CONNECTICUT DAILY TAX FREE INCOME FUND INC, 485BPOS, 1996-05-31

CONNECTICUT DAILY TAX FREE INCOME FUND INC
485BPOS, 1996-05-31

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As filed with the Securities and Exchange Commission on May 31, 1996

Registration No. 2-96456

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. 21 [X]

and/or

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

Amendment No. 18 [X]

CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)

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

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

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

Copy to: MICHAEL R. ROSELLA, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10020
(212) 856-6858

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

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

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 January 31, 1996 on March 25, 1996.

<PAGE>

CONNECTICUT DAILY TAX FREE INCOME FUND, INC.

Registration Statement on Form N-1A

CROSS-REFERENCE SHEET
Pursuant to Rule 404(c)

Part A
Item No. Prospectus Heading

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

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

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

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

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

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

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

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

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

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

<PAGE>

Part B Caption in Statement of
Item No. Additional Information

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

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

12. General Information and History . . . . Manager; Management of the Fund

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

14. Management of the Fund. . . . . . . . . Manager; Management of the Fund

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

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

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

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

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

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

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

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

23. Financial Statements . . . . . . . . . .Independent Auditor's Report;
Statement of Net Assets (audited),
dated January 31, 1996; Statement
of Operations (audited), dated
January 31, 1996; Statements of
Changes in Net Assets (audited),
for the fiscal years ended
January 31, 1995 and 1996; Notes to
Financial Statements (audited)

<PAGE>

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CONNECTICUT DAILY TAX FREE INCOME FUND, INC.

600 Fifth Avenue, New York, NY 10020
(212) 830-5200
================================================================================

SUPPLEMENT DATED May 31, 1996

Reich & Tang Asset Management L.P., the Fund's investment advisor, is a
wholly-owned subsidiary of New England Investment Companies, L.P. ("NEIC"). New
England Mutual Life Insurance Company ("The New England") owns NEIC's sole
general partner and a majority of the limited partnership interest in NEIC. The
New England and Metropolitan Life Insurance Company ("MetLife") have entered
into an agreement to merge, with MetLife to be the survivor of the merger. The
merger is conditioned upon, among other things, approval by the policyholders of
The New England and MetLife and receipt of certain regulatory approvals. The
merger is not expected to occur until after July 1, 1996.

The merger of The New England into MetLife will constitute an "assignment" of
the existing investment advisory agreement relating to the Fund. Under the
Investment Company Act of 1940, such an "assignment" will result in the
automatic termination of the investment advisory agreement, effective at the
time of the merger. In anticipation of the merger, shareholders of the Fund have
approved a new investment advisory agreement, intended to take effect at the
time of the merger. The new agreement will be substantially similar to the
existing agreement.

<PAGE>

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

PROSPECTUS
MAY 31, 1996

This Prospectus sets forth concisely the information about the Fund that
prospective investors will find helpful in making their investment decisions.
Additional information about the Fund has been filed with the Securities and
Exchange Commission and is available upon request and without charge by calling
or writing the Fund at the address or telephone number set forth above. The
"Statement of Additional Information" bears the same date as this Prospectus and
is incorporated by reference into this Prospectus in its entirety.

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.

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

SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT 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 .30%
12b-1 Fees .20%
Other Expenses .41%
Administration Fees-After Fee Waiver .18% ____
Total Fund Operating Expenses .91%

<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) $9 $29 $50 $112

The purpose of the above fee table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a further discussion of these fees see "Management of the Fund"
and "Distribution and Service Plan" herein. The Manager has voluntarily waived a
portion of the Administration Fees; absent such waiver the Administration Fees
would have been .20%. and Total Fund Operating Expenses would have been .94%. As
of December 1, 1995, however, the Administration Fee was changed to .21%. THE
FIGURES REFLECTED IN THIS EXAMPLE SHOULD NOT 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 Connecticut Daily Tax Free
Income Fund, Inc. has been audited by McGladrey & Pullen, LLP, Independent
Certified Public Accountants, whose report thereon appears in the Statement of
Additional Information.

Year Ended January 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----

Per Share Operating Performance:
(for a share outstanding throughout the period)

Net asset value, beginning of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income..... 0.0300 0.0230 0.0170 0.0210 0.0350 0.0490 0.0540 0.0440 0.0380 0.0380
Less distributions:
Dividends from net investment income (0.0300) (0.0230) (0.0170) (0.0210) (0.0350)(0.0490) (0.0540) (0.0440) (0.0380)(0.0380)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= ======== ======= ======= ======= ======= =======
Total Return................ 3.02% 2.29% 1.70% 2.12% 3.56% 5.01% 5.58% 4.53% 3.90% 3.88%

Ratios/Supplemental Data

Net assets, end of
period (000's omitted) $105,826 $81,801 $120,551 $129,297 $185,339 $178,335 $228,167 $245,529 $241,638 $248,193
Ratios to average net assets:
Expenses.................. .91%+ .88% 0.87% 0.86%+ 0.79% 0.80% 0.78% 0.79% 0.76%+ 0.75%+
Net investment income..... 2.96%+ 2.25% 1.68% 2.14%+ 3.51% 4.92% 5.44% 4.44% 3.83%+ 3.75%+

+ Net of management, shareholder servicing and administration fees waived
equivalent to .03%, .06%, .03% and .09% of average net assets, respectively.

</TABLE>

2
<PAGE>

INTRODUCTION

Connecticut Daily Tax Free Income Fund, Inc. (the "Fund") is a non-diversified,
open-end management investment company that is a short-term, tax-exempt money
market fund whose investment objectives are to seek as high a level of current
income, exempt under current law from Federal income taxes and to the extent
possible from Connecticut personal income taxes, as is believed to be consistent
with preservation of capital, maintenance of liquidity and stability of
principal by investing principally in short-term, high quality debt obligations
of the State of Connecticut, its political subdivisions, and certain possessions
and territories of the United States, the interest on which is exempt from
Federal income tax under section 103 of the Internal Revenue Code (the "Code"),
as described under "Investment Objectives, Policies and Risks" herein. The Fund
also may invest in municipal securities of issuers located in jurisdictions
other than Connecticut, the interest income on which will be exempt from Federal
income tax, but will be subject to Connecticut personal income taxes for
Connecticut residents. The Fund seeks to maintain an investment portfolio with a
dollar-weighted average maturity of 90 days or less, and to value its investment
portfolio at amortized cost and maintain a net asset value of $1.00 per share.
The Fund intends to invest all of its assets in tax-exempt obligations; however,
it reserves the right to invest up to 20% of the value of its net assets
intaxable obligations. This is a summary of the Fund's fundamental investment
policies which are set forth in full under "Investment Objectives, Policies and
Risks" herein and in the Statement of Additional Information and may not be
changed without approval of a majority of the Fund's outstanding shares. No
assurance can be given that these objectives will be achieved.

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

On any day on which the New York Stock Exchange, Inc. is open for trading ("Fund
Business Day"), investors may, without charge by the Fund, purchase and redeem
shares of the Fund's common stock at their net asset value next determined after
receipt of the order. An investor's purchase order will be accepted after the
payment is converted into Federal funds, and shares will be issued as of the
Fund's next net asset value determination which is made as of 12 noon, New York
City time, on each Fund Business Day. (See "How to Purchase and Redeem Shares"
and "Net Asset Value" herein.) Dividends from accumulated net income are
declared by the Fund on each Fund Business Day. The Fund generally pays interest
dividends monthly. Net capital gains, if any, will be distributed at least
annually and in no event later than within 60 days after the end of the Fund's
fiscal year. All dividends and distributions of capital gains are automatically
invested in additional shares of the Fund unless a shareholder has elected by
written notice to the Fund to receive either of such distributions in cash. (See
"Dividends and Distributions" herein.)

3
<PAGE>

meet their obligations thereunder. Investors should consider the greater risk of
the Fund's concentration versus the safety that comes with a less concentrated
portfolio and should compare yields available on portfolios of Connecticut
issues with those of more diversified portfolios including out-of-state issues
before making an investment decision. The Fund's Board of Directors is
authorized to divide the unissued shares into separate series of stock, one for
each of the Fund's separate investment portfolios that may be created in the
future.

INVESTMENT OBJECTIVES,
POLICIES AND RISKS

The Fund is a non-diversified, open-end management investment company that is a
short-term, tax-exempt money market fund whose investment objectives are to seek
as high a level of current income, exempt from Federal income taxes and, to the
extent possible, from Connecticut personal income taxes (the "Connecticut
Personal Income Tax"), as is believed to be consistent with preservation of
capital, maintenance of liquidity and stability of principal. There can be no
assurance that the Fund will achieve its investment objectives.

Although the Supreme Court has determined that Congress has the authority to
subject the interest on bonds such as the Municipal Obligations to regular
Federal income taxation, existing law excludes such interest from regular
Federal income tax. However, "exempt-interest dividends" may be subject to the
Federal alternative minimum tax. (See "Federal Income Taxes" herein.)
Exempt-interest dividends paid by the Fund correctly identified as derived from
obligations issued by or on behalf of the State of Connecticut or any political
subdivision thereof, or public instrumentality, state or local authority,
district, or similar public entity created under the laws of the State of
Connecticut or from obligations (such as certain obligations issued by or on
behalf of possessions or territories of the United States) the interest on which
Federal law prohibits the states from taxing ("Connecticut Municipal
Obligations") will be exempt from the Connecticut Personal Income Tax. (See
"Connecticut Income Taxes" herein.) To the extent suitable Connecticut Municipal
Obligations are not available for investment by the Fund, the Fund may purchase
Municipal Obligations issued by other states, their agencies and
instrumentalities or other obligations, the dividends designated as derived from
interest income on which will be exempt from Federal income tax but will be
subject to the Connecticut Personal Income Tax. However, except as a temporary
defensive measure during periods of adverse market conditions as determined by
the Manager, the Fund will invest at least 65% of its total assets in
Connecticut Municipal Obligations, the exempt-interest dividends derived from
which are exempt from the Connecticut Personal Income Tax, although the exact
amount of the Fund's assets invested in such securities will vary from time to
time. The Fund's investments may include "when-issued" Municipal Obligations,
stand-by commitments and taxable repurchase agreements. Although the Fund will
attempt to invest 100% of its assets in Municipal Obligations, the Fund reserves
the right to invest up to 20% of the value of its net assets in securities, the
interest income on which is subject to Federal, state and local income tax. The
Fund expects to

4
<PAGE>

invest more than 25% of its assets in participation certificates purchased from
banks in industrial revenue bonds and other Connecticut Municipal Obligations.

In view of this "concentration" in bank participation certificates in
Connecticut Municipal Obligations, an investment in the Fund should be made with
an understanding of the characteristics of the banking industry and the risks
which such an investment may entail, which include extensive governmental
regulation, changes in the availability and cost of capital funds, and general
economic conditions (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) The investment
objectives of the Fund described in this paragraph may not be changed unless
approved by the holders of a majority of the outstanding shares of the Fund that
would be affected by such a change. As used in this Prospectus, the term
"majority of the outstanding shares" of the Fund means, respectively, the vote
of the lesser of (i) 67% or more of the shares of the Fund present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy or (ii) more than 50% of the outstanding shares
of the Fund.

The Fund may only purchase Municipal Obligations that have been determined by
the Fund's Board of Directors to present minimal credit risks and that are
Eligible Securities at the time of acquisition. The term Eligible Securities
means (i) Municipal Obligations with remaining maturities of 397 days or less
and rated in the two highest short-term rating categories by any two nationally
recognized statistical rating ("NRSROs") or in such categories by the only NRSRO
that has rated the Municipal Obligations (collectively, the "Requisite NRSROs")
(acquisition in the latter situation must also be ratified by the Board of
Directors); (ii) Municipal Obligations with remaining maturities of 397 days or
less but that at the time of issuance were long-term securities (i.e., with
maturities greater than 366 days) and whose issuer has received from the
Requisite NRSROs a rating with respect to comparable short-term debt in the two
highest short-term rating categories and (iii) unrated Municipal Obligations
determined by the Fund's Board of Directors to be of comparable quality. Where
the issuer of a long-term security with a remaining maturity which would
otherwise qualify it as an Eligible Security, does not have have rated
short-term debt outstanding, the long-term security is treated as unrated but
may not be purchased if it has a long-term rating from any NRSRO that is below
the two highest long-term categories. A determination of comparability by the
Board of Directors is made on the basis of its credit evaluation of the issuer,
which may include an evaluation of a letter of credit, guarantee, insurance or
other credit facility issued in support of the Municipal Obligations or
participation certificates. (See "Variable Rate Demand Instruments and
Participation Certificates" in the Statement of Additional Information.) While
there are several organizations that currently qualify as NRSROs, two examples
of NRSROs are Standard & Poor's Corporation ("S&P") and Moody's Investors
Service, Inc. ("Moody's"). The two highest ratings by S&P and Moody's are "AAA"
and "AA" by S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by
Moody's in the case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by
Moody's in the case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2"
by Moody's in the case of tax-exempt commercial paper. The highest rating in the
case of variable and floating demand notes is "VMIG-1" by Moody's and "SP-1/AA"
by S&P. Such instruments may produce a lower yield than would be available from
less highly rated instruments. The Fund's Board of Directors has determined that
obligations which are backed by the credit of the Federal government (the
interest on which is not exempt from Federal income taxation) will be considered
to have a rating equivalent to Moody's "Aaa". Subsequent to its purchase by the
Fund, the quality of an investment may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Fund. If this occurs, the
Board of Directors of the Fund shall reassess promptly whether the security
presents minimal credit risks and shall cause the

5
<PAGE>

Fund to take such action as the Board of Directors determines is in the best
interest of the Fund and its shareholders. However, reassessment is not required
if the security is disposed of or matures within five business days of the
Manager becoming aware of the new rating and provided further that the Board of
Directors is subsequently notified of the Manager's actions.

In addition, in the event that a security (1) is in default, (2) ceases to be an
eligible investment under Rule 2a-7 or (3) is determined to no longer present
minimal credit risks, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Fund. In the event that the security
is disposed of it shall be disposed of as soon as practicable consistent with
achieving an orderly disposition by sale, exercise of any demand feature or
otherwise. In the event of a default with respect to a security which
immediately before default accounted for 1/2 of 1% or more of the Fund's total
assets, the Fund shall promptly notify the Securities and Exchange Commission of
such fact and of the actions that the Fund intends to take in response to the
situation.

In view of the "concentration" of the Fund in bank participation certificates in
Connecticut Municipal Obligations, which may be secured by bank letters of
credit or guarantees, an investment in the Fund should be made with an
understanding of the characteristics of the banking industry and the risks which
such an investment may entail which include extensive governmental regulation,
changes in the availability and cost of capital funds and general economic
condition. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) Banks are subject to
extensive governmental regulations which may limit both the amounts and types of
loans and other financial commitments which may be made and interest rates and
fees which may be charged. The profitability of this industry is largely
dependent upon the availability and cost of capital funds for the purpose of
financing lending operations under prevailing money market conditions. Also,
general economic conditions play an important part in the operations of this
industry and exposure to credit losses arising from possible financial
difficulties of borrowers might affect a bank's ability to meet its obligations
under a letter of credit. The Fund may invest 25% or more of the net assets of
any portfolio in securities that are related in such a way that an economic,
business or political development or change affecting one of the securities
would also affect the other securities including, for example, securities the
interest upon which is paid from revenues of similar type projects, or
securities the issuers of which are located in the same state.

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

As a non-diversified investment company, the Fund is not subject to any
statutory restriction under the 1940 Act with respect to investing its assets in
one or relatively few issuers. This non-diversification may present greater
risks than in the case of a diversified company. However, the Fund intends to
qualify as a "regulated investment company" under Subchapter M of the Code. The
Fund will be restricted in that, at the close of each quarter of the taxable
year, at least 50% of the value of its total assets must be represented by cash,
government securities, investment company securities and other securities
limited in respect of any one issuer to not more than 5% in value of the total
assets of the Fund and to not more than 10% of the outstanding voting securities
of such issuers. In addition, at the close of each quarter of its taxable year,
not more than 25% in value of the Fund's total assets may be invested in
securities of one issuer other than government

<PAGE>

securities. The limitations described in this paragraph are not fundamental
policies and may be revised to the extent applicable Federal income tax
requirements are revised. (See "Federal Income Taxes" herein.)

The primary purpose of investing in a portfolio of Connecticut Municipal
Obligations is the special tax treatment accorded Connecticut resident
individual investors. However, payment of interest and preservation of principal
is dependent upon the continuing ability of the issuers and/or obligors of
state, municipal and public authority debt obligations to meet their obligations
thereunder. Investors should consider the greater risk of the Fund's
concentration versus the safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios of Connecticut
issues with those of more diversified portfolios including out-of-state issues
before making an investment decision. The Fund's management believes that by
maintaining the Fund's investment portfolio in liquid, short-term, high quality
investments, including participation certificates and other variable rate demand
instruments that have high quality credit support from banks, insurance
companies or other financial institutions, the Fund is largely insulated from
the credit risks that may exist on long-term Connecticut Municipal Obligations.
For additional information, please refer to the Statement of Additional
Information.

CONNECTICUT RISK FACTORS

Because of the Fund's concentration in investments in Connecticut Municipal
Obligations, the safety of an investment in the Fund will depend importantly on
the financial strength of Connecticut and its political subdivisions. The
Connecticut economy relies in part on activities that have been subject to
cyclical change, and the State is now in a recession the depth and duration of
which are uncertain. The State's General Fund ran operating deficits for the
four fiscal years ended June 30, 1991, and accumulated an unappropriated deficit
of $965,712,000. While the State's General Fund ran operating surpluses for the
four fiscal years ended June 30, 1995, largely because of the enactment of the
Connecticut Personal Income Tax, contractions in defense and other industries
are adversely affecting Connecticut's economy, and unemployment and poverty
plague some of its cities and towns. There can be no assurance that general
economic difficulties or the financial circumstances of Connecticut or its towns
and cities will not adversely affect the market value of their obligations or
the ability of the obligors to pay debt service on such obligations.

MANAGEMENT OF THE FUND

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

The Manager is a Delaware limited partnership with its principal office at 600
Fifth Avenue, New York, New York 10020. The Manager was at April 30, 1996
investment manager, advisor or supervisor with respect to assets aggregating in
excess of $9.1 billion. The Manager acts as investment manager or administrator
of fifteen other registered investment companies and also advises pension
trusts, profit-sharing trusts and endowments.

7
<PAGE>

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.

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 55.9% of the total
partnership units outstanding of NEICLP, and Reich & Tang, Inc. owns
approximately 17.6% 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 ten investment advisory/management affiliates and two distribution
subsidiaries. These include, in addition to the Manager, 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., Harris Associates and an affiliate, Capital Growth Management
Limited Partnership. These affiliates in the aggregate are investment advisors
or managers to 42 other registered investment companies.

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

For its services under the Investment Management Contract, the Manager receives
from the Fund a fee equal to .30% per annum of the Fund's average daily net
assets for managing the Fund's investment portfolio and performing related
services. In addition to its fees under the Investment Management Contract,
Reich & Tang Distributors L.P., (the "Distributor"), receives a service fee
equal to .20% per annum of the Fund's average daily net assets under the
Shareholder Servicing Agreement. The fees are accrued daily and paid monthly.

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

DESCRIPTION OF COMMON STOCK

The Fund was incorporated in Maryland on March 8, 1985. The authorized capital
stock of the Fund consists of twenty billion shares of stock having a par value
of one-tenth of one cent ($.001) per share. The Fund's Board of Directors is
authorized to divide the unissued shares into separate series of stock, each
series representing a separate, additional investment portfolio. Shares of all
series will have identical voting rights, except where, by law, certain matters
must be approved by a majority of the shares of the affected series. Each share
of any series of shares when issued has equal dividend, distribution,
liquidation and voting rights within the series for which it was issued, and
each fractional share has those rights in proportion to the percentage that the
fractional share represents of a whole share. Shares will be voted in the
aggregate. There are no conversion or preemptive rights in connection with any
shares of

8
<PAGE>

the Fund. All shares, when issued in accordance with the terms of the offering
will be fully paid and nonassessable. Shares are redeemable at net asset value,
at the option of the shareholder.

Under its Articles of Incorporation the Fund has the right to redeem for cash
shares of stock owned by any shareholder to the extent and at such times as the
Fund's Board of Directors determines to be necessary or appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes. In this regard, the
Fund may also exercise its right to reject purchase orders. As of April 30,
1996, 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.

The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. Certificates for Fund shares will
not be issued to an investor.

DIVIDENDS AND DISTRIBUTIONS

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

Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year.

All dividends and distributions of capital gains are automatically invested in
additional Fund shares immediately upon payment thereof unless a shareholder has
elected by written notice to the Fund to receive either of such distributions in
cash.

HOW TO PURCHASE AND REDEEM SHARES

Investors who have accounts with Participating Organizations may invest in the
Fund through their Participating Organizations in accordance with the procedures
established by the Participating Organizations. (See "Investments Through
Participating Organizations" herein.) All other investors, and investors who
have accounts with Participating Organizations but who do not wish to invest in
the Fund through their Participating Organizations, may invest in the Fund
directly. (See "Direct Purchase and Redemption Procedures" herein.) The minimum
initial investment in the Fund by Participating Organizations is $1,000 which
may be satisfied by initial investments aggregating $1,000 by a Participating
Organization on behalf of customers whose initial investments are less than
$1,000. The minimum initial investment for securities brokers, financial
institutions and other industry professionals that are not Participating
Organizations is $1,000. The minimum initial investment for all other investors
is $5,000. Initial investments may be made in any amount in excess of the
applicable minimums. The minimum amount for subsequent investments is $100
unless the investor is a client of a Participating Organization whose clients
have made aggregate subsequent investments of $100.

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

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

9
<PAGE>

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

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

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

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

Redemption requests received by the Fund's transfer agent before 12 noon, New
York City time, on any Fund Business Day become effective at 12 noon that day.
Shares redeemed are not entitled to participate in dividends declared on the day
a redemption becomes effective. A redemption request received after 12 noon, New
York City time, on any Fund Business Day becomes effective on the next Fund
Business Day.

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

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

INVESTMENTS THROUGH
PARTICIPATING ORGANIZATIONS

10
<PAGE>

industry professionals or organizations which have entered into shareholder
servicing agreements with the Manager with respect to investment of their
customer accounts in the Fund. When instructed by its customer to purchase or
redeem Fund shares, the Participating Organization, on behalf of the customer,
transmits to the Fund's transfer agent a purchase or redemption order, and in
the case of a purchase order, payment for the shares being purchased. No
certificates are issued with respect to investments made through Participating
Organizations.

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

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

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

In the case of qualified Participating Organizations, orders received by the
Fund's transfer agent before 12 noon, New York City time, on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day provided that the Federal Funds required in connection with the orders
are received by the Fund's transfer agent before 4:00 p.m., New York City time,
on that day. Orders for which Federal Funds are received after 4:00 p.m., New
York City time, will not result in share issuance until the following Fund
Business Day. Participating Organizations are responsible for instituting
procedures to insure that purchase orders by their respective clients are
processed expeditiously.

DIRECT PURCHASE AND
REDEMPTION PROCEDURES

The following purchase and redemption procedures apply to investors who wish to
invest

11
<PAGE>

in the Fund directly and not through Participating Organizations. These
investors may obtain a current prospectus and the subscription order form
necessary to open an account by telephoning the Fund at the following numbers:

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

All shareholders, other than certain Participant Investors, will receive from
the Fund individual confirmations of each purchase and redemption of Fund shares
(other than draft check redemptions) and a monthly statement listing the total
number of Fund shares owned as of the statement closing date, purchase and
redemptions of Fund shares during the month covered by the statement and the
dividends paid on Fund shares of each shareholder during the statement period
(including dividends paid in cash or reinvested in additional Fund shares).
Certificates for Fund shares will not be issued to an investor.

Initial Purchases of Shares

Mail

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

Connecticut Daily Tax Free Income Fund, Inc.
Reich & Tang Funds
600 Fifth Avenue
New York, New York 10020

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

Bank Wire

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

Investors Fiduciary Trust Company
ABA # 101003621
DDA # 890752-953-8
For Connecticut Daily Tax Free
Income Fund, Inc.
Account of (Investor's Name)_________
Fund Account #0308___________________
SS #/Tax ID #________________________

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

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

Personal Delivery

Deliver a check made payable to "Connecticut Daily Tax Free Income Fund, Inc."
along with a completed subscription order form to:

Reich & Tang Funds
600 Fifth Avenue - 9th Floor
New York, New York 10020

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

You may purchase shares of the Fund (minimum of $100) by having salary, dividend
payments, interest payments or any other payments designated by you, or by
having federal salary, social security, or certain veteran's, military or other
payments from the federal government,

12
<PAGE>

automatically deposited into your Fund account. You can also have money debited
from your checking account. To enroll in any one of these programs, you must
file with the Fund a completed EFT Application, Pre-authorized Credit
Application, or a Direct Deposit Sign-Up Form for each type of payment that you
desire to include in the Privilege. The appropriate form may be obtained from
your broker or the Fund. You may elect at any time to terminate your
participation by notifying in writing the appropriate depositing entity and/or
federal agency. Death or legal incapacity will automatically terminate your
participation in the Privilege. Further, the Fund may terminate your
participation upon 30 days' notice to you.

Subsequent Purchases of Shares

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

Connecticut Daily Tax Free Income Fund, Inc.
Reich & Tang Funds
P.O. Box 13232
Newark, New Jersey 07101-3232

There is a $100 minimum for subsequent purchases of shares. All payments should
clearly indicate the shareholder's account number. Provided that the information
on the subscription form on file with the Fund is still applicable, a
shareholder may reopen an account without filing a new subscription order form
at any time during the year the shareholder's account is closed or during the
following calendar year.

Redemption of Shares

A redemption is effected immediately following, and at a price determined in
accordance with, the next determination of net asset value per share following
reciept by the Fund's transfer agent of the redemption order. Normally, payment
for redeemed shares is made on the same Fund Business Day after the redemption
is effected, provided the redemption request is received prior to 12 noon, New
York City time and on the next Fund Business Day if the redemption request is
received after 12 noon, New York City time. However, redemption requests will
not be effected unless the check (including a certified or cashier's check) used
to purchase the shares has been cleared for payment by the investor's bank,
currently considered by the Fund to occur within 15 days after investment.

A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee. When a
signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature, signed and guaranteed by an eligible
guarantor institution which includes a domestic bank, a domestic savings and
loan institution, a domestic credit union, a member bank of the Federal Reserve
System or a member firm of a national securities exchange, pursuant to the
Fund's transfer agent's standards and procedures (signature guarantees by
notaries public are not acceptable).

Written Requests

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

Connecticut Daily Tax Free Income Fund, Inc.
Reich & Tang Funds
600 Fifth Avenue
New York, New York 10020

All previously issued certificates submitted for redemption must be endorsed by
the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with signature guaranteed. Normally the redemption
proceeds are paid by check mailed to the shareholder of record.

13
<PAGE>

Checks

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

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

Shareholders electing the checking option are subject to the procedures, rules
and regulations of the Fund's agent bank. Checks drawn on a jointly owned
account may, at the shareholder's election, require only one signature. Checks
in amounts exceeding the value of the shareholder's account at the time the
check is presented for payment will not be honored. In addition, the Fund
reserves the right to charge the shareholder's account a fee up to $20 for
checks not honored as a result of an insufficient account value. Since the
dollar value of the account changes daily, the total value of the account may
not be determined in advance and the account may not be entirely redeemed by
check. The Fund reserves the right to terminate or modify the check redemption
procedure at any time or to impose additional fees.

Investors wishing to avail themselves of this method of redemption should elect
it on their subscription order form. Individuals and joint tenants are not
required to furnish any supporting documentation. Corporations and other
entities making this election, however, are required to furnish a certified
resolution or other evidence of authorization in accordance with the Fund's
normal practices. Appropriate authorization forms will be sent by the Fund or
its agents to corporations and other shareholders who select this option. As
soon as the authorization forms are filed in good order, the Fund will provide
the shareholder with a supply of checks. This checking service may be terminated
or modified at any time.

Telephone

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

A shareholder making a telephone withdrawal should call the Fund at
212-830-5200; outside New York State at 800-221-3079 and state (i) the name of
the shareholder appearing on the Fund's records, (ii) the shareholder's account
number with the Fund, (iii) the amount to be withdrawn, (iv) whether such amount
is to be forwarded to the shareholder's designated bank account or address and
(v) the name of the person requesting the redemption. Usually the proceeds

14
<PAGE>

are sent to the designated bank account or address on the same Fund Business Day
the redemption is effected, provided the redemption request is received before
12 noon, New York City time and on the next Fund Business Day if the redemption
request is received after 12 noon, New York City time. The Fund reserves the
right to terminate or modify the telephone redemption service in whole or in
part at any time and will notify shareholders accordingly.

Exchange Privilege

Shareholders of the Fund are entitled to exchange some or all of their shares in
the Fund for shares of certain other investment companies which retain Reich &
Tang Asset Management L.P. as investment advisor 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., 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 Equity Fund, Inc, and Short Term Income Fund, Inc. In the
future, the exchange privilege program may be extended to other investment
companies which retain Reich & Tang Asset Management L.P. as investment advisor,
manager or administrator. 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 shareholder
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
exchange. The minimum amount for an exchange is $1,000, except that shareholders
who are establishing a new account with an investment company through the
exchange privilege must ensure that a sufficient number of shares are exchanged
to meet the minimum initial investment required for the investment company into
which the exchange is being made. Shares are exchanged at their respective net
asset value.

The exchange privilege provides shareholders of the Fund with a convenient
method to shift their investment among different investment companies when they
feel such a shift is desirable. The exchange privilege is available to
shareholders resident in any state in which shares of the investment company
being acquired may legally be sold. Shares may be exchanged only between
investment company accounts registered in identical names. Before making an
exchange, the investor should review the current prospectus of the investment
company into which the exchange is to be made. Prospectuses may be obtained by
contacting the Distributor at the address or telephone number set forth on the
cover page of this Prospectus.

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

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

Connecticut Daily Tax Free Income Fund, Inc.
Reich & Tang Funds
600 Fifth Avenue
New York, New York 10020

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

Specified Amount Automatic Withdrawal Plan

Shareholders may elect to withdraw shares and receive payment from the Fund of a
specified amount of $50 or more automatically on a monthly, quarterly,
semi-annual or annual basis in an amount approved and confirmed by the Manager.
A specified amount plan payment is made by the Fund on the 23rd day of each
month. Whenever such 23rd day of a month is not a Fund

15
<PAGE>

Business Day, the payment date is the Fund Business Day preceding the 23rd day
of the month. In order to make a payment, a number of shares equal in aggregate
net asset value to the payment amount are redeemed at their net asset value on
the Fund Business Day immediately preceding the date of payment. To the extent
that the redemptions to make plan payments exceed the number of shares purchased
through reinvestment of dividends and distributions, the redemptions reduce the
number of shares purchased on original investment, and may ultimately liquidate
a shareholder's investment.

The election to receive automatic withdrawal payments may be made at the time of
the original subscription by so indicating on the subscription order form. The
election may also be made, changed or terminated at any later time by the
participant. Because the withdrawal plan involves the redemption of Fund shares,
such withdrawals may constitute taxable events to the shareholder but the Fund
does not expect that there will be any realizable capital gains.

DISTRIBUTION AND SERVICE PLAN

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

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. Reich
& Tang Asset Management L.P. serves as the sole limited partner of the
Distributor.

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

For its services under the Shareholder Servicing Agreement, the Distributor
receives from the Fund a service fee equal to .20% per annum of the Fund's
average daily net assets (the "Shareholder Servicing Fee"). The fee is accrued
daily and paid monthly and any portion of the fee may be deemed to be used by
the Distributor for purposes of distribution of Fund shares and for payments to
Participating Organizations with respect to servicing their clients or customers
who are shareholders of the Fund.

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

16
<PAGE>

from time to time from its own resources, which may include the Shareholder
Servicing Fee and past profits, for the purposes enumerated in (i) above. The
Manager and the Distributor may make payments to Participating Organizations for
providing certain of such services up to a maximum of (on an annualized basis)
.40% of the average daily net asset value of the shares serviced through the
Participating Organization. However, the Distributor in its sole discretion,
will determine the amount of such payments made pursuant to the Plan, provided
that such payments will not increase the amount which the Fund is required to
pay to the Manager and the Distributor for any fiscal year under the Investment
Management Contract, the Shareholder Servicing Agreement in effect for that
year.

For the fiscal year ended January 31, 1996, the total amount spent pursuant to
the Plan was .38% of the average daily net assets of the Fund, of which .20% of
the average daily net assets was paid by the Fund to the Manager, pursuant to
the Shareholder Servicing Agreement and an amount representing .18% of the
average daily net assets was paid by the Manager (which may be deemed an
indirect payment by the Fund).

FEDERAL INCOME TAXES

The Fund has elected to qualify under the Code as a regulated investment company
that distributes "exempt-interest dividends" as defined in the Code. The Fund's
policy is to distribute as dividends each year 100% (and in no event less than
90%) of its tax-exempt interest income, net of certain deductions, and its
investment company taxable income (if any). If distributions are made in this
manner, dividends designated as derived from the interest earned on Municipal
Obligations are "exempt-interest dividends" and are not subject to regular
Federal income tax although such "exempt-interest dividends" may be subject to
Federal alternative minimum tax. Dividends paid from taxable income, if any, and
distributions of any realized short-term capital gains (whether from tax-exempt
or taxable obligations) are taxable to shareholders as ordinary income for
Federal income tax purposes, whether received in cash or reinvested in
additional shares of the Fund. The Fund does not expect to realize long-term
capital gains, and thus does not contemplate distributing "capital gain
dividends" or having undistributed capital gain income within the meaning of the
Code. The Fund will inform shareholders of the amount and nature of its income
and gains in a written notice mailed to shareholders not later than 60 days
after the close of the Fund's taxable year. For Social Security recipients,
interest on tax-exempt bonds, including tax-exempt interest dividends paid by
the Fund, is to be added to adjusted gross income for purposes of computing the
amount of Social Security benefits includible in gross income. The Revenue
Reconciliation Act of 1993 (P.L. 103-66) and other recent tax legislation
affects many of the Federal tax aspects of Municipal Obligations and makes many
important changes to the Federal income tax system, including an increase in
marginal tax rates. In addition to these changes, the Tax Reform Act of 1986
(P.L. 99-514) limited the annual amount of many types of tax-exempt bonds that a
state may issue and revised current arbitrage restrictions. P.L. 99-514 also
provided that interest on certain "private activity bonds" (generally, a bond
issue in which more than 10% of the proceeds are used for a non-governmental
trade or business and which meets the private security or payment test, or a
bond issue which meets the private loan financing test) issued after August 7,
1986 will constitute an item of tax preference subject to the individual
alternative minimum tax and P.L. 103-66 increases the alternative minimum tax
rate for taxpayers other than corporations to up to 28%. Further, corporations
will be required to include in alternative minimum taxable income, 75% of the
amount by which their adjusted current earnings (including generally, tax-exempt
interest) exceeds their alternative minimum taxable income (determined without
this item). In addition, in certain cases Subchapter S corporations with
accumulated earnings and profits from Subchapter C years will be subject to a
tax on "passive investment income," including tax-exempt interest.

17
<PAGE>

Interest on certain "private activity bonds" (generally, a bond issue in which
more than 10% of the proceeds are used for a non-governmental trade or business
and which meets the private security or payment test, or a bond issue which
meets the private loan financing test) issued after August 7, 1986 will
constitue an item of tax preference subject to the individual alternative
minimum tax.

With respect to variable rate demand instruments, including participation
certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner thereof and that the interest on the underlying Municipal Obligations
will be tax-exempt from Federal income taxes to the Fund. Counsel has pointed
out that the Internal Revenue Service has announced that it will not ordinarily
issue advance rulings on the question of the ownership of securities or
participation interests therein subject to a put and could reach a conclusion
different from that reached by counsel. (See "Federal Income Taxes" in the
Statement of Additional Information.)

In South Carolina v. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require states to register bonds which they
issue and may subject the interest on such bonds to Federal tax if not
registered, and the Court further held that there is no constitutional
prohibition against the Federal government taxing the interest earned on state
or other municipal bonds. The Supreme Court decision affirms the authority of
the Federal government to regulate and control bonds such as the Municipal
Obligations and to tax such bonds in the future. The decision does not, however,
affect the current exemption from taxation of the interest earned on the
Municipal Obligations in accordance with Section 103 of the Code.

CONNECTICUT INCOME TAXES

The designation of all or a portion of a dividend paid by the Fund as an
"exempt-interest dividend" under the Code does not necessarily result in the
exemption of such amount from tax under the laws of any state or local taxing
authority. However, in the opinion of Day, Berry & Howard, special Connecticut
tax counsel to the Fund, exempt-interest dividends correctly designated as
derived from Connecticut Municipal Obligations received by the Fund are not
subject to the Connecticut Personal Income Tax.

Exempt-interest dividends that are not derived from Connecticut Municipal
Obligations and any other dividends of the Fund that are treated as ordinary
income for Federal income tax purposes are includible in a taxpayer's tax base
for the purposes of the Connecticut Personal Income Tax.

While capital gain dividends are not anticipated by the Fund, capital gain
dividends and amounts, if any, in respect of undistributed long-term capital
gains of the Fund would be includible in a taxpayer's tax base for purposes of
the Connecticut Personal Income Tax, as would gains, if any, recognized upon the
redemption, sale, or exchange of shares of the Fund, except that capital gain
dividends derived from obligations issued by or on behalf of the State of
Connecticut, its political subdivisions, or any public instrumentality, state or
local authority, district or similar public entity created under Connecticut law
are not subject to the tax.

Exempt-interest dividends, other than those derived from Connecticut Municipal
Obligations, are subject to the net Connecticut minimum tax.

All exempt-interest dividends are includible in gross income for purposes of the
Connecticut Corporation Business Tax payable by corporations. However, the
Corporation Business Tax allows a deduction for a portion of amounts includible
in gross income thereunder to the extent they are treated as dividends other
than exempt-interest dividends or capital gain dividends for Federal income tax
purposes, but

18
<PAGE>

disallows deductions for expenses related to such amounts.

Shareholders are urged to consult their tax advisors with respect to the
treatment of distributions from the Fund in their own states and localities.

GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on March
8, 1985 and it is registered with the Securities and Exchange Commission as a
non-diversified, open-end management investment company.

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

As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-Laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of the revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of revisions to the Fund's distribution agreement with
respect to a particular class or series of stock, and (d) upon the written
request of 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 shareholders, any registration of the Fund with the Securities and
Exchange Commission or any state, or as the Directors may consider necessary or
desirable. Each Director serves until the next meeting of the shareholders
called for the purpose of considering the election or reelection of such
Director or of a successor to such Director, and until the election and
qualification of his or her successor, elected at such a meeting, or until such
Director sooner dies, resigns, retires or is removed by the vote of the
shareholders.

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

NET ASSET VALUE

The net asset value of the Fund's shares is determined as of 12 noon, New York
City time, on each Fund Business Day. Fund Business Day means weekdays (Monday
through Friday) except customary business holidays and Good Friday. It is
computed by dividing the value of the Fund's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued but excluding capital stock and surplus) by the total number of shares
outstanding.

The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that if fluctuating
interest rates cause the market value of the Fund's portfolio to deviate more
than 1/2 of 1% from the value determined on the basis of amortized cost, the
Board of Directors will consider whether any action should be initiated.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
The Fund intends to maintain a stable net asset value at $1.00 per share
although there can be no assurance that this will be achieved.

19
<PAGE>

CUSTODIAN AND TRANSFER AGENT

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities. Reich & Tang Services
L.P., 600 Fifth Avenue, New York, New York 10020, 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>

TABLE OF CONTENTS

Table of Fees and Expenses..........................2
Selected Financial Information......................2
Introduction........................................3 CONNECTICUT
Investment Objectives, DAILY TAX
Policies and Risks.............................4 FREE INCOME
Connecticut Risk Factors............................7 FUND, INC.
Management of the Fund..............................7
Description of Common Stock.........................8
Dividends and Distributions.........................9
How to Purchase and Redeem Shares...................9
Investments Through
Participating Organizations......................10
Direct Purchase and
Redemption Procedures............................11 PROSPECTUS
Initial Purchases of Shares......................12 MAY 31, 1996
Subsequent Purchases of Shares...................13
Redemption of Shares.............................13
Exchange Privilege...............................14
Specified Amount Automatic
Withdrawal Plan..........................14
Distribution and Service Plan.......................16
Federal Income Taxes................................17
Connecticut Income Taxes............................18
General Information.................................19
Net Asset Value.....................................19
Custodian and Transfer Agent........................20

<PAGE>

- --------------------------------------------------------------------------------
VISTA SELECT SHARES OF VISTA SERVICE CENTER
CONNECTICUT P.O. BOX 419392
DAILY TAX FREE KANSAS CITY MISSOURI
INCOME FUND, INC. 1-800-34-VISTA
================================================================================

PROSPECTUS
May 31, 1996

Connecticut Daily Tax Free Income Fund, Inc. (the "Fund") is a non-diversified,
open-end management company that is a short-term, tax-exempt money market fund
whose investment objectives are to seek as high a level of current income,
exempt from Federal income taxes and to the extent possible from Connecticut
personal income taxes, as is believed to be consistent with preservation of
capital, maintenance of liquidity and stability of principal. No assurance can
be given that these objectives will be achieved. This Prospectus relates
exclusively to the Vista Select shares class of the Fund.

This Prospectus sets forth concisely the information about the Fund that
prospective investors will find helpful in making their investment decisions.
Investors should read this Prospectus and retain it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission and is available upon request and without charge by calling
or writing the Fund at the address or telephone number set forth above. The
"Statement of Additional Information" bears the same date as this Prospectus and
is incorporated by reference into this Prospectus in its entirety.

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.

Investors should be aware that the Vista Select shares may not be purchased
other than through certain securities dealers with whom Vista Broker-Dealer
Services, Inc. ("VBDS") has entered into agreements for this purpose, directly
from VBDS or through certain "Participating Organizations" (see "Investments
Through Participating Organizations") with whom they have accounts. Vista Select
shares have been created for the primary purpose of providing a Connecticut
tax-free money market fund product for shareholders of certain funds distributed
by VBDS. Shares of the Fund other than the Vista Select shares are offered
pursuant to a separate prospectus.

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

THIS PROSPECTUS SHOULD BE READ ANDRETAINED 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 .30%
12b-1 Fees .20%
Other Expenses .41%
Administration Fees-After Fee Waiver .18% ____
Total Fund Operating Expenses .91%

</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION

Year Ended January 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----

Per Share Operating Performance:
(for a share outstanding throughout the period)

Ratios/Supplemental Data

+ Net of management, shareholder servicing and administration fees waived
equivalent to .03%, .06%, .03% and .09% of average net assets, respectively.

</TABLE>

2
<PAGE>

INTRODUCTION

Connecticut Daily Tax Free Income Fund, Inc. (the "Fund") is a non-diversified,
open-end management investment company that is a short-term, tax-exempt money
market fund whose investment objectives are to seek as high a level of current
income, exempt under current law from Federal income taxes and to the extent
possible from Connecticut personal income taxes, as is believed to be consistent
with preservation of capital, maintenance of liquidity and stability of
principal by investing principally in short-term, high quality debt obligations
of the State of Connecticut, its political subdivisions, and certain possessions
and territories of the United States, the interest on which is exempt from
Federal income tax under section 103 of the Internal Revenue Code (the "Code"),
as described under "Investment Objectives, Policies and Risks" herein. The Fund
also may invest in municipal securities of issuers located in jurisdictions
other than Connecticut, the interest income on which will be exempt from Federal
income tax, but will be subject to Connecticut personal income taxes for
Connecticut residents. The Fund seeks to maintain an investment portfolio with a
dollar-weighted average maturity of 90 days or less, and to value its investment
portfolio at amortized cost and maintain a net asset value of $1.00 per share.
The Fund intends to invest all of its assets in tax-exempt obligations; however,
it reserves the right to invest up to 20% of the value of its net assets in
taxable obligations. This is a summary of the Fund's fundamental investment
policies which are set forth in full under "Investment Objectives, Policies and
Risks" herein and in the Statement of Additional Information and may not be
changed without approval of a majority of the Fund's outstanding shares. No
assurance can be given that these objectives will be achieved.

3
<PAGE>

that comes with a less concentrated portfolio and should compare yields
available on portfolios of Connecticut issues with those of more diversified
portfolios including out-of-state issues before making an investment decision.
The Fund's Board of Directors is authorized to divide the unissued shares into
separate series of stock, one for each of the Fund's separate investment
portfolios that may be created in the future.

Vista Select shares have been created for the primary purpose of providing a
Connecticut tax-free money market fund product for investors who purchase shares
directly from VBDS, through dealers with whom VBDS has entered into agreements
for this purpose, or through certain "Participating Organizations" (see
"Investments Through Participating Organizations" herein) with whom they have
accounts or who acquire Vista Select shares through the exchange of shares of
certain other investment companies as hereinafter described. Vista Select shares
are identical to other shares of the Fund, which are offered pursuant to a
separate prospectus, with respect to investment objectives and yield, but differ
with respect to certain other matters. For example, shareholders who hold other
shares of the Fund may not participate in the exchange privilege described
herein and have different arrangements for redemptions by check.

INVESTMENT OBJECTIVES,
POLICIES AND RISKS

The Fund is a non-diversified, open-end management investment company that is a
short-term, tax-exempt money market fund whose investment objectives are to seek
as high a level of current income, exempt from Federal income taxes and to the
extent possible from Connecticut personal income taxes (the "Connecticut
Personal Income Tax"), as is believed to be consistent with preservation of
capital, maintenance of liquidity and stability of principal. There can be no
assurance that the Fund will achieve its investment objectives.

4
<PAGE>

temporary defensive measure during periods of adverse market conditions as
determined by the Manager, the Fund will invest at least 65% of its assets in
Connecticut Municipal Obligations, the exempt-interest dividends derived from
which are exempt from the Connecticut Personal Income Tax, although the exact
amount of the Fund's assets invested in such securities will vary from time to
time. The Fund's investments may include "when-issued" Municipal Obligations,
stand-by commitments and taxable repurchase agreements. Although the Fund will
attempt to invest 100% of its assets in Municipal Obligations, the Fund reserves
the right to invest up to 20% of the value of its total assets in securities,
the interest income on which is subject to Federal, state and local income tax.
The Fund expects to invest more than 25% of its assets in participation
certificates purchased from banks in industrial revenue bonds and other
Connecticut Municipal Obligations.

In view of this "concentration" in bank participation certificates in
Connecticut Municipal Obligations, an investment in the Fund should be made with
an understanding of the characteristics of the banking industry and the risks
which such an investment may entail, which include extensive governmental
regulation, changes in the availability and cost of capital funds, and general
economic conditions. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) The investment
objectives of the Fund described in this paragraph may not be changed unless
approved by the holders of a majority of the outstanding shares of the Fund that
would be affected by such a change. As used in this Prospectus, the term
"majority of the outstanding shares" of the Fund means, respectively, the vote
of the lesser of (i) 67% or more of the shares of the Fund present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy or (ii) more than 50% of the outstanding shares
of the Fund.

The Fund may only purchase Municipal Obligations that have been determined by
the Fund's Board of Directors to present minimal credit risks and that are
Eligible Securities at the time of acquisition. The term Eligible Securities
means (i) Municipal Obligations with remaining maturities of 397 days or less
and rated in the two highest short-term rating categories by any two nationally
recognized statistical rating organizations ("NRSROs") or in such categories by
the only NRSRO that has rated the Municipal Obligations (collectively, the
"Requisite NRSROs") (acquisition in the latter situation must also be ratified
by the Board of Directors); (ii) Municipal Obligations with remaining maturities
of 397 days or less but that at the time of issuance were long-term securities
(i.e., with maturities greater than 366 days) and whose issuer has received from
the Requisite NRSROs a rating with respect to comparable short-term debt in the
two highest short-term rating categories and (iii) unrated Municipal Obligations
determined by the Fund's Board of Directors to be of comparable quality. Where
the issuer of a long-term security with a remaining maturity which would
otherwise qualify it as an Eligible Security, does not have rated short-term
debt outstanding, the long-term security is treated as unrated but may not be
purchased if it has a long-term rating from any NRSRO that is below the two
highest long-term categories. A determination of comparability by the Board of
Directors is made on the basis of its credit evaluation of the issuer, which may
include an evaluation of a letter of credit, guarantee, insurance or other
credit facility issued in support of the Municipal Obligations or participation
certificates. (See "Variable Rate Demand Instruments and Participation
Certificates" in the Statement of Additional Information.) While there are
several organizations that currently qualify as NRSROs, two examples of NRSROs
are Standard & Poor's Corporation ("S&P") and Moody's Investors Service, Inc.
("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in the
case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in the
case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's in
the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "VMIG-1" by Moody's and "SP-1/AA" by S&P.
Such instruments may

5
<PAGE>

produce a lower yield than would be available from less highly rated
instruments. The Fund's Board of Directors has determined that obligations which
are backed by the credit of the Federal government (the interest on which is not
exempt from Federal income taxation) will be considered to have a rating
equivalent to Moody's "Aaa".

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

6
<PAGE>

company" under Subchapter M of the Code. The Fund will be restricted in that, at
the close of each quarter of the taxable year, at least 50% of the value of its
total assets must be represented by cash, Government securities, investment
company securities and other securities limited in respect of any one issuer to
not more than 5% in value of the total assets of the Fund and to not more than
10% of the outstanding voting securities of such issuers. In addition, at the
close of each quarter of its taxable year, not more than 25% in value of the
Fund's total assets may be invested in securities of one issuer other than
government securities. The limitations described in this paragraph are not
fundamental policies and may be revised to the extent applicable Federal income
tax requirements are revised. (See "Federal Income Taxes" herein.)

CONNECTICUT RISK FACTORS

MANAGEMENT OF THE FUND

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

7
<PAGE>

$9.1 billion. The Manager acts as investment manager or administrator of fifteen
other registered investment companies and also advises pension trusts,
profit-sharing trusts and endowments.

New England Investment Companies, L.P. ("NEICLP") is the limited partner
and owner of a 99.5% interest in the 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.

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

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

DESCRIPTION OF COMMON STOCK

8
<PAGE>

to divide the unissued shares into separate series of stock, each series
representing a separate, additional investment portfolio. Shares of all series
will have identical voting rights, except where, by law, certain matters must be
approved by a majority of the shares of the affected series. Each share of any
series of shares when issued has equal dividend, distribution, liquidation and
voting rights within the series for which it was issued, and each fractional
share has those rights in proportion to the percentage that the fractional share
represents of a whole share. Shares will be voted in the aggregate. There are no
conversion or preemptive rights in connection with any shares of the Fund. All
shares, when issued in accordance with the terms of the offering, will be fully
paid and nonassessable. Shares are redeemable at net asset value, at the option
of the shareholder.

Vista Select shares have been created for the primary purpose of providing a
Connecticut tax-free money market fund product for investors who purchase shares
directly from VBDS, through dealers with whom VBDS has entered into agreements
for this purpose (see "Investments Through Participating Organizations" herein)
with whom they have accounts or who acquire Vista Select shares through the
exchange of shares of certain other investment companies as hereinafter
described. Vista Select shares are identical to other shares of the Fund, which
are offered pursuant to a separate prospectus, with respect to investment
objectives and yield, but differ with respect to certain other matters. For
example, shareholders who hold other shares of the Fund may not participate in
the exchange privilege described herein and have different arrangements for
redemptions by check.

The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. Unless specifically requested by an
investor who is a shareholder of record, the Fund does not issue certificates
evidencing Fund shares.

DIVIDENDS AND DISTRIBUTIONS

Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year.

HOW TO PURCHASE AND REDEEM SHARES

Investors may invest in Vista Select shares through VBDS or through dealers with
whom VBDS has entered into agreements for this purpose as described herein and
those who have accounts with Participating Organizations may invest in the Vista
Select shares through their Participating Organizations in accordance with the
procedures established by the Participating Organizations. (See "Investments
Through Participating Organizations" herein.) The minimum initial investment in
the Vista Select shares is $2,500. Initial investments may be made in any amount
in excess of the applicable minimums.

9
<PAGE>

The minimum amount for subsequent investments is $100.

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

10
<PAGE>

redemption will be given at least 30 days in advance to any shareholder whose
account is to be redeemed. For Participant Investor accounts, notice of a
proposed mandatory redemption will be given only to the appropriate
Participating Organization, and the Participating Organization will be
responsible for notifying the Participant Investor of the proposed mandatory
redemption. During the notice period a shareholder or Participating Organization
who receives such a notice may avoid mandatory redemption by purchasing
sufficient additional shares to increase the total net asset value to at least
the minimum amount and thereby avoid such mandatory redemption.

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

Initial Purchases of Vista Select Shares

Investors may obtain a current prospectus and the order form necessary to open
an account by telephoning the Vista Service Center at 1-800-34-VISTA.

Mail

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

Connecticut Daily Tax Free Income Fund, Inc.
P. O. Box 419392
Kansas City, Missouri 64141-6392

Bank Wire

To purchase shares using the wire system for transmittal of money among banks,
investors should first obtain a new account number by telephoning the Fund at
1-800-34-VISTA to obtain a new account number. The investors should then
instruct a member commercial bank to wire their money immediately to:

DST Systems, Inc.
ABA #1010-0362-1
VISTA MUTUAL FUNDS
DDA # 751-1-629
For Connecticut Daily Tax Free
Income Fund, Inc.
Account of (Investor's Name)___________
Fund Account #__________________________
SS #/Tax ID #___________________________

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

Personal Delivery

Deliver a check made payable to "Connecticut Daily Tax Free Income Fund, Inc."
along with a completed subscription order form to:

Vista Mutual Funds
127 W. 10th Street - 8th Floor
Kansas City, Missouri 64105

Subsequent Purchases of Shares

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

Vista Mutual Funds
P.O. Box 419392
Kansas City, Missouri 64141-6392

11
<PAGE>

new subscription order form at any time during the year the shareholder's
account is closed or during the following calendar year.

Redemption of Shares

A redemption is effected immediately following, and at a price determined in
accordance with, the next determination of net asset value per share following
receipt by the Fund's transfer agent of the redemption order. Normally, payment
for redeemed shares is made on the same Fund Business Day after the redemption
is effected, provided the redemption request is received prior to 12 noon, New
York City time and on the next Fund Business Day if the redemption request is
received after 12 noon, New York City time. However, redemption requests will
not be effected unless the check (including a certified or cashier's check) used
to purchase the shares has been cleared for payment by the investor's bank,
currently considered by the Fund to occur within 15 days after investment.

A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee. When a
signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature, signed and guaranteed by an eligible
guarantor institution which includes a domestic bank, a domestic savings and
loan institution, a domestic credit union, a member bank of the Federal Reserve
System or a member firm of a national securities exchange, pursuant to the
fund's transfer agent's standard and procedures (signature guarantees by
notaries public are not acceptable).

Written Requests

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

Vista Mutual Funds
P.O. Box 419392
Kansas City, Missouri 64141-6392

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

Checks

By making the appropriate election on their subscription form, shareholders may
request a supply of checks which may be used to effect redemptions. The checks,
which will be issued in the shareholder's name, are drawn on a special account
maintained by the Fund with the agent bank. Checks may be drawn in any amount of
$500 or more. When a check is presented to the Fund's agent bank, it instructs
the Fund's transfer agent to redeem a sufficient number of full and fractional
shares in the shareholder's account to cover the amount of the check. The use of
a check to make a withdrawal enables a shareholder in the Fund to receive
dividends on the shares to be redeemed up to the Fund Business Day on which the
check clears. Checks provided by the Fund may not be certified. Vista Select
Shares purchased by check may not be redeemed by check which could take up to 15
days following the date of purchase.

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

Shareholders electing the checking option are subject to the procedures, rules
and regulations of the Fund's agent bank. Checks drawn on a jointly owned
account may, at the shareholder's election, require only one signature. The
Fund's agent bank will not honor checks which are in amounts exceeding the value
of the shareholder's account at the time the check is presented for payment.

12
<PAGE>

Since the dollar value of the account changes daily, the total value of the
account may not be determined in advance and the account may not be entirely
redeemed by check. The Fund reserves the right to terminate or modify the check
redemption procedure at any time.

Investors wishing to avail themselves of this method of redemption should elect
it on their subscription order form. Individuals and joint tenants are not
required to furnish any supporting documentation. Corporations and other
entities making this election, however, are required to furnish a certified
resolution or other evidence of authorization in accordance with the Fund's
normal practices. Appropriate authorization forms will be sent by the Fund or
its agents to corporations and other shareholders who select this option. As
soon as the authorization forms are filed in good order with the Fund's agent
bank, it will provide the shareholder with a supply of checks. This checking
service may be terminated or modified at any time.

Telephone

The Fund accepts telephone requests for redemption from shareholders who elect
this option. The proceeds of a telephone redemption may be sent to the
shareholders at their addresses or, to their bank accounts, both as set forth in
the subscription order form or in a subsequent written authorization. However,
all telephone redemption requests in excess of $25,000 will be wired directly to
such previously designated bank account, for the protection of shareholders. The
Fund may accept telephone redemption instructions from any person with respect
to accounts of shareholders who elect this service and thus such shareholders
risk possible loss of principal and interest in the event of a telephone
redemption not authorized by them. To provide evidence of telephone
instructions, the transfer agent will record telephone conversations with
shareholders. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. The failure by the Fund to
employ such procedures may cause the Fund to be liable for any losses incurred
by investors due to telephone redemptions based upon unauthorized or fraudulent
instructions.

A shareholder making a telephone withdrawal should call the Fund at 800-34-VISTA
and state (i) the name of the shareholder appearing on the Fund's records, (ii)
the shareholder's account number with the Fund, (iii) the amount to be
withdrawn, (iv) whether such amount is to be forwarded to the shareholder's
designated bank account or address and (v) the name of the person requesting the
redemption. Usually the proceeds are sent to the designated bank account or
address on the same Fund Business Day the redemption is effected, provided the
redemption request is received before 12 noon, New York City time and on the
next Fund Business Day if the redemption request is received after 12 noon, New
York City time. The Fund reserves the right to terminate or modify the telephone
redemption service in whole or in part at any time and will notify shareholders
accordingly.

Exchange Privilege

Shareholders of the Vista Select shares of the Fund may exchange at relative net
asset value for Vista Shares of the Vista U.S. Government Money Market Fund, the
Vista Tax Free Money Market Fund, the Vista New York Tax Free Money Market Fund,
the Vista California Tax Free Money Market Fund and the Vista Select shares of
any Reich & Tang sponsored funds and may exchange at relative net asset value
plus any applicable sales charges, the Vista Select shares of the Fund for the
shares of the non-money market Vista Mutual Funds, in accordance with the terms
of the then-current prospectus of the fund being acquired. The prospectus of the
Vista Mutual Fund into which shares are being exchanged should be read carefully
prior to any exchange and retained for future reference. With respect to
exchanges into a fund which charges a front-end sales charge, such sales charge
will not be applicable if the shareholder previously acquired his Vista Select
shares by exchange from such fund. Under the Exchange Privilege, Vista Select
shares may be exchanged for shares of other funds only if those funds are
registered in the states where the

13
<PAGE>

exchange may legally be made. In addition, the account registration for the
Vista Mutual Funds into which Vista Select shares are being exchanged must be
identical to that of the account registration for the Fund from which shares are
being redeemed. Any such exchange may create a gain or loss to be recognized for
Federal income tax purposes. Normally, shares of the fund to be acquired are
purchased on the redemption date, but such purchase may be delayed by either
Fund up to five business days if the Fund determines that it would be
disadvantageous by an immediate transfer of the proceeds. (This privilege may be
amended or terminated at any time following 60 days' prior notice.) Arrangements
have been made for the acceptance of instructions by telephone to exchange
shares if certain preauthorizations or indemnifications are accepted and on
file. Further information is available from the Transfer Agent.

Specified Amount Automatic Withdrawal Plan

Shareholders who own $10,000 or more of the shares of the Fund may elect to
withdraw shares and receive payment from the Fund of a specified amount of $100
or more automatically on a monthly or quarterly basis in an amount approved and
confirmed by the Manager. In order to make a payment, a number of shares equal
in aggregate net asset value to the payment amount are redeemed at their net
asset value so that the designated payment is received on approximately the 1st
or 15th day of the month following the end of the selected payment period. To
the extent that the redemptions to make plan payments exceed the number of
shares purchased through reinvestment of dividends and distributions, the
redemptions reduce the number of shares purchased on original investment, and
may ultimately liquidate a shareholder's investment.

Investments Through
Participating Organizations

Participant Investors may, if they wish, invest in the Fund through the
Participating Organizations with which they have accounts. "Participating
Organizations" are securities brokers, banks and financial institutions or other
industry professionals or organizations which have entered into shareholder
servicing agreements with the Fund. When instructed by its customer to purchase
or redeem Fund shares, the Participating Organization, on behalf of the
customer, transmits to the transfer agent a purchase or redemption order, and in
the case of a purchase order, payment for the shares being purchased. No
certificates are issued with respect to investments in the Fund.

Participating Organizations may confirm to their customers who are shareholders
in the Fund each purchase and redemption of Vista Select Shares for the
customers' accounts. Also, Participating Organizations may send their customers
periodic account statements showing the total number of Vista Select shares
owned by each customer as of the statement closing date, purchases and
redemptions of Vista Select shares by each customer during the period covered by
the statement and the income earned by Vista Select shares of each customer
during the statement period (including dividends paid in cash or reinvested in
additional Vista Select shares).

14
<PAGE>

through Participating Organizations may be less than by investing in the Fund
directly. A Participant Investor should read this Prospectus in conjunction with
the materials provided by the Participating Organization describing the
procedures under which Vista Select shares may be purchased and redeemed through
the Participating Organization.

In the case of qualified Participating Organizations, orders received by the
transfer agent before 12 noon, New York City time, on a Fund Business Day,
without accompanying Federal Funds will result in the issuance of shares on that
day provided that the Federal Funds required in connection with the orders are
received by the Fund's transfer agent before 4:00 p.m, New York City time, on
that day. Orders for which Federal Funds are received after 4:00 p.m., New York
City time, will not result in share issuance until the following Fund Business
Day.

DISTRIBUTION AND SERVICE PLAN

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. Reich &
Tang Asset Management L.P. serves as the sole limited partner of the
Distributor.

15
<PAGE>

shareholders of the Fund and preparing and printing subscription application
forms for shareholder accounts.

The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the Management Fee and past profits for the
following purposes: (i) defray the costs of, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing and related administrative
functions on behalf of the Fund; (ii) to compensate certain Participating
Organizations for providing assistance in distributing the Fund's shares; and
(iii) to pay the costs of printing and distributing the Fund's prospectus to
prospective investors, and to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
shares. The Distributor may also make payments from time to time from its own
resources, which may include the Shareholder Servicing Fee and past profits, for
the purposes enumerated in (i) above. The Manager and the Distributor may make
payments to Participating Organizations for providing certain of such services
up to a maximum of (on an annualized basis) .40% of the average daily net asset
value of the shares serviced through the Participating Organization. However,
the Distributor in its sole discretion, will determine the amount of such
payments made pursuant to the Plan, provided that such payments will not
increase the amount which the Fund is required to pay to the Manager and the
Distributor for any fiscal year under the Investment Management Contract, the
Shareholder Servicing Agreement or the Administrative Services Contract in
effect for that year.

For the fiscal year ended January 31, 1996, the total amount spent pursuant to
the Plan was . 38% of the average daily net assets of the Fund, of which . 20%
of the average daily net assets was paid by the Fund to the Manager, pursuant to
the Shareholder Servicing Agreement and an amount representing .18% of the
average daily net assets was paid by the Manager (which may be deemed an
indirect payment by the Fund).

FEDERAL INCOME TAXES

The Fund has elected to qualify under the Code as a regulated investment company
that intends to distribute "exempt-interest dividends" as defined in the Code.
The Fund's policy is to distribute as dividends each year 100% (and in no event
less than 90%) of its tax-exempt interest income, net of certain deductions, and
its investment company taxable income (if any). If distributions are made in
this manner, dividends designated as derived from the interest earned on
Municipal Obligations are "exempt-interest dividends" and are not subject to
regular Federal income tax although such "exempt-interest dividends" may be
subject to Federal alternative minimum tax. Dividends paid from taxable income,
if any, and distributions of any realized short-term capital gains (whether from
tax-exempt or taxable obligations) are taxable to shareholders as ordinary
income for Federal income tax purposes, whether received in cash or reinvested
in additional shares of the Fund. The Fund does not expect to realize long-term
capital gains, and thus does not contemplate distributing "capital gain
dividends" or having undistributed capital gain income within the meaning of the
Code. The Fund will inform shareholders of the amount and nature of its income
and gains in a written notice mailed to shareholders not later than 60 days
after the close of the Fund's taxable year. For Social Security recipients,
interest on tax-exempt bonds, including tax-exempt interest dividends paid by
the Fund, is to be added to adjusted gross income for purposes of computing the
amount of Social Security benefits includible in gross income. The Revenue
Reconciliation Act of 1993 (P.L. 103-66) and other recent tax legislation,
affects many of the Federal tax aspects of Municipal Obligations and makes many
important changes to the Federal income tax system, including an increase of
marginal tax rates. P.L. 99-514 also provided that interest on certain "private
activity bonds" (generally, a bond issue in which more than 10% of the proceeds
are used for

16
<PAGE>

a non-governmental trade or business and which meets the private securities or
payment test, or a bond issue which meets the private loan financing test)
issued after August 7, 1986 will constitute an item of tax preference subject to
the individual alternative minimum tax and increases the individual alternative
minimum tax rate and P.L. 103-66 increases the alternative minimum tax rate for
taxpayers other than corporations to 28%. Further, corporations will be required
to include as an item of tax preference for purposes of the alternative minimum
tax, 75% of the amount by which its adjusted current earnings (including
generally, tax-exempt interest) exceeds its alternative minimum taxable income
(determined without this tax preference item). In addition, in certain cases
Subchapter S corporations with accumulated earnings and profits from Subchapter
C years will be subject to a tax on "passive investment income," including
tax-exempt interest.

CONNECTICUT INCOME TAXES

17
<PAGE>

instrumentality, state or local authority, district or similar public entity
created under Connecticut law are not subject to the tax.

Exempt-interest dividends, other than those derived from Connecticut Municipal
Obligations, are subject to the net Connecticut minimum tax.

All exempt-interest dividends are includible in gross income for purposes of the
Connecticut Corporation Business Tax payable by corporations. However, the
Corporation Business Tax allows a deduction for a portion of amounts includible
in gross taxable income thereunder to the extent they are treated as dividends
other than exempt-interest dividends or capital gain dividends for Federal
income tax purposes, but disallows deductions for expenses related to such
amounts.

Shareholders are urged to consult their tax advisors with respect to the
treatment of distributions from the Fund in their own states and localities.

GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on March 8,
1985 and it is registered with the Securities and Exchange Commission as a
non-diversified, open-end management investment company.

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

NET ASSET VALUE

18
<PAGE>

price an investment company would receive if the instrument were sold. The Fund
intends to maintain a stable net asset value at $1.00 per share although there
can be no assurance that this will be achieved.

CUSTODIAN AND TRANSFER AGENT

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, is custodian for the Fund's cash and securities and is transfer
agent and dividend agent for the Vista Select shares of the Fund. The Fund's
custodian and transfer agent do not assist in, and are not responsible for,
investment decisions involving assets of the Fund.

<PAGE>

TABLE OF CONTENTS

Table of Fees and Expenses...........................2
Selected Financial Information.......................2
Introduction.........................................3
Investment Objectives,
Policies and Risks.................................4
Connecticut Risk Factors.............................7
Management of the Fund...............................7
Description of Common Stock..........................8
Dividends and Distributions..........................9
How to Purchase and Redeem Shares....................9
Initial Purchases of Vista Select Shares.........11
Subsequent Purchases of Shares...................11
Redemption of Shares.............................12
Exchange Privilege...............................13
Specified Amount Automatic
Withdrawal Plan...............................14
Investments Through
Participating Organizations......................14
Distribution and Service Plan........................15
Federal Income Taxes.................................16
Connecticut Income Taxes.............................17
General Information .................................18
Net Asset Value......................................18
Custodian and Transfer Agent.........................19

<PAGE>

- --------------------------------------------------------------------------------
EVERGREEN SHARES OF
CONNECTICUT
DAILY TAX FREE
INCOME FUND, INC. [GRAPHIC OMITTED]
================================================================================

PROSPECTUS
May 31, 1996

This Prospectus sets forth concisely the information about the Fund that
prospective investors will find helpful in making their investment decisions.
Additional information about the Fund has been filed with the Securities and
Exchange Commission and is available upon request and without charge by calling
the Fund at (800) 807-2940. The "Statement of Additional Information" bears the
same date as this Prospectus and is incorporated by reference into this
Prospectus in its entirety.

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

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

TABLE OF FEES AND EXPENSES 3 SHAREHOLDER SERVICES 10
SELECTED FINANCIAL INFORMATION 3 Effect of Banking Laws 11
INTRODUCTION 4 DISTRIBUTION AND SERVICE PLAN 12
INVESTMENT OBJECTIVES, FEDERAL INCOME TAXES 13
POLICIES AND RISKS 5 CONNECTICUT INCOME TAXES 13
CONNECTICUT RISK FACTORS 7 GENERAL INFORMATION 14
MANAGEMENT OF THE FUND 7 NET ASSET VALUE 14
DESCRIPTION OF COMMON STOCK 8 CUSTODIAN AND TRANSFER AGENT 15
DIVIDENDS AND DISTRIBUTIONS 8
HOW TO PURCHASE AND REDEEM SHARES 9
How to Buy Shares 9
How to Redeem Shares 9

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
TABLE OF FEES AND EXPENSES

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

<S> <C> <C>
Management Fees .30%
12b-1 Fees .20%
Other Expenses .41%
Administration Fees-After Fee Waiver .17% ____
Total Fund Operating Expenses .91%

</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION

Year Ended January 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----

Per Share Operating Performance:
(for a share outstanding throughout the period)

Ratios/Supplemental Data

+ Net of management, shareholder servicing and administration fees waived
equivalent to .03%, .06%, .03% and .09% of average net assets, respectively.

</TABLE>

3
<PAGE>

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

Connecticut Daily Tax Free Income Fund, Inc. (the "Fund") is a non-diversified,
open-end management investment company that is a short-term, tax-exempt money
market fund whose investment objectives are to seek as high a level of current
income, exempt under current law from Federal income taxes and to the extent
possible from Connecticut personal income taxes, as is believed to be consistent
with preservation of capital, maintenance of liquidity and stability of
principal by investing principally in short-term, high quality debt obligations
of the State of Connecticut, its political subdivisions, and certain possessions
and territories of the United States, the interest on which is exempt from
Federal income tax under section 103 of the Internal Revenue Code (the "Code"),
as described under "Investment Objectives, Policies and Risks" herein. The Fund
also may invest in municipal securities of issuers located in jurisdictions
other than Connecticut, the interest income on which will be exempt from Federal
income tax, but will be subject to Connecticut personal income taxes for
Connecticut residents. The Fund seeks to maintain an investment portfolio with a
dollar-weighted average maturity of 90 days or less, and to value its investment
portfolio at amortized cost and maintain a net asset value of $1.00 per share.
The Fund intends to invest all of its assets in tax-exempt obligations; however,
it reserves the right to invest up to 20% of the value of its net assets in
taxable obligations. This is a summary of the Fund's fundamental investment
policies which are set forth in full under "Investment Objectives, Policies and
Risks" herein and in the Statement of Additional Information and may not be
changed without approval of a majority of the Fund's outstanding shares. No
assurance can be given that these objectives will be achieved.

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

On any day on which the New York Stock Exchange, Inc. is open for trading ("Fund
Business Day"), investors may, without charge by the Fund, purchase and redeem
shares of the Fund's common stock at their net asset value next determined after
receipt of the order. An investor's purchase order will be accepted after the
payment is converted into Federal funds, and shares will be issued as of the
Fund's next net asset value determination which is made as of 12 noon, Eastern
time, on each Fund Business Day. (See "How to Purchase and Redeem Shares" and
"Net Asset Value" herein.) Dividends from accumulated net income are declared by
the Fund on each Fund Business Day. The Fund generally pays interest dividends
monthly. Net capital gains, if any, will be distributed at least annually and in
no event later than within 60 days after the end of the Fund's fiscal year. All
dividends and distributions of capital gains are automatically invested in
additional shares of the Fund unless a shareholder has elected by written notice
to the Fund to receive either of such distributions in cash. (See "Dividends and
Distributions" herein.)

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

Evergreen shares are identical to other shares of the Fund, which are offered
pursuant to a separate prospectus, with respect to investment objectives and
yield, but differ with respect to certain other matters. See "How to Purchase
and Redeem Shares" and "Shareholder Services."

4
<PAGE>

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES,
POLICIES AND RISKS
- --------------------------------------------------------------------------------

5
<PAGE>

term securities (i.e., with maturities greater than 366 days) and whose issuer
has received from the Requisite NRSROs a rating with respect to comparable
short-term debt in the two highest short-term rating categories and (iii)
unrated Municipal Obligations determined by the Fund's Board of Directors to be
of comparable quality. Where the issuer of a long-term security with a remaining
maturity which would otherwise qualify it as an Eligible Security, does not have
rated short-term debt outstanding, the long-term security is treated as unrated
but may not be purchased if it has a long-term rating from any NRSRO that is
below the two highest long-term categories. A determination of comparability by
the Board of Directors is made on the basis of its credit evaluation of the
issuer, which may include an evaluation of a letter of credit, guarantee,
insurance or other credit facility issued in support of the Municipal
Obligations or participation certificates. (See "Variable Rate Demand
Instruments and Participation Certificates" in the Statement of Additional
Information.) While there are several organizations that currently qualify as
NRSROs, two examples of NRSROs are Standard & Poor's Corporation ("S&P") and
Moody's Investors Service, Inc. ("Moody's"). The two highest ratings by S&P and
Moody's are "AAA" and "AA" by S&P in the case of long-term bonds and notes or
"Aaa" and "Aa" by Moody's in the case of bonds; "SP-1" and "SP-2" by S&P or
"MIG-1" and "MIG-2" by Moody's in the case of notes; "A-1" and "A-2" by S&P or
"Prime-1" and "Prime-2" by Moody's in the case of tax-exempt commercial paper.
The highest rating in the case of variable and floating demand notes is "VMIG-1"
by Moody's and "SP-1/AA" by S&P. Such instruments may produce a lower yield than
would be available from less highly rated instruments. The Fund's Board of
Directors has determined that obligations which are backed by the credit of the
Federal government (the interest on which is not exempt from Federal income
taxation) will be considered to have a rating equivalent to Moody's "Aaa".

"regulated investment company" under Subchapter M of the Code. The Fund will be
restricted in that, at the close of each quarter of the taxable year, at least
50% of the value of its total assets must be represented by cash, government
securities, investment company securities and other securities limited in
respect of any one issuer to not more than 5% in value of the total assets of
the Fund and to not more than 10% of the outstanding voting securities of such
issuers. In addition, at the close of each quarter of its taxable year, not more
than 25% in value of the Fund's total assets may be invested in securities of
one issuer other than government securities. The limitations described in this
paragraph are not fundamental policies and may be revised to the extent
applicable Federal income tax requirements are revised. (See "Federal Income
Taxes" herein.)

- --------------------------------------------------------------------------------
CONNECTICUT RISK FACTORS
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
MANAGEMENT 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 April 30, 1996
investment manager, adviser or supervisor with respect to assets aggregating in
excess of $9.1 billion. The Manager acts as investment manager or administrator
of fifteen other registered investment companies and also advises pension
trusts, profit-sharing trusts and endowments.

New England Investment Companies, L.P. ("NEICLP") is the limited partner and
owner of a 99.5% interest in the 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.

7
<PAGE>

approximately 17.6% 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 ten
investment advisory/management affiliates and two distribution subsidiaries.
These include, in addition to the Manager, 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., Harris
Associates and an affiliate, Capital Growth Management Limited Partnership.
These affiliates in the aggregate are investment advisors or managers to 42
other registered investment companies.

- --------------------------------------------------------------------------------
DESCRIPTION OF COMMON STOCK
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------

8
<PAGE>

Net realized capital gains, if any, are distributed at least annually and in no
event later than 60 days after the end of the Fund's fiscal year.

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

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

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

HOW TO REDEEM SHARES

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

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

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

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

The telephone redemption service is not available to shareholders automatically.
Shareholders wishing to use the telephone redemption service must indicate this
on the Share Purchase Application and choose how the redemption proceeds are to
be paid. Redemption proceeds will either (i) be mailed by check to the
shareholder at the address in which the account is registered or (ii) be wired
to an account with the same registration as the shareholder's account in the
Fund at a designated commercial bank. State Street currently deducts a $5.00
wire charge from all redemption proceeds wired. This charge is subject to change
without notice. Redemption proceeds will be wired on the same day if the request
is made prior to 12 noon (Eastern time). Such shares, however, will not earn
dividends for that day. Redemption requests received after 12 noon will earn
dividends for that day, and the proceeds will be wired on the following business
day. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a

9
<PAGE>

Shareholder Services Form and send it to State Street Bank and Trust Company,
P.O. Box 9021, Boston, Massachusetts 02205-9827, with such shareholder's
signature guaranteed by a bank or trust company (not a Notary Public), a member
firm of a domestic stock exchange or by other financial institutions whose
guarantees are acceptable to State Street. Shareholders should allow
approximately ten days for such form to be processed. The Fund will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures include requiring some form of personal identification
prior to acting upon instructions and tape recording of telephone instructions.
If the Fund fails to follow such procedures, it may be liable for any losses due
to unauthorized or fraudulent instructions. The Fund will not be liable for
following telephone instructions reasonably believed to be genuine. The Fund
reserves the right to refuse a telephone redemption if it is believed advisable
to do so. Financial intermediaries may charge a fee for handling telephone
requests. Procedures for redeeming Fund shares by telephone may be modified or
terminated without notice at any time.

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

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

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

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

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

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

Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designated a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $75. Fund shares will be redeemed as necessary to meet withdrawal payments.
All participants must elect to have their dividends and capital gain
distributions reinvested automatically. In order to make a payment, a number of
shares equal in aggregate net asset value to the payment amount are redeemed at
their net asset value on the Fund Business Day immediately preceding the date of
payment. To the extent that the redemptions to make plan payments exceed the
number of shares purchased through reinvestment of dividends and distributions,
the redemptions reduce the number of shares purchased on original investment,
and may ultimately liquidate a shareholder's investment. Because the withdrawal
plan involves the redemption of Fund shares, such withdrawals may constitute
taxable events to the shareholder but the Fund does not expect that there will
be any realizable capital gains.

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

<PAGE>

administrative and recordkeeping services to plans which make shares of the
Evergreen mutual funds available to their participants.

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

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

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

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

Redemption requests received by the Fund's transfer agent before 12 noon,
Eastern time, on any Fund Business Day become effective at 12 noon that day.
Shares redeemed are not entitled to participate in dividends declared on the day
a redemption becomes effective. A redemption request received after 12 noon,
Eastern time, on any Fund Business Day becomes effective on the next Fund
Business Day.

The Fund has reserved the right to close an account that through redeemption has
remained below $1000 for 30 days. Shareholders will receive 60 days' written
notice to increase the account value before the account is closed.

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

EFFECT OF BANKING LAWS

11
<PAGE>

acting in other capacities for investment companies, such as providing
administrative and shareholder account maintenance services and receiving
compensation from the Manager for providing such services. However, this is an
unsettled area of the law and if a determination contrary to the Fund
management's position is made by a bank regulatory agency or court concerning
shareholder servicing and administration payments to banks from the Manager, any
such payments will be terminated and any shares registered in the banks' names,
for their underlying customers, will be re-registered in the name of the
customers at no cost to the Fund or its shareholders. In addition, state
securities laws may differ on this issue from the interpretations of Federal law
expressed herein and banks and financial institutions may be required to
register as underwriters, distributors or dealers pursuant to state law.

- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN
- --------------------------------------------------------------------------------

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. Reich &
Tang Asset Management L.P. serves as the sole limited partner of the
Distributor.

The Plan provides that the Manager may make payments from time to time from its
own resources, which may include the Management Fee and past profits for the
following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements, for performing shareholder servicing and related
administrative functions on behalf of the Fund; (ii) to compensate certain
Participating Organizations for providing assistance in distributing the Fund's
shares; and (iii) to pay the costs of printing and distributing the Fund's
prospectus to prospective investors and to defray the cost of the preparation
and printing of brochures and other promotional materials, mailings to
prospective shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Fund's shares. The Distributor may also make payments
from time to time from its own resources, which may include the Shareholder
Servicing Fee and past profits, for the purposes enumerated in (i) above. The
Manager and the Distributor may make payments to Participating Organizations for
providing certain of such services up to a maximum of (on an annualized basis)
.40% of the average daily net asset value of the shares serviced through the
Participating Organization. However, the Distributor in its sole discretion,
will determine the amount of such payments made pursuant to the Plan, provided
that such payments will not increase the amount which the Fund is required to
pay to the Manager and the Distributor for any fiscal year under the Investment
Management Contract, the Shareholder Servicing Agreement in effect for that
year.

12
<PAGE>

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

- --------------------------------------------------------------------------------
CONNECTICUT INCOME TAXES
- --------------------------------------------------------------------------------

13
<PAGE>

Exempt-interest dividends, other than those derived from Connecticut Municipal
Obligations, are subject to the net Connecticut minimum tax.

Shareholders are urged to consult their tax advisors with respect to the
treatment of distributions from the Fund in their own states and localities.

- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Fund was incorporated under the laws of the State of Maryland on March 8,
1985 and it is registered with the Securities and Exchange Commission as a
non-diversified, open-end management investment company.

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

- --------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------

The net asset value of the Fund's shares is determined as of 12 noon, Eastern
time, on each Fund Business Day. Fund Business Day means weekdays (Monday
through Friday) except customary business holidays and Good Friday. It is
computed by dividing the value of the Fund's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued but excluding capital stock and surplus) by the total number of shares
outstanding.

14
<PAGE>

which the value of an instrument is higher or lower than the price an investment
company would receive if the instrument were sold. The Fund intends to maintain
a stable net asset value at $1.00 per share although there can be no assurance
that this will be achieved.

- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 is the registrar,
transfer agent and dividend disbursing agent for the 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.

15
<PAGE>

DISTRIBUTOR
Evergreen Funds Distributor, Inc., 230 Park Avenue, New York, New York 10169

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

537621 (REV01)
3/96

16
<PAGE>

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

STATEMENT OF ADDITIONAL INFORMATION
May 31, 1996

RELATING TO THE CONNECTICUT DAILY TAX FREE INCOME FUND, INC.,
VISTA SELECT SHARES OF CONNECTICUT DAILY TAX FREE INCOME, INC. AND THE
EVERGREEN SHARES OF CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
PROSPECTUSES DATED MAY 31, 1996

This Statement of Additional Information, although not in itself a Prospectus,
expands upon and supplements the information contained in the current Prospectus
of Connecticut Daily Tax Free Income Fund, Inc., Vista Select Shares of
Connecticut Daily Tax Free Income Fund, Inc. and Evergreen Shares of Connecticut
Daily Tax Free Income Fund, Inc. (each the "Fund"), dated May 31, 1996 and
should be read in conjunction with the respective Prospectus. The Fund's
Prospectus may be obtained from any Participating Organization or by writing or
calling the Fund. This Statement of Additional Information is incorporated by
reference into the respective Prospectus in its entirety.

If you wish to invest in Vista Select Shares of Connecticut Daily Tax Free
Income Fund, Inc., you should obtain a separate prospectus by writing to Vista
Service Center, P.O. Box 419392, Kansas City, Missouri 64141-6392 or by calling
(800) 34-VISTA.

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

Table of Contents
- --------------------------------------------------------------------------------

Investment Objectives, Manager............................14
Policies and Risks..................2 Expense Limitation................15
Description of Municipal Obligations..3 Management of the Fund.............16
Variable Rate Demand Instruments....5 Compensation Table.................17
and Participation Certificates....5 Counsel and Auditors...............17
When-Issued Securities..............7 Distribution and Service Plan......18
Stand-by Commitments................7 Description of Common Stoc.........19
Taxable Securities....................8 Federal Income Taxes...............20
Repurchase Agreements...............8 Connecticut Income Taxes...........21
Connecticut Risk Factors..............9 Custodian and Transfer Agent.......22
Investment Restrictions..............11 Description of Ratings.............23
Portfolio Transactions...............12 Taxable Equivalent Yield Table.....25
How to Purchase and Redeem Shares....13 Independent Auditors Report........26
Net Asset Value......................13 Financial Statements...............27
Yield Quotations.....................13

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

<PAGE>

INVESTMENT OBJECTIVES, POLICIES AND RISKS

As stated in the Prospectus, the Fund is a non-diversified, open-end management
investment company that is a short-term, tax-exempt money market fund. The
Fund's investment objectives are to seek as high a level of current income,
exempt from Federal income taxes and, to the extent possible, from Connecticut
personal income taxes (the "Connecticut Personal Income Tax"), as is believed to
be consistent with preservation of capital, maintenance of liquidity and
stability of principal. No assurance can be given that these objectives will be
achieved. The following discussion expands upon the description of the Fund's
investment objectives and policies in the Prospectus.

The Fund's assets will be invested primarily in high quality debt obligations
issued by or on behalf of the State of Connecticut, other states, territories
and possessions of the United States, and their authorities, agencies,
instrumentalities and political subdivisions, the interest on which currently is
exempt from Federal income taxation ("Municipal Obligations") and in
participation certificates in Municipal Obligations purchased from banks,
insurance companies or other financial institutions. Dividends paid by the Fund
which are "exempt-interest dividends" by virtue of being properly designated as
derived from Municipal Obligations and participation certificates in Municipal
Obligations will be exempt from Federal income tax provided the Fund complies
with Section 852(b)(5) of Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code"). Although the Supreme Court has determined that Congress
has the authority to subject the interest on bonds such as the Municipal
Obligations to regular Federal income taxation, existing law excludes such
interest from regular Federal income tax. However, "exempt-interest dividends"
may be subject to the Federal alternative minimum tax. (See "Federal Income
Taxes" herein.) Exempt-interest dividends paid by the Fund correctly identified
as derived from obligations issued by or on behalf of the State of Connecticut,
any political subdivisions thereof, or public instrumentality, state or local
authority, district, or similar public entity created under the laws of
Connecticut or from obligations (such as certain obligations issued by or on
behalf of possessions or territories of the United States) the interest on which
Federal law prohibits the states from taxing ("Connecticut Municipal
Obligations") will be exempt from the Connecticut Personal Income Tax. (See
"Connecticut Income Taxes" herein.) To the extent suitable Connecticut Municipal
Obligations are not available for investment by the Fund, the Fund may purchase
Municipal Obligations issued by other states, their agencies and
instrumentalities or other obligations, the dividends designated as derived from
interest income on which will be exempt from Federal income tax but will be
subject to the Connecticut Personal Income Tax. Except as a temporary defensive
measure during periods of adverse market conditions as determined by the
Manager, the Fund will invest at least 65% of its assets in Connecticut
Municipal Obligations, the exempt-interest dividends derived from which are
exempt from the Connecticut Personal Income Tax, although the exact amount of
the Fund's assets invested in such securities will vary from time to time. The
Fund seeks to maintain an investment portfolio with a dollar-weighted average
maturity of 90 days or less and to value its investment portfolio at amortized
cost and maintain a net asset value at a $1.00 per share. There can be no
assurance that this value will be maintained. The Fund may hold uninvested cash
reserves pending investment. The Fund's investments may include "when-issued"
Municipal Obligations, stand-by commitments and taxable repurchase agreements.

Although the Fund will attempt to invest 100% of its assets in Municipal
Obligations, the Fund reserves the right to invest up to 20% of the value of its
net assets in securities, the interest income on which is subject to Federal,
state and local income tax. The Fund expects to invest more than 25% of its
assets in participation certificates purchased from banks in industrial revenue
bonds and other Connecticut Municipal Obligations. In view of this
"concentration" in bank participation certificates in Connecticut Municipal
Obligations, an investment in Fund shares should be made with an understanding
of the characteristics of the banking industry and the risks which such an
investment may entail. (See "Variable Rate Demand Instruments and Participation
Certificates" herein.) The investment objectives of the Fund described in this
paragraph may not be changed unless approved by the holders of a majority of the
outstanding shares of the Fund that would be affected by such a change. As used
herein, the term "majority of the outstanding shares" of the Fund means,
respectively, the vote of the lesser of (i) 67% or more of the shares of the
Fund present at a meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy or (ii) more than 50% of
the outstanding shares of the Fund.

2
<PAGE>

NRSROs a rating with respect to comparable short-term debt in the two highest
short-term rating categories and (iii) unrated Municipal Obligations determined
by the Fund's Board of Directors to be of comparable quality. Where the issuer
of a long-term security with a remaining maturity which would otherwise qualify
it as an Eligible Security, does not have rated short-term debt outstanding, the
long-term security is treated as unrated but may not be purchased if it has a
long-term rating from any NRSRO that is below the two highest long-term
categories. A determination of comparability by the Board of Directors is made
on the basis of its credit evaluation of the issuer, which may include an
evaluation of a letter of credit, guarantee, insurance or other credit facility
issued in support of the Municipal Obligations or participation certificates.
(See "Variable Rate Demand Instruments and Participation Certificates" herein.)
While there are several organizations that currently qualify as NRSROs, two
examples of NRSROs are Standard & Poor's Corporation ("S&P") and Moody's
Investors Service, Inc. ("Moody's"). The two highest ratings by S&P and Moody's
are "AAA" and "AA" by S&P in the case of long-term bonds and notes or "Aaa" and
"Aa" by Moody's in the case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and
"MIG-2" by Moody's in the case of notes; "A-1" and "A-2" by S&P or "Prime-1" and
"Prime-2" by Moody's, in the case of tax-exempt commercial paper. The highest
rating in the case of variable and floating demand notes is "VMIG-1" by Moody's
and "SP-1/A" by S&P. Such instruments may produce a lower yield than would be
available from less highly rated instruments. The Fund's Board of Directors has
determined that Municipal Obligations which are backed by the credit of the
Federal Government will be considered to have a rating equivalent to Moody's
"Aaa." (See "Description of Ratings" herein.)

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

As a non-diversified investment company, the Fund is not subject to any
statutory restriction under the Investment Company Act of 1940, as amended (the
"1940 Act"), with respect to investing its assets in one or relatively few
issuers. This non-diversification may present greater risks than in the case of
a diversified company. However, the Fund intends to qualify as a "regulated
investment company" under Subchapter M of the Code. The Fund will be restricted
in that at the close of each quarter of the taxable year, at least 50% of the
value of its total assets must be represented by cash, government securities,
investment company securities and other securities limited in respect of any one
issuer to not more than 5% in value of the total assets of the Fund and to not
more than 10% of the outstanding voting securities of such issuer. In addition,
at the close of each quarter of its taxable year, not more than 25% in value of
the Fund's total assets may be invested in securities of one issuer other than
government securities. The limitations described in this paragraph are not
fundamental policies and may be revised to the extent applicable Federal income
tax requirements are revised. (See "Federal Income Taxes" herein.)

DESCRIPTION OF MUNICIPAL OBLIGATIONS

As used in the Prospectus, "Municipal Obligations" include the following as well
as "Variable Rate Demand Instruments and Participation Certificates" discussed
herein.

1) Municipal Bonds with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition.

Municipal Bonds are debt obligations of states, cities, counties,
municipalities and municipal agencies (all of which are generally referred
to as "municipalities") which generally have a maturity at the time of
issue of one year or more and which are issued to raise funds for various
public purposes such as construction of a wide range of public facilities,
to refund outstanding obligations and to obtain funds for institutions and
facilities.

The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by
the issuer's pledge of its faith, credit and taxing power for the payment
of principal and interest. Issuers of general obligation bonds include
states, counties, cities, towns and other governmental units. The principal
of, and interest on, revenue bonds are payable from the income of specific
projects or authorities and generally are not supported by the issuer's
general power to levy taxes. In some cases, revenues derived from specific
taxes are pledged to support payments on a revenue bond.

In addition, certain kinds of "private activity bonds" are issued by public
authorities to provide funding for various privately operated industrial
facilities (hereinafter referred to as "industrial revenue bonds" or
"IRBs"). Interest on the IRBs is generally exempt, with certain exceptions,
from regular Federal income tax pursuant to Section 103(a) of the Code,
provided the issuer and corporate obligor thereof continue to meet certain
conditions. (See

3
<PAGE>

"Federal Income Taxes" herein.) IRBs are, in most cases, revenue bonds and
do not generally constitute the pledge of the credit of the issuer of such
bonds. The payment of the principal and interest on IRBs usually depends
solely on the ability of the user of the facilities financed by the bonds
or other guarantor to meet its financial obligations and, in certain
instances, the pledge of real and personal property as security for
payment. If there is no established secondary market for the IRBs, the IRBs
or the participation certificates in IRBs purchased by the Fund will be
supported by letters of credit, guarantees or insurance that meet the
definition of Eligible Securities at the time of acquisition stated herein
and provide the demand feature which may be exercised by the Fund to
provide liquidity. Shareholders should note that the Fund may invest in
IRBs acquired in transactions involving a Participating Organization. In
accordance with investment restriction 6 herein, the Fund is permitted to
invest up to 10% of the portfolio in high quality, short-term Municipal
Obligations (including IRBs) meeting the definition of Eligible Securities
at the time of acquisition that may not be readily marketable or have a
liquidity feature.

2) Municipal Notes with remaining maturities of 397 days or less that are
Eligible Securities at the time of acquisition. The principal kinds of
Municipal Notes include tax anticipation notes, bond anticipation notes,
revenue anticipation notes and project notes. Notes sold in anticipation of
collection of taxes, a bond sale or receipt of other revenues are usually
general obligations of the issuing municipality or agency. Project notes
are issued by local agencies and are guaranteed by the United States
Department of Housing and Urban Development. Project notes are also secured
by the full faith and credit of the United States. The Fund's investments
may be concentrated in Municipal Notes of Connecticut issuers.

3) Municipal Commercial Paper that is an Eligible Security at the time of
acquisition. Issues of Municipal Commercial Paper typically represent very
short-term, unsecured, negotiable promissory notes. These obligations are
often issued to meet seasonal working capital needs of municipalities or to
provide interim construction financing and are paid from general revenues
of municipalities or are refinanced with long-term debt. In most cases
Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions which may be called upon in the
event of default by the issuer of the commercial paper.

4) Municipal Leases, which may take the form of a lease or an installment
purchase or conditional sale contract, issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, telecommunications
equipment and other capital assets. Municipal Leases frequently have
special risks not normally associated with general obligation or revenue
bonds. Leases and installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass eventually to the
governmental issuer) have evolved as a means for governmental issuers to
acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt-issuance
limitations of many state constitutions and statutes are deemed to be
inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has
no obligation to make future payments under the lease or contract unless
money is appropriated for such purpose by the appropriate legislative body
on a yearly or other periodic basis. To reduce this risk, the Fund will
only purchase Municipal Leases subject to a non-appropriation clause where
the payment of principal and accrued interest is backed by an unconditional
irrevocable letter of credit, a guarantee, insurance or other comparable
undertaking of an approved financial institution. These types of municipal
leases may be considered illiquid and subject to the 10% limitation of
investments in illiquid securities set forth under "Investment
Restrictions" contained herein. The Board of Directors may adopt guidelines
and delegate to the Manager the daily function of determining and
monitoring the liquidity of municipal leases. In making such determination,
the Board and the Manager may consider such factors as the frequency of
trades for the obligation, the number of dealers willing to purchase or
sell the obligations and the number of other potential buyers and the
nature of the marketplace for the obligations, including the time needed to
dispose of the obligations and the method of soliciting offers. If the
Board determines that any municipal leases are illiquid, such lease will be
subject to the 10% limitation on investments in illiquid securities.

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

4
<PAGE>

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

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

Variable Rate Demand Instruments and Participation Certificates

Variable rate demand instruments that the Fund will purchase are tax-exempt
Municipal Obligations that provide for a periodic adjustment in the interest
rate paid on the instrument and permit the holder to demand payment of the
unpaid principal balance plus accrued interest at specified intervals upon a
specified number of days' notice either from the issuer or by drawing on a bank
letter of credit, a guarantee or insurance issued with respect to such
instrument.

The variable rate demand instruments in which the Fund may invest are payable on
demand on not more than thirty calendar days' notice and may be exercised either
at any time or at specified intervals not exceeding 397 days depending upon the
terms of the instrument. The terms of the instruments provide that interest
rates are adjustable at intervals ranging from daily to up to 397 days and the
adjustments are based upon the "prime rate"* of a bank or other appropriate
interest rate adjustment index as provided in the respective instruments. The
Fund will decide which variable rate demand instruments it will purchase in
accordance with procedures prescribed by its Board of Directors to minimize
credit risks. A fund utilizing the amortized cost method of valuation under Rule
2a-7 of the 1940 Act may only purchase variable rate demand instruments only if
(i) the instrument is subject to an unconditional demand feature, exercisable by
the Fund in the event of a default in the payment of principal or interest on
the underlying securities, that is an Eligible Security or (ii) the instrument
is not subject to an unconditional demand feature but does qualify as an
Eligible Security and has a long-term rating by the Requisite NRSROs in one of
the two highest rating categories, or if unrated, is determined to be of
comparable quality by the Fund's Board of Directors. The Fund's Board of
Directors may determine that an unrated variable rate demand instrument meets
the Fund's quality criteria if it is backed by a letter of credit or guarantee
or is insured by an insurer that meets the quality criteria for the Fund stated
herein or on the basis of a credit evaluation of the underlying obligor. If an
instrument is ever not deemed to be an Eligible Security, the Fund either will
sell it in the market or exercise the demand feature. The variable rate demand
instruments that the Fund may invest in include participation certificates
purchased by the Fund from banks, insurance companies or other financial
institutions in fixed or variable rate, tax-exempt Municipal Obligations
(expected to be concentrated in IRBs) owned by

- --------------------------
* The "prime rate" is generally the rate charged by a bank to its most
credit-worthy customers for short-term loans. The prime rate of a particular
bank may differ from other banks and will be the rate announced by each bank
on a particular day. Changes in the prime rate may occur with great frequency
and generally become effective on the date announced.

5
<PAGE>

such institutions or affiliated organizations. The Fund will not purchase
participation certificates in fixed rate tax-exempt Municipal Obligations
without obtaining an opinion of counsel that the Fund will be treated as the
owner thereof for Federal income tax purposes. A participation certificate gives
the Fund an undivided interest in the Municipal Obligation in the proportion
that the Fund's participation interest bears to the total principal amount of
the Municipal Obligation and provides the demand repurchase feature described
below. Where the institution issuing the participation does not meet the Fund's
eligibility criteria, the participation is backed by an irrevocable letter of
credit or guaranty of a bank (which may be the bank issuing the participation
certificate, a bank issuing a confirming letter of credit to that of the issuing
bank, or a bank serving as agent of the issuing bank with respect to the
possible repurchase of the certificate of participation) or insurance policy of
an insurance company that the Board of Directors of the Fund has determined
meets the prescribed quality standards for the Fund. The Fund has the right to
sell the participation certificate back to the institution and draw on the
letter of credit or insurance after no more than 30 days' notice, either at any
time or at specified intervals not exceeding 397 days (depending on the terms of
the participation), for all or any part of the full principal amount of the
Fund's participation interest in the security, plus accrued interest. The Fund
intends to exercise the demand only (1) upon a default under the terms of the
bond documents, (2) as needed to provide liquidity to the Fund in order to make
redemptions of Fund shares or (3) to maintain a high quality investment
portfolio. The institutions issuing the participation certificates will retain a
service and letter of credit fee and a fee for providing the demand repurchase
feature, in an amount equal to the excess of the interest paid on the
instruments over the negotiated yield at which the participations were purchased
by the Fund. The total fees generally range from 5% to 15% of the applicable
prime rate or other interest rate index. With respect to insurance, the Fund
will attempt to have the issuer of the participation certificate bear the cost
of the insurance, although the Fund retains the option to purchase insurance if
necessary, in which case the cost of insurance will be an expense of the Fund
subject to the Fund's expense limitation. (See "Expense Limitation" herein.) The
Manager has been instructed by the Fund's Board of Directors to continually
monitor the pricing, quality and liquidity of the variable rate demand
instruments held by the Fund, including the participation certificates, on the
basis of published financial information and reports of the rating agencies and
other bank analytical services to which the Fund may subscribe. Although these
instruments may be sold by the Fund, the Fund intends to hold them until
maturity, except under the circumstances stated above. (See "Federal Income
Taxes" herein.)

In view of the "concentration" of the Fund in bank participation certificates in
Connecticut Municipal Obligations, which may be secured by bank letters of
credit or guarantees, an investment in the Fund should be made with an
understanding of the characteristics of the banking industry and the risks which
such an investment may entail. Banks are subject to extensive governmental
regulations which may limit both the amounts and types of loans and other
financial commitments which may be made and interest rates and fees which may be
charged. The profitability of this industry is largely dependent upon the
availability and cost of capital funds for the purpose of financing lending
operations under prevailing money market conditions. Also, general economic
conditions play an important part in the operations of this industry and
exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations under a letter
of credit. The Fund may invest 25% or more of the net assets of any portfolio in
securities that are related in such a way that an economic, business or
political development or change affecting one of the securities would also
affect the other securities including, for example, securities the interest upon
which is paid from revenues of similar type projects, or securities the issuers
of which are located in the same state.

The recent period has seen wide fluctuations in interest rates, particularly
"prime rates" charged by banks. While the value of the underlying variable rate
demand instruments may change with changes in interest rates generally, the
variable rate nature of the underlying variable rate demand instruments should
minimize changes in value of the instruments. Accordingly, as interest rates
decrease or increase, the potential for capital appreciation and the risk of
potential capital depreciation is less than would be the case with a portfolio
of fixed income securities. The portfolio may contain variable rate demand
instruments on which stated minimum or maximum rates, or maximum rates set by
state law limit the degree to which interest on such variable rate demand
instruments may fluctuate; to the extent it does, increases or decreases in
value may be somewhat greater than would be the case without such limits.
Additionally, the portfolio may contain variable rate demand participation
certificates in fixed rate Municipal Obligations. The fixed rate of interest on
these Municipal Obligations will be a ceiling on the variable rate of the
participation certificate. In the event that interest rates increased so that
the variable rate exceeded the fixed rate on the Municipal Obligations, the
Municipal Obligations could no longer be valued at par and may cause the Fund to
take corrective action, including the elimination of the instruments from the
portfolio. Because the adjustment of interest rates on the variable rate demand
instruments is made in relation to movements of the applicable banks' "prime
rates", or other interest rate adjustment index, the variable rate demand
instruments are not comparable to long-term fixed rate securities. Accordingly,
interest rates on the variable rate demand instruments may be higher or lower
than current market rates for fixed rate obligations of comparable quality with
similar maturities.

6
<PAGE>

Because of the variable rate nature of the instruments, the Fund's yield will
decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined. On the
other hand, during periods where prevailing interest rates have increased, the
Fund's yield will increase and its shareholders will have reduced risk of
capital depreciation.

For purposes of determining whether a variable rate demand instrument held by
the Fund matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (1) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (2) the period remaining until the instrument's next interest rate
adjustment. The maturity of a variable rate demand instrument will be determined
in the same manner for purposes of computing the Fund's dollar-weighted average
portfolio maturity. If a variable rate demand instrument ceases to be an
Eligible Security, it will be sold in the market or through exercise of the
repurchase demand feature to the issuer.

When-Issued Securities

New issues of certain Municipal Obligations frequently are offered on a
when-issued basis. The payment obligation and the interest rate that will be
received on the Municipal Obligations are each fixed at the time the buyer
enters into the commitment although delivery and payment of the Municipal
Obligations normally take place within 45 days after the date of the Fund's
commitment to purchase. Although the Fund will only make commitments to purchase
when-issued Municipal Obligations with the intention of actually acquiring them,
the Fund may sell these securities before the settlement date if deemed
advisable by the Manager.

Municipal Obligations purchased on a when-issued basis and the securities held
in the Fund's portfolio are subject to changes in value (both generally changing
in the same way, that is, both experiencing appreciation when interest rates
decline and depreciation when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Purchasing Municipal Obligations on
a when-issued basis can involve a risk that the yields available in the market
when the delivery takes place may actually be higher or lower than those
obtained in the transaction itself. A separate account of the Fund consisting of
cash or liquid debt securities equal to the amount of the when-issued
commitments will be established at the Fund's custodian bank. For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market value. If the market or fair value of such
securities declines, additional cash or highly liquid securities will be placed
in the account daily so that the value of the account will equal the amount of
such commitments by the Fund. On the settlement date of the when-issued
securities, the Fund will meet its obligation from then available cash flow,
sale of securities held in the separate account, sale of other securities or,
although it would not normally expect to do so, from sale of the when-issued
securities themselves (which may have a value greater or lesser than the Fund's
payment obligations). Sale of securities to meet such obligations may result in
the realization of capital gains or losses, which are not exempt from Federal
income tax.

Stand-by Commitments

When the Fund purchases Municipal Obligations it may also acquire stand-by
commitments from banks and other financial institutions with respect to such
Municipal Obligations. Under a stand-by commitment, a bank or broker-dealer
agrees to purchase at the Fund's option a specified Municipal Obligation at a
specified price with same day settlement. A stand-by commitment is the
equivalent of a "put" option acquired by the Fund with respect to a particular
Municipal Obligation held in its portfolio.

The amount payable to the Fund upon its exercise of a stand-by commitment
normally would be (1) the acquisition cost of the Municipal Obligation
(excluding any accrued interest that the Fund paid on the acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the security, plus (2) all interest accrued on
the security since the last interest payment date during the period the security
was owned by the Fund. Absent unusual circumstances relating to a change in
market value, the Fund would value the underlying Municipal Obligation at
amortized cost. Accordingly, the amount payable by a bank or dealer during the
time a stand-by commitment is exercisable would be substantially the same as the
market value of the underlying Municipal Obligation.

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

The Fund expects that stand-by commitments generally will be available without
the payment of any direct or indirect consideration. However, if necessary and
advisable, the Fund may pay for stand-by commitments either separately in cash
or
7
<PAGE>

by paying a higher price for portfolio securities which are acquired subject to
such a commitment (thus reducing the yield to maturity otherwise available for
the same securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Fund's portfolio would not exceed 1/2 of 1% of
the value of the Fund's total assets calculated immediately after each stand-by
commitment was acquired.

The Fund would enter into stand-by commitments only with banks and other
financial institutions that, in the Manager's opinion, present minimal credit
risks and, where the Municipal Obligation does not meet the eligibility
criteria, only where the issuer of the stand-by commitment has received a rating
which meets the eligibility criteria or if not rated, presents a minimal risk of
default as determined by the Board of Directors. The Fund's reliance upon the
credit of these banks and broker-dealers would be supported by the value of the
underlying Municipal Obligations held by the Fund that were subject to the
commitment.

The Fund intends to acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The purpose of this practice is to permit the Fund to be fully
invested in securities the interest on which is exempt from Federal income taxes
while preserving the necessary liquidity to purchase securities on a when-issued
basis, to meet unusually large redemptions and to purchase at a later date
securities other than those subject to the stand-by commitment.

The acquisition of a stand-by commitment would not affect the valuation or
assumed maturity of the underlying Municipal Obligations which will continue to
be valued in accordance with the amortized cost method. Stand-by commitments
acquired by the Fund would be valued at zero in determining net asset value. In
those cases in which the Fund paid directly or indirectly for a stand-by
commitment, its cost would be reflected as unrealized depreciation for the
period during which the commitment is held by the Fund. Stand-by commitments
would not affect the dollar-weighted average maturity of the Fund's portfolio.
The maturity of a security subject to a stand-by commitment is longer than the
stand-by repurchase date.

The stand-by commitments that the Fund may enter into are subject to certain
risks which include the ability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, the fact that the commitment
is not marketable by the Fund, and that the maturity of the underlying security
will generally be different from that of the commitment.

ln addition, the Fund may apply to the Internal Revenue Service for a ruling, or
seek from its counsel an opinion, that interest on Municipal Obligations subject
to stand-by commitments will be exempt from Federal income taxation. (See
"Federal Income Taxes" herein.) ln the absence of a favorable tax ruling or
opinion of counsel, the Fund will not engage in the purchase of securities
subject to stand-by commitments.

TAXABLE SECURITIES

Although the Fund will attempt to invest 100% of its net assets in Municipal
Obligations, the Fund may invest up to 20% of the value of its total assets in
securities of the kind described below, the interest income on which is subject
to Federal income tax, under any one or more of the following circumstances: (a)
pending investment of proceeds of sales of Fund shares or of portfolio
securities, (b) pending settlement of purchases of portfolio securities and (c)
to maintain liquidity for the purpose of meeting anticipated redemptions. In
addition, the Fund may temporarily invest more than 20% in such taxable
securities when, in the opinion of the Manager, it is advisable to do so because
of adverse market conditions affecting the market for Municipal Obligations. The
kinds of taxable securities in which the Fund may invest are limited to the
following short-term, fixed-income securities (maturing in 397 days or less from
the time of purchase): (1) obligations of the United States government or its
agencies, instrumentalities or authorities; (2) commercial paper meeting the
definition of Eligible Securities at the time of acquisition; (3) certificates
of deposit of domestic banks with assets of $1 billion or more; and (4)
repurchase agreements with respect to any Municipal Obligations or other
securities which the Fund is permitted to own. (See "Federal Income Taxes"
herein.)

Repurchase Agreements

The Fund may invest in instruments subject to repurchase agreements with
securities dealers or member banks of the Federal Reserve System. Under the
terms of a typical repurchase agreement, the Fund would acquire an underlying
debt instrument for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase and the Fund to resell the
instrument at a fixed price and time, thereby determining the yield during the
Fund's holding period. This results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement is subject to the
risk that the seller may fail to repurchase the security. Repurchase agreements
may be deemed to be loans under the

8
<PAGE>

1940 Act. All repurchase agreements entered into by the Fund shall be fully
collateralized at all times during the period of the agreement in that the value
of the underlying security shall be at least equal to the amount of the loan,
including the accrued interest thereon, and the Fund or its custodian shall have
possession of the collateral, which the Fund's Board believes will give it a
valid, perfected security interest in the collateral. ln the event of default by
the seller under a repurchase agreement construed to be a collateralized loan,
the underlying securities are not owned by the Fund but only constitute
collateral for the seller's obligation to pay the repurchase price. Therefore,
the Fund may suffer time delays and incur costs in connection with the
disposition of the collateral. The Fund's Board believes that the collateral
underlying repurchase agreements may be more susceptible to claims of the
seller's creditors than would be the case with securities owned by the Fund. It
is expected that repurchase agreements will give rise to income which will not
qualify as tax-exempt income when distributed by the Fund. The Fund will not
invest in a repurchase agreement maturing in more than seven days if any such
investment together with illiquid securities held by the Fund exceed 10% of the
Fund's total net assets. (See Investment Restriction Number 6 herein.)
Repurchase agreements are subject to the same risks described herein for
stand-by commitments.

CONNECTICUT RISK FACTORS

As referred to in the Prospectus, the safety of an investment in the Fund
depends importantly on the fiscal stability of Connecticut and its subdivisions,
agencies, instrumentalities or authorities, which issue the Connecticut
Municipal Obligations in which the Fund's investments are concentrated.

The following information is only a summary of risk factors associated with
Connecticut. It has been compiled from official government statements and other
publicly available documents. Although the Sponsors have not independently
verified the information, they have no reason to believe that it is not correct
in all material respects.

Connecticut's manufacturing industry, which has historically been of prime
economic importance to the State, its municipalities and its residents, has been
in decline for several years. Although Connecticut's manufacturing industry is
diversified between transportation equipment (primarily aircraft engines,
helicopters and submarines), non-electrical machinery, fabricated metal products
and electrical machinery, defense-related business represents a relatively high
proportion of manufacturing receipts. As a result, reductions in defense
spending have had a substantial adverse effect on Connecticut's manufacturing
industry.

Connecticut's manufacturing employment peaked in 1970 at over 441,000 workers
but had declined 35.4% by 1994. Although the loss of manufacturing jobs was
partially offset by a 66.3% rise in other non-agricultural employment during the
same period, Connecticut's growth in non-manufacturing employment has lagged
behind the New England region and the nation as a whole. Moreover, Connecticut's
largest defense contractors have announced plans to reduce their labor forces
substantially over the next four years.

From 1986 through 1994, Connecticut's unemployment rate was generally lower than
the unemployment rate for the U.S. as a whole, and average per capita personal
income of Connecticut residents was higher than that of residents of other
states. The average unemployment rate (seasonally adjusted) in Connecticut
increased from a low of 3.0% in 1988 to 7.5% in 1992 and, after a number of
important changes in the method of calculation, was reported to be 5.6% in 1994.
Average per capita personal income of Connecticut residents increase in every
year form 1985 to 1994, rising from $18,268 to $29,044. However, pockets of
significant unemployment and poverty exist in some Connecticut cities and towns,
and Connecticut is now in a recession, the depth and duration of which are
uncertain.

For the four fiscal years ended June 30, 1991, the General Fund ran operating
deficits of approximately $115,600,000, $28,000,000, $259,000,000 and
$808,500,000, respectively. At the end of the 1990-1991 fiscal year, the General
Fund had an accumulated unappropriated deficit of $965,712,000. For the four
fiscal years ended June 30, 1995, the General Fund ran operating surpluses of
approximately $110,200,000, $113,500,000, $19,700,000 and $80,5000,000,
respectively. General Fund budgets for the biennium ending June 30, 1997, were
adopted in 1995 and amended in 1996. General Fund expenditures and revenues are
budgeted to be approximately $9,050,000,000 and $9,200,000,000 for the 1995-1996
and 1996-1997 fiscal years, respectively.

In 1991, to address the General Fund's growing deficit, legislation was enacted
by which the State imposed an income tax on individuals, trusts and estates for
taxable years generally commencing in 1992. For each fiscal year starting with
the 1991-1992 fiscal year, the General Fund has operated at a surplus with over
60% of the State's tax revenues being

9
<PAGE>

generated by the income tax and the sales and use tax. However, the State's
budgeted expenditures have almost doubled from approximately $4,3000,000,000 for
the 1986-1987 fiscal year to approximately $9,2000,000,000 for the 1996-1997
fiscal year.

The 1991 legislation also authorized the State Treasurer to issue Economic
Recovery Notes to fund the General Fund's accumulated deficit of $965,712,000 as
of June 30, 1991, and during 1991 the State issued a total of $965,710,000
Economic Recovery Notes, of which $315,710,000 were outstanding as of September
15, 1995. The notes were to be payable no later than June 30, 1996, but as part
of the budget adopted for the biennium ending June 30, 1997, payment of the
remaining notes scheduled to be paid during the 1995-96 fiscal year was
rescheduled to be paid over the four fiscal years ending June 30, 1999.

The State's primary method for financing capital projects is through the sale of
general obligation bonds. As of September 15, 1995, the State had authorized
general obligation bonds totaling $10,513,394,000, of which $9,068,876,000 had
been approved for issuance by the State Bond commission, $7,715,675,000 had been
issued, and $6,186,518,000 were outstanding.

In 1995, the State established the University of Connecticut as a separate
corporate entity to issue bonds and construct certain infrastructure
improvements. The improvements are to be financed by $18 million of general
obligation bonds of the State and $962 million bonds of the University. The
University's bonds will be secured by a State debt service commitment, the
aggregate amount of which is limited to $382 million for the four fiscal years
ending June 30, 1999, and $580 million for the six fiscal years ending June 30,
2005.

In addition to the bonds described above, the State also has limited or
contingent liability on a significant amount of other bonds. Such bonds have
been issued by the following quasi-public agencies: the Connecticut Housing
Finance Authority, the Connecticut Development Authority, the Connecticut Higher
Education Supplemental Loan Authority, the Connecticut Resources Recovery
Authority and the Connecticut Health and Educational Facilities Authority. Such
bonds have also been issued by the cities of Bridgeport and West Haven and the
Southeastern Connecticut Water Authority. As of September 15, 1995, the amount
of bonds outstanding on which the State has limited or contingent liability
totaled $3,755,500,000.

In 1984, the State established a program to plan, construct and improve the
State's transportation system (other than Bradley International Airport). The
total cost of the program through June 30, 2000, is currently estimated to be
$11.2 billion, to be met from federal, state, and local funds. The State expects
to finance most of its $4.7 billion share of such cost by issuing $4.2 billion
share of such cost by issuing $4.2 billion of special tax obligation ("STO")
bonds. The STO bonds are payable solely from specified motor fuel taxes, motor
vehicle receipts, and license, permit and fee revenues pledged therefor and
credited to the Special Transportation Fund, which was established to budget and
account for such revenues.

As of September 15, 1995, the General Assembly had authorized $4,157,900,000 of
such STO bonds, of which $3,269,700,000 had been issued. It is anticipated that
additional STO bonds will be authorized annually in amounts necessary to finance
and to complete the infrastructure program. Such additional bonds may have equal
rank with the outstanding bonds provided certain pledged revenue coverage
requirements are met. The State expects to continue to offer bonds for this
program.

On March 29, 1990, Standard and Poors reduced its ratings of the State's general
obligation bonds from AA+ to AA, and on April 9, 1990, Moodys reduced its
ratings from Aa1 to Aa. On September 13, 1991, Standard & Poors further reduced
its ratings of the State's general obligation bonds and certain obligations that
depend in part on the creditworthiness of the State to AA-. On March 17, 1995,
Fitch reduced its ratings of the State's general obligation bonds from AA+ to
AA.

10
<PAGE>

General obligation bonds issued by municipalities are payable primarily from ad
valorem taxes on property located in the municipality. A municipality's property
tax base is subject to many factors outside the control of the municipality,
including the decline in Connecticut's manufacturing industry. In addition to
general obligation bonds backed by the full faith and credit of the
municipality, certain municipal authorities finance projects by issuing bonds
that are not considered to be debts of the municipality. Such bonds may be
repaid only from revenues of the financed project, the revenues from which may
be insufficient to service the related debt obligations.

In recent years, certain Connecticut municipalities have experienced severe
fiscal difficulties and have reported operating and accumulated deficits. The
most notable of these is the City of Bridgeport, which filed a bankruptcy
petition on June 7, 1991. The State opposed the petition. The United States
Bankruptcy Court for the District of Connecticut held that Bridgeport has
authority to file such a petition should be dismissed on the grounds that
Bridgeport was not insolvent when the petition was filed.

Regional economic difficulties, reductions in revenues and increases in expenses
could lead to further fiscal problems for the State and its political
subdivisions, authorities and agencies. Difficulties in payment of debt service
on borrowings could result in declines, possibly severe, in the value of their
outstanding obligations, increases in their future borrowing costs, and
impairment of their ability to pay debt service on their obligations.

INVESTMENT RESTRICTIONS

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

1) Make portfolio investments other than as described under "Investment
Objectives, Policies and Risks" or any other form of Federal tax-exempt
investment which meets the Fund's high quality criteria, as determined by
the Board of Directors and which is consistent with the Fund's objectives
and policies.

2) Borrow Money. This restriction shall not apply to borrowings from banks for
temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests that might otherwise require the untimely disposition
of securities, in an amount up to 15% of the value of the Fund's total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing was made.
While borrowings exceed 5% of the value of the Fund's total assets, the
Fund will not make any investments. lnterest paid on borrowings will reduce
net income.

3) Pledge, hypothecate, mortgage or otherwise encumber its assets, except in
an amount up to 15% of the value of its total assets and only to secure
borrowings for temporary or emergency purposes.

4) Sell securities short or purchase securities on margin, or engage in the
purchase and sale of put, call, straddle or spread options or in writing
such options, except to the extent that securities subject to a demand
obligation and stand-by commitments may be purchased as set forth under
"Investment Objectives, Policies and Risks."

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

6) Purchase securities subject to restrictions on disposition under the
Securities Act of 1933 ("restricted securities"), except the Fund may
purchase variable rate demand instruments which contain a demand feature.
The Fund will not invest in a repurchase agreement maturing in more than
seven days if any such investment together with securities that are not
readily marketable held by the Fund exceed 10% of the Fund's total net
assets.

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

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

9) Purchase more than 10% of all outstanding voting securities of any one
issuer or invest in companies for the purpose of exercising control.

11
<PAGE>

10) Invest more than 25% of its assets in the securities of "issuers" in any
single industry, provided that the Fund may invest more than 25% of its
assets in bank participation certificates and there shall be no limitation
on the purchase of those Municipal Obligations and other obligations issued
or guaranteed by the United States government, its agencies or
instrumentalities. When the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from those of
the government creating the issuing entity and a security is backed only by
the assets and revenues of the entity, the entity would be deemed to be the
sole issuer of the security. Similarly, in the case of an industrial
revenue bond, if that bond is backed only by the assets and revenues of the
non-governmental user, then such non-governmental user would be deemed to
be the sole issuer. If, however, in either case, the creating government or
some other entity, such as an insurance company or other corporate obligor,
guarantees a security or a bank issues a letter of credit, such a guarantee
or letter of credit would be considered a separate security and would be
treated as an issue of such government, other entity or bank. With respect
to 75% of the total amortized cost value of the Fund's assets, not more
than 5% of the Fund's assets may be invested in securities that are subject
to underlying puts from the same institution, and no single bank shall
issue its letter of credit and no single financial institution shall issue
a credit enhancement covering more than 5% of the total assets of the Fund.
However, if the puts are exercisable by the Fund in the event of default on
payment of principal and interest on the underlying security, then the Fund
may invest up to 10% of its assets in securities underlying puts issued or
guaranteed by the same institution; additionally, a single bank can issue
its letter of credit or a single financial institution can issue a credit
enhancement covering up to 10% of the Fund's assets, where the puts offer
the Fund such default protection.

11) Invest in securities of other investment companies, except the Fund may
purchase unit investment trust securities where such unit trusts meet the
investment objectives of the Fund and then only up to 5% of the Fund's net
assets, except as they may be acquired as part of a merger, consolidation
or acquisition of assets.

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

If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of the Fund's assets will not constitute a
violation of such restriction.

PORTFOLIO TRANSACTIONS

The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its formation.
Any transaction for which the Fund pays a brokerage commission will be effected
at the best price and execution available. Purchases from underwriters of
portfolio securities include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price. The Fund purchases participation
certificates in variable rate Municipal Obligations with a demand feature from
banks or other financial institutions at a negotiated yield to the Fund based on
the applicable interest rate adjustment index for the security. The interest
received by the Fund is net of a fee charged by the issuing institution for
servicing the underlying obligation and issuing the participation certificate,
letter of credit, guarantee or insurance and providing the demand repurchase
feature.

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

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

12
<PAGE>

purchase or sale orders may be aggregated in order to obtain any price advantage
available to large denomination purchasers or sellers.

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

HOW TO PURCHASE AND REDEEM SHARES

The material relating to the purchase and redemption of shares in the respective
Prospectus is herein incorporated by reference.

NET ASSET VALUE

The Fund does not determine 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 Day and Christmas Day.

The net asset value of the Fund's shares is determined as of 12 noon, New York
City time, on each Fund Business Day. It is computed by dividing the value of
the Fund's net assets (i.e., the value of its securities and other assets less
its liabilities, including expenses payable or accrued but excluding capital
stock and surplus) by the total number of shares outstanding.

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

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

YIELD QUOTATIONS

The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the Securities and Exchange Commission. Under that
method, the Fund's yield figure, which is based on a chosen seven-day period, is
computed as follows: the Fund's return for the seven-day period (which is
obtained by dividing the net change in the value of a hypothetical account
having a balance of one share at the beginning of the period by the value of
such account at the beginning of the period [expected to always be $1.00]) is
multiplied by (365/7) with the resulting annualized figure carried to the
nearest hundredth of one percent. For purposes of the foregoing computation, the
determination of the net change in account value during the seven-day period
reflects (i) dividends declared on the original share and on any additional
shares, including the value of any additional shares purchased with dividends
paid on the original share, and (ii) fees charged to all shareholder accounts.
Realized capital gains or losses and unrealized appreciation or depreciation of
the Fund's portfolio securities are not included in the computation. Therefore
annualized yields may be different from effective yields quoted for the same
period.

The Fund's "effective yield" is obtained by adjusting its "current yield" to
give effect to the compounding nature of the Fund's portfolio, as follows: the
unannualized base period return is compounded and brought out to the nearest one
hundredth of one

13
<PAGE>

percent by adding one to the base period return, raising the sum to a power
equal to 365 divided by 7 and subtracting one from the result, i.e., effective
yield = (base period return + 1)365/7 - 1.

Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day. The Fund's yield for any given period is not an indication, or
representation by the Fund, of future yields or rates of return on the Fund's
shares, and may not provide a basis for comparison with bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors who
purchase the Fund's shares directly may realize a higher yield than Participant
Investors because they will not be subject to any fees or charges that may be
imposed by Participating Organizations.

The Fund may from time to time advertise its tax equivalent yield. The tax
equivalent yield is computed based upon a 30-day (or one month) period ended on
the date of the most recent balance sheet included in this Statement of
Additional Information, computed by dividing that portion of the yield of the
Fund (as computed pursuant to the formulae previously discussed) which is
tax-exempt by one minus a stated income tax rate and adding the product to that
portion, if any, of the yield of the Fund that is not tax-exempt. The tax
equivalent yield for the Fund may also fluctuate daily and does not provide a
basis for determining future yields.

The Fund may from time to time advertise a taxable equivalent yield table which
shows the yield an investor would need to receive from a taxable investment in
order to equal a tax-free yield from the Fund. (See the Taxable Equivalent Yield
Table appearing herein.)

The Fund's yield for the seven day period ended April 30, 1996 was 2.81% which
is equivalent to an effective yield of 2.85%.

MANAGER

The investment manager for the Fund is Reich & Tang Asset Management L.P., a
Delaware limited partnership with principal offices at 600 Fifth Avenue, New
York, New York 10020 (the "Manager"). The Manager was at April 30, 1996
investment manager, advisor, or supervisor with respect to assets aggregating in
excess of $9.1 billion. In addition to the Fund, the Manager acts as investment
manager and administrator of fifteen other investment companies and also advises
pension trusts, profit-sharing trust and endowments.

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.

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 ten
investment advisory/management affiliates and two distribution subsidiaries.
These include, in addition to the Manager 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., Harris Associates and an affiliate, Capital Growth Management
Limited Partnership. These affiliates in the aggregate are investment advisors
or managers of 42 other registered investment companies.

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 Investment Management Contract was most recently approved on January 26,
1996 by the Board of Directors, including a majority of directors who are non
interested directors as defined in the 1940 Act, of the Fund or the Manager. The
new Investment Management Contract has a term which extends to January 31, 1997,
and may be continued in force thereafter for

14
<PAGE>

successive twelve-month periods beginning each February 1, provided that such
continuance is specifically approved annually by majority vote of the Fund's
outstanding voting securities or by its Board of Directors, and in either case
by a majority of the directors who are not parties to the Investment Management
Contract or interested persons of any such party, by votes cast in person at a
meeting called for the purpose of voting on such matter. The 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 is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or by the Manager on sixty days' written notice, and will automatically
terminate in the event of its assignment. The Investment Management Contract
provides that in the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or of reckless disregard of its
obligations thereunder, the Manager shall not be liable for any action or
failure to act in accordance with its duties thereunder.

For its services under the Investment Management Contract, the Manager receives
from the Fund a fee equal to .30 of 1% per annum of the Fund's average daily net
assets (the "Management Fee") for managing the Fund's investment portfolio and
performing related administrative and clerical services. Pursuant to the
Investment Management Contract, for the fiscal years ended January 31, 1994,
1995 and 1996, the Manager received fees of $520,579, $239,914 and 278,564
respectively. The fees are accrued daily and paid monthly. Any portion of the
total fees received by the Manager may be used by the Manager to provide
shareholder and administrative services. (See "Distribution and Service Plan"
herein.)

Pursuant to the Administrative Services Contract with the Fund, the Manager
performs clerical, accounting supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of bookkeeping and related services by Investors Fiduciary Trust
Company, the Fund's bookkeeping agent, (ii) prepare reports to and filings with
regulatory authorities and (iii) perform such other services as the Fund may
from time to time request of the Manager. The personnel rendering such services
may be employees of the Manager, of its affiliates or of other organizations.
For its services under the Administrative Services Contract, the Manager
receives from the Fund a fee equal to 21% per annum of the Fund's average daily
net assets. Prior to December 1, 1995, the Administration Fee was .20%. For the
Fund's fiscal year ended January 31, 1996, the Manager received under the
Administrative Services Contract a fee of $187,517 of which $27,856 was waived.

Expense Limitation

The Manager has agreed to reimburse the Fund for its expenses (exclusive of
interest, taxes, brokerage and extraordinary expenses) which in any year exceed
the limits on investment company expenses prescribed by any state in which the
Fund's shares are qualified for sale. For the purpose of this obligation to
reimburse expenses, the Fund's annual expenses are estimated and accrued daily,
and any appropriate estimated payments are made to it on a monthly basis.
Subject to the obligations of the Manager to reimburse the Fund for its excess
expenses as described above, the Fund has, under the Investment Management
Contract, confirmed its obligation for payment of all its other expenses,
including taxes, brokerage fees and commissions, commitment fees, certain
insurance premiums, interest charges and expenses of the custodian, transfer
agent and dividend disbursing agent's fees, telecommunications expenses,
auditing and legal expenses, accounting services or recordkeeping agent fees,
costs of forming the corporation and maintaining corporate existence,
compensation of directors, officers and employees of the Fund and costs of other
personnel performing services for the Fund who are not officers of the general
partner of the Manager or its affiliates, costs of investor services,
shareholders' reports and corporate meetings, Securities and Exchange Commission
registration fees and expenses, state securities laws registration fees and
expenses, expenses of preparing and printing the Fund's prospectus for delivery
to existing shareholders and of printing application forms for shareholder
accounts, and the fees payable to the Manager under the Investment Management
Contract.

The Fund may from time to time hire its own employees or contract to have
management services performed by third parties (including Participating
Organizations) as discussed herein, and the management of the Fund intends to do
so whenever it appears advantageous to the Fund. The Fund's expenses for
employees and for such services are among the expenses subject to the expense
limitation described above.

15
<PAGE>

MANAGEMENT OF THE FUND

The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below. The address of each such person, unless
otherwise indicated is 600 Fifth Avenue, New York, New York 10020. Mr. Duff may
be deemed an "interested person" of the Fund, as defined in the 1940 Act, on the
basis of his affiliation with the Manager.

Steven W. Duff, 42 - President and Director of the Fund, is President of Mutual
Funds division of the Manager since September 1994. Mr. Duff was formerly
Director of Mutual Fund Administration at NationsBank which he was associated
with from June 1981 to August 1994. Mr. Duff is President and a Director of
California Daily Tax Free Income Fund, Inc., 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. Short Term Income Fund, Inc., President and a
Trustee of Florida Daily Municipal Income Fund, Institutional Daily Income Fund,
Pennsylvania Daily Municipal Income Fund, President of Cortland Trust, Inc.,
Executive Vice President of Reich & Tang Equity Fund, Inc. and President and
Chief Executive Officer of Tax Exempt Proceeds Fund, Inc.

Dr. W. Giles Mellon, 65 - Director of the Fund, is Professor of Business
Administration and Area Chairman of Economics in the Graduate School of
Management, Rutgers University with which he has been associated since 1966. His
address is Rutgers University Graduate School of Management, 92 New Street,
Newark, New Jersey 07102. Dr. Mellon is also a Director of California 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., Reich & Tang
Equity Fund, Inc. and Short Term Income Fund, Inc. and a Trustee of Florida
Daily Municipal Income Fund, Institutional Daily Income Fund and Pennsylvania
Daily Municipal Income Fund.

Robert Straniere, 54 - Director of the Fund, has been a member of the New York
State Assembly and a partner with Straniere Law Firm 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., Daily Tax Free Income Fund,
Inc., Delafield Fund, Inc., Lifecycle Funds, Inc., Michigan Daily Tax Free
Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., North Carolina
Daily Municipal Income Fund, Inc., Reich & Tang Equity Fund, Inc. and Short Term
Income Fund, Inc. and a Trustee of Florida Daily Municipal Income Fund,
Institutional Daily Income Fund and Pennsylvania Daily Municipal Income Fund.

Dr. Yung Wong, 57 - Director of the Fund, was Director of Shaw Investment
Management (UK) Limited from 1994 to October 1995 and formerly was 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 (provider of telecommunications equipment) since January 1989 and of
TelWatch, Inc. (provider of network management software) since August 1989. Dr.
Wong is also a Director of California 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., Reich & Tang Equity Fund, Inc. and Short Term
Income Fund, Inc. and a Trustee of Florida Daily Municipal Income Fund,
Institutional Daily Income Fund and Pennsylvania Daily Municipal Income Fund.

Molly Flewharty, 45 - Vice President of the Fund, is Vice President of the Reich
& Tang Mutual Funds division of the Manager since September 1993. Ms. Flewharty
was formerly Vice President of Reich & Tang, Inc. which she was associated with
from December 1977 to September 1993. Ms. Flewharty is also Vice President of
California 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 and Short Term Income Fund, Inc.

Lesley M. Jones, 47 - Vice President of the Fund, is Senior Vice President of
the Reich & Tang Mutual Funds division of the Manager since September 1993. Ms.
Jones was formerly Senior Vice President of Reich & Tang, Inc. which she was
associated with from April 1973 to September 1993. Ms. Jones is also a Vice
President of California 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 Equity Fund, Inc. and Short Term Income
Fund, Inc.

16
<PAGE>

Dana E. Messina, 39 - Vice President of the Fund, is Executive Vice President of
the Reich & Tang Mutual Funds division of the Manager since January 1995 and was
Vice President from September 1993 to January 1995.. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. 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., Cortland Trust, Inc., Daily Tax Free Income Fund,
Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund, Institutional
Daily Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Reich & Tang Equity Fund, Inc. and Short Term Income Fund, Inc. and Tax
Exempt Proceeds Fund, Inc.

Bernadette N. Finn, 48 - Secretary of the Fund, is Vice President and Assistant
Secretary of the Reich & Tang Mutual Funds Division of the Manager since
September 1993. Ms. Finn was formerly Vice President and Assistant Secretary of
Reich & Tang, Inc. which she was associated with from September 1970 to
September 1993. Ms. Finn is also Secretary of California 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, Tax Exempt Proceeds Fund, Inc.,
a Vice President and Secretary of Delafield Fund, Inc., Institutional Daily
Income Fund, Reich & Tang Equity Fund, Inc. and Short Term Income Fund, Inc.

Richard De Sanctis, 39 - Treasurer of the Fund, is Vice President and Treasurer
of the Manager 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. He is also Treasurer of
California Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc.,
Tax Exempt Proceeds Fund, Inc. and Short Term Income Fund, Inc. and is Vice
President and Treasurer of Cortland Trust, Inc.

The Fund paid an aggregate remuneration of $15,000 to its directors with respect
to the fiscal year ended January 31, 1996, all of which consisted of aggregate
directors' fees paid to the three disinterested directors, pursuant to the terms
of the Investment Management Contract. (See "Manager" herein.) See Compensation
Table below.

<TABLE>
<CAPTION>
COMPENSATION TABLE

<S> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
Aggregate Pension or Estimated Annual Total Compensation
Name of Person, Compensation from Retirement Benefits Benefits upon from Fund and Fund
Position Registrant for Fiscal Accrued as Part of Retirement Complex Paid to
Year Fund Expenses Directors

W. Giles Mellon,
Director $5,000.00 0 0 $44,000.00 (15 Funds)

Robert Straniere,
Director $5,000.00 0 0 $44,000.00 (15 Funds)

Dr.Yung Wong
Director $5,000.00 0 0 $44,000.00 (15 Funds)

* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending January 31, 1996 (and, with respect to certain of the
funds in the Fund Complex, estimated to be paid during the fiscal year ending
January 31, 1996). 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.
</TABLE>

COUNSEL AND AUDITORS

Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Battle Fowler LLP, 75 East 55th Street, New York, New York 10022.

Matters in connection with Connecticut tax law are passed upon by Day, Berry and
Howard, Cityplace, Hartford, Connecticut 06103.

17
<PAGE>

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

DISTRIBUTION AND SERVICE PLAN

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

Reich & Tang Asset Management, Inc. serves as the sole general partner for both
Reich & Tang Asset Management L.P. and Reich & Tang Distributors L.P., and Reich
& Tang Asset Management L.P. serves as the sole limited partner of the
Distributor.

For its services under the Shareholder Servicing Agreement, the Distributor
receives from the Fund a fee equal to .20% per annum of the Fund's average daily
net assets (the "Shareholder Servicing Fee"). The fee is accrued daily and paid
monthly and any portion of the fee may be deemed to be used by the Distributor
for purposes of distribution of Fund shares and for payments to Participating
Organizations with respect to servicing their clients or customers who are
shareholders of the Fund.

The Plan provides that the Manager may make payments from time to time from its
own resources which may include the Management Fee and past profits for the
following purposes: (i) to defray the costs of, and to compensate others,
including Participating Organizations with whom the Distributor has entered into
written agreements, for performing shareholder servicing and related
administrative functions on behalf of the Fund; (ii) to compensate certain
Participating Organizations for providing assistance in distributing the Fund's
shares; to pay the costs of printing and distributing the Fund's prospectus to
prospective investors; and (iii) to defray the cost of the preparation and
printing of brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including the
salaries and/or commissions of sales personnel in connection with the
distribution of the Fund's shares. The Distributor may also make payments from
time to time from its own resources, which may include the Shareholder Servicing
Fee and past profits for the purposes enumerated in (i) above. The Distributor,
in its sole discretion, will determine the amount of such payments made pursuant
to the Plan, provided that such payments will not increase the amount which the
Fund is required to pay to the Manager and Distributor for any fiscal year under
the Investment Management Contract, the Shareholder Servicing Agreement or the
Administrative Services Contract in effect for that year.

In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the Plan requires
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.

For the Fund's fiscal year ended January 31, 1996, the amount payable to the
Distributor under the Distribution and Service Plan and Shareholder Servicing
Agreement adopted thereunder pursuant to the Rule under the 1940 Act, totalled
$185,710., none of which was waived. During this same period the Manager and
Distributor made payments under the Plan totalling $355,788, of which $332,099
was paid to or on behalf of Participating Organizations. The excess of such
payments over the total payments the Distributor received from the Fund
represents distribution expenses funded by the Manager and Distributor from
their own resources including the Management Fee.

18
<PAGE>

The Board of Directors, including a majority of the non interested directors as
defined in the 1940 Act, initially approved the Plan on April 29, 1985 and most
recently approved the Plan on January 26, 1996 to continue in effect until
January 31, 1997. The Plan provides that it may continue in effect for
successive annual periods provided it is approved by the shareholders or by the
Board of Directors, including a majority of directors who are not interested
persons of the Fund and who have no direct or indirect interest in the operation
of the Plan or in the agreements related to the Plan. The Plan further provides
that it may not be amended to increase materially the costs which may be spent
by the Fund for distribution pursuant to the Plan without shareholder approval,
and the other material amendments must be approved by the directors in the
manner described in the preceding sentence. The Plan may be terminated at any
time by a vote of a majority of the disinterested directors of the Fund or the
Fund's shareholders.

DESCRIPTION OF COMMON STOCK

The authorized capital stock of the Fund, which was incorporated on March 8,
1985 in Maryland, consists of twenty billion shares of stock having a par value
of one-tenth of one cent ($.001) per share. Each share has equal dividend,
distribution, liquidation and voting rights and a fractional share has those
rights in proportion to the percentage that the fractional share represents of a
whole share. Shares will be voted in the aggregate. There are no conversion or
preemptive rights in connection with any shares of the Fund. All shares, when
issued in accordance with the terms of the offering will be fully paid and
non-assessable. Shares are redeemable at net asset value, at the option of the
shareholder. As of April 30, 1996 there were 100,046,376 shares of the Fund
outstanding. As of April 30, 1996, 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 shares as of April 30, 1996.

Nature of
Name and Address % of class ownership

Reich & Tang 76.88% Record
Services L.P.
600 Fifth Avenue
New York, New York 10020

Neuberger & Berman 6.53% Record
11 Broadway
New York, New York 10004-1302

The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. Unless specifically requested by an
investor, the Fund will not issue certificates evidencing Fund shares.

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

19
<PAGE>

FEDERAL INCOME TAXES

The Fund has elected to qualify under the Code as a "regulated investment
company" that distributes "exempt-interest dividends". The Fund intends to
continue to qualify for regulated investment company status so long as such
qualification is in the best interests of its shareholders. Such qualification
relieves the Fund of liability for Federal income taxes to the extent its
earnings are distributed in accordance with the applicable provisions of the
Code.

The Fund's policy is to distribute as dividends each year 100% and in no event
less than 90% of its tax-exempt interest income, net of certain deductions.
Exempt-interest dividends, as defined in the Code, are dividends or any part
thereof (other than capital gain dividends) paid by the Fund that are
attributable to interest on obligations the interest on which is exempt from
regular Federal income tax and designated by the Fund as exempt-interest
dividends in a written notice mailed to the Fund's shareholders not later than
60 days after the close of its taxable year. The percentage of the total
dividends paid by the Fund during any taxable year that qualifies as
exempt-interest dividends will be the same for all shareholders receiving
dividends during the year.

Exempt-interest dividends are to be treated by the Fund's shareholders as items
of interest excludable from their gross income under Section 103(a) of the Code.
If a shareholder receives an exempt-interest dividend with respect to any share
and such share has been held for six months or less, then any loss on the sale
or exchange of such share will be disallowed to the extent of the amount of such
exempt-interest dividend. The Code provides that interest on indebtedness
incurred, or continued, to purchase or carry certain tax-exempt securities such
as shares of the Fund is not deductible. Therefore, among other consequences, a
certain proportion of interest on indebtedness incurred, or continued, to
purchase or carry securities on margin may not be deductible during the period
an investor holds shares of the Fund. For Social Security recipients, interest
on tax-exempt bonds, including exempt-interest dividends paid by the Fund, is to
be added to adjusted gross income for purposes of computing the amount of social
security benefits includible in gross income. The amount of such interest
received must be disclosed on the shareholders' Federal income tax returns.
Taxpayers other than corporations are required to include as an item of tax
preference for purposes of the Federal alternative minimum tax all tax-exempt
interest on "private activity" bonds (generally, a bond issue in which more than
10% of the proceeds are used in a non-governmental trade or business) (other
than Section 501(c)(3) bonds) issued after August 7, 1986. Thus, this provision
will apply to the portion of the exempt-interest dividends from the Fund's
assets that are attributable to such post-August 7, 1986 private activity bonds,
if any such bonds are acquired by the Fund. Corporations are required to
increase their alternative minimum taxable income by 75% of the amount by which
the adjusted current earnings (which will include tax-exempt interest) of the
corporation exceeds the alternative minimum taxable income (determined without
this provision). In addition, in certain cases, Subchapter S corporations with
accumulated earnings and profits from Subchapter C years are subject to a
minimum tax on excess "passive investment income" which includes tax-exempt
interest. A shareholder is advised to consult his tax adviser with respect to
whether exempt-interest dividends retain the exclusion under Section 103(a) of
the Code if such shareholder would be treated as a "substantial user" or
"related person" under Section 147(a) of the Code with respect to some or all of
the "private activity bonds," if any, held by the Fund.

Although it is not intended, it is possible that the Fund may realize short-term
or long-term capital gains or losses from its portfolio transactions. The Fund
may also realize short-term or long-term capital gains upon the maturity or
disposition of securities acquired at discounts resulting from market
fluctuations. Short-term capital gains will be taxable to shareholders as
ordinary income when they are distributed. Any net capital gains (the excess of
its net realized long-term capital gain over its net realized short-term capital
loss) will be distributed annually to the Fund's shareholders. The Fund will
have no tax liability with respect to distributed net capital gains and the
distributions will be taxable to shareholders as long-term capital gains
regardless of how long the shareholders have held Fund shares. However, Fund
shareholders who at the time of a net capital gain distribution have not held
their Fund shares for more than six months, and who subsequently dispose of
those shares at a loss, will be required to treat such loss as a long-term
capital loss, to the extent of such net capital gain distribution. Distributions
of net capital gain will be designated as a "capital gain dividend" in a written
notice mailed to the Fund's shareholders not later than 60 days after the close
of the Fund's taxable year.

The Fund intends to distribute at least 90% of its investment company taxable
income (taxable income subject to certain adjustments exclusive of the excess of
its net long-term capital gain over its net short-term capital loss) for each
taxable year. The Fund will be subject to Federal income tax on any
undistributed investment company taxable income. To the extent such income is
distributed it will be taxable to shareholders as ordinary income. Expenses paid
or incurred by the Fund will be

20
<PAGE>

allocated between tax-exempt and taxable income in the same proportion as the
amount of the Fund's tax-exempt income bears to the total of such exempt income
and its gross income (excluding from gross income the excess of capital gains
over capital losses). If the Fund does not distribute at least 98% of its
ordinary income and 98% of its capital gain net income for a taxable year, the
Fund will be subject to a nondeductible 4% excise tax on the excess of such
amounts over the amounts actually distributed.

If a shareholder fails to provide the Fund with a current taxpayer
identification number, the Fund generally is required to withhold 31% of taxable
interest, dividend payments and proceeds from the redemption of shares of the
Fund.

Dividends and distributions to shareholders will be treated in the same manner
for Federal income tax purposes whether received in cash or reinvested in
additional shares of the Fund.

With respect to the variable rate demand instruments, including participation
certificates therein, the Fund is relying on the opinion of Battle Fowler LLP,
counsel to the Fund, that it will be treated for Federal income tax purposes as
the owner thereof and the interest on the underlying Municipal Obligations will
be tax-exempt to the Fund. Counsel has pointed out that the Internal Revenue
Service has announced that it will not ordinarily issue advance rulings on the
question of ownership of securities or participation interests therein subject
to a put, and as a result, the Internal Revenue Service could reach a conclusion
different from that reached by counsel.

From time to time, proposals have been introduced before Congress to restrict or
eliminate the Federal income tax exemption for interest on Municipal
Obligations. If such a proposal were introduced and enacted in the future, the
ability of the Fund to pay exempt-interest dividends would be adversely affected
and the Fund would re-evaluate its investment objectives and policies and
consider changes in the structure. The Revenue Reconciliation Act of 1993 (P.L.
103-66) and other recent tax legislation affects many of the Federal tax aspects
of Municipal Obligations and makes many important changes to the Federal income
tax system, including an increase in marginal tax rates. In addition to these
changes, the Tax Reform Act of 1986 (P.L. 99-514) limited the annual amount of
many types of tax-exempt bonds that a state may issue and revised current
arbitrage restrictions. P.L. 99-514 also provided that interest on certain
"private activity bonds" (generally, a bond issue in which more than 10% of the
proceeds are used for a non-governmental trade or business and which meets the
private security or payment test, or a bond issue which meets the private loan
financing test) issued after August 7, 1986 will constitute an item of tax
preference subject to the individual alternative minimum tax and P.L. 103-66
increases the alternative minimum tax rate for taxpayers other than corporations
to up to 28%.

In South Carolina v. Baker, the U.S. Supreme Court held that the Federal
government may constitutionally require states to register bonds they issue and
may subject the interest on such bonds to Federal income tax if not registered,
and that there is no constitutional prohibition against the Federal government's
taxing the interest earned on state or other municipal bonds. The Supreme Court
decision affirms the authority of the Federal government to regulate and control
bonds such as the Municipal Obligations and to tax such bonds in the future. The
decision does not, however, affect the current exemption from taxation of the
interest earned on the Municipal Obligations in accordance with Section 103 of
the Code.

CONNECTICUT INCOME TAXES

The designation of all or a portion of a dividend paid by the Fund as an
"exempt-interest dividend" under the Code does not necessarily result in the
exemption of such amount from tax under the laws of any state or local taxing
authority. With respect to "exempt-interest dividends" that are paid by the
Fund, in the opinion of Day, Berry & Howard, special Connecticut tax counsel to
the Fund, exempt-interest dividends correctly designated as derived from
Connecticut Municipal Obligations received by the Fund are not subject to the
Connecticut Personal Income Tax on individuals, trusts and estates.

Exempt-interest dividends that are not derived from Connecticut Municipal
Obligations and any other dividends of the Fund (including, if any, capital gain
dividends) are includible in the tax base for the Connecticut Personal Income
Tax on individuals, trusts and estates, except that capital gain dividends
derived from obligations issued by or on behalf of the State of Connecticut, its
political subdivisions, or any public instrumentality, state or local authority,
district or similar public entity created under Connecticut law are not subject
to the tax.

Exempt-interest dividends, except those derived from Connecticut Municipal
Obligations, are subject to the net Connecticut minimum tax

21
<PAGE>

Exempt-interest dividends derived from Connecticut Municipal Obligations are not
exempt from Connecticut Corporation Business Tax payable by corporations.

Shareholders are urged to consult their tax advisors with respect to the
treatment of distributions from the Fund in their own states and localities.

CUSTODIAN AND TRANSFER AGENT

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities. Reich & Tang Services
L.P., 600 Fifth Avenue, New York, New York 10020 is transfer agent and dividend
disbursing agent for the shares of Connecticut Daily Tax Free Income Fund, Inc.
State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827 is the registrar, transfer agent and dividend disbursing agent for
the Evergreen Shares of the Fund. Investors Fiduciary Trust Company, 127 West
10th Street, Kansas City, Missouri 64105 is transfer agent and dividend
disbursing agent for the Vista Select shares of of the Fund. The custodian and
transfer agents do not assist in, and are not responsible for, investment
decisions involving assets of the Fund.

22
<PAGE>

DESCRIPTION OF RATINGS*

Description of Moody's Investors Service, Inc.'s two highest municipal bond
ratings:

Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

Con. (_____) - Bonds for which the security depends upon the completion of some
act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.

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

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

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

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

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

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

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

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

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

- --------------------------------------------------------------------------------
* As described by the rating agencies.

23
<PAGE>

Description of Standard & Poor's Corporation's two highest commercial paper
ratings:

A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.

A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.

A-2 - Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.

Description of Moody's Investors Service Inc.'s two highest commercial paper
ratings:

Moody's employs the following designations, both judged to be investment grade,
to indicate the relative repayment capacity of rated issues: Prime-1, highest
quality; Prime-2, higher quality.

<PAGE>

<TABLE>
<CAPTION>
TAXABLE EQUIVALENT YIELD TABLE
- ------------------------------------------------------------------------------------------------------
1. If Your Taxable Income Bracket Is . . .
- ------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
Single 0- 24,001 58,151 121,301 263,751
Return 24,000 58,150 121,300 263,750 and over
- ------------------------------------------------------------------------------------------------------
Joint 0- 40,101 96,901 147,701 263,751
Return 40,100 96,900 147,700 263,750 and over

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

2. Then Your Combined Income Tax Bracket Is . . .
- ------------------------------------------------------------------------------------------------------
Federal
Tax Bracket 15.0% 28.0% 31.0% 36.0% 39.6%
- ------------------------------------------------------------------------------------------------------
State
Tax Bracket 4.5% 4.5% 4.5% 4.5% 4.5%
- ------------------------------------------------------------------------------------------------------
Combined
Tax Bracket 18.83% 31.24% 34.11% 38.88% 42.32%
- ------------------------------------------------------------------------------------------------------
3. Now Compare Your Tax Free Income Yields
With Taxable Income Yields
- ------------------------------------------------------------------------------------------------------
Tax Exempt Equivalent Taxable Investment Yield
Yield Required to Match Tax Exempt Yield
- ------------------------------------------------------------------------------------------------------
2.0% 2.46% 2.91% 3.04% 3.27% 3.47%
- ------------------------------------------------------------------------------------------------------
2.5% 3.08% 3.64% 3.79% 4.09% 4.33%
- ------------------------------------------------------------------------------------------------------
3.0% 3.70% 4.36% 4.55% 4.91% 5.20%
- ------------------------------------------------------------------------------------------------------
3.5% 4.31% 5.09% 5.31% 5.73% 6.07%
- ------------------------------------------------------------------------------------------------------
4.0% 4.93% 5.82% 6.07% 6.54% 6.93%
- ------------------------------------------------------------------------------------------------------
4.5% 5.54% 6.54% 6.83% 7.36% 7.80%
- ------------------------------------------------------------------------------------------------------
5.0% 6.16% 7.27% 7.59% 8.18% 8.67%
- ------------------------------------------------------------------------------------------------------
5.5% 6.78% 8.00% 8.35% 9.00% 9.54%
- ------------------------------------------------------------------------------------------------------
6.0% 7.39% 8.73% 9.11% 9.82% 10.40%
- ------------------------------------------------------------------------------------------------------
6.5% 8.01% 9.45% 9.86% 10.63% 11.27%
- ------------------------------------------------------------------------------------------------------
7.0% 8.62% 10.18% 10.62% 11.45% 12.14%
- ------------------------------------------------------------------------------------------------------
</TABLE>

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

-25-
<PAGE>

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

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

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

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

We have audited the accompanying statement of net assets of Connecticut Daily
Tax Free Income Fund, Inc. as of January 31, 1996, 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 January 31, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of Connecticut Daily Tax Free Income Fund, Inc. as of January 31, 1996,
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
February 22, 1996

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

26
<PAGE>

- -------------------------------------------------------------------------------
CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS
JANUARY 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Standard
Amount Date Yield Value Moody's & Poors
------ ---- ----- ----- ------- -----
Other Tax Exempt Investments (12.23%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 1,460,000 Darien, CT BAN (c) 08/14/96 3.54% $ 1,463,003
2,250,000 Montville, CT BAN (c) 01/28/97 3.23 2,250,625
1,775,000 Shelton, CT BAN (c) 06/04/96 3.32 1,775,408
2,000,000 State of Connecticut Regional School District Number 15
(Towns of Middlebury & Southbury) (c) 02/15/96 3.43 2,000,037
2,000,000 Town of Madison, CT GO BAN (c) 03/27/96 3.99 2,000,578
3,450,000 Town of Westport, CT BAN (c) 06/14/96 3.40 3,450,555
- ----------- -----------
12,935,000 Total Other Tax Exempt Investments 12,940,206
- ----------- -----------

<CAPTION>
Other Variable Rate Demand Investments (b) (51.73%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 5,100,000 Connecticut Development Authority
(Exeter Energy Project) - Series 1989B
LOC Sanwa Bank, Ltd. 12/01/19 3.30% $ 5,100,000 A1
400,000 Connecticut Development Authority
(Exeter Energy Project) - Series 1989C
LOC Sanwa Bank, Ltd. 12/01/19 3.30 400,000 A1
3,600,000 Connecticut HEFA (Bridgeport Hospital) - Series B
(Escrowed in treasuries for call on 02/07/96) (c)
LOC Fuji Bank, Ltd. 07/01/25 3.90 3,600,000
6,700,000 Connecticut HFA Housing Mortgage Finance Program
AMBAC Insured 05/15/18 3.10 6,700,000 A1+
2,000,000 Connecticut PCR Refunding Bond
(CT Light & Power Company Project)
LOC Union Bank of Switzerland 09/01/28 3.30 2,000,000 VMIG-1 A1+
8,900,000 Connecticut State Development Authority
(CT Light & Power Company Project) - Series 1993A
LOC Deutsche Bank A.G. 09/01/28 3.00 8,900,000 VMIG-1 A1+
3,200,000 Connecticut State Development Authority
(Corporation for Independent Living Project)
LOC Chemical Bank 07/01/15 3.15 3,200,000 VMIG-1
3,500,000 Connecticut State Development Authority
(Western Mass Electric Company) - Series 1993A
LOC Union Bank of Switzerland 09/01/25 3.00 3,500,000 VMIG-1 A1+
1,300,000 Connecticut State Development Authority IDRB
(Columbia Diamond Ring)
LOC Barclays Bank PLC 09/01/08 4.15 1,300,000 P1 A1+
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.

27
<PAGE>

- -------------------------------------------------------------------------------
CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
JANUARY 31, 1996
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Standard
Amount Date Yield Value Moody's & Poors
------ ---- ----- ----- ------- -----
Other Variable Rate Demand Investments (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 6,000,000 Connecticut State Development Authority IDRB
(Gerber Scientific Incorporated)
LOC Wachovia Bank & Trust Co., N.A. 12/01/14 3.35% $ 6,000,000 A1+
1,500,000 Connecticut State Development Authority IDRB
(Rand Whitney Container Board L.P.)
LOC Chase Manhattan Bank, N.A. 08/01/23 2.90 1,500,000 P1 A1
500,000 Connecticut State Development Authority IDRB
(Solid Waste Exeter Project)
LOC Sanwa Bank, Ltd. 12/01/19 3.30 500,000 A1
1,200,000 Connecticut State Development Authority IDRB
(Vitta Corporation Project)
LOC Barclays Bank PLC 09/01/09 4.15 1,200,000 P1 A1+
1,600,000 Connecticut State Special Tax Obligation RB
(Second Lien Transportation Infrastructure)
LOC Commerzbank A.G. 12/01/10 2.90 1,600,000 VMIG-1 A1+
3,845,000 Hartford County, CT RDA (Underwood Tower Project) (c)
LOC Financial Security Assurance, Inc. 06/01/20 3.30 3,845,000
1,400,000 State of Connecticut HEFA - Series A
LOC Credit Locale de France 07/01/24 2.90 1,400,000 VMIG-1
4,000,000 State of Connecticut Special Assessment Unemployment
Compensation Advance Fund RB - Series 1993B
LOC Mitsubishi Bank, Ltd. 11/01/01 3.35 4,000,000 VMIG-1 A1+
- ----------- -----------
54,745,000 Total Other Variable Rate Demand Instruments 54,745,000
- ----------- -----------

<CAPTION>
Put Bonds (d) (16.55%)
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 1,800,000 Connecticut State HEFA (Yale University) - Series E
FGIC Insured 06/01/96 4.00% $ 1,800,000 VMIG-1 A1+
2,000,000 Connecticut State HFA Housing Mortgage Finance Program Bond 04/15/96 3.75 2,000,000 MIG-1 SP-1+
3,860,000 Connecticut State RRA Bond
(Wallingford Resource Recovery) - Series 1986
LOC National Westminster Bank PLC 11/14/96 3.85 3,860,000 P1 A1+
5,000,000 Connecticut State Special Assessment Unemployment
Compensation Advance Fund RB - Series 1993C
FGIC Insured 07/01/96 3.82 5,000,594 VMIG-1 A1+
4,860,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Reynolds Metals Corporation)
LOC ABN AMRO Bank N.V. 09/01/96 3.73 4,858,645 VMIG-1 A1+
- ----------- -----------
17,520,000 Total Put Bonds 17,519,239
- ----------- -----------
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.

28
<PAGE>

Revenue Bonds (3.96%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 3,300,000 South Central Connecticut Regional Water System RB (c)
Escrowed in U.S. Treasury Securities 08/01/96 3.62% $ 3,418,636
750,000 University of Puerto Rico RB (c)
Escrowed in U.S. Treasury Securities 06/01/96 3.55 774,344
- ----------- -----------
4,050,000 Total Revenue Bonds 4,192,980
- ----------- -----------

<CAPTION>
Tax Exempt Commercial Paper (14.16%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 980,000 Connecticut HFA Mortgage Project - 1989 Series D 02/13/96 3.75% $ 980,000 A1+
1,000,000 Connecticut HFA Mortgage Project - 1990 Series C 02/09/96 3.60 1,000,000 VMIG-1 A1+
1,000,000 Connecticut State HEFA (Yale University) - Series L 02/09/96 3.45 1,000,000 VMIG-1 A1+
1,000,000 Connecticut State HEFA (Yale University) - Series L 03/01/96 3.15 1,000,000 VMIG-1 A1+
3,000,000 Connecticut State HEFA (Yale University) - Series M 04/12/96 3.25 3,000,000 VMIG-1 A1+
7,000,000 Puerto Rico Government Development Bank 02/16/96 3.15 7,000,000 A1+
1,000,000 Puerto Rico Government Development Bank 03/01/96 3.05 1,000,000 A1+
- ----------- -----------
14,980,000 Total Tax Exempt Commercial Paper 14,980,000
- ----------- -----------

<CAPTION>
Variable Rate Demand Instruments - Participations (b) (1.35%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 908,289 Connecticut State Development Authority IDRB (Nefco Holding)
LOC Chemical Bank 11/01/00 5.53% $ 908,289 P1 A1
519,152 Connecticut State Development Authority IDRB
(The Finlay Brothers Project)
LOC Chemical Bank 10/01/00 5.53 519,152 P1 A1
- ----------- -----------
1,427,441 Total Variable Rate Demand Instruments - Participations 1,427,441
- ----------- -----------
Total Investments (99.98%) (Cost $105,804,866+) 105,804,866
Cash and Other Assets in Excess of Liabilities (.02%) 21,140
-----------
Net Assets (100%), 105,843,655 Shares Outstanding (Note 3) $105,826,006
============
Net Asset Value, offering and redemption price per share $ 1.00
============
+ Aggregate cost for federal income tax purposes is $105,804,205.

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

29
<PAGE>

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

===============================================================================
FOOTNOTES:

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

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

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

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

<TABLE>
<CAPTION>
KEY:
<C> <C> <C> <C> <C> <C>
BAN = Bond Anticipation PCFA = Pollution Control Finance Authority
GO = General Obligation PCR = Pollution Control Revenue
HEFA = Health and Education Facilities Authority RB = Revenue Bond
HFA = Housing Finance Authority RDA = Revenue Development Authority
IDRB = Industrial Development Revenue Bond RRA = Resource Recovery Authority
LOC = Letter of Credit
</TABLE>

- -------------------------------------------------------------------------------
See Notes to Financial Statements.

30
<PAGE>

- -------------------------------------------------------------------------------
CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1996
===============================================================================
<TABLE>
<CAPTION>

INVESTMENT INCOME
<S> <C>
Income:
Interest...................................................................... $ 3,591,042
-------------------
Expenses: (Note 2)
Investment management fee.................................................... 278,564
Administration fee........................................................... 187,517
Shareholder servicing fee.................................................... 185,710
Custodian expenses........................................................... 17,836
Shareholder servicing and related shareholder expenses....................... 75,497
Legal, compliance and filing fees............................................ 27,873
Audit and accounting......................................................... 77,630
Directors' fees.............................................................. 16,728
Other........................................................................ 7,105
------------------
Total expenses........................................................... 874,460
Less:
Expenses paid indirectly............................................... ( 3,075)
Fees waived............................................................ ( 27,856)
------------------
Net expenses....................................................... 843,529
------------------
Net investment income........................................................ 2,747,513

<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments......................................... 2,987
------------------
Increase in net assets from operations.......................................... $ 2,750,500
==================

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

31
<PAGE>

- -------------------------------------------------------------------------------
CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED JANUARY 31, 1996 AND 1995
===============================================================================
<TABLE>
<CAPTION>
1996 1995
---- ----

INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income........................................... $ 2,747,513 $ 1,801,080

Net realized gain (loss) on investments........................ 2,987 2,109
--------------- ---------------

Increase (decrease) in net assets from operations.................... 2,750,500 1,803,189

Dividends to shareholders from net investment income................. ( 2,747,513)* ( 1,801,080)*
Capital share transactions (Note 3).................................. 24,022,159 ( 38,752,190)
--------------- ---------------
Total increase (decrease)....................................... 24,025,146 ( 38,750,081)
Net assets:
Beginning of year............................................... 81,800,860 120,550,941
--------------- ---------------
End of year..................................................... $ 105,826,006 $ 81,800,860
=============== ===============

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

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

32
<PAGE>

- -------------------------------------------------------------------------------
CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
===============================================================================

1. Summary of Accounting Policies.

Connecticut Daily Tax Free Income Fund, Inc. is a no-load, non-diversified,
open-end management investment company registered under the Investment Company
Act of 1940. The Fund is a short-term, tax-exempt money market fund. Its
financial statements are prepared in accordance with generally accepted
accounting principles for investment companies as follows:

a) Valuation of Securities -

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

b) Federal Income Taxes -

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

c) Dividends and Distributions -

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

d) Use of Estimates -

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

e) General -

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

2. Investment Management Fees and Other Transactions with Affiliates.

Under the Investment Management Contract, the Fund pays an investment management
fee to Reich & Tang Asset Management L.P. (Manager) at the annual rate of .30%
of the Fund's average daily net assets. 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 on investment
company expenses prescribed by any state in which the Fund's shares are
qualified for sale. No such reimbursement was required for the year ended
January 31, 1996.

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

33
<PAGE>

- -------------------------------------------------------------------------------
CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================

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

Pursuant to an Administrative Services Contract the Fund pays to the Manager an
annual fee of .21% of the Fund's average daily net assets. Prior to December 1,
1995, the administration fee was .20%.

The Manager is a wholly-owned subsidiary of New England Investment Companies,
L.P. ("NEIC"). On August 16, 1995, New England Mutual Life Insurance Company
("The New England"), the owner of NEIC's general partner and a majority owner of
the limited partnership interest in NEIC, entered into an agreement to merge
with Metropolitan Life Insurance Company ("MetLife"), with MetLife to be the
survivor of the merger. The merger is subject to several conditions, including
the required approval, by shareholders of the Fund of a proposed new investment
advisory agreement, intended to take effect at the time of the merger. The new
agreement will be substantially similar to the existing agreement.

Pursuant to a Distribution Plan adopted under Securities and Exchange Commission
Rule 12b-1, the Fund and Reich & Tang Distributors L.P. (the Distributor) have
entered into a Distribution Agreement and a Shareholder Servicing Agreement. For
its services under the Shareholder Servicing Agreement, the Distributor receives
from the Fund a fee equal to .20% of the Fund's average daily net assets. There
were no additional expenses borne by the Fund pursuant to the Distribution Plan.

During the year ended January 31, 1996, the Manager voluntarily waived
administration fees of $27,856.

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

Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $5,983 paid to Reich & Tang
Services L.P., an affiliate of the Manager, as servicing agent for the Fund.
Included in the Statement of Operations under the caption "Custodian expenses"
are expense offsets of $3,075.

3. Capital Stock.

At January 31, 1996, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $105,825,345. Transactions in capital
stock, all at $1.00 per share, were as follows:

<TABLE>
<CAPTION>
Year Year
Ended Ended
January 31, 1996 January 31, 1995
---------------- ----------------
<S> <C> <C>
Sold........................................... 230,071,612 190,586,219
Issued on investment of dividends.............. 2,456,633 1,674,156
Redeemed....................................... ( 208,506,086) ( 231,012,565)
------------------ -------------------
Net increase (decrease)........................ 24,022,159 ( 38,752,190)
================== ===================
</TABLE>

4. Sales of Securities.

Accumulated undistributed realized gains at January 31, 1996 amounted to $661.

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

34
<PAGE>

5. Concentration of Credit Risk.

The Fund invests primarily in obligations of political subdivisions of the State
of Connecticut and, accordingly, is subject to the credit risk associated with
the non-performance of such issuers. Approximately 56% of these investments are
further secured, as to principal and interest, by letters of credit issued by
financial institutions. The Fund maintains a policy of monitoring its exposure
by reviewing the creditworthiness of the issuers, as well as that of the
financial institutions issuing the letters of credit, and by limiting the amount
of holdings with letters of credit from one financial institution.

6. Selected Financial Information.

Reference is made to page 2 of the Connecticut Daily Tax Free Income Fund, Inc.
Prospectus and the Vista Select Shares of Connecticut Daily Tax Free Income
Fund, Inc. Prospectus for Selected Financial Information. Reference is made to
page 3 of the Evergreen Shares of Connecticut Daily Tax Free Income Fund, Inc.
Prospectus for Selected Financial Information.

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

35
<PAGE>

CONNECTICUT DAILY TAX FREE INCOME FUND, INC.

PART C - OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

(A) Financial Statements.

Included in Prospectus - Part A:

(1) Table of Fees and Expenses

(2) Selected Financial Information

Included in Statement of Additional Information - Part B:

(1) Report of McGladrey & Pullen, LLP independent certified
public accountants, dated February 22, 1996.

(2) Statement of Net Assets (audited),dated January 31, 1996.

(3) Statement of Operations (audited),dated January 31, 1996.

(4) Statements of Changes in Net Assets (audited),for the fiscal years
ended January 1995 and 1996.

(5) Notes to Financial Statements (audited).

(B) Exhibits.

* (1) Articles of Incorporation of the Registrant.

* (2) By-Laws of the Registrant.

(3) Not applicable.

** (4) Form of certificate for shares of Common Stock, par value
$.001 per share, of the Registrant.

**** (5) Investment Management Contract between the Registrant and
Reich & Tang Asset Management L.P.

**** (6) See Distribution Agreement between the Registrant and Reich &
Tang Distributors L.P.

(7) Not applicable.

***** (8) Custody Agreement between the Registrant and Investors Fiduciary
Trust Company.

(9) Not applicable.

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

+ Filed with Pre-Effective Amendment No. 1 to said Registration Statement on
May 13, 1985, and incorporated herein by reference.
* Filed with the initial Registration Statement No. 2-96546, on March 20,
1985, and incorporated herein by reference.
** Filed herewith.
*** Filed with Post-Effective Amendment No. 5 to said Registration Statement on
May 27, l988, and incorporated herein by reference.
**** Filed with Post-Effective Amendment No. 17 to said Registration Statement
on March 31, 1994 and incorporated by reference herein.
*****Filed with Post-Effective Amendment No. 19 to said Registration Statement
on May 26, 1995 and incorporated by reference herein.

C-1
<PAGE>

+ (10) Opinion of Battle Fowler LLP as to the legality of the
Securities being registered, including their consent to the filing
thereof and to the use of their name under the headings "Federal
Income Taxes" in the Prospectus and in the Statement of Additional
Information, and under the heading "Counsel and Auditors" in the
Statement of Additional Information.

+ (11.1) Consent of Day, Berry & Howard to the use of their name
under the heading "Connecticut Income Taxes" in the Prospectus and
in the Statement of Additional Information, and under the heading
"Counsel and Auditors" in the Statement of Additional Information.

(11.2) Consent of Certified Public Accountants filed herein.

+ (11.3) Power of Attorney of Principal Officers and Directors of
the Registrant.

(12) Not applicable.

+ (13) Written assurance of Reich & Tang, Inc. that its purchase of
shares of the Registrant was for investment purposes without any
present intention of redeeming or reselling.

(14) Not applicable.

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

**** (15.2) Amended Distribution Agreement between the Registrant and Reich &
Tang Distributors L.P.

**** (15.3) Amended Shareholder Servicing Agreement between the Registrant and
Reich & Tang Distributors L.P.

(15.4) Administrative Services Contract between the Registrant and Reich
& Tang Distributors L.P. filed herein.

(16) Financial Data Schedule Filed herein.

Item 25. Persons controlled by or Under Common Control with Registrant.

None.

Item 26. Number of Holders of Securities.

Number of Record Holders
Title of Class as of April 30, 1996

Common Stock
(par value $.001) 551

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

+ Filed with Pre-Effective Amendment No. 1 to said Registration Statement
filed on May 13, 1985, and incorporated herein by reference.
*** Filed with Post-Effective Amendment No. 15 to said Registration Statement
filed on May 28, 1993, and incorporated herein by reference.
**** Filed with Post-Effective Amendment No. 17 to said Registration Statement
on March 31, 1994 and incorporated by reference herein.

C-2
<PAGE>

Item 27. Indemnification.

Registrant incorporates herein by reference the response to Item 27 of
Registration Statement filed with the Commission on May 13, 1985.

Item 28. Business and Other Connections of Investment Advisor.

The description of Reich & Tang Asset Management L.P.("RTAM") under the
caption "Management of the Fund" in the Prospectus and "Manager" and "Management
of the Fund" in the Statement of Additional Information constituting parts A and
B, respectively, of this Post-Effective Amendment No. 21 to the 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 55.9% of the outstanding partnership units of New
England Investment Companies, L.P. ("NEICLP"), Reich & Tang, Asset Management
L.P., owns approximately 17.6% 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 advisor, Reich & Tang Asset Management L.P., is a
registered investment advisor. Reich & Tang Asset Management L.P.'s investment
advisory clients include California 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, Short Term Income Fund, Inc. and Tax
Exempt Proceeds Fund, Inc., registered investment companies whose address is 600
Fifth Avenue, New York, New York 10020, which invest principally in money market
instruments, Delafield Fund, Inc. and Reich & Tang Equity Fund, Inc., registered
investment companies whose addresses are 600 Fifth Avenue, New York, New York
10020, which invests principally in equity securities. 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.
G. Neil Ryland, Executive Vice President, Treasurer and Chief Financial Officer
NEIC since July 1993, Executive Vice from March 1989 until July 1993, from
September 1985 to December 1988, Mr. Ryland was employed by Kenner Parker Toys,
Inc. as Senior Vice President and Chief Financial Officer. Edward N. Wadsworth,
Executive Vice President, General Counsel, Clerk and Secretary of NEIC since
December 1989, Senior Vice President and Associate General Counsel of The New
England from 1984 until December 1992, and Secretary of Westpeak and Draycott
and the Treasurer of NEIC. Lorraine C. Hysler has been Secretary of RTAM since
July 1994, Assistant Secretary of NEIC since September 1993, Vice President of
the Mutual Funds Group of NEICLP from September 1993 until July 1994, and Vice
President of Reich & Tang Mutual Funds since July 1994. Ms. Hysler joined Reich
& Tang, Inc. in May 1977 and served as Secretary from April 1987 until September
1993. Richard E. Smith, III has been a Director of RTAM since July 1994,
President and Chief Operating Officer of

C-3
<PAGE>

Capital Management Group of NEICLP from May 1994 until July 1994, President and
Director of RTAM since July 1994, President and Chief Operating Officer of the
Chief Operating Officer of the Reich & Tang Capital Management Group since July
1994, Executive Vice President and Director of Rhode Island Hospital Trust from
March 1993 to May 1994, President, Chief Executive Officer and Director of USF&G
Review Management Corp. from January 1988 until September 1992. Steven W. Duff
has been a Director of RTAM since October 1994, President and Chief Executive
Officer of Reich & Tang Mutual Funds since August 1994, Senior Vice President of
NationsBank from June 1981 until August 1994, Mr. Duff is President and a
Director of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc. and Short Term Income Fund, Inc., President and Chairman of Reich & Tang
Government Securities Trust, President and Trustee of Institutional Daily
Municipal Income Fund, Pennsylvania Daily Municipal Income Fund, President and
Chief Executive Officer of Tax Exempt Proceeds Fund, Inc., and Executive Vice
President of Reich & Tang Equity Fund, Inc. Bernadette N. Finn has been Vice
President/Compliance of RTAM since July 1994, Vice President of Mutual Funds
Division of NEICLP from September 1993 until July 1994, Vice President of Reich
& Tang Mutual Funds since July 1994. Ms. Finn joined Reich & Tang, Inc. in
September 1970 and served as Vice President from September 1982 until May 1987
and as Vice President and Assistant Secretary from May 1987 until September
1993. Ms. Finn is also Secretary of California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Delafield
Fund, Inc., Daily Tax Free Income Fund, Inc., Institutional Daily Municipal
Income Fund, Michigan Daily Tax Free Income Funds, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund and Tax Exempt Proceeds Fund, Inc., a Vice President and Secretary of Reich
& Tang Equity Fund, Inc., Reich & Tang Government Securities Trust and Short
Term Income Fund, Inc. Richard De Sanctis has been Treasurer of RTAM since July
1994, Assistant Treasurer of NEIC since September 1993 and Treasurer of the
Mutual Funds Group of NEICLP from September 1993 until July 1994, Treasurer of
the Reich & Tang Mutual Funds since July 1994. Mr. De Sanctis joined Reich &
Tang, Inc. in December 1990 and served as Controller of Reich & Tang, Inc., from
January 1991 to September 1993. Mr. De Sanctis was Vice President and Treasurer
of Cortland Financial Group, Inc. and Vice President of Cortland Distributors,
Inc. from 1989 to December 1990. Mr. De Sanctis is also Treasurer of California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Institutional Daily
Municipal Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey
Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal
Income Fund, Reich & Tang Equity Fund, Inc., Reich & Tang Government Securities
Trust, Short Term Income Fund, Inc. and Tax Exempt Proceeds Fund, Inc. and is
Vice President and Treasurer of Cortland Trust, Inc.

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., Cortland Trust,
Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily
Municipal Income Fund, Institutional Daily Income Fund, Michigan Daily Tax Free
Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily
Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short
Term Income Fund, Inc. and Tax Exempt Proceeds Fund, Inc.

(b) The following are the directors and officers of Reich & Tang Asset
Management Inc., the general partner of Reich & Tang Distributors L.P. Reich &
Tang Distributors L.P. does not have any officers. The principal business
address of Messrs. Voss, Ryland, and Wadsworth is 399 Boylston Street, Boston,
Massachusetts 02116. For all other persons, the principal business address is
600 Fifth Avenue, New York, New York 10022.

C-4
<PAGE>

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

G. Neal Ryland Director None
Edward N. Wadsworth Clerk None
Richard E. Smith III Director None
Steven W. Duff Director President
Bernadette N. Finn Vice President - Compliance Secretary
Lorraine C. Hysler Secretary None
Richard De Sanctis Vice President and Treasurer Treasurer

Item 30. Location of Accounts and Records.

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

Item 31. Management Services.

Not applicable.

Item 32. Undertakings.

(a) Not applicable.

(b) Not applicable.

C-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it 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 30th day of May, 1996.

CONNECTICUT DAILY TAX FREE INCOME FUND, INC.

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

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on May 30, 1996.

SIGNATURE TITLE

(1) Principal Executive
Officer

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

(2) Principal Financial and
Accounting Officer

/s/Richard De Sanctis Treasurer
Richard De Sanctis

(3) Majority of Directors

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

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

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

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

* An executed copy of the power of attorney was filed as Exhibit 16 with
Pre-Effective Amendment No. 1 to Registration Statement No. 2-96546 on May
13, 1985.
<PAGE>

EXHIBIT INDEX

(11.2) Consent of Certified Public Accountants

(15.4) Administrative Services Contract between the Registrant and Reich &
Tang Distributors L.P.

(16) Financial Data Schedule

EXHIBIT 11

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

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use of our report dated February 22, 1996, on the
financial statements referred to therein in Post-Effective Amendment No. 21 to
the Registration Statement on Form N-1A, File No. 2-96456 of Connecticut Daily
Tax Free Income Fund, Inc., as filed with the Securities and Exchange
Commission.

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

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

New York, New York
May 23, 1996

EXHIBIT 15.4
ADMINISTRATIVE SERVICES CONTRACT

CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
the "Fund"

New York, New York

December 1, 1995

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

Gentlemen:

We herewith confirm our agreement with you as follows:

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

2. a. We hereby employ you as our administrator (the "Administrator")
to provide all management and administrative services reasonably necessary for
our operation, other than those services you provide to us pursuant to the
Investment Management Contract. The services to be provided by you shall include
but not be limited to those enumerated on Exhibit A hereto. The personnel
providing these services may be your employees or employees of your affiliates
or of other organizations. You shall make periodic reports to the Fund's Board
of Directors in the performance of your obligations under this Agreement and the
execution of your duties hereunder is subject to the general control of the
Board of Directors.

b. It is understood that you will from time to time employ,
subcontract with or otherwise associate with yourself, entirely at your expense,
such persons as you believe to be particularly fitted to assist you in the
execution of your duties hereunder. While this agreement is in effect, you or
persons affiliated with you, other than us ("your affiliates"),

<PAGE>

will provide persons satisfactory to our Board of Directors to be elected or
appointed officers or employees of our corporation. These shall be a president,
a secretary, a treasurer, and such additional officers and employees as may
reasonably be necessary for the conduct of our business.

c. You or your affiliates will also provide persons, who may be
our officers, to (i) supervise the performance of bookkeeping and related
services and calculation of net asset value and yield by our bookkeeping agent,
(ii) prepare reports to and the filings with regulatory authorities, and (iii)
perform such clerical, other office and shareholder services for us as we may
from time to time request of you. Such personnel may be your employees or
employees of your affiliates or of other organizations. Notwithstanding the
preceding, you shall not be required to perform any accounting services not
expressly provided for herein.

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

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

4. In consideration of the foregoing we will pay you an annual fee of .21%
of the Fund's average daily net assets. Your fee will be accrued by us daily,
and will be payable on the last day of each calendar month for services
performed hereunder during that month or on such other schedule as we may agree
in writing. You may use any portion of this fee for distribution of our shares,
or for making payments to organizations whose customers or clients are our
stockholders. You may waive yourright to any fee to which you are entitled
hereunder, provided such waiver is delivered to us in writing.

2
<PAGE>

5. This Agreement will become effective on the date hereof and shall
continue in effect until January 31, 1997 and thereafter for successive
twelve-month periods (computed from each February 1st), provided that such
continuation is specifically approved at least annually by our Board of
Directors and by a majority of those of our directors who are neither party to
this Agreement nor, other than by their service as directors of the corporation,
interested persons, as defined in the 1940 Act, of any such person who is party
to this Agreement. This Agreement may be terminated at any time, without the
payment of any penalty, (i) by vote of a majority of our outstanding voting
securities, as defined in the 1940 Act, or (ii) by a vote of a majority of our
entire Board of Directors, on sixty days' written notice to you, or (iii) by you
on sixty days' written notice to us.

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

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

8. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the 1940 Act.

3
<PAGE>

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

Very truly yours,

CONNECTICUT DAILY TAX FREE INCOME FUND, INC.

By: /s/ Bernadette N. Finn

ACCEPTED: December 1, 1995

REICH & TANG ASSET MANAGEMENT L.P.

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

By: /s/ Lorraine C. Hysler

<PAGE>

Exhibit A

Administration Services To Be Performed
by Reich & Tang Asset Management L.P.

Administration Services

1. In conjunction with Fund counsel, prepare and file all Post-Effective
Amendments to the Registration Statement, all state and federal tax
returns and all other regulatory filings.

2. In conjunction with Fund counsel, prepare and file all Blue Sky
filings, reports and renewals.

3. Coordinate, but not pay for, required Fidelity Bond and Trustees and
Officers Insurance (if any) and monitor their compliance with
Investment Company Act.

4. Coordinate the preparation and distribution of all materials for
Trustees, including the agenda for meetings and all exhibits thereto,
and actual and projected quarterly summaries.

5. Coordinate the activities of the Fund's Manager, Custodian, Legal
Counsel and Independent Accountants.

6. Prepare and file all periodic reports to shareholders and proxies and
provide support for shareholders meetings.

7. Monitor daily and periodic compliance with respect to all requirements
and restrictions of the Investment Company Act, the Internal Revenue
Code and the Prospectus.

8. Monitor daily the Fund's bookkeeping services agent's calculation of
all income and expense accruals, sales and redemptions of capital
shares outstanding.

9. Evaluate expenses, project future expenses, and process payments of
expenses.

10. Monitor and evaluate performance of accounting and accounting related
services by Fund's bookkeeping services agent. Nothing herein shall be
construed to require you to perform any accounting services not
expressly provided for in this Agreement.

<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000764901
<NAME> Connecticut Daily Tax Free Income Fund, Inc.

<S> <C>
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 105804866
<INVESTMENTS-AT-VALUE> 105804866
<RECEIVABLES> 780170
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1253495
<TOTAL-ASSETS> 107838531
<PAYABLE-FOR-SECURITIES> 1775408
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 237117
<TOTAL-LIABILITIES> 2012525
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105843655
<SHARES-COMMON-STOCK> 105843655
<SHARES-COMMON-PRIOR> 81821496
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (17,649)
<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3591042
<OTHER-INCOME> 0
<EXPENSES-NET> 843529
<NET-INVESTMENT-INCOME> 2747513
<REALIZED-GAINS-CURRENT> 2987
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2750500
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2747513
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2300771612
<NUMBER-OF-SHARES-REDEEMED> 208506086
<SHARES-REINVESTED> 2456633
<NET-CHANGE-IN-ASSETS> 24025146
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (20636)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 278564
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 874460
<AVERAGE-NET-ASSETS> 92854857
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .030
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .030
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>