Distributor ("Transfer Agent"), as the
stockholder's agent, establishes an open account to which all shares purchased
are credited, together with any dividends and capital gain distributions which
are paid in additional shares. (See "Dividends, Distributions and Taxes"
herein.) Although most stockholders elect not to receive stock certificates,
certificates for full shares can be obtained on specific written request to the
Transfer Agent. No certificates are issued for fractional shares.

If an investor purchases or redeems shares of the Fund through an investment
dealer, bank or other institution, that institution may impose charges for its
services; these charges would reduce the investor's yield or return. An investor
may purchase or redeem shares of the Fund directly

9
<PAGE>

from the Fund's Distributor or its Transfer Agent without any such charges.

New Stockholders

Mail

To purchase shares of the Fund send a check made payable to "Reich & Tang Equity
Fund, Inc." and a completed subscription order form to the Fund at the following
address:

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

Checks are accepted subject to collection at full face value in United States
currency.

Bank Wire

To purchase shares of the Fund using the wire system for transmittal of money
among banks, an investor should first telephone the Fund at 212-830-5220 (within
New York State) or at 800-221-3079 (outside New York State) to obtain a new
account number. The investor should then instruct a member commercial bank to
wire funds to:

Investors Fiduciary Trust Company
ABA #101003621
DDA #890752-953-8
For Reich & Tang Equity Fund, Inc.
Account of (Investor's Name)
Fund Account #0239
SS#/Tax ID#

Then promptly complete and mail the subscription order form. There may be a
charge by your bank for transmitting the money by bank wire. The Fund does not
charge investors in the Fund for the receipt of wire transfers. If you are
planning to wire funds, it is suggested that you instruct your bank early in the
day so the wire transfer can be accomplished the same day. Payment in the form
of a "bank wire" received prior to 4 p.m., 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 "Reich & Tang Equity Fund, Inc." along with a
completed subscription order form to:

Reich & Tang Mutual Funds

600 Fifth Avenue - 9th Floor
New York, New York 10020

Present Stockholders

Subsequent purchases can be made by personal delivery or bank wire, as indicated
above, or by mailing a check to the Fund at:

Reich & Tang Equity Fund, Inc.
Mutual Funds Group
P.O. Box 16815
Newark, New Jersey 07101-6815

The stockholder's account number should be clearly indicated.

REDEMPTION OF SHARES

Stockholders may make a redemption in any amount by sending a written request to
the Fund, accompanied by any certificate that may have been issued to the
stockholder, addressed to:

Reich & Tang Mutual Funds

600 Fifth Avenue - 8th Floor
New York, New York 10020

Upon receipt by the Fund of a redemption request in proper form, shares of the
Fund will be redeemed at their next determined net asset value. (See "Net The
request must specify the name of the Fund, the dollar amount or number of shares
to be redeemed, and the account number. The request must be signed in exactly
the same way the account is registered (if there is more than one owner of the
shares, all must sign) and, if any, certificates are included in the request,
presentation of such certificates properly endorsed. In all cases, all the
signatures on a redemption request and/or certificates must be guaranteed by an
eligible guarantor institution which includes a domestic bank, a domestic
savings and loan institution, a

10
<PAGE>

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 (guarantees by notaries public are not acceptable).
Further documentation, such as copies of corporate resolutions and instruments
of authority, may be requested from corporations, administrators, executors,
personal representatives, trustees or custodians to evidence the authority of
the person or entity making the redemption request.

Checks for redemption proceeds normally will be mailed within seven days, but
will not be mailed until all checks (including a certified or cashier's check)
in payment for the purchase of the shares to be redeemed have been cleared,
currently considered by the Fund to occur up to 15 days after investment. Unless
other instructions are given in proper form, a check for the proceeds of a
redemption will be sent to the stockholder's address of record and generally
will be mailed within seven days after receipt of the request.

The Fund may suspend the right of redemption and postpone the date of payment
for more than seven days during any period when (i) trading on the New York
Stock Exchange is restricted or the Exchange is closed, other than customary
weekend and holiday closings, (ii) the Securities and Exchange Commission has by
order permitted such suspension or (iii) an emergency, as defined by rules of
the Securities and Exchange Commission, exists making disposal of portfolio
investments or determination of the value of the net assets of the Fund not
reasonably practicable.

The proceeds of a redemption may be more or less than the amount invested and,
therefore, a redemption may result in a gain or loss for Federal income tax
purposes.

To be in a position to eliminate excessive expenses, the Fund reserves the right
to redeem upon not less than 30 days' notice all shares of the Fund in an
account (other than an IRA) which has a value below $500 not due to market
movement or the Fund may impose a monthly service charge of $10 on such
accounts. However, a stockholder will be allowed to make additional investments
prior to the date fixed for redemption to avoid liquidation of the account.

Systematic Withdrawal Plan

Any stockholder who owns shares of the Fund with an aggregate value of $10,000
or more may establish a Systematic Withdrawal Plan under which he offers to sell
to the Fund at net asset value the number of full and fractional shares which
will produce the monthly or quarterly payments specified (minimum $50.00 per
payment). Depending on the amounts withdrawn, systematic withdrawals may deplete
the investor's principal. Investors contemplating participation in this plan
should consult their tax advisors.

Stockholders wishing to utilize this plan may do so by completing an application
which may be obtained by writing or calling the Fund. No additional charge to
the stockholder is made for this service.

Telephone Redemption Privilege

The Fund accepts telephone requests for redemption from stockholders who elect
this option. Telephone requests for redemption may not exceed the sum of $25,000
per request per day. The proceeds of a telephone redemption will be sent to the
stockholder at his address or to his bank account as set forth in the
subscription order form or in a subsequent signature guaranteed written
authorization. The Fund may accept telephone redemption instructions from any
person with respect to accounts of stockholders who elect this service, and thus
stockholders risk possible loss of dividends 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 stockholders electing such option

11
<PAGE>

provide a form of personal identification. The failure by the Fund to employ
such procedures may cause the Fund to be liable for the losses incurred by
investors due to telephone redemptions based upon unauthorized or fraudulent
instructions.

RETIREMENT PLANS

The Fund has available a form of individual retirement account ("IRA") for
investment in the Fund's shares. Individuals earning compensation, including
earnings from self-employment, generally may make IRA contributions of up to
$2,000 annually. However, the deductibility of an individual's IRA contribution
may be reduced or eliminated if the individual or, in the case of a married
individual, either the individual or the individual's spouse, is an active
participant in an employer-sponsored retirement plan. Thus, in the case of an
active participant, the deduction will not be available for an individual with
adjusted gross income above $35,000, a married couple filing a joint return with
adjusted gross income above $50,000 and a married individual filing separately
with adjusted gross income above $10,000. In addition, an individual with a
non-working spouse may establish a separate IRA for the spouse and annually
contribute a total of up to $2,250 to the two IRAs, provided that no more than
$2,000 may be contributed to the IRA of either spouse. The minimum investment
required to open an IRA is $250.

Withdrawals from an IRA, other than that portion, if any, of the withdrawal
considered to be a return of the investor's non-deductible IRA contribution, are
taxed as ordinary income when received. Such withdrawals may be made without
penalty after the participant reaches age 59 1/2, and must commence shortly
after age 70 1/2. Withdrawals before age 59 1/2 or the failure to commence
withdrawals on a timely basis after age 70 may involve the payment of certain
penalties.

Fund shares may also be a suitable investment for assets of other types of
qualified pension or profit-sharing plans, including cash or deferred or salary
reduction "401(k) plans" which give participants the right to defer portions of
their compensation for investment on a tax-deferred basis until distributions
are made from the plans.

Persons desiring information concerning investments by IRAs and other retirement
plans should write or telephone the Fund.

EXCHANGE PRIVILEGE

Stockholders of the Fund are entitled to exchange some or all of their shares in
the Fund for shares of certain other investment companies which retain New
England Investment Companies, L.P. as investment advisor or manager and which
participate in the exchange privilege program with the 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.,
New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Government
Securities Trust and Short Term Income Fund, Inc. In the future, the exchange
privilege program may be extended to other investment companies which retain New
England Investment Companies, L.P. as investment advisor or manager. An exchange
of shares in the Fund pursuant to the exchange privilege is, in effect, a
redemption of Fund shares (at net asset value) followed by the purchase of
shares of the investment company into which the exchange is made (at net asset
value) and may result in a stockholder realizing a taxable gain or loss for
Federal income tax purposes.

There is no charge for the exchange privilege or limitation as to frequency of
exchanges. The minimum amount for an exchange is $1,000, except that
stockholders who are establishing a new

12
<PAGE>

account with an investment company through the exchange privilege must insure
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. The exchange privilege is available to stockholders resident in any state
in which shares of the investment company being acquired may legally be sold.
Before making an exchange, the investor should review the current prospectus of
the investment company into which the exchange is being made. Prospectuses may
be obtained by contacting the Distributor at the address or telephone number
listed on the cover of this Instructions for exchange may be made in writing to
the Transfer Agent at the appropriate address listed herein or, for stockholders
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
at any time.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each dividend and capital gains distribution, if any, declared by the Fund on
its outstanding shares will, at the election of each stockholder, be paid in
cash or in additional shares of common stock of the Fund having an aggregate net
asset value as of the payment date of such dividend or distribution equal to the
cash amount of such dividend or distribution. Election to receive dividends and
distributions in cash or shares is made at the time shares are subscribed for
and may be changed by notifying the Fund in writing at any time prior to the
record date for a particular dividend or distribution. If the stockholder makes
no election the Fund will make the distribution in shares. There is no sales or
other charge in connection with the reinvestment of dividends and capital gains
distributions.

While it is the intention of the Fund to distribute to its stockholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by the Fund of income and capital gains
from investments. Dividends will normally be paid quarterly. Capital gains
distributions, if any, will be made at least annually and usually at the end of
the Fund's fiscal year. There is no fixed dividend rate, and there can be no
assurance that the Fund will pay any dividends or realize any capital gains.

The Fund qualified for the fiscal year ended December 31, 1994 and intends for
each year thereafter to qualify for tax treatment as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended. Qualification as a
regulated investment company relieves the Fund of Federal income tax on that
part of its net ordinary income and net realized capital gains which it pays out
to its stockholders. Dividends out of net ordinary income and distributions of
net short-term capital gains are taxable to the recipient stockholders as
ordinary income and are eligible, in the case of corporate stockholders, for the
dividends-received deduction to the extent that the Fund's income is derived
from qualifying dividends received by the Fund from domestic corporations. A
corporation's dividends-received deduction will be disallowed unless the
corporation holds shares in the Fund at least 46 days. Furthermore, a
corporation's dividends-received deduction will be disallowed to the extent a
corporation's investment in shares of the Fund is financed with indebtedness.

The excess of net long-term capital gains over the net short-term capital losses
realized and distributed by the Fund to its stockholders as capital gains
distributions are taxable to the stockholders as long-term capital gains,
irrespective of the length of time a stockholder may have held his stock. Such
long-term capital gains distributions are not eligible for the
dividends-received deduction referred to above. If a stockholder held shares six

13
<PAGE>

months or less and during that period received a distribution taxable to such
stockholder as long-term capital gain, any loss realized on the sale of such
shares during such six-month period would be a long-term capital loss to the
extent of such distribution.

Any dividend or distribution received by a stockholder on shares of the Fund
shortly after the purchase of such shares by such stockholder will have the
effect of reducing the net asset value of such shares by the amount of such
dividend or distribution. Furthermore, such dividend or distribution, although
in effect a return of capital, is subject to applicable taxes to the extent that
the investor is subject to such taxes regardless of the length of time the
investor may have held the stock.

The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions and redemptions) paid
to stockholders who have not complied with IRS regulations. In connection with
this withholding requirement, a stockholder will be asked to certify on his
application that the social security or tax identification number provided is
correct and that the stockholder is not subject to 31% backup withholding for
previous underreporting to the IRS.

NET ASSET VALUE

The Fund determines the net asset value per share of the Fund as of 4:00 p.m.,
New York City time, by dividing the value of the Fund's net assets (i.e., the
value of its securities and other assets less its liabilities, including
expenses payable or accrued but excluding capital stock and surplus) by the
number of shares outstanding at the time the determination is made. The Fund
determines its net asset value on each Fund Business Day. Fund Business Day for
this purpose means weekdays (Monday through Friday) except customary national
business holidays and Good Friday. Purchases and redemptions will be effected at
the time of determination of net asset value next following the receipt of any
purchase or redemption order in proper form. (See "Purchase of Shares" and
"Redemption of Shares" herein.)

Portfolio securities for which market quotations are readily available are
valued at market value. All other investment assets of the Fund are valued in
such manner as the Board of Directors of the Fund in good faith deems
appropriate to reflect their fair value.

GENERAL INFORMATION

Description of Common Stock

The Fund was incorporated in Maryland on October 15, 1984. The authorized
capital stock of the Fund consists of one hundred million shares of common stock
having a par value of one-tenth of one cent ($.001) per share. Each share has
equal dividend, distribution, liquidation and voting rights. There are no
conversion or preemptive rights in connection with any shares of the Fund. All
shares when issued in accordance with the terms of the offering will be fully
paid and non-assessable.

As a general matter, the Fund will not hold annual or other meetings of the
Fund's stockholders. This is because the By-laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of 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 holders or 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 including the removal of Fund director(s) and communication
among stockholders, 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 stockholders
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

14
<PAGE>

such a meeting, or until such Director sooner dies, resigns, retires or is
removed by the vote of the stockholders.

Performance

From time to time the Fund may distribute sales literature or publish
advertisements containing "total return" quotations for the Fund. Such sales
literature or advertisements will disclose the Fund's average annual compounded
total return for the Fund's last one year period, five year period and the
period since the Fund's inception, and may include total return information for
other periods. The Fund's total return for each period is computed, through use
of a formula prescribed by the Securities and Exchange Commission, by finding
the average annual compounded rates of return over the period that would equate
an assumed initial amount invested to the value of the investment at the end of
the period. For purposes of computing total return, income dividends and capital
gains distributions paid on shares of the Fund are assumed to have been
reinvested when received.

Custodian, Transfer Agent and Dividend Agent

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, is the custodian for the Fund's cash and securities and Fundtech Services
L.P., Three University Plaza, Hackensack, New Jersey 07601, an affiliate of the
Manager and Distributor, is the transfer agent and dividend agent for the shares
of the Fund. The Fund's transfer agent and custodian do not assist in and are
not responsible for investment decisions involving assets of the Fund.

Information for Stockholders

All stockholder inquiries should be directed to Reich & Tang Equity Fund, Inc.,
600 Fifth Avenue, New York, New York 10020 (telephone: 212-830-5220 or outside
New York State 800-221-3079).

The Fund sends to all its stockholders semi-annual unaudited and annual audited
reports, including a list of investment securities held.

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.

<PAGE>

TABLE OF CONTENTS

Table of Fees and Expenses..................2
Selected Financial Information..............2
Investments Objectives,
Policies and Risks.......................3 (INSERT LOGO
Investment Restrictions.....................5 GRAPHIC HERE)
The Manager.................................5
Distribution and Service Plan...............8
Purchase of Shares..........................9
New Shareholders.........................10
Present Shareholders.....................10
Redemption of Shares........................10
Systematic Withdrawal Plan...............11 PROSPECTUS
Telephone Redemption Privilege...........11
Retirement Plans............................12
Exchange Privilege..........................12 May 1, 1995
Dividends and Distributions and Taxes.......13
Net Asset Value.............................14
General Information ........................14
Description of Common Stock..............14
Performance..............................15
Custodian, Transfer Agent
and Dividend Agent....................15
Information for Stockholders.............15

<PAGE>

________________________________________________________________________________

[INSERT LOGO GRAPHIC] 600 FIFTH AVENUE,NEW YORK, NY 10020

(212) 830-5220

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

STATEMENT OF ADDITIONAL INFORMATION

May 1, 1995

This Statement of Additional Information is not a prospectus and is only
authorized for distribution when preceded or accompanied by the Fund's
prospectus dated May 1, 1995 (the "Prospectus"). This Statement of Additional
Information contains additional and more detailed information than that set
forth in the Prospectus and should be read in conjunction with the Prospectus,
additional copies of which may be obtained without charge by either writing or
telephoning the Fund at the address or telephone number set forth above.

Table of Contents
<C> <C>
Investment Policies................................. Description of Common Stock......................
Investment Restrictions............................. Performance......................................
Management.......................................... Net Asset Value..................................
Investment Management Contract...................... Counsel, Auditors and Custodian,
Distribution and Service Plan....................... Transfer Agent and
Expenses of the Fund................................ Dividend Agent..................................
Portfolio Transactions.............................. Independent Auditor's Report.....................
Redemption of Shares................................ Financial Statements.............................

</TABLE>

<PAGE>

INVESTMENT POLICIES

Warrants

The Fund may invest in warrants which entitle the holder to buy equity
securities at a specific price for a specific period of time. Warrants may be
considered more speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
securities which may be purchased nor do they represent any rights in the assets
of the issuing company. Also, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to the expiration date.

Foreign Securities

Investments may be made in both domestic and foreign companies. While the Fund
has no present intention to invest any significant portion of its assets in
foreign securities, it reserves the right to invest not more than 15% of the
value of its total assets (at the time of purchase and after giving effect
thereto) in the securities of foreign issuers and obligors. Investments in
foreign companies involve certain considerations which are not typically
associated with investing in domestic companies. An investment may be affected
by changes in currency rates and in exchange control regulations. There may be
less publicly available information about a foreign company than about a
domestic company. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic companies. Foreign stock markets have substantially less
volume than the New York Stock Exchange and securities of some foreign companies
may be less liquid and more volatile than securities of comparable domestic
companies. There is generally less government regulation of stock exchanges,
brokers and listed companies than in the United States. In addition, with
respect to certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, political or social instability or diplomatic
developments which could affect investments in those countries. Individual
foreign economies may differ favorably or unfavorably from the United States'
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position.

Repurchase Agreements

When the Fund enters into a repurchase agreement, it requires the continual
maintenance of collateral (to be held by the Fund's custodian in a segregated
account) in an amount equal to, or in excess of, the vendor's repurchase
agreement commitment. The underlying securities are ordinarily U.S. Treasury or
other government obligations or high quality money market instruments. In the
event that a vendor defaulted on its repurchase obligation, the Fund might
suffer a loss to the extent that the proceeds from the sale of the collateral
were less than the repurchase price. If the vendor becomes bankrupt, the Fund
might be delayed, or may incur costs or possible losses of principal and income,
in selling the collateral. Repurchase agreements may be entered into with member
banks of the Federal Reserve System or "primary dealers" (as designated by the
Federal Reserve Bank of New York) in U.S. Government securities.

Other Matters

In addition, for purposes of complying with the securities regulations of
certain states, the Fund has adopted the following additional investment
restriction, which may be changed by the Fund's Board of Directors without
stockholder approval. The Fund may not purchase or retain the securities of any
issuer if the officers or directors of the Fund or New England Investment
Companies, Inc., the general partner of the Fund's advisor, owning beneficially
more than one-half of one percent of the securities together own beneficially
more than 5% of such securities.

INVESTMENT RESTRICTIONS

The Fund has adopted the following investment restrictions which are in addition
to those described in the Prospectus. Under the following restrictions, which
may not be changed without the approval of the Fund's stockholders, the Fund may
not:

1. Purchase or otherwise acquire interests in real estate, real estate
mortgage loans or interests in oil, gas or other mineral exploration or
development programs;

2
<PAGE>

2. Sell securities short or invest in puts, calls, straddles, spreads or
combinations thereof;

3. Purchase or acquire commodities or commodity contracts;

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

5. Participate on a joint or a joint and several basis in any securities
trading account; and

6. Invest in companies for the purpose of exercising control.

MANAGEMENT

Directors and Officers

The directors and executive officers of the Fund, and their principal
occupations for the past five years, are listed below. The address of each such
person, unless otherwise indicated, is 600 Fifth Avenue, New York, New York
10020. Directors deemed to be "interested persons" of the Fund for the purposes
of the Investment Company Act of 1940 (the "1940 Act") are indicated by an
asterisk.

ROBERT F. HOERLE, 62*: Chairman, President and a Director of the Fund, is
Managing Director of the Capital Management Division of the Manager since
September 1993. Mr. Hoerle was formerly Executive Vice President and Chairman of
Reich & Tang, Inc. with which he was associated with from February 1971 to
September 1993. Mr. Hoerle is also Chairman and a Trustee of Reich & Tang
Government Securities Trust.

W. GILES MELLON, 64: Director of the Fund, is a Professor of Business
Administration and Area Chairman of Finance in the Graduate School of Business
Administration, Rutgers University with which he has been associated since 1966.
His address is 92 New Street, Newark, New Jersey 07102. Dr. Mellon is also a
Director of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income
Fund, Inc., North Carolina Daily Municipal Income Fund, Inc. and Short Term
Income Fund, Inc. and a Trustee of Florida Daily Municipal Income Fund,
Institutional Daily Income Fund, Pennsylvania Daily Municipal Income Fund and
Reich & Tang Government Securities Trust.

ROBERT STRANIERE, 53: Director of the Fund, is a member of the New York State
Assembly and a partner in the law firm of Straniere and Straniere since 1981.
His address is 182 Rose Avenue, Staten Island, New York 10306. Mr. Straniere is
also a Director of California Daily Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield
Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.
and Short Term Income Fund, Inc. and a Trustee of Florida Daily Municipal Income
Fund, Institutional Daily Income Fund, Pennsylvania Daily Municipal Income Fund
and Reich & Tang Government Securities Trust.

YUNG WONG, 56: Director of the Fund, is a General Partner of Abacus Partners
Limited Partnership (a general partner of a venture capital investment firm)
since 1984. His address is 29 Alden Road, Greenwich, Connecticut 06831. Dr. Wong
is a Director of Republic Telecom Systems Corporation (a provider of
telecommunications equipment) since January 1989 and of TelWatch, Inc. (a
provider of network management software) since August 1989. Dr. Wong is also a
Director of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income
Fund, Inc., North Carolina Daily Municipal Income Fund, Inc. and Short Term
Income Fund, Inc. and a Trustee of Florida Daily Municipal Income Fund,
Institutional Daily Income Fund, Pennsylvania Daily Municipal Income Fund and
Reich & Tang Government Securities Trust.

STEVEN W. DUFF, 41: Executive Vice 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 also 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. Mr. Duff is also Senior Vice President of
Lebenthal Funds, Inc., President and a Trustee of Florida Daily Municipal Income
Fund, Institutional Daily Income Fund and Pennsylvania Daily Municipal Income

3
<PAGE>

Fund, President and Chairman of Reich & Tang Government Securities Trust and
President and Chief Executive Officer of Tax Exempt Proceeds Fund, Inc.

STEVEN M. WILSON, 35: Senior Vice President of the Fund, is Senior Vice
President of the Capital Management Division of the Manager since September
1993. Mr. Wilson was formerly Senior Vice President of Reich & Tang, Inc. with
which he was associated with from July 1986 to September 1993.

BERNADETTE N. FINN, 47: Vice President and Secretary of the Fund, 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.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Lebenthal Funds,
Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina
Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income Fund and
Tax Exempt Proceeds Fund, Inc., a Vice President and Secretary of Institutional
Daily Income Fund, Reich & Tang Government Securities Trust and Short Term
Income Fund, Inc.

MOLLY FLEWHARTY, 44: Vice President of the Fund, 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 a 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, Lebenthal Funds, Inc., Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund,
Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily
Municipal Income Fund, Reich & Tang Government Securities Trust and Short Term
Income Fund, Inc.

LESLEY M. JONES, 46: Vice President of the Fund, 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.,
New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Government
Securities Trust and Short Term Income Fund, Inc.

DANA E. MESSINA, 38: Vice President of the Fund, Executive Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Messina was
formerly Vice President of Reich & Tang, Inc. with which she was associated with
from December 1980 to September 1993. Ms. Messina is also Vice President of
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield
Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily Income
Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina
Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income Fund,
Reich & Tang Government Securities Trust and Short Term Income Fund, Inc., Vice
President and Treasurer of Lebenthal Funds, Inc. and is Treasurer, Chief
Accounting Officer and Chief Financial Officer of Tax Exempt Proceeds Fund, Inc.

RICHARD De SANCTIS, 38: Treasurer of the Fund, is Assistant Treasurer of NEIC
since September 1993. Mr. De Sanctis was formerly Controller of Reich & Tang,
Inc. from January 1991 to September 1993 and Vice President and Treasurer of
Cortland Financial Group, Inc., and Vice President of Cortland Distributors,
Inc. from 1989 to December 1990. Mr. De Sanctis is also Treasurer of 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., New York Daily Tax
Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Reich & Tang Government Securities
Trust and Short Term Income Fund, Inc. and is Vice President and Treasurer of
Cortland Trust, Inc.

4
<PAGE>

Directors of the Fund not affiliated with the Manager receive from the Fund an
annual retainer of $2,000 and a fee of $500 for each Board of Directors meeting
attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Directors who are affiliated with the Manager do
not receive compensation from the Fund.

The Fund paid an aggregate remuneration of $12,000 to its Directors with respect
to the period ended December 31, 1994, all of which consisted of aggregate
director's fees paid to the three disinterested directors, pursuant to the terms
of the Investment Management Contract. See Compensation Table below.

________________________________________________________________________________

<TABLE>
<CAPTION>
COMPENSATION TABLE

<S> <C> <C> <C> <C> <C>
(1) (2) (3) (4) (5)

Name of Person, Aggregate Compensation Pension or Retirement Estimated Annual Total Compensation from
Position from Registrant for Benefits Accrued as Part Benefits upon Retirement Fund and Fund Complex
Fiscal Year of Fund Expenses Paid to Directors*

W. Giles Mellon,
Director $4,000.00 0 0 $48,791.67 (14 Funds)

Robert Straniere,
Director $4,000.00 0 0
$48,791.67 (14 Funds)
Yung Wong,
Director
$4,000.00 0 0 $48,791.67 (14 Funds)

<FN>
* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending December 31, 1994 (and, with respect to certain of the
funds in the Fund Complex, estimated to be paid during the fiscal year ending
December 31, 1994). 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.
</FN>
</TABLE>

________________________________________________________________________________

INVESTMENT MANAGEMENT CONTRACT

Pursuant to its Investment Management Contract with the Fund, Reich & Tang Asset
Management L.P. (the "Manager") is responsible for the investment management of
the Fund's assets, including the responsibility for making investment decisions
and placing orders for the purchase and sale of the Fund's investments directly
with the issuers or with brokers or dealers selected by it in its discretion.
(See "Portfolio Transactions" herein.) The Manager also furnishes to the Board
of Directors periodic reports on the investment performance of the Fund.

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"). The Manager was at March 31, 1995 manager,
advisor or supervisor with respect to assets aggregating in excess of $9.6
billion. In addition to the Fund, the Manager's advisory clients include, among
others, 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, Lebenthal Funds, Inc. {Lebenthal New York Tax Free Money 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 Government Securities Trust, Short Term Income Fund, Inc. and Tax Exempt
Proceeds Fund, Inc. The Manager also advises pension trusts, profit-sharing
trusts and endowments.

Effective October 1, 1994, the Board of Directors of the Fund approved the
re-execution of the Investment Management Contract and the Administrative
Services Contract with the Manager. The Manager's predecessor, New England
Investment Companies, L.P. ("NEICLP") is the limited partner and owner of a

5
<PAGE>

99.5% interest in the newly created limited partnership, Reich & Tang Asset
Management L.P., 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. The re-execution of the Investment
Management Contract does not result in "assignment" of the Investment Management
Contract with NEICLP under the Act, since there is no change in actual control
or management of the Manager caused by the re-execution.

New England Investment Companies, Inc. ("NEIC"), a Massachusetts corporation,
serves as the sole general partner of NEICLP. The New England Mutual Life
Insurance Company ("The New England") owns approximately 68.1% of the total
partnership units outstanding of NEICLP, and Reich & Tang, Inc., owns
approximately 22.8% of the outstanding partnership units of NEICLP. In addition,
NEIC is a wholly-owned subsidiary of The New England which may be deemed a
"controlling person" of the Manager. NEIC is a holding company offering a broad
array of investment styles across a wide range of asset categories through eight
investment advisory/management affiliates and three distribution subsidiaries.
These include Loomis, Sayles & Company, L.P., Copley Real Estate Advisors, Inc.,
Westpeak Investment Advisors, L.P., Draycott Partners, Ltd., TNE Investment
Services, L.P., New England Investment Associates, Inc. and an affiliate, and
Capital Growth Management Limited Partnership. These affiliates in the aggregate
are investment advisors or managers of 57 other registered investment companies.

The re-executed Investment Management Contract and Administrative Services
Contract contain the same terms and conditions governing the Manager's
investment management and administrative responsibilities, respectively, as the
Fund's previous Investment Management Contract except for (i) the dates of
execution and (ii) the identity of the Manager.

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

The Manager provides persons satisfactory to the Board of Directors of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of Reich &
Tang Asset Management, Inc. the sole general partner of the Manager, or
employees of the Manager or its affiliates. The re-executed Investment
Management Contract was approved 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, effective October 1, 1994. The Investment Management
Contract was approved by a majority of the Fund's shareholders at the meeting
held on July 21, 1993.

The Investment Management Contract will continue in effect until December 31,
1995, and may be continued in force thereafter for successive twelve-month
periods beginning each January 1 provided that continuance is specifically
approved annually by the Fund's Board of Directors or by vote of the
stockholders, 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 vote cast in person at a meeting called for the purpose of voting on
the Investment Management Contract.

The Investment Management Contract is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or by the Manager on sixty days' written notice, and will automatically
terminate in the event of its assignment. The 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 Investment Management Contract, the Manager receives
from the Fund a fee, payable monthly, at the annual rate of .80% of the Fund's
average daily net assets. In addition to management services with respect to the
purchase and sale of securities, the fee includes compensation for overall
management of the Fund and for distributing the Fund's shares. For the Fund's
fiscal years ended December 31, 1992, 1993 and 1994, the Manager received
investment management fees of $845,764, $961,193, and $749,912, respectively.

6
<PAGE>

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 accounting related services by Investors Fiduciary Trust Company,
the Fund's bookkeeping or recordkeeping agent, (ii) prepare reports to and
filings with regulatory authorities and (iii) perform such other services as the
Fund may from time to time request of the Manager. The personnel rendering such
services may be employees of the Manager, of its affiliates or of other
organizations. 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 the general partner of the Manager. It is intended that
such rates will be the actual costs of the Manager. For its services under the
Administrative Services Contract, the Manager receives from the Fund a fee equal
to .20% per annum of the Fund's average daily net assets. For the Fund's fiscal
years ended December 31, 1993 and 1994, the Manager received an administrative
services fee of $65,184 and $187,478, respectively.

The Manager now acts as investment manager or advisor for other persons and
entities and may under the Management Contract act as investment manager,
administrator or advisor to other registered investment companies. At present,
the Manager is investment manager or advisor to eighteen other registered
investment companies including 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, Lebenthal Funds, Inc. {Lebenthal New York
Tax Free Money 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 Government Securities Trust, Short Term Income Fund,
Inc. and Tax Exempt Proceeds Fund, Inc. The Manager also advises pension trusts,
profit sharing trusts and endowments.

DISTRIBUTION AND SERVICE PLAN

The Fund's Distribution and Service Plan (the "Plan") provides that all written
agreements relating to the Plan entered into between either the Fund and the
Manager, Reich & Tang Distributors L.P. (the "Distributor") and organizations
whose customers or clients are Fund stockholders ("Intermediaries") must be in a
form satisfactory to the Fund's Board of Directors. Pursuant to the Plan, the
Fund has entered into a Distribution Agreement with the Distributor.

The Plan requires the Fund and the Manager to prepare, at least quarterly,
written reports setting forth all amounts expended for distribution purposes by
the Fund and the Manager pursuant to the Plan and identifying the distribution
activities for which those expenditures were made. Such distribution activities
included the printing of prospectuses and subscription order forms and
promotional brochures and related promotional expenses. See "Investment
Management Contract" herein for information regarding fee arrangements and
termination provisions under the Investment Management Contract.

The Plan provides that it will continue in effect for successive annual periods
provided that it must be approved by a vote of at least a majority of the
outstanding voting securities of the Fund and by a majority of the Board of
Directors, including those directors who are not "interested persons" of the
Fund (as defined in the 1940 Act) and who have no direct or indirect financial
interest in the Plan. The Plan must be approved at least annually by the Board
of Directors in the manner described in the foregoing sentence and may be
terminated at any time by a vote of a majority of the outstanding voting
securities of the Fund or a majority of those directors who are not "interested
persons" and who have no direct or indirect financial interest in the Plan. The
Plan was most recently approved by the Board of Directors on and shall continue
in effect until December 31, 1995. The Plan was approved by the shareholders of
the Fund at their first meeting held on April 29, 1986.

The Plan further provides that it may not be amended to increase materially the
costs which may be incurred by the Fund for distribution pursuant to the Plan
without stockholder approval, and that all material amendments of the Plan must
be approved by a majority of the Board of Directors, including those who are not
"interested persons" of the Fund and who have no direct or indirect financial
interest in the Plan.

7
<PAGE>

While the Plan is in effect, the selection and nomination of directors who are
not "interested persons" of the Fund (as defined in the 1940 Act) is committed
to the discretion of the directors who are not "interested persons" of the Fund.

The Distribution Agreement between the Fund and the Distributor provides that it
shall terminate automatically in the event of its assignment.

EXPENSES OF THE FUND

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 limits prescribed by any state in which the Fund's shares are qualified for
sale. The Fund's expenses for distribution purposes pursuant to the Plan,
described above, are included within such expenses only to the extent required
by the state with the most restrictive expense limitation in which the Fund's
shares are qualified for sale. The Fund may elect not to qualify its shares for
sale in every state. The Fund believes that currently the most restrictive
expense ratio limitation imposed by any state is 2 1/2% of the first $30 million
of the Fund's average net assets, 2% of the next $70 million of its average net
assets and 1 1/2% of its average net assets in excess of $100 million. For the
purpose of this limitation, expenses shall include the fee payable to the
Manager and the amortization of organization expenses. 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. No such reimbursement was required for the year ended December
31, 1994.

Subject to the Manager's obligations to pay for services performed by officers
of the Manager or its affiliates and for investment management services and
certain distribution and promotional expenses and to reimburse the Fund for its
excess expenses as described above, under the Investment Management Contract the
Fund has assumed responsibility for payment of all of its other expenses,
including (a) brokerage and commission expenses, (b) Federal, state and local
taxes, including issue and transfer taxes incurred by or levied on the Fund, (c)
commitment fees and certain insurance premiums, (d) interest charges on
borrowings, (e) charges and expenses of the Fund's custodian, (f) charges and
expenses of persons performing issuance, redemption, transfer and dividend
disbursing functions for the Fund, (g) recurring and nonrecurring legal and
accounting expenses, including the Fund's cost of the bookkeeping agent for the
determination of net asset value per share and the maintenance of portfolio and
general accounting records, (h) telecommunication expenses, (i) costs of
organizing and maintaining the Fund's existence as a corporation, (j)
compensation, including directors' fees, of any of the Fund's directors,
officers or employees who are not officers of New England Investment Companies,
Inc., the general partner of the Manager, and costs of other personnel providing
services to the Fund, (k) costs of stockholders' services including charges and
expenses of persons providing confirmations of transactions in Fund shares,
periodic statements to stockholders, and recordkeeping and stockholder services,
(l) costs of stockholders' reports, proxy solicitations, and corporate meetings,
(m) fees and expenses of registering the Fund's shares under the appropriate
Federal securities laws and of qualifying those shares under applicable state
securities laws, including expenses attendant upon the initial registration and
qualifications of the Fund's shares and attendant upon renewals of, or
amendments to, those registrations and qualifications, (n) expenses of preparing
and printing the Fund's prospectuses and statements of additional information
and of delivering them to stockholders of the Fund, (o) payment of fees and
expenses provided for in the Investment Management Contract, Administrative
Services Agreement and Distribution Agreement and (p) any other distribution or
promotional expenses pursuant to a distribution and service plan.

PORTFOLIO TRANSACTIONS

The Manager makes the Fund's portfolio decisions and determines the broker to be
used in each specific transaction with the objective of negotiating a
combination of the most favorable commission and the best price obtainable on
each transaction (generally defined as best execution). When consistent with the
objective of obtaining best execution, brokerage may be directed to persons or
firms supplying investment information to the Manager or portfolio transactions
may be effected by the Manager. Neither the Fund nor the Manager has entered
into agreements or understandings with any brokers regarding the placement of
securities transactions because of research services they provide. To the extent
that such persons or firms supply investment information to the Manager for use
in rendering investment advice to the Fund, such information may be supplied at
no cost to the Manager and, therefore, may have the effect of reducing the
expenses of the Manager in rendering advice to the Fund. While it is impossible
to place an actual dollar value on such investment information, its receipt by

8
<PAGE>

the Manager probably does not reduce the overall expenses of the Manager to any
material extent. Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking best execution,
the Manager may consider sales of shares of the Fund as a factor in the
selection of brokers to execute portfolio transactions for the Fund.

The investment information provided to the Manager is of the type described in
Section 28(e) of the Securities Exchange Act of 1934 and is designed to augment
the Manager's own internal research and investment strategy capabilities.
Research services furnished by brokers through which the Fund effects securities
transactions are used by the Manager in carrying out its investment management
responsibilities with respect to all its clients' accounts. There may be
occasions where the transaction cost charged by a broker may be greater than
that which another broker may charge if the Manager determines in good faith
that the amount of such transaction cost is reasonable in relation to the value
of brokerage and research services provided by the executing broker. During the
year ended December 31, 1994, the Manager did not place any portfolio
transactions for the Fund with firms supplying investment information to the
Manager.

The Fund may deal in some instances in securities which are not listed on a
national securities exchange but are traded in the over-the-counter market. It
may also purchase listed securities through the third market. Where transactions
are executed in the over-the-counter market or third market, the Fund will seek
to deal with the primary market makers; but when necessary in order to obtain
best execution, it will utilize the services of others. In all cases the Fund
will attempt to negotiate best execution. The Distributor may from time to time
effect transactions in the Fund's portfolio securities. In such instances, the
placement of orders with the Distributor would be consistent with the Fund's
objective of obtaining best execution.

With respect to orders placed with the Distributor for execution on a national
securities exchange, commissions received must conform to Section 17(e)(2)(A) of
the 1940 Act and Rule 17e-1 thereunder, which permit an affiliated person of a
registered investment company (such as the Fund) to receive brokerage
commissions from such registered investment company provided that such
commissions are reasonable and fair compared to commissions received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time. In addition, pursuant to Section 11(a) of
the Securities Exchange Act of 1934, the Distributor is restricted as to the
nature and extent of the brokerage services it may perform for the Fund. The
Securities and Exchange Commission has adopted rules under Section 11(a) which
permit a distributor to a registered investment company to receive compensation
for effecting, on a national securities exchange, transactions in portfolio
securities of such investment company, including causing such transactions to be
transmitted, executed, cleared and settled and arranging for unaffiliated
brokers to execute such transactions. To the extent permitted by such rules, the
Distributor may receive compensation relating to transactions in portfolio
securities of the Fund provided that the Fund enters into a written agreement,
as required by such rules, with the Distributor authorizing it to retain
compensation for such services. Transactions in portfolio securities placed with
the Distributor which are executed on a national securities exchange must be
effected in accordance with procedures adopted by the Board of Directors of the
Fund pursuant to Rule 17e-1.

During the years ended December 31, 1992, 1993 and 1994, the Fund paid a total
of $39,846, $39,973, and $71,681 respectively, in brokerage commissions,
$28,272, $32,683 and $30,195, respectively, of which was paid to the Manager.
During the years ended December 31, 1992, 1993 and 1994, the brokerage
commissions paid to the Manager represented approximately 70.95%, 81.76% and
42.12%, respectively, of the total brokerage commissions paid by the Fund during
such years and were paid on account of transactions having an aggregate dollar
value equal to approximately 81.67%, 90.56% and 60.37%, respectively, of the
aggregate dollar value of all portfolio transactions of the Fund during such
years for which commissions were paid. The Fund's portfolio turnover rate for
the years ended December 31, 1993 and 1994 was 26.69% and 25.80%, respectively.

REDEMPTION OF SHARES

Payment of the redemption price for shares redeemed may be made either in cash
or in portfolio securities (selected in the discretion of the Board of Directors
of the Fund and taken at their value used in determining the Fund's net asset
value per share as described under "Net Asset Value" herein), or partly in cash
and partly in portfolio securities. However, payments will be made wholly in
cash unless the Board of Directors believes that economic conditions exist which
would make such a practice detrimental to the best interests of the Fund. If
payment for shares redeemed is made wholly or partly in portfolio securities,
brokerage costs may be incurred by the investor in converting the securities

9
<PAGE>

to cash. The Fund will not distribute in kind portfolio securities that are not
readily marketable. The Fund has filed a formal election with the Securities and
Exchange Commission pursuant to which the Fund will only effect a redemption in
portfolio securities where the particular stockholder of record is redeeming
more than $250,000 or 1% of the Fund's total net assets, whichever is less,
during any 90-day period. In the opinion of the Fund's management, however, the
amount of a redemption request would have to be significantly greater than
$250,000 or 1% of total net assets before a redemption wholly or partly in
portfolio securities was made.

DESCRIPTION OF COMMON STOCK

On March 31, 1995 there were 6,076,065 shares of the Fund's common stock
outstanding. As of March 31, 1995, the amount of shares owned by all officers
and directors of the Fund, as a group, was less than 1% of the outstanding
shares of the Fund. Set forth below is certain information as to persons who
owned 5% or more of the Fund's outstanding common stock as of March 31, 1995:

Nature of
Name and Address % of Shares Ownership

Patterson & Co. 21.56 Record
PNB Personal Trust Company
P.O. Box 7829
Philadephia, Pennsylvania 19101

Maritime Overseas 08.20 Record
Corporate Pension Plan
511 Fifth Avenue
New York, New York 10017

NEIC Master Retirement Trust 05.29 Record
399 Boylston Street
Boston, Massachusetts 02116

PERFORMANCE

From time to time the Fund may distribute sales literature or publish
advertisements containing "total return" quotations for the Fund. Such sales
literature or advertisements will disclose the Fund's average annual compounded
total return for the Fund's last one year period, five year period and the
period since the Fund's inception, and may include total return information for
other periods. The Fund's total return for each period is computed by finding,
through the use of a formula prescribed by the Securities and Exchange
Commission, the average annual compounded rates of return over the period that
would equate an assumed initial amount invested to the value of such investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of the Fund are assumed
to have been reinvested when received.

The Fund's total return for the twelve months ended December 31, 1994 was 1.70%.
The Fund's average annual compounded total return for the five year period ended
December 31, 1994 was 9.30%. The Fund's average annual compounded total return
from January 4, 1985 (inception) to December 31, 1994 was 14.16%.

The Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in the Fund's portfolio and the Fund's expenses. Total return
information is useful in reviewing the Fund's performance but such information
may not provide a basis for comparison with bank deposits or other investments
which pay a fixed return for a stated period of time. An investor's principal
invested in the Fund is not fixed and will fluctuate in response to prevailing
market conditions.

NET ASSET VALUE

The Fund does not determine its net asset value per share on the following
holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.

For purposes of determining the Fund's net asset value per share, readily
marketable portfolio securities listed on the New York Stock Exchange are
valued, except as indicated below, at the last sale price reflected on the
consolidated tape at the close of the New York Stock Exchange on the business
day as of which such value is being determined. If there has been no sale on

10
<PAGE>

such day, the securities are valued at the mean of the closing
bid and asked prices on such day. If no bid or asked prices are quoted on such
day, then the security is valued by such method as the Board of Directors shall
determine in good faith to reflect its fair market value. Readily marketable
securities not listed on the New York Stock Exchange but listed on other
national securities exchanges or admitted to trading on the National Association
of Securities Dealers Automated Quotations, Inc. ("NASDAQ") National List are
valued in like manner. Portfolio securities traded on more than one national
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.

Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Manager to be
over-the-counter but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the Board of
Directors deems appropriate to reflect their fair market value.

U.S. Government obligations and other debt instruments having sixty days or less
remaining until maturity are stated at amortized cost. All other investment
assets, including restricted and not readily marketable securities, are valued
in such manner as the Board of Directors in good faith deems appropriate to
reflect their fair market value.

COUNSEL, AUDITORS AND CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT

Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Battle Fowler LLP, 75 East 55th Street, New York, New York 10022.
Venable, Baetjer and Howard, Baltimore, Maryland, has provided an opinion for
matters relating to Maryland law.

McGladrey & Pullen LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, have been selected to audit the financial
statements of the Fund.

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, is the custodian for the Fund's cash and securities. Fundtech Services
L.P., Three University Plaza, Hackensack, New Jersey 07601, an affiliate of the
Manager and Distributor, is the transfer agent and dividend agent for the shares
of the Fund. The Fund's transfer agent and custodian do not assist in and are
not responsible for investment decisions involving assets of the Fund.

<PAGE>

________________________________________________________________________________

REICH & TANG EQUITY FUND, INC.
INDEPENDEDNT AUDITOR'S REPORT

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

The Board of Directors and Shareholders
Reich & Tang Equity Fund, Inc.

We have audited the accompanying statement of net assets of Reich & Tang Equity
Fund, Inc. as of December 31, 1994 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 December 31, 1994 by correspondence with the custodian and brokers.
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 Reich & Tang Equity Fund, Inc. as of December 31, 1994, 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 LLP

New York, New York
January 27, 1995

________________________________________________________________________________

12
<PAGE>

________________________________________________________________________________

REICH & TANG EQUITY FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1994
================================================================================

Value
Shares (Note 1)

<S> <C> <C>
Common Stocks (94.33%)
Aerospace/Defense (2.29%)
Sundstrand Corporation 45,600 $ 2,074,800
---------------------- ------ - ---------

Agriculture (4.06%)
DEKALB Genetics Corporation 21,500 575,125
--------------------------- ------ -------
Pioneer Hi-Bred International, Inc. 90,000 3,105,000
----------------------------------- ------ ---------
3,680,125

Apparel (2.63%)
Land's End, Inc. 84,900 1,167,375
---------------- ------ ---------
Fruit of the Loom, Inc.* 45,200 1,220,400
------------------------ ------ ---------
2,387,775

Banking/Financial Services (1.67%)
Marshall & Ilsley Corporation 79,500 1,510,500
---------

Chemical (Specialty) (10.08%)
Great Lakes Chemical Corporation 47,600 2,713,200
Hercules Incorporated 18,000 2,076,750
Lubrizol Corporation (The) 66,500 2,252,687
Morton International, Inc. 73,500 2,094,750
---------
9,137,387

Consumer Products (2.24%)
Avon Products, Inc. 30,000 1,792,500
Bausch & Lomb Incorporated 7,000 237,125
-------
2,029,625

Converted Paper Products (4.58%)
Sonoco Products Company 190,000 4,156,250
---------

Energy (7.48%)
Equitable Resources, Inc. 104,750 2,841,344
Kerr-McGee Corporation 70,000 3,220,000
Union Texas Petroleum Holdings, Inc. 34,500 715,875
-------

6,777,219
</TABLE>

________________________________________________________________________________

See Notes to Financial Statements.

13
<PAGE>

________________________________________________________________________________

REICH & TANG EQUITY FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1994 (CONTINUED)

================================================================================
Value

Shares (Note 1)

<S> <C> <C>
Common Stocks (Continued)
Food Processing (4.35%)
Flowers Industries, Inc. 68,500 $ 1,241,562
Universal Foods Corp. 98,400 2,706,000
---------
3,947,562
Industrial Products (18.71%)
Albany International Corp. Class A 118,700 2,284,975
AlliedSignal Inc. 43,500 1,479,000
Corning Incorporated 59,000 1,762,625
Dexter Corporation (The) 86,500 1,881,375
Dover Corporation 22,300 1,151,238
Harsco Corp. 57,000 2,329,875
Minerals Technologies, Inc. 22,600 661,050
Snap-On Tools Incorporated 70,000 2,327,500
Teleflex Inc. 39,000 1,384,500
Varian Associates, Inc. 48,500 1,697,500
---------
16,959,638

Industrial Services (5.39%)
Deluxe Corporation 103,100 2,732,150
Equifax Inc. 51,200 1,350,400
Marshall Industries* 30,000 802,500
-------
4,885,050

Insurance (Prop/Casualty)(9.31%)
AMBAC Indemnity Corporation 60,500 2,253,625
Penncorp Financial Group 56,700 744,188
UNUM Corporation 102,500 3,869,375
Zurich Reinsuraance Centre Holdings, Inc.* 54,300 1,567,912
---------
8,435,100

Medical Supplies (6.95%)
AMSCO International, Inc.* 122,500 1,117,812
Alergan Inc. 52,000 1,469,000
Becton, Dickinson & Co. 77,400 3,715,200
---------
6,302,012

Newspaper (2.63%)
Lee Enterprises, Inc. 69,000 2,380,500
---------
</TABLE>

________________________________________________________________________________

See Notes to Financial Statements.

14
<PAGE>

________________________________________________________________________________

REICH & TANG EQUITY FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1994 (CONTINUED)

================================================================================
Shares (Note 1)

<S> <C> <C>
Common Stocks (Continued)
Office Equipment & Supplies (2.01%)
Herman Miller, Inc. 69,500 $ 1,824,375
- ---------

Retail Store (5.85%)
The Limited, Inc. 84,000 1,522,500
United States Shoe Corporation (The) 121,500 2,278,125
Woolworth Corporation 100,000 1,500,000
---------
5,300,625

Toy/School Supplies (4.10%)
Hasbro, Inc. 102,750 3,005,438
Josten, Inc. 38,000 707,750
-------
3,713,188
Total Common Stocks (Cost $70,414,512) 85,501,731
----------
</TABLE>

<TABLE>

Face
Amount

<S> <C> <C>
Short-Term Investments (5.05%)
Repurchase Agreements (5.05%)

Morgan (J.P.) Securities Inc. 5.30%, due 01/03/95
(Collateralized by $4,469,000
U.S. Treasury Bonds, 8.125%, due 8/15/19) $4,578,000 4,578,000
---------
Total Short-Term Investments (Cost $4,578,000) 4,578,000
- ---------------------------------------------- ---------
Total Investments (99.38%) (Cost $74,992,512+) 90,079,731
- --------------------------------------------------- ----------
Cash and Other Assets, Net of Liabilities (.62%) 559,405
- ------------------------------------------------ -------
Net Assets (100.00%) 5,890,667 shares outstanding (Note 3) $ 90,639,136
- ---------------------------------------------------------- - ==========
Net asset value, offering and redemption price per share $ 15.39
- -------------------------------------------------------- - =====

* Non-income producing.
+ Aggregate cost for federal income tax purposes is $75,118,945.
Aggregate unrealized appreciation and depreciation are, based on cost for
Federal income tax purposes, are $17,222,799 and $2,262,013 respectively.
</TABLE>

________________________________________________________________________________

See Notes to Financial Statements.

<PAGE>

________________________________________________________________________________

REICH & TANG EQUITY FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994

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

INVESTMENT INCOME

<S> <C>
Income:
Dividends.................................................................... $ 2,156,543
Interest..................................................................... 204,372
-------
Total income............................................................ 2,360,915
---------
Expenses: (Note 2)
Investment management fee.................................................... 749,912
Administration fee........................................................... 187,478
Custodian, shareholder servicing and related shareholder expenses............ 85,698
Legal, compliance and filing fees............................................ 24,854
Audit and accounting......................................................... 19,500
Directors' fees and expenses................................................. 12,000
Other........................................................................ 18,449
------
Total expenses............................................................... 1,097,891
---------
Net investment income.............................................................. 1,263,024
---------
</TABLE>

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

<S> <C>
Net realized gain (loss) on investments............................................ 11,723,466
Net unrealized appreciation(depreciation) of investments........................... ( 11,304,004)
- -----------
Net gain (loss) on investments...................................... 419,462
-------
Increase (decrease) in net assets from operations.................................. $ 1,682,486
= =========
</TABLE>

________________________________________________________________________________

See Notes to Financial Statements.

<PAGE>

________________________________________________________________________________

REICH & TANG EQUITY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1994 AND 1993

================================================================================
1994 1993
---- ----

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

Operations:
Net investment income........................................... $ 1,263,024 $ 1,183,817

Net realized gain (loss) on investments......................... 11,723,466 8,226,929

Change in unrealized appreciation (depreciation)
of investments................................................. ( 11,304,004) 4,219,169
- ---------- ---------

Increase (decrease) in net assets from operations............... 1,682,486 13,629,915

Distributions from:

Net investment income........................................... ( 1,263,024) ( 1,183,817)

Return of Capital............................................... ( 1,234) ( 8,081)

Net realized gains on investments............................... ( 11,723,466) ( 8,226,929)

In excess of net realized gains................................. ( 107,955) ---

Capital share transactions (Note 3)............................... ( 3,128,833) 8,267,738
- --------- ---------

Total increase (decrease)..................................... ( 14,542,026) 12,478,826

Net Assets:.......................................................

Beginning of year................................................. 105,181,162 92,702,336
----------- - ----------

End of year....................................................... $ 90,639,136 $ 105,181,162
= ========== = ===========
</TABLE>

________________________________________________________________________________

See Notes to Financial Statements.

17
<PAGE>

________________________________________________________________________________

REICH & TANG EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS

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

1. Summary of Accounting Policies

Reich & Tang Equity Fund, Inc. is a no-load, diversified, open-end
management investment company registered under the Investment Company Act
of 1940. Its financial statements are prepared in accordance with generally
accepted accounting principles for investment companies as follows:

a) Valuation of Securities -

Securities traded on a national securities exchange or admitted to trading
on the National Association of Securities Dealers Inc. Automated
Quotations National List are valued at the last reported sales price on
the last business day of the fiscal period. Common stocks for which no
sale was reported on that date and over-the-counter securities, are valued
at the mean between the last reported bid and asked prices. United States
Government obligations and other debt instruments having sixty days or
less remaining until maturity are stated at amortized cost. Debt
instruments having a remaining maturity of more than sixty days will be
valued at the highest bid price obtained from a dealer maintaining an
active market in that security or on the basis of prices obtained from a
pricing service approved as reliable by the Board of Directors. All other
investment assets, including restricted and not readily marketable
securities, are valued in such manner as the Board of Directors in good
faith deems appropriate to reflect their fair market value.

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 taxable income to its shareholders. Therefore, no provision for
federal income tax is required.
c) General -

Securities transactions are recorded on the trade date basis. Interest
income is accrued as earned and dividend income is recorded on the
ex-dividend date. Realized gains and losses from securities transactions
are recorded on the identified cost basis. Dividends and capital gain
distributions to shareholders, which are determined in accordance with
income tax regulations, are recorded on the ex-dividend date. Distributions
which exceed net realized capital gains for financial reporting purposes
but not for tax purposes are reported as distributions in excess of net
realized gains. It is the Fund's policy to take possession of securities as
collateral under repurchase agreements and to determine on a daily basis
that the value of such securities plus accrued interest are sufficient to
cover the value of the repurchase agreements.

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. ("The Manager") equal
to .80% of the Fund's average daily net assets. The Manager is required to
reimburse the Fund for its expenses (exclusive of interest, taxes,
brokerage, and extraordinary expenses) to the

________________________________________________________________________________

<PAGE>

________________________________________________________________________________

REICH & TANG EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

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

2. Investment Management Fees and Other Transactions with Affiliates (Continued)

extent that such expenses, including the management fee, for any fiscal year
exceed 2 1/2% of the first $30 million of its average net assets, 2% of the next
$70 million of its average net assets and 1 1/2% of its average net assets in
excess of $100 million. No such reimbursement was required for the year ended
December 31, 1994.

The Fund has adopted a Distribution and Service Plan and, pursuant to the Plan,
has entered into a Distribution Agreement with the Manager. There were no
expenses borne by the Fund pursuant to the Distribution Plan.

Pursuant to an Administrative Services Agreement, the Fund pays to the Manager
an annual fee of .20% of the Fund's average daily net assets.

Brokerage commissions paid during the period to New England Investment
Companies, L.P. amounted to $30,195.

Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$2,000 per annum plus $500 per meeting attended.

3. Capital Stock

At December 31, 1994 100,000,000 shares of $.001 par value stock were authorized
and capital paid in amounted to $75,678,351. Transactions in capital stock were
as follows:

Year Ended Year Ended
December 31, 1994 December 31, 1993
Shares Amount Shares Amount

<S> <C> <C> <C> <C>
Sold........................................ 6,479,849 $114,659,362 7,751,725 $140,488,734

Issued on reinvestment of dividends......... 800,793 12,430,834 507,798 8,960,357

Redeemed.................................... ( 7,361,171) (130,219,029) ( 7,768,723) (141,181,353)
----------- ------------- ----------- ------------

Net increase (decrease)..................... ( 80,529) $( 3,128,833) 490,800 $ 8,267,738
========= ============ ======= ===========

</TABLE>

4. Investment Transactions

Purchases and sales of investment securities, other than U.S. Government direct
and agency obligations and short-term investments, totaled $23,047,808 and
$39,218,376 respectively. Accumulated undistributed net realized losses at
December 31, 1994 amounted to $126,434.

5. Selected Financial Information

Reference is made to page 2 of the Prospectus for Selected Financial
Information.

________________________________________________________________________________

<PAGE>

PART C
OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits.

(a) Financial Statements.

Included in Prospectus: Selected Financial Information.

Included in the Statement of Additional Information: Independent
Auditor's Report; Statement of Net Assets at December 31, 1994;
Statement of Operations for year ended December 31, 1994; Statement of
Changes in Net Assets for years ended December 31, 1994 and 1993; Notes
to Financial Statements.

(b) Exhibits:

(1) Articles of Incorporation of Registrant (filed as Exhibit 1 to
Registration Statement on Form N-1A (File Nos. 2-94184 and
811-4148) and incorporated herein by reference).

(2) By-Laws of Registrant (filed as Exhibit 2 to Registration Statement
on Form N-1A (File Nos. 2-94184 and 811-4148) and incorporated
herein by reference).

(3) None.

(4) Form of certificate for shares of the common stock of Registrant
(filed as Exhibit 4 to Registration Statement on Form N-1A (File
Nos. 2-94184 and 811-4148) and incorporated herein by reference).

(5) Investment Management Contract between the Registrant and Reich &
Tang Asset Management L.P. (filed as Exhibit 5 to Post-Effective
Amendment No. 17 to Registration Statement on Form N-1A (File Nos.
2-94184 and 811-4148) and incorporated herein by reference).

(6) Distribution Agreement between the Registrant and Reich & Tang
Distributors L.P.
(7) None.

(8) (a) Custody Agreement between the Registrant and Investors
Fiduciary Trust Company filed as Exhibit 8(a) herein.

(b) Transfer Agency Agreement between the Registrant and Investors
Financial Services Company (filed as Exhibit 8(b) to
Post-Effective Amendment No. 13 to Registration Statement on
Form N-1A) (file Nos. 2-94184 and 811-4148) and incorporated
herein by reference).

(9) None.

(10) (a) Opinion of Messrs. Seward & Kissel (filed as Exhibit 10(a) to
Pre-Effective Amendment No. 1 to Registration Statement on
Form N-1A (File Nos. 2-94184 and 811-4148) and incorporated
herein by reference).

C-1

<PAGE>

(b) Opinion of Messrs. Venable, Baetjer and Howard (filed as
Exhibit 10(b) to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-1A (File Nos. 2-94184 and 811-4148) and
incorporated herein by reference).

(11) Consent of Independent Auditors filed as Exhibit 11 herein.

(12) None.

(13) Investment representation letter of Reich & Tang, Inc. as
initial purchaser of shares of stock of Registrant (filed as
Exhibit 13 to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-1A (File No. 2-94184) and incorporated
herein by reference).

(14) None.

(15.1) Rule 12b-1 Plan of Registrant (filed as Exhibit 15 to
Post-Effective Amendment No. 5 to Registration Statement on
Form N-1A (File Nos. 2-94184 and 811-4148) and incorporated
herein by reference).

(15.2) Administrative Services Agreement between the Registrant and
Reich & Tang Asset Management L.P. (filed as Exhibit 15.2 to
Post-Effective Amendment No. 17 to Registration Statement on
Form N-1A (File Nos. 2-94184 and 811-4148) and incorporated
herein by reference).

(16) Not Applicable

Other Exhibits: Powers of Attorney of Messrs. Reich, Hoerle, Mellon,
Straniere and Wong (filed as Other Exhibits to Pre-Effective Amendment No. 1 to
Registration Statement on Form N-1A (File Nos. 2-94184 and 811-4148) and
incorporated herein by reference). Powers of Attorney of Messrs. Hoerle, Mellon,
Straniere, Wong and Flavin (filed as Other Exhibits to Post-Effective Amendment
No. 11 to Registration Statement on Form N-1A (File Nos. 2-94184 and 811-4148)
and incorporated herein by reference).

ITEM 25. Persons Controlled by or under Common Control with Registrant.

No such persons.

ITEM 26. Number of Holders of Securities.

The following information is furnished as of March 31, 1995:

(1) (2)
Number of Record
Title of Class Holders

Common Stock, par value
$ .001 per share 755

ITEM 27. Indemnification

Registrant incorporates herein by reference the response to Item 27 of
Registration Statement filed with the Commission on November 6, 1984.

C-2

<PAGE>

ITEM 28. Business and Other Connections of Investment Adviser.

The description of Reich & Tang Asset Management L.P. under the
captions "The Manager" in the Prospectus and "Management and Investment
Management Contract" in the Statement of Additional Information constituting
Parts A and B, respectively, of this Post-Effective Amendment Number 20 to
Registrant's Registration Statement are incorporated herein by reference.

New England Mutual Life Insurance Company, ("The New England") of which
New England Investment Companies, Inc. ("NEIC") is an indirect wholly-owned
subsidiary, owns approximately 68.1% of the outstanding partnership units of New
England Investment Companies, L.P., ("NEICLP") and Reich & Tang, Inc. owns
approximately 22.8% of the outstanding partnership units of NEICLP. NEICLP is
the limited partner and owner of a 99.5% interest in Reich & Tang Asset
Management L.P. Reich & Tang Asset Management, Inc. serves as the sole general
partner and owner of the remaining .5% interest of Reich & Tang Asset Management
L.P. and serves as the sole general partner of Reich & Tang Distributors L.P.
Reich & Tang Asset Management L.P. serves as the sole limited partner of the
Distributor.

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., 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., North Carolina Daily Municipal Income
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Short Term Income Fund,
Inc. and Tax Exempt Proceeds Fund, Inc., registered investment companies
investing principally in money market instruments, whose addresses are 600 Fifth
Avenue, New York, New York 10020, Delafield Fund, Inc. and Reich & Tang Equity
Fund, Inc., registered investment companies investing primarily in equity
securities, whose addresses are 600 Fifth Avenue, New York, New York 10020 and
Reich & Tang Government Securities Trust, a registered investment company
investing solely in United States Government securities, whose address is 600
Fifth Avenue, New York, New York 10020, Cortland Trust, Inc., a registered
investment company whose address is Three University Plaza, Hackensack, New
Jersey 07601 and Lebenthal Funds, Inc. {Lebenthal New York Tax Free Money Fund},
a registered investment company whose address is 120 Broadway, New York, New
York 10271, which invest primarily in money market instruments. In addition,
Reich & Tang Asset Management L.P. is the sole general partner of Alpha
Associates, August Associates, Reich & Tang Small Cap 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.
Edward E. Phillips, Chairman of the Board of NEIC from December 1989 until
December 1991 and from August 1992 until December 1992, Chief

C-3
<PAGE>

Executive Officer of NEIC from August 1992 until October 1992, Chairman of the
Board of The New England from 1978 to January 1992, and Director of NYNEX
Corporation and Affiliated Publications, Inc. Robert A. Shafto, a Director of
NEIC since August 1992, Chairman of The New England since July 1993, and
President and Chief Executive Officer of The New England since July 1993, having
served in that capacity since January 1992, President and Chief Operating
Officer of The New England from 1990 to 1992 and President -- Insurance and
Personal Financial Services of The New England from 1988 to 1990, and Director
of Fleet Bank of Massachusetts, N.A. Lawrence E. Fouracker, Director of NEIC
since May 1990, Director of The New England, Alcan Aluminum, Limited, Citicorp,
Inc., Enserch Corporation, General Electric Company, The Gillette Company and
Ionics, Inc. Thomas J. Galligan, Jr., Director of NEIC since May 1990, Chairman
of the Board of Directors of Boston Edison Company from 1979 until his
retirement in December 1986, served as its Chief Executive Officer from 1979 to
1984 and served as a Director until May 1990, Director of The New England from
1971 to 1990. Charles M. Leighton, Director of NEIC since May 1990, has been
Chairman of the Board and Chief Executive Officer of CML Group, Inc. a
speciality consumer products company, since 1969, and Director of The New
England and Corporate Software, Inc. Oscar L. Tang, Director of NEIC, Chairman
and Chief Executive Officer of Mid Pacific Air Corporation, and Director of
South Seas Textile Manufacturing Co., Ltd. G. Neil Ryland, Executive Vice
President, Treasurer and Chief Financial Officer 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. Sherry A. Umberfield, Executive Vice
President, Corporate Development of NEIC since December 1989, Vice President of
The New England from December 1988 to December 1992 and a Second Vice President
of The New England from 1984 to 1988, and Director of TNE Investment Services
Corporation ("TNEIS"), New England Investment Marketing, Inc. ("NEIM"), Westpeak
Investment Advisors, Inc. ("Westpeak") and Draycott Partners, Ltd, ("Draycott").
Edward N. Wadsworth, Executive Vice President, General Counsel, Clerk and
Secretary of NEIC since December 1989, Senior Vice President and Associate
General Counsel of The New England from 1984 until December 1992, and Secretary
of Westpeak and Draycott and the Treasurer of NEIM.

ITEM 29. Principal Underwriters.

(a) Reich & Tang Distributors L.P., the Registrant's distributor, 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., New York Daily Tax Free Income Fund,
Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily
Municipal Income Fund, Reich & Tang Government Securities Trust, 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 Asset Management L.P. Reich
& Tang Distributors L.P. does not have any officers. The principal business
address of each of these persons is 399 Boylston Street, Boston, Massachusetts
02116.

C-4
<PAGE>

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

Peter S. Voss President, CEO, and None
Director
Edward E. Phillips Director None
Robert A. Shafto Director None
Lawrence E. Fouraker Director None
Thomas J. Galligan, Jr. Director None
Charles M. Leighton Director None
Oscar L. Tang Director None
G. Neal Ryland Executive Vice President, None
Treasurer and CFO
Sherry A. Umberfield Executive Vice President -None
Corporate Development
Edward N. Wadsworth Executive Vice President None
and General Counsel

ITEM 30. Location of Accounts and Records.

The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained at the offices of Reich & Tang Asset Management L.P.,
600 Fifth Avenue, New York, New York 10020 (see "The Manager" in the
Prospectus). Additional records are maintained at the offices of Investors
Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri 64105, the
Registrant's Custodian and Fundtech Services L.P., Three University Plaza,
Hackensack, New Jersey 07601, the Registrant's transfer agent and dividend
disbursing agent.

ITEM 31. Management Services.

Not applicable.

ITEM 32. Undertakings.

The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's annual report, as supplemented,
when available, upon request, without charge.

C-5

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Post-Effective Amendment
to its Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and State of New York, on the 24th day of
April, 1995.

REICH & TANG EQUITY FUND, INC.

By: /s/Robert F. Hoerle
Robert F. Hoerle
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the date
indicated.

SIGNATURE TITLE DATE

(1) Principal Executive Officer:

/s/Robert F. Hoerle
Robert F. Hoerle President 4/24/95

(2) Principal Financial and
Accounting Officer:

/s/Richard DeSanctis
Richard De Sanctis Treasurer 4/24/95

(3) Majority of Directors:

/s/Robert F.Hoerle 4/24/95
Robert F. Hoerle

W. Giles Mellon Director)
Robert Straniere Director)
Yung Wong Director)

By: /s/Robert F. Hoerle 4/24/95
Robert F. Hoerle
Attorney-in-fact

EXHIBIT 11

McGLADREY & PULLEN, L.L.P.
Certified Public Accountants & Consultants

CONSENT OF INDEPENDENT AUDITORS

We consent to the use of our report dated January 27, 1995, on the
Financial statements referred to therein, in Post-Effective Amendment No. 20 to
the Registration Statement on Form N-1A, File No. 2-94184, of Reich & Tang
Equity Fund, Inc. as filed with the Securities and Exchange Commission.

We also consent to the reference to our Firm in the Prospectus under
the caption "Selected Financial Information" and in the Statement of Additional
Information under the caption "Counsel, Auditors and Custodian, Transfer Agent
and Dividend Agent."

McGladrey & Pullen, LLP

New York, New York
April 20, 1995

EXHIBIT 8(A)

CUSTODY AGREEMENT

THIS AGREEMENT made the 1st day of April, 1994 by and between INVESTORS
FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of the state
of Missouri, having its trust office located at 127 West 10th Street, Kansas
City, Missouri 64105 ("Custodian"), and The Funds listed in Exhibit A, having
its principal office and place of business at 600 Fifth Avenue; New York, New
York 10020 ("Fund").

WITNESSETH:

WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of Fund's investment portfolio; and

WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;

NOW THEREFORE, for an in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:

1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian
of the securities and monies at any time owned by the Fund.

2. REPRESENTATIONS AND WARRANTIES.

A. Fund hereby represents, warrants and acknowledges to Custodian:

1. That it is a corporation or trust (as specified above) duly organized
and existing and in good standing under the laws of its state of
organization, and that it is registered under the Investment Company
Act of 1940 (the "1940 Act"); and

2. That it has the requisite power and authority under applicable law,
its articles of incorporation and its bylaws to enter into this
Agreement; that it has taken all requisite action necessary to appoint
Custodian as custodian for the Fund; that this Agreement has been duly
executed and delivered by Fund; and that this Agreement constitutes a
legal, valid binding obligation of Fund, enforceable in accordance
with its terms.

<PAGE>

B. Custodian hereby represents, warrants and acknowledges to Fund:

1. That it is a trust company duly organized and existing and in good
standing under the laws of the State of Missouri; and

2. That it has the requisite power and authority under applicable law,
its charter and its bylaws to enter into and perform this Agreement;
that this Agreement has been duly executed and delivered by Custodian;
and that this Agreement constitutes a legal, valid binding obligation
of Custodian, enforceable in accordance with its terms.

3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.

A. Delivery of Assets

Except as permitted by the 1940 Act, Fund will deliver or cause to be
delivered to Custodian on the effective date of this Agreement, or as
soon thereafter as practicable, and from time to time thereafter, all
portfolio securities acquired by it and monies then owned by it or
from time to time coming into its possession during the time this
Agreement shall continue in effect. Custodian shall have no
responsibility or liability whatsoever for or on account of securities
or monies not so delivered.

B. Delivery of Accounts and Records

Fund shall turn over or cause to be turned over to Custodian all of
the Fund's relevant accounts and records previously maintained.
Custodian shall be entitled to rely conclusively on the completeness
and correctness of the accounts and records turned over to it, and
Fund shall indemnify and hold Custodian harmless of and from any and
all expenses, damages and losses whatsoever arising out of or in
connection with any error, omission, inaccuracy or other deficiency of
such accounts and records or in the failure of Fund to provide, or to
provide in a timely manner, any accounts, records or information
needed by the Custodian to perform its functions hereunder.

C. Delivery of Assets to Third Parties

Custodian will receive delivery of and keep safely the assets of Fund
delivered to it from time to time segregated in a separate account,

2
<PAGE>

and if Fund is comprised of more than one portfolio of investment
securities (each a "Portfolio") Custodian shall keep the assets of
each Portfolio segregated in a separate account. Custodian will not
deliver, assign, pledge or hypothecate any such assets to any person
except as permitted by the provisions of this Agreement or any
agreement executed by it according to the terms of Section 3.S. of
this Agreement. Upon delivery of any such assets to a subcustodian
pursuant to Section 3.S. of this Agreement, Custodian will create and
maintain records identifying those assets which have been delivered to
the subcustodian as belonging to the Fund, by Portfolio if applicable.
The Custodian is responsible for the safekeeping of the securities and
monies of Fund only until they have been transmitted to and received
by other persons as permitted under the terms of this Agreement,
except for securities and monies transmitted to subcustodians
appointed under Section 3.S. of this Agreement, for which Custodian
remains responsible to the extent provided in Section 3.S. hereof.
Custodian may participate directly or indirectly through a
subcustodian in the Depository Trust Company (DTC), Treasury/Federal
Reserve Book Entry System (Fed System), Participant Trust Company
(PTC) or other depository approved by the Fund (as such entities are
defined at 17 CFR Section 270.17f-4(b)) (each a "Depository") and
collectively, the "Depositories").

D. Registration of Securities

The Custodian shall at all times hold registered securities of the
Fund in the name of the Custodian, the Fund, or a nominee of either of
them, unless specifically directed by instructions to hold such
registered securities in so-called "street name", provided that, in
any event, all such securities and other assets shall be held in an
account of the Custodian containing only assets of the Fund, or only
assets held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the Custodian at
all time shall indicate the Fund or other customer for which such
securities and other assets are held in such account and the

3
<PAGE>

respective interests therein. If, however, the Fund directs the
Custodian to maintain securities in "street name", notwithstanding
anything contained herein to the contrary, the Custodian shall be
obligated only to utilize its best efforts to timely collect income
due the Fund on such securities and to notify the Fund of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers. All securities, and the
ownership thereof the Fund, which are held by Custodian hereunder,
however, shall at all time be identifiable on the records of the
Custodian. The Fund agrees to hold Custodian and its nominee harmless
for any liability as a shareholder of record of securities held in
custody.

E. Exchange of Securities

Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchange, portfolio securities
held by it for the account of Fund for other securities or cash issued
or paid in connection with any reorganization, recapitalization,
merger, consolidation, split-up of shares, change of par value,
conversion or otherwise, and will deposit any such securities in
accordance with the terms of any reorganization or protective plan.
Without instructions, Custodian is authorized to exchange securities
held by it in temporary form for securities in definitive form, to
effect an exchange of shares when the par value of the stock is
changed, and, upon receiving payment therefor, to surrender bonds or
other securities held by it at maturity or when advised of earlier
call for redemption, except that Custodian shall receive instructions
prior to surrendering any convertible security.

F. Purchases of Investments of the Fund

Fund will, on each business day on which a purchase of securities
shall be made by it, deliver to custodian instructions which shall
specify with respect to each such purchase.

1. If applicable, the name of the Portfolio making such purchase;
2. The name of the issuer and description of the security;

4
<PAGE>

3. The number of shares and the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes
and other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase; and
8. The name of the person from whom or the broker or dealer through
whom the purchase was made.
9. Whether the security is to be received in certificated form or
via a specified Depository.

In accordance with such instructions, Custodian will pay for out of
monies held for the account of Fund, but only insofar as such monies
are available for such purpose, and receive the portfolio securities
so purchased by or for the account of Fund, except that Custodian may
in its sole discretion advance funds to the Fund, which may result in
an overdraft because the monies held by the Custodian on behalf of the
Fund are insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, such payment shall
be made by the Custodian only upon receipt of securities: (a) by the
Custodian; (b) by a clearing corporation of a national exchange of
which the Custodian is a member; or (c) by a Depository.
Notwithstanding the foregoing, (i) in the case of a repurchase
agreement, the Custodian may release funds to a Depository prior to
the receipt of advice from the Depository that the securities
underlying such repurchase agreement have been transferred by
book-entry into the account maintained with such Depository by the
Custodian, on behalf of its customers, provided that the Custodian's
instructions to the Depository require that the Depository make
payment of such funds only upon transfer by book-entry of the
securities underlying the repurchase agreement in such amount; (ii) in
the case of time deposits, call account deposits, currency deposits

5
<PAGE>

and other deposits, foreign exchange transactions, futures contracts
or options, the Custodian may make payment therefor before receipt of
an advice or confirmation evidencing said deposit or entry into such
transaction; and (iii) in the case of the purchase of securities, the
settlement of which occurs outside of the United States of America,
the Custodian may make, or cause a subcustodian appointed pursuant to
Section 3.S.2. of this Agreement to make, payment therefor in
accordance with generally accepted local custom and market practice.

G. Sales and deliveries of Investments of the Fund - Other than Options
and Futures

Fund will, on each business day on which a sale of investment
securities (other than options and futures) of Fund has been made,
deliver to Custodian instructions specifying with respect to each such
sales:

1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the securities;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by Fund upon such sale; and
9. The name and address of the broker or dealer through whom or
person to whom the sale was made.

In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the amount
of Fund to the broker or other person specified in the instructions
relating to such sale. Except as otherwise instructed by Fund, such
delivery shall be made upon receipt of payment therefor: (a) in such

6
<PAGE>

form as is satisfactory to the Custodian; (b) credit to the account of
the Custodian with a clearing corporation of a national securities
exchange of which the Custodian is a member; or (c) credit to the
amount of the Custodian, on behalf of its customers, with a
Depository. Notwithstanding the foregoing: (i) in the case of
securities held in physical form, such securities shall be delivered
in accordance with "street delivery custom" to a broker or its
clearing agent; or (ii) in the case of the sale of securities, the
settlement of which occurs outside of the United States of America,
the Custodian may make, or cause a subcustodian appointed pursuant to
Section 3.S.2. of this Agreement to make, payment therefor in
accordance with generally accepted local custom and market practice.

H. Purchases of Sales of Options and Futures

Fund will, on each business day on which a purchase or sale of the
following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:

1. If appliable, the name of the Portfolio making such purchase or
sale;

2. Security Options

a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising, expiring
or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom the
sale or purchase was made.

7
<PAGE>
3. Options on Indices

a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising,
expiring or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions.

4. Security Index Future Contracts

a. The last trading date specified in the contract and, when
available, the closing level, thereof;
b. The index level on the date the contract is entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of
Custodian, Fund shall deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement which shall be incorporated by reference into this
Custody Agreement); and
f. The name and address of the futures commission merchant
through whom the sale or purchase was made or other
applicable settlement instructions.

8
<PAGE>
5. Options on Index Future Contracts

a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,exercising,
expiring or closing transaction;

h. Whether the option is written or purchased; and
i. The market on which the option is traded.

I. Securities Pledged or Loaned

If specifically allowed for in the prospectus of Fund, and subject to such
additional terms and conditions as Custodian may require:

1. Upon receipt of instructions, Custodian will release or cause to be
released securities held in custody to the pledge designated in such
instructions by way of pledge or hypothecation to secure any loan
incurred by Fund; provided, however, that the securities shall be
released only upon payment to Custodian of the monies borrowed, except
that in cases where additional collateral is required to secure a
borrowing already made, further securities may be released or caused
to be released for that purpose upon receipt of instructions. Upon
receipt of instructions, Custodian will pay, but only from funds
available for such purpose, any such loan upon redelivery to it of the
securities pledge or hypothecated therefor and upon surrender of the
note or notes evidencing such loan.

2. Upon receipt of instructions, Custodian will release securities held
in custody to the borrower designated in such instructions; provided,
however, that the securities will be released only upon deposit with
Custodian of full cash collateral as specified in such instructions,

9
<PAGE>

and that Fund will retain the right to any dividends, interest or
distribution on such loaned securities. upon receipt of instructions
and the loaned securities, Custodian will release the cash collateral
to the borrower.

J. Routine Matters

Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealing with securities or other dealing with
securities or other property of Fund except as may be otherwise
provided in this Agreement or directed from time to time by the Fund
in writing.

K. Deposit Accounts

Custodian will open and maintain one or more special purpose deposit
account in the name of Custodian ("Account"), subject only to draft or
order by Custodian upon receipt of instructions. All monies received
by Custodian from or for the account of Fund shall be deposited in
said Accounts. Barring events not in the control of the Custodian such
as strikes, lockouts or labor disputes, riots, war or equipment or
transmission failure or damage, fire, flood, earthquake or other
natural disaster, action or inaction of governmental authority or
other causes beyond its control, at 9:00 a.m., Kansas City time, on
the second business day after deposit of any check into an Account,
Custodian agrees to make Fed Funds available to the Fund in the amount
of the check. Deposits made by Federal Reserve wire will be available
to the Fund immediately and ACH wires will be available to the Fund on
the next business day. Income earned on the portfolio securities will
be credited to the Fund based on the schedule attached as Exhibit A.
The Custodian will be entitled to reverse any credited amounts where
credits have been made and monies are not finally collected. If monies
are collected after such reversal, the Custodian will credit the Funds
in that amount. Custodian may open and maintain Accounts in its own
banking department, or in such other banks or trust companies as may
be designated by it or by Fund in writing, all such Accounts, however,

10
<PAGE>

to be in the name of Custodian and subject only to its draft or order.
Funds received and held for the account of different Portfolios shall
be maintained in separate Accounts established for each Portfolio.

L. Income and other Payments to Fund

Custodian will:

1. Collect, claim, and receive and deposit for the account of Fund
all income and other payments which become due and payable on or
after the effective date of this Agreement with respect to the
securities deposited under this Agreement, and credit the account
of Fund in accordance with the schedule attached hereto as
Exhibit A. If, for any reason, the Fund is credited with income
that is not subsequently collected, Custodian may reverse that
credited amount.

2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and

3. Take such other action as may be necessary or proper in
connection with:

a. the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for
payment of:

1. all coupons and other income items requiring
presentation; and

2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the custodian has actual knowledge, or
should reasonably be expected to have knowledge; and

b. the endorsement for collection, in the name of Fund, of all
checks, drafts or other negotiable instruments.

Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfactory against

11
<PAGE>

the costs and expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and other
similar items and will deal with the same pursuant to instructions.
Unless prior instructions have been received to the contrary,
Custodian will, without further instructions, sell any rights held for
the account of Fund on the last trade date prior to the date of
expiration of such rights.

M. Payment of Dividends and other Distributions

On the declaration of any dividend or other distribution on the shares
of capital stock of Fund ("Fund Shares") by the Board of Directors of
Fund, Fund shall deliver to Custodian instructions with respect
thereto. On the date specified in such instructions for the payment of
such dividend or other distribution, Custodian will pay out of the
monies held for the account of Fund, insofar as the same shall be
available for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be necessary to pay the
amount per share payable in cash on Fund Shares issued and outstanding
on the record date established by such resolution.

N. Shares of Fund Purchased by Fund

Whenever any Fund Shares are repurchased or redeemed by Fund, Fund or
its agent shall advise Custodian of the aggregate dollar amount to be
paid for such shares and shall confirm such advice in writing. Upon
receipt of such advice, Custodian shall charge such aggregate dollar
amount to the amount of Fund and either deposit the same in the
account maintained for the purpose of paying for the repurchase or
redemption of Fund Shares or deliver the same in accordance with such
advice. Custodian shall not have any duty or responsibly to determine
that Fund Shares have been removed form the proper shareholder account
or accounts or that the proper number of Fund Shares have been
cancelled and removed from the shareholder records.

O. Shares of Fund Purchased from Fund

Whenever Fund Shares are purchased from Fund, Fund will deposit or
cause to be deposited with Custodian the amount received for such

12
<PAGE>

shares. Custodian shall not have any duty or responsibility to
determine that Fund Shares purchased from Fund have been added to the
proper shareholder account or accounts or that the proper number of
such shares have been added to the shareholder records.

P. Proxies and Notices

Custodian will promptly deliver or mail or have delivered or mailed to
Fund all proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements affecting or
relating to securities held by Custodian for Fund and will, upon
receipt of instructions, execute and deliver or cause its nominee to
execute and deliver or mail or have delivered or mailed such proxies
or other authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by Custodian,
neither it nor its nominee will exercise any power inherent in any
such securities, including any power to vote the same, or execute any
proxy, power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver with respect
thereto, or take any other similar action.

Q. Disbursements

Custodian will pay or cause to be paid, insofar as funds are available
for the purpose, bills, statements and other obligations of Fund
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by Fund,
interest charges, dividend disbursements, taxes, management fees,
custodian fees, legal fees, auditors' fee, transfer agents' fee,
brokerage commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting forth the
name of the person to whom payment is to be made, the amount of the
payment, and the purpose of the payment.

R. Daily Statement of Accounts.

Custodian will, within a reasonable time, render to Fund a detailed
statement of the amounts received or paid and of securities received

13
<PAGE>

or delivered for the account of Fund during each business day.
Custodian will, from time to time, upon request by Fund, render a
detailed statement of the securities and monies held for Fund under
this Agreement, and Custodian will maintain such books and records as
are necessary to enable it to do so. Custodian will permit such
persons as are authorized by Fund, including Fund's independent public
accounts, reasonable access to such records or will provide reasonable
confirmation of the contents of such records, and if demanded,
Custodian will permit federal and state regulatory agencies to examine
the securities, books and records. Upon the written instructions of
Fund or as demanded by federal or state regulatory agencies, Custodian
will instruct any subcustodian to permit such persons as are
authorized by Fund, including Fund's independent public accounts,
reasonable access to such records, or to provide reasonable
confirmation of the contents of such records, and to permit such
agencies to examine the books, records and securities held by such
subcustodian which relate to Fund.

S. Appointment of Subcustodians

1. Notwithstanding any other provisions of this Agreement, all or
any of the monies or securities of Fund may be held in
Custodian's own custody or in the custody of one or more other
banks or trust companies acting as subcustodians as may be
selected by Custodian. Any such subcustodian selected by the
Custodian must have the qualifications required for a custodian
under the 1940 Act, as amended. It is understood that Custodian
initially intends to appoint United Missouri Bank, N.A. (UMB) and
United Missouri Trust Company of New York (UMTCNY) as
subcustodians. Custodian shall be responsible to the Fund for any
loss, damage or expense suffered or incurred by the Fund
resulting from the actions or omissions of UMB, UMTCNY and any
other subcustodians selected and appointed by Custodian (except
subcustodians appointed as the request of Fund and as provided in
Subsection 2 below) to the same extent Custodian would be

14
<PAGE>

responsible to the Fund under Section 5. of this Agreement if it
committed the act or omission itself. Upon request of the Fund,
Custodian shall be willing to contract with other subcustodians
reasonably acceptable to the Custodian for purposes of (i)
effecting third-party repurchase transactions with banks,
brokers, dealers or other entities through the use of a common
custodian or subcustodian, or (ii) providing depository and
clearing agency services with respect to certain variable rate
demand note securities; or (iii) for other reasonable purposes
specified by Fund; provided, however, that the Custodian shall be
responsible to the Fund for any loss, damage or expense suffered
or incurred by the Fund resulting from the actions or omissions
of any such subcustodian only to the same extent such
subcustodian is responsible to the Custodian. The Fund shall be
entitled to review the Custodian's contracts with any such
subcustodians appointed at the request of Fund. Custodian shall
be responsible to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from the actions or
omission of any Depository only to the same extent such
Depository is responsible to Custodian.

2. Notwithstanding any other provisions of this Agreement, Fund's
foreign securities (as defined in Rule 17F-5(c)(1) under the 1940
Act) and Fund's cash or cash equivalents, in amounts deemed by
the Fund to be reasonably necessary to effect Fund's foreign
securities transactions, may be held in the custody of one or
more banks or trust companies acting as subcustodians, and
thereafter, pursuant to a written contract or contracts as
approved by Fund's Board of Directors, may be transferred to
accounts maintained by any such subcustodian with eligible
foreign custodians, as defined in Rule 17f-5(c)(2). Custodian
shall be responsible to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from the actions or

15
<PAGE>

omissions of any foreign subcustodians or a domestic
subcustodians or a domestic subcustodian contracting with such
foreign subcustodians only to the same extent such domestic
subcustodian is responsible to the Custodian.

T. Accounts and Records Property of Fund

Custodian acknowledges that all of accounts and records maintained by
Custodian pursuant to this Agreement are the property of Fund, and
will be made available to Fund for inspection or reproduction within a
reasonable period of time, upon demand. Custodian will assist Fund's
independent auditors, or upon approval of Fund, or upon demand, any
regulatory body, in any requested review of Fund's accounts and
records but shall be reimbursed by Fund for all expenses and employee
time invested in any such review outside of routine and normal
periodic reviews. Upon receipt from Fund of the necessary information
or instructions, Custodian will supply information from the books and
records it maintains for Fund that Fund needs for tax returns,
questionnaires, periodic reports to shareholders and such other
reports and information requests as Fund and Custodian shall agree
upon from time to time.

U. Adoption of Procedures

Custodian and Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no procedure
approved or directed by Fund or its accountants or other advisors
conflicts with of violates any requirements of its prospectus,
articles of incorporation, bylaws, any applicable law, rule or
regulation, or any order, decree or agreement by which Fund may be
bound. Fund will be responsible to notify Custodian of any changes in
statutes, regulations, rules requirements or policies which might
necessitate changes in Custodian's responsibilities or procedures.

V. Overdrafts

If Custodian shall in its sole discretion advance funds to the account
of the Fund which results in an overdraft in any Account because the
monies held therein by Custodian on behalf of the Fund are

16
<PAGE>

insufficient to pay the total amount payable upon a purchase of
securities as specified in Fund's instructions or for some other
reason, the amount of the overdraft shall be payable by the Fund to
Custodian upon demand together with the overdraft charge set forth on
the then-current Fee Schedule from the date advanced until the date of
payment. Fund hereby grants Custodian a lien on any security interest
in the assets of the Fund to secure the full amount of any outstanding
overdraft and related overdraft charges.

W. Exercise of Rights; Tender Offers

Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts calls, rights or similar securities to the trustee
therefor, or to the agent of such issuer or trustee, for the purpose
of exercise or sale, provided that the new securities, cash or other
assets, if any, are to be delivered to the Custodian; and (b) deposit
securities upon invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered to the
Custodian or the tendered securities are to be returned to the
Custodian.

4. INSTRUCTIONS.

A. The term "instructions", as used herein, means written (including
telecopied or telexed) or oral instructions which Custodian reasonably
believes were given by a designated representative of Fund. Fund shall
deliver to Custodian, prior to delivery of any assets to Custodian and
thereafter from time to time as changes therein are necessary, written
instructions naming one or more designated representatives to give
instructions in the name and on behalf of Fund, which instructions may
be received and accepted by Custodian as conclusive evidence of the
authority of any designated representative to act for Fund and may be
considered to be in full force and effect (and Custodian will be fully
protected in acting in reliance thereon) until receipt by Custodian of
notice to the contrary. Unless such written instructions delegating
authority to any person to give instructions specifically limit such
authority to specific matters or require that the approval of anyone
else will first have been obtained, Custodian will be under no

17
<PAGE>

obligation to inquire into the right of such person, acting alone, to
give any instructions whatsoever which Custodian may receive from such
person. If Fund fails to prove Custodian any such instructions naming
designated representatives, any instructions received by Custodian
from a person reasonably believed to be an appropriate representative
of Fund shall constitute valid and proper instructions hereunder.

B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such
oral instruction. At Custodian's sole discretion, Custodian may record
on tape, or otherwise, any oral instruction whether given in person or
via telephone, each such recording identifying the parties, the date
and the time of the beginning and ending of such oral instruction.

5. LIMITATION OF LIABILITY OF CUSTODIAN

A. Custodian shall at all time use reasonable care and due diligence and
act good faith in performing its duties under this Agreement.
Custodian shall not be responsible for, and the Fund shall indemnify
and hold Custodian harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability which may be asserted against Custodian, incurred by
Custodian or for which Custodian may be held to be liable, arising out
of or attributable to:

1. All actions taken by Custodian pursuant to this Agreement or any
instructions provided to it hereunder, provided that Custodian
has acted in good faith and with due diligence and reasonable
care; and

2. The Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to pay
or reimburse Custodian under this indemnification provision), the
Fund's negligence or willful misconduct, or the failure of any
representation or warranty of the Fund hereunder to be and remain
true and correct in all respects at all times.

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<PAGE>

B. Custodian may request and obtain at the expense of Fund the advice and
opinion of counsel for Fund or of its own counsel with respect to
questions or matters of law, and it shall be without liability to Fund
for any action taken or omitted by it in good faith, in conformity
with such advice or opinion. If Custodian reasonably believes that it
could not prudently act according to the instructions of the Fund or
the Fund's accountants or counsel, it may in its discretion, with
notice to the Funds, not act according to such instruction.

C. Custodian may rely upon the advice and statements of Fund, Fund's
accountants and officers or the other authorized individuals, and
other persons believed by it in good faith to be exert in matters upon
which they are consulted, and Custodian shall not be liable for any
actions taken, in good faith, upon such advice and statements.

D. If Fund requests Custodian in any capacity to take any action which
involves the payment of money by Custodian, or which might make it or
its nominee liable for payment of monies or in any other way,
Custodian shall be indemnified and held harmless by Fund against any
liability on account of such action; provided, however, that nothing
herein shall obligate Custodian to take any such action except in its
sole discretion.

E. Custodian shall be protected in acting as custodian hereunder upon any
instructions, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed and shall be entitled to receive upon request as
conclusive proof of any fact or matter required to be ascertained from
Fund hereunder a certificate signed by an officer or designated
representative of Fund.

F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:

1. The validity of the issue of any securities purchased by or for
Fund, the legality of the purchase of any securities or foreign
currency positions or evidence of ownership required by Fund to

19
<PAGE>
be received by Custodian, or propriety of the decision to
purchase or amount paid therefor;

2. The legality of the sale of any securities or foreign currency
positions by or for Fund, or the propriety of the amount for
which the same are sold;

3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;

4. The legality of the repurchase or redemption of any Fund Shares,
or the propriety of the amount to be paid therefor; or

5. The legality of the declaration of any dividend by Fund, or the
legality of the issue of any Fund Shares in payment of any stock
dividend.

G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check , draft wire transfer,
clearinghouse funds, uncollected funds, or instrument for payment of
money to be received by it on behalf of Fund until Custodian actually
receives such money; provided, however, that it shall advise Fund
promptly if it fails to receive any such money in the ordinary course
of business and shall cooperate with Fund toward the end that such
money shall be received.

H. Except as provided in Section 3.S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.

I. Custodian shall not be responsible or liable for the failure or delay
in performance of its obligations under this Agreement, or those of
any entity for which it is responsible hereunder, arising out of or
caused, directly or indirectly by circumstances beyond the affected
entity's reasonable control, including, without limitations: any
interruption, loss or malfunction of any utility, transportation,
computer(hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance, ruling,
regulations or direction; war, strike, riot, emergency, civil

20
<PAGE>

disturbance, terrorism, vandalism, explosions, labor disputes,
freezes, floods, fires, tornadoes, acts of God or public enemy,
revolutions, or insurrection.

J. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS
AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE
OTHER PARTY, FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY
ACT OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF
ADVISED OF THIS POSSIBILITY THEREOF.

6. COMPENSATION. In consideration for its services hereunder, Fund will pay to
Custodian such compensation as shall be set forth in a separate fee
schedule to be agreed to by Fund and Custodian from time to time. A copy of
the initial fee schedule is attached hereto and incorporated herein by
reference. Custodian shall also be entitled to receive, and Fund agrees to
pay a Custodian, on demand, reimbursement for Custodian's cash
disbursements and reasonable out-of-pocket costs and expenses, including
attorney's fees, incurred by Custodian in connection with the performance
of services hereunder. Custodian may charge such compensation against
monies held by it for the account of Fund. Custodian will also be entitled
to charge against any monies held by it for the account of Fund the amount
of any loss, charge, liability, advance, overdraft or expense for which it
shall be entitled to reimbursement from Fund, including but not limited to
fees and expenses due to Custodian for other services provided to the Fund
by Custodian. Custodian will be entitled to reimbursement by the Fund for
losses, damages, liabilities, advances, overdrafts and expenses of
subcustodians only to the extent that (i) Custodian would have been
entitled to reimbursement hereunder if it had incurred that same itself
directly, and (ii) Custodian is obligated to reimburse the subcustodian
therefor.

7. TERM AND TERMINATION. The initial term of this Agreement shall be for a
period of _________. Thereafter, either party to this Agreement may
terminate the same by notice in writing, delivered or mailed, postage
prepaid, to the other party hereto and received not less than ninety (90)
days prior to the date upon which such termination will take effect. Upon
termination of this Agreement, Fund will pay Custodian its fees and

21
<PAGE>

compensation due hereunder and its reimbursable disbursements, costs and
expenses paid or incurred to such date and Fund shall designate a successor
custodian by notice in writing to Custodian by the termination date. In the
event no written order designating a successor custodian has been delivered
to Custodian on or before the date when such termination becomes effective,
then Custodian may, at its option, deliver the securities, funds and
properties of Fund to a bank or trust company at the selection of
Custodian, and meeting the qualifications for custodian set forth in the
1940 Act and having not less that Two Million Dollars ($2,000,000)
aggregate capital, surplus and undivided profits, as shown by its last
published report, or apply to a court of competent jurisdiction for the
appointment of a successor custodian or other proper relief, or take any
other lawful action under the circumstances; provided, however, that Fund
shall reimburse Custodian for its costs and expenses, including reasonable
attorney's fees, incurred in connection therewith. Custodian will, upon
termination of this Agreement and payment of all sums due to Custodian from
Fund hereunder or otherwise deliver to the successor custodian so specified
or appointed, or as specified by the court, at Custodian office, all
securities then held by Custodian hereunder, duly endorsed and in form for
transfer, and all funds and other properties of Fund deposited with or held
by Custodian hereunder and Custodian will co-operate in effecting changes
in book-entries at all Depositories. Upon delivery to a successor custodian
or as specified by the court, Custodian will have no further obligations or
liabilities under this Agreement. Thereafter such successor will be the
successor custodian under this Agreement and will be entitled to reasonable
compensation for its services. In the event that securities, funds and
other properties remain in the possession of the Custodian after the date
of termination thereof owing to failure of the Fund to appoint a successor
custodian, the Custodian shall be entitled to compensation as provided in
the then-current fee schedule hereunder for its services during such period
as the Custodian retains possession of such securities, funds and other
properties, and the provisions of this Agreement relating to the duties and
obligations of the Custodian shall remain in full force and effect.

22
<PAGE>

8. NOTICES. Notices, requests, instructions and other writings addressed to
Fund at ______________________, or at such other address as Fund may have
designated to Custodian in writing, will be deemed to have been properly
given to Fund hereunder; and notices, requests, instructions and other
writings addressed to Custodian at its offices at 127 West 10th Street,
Kansas City, Missouri 64105, Attention: Custody Department, or to such
other address as it may have designated to Fund in writing, will be deemed
to have been properly given to Custodian hereunder.

9. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio:

A. Each Portfolio shall be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered by this
Agreement, every reference herein to the Fund shall be deemed to
relate solely to the particular Portfolio to which such transaction
relates. Under no circumstances shall the rights, obligation or
remedies with respect to a particular Portfolio constitute a right,
obligation or remedy applicable to any other Portfolio. The use of
this single document to memorialize the separate agreement of each
Portfolio is understood to be for clerical convenience only and shall
not constitute any basis for joining the Portfolios for any reason.

B. Additional Portfolios may be added to this Agreement, provided that
Custodian consents to such addition. Rates or charges for each
additional Portfolio shall be as agreed upon by Custodian and Fund in
writing.

10. MISCELLANEOUS.

A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of Missouri, without reference to the choice of laws
principle thereof.

B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.

23
<PAGE>

C. The representations and warranties and the indemnification extended
hereunder are intended to and shall continue after and survive the
expiration, termination or cancellation of this Agreement.

D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by each party hereto.

E. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting form any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed as
a continuing or permanent waiver of any such terms, conditions, rights
or privileges, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred. No
waiver, release or discharge of any party's rights hereunder shall be
effective unless contained in a written instrument signed by the party
sought to be charged.

F. The captions in the Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect

G. This Agreement may be executed into or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.

H. If any part, term or provision of this Agreement is determined by the
courts or any regulatory authority to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held
to be illegal or invalid.

I. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party.

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<PAGE>

J. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
Custodian and Fund.

K. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by either party hereunder shall not
affect any rights or obligations of the other party hereunder.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.

INVESTORS FIDUCIARY TRUST COMPANY

By: /s/Allen A. Straw
Title: Executive Vice President

FUND

By: /s/Bernadette N. Finn
Title: Secretary

25
<PAGE>

EXHIBIT A

INVESTORS FIDUCIARY TRUST COMPANY
AVAILABILITY SCHEDULE BY TRANSACTION TYPE

<TABLE>
<CAPTION>
TRANSACTION DTC PHYSICAL FED

TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE

<S> <C> <C> <C> <C> <C> <C>
Calls Puts As Received C or F* As Received C or F*

Maturities As Received C or F* Maturity Date C or F* Maturity Date F

Tender Reorgs. As Received C As Received C N/A

Dividends Paydate C Paydate C N/A

Floating Rate Paydate C Paydate C N/A
Int.

Floating Rate As Rate C N/A
Int. (No Rate) N/A Received

Mtg. Backed Paydate C Paydate + 1 C Paydate F
P&I Bus. Day

Fixed Rate
Inc. Paydate C Paydate C Paydate F

Euroclear N/A C Paydate C

</TABLE>

Legend

C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
* Availability based in how received.

26
<PAGE>

EXHIBIT A

Name of Fund

California Daily Tax Free Income Fund, Inc. *
Connecticut Daily Tax Free Income Fund, Inc. *
Cortland Trust Inc. *
Daily Tax Free Income Fund, Inc. *
Florida Daily Municipal Income Fund +
Institutional Daily Income Fund +
Michigan Daily Tax Free Income Fund, Inc. *
New Jersey Daily Municipal Income Fund, Inc. *
New York Daily Tax Free Income Fund, Inc. *
North Carolina Daily Municipal Income Fund, Inc. *
Pennsylvania Daily Municipal Income Fund +
Reich & Tang Equity Fund, Inc. *
Reich & Tang Government Securities Trust +
Short Term Income Fund, Inc. *
Tax Exempt Proceeds Funds, Inc. *

* Maryland Corporation
+ Massachusetts Business Trust

Dated: August 30, 1994