REICH & TANG GOVERNMENT SECURITIES TRUST, 497, 1995-07-14

REICH & TANG GOVERNMENT SECURITIES TRUST
497, 1995-07-14

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RULE 497(b)
Registration No. 33-1696
================================================================================
600 FIFTH AVENUE
REICH & TANG NEW YORK, NY 10020
GOVERNMENT SECURITIES TRUST (212) 830-5220
================================================================================

PROSPECTUS

July 3, 1995

Reich & Tang Government Securities Trust (the "Trust") is a no-load, open-end,
diversified, management investment company. The Trust's investment objective is
to seek as high a level of current income as is consistent with prudent
investment risk by investing solely in securities that are issued or guaranteed
by the United States Government or its agencies and instrumentalities and backed
by the full faith and credit of the United States ("U.S. Government Securities")
and in repurchase agreements pertaining to such U.S. Government Securities.

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

This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Trust. A Statement of Additional Information
dated July 3, 1995, containing additional and more detailed information about
the Trust (the "Statement of Additional Information"), has been filed with the
Securities and Exchange Commission and is hereby incorporated by reference into
this Prospectus. It is available without charge and can be obtained by writing
or calling the Trust at the address and telephone number set forth above.

Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the shares are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency.

This Prospectus should be read and retained by investors for future reference.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Table of Contents

<S> <C> <C>
Table of Fees and Expenses............................2 Specified Amount Automatic Withdrawal Plan............9
Selected Financial Information........................2 Exchange Privilege.....................................9
Prospectus Summary....................................3 Individual Retirement Accounts........................10
Investment Objectives, Policies and Risks.............3 Custodian and Transfer Agent..........................10
Repurchase Agreements..............................4 Management and Investment
Portfolio Turnover.................................5 Management Contract.............................10
Investment Restrictions...............................5 Distribution and Service Plan.......................11
How to Purchase and Redeem Shares.....................5 Expenses of the Trust.................................13
Investment Through Dividends and Federal Income Tax Matters..............13
Participating Organizations........................6 Net Asset Value.......................................14
Other Purchase and Redemption Procedures..............7 Description of Shares.................................14
Initial Purchase of Shares..........................7 Performance...........................................14
Subsequent Purchases of Shares......................8 Information for Shareholders..........................14
Redemption of Shares................................8

</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 - After Fee Waiver 0.07%
12b-1 Fees - After Fee Waiver -0-
Other Expenses - After Reimbursement of Expenses 0.48%
Administration Fees - After Fee Waiver -0- _____
Total Fund Operating Expenses - After Fee Waiver and Expense Reimbursement 0.55%

<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): $6 $18 $31 $70

The purpose of the foregoing table is to assist an investor in understanding the
various costs and expenses that an investor in the Trust will bear directly or
indirectly. For a further discussion of these fees see "Management and
Investment Management Contract" and "Distribution and Service Plan" herein. The
Manager has voluntarily waived a portion of the Management Fee and the entire
Administration Fee and the Distributor has waived the entire 12b-1 Fee; absent
such waivers, the Management Fee, Administration Fee and the 12b-1 Fee would
have been .35%, .20% and .25%, respectively.Accordingly, absent fee waivers,
Other Expenses of the Trust and Total Fund Operating Expenses would have been
.68% and 1.28%, respectively.
</TABLE>

THE FIGURES REFLECTED IN THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN ABOVE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION

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

Year Ended February 28/29, February 27, 1986
--------------------------- (Inception) to
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989 1988 February 28, 1987
---- ---- ---- ---- ---- ---- ---- ---- -----------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of year $10.37 $10.83 $10.27 $9.89 $9.58 $9.30 $9.82 $10.45 $10.00
------ ------ ------ ----- ----- ----- ----- ------ ------

Income from investment operations:
Net investment income.......... 0.48 0.49 0.68 0.75 0.77 0.77 0.78 0.86 0.83
Net realized and unrealized gain/
(loss) on investments...... (.37) 0.09 0.66 0.38 0.31 0.28 ( 0.52) ( 0.58) 0.45
------ ----- ----- ---- ---- ---- ------ ------ -----
Total from investment operations. .11 0.58 1.34 1.13 1.08 1.05 0.26 0.28 1.28
------ ----- ----- ---- ---- ---- ------ ------ -----
Less distributions:
Dividends from net investment income (.48) (0.49) (0.68) (0.75) (0.77) (0.77) ( 0.78) ( 0.86) (0.83)

Distributions from net realized gain
on investments............ (.28) (0.55) (0.10) - - - - ( 0.05) -
----- ----- ------ ---- ---- ---- ----- ------- -----
Total distributions....... (.76) (1.04) (0.78) (0.75) (0.77) (0.77) ( 0.78) ( 0.86) (0.83)
----- ----- ------ ------ ------ ------ ------ ------- ------
Net asset value, end of year... $9.72 $10.37 $10.83 $10.27 $9.89 $9.58 $9.30 $9.82 $10.45
====== ====== ====== ====== ====== ====== ====== ====== =======
Total Return................... 1.23% 5.33% 13.60% 11.22% 11.78% 11.62% 2.86% 3.38% 13.39%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted).............. $11,523 $19,316 $20,166 $4,576 $13,247 $10,313 $7,775 $4,733 $4,489
Ratios to average net assets:
Expenses..................... 55%+ 0.55%+ 0.55%+ 0.55%+ 0.55%+ 0.55%+ 0.52%+ 0.25%+ 0.25%+
Net investment income........ 4.86%+ 4.47%+ 6.48%+ 7.49%+ 7.92%+ 8.01%+ 8.07%+ 8.96%+ 8.91%+
Portfolio turnover rate........ 25.43% 83.55% 66.47% 19.86% 7.25% .22% 1.32% 1.38% 6.04%

+ Net of investment management, administration and shareholder servicing fee
waivers and expense reimbursements equivalent to .73%, .80%, .85%, 1.00%,
.93%, 1.39%, 2.20%, 3.61% and 6.52% of average net assets, respectively.
</TABLE>
2
<PAGE>

PROSPECTUS SUMMARY

The Trust is a diversified, open-end mutual fund whose shares are offered
without a sales load. The investment objective of the Trust is to provide
shareholders with as high a level of current income as is consistent with
prudent investment risk. In seeking to achieve its objective, the Trust will
invest solely in securities that are issued or guaranteed by the United States
Government or its agencies and instrumentalities and backed by the full faith
and credit of the United States ("U.S. Government Securities") and in repurchase
agreements pertaining to such U.S. Government Securities. (See "Investment
Objectives, Policies and Risks" herein.)

There is no sales load. Shares may be purchased and redeemed at net asset value.
The Trust may, however, bear directly or indirectly certain costs associated
with the distribution of its shares. (See "How to Purchase and Redeem Shares"
and "Distribution and Service Plan" herein.)

Shares may be purchased through the Trust's transfer agent. The minimum initial
investment is $5,000 ($1,000 through certain financial intermediaries); there is
no minimum for subsequent purchases. The minimum initial investment for
retirement plans is lower. (See "Individual Retirement Accounts" herein.)

The Manager of the Trust is Reich & Tang Asset Management L.P. (the "Manager"),
a registered investment adviser. In addition to the Trust, Reich & Tang Asset
Management L.P. acts as manager, administrator or investment adviser of eighteen
other registered investment companies and also advises pension trusts, profit
sharing trusts and endowments. The Trust pays a management fee to Reich & Tang
Asset Management L.P. at the annual rate of .35% of the average daily net assets
of the Trust. Under a Distribution and Service Plan adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended, (the "1940 Act") the
Trust pays to Reich & Tang Distributors L.P. (the "Distributor"), a shareholder
servicing fee at the annual rate of .25% of the average daily net assets of the
Trust.

In addition, the Distribution and Service Plan provides that the Trust may pay
certain additional direct expenses relating to the distribution of its shares
and the servicing of shareholder accounts, provided that such payments will not
exceed in any year .05% of the Trust's average daily net assets for the year.
The Trust is also responsible for the payment of its other operating expenses,
including, among others, brokerage and commission expenses, charges and expenses
of the Trust's custodian, charges and expenses of persons performing issuance,
redemption, transfer and dividend disbursing functions for the Trust, recurring
and non-recurring legal and accounting expenses, including the determination of
net asset value per share and the maintenance of portfolio and general
accounting records, compensation, including trustees' fees of any of the Trust's
trustees, officers or employees who are not officers of Reich & Tang Asset
Management, Inc., the sole general partner of the Manager, and costs of other
personnel providing services to the Trust, costs of shareholder's reports, proxy
solicitations, and Trust meetings, expenses of servicing shareholders and
shareholder accounts, fees and expenses to qualify the Trust's shares for sale
under Federal and State securities laws and expenses of printing the Trust's
prospectuses and statements of additional information. (See "Management and
Investment Management Contract", "Distribution and Service Plan" and "Expenses
of the Trust" herein.)

The value of Trust shares will fluctuate with changes in the market value of its
portfolio securities. The Trust's shares are not guaranteed by the U.S.
Government.

Dividends of net investment income are declared on each Trust Business Day
(weekdays, Monday through Friday, except customary national holidays and Good
Friday) and paid after the close of business on the fifteenth day of each month
or after the close of business on the previous business day, if the fifteenth is
not a Trust Business Day. (See "Dividends and Federal Income Tax Matters"
herein.)

IRA and other retirement plans utilizing the Trust as an investment medium
provide Federal income tax benefits for qualified participants. (See "Individual
Retirement Accounts" herein.)

Exchange privileges are offered whereby shareholders of the Trust are entitled
to exchange some or all of their shares in the Trust for shares of certain other
investment companies which retain Reich & Tang Asset Management L.P. as
investment adviser or manager. (See "Exchange Privilege" herein.)

An investment in the Trust entails certain risks, including risks associated
with the purchase of when-issued securities and repurchase agreements. Risks
factors are further described under "Investment Objectives, Policies and Risks"
herein.

INVESTMENT OBJECTIVES, POLICIES AND RISKS

3
<PAGE>

Securities. There can be no assurance that the Trust's investment objective will
be achieved. The Trust's investment objective and its investment policy of
investing solely in U.S. Government Securities are deemed fundamental and may
not be changed without shareholder approval. The Trust's other investment
policies are not fundamental and, therefore, may be changed by the Trustees
without shareholder approval.

U.S. Government Securities include (i) U.S. Treasury obligations which differ
only in their interest rates, maturities and times of issuance as follows: U.S.
Treasury bills (maturity of one year or less), U.S. Treasury notes (maturities
of one to ten years) and U.S. Treasury bonds (generally maturities of greater
than ten years); and (ii) obligations issued or guaranteed by U.S. Government
agencies and instrumentalities that are supported by the full faith and credit
of the United States (such as securities issued by the Government National
Mortgage Association, the Federal Housing Administration, the Department of
Housing and Urban Development, the Export-Import Bank, the General Services
Administration and the Maritime Administration and certain securities issued by
the Farmers' Home Administration and the Small Business Administration). The
maturities of U.S. Government Securities usually range from three months to
thirty years.

Securities of the Government National Mortgage Association ("GNMA") include GNMA
Certificates, which are mortgage-backed securities representing part ownership
of a pool of mortgage loans. Such loans are initially made by lenders such as
mortgage bankers, commercial banks and savings and loan associations and are
either insured by the Federal Housing Administration or Farmers' Home
Administration or guaranteed by the Veterans Administration. A GNMA Certificate
represents an interest in a specific pool of such mortgages which, after being
approved by GNMA, is offered to investors through securities dealers. The Trust
will invest in GNMA Certificates only of the "fully modified pass-through" type
which are guaranteed as to timely payment of principal and interest by the full
faith and credit of the U.S. Government.

The average life of a GNMA Certificate is likely to be substantially less than
the original maturity of the mortgage pools underlying the securities, due to
prepayments of principal by mortgagors and mortgage foreclosures which will
usually result in the return of the greater part of principal investment long
before the maturity of the mortgages in the pool. The occurrence of mortgage
prepayments is affected by many factors including the level of interest rates,
general economic conditions, the location and age of the mortgage and other
social and demographic conditions. At the time principal prepayments or payments
upon foreclosure are received by the Trust, prevailing interest rates may be
higher or lower than the current yield of the Trust's portfolio. Prepayments
often occur following a decline in interest rates, in which case reinvestment
will take place at a lower interest rate than the rate on the prepaid
obligation. Foreclosures impose no risk to principal investment because of the
GNMA guarantee; however, inasmuch as foreclosures will involve a repayment of
principal to the Trust, the Trust's yield on its portfolio securities will be
affected if reinvestment takes place at a higher or lower interest rate.

The prices of U.S. Government Securities, like conventional bonds, are inversely
affected by changes in interest rate levels. A decrease in rates generally
produces an increase in the value of the portfolio's investments, while an
increase in rates generally reduces the value of these investments. Investors
should be prepared to accept the principal volatility normally associated with
investment in longer term fixed income securities and should not rely on the
Trust for their short-term financial needs. The Trust is not intended to be a
vehicle for trading on short-term swings in the market. The Trust may purchase
U.S. Government Securities on a "when-issued" basis. When such transactions are
negotiated, the price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the securities
take place at a later date. The use of when-issued transactions enables the
Trust to hedge against an anticipated decline in interest rates and increase in
prices. However, if the Trust's Manager were to forecast incorrectly the
direction of interest rate movement, the Trust might be required to complete a
when-issued transaction at a price inferior to the current market price. No
when-issued commitments will be made if, as a result, more than 20% of the value
of the Trust's total assets would be committed to such transactions. (See
"Investment Policies" in the Statement of Additional Information.)

Repurchase Agreements

4
<PAGE>

not be related to the interest rate on the underlying securities. The difference
between the total amount to be received upon the repurchase of the securities
and the price paid by the Trust upon their acquisition is accrued daily as
interest. The Trust requires continual maintenance by the Trust's custodian of
the market value of underlying collateral in amounts equal to, or in excess of,
the value of the repurchase agreement including the agreed upon interest. If the
institution defaults on the repurchase agreement, the Trust will retain
possession of the underlying securities. In addition, if bankruptcy proceedings
are commenced with respect to the seller, realization on the collateral by the
Trust may be delayed or limited and the Trust may incur additional costs. In
such case the Trust will be subject to risks associated with changes in the
market value of the collateral securities. The Trust intends to limit repurchase
agreements to transactions with institutions believed by the Trust's Manager to
present minimal credit risk. Repurchase agreements may be considered to be loans
under the 1940 Act.

Portfolio Turnover

The Trust intends to invest for long-term purposes. However, the rate of
portfolio turnover will depend upon market and other conditions, and it will not
be a limiting factor when the Trust's Manager believes that portfolio changes
are appropriate. It is anticipated that the annual portfolio turnover rate will
generally not exceed 100%. A 100% turnover rate would occur, for example, if all
of the securities in the Trust are replaced once within a period of one year.
The Trust will not normally engage in short-term trading but reserves the right
to do so. The Trust's portfolio turnover rate was 25.43% during the fiscal year
ended February 28, 1995. (See "Selected Financial Information" herein.)

INVESTMENT RESTRICTIONS

The Trust has adopted the following investment restrictions which may not be
changed without shareholder approval. The Trust may not:

1. Invest more than 5% of the value of its total assets in repurchase
agreements purchased from any one seller, except that up to 25% of the
value of the Trust's total assets may be invested without regard to
this limitation;

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

3. Make loans, except that the Trust may purchase the debt securities and
repurchase agreements described in "Investment Objectives, Policies and
Risks" herein;

4. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
in an amount of not more than 15% of the value of its total assets to
secure borrowings for temporary or emergency purposes; or

5. Invest more than 10% of the value of its net assets in the aggregate in
securities for which there is no readily available market and
repurchase agreements maturing in more than 7 days.

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

HOW TO PURCHASE AND REDEEM SHARES

Investors who have accounts with organizations, such as securities brokers,
banks and financial institutions or other industry professionals, which are
capable of maintaining automated data exchange arrangements with the Trust and
which have entered into agreements with the Trust to do so ("Participating
Organizations"), may invest in the Trust through their Participating
Organizations. (See "Investment through Participating Organizations" herein.)
All other investors, and investors who have accounts with Participating
Organizations but who do not wish to invest in the Trust through their
Participating Organizations, may invest in the Trust directly. (See "Other
Purchase and Redemption Procedures" herein.) The minimum initial investment in
the Trust is $1,000 for Participating Organizations purchasing shares for their
own account and for shareholders who invest through Participating Organizations
and is $5,000 for other shareholders. There is no minimum for subsequent
investments.

The Trust sells and redeems its shares on a continuous basis at their net asset
value next determined after receipt of an order and does not impose a sales load
for either sales or redemptions. All transactions in Trust

5
<PAGE>

shares are effected through the Trust's transfer agent, which accepts orders for
purchases and redemptions from Participating Organizations and from shareholders
directly.

In order to maximize earnings, the Trust normally has its assets as fully
invested as is practicable. Many securities in which the Trust 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 Trust
does not accept a subscription until the investor's payment has been converted
by the Trust's transfer agent into Federal Funds.

Shares will be issued as of the first determination of the Trust's net asset
value per share made after receipt of the investor's purchase order accompanied
by Federal Funds. Except as described below in the case of certain Participating
Organizations (see "Investment Through Participating Organizations" herein), an
investor's funds will not be invested by the Trust during the period before the
Trust's receipt of Federal Funds and its issuance of Trust shares. The Trust
reserves the right to reject any subscription to its shares.

Shares are issued as of 4:00 p.m., New York City time, on any Trust Business
Day, as defined herein, on which an order for the shares and accompanying
Federal Funds are received by the Trust's transfer agent before 4:00 p.m. Orders
accompanied by Federal Funds and received after 4:00 p.m. on a Trust Business
Day will not result in share issuance until the following Trust Business Day.

Share certificates are issued only upon the written request to the Trust of the
purchaser. No certificates are issued for fractional shares or for shares
redeemable by telephone.

There is no redemption charge, no minimum period of investment, and no
restriction on frequency of redemptions. Proceeds of redemptions are paid in
cash. (See "Redemption of Shares" herein.)

The date of payment upon redemption may not be postponed for more than seven
days after shares are tendered for redemption, and the right of redemption may
not be suspended, 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 Trust of its securities is not reasonably practicable or
as a result of which it is not reasonably practicable for the Trust 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 Trust.

Redemption requests received, in proper form, by the Trust's transfer agent
before 4:00 p.m., New York City time, on any Trust Business Day, become
effective at 4:00 p.m. that day at that day's net asset value. A redemption
request received after 4:00 p.m. on any Trust Business Day becomes effective on
the next Trust Business Day at that day's net asset value. Shares redeemed are
entitled to participate in dividends declared on the day a redemption becomes
effective.

INVESTMENT THROUGH PARTICIPATING ORGANIZATIONS

Persons may, if they wish, invest in the Trust through the Participating
Organizations with which they have accounts. When instructed by its customer to
purchase or redeem Trust shares, the Participating Organization, on behalf of
the customer, transmits to the Trust'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 shares purchased through
Participating Organizations.

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

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 Trust directly may impose
charges, limitations, minimums and restrictions in addition to or different from
those applicable to shareholders who invest in the Trust directly. A Participant
Investor should read this Prospectus in conjunction with the materials provided
by the Participating Organization describing the procedures under which Trust
shares may be purchased and redeemed through the Participating

6
<PAGE>

Organization and any fees and limitations which may be applicable to those
procedures. Participating Organizations may receive compensation from the
Distributor pursuant to a Distribution Plan adopted by the Trust. (See
"Distribution and Service Plan" herein.)

OTHER PURCHASE AND REDEMPTION PROCEDURES

The following purchase and redemption procedures apply to investors who wish to
invest in the Trust directly and not through Participating Organizations. These
investors may obtain 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 whose Participating
Organizations have undertaken to provide confirmations, will receive from the
Trust individual confirmations of each purchase and redemption of Trust shares
(other than draft check redemptions) and a monthly statement listing the total
number of Trust shares owned as of the statement closing date, purchases and
redemptions of Trust shares during the month covered by the statement and the
dividends paid on Trust shares of each shareholder during the statement period
(including dividends paid in cash or reinvested in additional Trust shares).

Initial Purchase of Shares

Mail

Investors may send a check made payable to "Reich & Tang Government Securities
Trust" and a completed subscription order form to:

Reich & Tang Government Securities Trust
Reich & Tang Mutual Funds
600 Fifth Avenue
New York, New York 10020

Checks are accepted subject to collection at full value in United States
currency and conversion into Federal Funds. 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 up to 15 days to convert into Federal Funds. An
investor's subscription will not be accepted until the Trust receives Federal
Funds.

Bank Wire

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

DST Systems, Inc.
ABA # 101003621
DDA # 890752-953-8
For Reich & Tang Government Securities Trust
Account of (Investor's Name)________________________
Fund Account # 0345_________________________________
SS #/Tax ID #_______________________________________

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

The investor planning to wire funds should instruct his bank early in the day so
the wire transfer can be accomplished the same day. There may be a charge by the
investor's bank for transmitting the money by bank wire, and there also may be a
charge for use of Federal Funds. The Trust does not charge investors in the
Trust for its receipt of wire transfers. Payment in the form of a "bank wire"
received prior to 4:00 p.m., New York City time, on a Trust Business Day will be
treated as a Federal Funds payment received on that day. Payment in the form of
a "bank wire" received after 4:00 p.m., New York City time, on a Trust Business
Day will be treated as a Federal Funds payment received on the next Trust
Business Day.

Personal Delivery

Deliver a check made payable to "Reich & Tang Government Securities Trust" along
with a completed subscription order form to:

7
<PAGE>

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

Subsequent Purchases of Shares

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

Reich & Tang Government Securities Trust
Mutual Funds Group
P.O. Box 16815
Newark, New Jersey 07101-6815

There is no minimum for each subsequent purchase. All payments should clearly
indicate the shareholder's account number.

Provided that the information on the subscription order form on file with the
Trust 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
receipt by the Trust's transfer agent of the redemption order (and any
supporting documentation which it may require). Normally payment for redeemed
shares is made on the next Trust Business Day after the redemption is effected,
provided the redemption request is received prior to 4:00 p.m., New York City
time. However, redemption requests will not be effected until all checks
(including a certified or cashier's check) in payment for the purchase of the
shares to be redeemed have been cleared, currently considered by the Trust to
occur up to 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 Trust's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee. When a
signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature and signed 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
Trust's transfer agent's standards and procedures (guarantees by notaries public
are not acceptable).

Written Requests

Shareholders may make a redemption in any amount by sending a written request,
together with any certificates that may have been previously issued, to:

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

All 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.

Telephone

The Trust accepts telephone requests for redemption from shareholders who elect
this option. The proceeds of a telephone redemption will be sent to the
shareholder at his address or to his bank account as set forth in the
subscription order form or in a subsequent written authorization. The Trust may
accept telephone redemption instructions from any person with respect to
accounts of shareholders who elect this service, and thus shareholders risk
possible loss of principal and dividends in the event of a telephone redemption
not authorized by them. The Trust 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 Trust to employ such procedures may cause the Trust to be liable
for any losses incurred by investors due to telephone redemptions based upon
unauthorized or fraudulent instructions. Telephone requests to wire redemption
proceeds must be for amounts in excess of $1,000.

A shareholder making a telephone withdrawal should call the Trust at
212-830-5220; outside New York State at 800-221-3079 and state (i) the name of
the shareholder appearing on the Trust's records, (ii) his account

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number with the Trust, (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 investor on the next Trust Business Day after the
redemption is effected, provided the redemption request is received prior to
4:00 p.m., New York City time. If the redemption request is received after 4:00
p.m., New York City time, the redemption is effected on the following Trust
Business Day at that day's net asset value and the proceeds are usually sent to
the investor on the second following Trust Business Day. The Trust reserves the
right to terminate or modify the telephone redemption service at any time.
During times of severe disruptions in the securities markets (or the economy
generally), shareholders may experience difficulties in making telephone
redemption requests.

Specified Amount Automatic Withdrawal Plan

Shareholders may elect to redeem shares and receive payment from the Trust of a
specified amount of $50 or more automatically on a monthly, quarterly,
semi-annual or annual basis. A specified amount plan payment is made by the
Trust on the 23rd day of each month. Whenever such 23rd day of a month is not a
Trust Business Day, the payment date is the Trust Business Day immediately
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 Trust 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. A shareholder may
recognize a gain or a loss upon redemption of shares to the extent the amount
received upon redemption exceeds or is less than his basis in the shares
redeemed.

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 by sending a written request to the Trust's transfer agent.

EXCHANGE PRIVILEGE

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

An exchange of shares in the Trust pursuant to the exchange privilege is, in
effect, a redemption of Trust 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 will normally 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
exchanges. 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 insure that a sufficient number of shares
are exchanged to meet the minimum initial investment required for the investment
company into which the exchange is being made.

The exchange privilege provides shareholders of the Trust 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 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
Reich & Tang Mutual Funds at the address or telephone number listed on the cover
of this Prospectus.

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

Reich & Tang Government Securities Trust
Reich & Tang Mutual Funds
600 Fifth Avenue
New York, New York 10020

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<PAGE>

or by telephoning the Trust at 212-830-5220 (within New York State) or
800-221-3079 (outside New York State). The Trust reserves the right to reject
any exchange request and may modify or terminate the exchange privilege upon 60
days' notice to shareholders.

INDIVIDUAL RETIREMENT ACCOUNTS

A form of individual retirement account (an "IRA") is available from the Trust
for investment in shares of the Trust. This form may be used for the
contributions described below as well as for eligible rollover contributions of
distributions received from qualifying employer-sponsored pension and
profit-sharing plans and from other IRAs. Under the form, all assets in the IRA
are automatically invested in Trust shares, including all dividends and capital
gain distributions paid on Trust shares held in the IRA. Investors Fiduciary
Trust Company acts as custodian of an IRA established pursuant to the form and
charges the following fees for custodian services: a $10 fee to open the IRA; an
annual maintenance fee of $10; and a $10 fee for each distribution from the IRA.

Individuals generally may make IRA contributions of up to $2,000 annually.
However, the deductibility of an individual's IRA contribution will be reduced
if the individual or, in the case of a married individual, either the individual
or the individual's spouse is an active participant in an employer-sponsored
retirement plan. Thus, in the case of an active participant, the deduction will
not be available for an individual with adjusted gross income above $35,000, a
married couple filing a joint return with adjusted gross income above $50,000
and a married individual filing separately with adjusted gross income above
$10,000. In addition, an individual with a non-working spouse may establish a
separate IRA for the spouse and annually contribute a total of up to $2,250 to
the two IRAs, provided that no more than $2,000 may be contributed to the IRA of
either spouse.

Withdrawals from an IRA, other than that portion, if any, of the withdrawal
considered to be a return of the investor's non-deductible IRA contributions,
are taxed as ordinary income when received. Such withdrawals may be made without
penalty after the participant reaches age 591/2, and must commence no later than
shortly after age 701/2. Withdrawals before age 591/2 or the failure to commence
withdrawals on a timely basis after age 701/2 may involve the payment of certain
penalties.

To encourage investments by existing and new IRAs, the Trust has lowered the
minimum for initial IRA investments to $250. There is no minimum on subsequent
IRA investments.

An investor should contact the Trust to obtain further information concerning a
Trust IRA and required disclosure statement. His tax adviser should be consulted
as well.

CUSTODIAN AND TRANSFER AGENT

DST Ssyemes, Inc., 127 West 10th Street, Kansas City, Missouri 64105, is the
custodian for the Trust's cash and securities and is the transfer agent and
dividend agent for the shares of the Trust. The Trust's transfer agent and
custodian does not assist in and is not responsible for any investment decisions
involving assets of the Trust.

MANAGEMENT AND INVESTMENT MANAGEMENT CONTRACT

The business and affairs of the Trust are managed under the direction of the
Trustees. The Trust has retained as its

a Delaware limited partnership with its principal office at 600 Fifth Avenue,
New York, New York 10020. The Manager was at May 31, 1995 investment manager,
adviser or supervisor for assets aggregating in excess of $7.4 billion. The
Manager acts as investment manager or administrator of eighteen other investment
companies and also advises pension trusts, profit-sharing trusts and endowments.

Effective October 1, 1994, the Board of Directors of the Fund approved the
re-execution of the Investment Management Contract and Administrative Services
Contract with the Manager. The Manager's predecessor, New England Investment
Companies, L.P. ("NEICLP") is the limited partner and owner of a 99.5% interest
in the newly created limited partnership, Reich & Tang Asset Management L.P.,
the Manager. Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of
NEICLP) is the general partner and owner of the remaining .5% interest of the
Manager. Reich & Tang Asset Management L.P. has succeeded NEICLP as the Manager
of the Fund. The re-execution of the Investment Management Contract did not
result in "assignment" of the Investment Management contract with NEICLP under
the 1940 Act, since there is no change in actual control or management of the
Manager caused by the re-execution. New England Investment Companies, Inc.
("NEIC"), a Massachusetts corporation, serves as the sole general partner of
NEICLP. The New England Mutual Life Insurance Company ("The New England") owns
approximately 68.1% of the total partnership units outstanding of NEICLP, and
Reich & Tang, Inc. owns approximately 22.8% of the outstanding partnership units
of NEICLP. In addition, NEIC is a wholly-owned subsidiary of The New England
which may be deemed a "controlling person" of the Manager. NEIC is a holding
company offering a broad array of investment styles

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across a wide range of asset categories through eight investment
advisory/management affiliates and three 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., and an
affiliate, Capital Growth Management Limited Partnership. These affiliates in
the aggregate are investment advisors or managers to 57 other registered
investment companies.

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

The Investment Management Contract provides that the Manager will receive from
the Trust a fee, computed daily and paid monthly, at the annual rate of .35% of
the average daily net assets of the Trust. In addition to management services
with respect to the purchase and sale of securities, the fee includes payments
for overall management of the Trust. Reich & Tang Distributors L.P. (the
"Distributor") receives a fee equal to .25 of 1% per annum of the Trust'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 Trust shares. (See "Distribution
and Service Plan" herein.) Under the Investment Management Contract the Manager
also provides persons satisfactory to the Trustees to act as its officers.
Certain officers as well as certain other employees and the Trustees 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. Robert F.
Hoerle, Chairman and a Trustee of the Trust, has been primarily responsible for
the day-to-day management of the Trust's portfolio since its inception in 1986.
Mr. Hoerle was formerly Chairman and Director of Reich & Tang, Inc. with which
he was associated with from February 1971 to September 1993. He is also
Chairman, President and a Director of Reich & Tang Equity Fund, Inc. A
description of Mr. Hoerle's business experience is set forth under "Management -
Trustees and Officers" in the Statement of Additional Information. The Trust's
Annual Report for the trust year ending February 28, 1995 contains information
regarding the Trust's performance and will be provided, without charge, upon
request.

For its services under the Administrative Services Contract, the Manager
receives a fee equal to .20% per annum of the Trust'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 Trust shares (see "Distribution and
Service Plan" herein).

Pursuant to the Administrative Services Contract for the Trust, the Manager
performs clerical, accounting supervision and other office services, such as
dealing with unusual shareholder problems and assisting Participating
Organizations in dealing with the transfer agent, which the Manager is not
required to furnish under the Investment Management Contract. In addition, the
Manager also provides the Trust with personnel to (i) supervise the performance
of bookkeeping and related services by Investors Fiduciary Trust Company, the
Trust's bookkeeping agent, (ii) prepare reports to and filings with regulatory
authorities and (iii) perform such other services as the Trust may from time to
time request of the Manager. The personnel rendering these services, who may act
as officers of the Trust, may be employees of the Manager or its affiliates. The
cost to the Trust of these services must be agreed to by the Trust and is
intended to be no higher than the actual cost to the Manager or its affiliates
of providing the services. The Trust does not pay for services performed by
employees of the Manager or its affiliates or for investment management
services. The Trust may from time to time hire its own employees or contract to
have services performed by third parties, which may include Participating
Organizations and other broker-dealers, and the management of the Trust intends
to do so whenever it appears advantageous to the Trust.

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.)

DISTRIBUTION AND SERVICE PLAN

Rule 12b-1 (the "Rule") under the 1940 Act regulates the circumstances under
which an investment company may, directly or indirectly, bear the expenses of
distributing its shares. The Rule defines distribution expenses to include the
cost of "any activity which is primarily intended to result in the sale of
(trust) shares." The Rule provides, among other things, that an investment
company may bear distribution expenses only pursuant to a plan adopted in
accordance with the Rule. Because certain proposed expenditures, described
below, by the

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Trust, the Manager and the Distributor could be deemed to involve payment of
distribution expenses by the Trust, the Trustees have adopted a Distribution and
Service Plan (the "Plan") and, pursuant to the Plan, the Trust has entered into
a Distribution Agreement and a Shareholder Servicing Agreement with 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., and New
England Investment Companies, L.P. serves as the sole limited partner of the
Distributor.

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

The Shareholder Servicing Agreement includes provisions allowing the Manager and
Distributor to defray the cost of, or compensate other persons, including
Participating Organizations and other organizations whose customers or clients
are Trust shareholders, for providing shareholder, administrative and accounting
services to the Trust. Under the Shareholder Servicing Agreement the Manager and
Distributor may also compensate the foregoing persons and organizations for
providing assistance in distributing the Trust's shares. The Shareholder
Servicing Agreement further contemplates that the Manager and Distributor may
pay for the preparation and printing of brochures and other promotional
materials, mailings to prospective shareholders, advertising and other
activities in connection with the distribution of the Trust's shares. The
Shareholder Servicing Agreement provides that the Distributor will receive a fee
at the annual rate of .25% of the average daily net assets of the Trust.

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

Under the Plan, the Manager and the Distributor may defray their costs
associated with the distribution of the Trust's shares from payments under the
Shareholder Servicing Agreement, its other revenues (which may include
management or advisory fees received from the Trust and management or advisory
fees received from other investment companies) and past profits. The Distributor
in its sole discretion, will determine the amount of its payments made pursuant
to the Plan, but no such payment will increase the amount which the Trust is
required to pay to the Manager and the Distributor for any fiscal year under
either the Investment Management Contract in effect for that year or under the
Shareholder Servicing Agreement in effect for that year, or otherwise.

Under the Plan, the Trust defrays (i) telecommunications expenses, including the
cost of dedicated lines and CRT terminals, incurred by the Manager and the
Distributor in carrying out their obligations under the Shareholder Servicing
Agreement and (ii) the costs of preparing and printing the Trust's prospectus,
statement of additional information and subscription application forms and of
delivering them to existing and new shareholders of the Trust. In addition, the
Trust may defray all or part of the costs of preparing and printing brochures
and other promotional materials and of delivering prospectuses and those
materials to prospective shareholders of the Trust. The payments made by the
Trust for the expenses referred to in this paragraph will not exceed in any year
.05% of the Trust's average daily net assets for the year. The Trust made no
payments pursuant to the provisions of the Plan for the fiscal year ended
February 28, 1995.

Under the Plan, the Trust is not obligated to pay any distribution expense in
excess of the shareholder servicing fee and other expenses described above, and
any distribution expenses accrued by the Distributor in one fiscal year of the
Trust may not be paid from the shareholder servicing fee received from the Trust
in subsequent fiscal years of the Trust. Thus, if the Plan were terminated no
amounts (other than amounts accrued but not yet paid) would be owed by the Trust
to the Distributor or otherwise payable by the Trust for distribution expenses.
In addition, shareholder servicing fee received from the Trust will not be used
to pay any interest expense, carrying charges or other financing costs, or
allocation of overhead of the Manager or the Distributor. The shareholder
servicing fee is not intended to be a source of profit to the Distributor.

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<PAGE>

EXPENSES OF THE TRUST

The Manager has agreed to reimburse the Trust for its expenses (exclusive of
interest, taxes, brokerage and extraordinary expenses) which in any year exceed
the limits prescribed by any state in which the Trust's shares are qualified for
sale. The Trust may elect not to qualify its shares for sale in every state. The
Manager of the Trust believes that currently the most restrictive expense ratio
limitation imposed by any state is 21/2% of the first $30 million of the Trust's
average net assets, 2% of the next $70 million of its average net assets and
11/2% of its average net assets in excess of $100 million. For the purpose of
this obligation to reimburse expenses, the Trust's annual expenses are estimated
and accrued daily, and any appropriate estimated payments are made to it on a
monthly basis.

For the fiscal year ended February 28, 1995, the total expenses for the Trust
were $240,688 of which $89,876 was waived by the Manager, $46,826 was waived by
the Distributor and $837 were reimbursed. Trust expenses, net of the waiver of
fees by the Manager and the reimbursement of certain Trust expenses, were .55%
of the average daily net assets of the Trust. The Manager has agreed to waive
all or, depending on the asset growth of the Trust, a portion of its fee under
the Investment Management Contract and the Distributor has agreed to waive all
or a portion of its fee under the Shareholder Servicing Agreement until such
time as the net assets of the Trust exceed $20 million. The Manager and the
Distributor will not be obligated to waive such fees after such time.

Subject to the Manager's obligation to pay for services performed by officers of
the Manager or its affiliates and for investment management services and certain
distribution and promotional expenses under the Investment Management Contract
and Distribution Plan, the Trust has assumed responsibility for payment of all
of its other expenses, including (a) brokerage and commission expenses, (b)
Federal, state and local taxes, including issue and transfer taxes incurred by
or levied on the Trust, (c) certain insurance premiums, (d) interest charges on
borrowings, (e) charges and expenses of the Trust's custodian, (f) charges and
expenses of persons performing issuance, redemption, transfer and dividend
disbursing functions for the Trust, (g) recurring and non-recurring legal and
accounting expenses, including the determination of net asset value per share
and the maintenance of portfolio and general accounting records, (h) costs of
organizing and maintaining the Trust's existence as a trust, (i) compensation,
including Trustees' fees, of any of the Trust's trustees, officers or employees
who are not officers of Reich & Tang Asset Management, Inc. and costs of other
personnel providing services to the Trust, (j) costs of shareholder's reports,
proxy solicitations and Trust meetings, (k) expenses of servicing shareholders
and shareholder accounts, (l) fees and expenses of registering the Trust's
shares under the appropriate Federal securities laws and of qualifying those
shares under applicable state securities laws, including expenses attendant upon
initial registration and qualifications of the Trust's shares and attendant upon
renewals of, or amendments to, those registrations and qualifications, (m)
expenses of printing the Trust's prospectuses and statements of additional
information and (n) payment of the fees provided for in the Investment
Management Contract, Administrative Service Contract and the Shareholder
Servicing Agreement. In addition, under the Distribution Plan, the Trust may pay
for certain costs relating to the distribution of Trust shares.

DIVIDENDS AND FEDERAL INCOME TAX MATTERS

The Trust declares dividends equal to its entire net investment income on each
Trust Business Day. The Trust declares dividends for Saturdays, Sundays and
holidays on the previous Trust Business Day. The Trust generally pays dividends
after the close of business on the 15th day of each month, or after the close of
business on the previous business day if the 15th day of the month is not a
Trust Business Day. Capital gains realized by the Trust, if any, are distributed
at least annually.

Each income dividend and capital gains distribution, if any, declared by the
Trust on its outstanding shares will, at the election of each shareholder, be
paid in cash or automatically reinvested in additional full and fractional
shares of beneficial interest of the Trust at the net asset value determined on
the date of payment. Election to receive dividends and distributions in cash or
shares is made at the time the shares are subscribed for and may be changed by
written notification to the Trust at any time prior to the record date for a
particular dividend or distribution. If the shareholder makes no election the
Trust will make the distribution in shares. There is no sales or other charge in
connection with the reinvestment of dividends and capital gains distributions.

The Trust qualified for the fiscal year ended February 28, 1995 and intends for
each year thereafter to qualify as a regulated investment company under the
Internal Revenue Code and as such will not be liable for Federal income taxes on
the net income and capital gains distributed to its shareholders.

For Federal income tax purposes, dividends of net ordinary income and
distributions of net realized short-term capital gains by the Trust to its
shareholders are taxable to the shareholders as ordinary income and
distributions of net realized long-term capital gains are taxable as long-term
capital gains irrespective of the

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length of time a shareholder may have held his shares. Dividends and
distributions are so taxed even if the shareholder elects to have the dividends
or distributions automatically reinvested in additional Trust shares. No
dividends or distributions will qualify for the dividends-received deduction
allowable to corporations. Dividends and distributions may be subject to state
and local taxes. Distributions by the Trust that are derived from interest on
certain obligations of the U.S. Government and agencies thereof may be exempt
from state and local taxes in certain states. Prior to investing in shares of
the Trust, a prospective shareholder may wish to consult his tax adviser
concerning the state and local tax consequences of such an investment.

Shareholders will be advised annually as to the tax status of dividends and
capital gains distributions.

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

NET ASSET VALUE

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

Except as described below, debt securities are normally valued at the last
quoted bid price for those debt securities for which the over-the-counter market
is the primary market. As authorized by the Board of Trustees, debt securities
may be valued on the basis of valuations furnished by a pricing service which
determines valuations based upon market transactions for normal,
institutional-size trading units of such securities. Securities for which there
is no such quotation or valuation and all other assets are valued in such manner
as the Board of Trustees in good faith deems appropriate to reflect their fair
value.

DESCRIPTION OF SHARES

Reich & Tang Government Securities Trust was established as a Massachusetts
business trust under the laws of Massachusetts by an Agreement and Declaration
of Trust dated November 13, 1985. The Trust has an unlimited authorized number
of shares of beneficial interest. These shares are entitled to one vote per
share with proportional voting for fractional shares. There are no conversion or
preemptive rights in connection with any shares of the Trust. All shares when
issued in accordance with the terms of the offering will be fully paid and
non-assessable. Shares of the Trust are redeemable at net asset value, at the
option of the shareholders. Prior to May 19, 1988, the name of the Trust was The
GNMA Income Trust.

As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Procedures for calling a shareholder's meeting for the
removal of Trustees of the Trust, similar to those set forth in Section 16(c) of
the 1940 Act, are available to shareholders of the Trust.

PERFORMANCE

From time to time the Trust advertises its "yield" and "total return." The
Trust's yield for any 30-day (or one month) period is computed by dividing the
net investment income per share earned during such period by the maximum public
offering price per share on the last day of the period, and then annualizing
such 30-day (or one month) yield in accordance with a formula prescribed by the
Securities and Exchange Commission which provides for compounding on a
semi-annual basis. Advertisements of the Trust's total return disclose its
average annual compounded total return for a recent one year period and the
period since inception. The Trust's total return for this period is computed,
through the use of a formula prescribed by the Securities and Exchange
Commission, by finding the average annual compounded rate of return over the
period that would equate an assumed initial amount invested to the value of the
investment at the end of the period. For purposes of computing total return,
income dividends and capital gains distributions paid on shares of the Trust are
assumed to have been reinvested when received.

INFORMATION FOR SHAREHOLDERS

All shareholder inquiries should be directed to Reich & Tang Government
Securities Trust, 600 Fifth Avenue, New York, New York 10020 (telephone:
212-830-5220 or outside New York State 800-221-3079).

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

The weighted average maturity of the Fund at the beginning of the fiscal year,
March 1, 1994, was a little over nine years, and it had been lengthened in the
previous few months through purchases of intermediate-term notes. We had begun
calendar 1994 with a relatively negative view of the outlook for bond prices,
having reduced the weighted average maturity of the portfolio from eleven years
to seven years between August and December of 1993. The Federal Reserve Board
had been tightening monetary policy and this stance, along with heightened
inflationary expectations due to the strong economy brought about a sharp
decline in bond prices. The liquidation of derivatives and leveraged bond
positions caused one the worst declines in bond prices in many years. Thus,
seeking to take advantage of sharply lower prices and higher yields, we
lengthened the average maturity of the portfolio to about ten years and retained
this profile through the remainder of calendar 1994. Real Bond yields appeared
to be very attractive. By June, the asset mix in the portfolio was skewed to the
short end with 55% of assets in three year maturities or less, 11% in a five
year Treasury note, and 34% at the long end of the yield curve. We refer to this
profile as an "abbreviated bar-bell curve". We made minimal changes to the
portfolio for the remainder of the calendar year and because the preponderance
of assets were at the short end of the yield curve, performance tracked
favorably against the index. Calendar year 1994 turned out to be one of the
worst years in the bond market since the 1930's. Early in 1995 we began to
liquidate postions in the Fund in order to meet asset withdrawals. The fiscal
year ended on February 28, 1995 with most of the Fund assets in short term
maturities.

<TABLE>
<CAPTION>
Comparison of change on value of $10,000 invested in the Reich & Tang Government
Securities Trust and Lehman Intermediate Bond Index

Reich & Tang Lehman Intermediate

<S> <C> <C>
05/18/88 10,000.00 10,000.00
02/28/89 10,341.00 10,459.00
02/28/90 11,542.62 11,629.36
02/28/91 12,902.35 12,949.29
02/28/92 14,349.99 14,415.15
02/28/93 16,301.59 15,924.42
02/28/94 17,170.46 16,550.25
02/28/95 17,381.66 16,911.05

</TABLE>

15
<PAGE>

================================================================================
REICH & TANG 600 Fifth Avenue, New York, NY 10020
GOVERNMENT SECURURITES TRUST (212) 830-5220

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

STATEMENT OF ADDITIONAL INFORMATION

July 3, 1995

Reich & Tang Government Securities Trust (the "Trust") is a no-load, open-end,
diversified, management investment company. The Trust's investment objective is
to seek as high a level of current income as is consistent with prudent
investment risk, by investing solely in securities that are issued or guaranteed
by the United States Government or its agencies or instrumentalities and backed
by the full faith and credit of the United States ("U.S. Government Securities")
and in repurchase agreements pertaining to such U.S. Government Securities.

This Statement of Additional Information is not a prospectus and is only
authorized for distribution when preceded or accompanied by the Trust's
prospectus dated July 3, 1995 (the "Prospectus"). This Statement of Additional
Information contains additional and more detailed information than that set
forth in the Prospectus and should be read in conjunction with the Prospectus,
additional copies of which may be obtained without charge by writing or
telephoning the Trust's distributor, Reich & Tang Distributors L.P., at the
address and telephone number set forth above.

<TABLE>
<CAPTION>
Table of Contents

<S> <C> <C>
Investment Policies..................................2 Redemption of Shares...............................9
Investment Restrictions..............................3 Net Asset Value...................................10
Management...........................................3 Description of Shares.............................10
Compensation Table...................................5 Counsel, Auditors, Custodian
Distribution and Service Plan........................7 and Transfer Agent...........................10
Expenses of the Trust................................8 General Information...............................10
Portfolio Transactions...............................8 Independent Auditor's Report......................12
Yield and Total Return Quotations....................9 Financial Statements..............................13
</TABLE>

<PAGE>

INVESTMENT POLICIES

U.S. Government Securities

The investment objective of the Trust is to seek as high a level of current
income as is consistent with prudent investment risk by investing solely in
securities that are issued or guaranteed by the United States Government or its
agencies and instrumentalities and backed by the full faith and credit of the
United States ("U.S. Government Securities") and inT repurchase agreements
pertaining to such U.S. Government Securities. There can be no assurance that
the Trust's investment objective will be achieved. The Trust's investment
objective and its investment policy of investing solely in U.S. Government
Securities are deemed fundamental and may not be changed without shareholder
approval. The Trust's other investment policies are not fundamental and,
therefore, may be changed by the Trustees without shareholder approval.

Securities of the Government National Mortgage Association ("GNMA") include GNMA
Certificates, which are mortgage-backed securities representing part ownership
of a pool of mortgage loans. Such loans are initially made by lenders such as
mortgage bankers, commercial banks and savings and loan associations and are
either insured by the Federal Housing Administration (FHA) or Farmers' Home
Administration (FmHA) or guaranteed by the Veterans Administration (VA). A GNMA
Certificate represents an interest in a specific pool of such mortgages which,
after being approved by GNMA, is offered to investors through securities
dealers. The Trust will invest in GNMA Certificates only of the "fully modified
pass-through" type which are guaranteed as to timely payment of principal and
interest by the full faith and credit of the U.S. Government.

The prices of U.S. Government Securities, like conventional bonds, are inversely
affected by changes in interest rate levels. A decrease in rates generally
produces an increase in the value of the portfolio's investments, while an
increase in rates generally reduces the value of these investments. Investors
should be prepared to accept the principal volatility normally associated with
investment in longer term fixed income securities and should not rely on the
Trust for their short-term financial needs. The Trust is not intended to be a
vehicle for trading on short-term swings in the market. The Trust may purchase
U.S. Government Securities on a "when-issued" basis. When such transactions are
negotiated, the price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the securities
take place at a later date. The use of when-issued transactions enables the
Trust to hedge against an anticipated decline in interest rates and increase in
prices. However, if the Trust's manager were to forecast incorrectly the
direction of interest rate movement, the Trust might be required to complete a
when-issued transaction at a price inferior to the current market price. No
when-issued commitments will be made if, as a result, more than 20% of the value
of the Trust's total assets would be committed to such transactions.

2
<PAGE>

Repurchase Agreements

In order to maintain liquidity to meet anticipated redemptions or for temporary
defensive purposes, the Trust's investment portfolio may include repurchase
agreements with banks and dealers in U.S. Government Securities. A repurchase
agreement involves the purchase by the Trust of an investment contract from a
bank or a dealer in U.S. Government Securities which contract is secured by U.S.
Government obligations whose value is equal to or greater than the value of the
repurchase agreement including the agreed upon interest. The agreement provides
that the institution will repurchase the underlying securities at an agreed upon
time and price. The total amount received on repurchase would exceed the price
paid by the Trust, reflecting an agreed upon rate of interest for the period
from the date of the repurchase agreement to the settlement date, and would not
be related to the interest rate on the underlying securities. The difference
between the total amount to be received upon the repurchase of the securities
and the price paid by the Trust upon their acquisition is accrued daily as
interest. The Trust requires continual maintenance by the Trust's custodian of
the market value of underlying collateral in amounts equal to, or in excess of,
the value of the repurchase agreement including the agreed upon interest. If the
institution defaults on the repurchase agreement, the Trust will retain
possession of the underlying securities. In addition, if bankruptcy proceedings
are commenced with respect to the seller, realization on the collateral by the
Trust may be delayed or limited and the Trust may incur additional costs. In
such case, the Trust will be subject to risks associated with changes in the
market value of the collateral securities. The Trust intends to limit repurchase
agreements to transactions with institutions believed by the Trust's Manager to
present minimal credit risk. Repurchase agreements may be considered to be loans
under the Investment Company Act of 1940, as amended (the "1940 Act").

When-Issued Securities

The Trust may purchase U.S. Government Securities on a "when-issued" basis. When
such transactions are negotiated, the price, which is generally expressed in
yield terms, is fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. Normally, the settlement
date occurs within two months after the transaction, but delayed settlements
beyond two months may be negotiated. During the period between a commitment by
the Trust and settlement, no payment is made for the securities purchased by the
Trust, and, thus, no interest accrues to the Trust from the transaction.

When-issued securities may be sold prior to the settlement date, but the Trust
enters into when-issued commitments only with the intention of actually
receiving the securities. To facilitate such transactions, the Trust's custodian
will maintain at all times during the commitment period, in a separate account
of the Trust, liquid portfolio securities having value equal to, or greater
than, any when-issued commitments.

If the Trust, however, chooses to dispose of the right to acquire a when-issued
security prior to its acquisition, it can incur a gain or loss. (At the time the
Trust makes the commitment to purchase a security on a when-issued basis, it
records the transaction and reflects the value of the security purchased in
determining its net asset value.)

INVESTMENT RESTRICTIONS

The Trust has adopted the following investment restrictions which are in
addition to those described in the Prospectus. Under the following restrictions,
which may not be changed without approval of a majority vote of the Trust's
outstanding shares, the Trust may not (1) invest more than 25% of the value of
its total assets in the securities of issuers conducting their principal
business activities in a single industry, except that this limitation shall not
apply to investments in securities issued or guaranteed by the United States
Government, its agencies or instrumentalities, (2) invest in real estate (except
through the purchase of GNMA Certificates), commodities, commodity contracts,
commodity options, or interests in oil, gas or other mineral exploration or
development programs, (3) purchase restricted securities or purchase securities
on margin, (4) make short sales of securities, (5) write, purchase or sell puts,
calls, straddles, spreads or any combination thereof, (6) act as an underwriter
of securities or (7) issue senior securities, except insofar as the Trust may be
deemed to have issued a senior security in connection with any permitted
borrowing. The majority vote of the Trust's outstanding shares means the vote of
(i) 67% or more of the shares present at a meeting at which more than 50% of the
outstanding shares are present or represented by proxy or (ii) more than 50% of
the outstanding shares, whichever is less.

MANAGEMENT

Trustees and Officers

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

3
<PAGE>

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

Dr. W. Giles Mellon, 64 - Trustee of the Trust, is Professor of Business
Administration and Area Chairman of Economics and Finance 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., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax
Free Income Fund, Inc., Delafield Fund, Inc., Michigan Daily Tax Free Income
Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., 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, 53 - Trustee of the Trust, has been a member of the New York
State Assembly and a partner in the law firm of Straniere and Straniere since
1981. His address is 182 Rose Avenue, Staten Island, New York 10306. Mr.
Straniere is also a Director of California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey
Daily Municipal Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc., 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, 56 - Trustee of the Trust, is General Partner of Abacus Partners
Limited Partnership (a general partner of a venture capital investment firm)
with which he has been associated 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.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey
Daily Municipal Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc., 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.

Steven W. Duff, 41 - President of the Trust, is President of the Mutual Funds
Division of the Manager since September 1994. Mr. Duff was formerly Director of
Mutual Fund Administration at NationsBank which he was associated with from June
1981 to August 1994. Mr. Duff is President and a Director of Californnia 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., Senior Vice President of Lebenthal Funds, Inc., President and a
Trustee of Florida Daily Municipal Income Fund, Institutional Daily Income Fund,
Pennsylvania Daily Municipal Income Fund, Executive Vice President and a
Director of Reich & Tang Equity Fund, Inc., and President and Chief Executive
Officer of Tax Exempt Proceeds Fund, Inc.

Bernadette N. Finn, 47 - Vice President and Secretary of the Trust, is Vice
President of the Mutual Funds Division of the Manager since September 1993. Ms.
Finn was formerly Vice President and Assistant Secretary of Reich & Tang, Inc.
which she was associated with from September 1970 to September 1993. Ms. Finn is
also Secretary of California Daily Tax Free Income Fund, Inc., Connecticut Daily
Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund,
Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund, Lebenthal
Funds, Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund and Tax Exempt Proceeds Fund, Inc., a Vice President and Secretary of
Institutional Daily Income Fund, Reich & Tang Equity Fund, Inc. and Short Term
Income Fund, Inc.

Molly Flewharty, 44 - Vice President of the Trust, is Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. which she was associated with from
December 1977 to September 1993. Ms. Flewharty is also Vice President of
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield
Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily Income
Fund, Lebenthal Funds, Inc., Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund,
Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily
Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short Term Income Fund,
Inc. and Tax Exempt Proceeds Fund, Inc.

4
<PAGE>

Lesley M. Jones, 46 - Vice President of the Trust, is Senior Vice President of
the Mutual Funds Division of the Manager since September 1993. Ms. Jones was
formerly Senior Vice President of Reich & Tang, Inc. which she was associated
with from April 1973 to September 1993. Ms. Jones is also a Vice President of
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 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.

Dana E. Messina, 38 - Vice President of the Trust, is Executive Vice President
of the Mutual Funds Division of the Manager since September 1993. 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., Connecticut Daily Tax Free Income
Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield
Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily Income
Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal
Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina
Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income Fund,
Reich & Tang Equity Fund, Inc. and Short Term Income Fund, Inc., Treasurer,
Chief Accounting Officer and Chief Financial Officer of Tax Exempt Proceeds
Fund, Inc., and Vice President and Treasurer of Lebenthal Funds, Inc.

Richard De Sanctis, 38 - Treasurer of the Trust, is Assistant Treasurer of NEIC
since September 1993. Mr. De Sanctis was formerly Controller of Reich & Tang,
Inc. from January 1991 to September 1993 and Vice President and Treasurer of
Cortland Financial Group, Inc. and Vice President of Cortland Distributors, Inc.
from 1989 to December 1990. Mr. De Sanctis is also Treasurer of California Daily
Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily
Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal Income
Fund, Institutional Daily Income Fund, Michigan Daily Tax Free 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 Vice President and Treasurer of Cortland Trust, Inc.

The Trust paid an aggregate remuneration of $6,000 to its trustees with respect
to the fiscal year ended February 28, 1995, all of which consisted of aggregate
trustees' fees paid to the three disinterested trustees, pursuant to the terms
of the Investment Management Contract. (See "Expenses of the Trust" herein.) See
Compensation Table below.

<TABLE>
<CAPTION>
COMPENSATION TABLE

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

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

W. Giles Mellon, $2,000.00 0 0 $51,500 (14 Funds)
Trustee

Robert Straniere, $2,000.00 0 0 $51,500 (14 Funds)
Trustee

Dr. Yung Wong, $2,000.00 0 0 $51,500 (14 Funds)
Trustee

* The total compensation paid to such persons by the Trust and Fund Complex for
the fiscal year ending February 28, 1995 (and with respect to certain of the
funds in the Fund Complex, estimated to be paid during the fiscal year ending
February 28, 1995). 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 Trust, because, among other
things, they have a common investment advisor.
</TABLE>

5
<PAGE>

Investment Manager

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

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 May 31, 1995 manager,
advisor or supervisor with respect to assets aggregating in excess of $7.4
billion. In addition to the Fund, the Manager's advisory clients include, among
others, California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free
Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily
Income Fund, Lebenthal Funds, Inc. (Lebenthal New York Tax Free Money Fund),
Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income
Fund, Inc., New York Daily Tax Free Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich &
Tang Equity Fund, Inc., Short Term Income Fund, Inc. and Tax Exempt Proceeds
Fund, Inc. The Manager also advises pension trusts, profit-sharing trusts and
endowments.

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

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

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

The Manager provides persons satisfactory to the Board of Trustees of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and Trustees of the Fund, may be 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 has a term which extends to February 28, 1996
and may be continued in force thereafter for successive twelve month periods
beginning each March 1, provided that such continuance is specifically approved
annually by the Trust's Board of Trustees or by vote of the shareholders, and in
either case by a majority of the Trustees who are not parties to the Investment
Management Contract or interested persons of any such party, by vote cast in
person at a meeting called for the purpose of voting on the Investment
Management Contract. The re-executed Investment Management Contract was approved
by the Board of Trustees, including a majority of trustees who are not
interested persons (as defined in the 1940 Act), of the Fund or the Manager,
effective October 1, 1994. The Investment Management Contract was approved by a
majority of the Fund's shareholders at the meeting held on July 21, 1993.

6
<PAGE>

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

For the Trust's fiscal years ended February 28, 1993, 1994 and 1995, the fees
under the Investment Management Contract were $98,712, $92,810 and $65,556
respectively. In 1995, $52,415 of such amount was waived and all of such amounts
were voluntarily waived by the Manager for the fiscal years ended February 28,
1993 and 1994, and, therefore, the Trust paid no fee under the Investment
Management Contract with respect to such years. The Manager has agreed to waive
all or, depending on the asset growth of the Trust, a portion of its fee under
the Investment Management Contract until such time as the net assets of the
Trust exceed $20 million. The Manager will not be obligated to waive such fees
after such time.

Pursuant to the Administrative Services Contract with the Fund, the Manager
performs clerical, accounting supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of accounting related services by DST Systems, Inc., the Fund's
bookkeeping or recordkeeping agent, (ii) prepare reports to and filings with
regulatory authorities and (iii) perform such other services as the Fund may
from time to time request of the Manager. The personnel rendering such services
may be employees of the Manager, of its affiliates or of other organizations.
The Fund pays the Manager for such personnel and for rendering such services at
rates which must be agreed upon by the Fund and the Manager, provided that the
Fund does not pay for services performed by any such persons who are also
officers of the general partner of the Manager. It is intended that such rates
will be the actual costs of the Manager. For its services under the
Administrative Services Contract, the Manager receives from the Trust a fee
equal to 20% per annum of the Trust's average daily net assets. For the Trust's
fiscal year ended February 28, 1995, the Manager did not receive a fee; $37,461
was waived by the Manager.

The Manager now acts as investment manager or adviser for other persons and
entities and may under the Investment Management Contract act as investment
manager, administrator or adviser to other registered investment companies. The
Manager was at May 31, 1995 investment manager or administrator of eighteen
other investment companies and also advises pension trusts, profit-sharing
trusts, endowments and others.

DISTRIBUTION AND SERVICE PLAN

The Trust's distribution and service plan (the "Plan") provides that all written
agreements relating to the Plan entered into between either the Trust or Reich &
Tang Distributors L.P. (the "Distributor") and Participating Organizations and
other organizations must be in a form satisfactory to the Trust's Board of
Trustees. In addition, the Plan requires the Trust and the Distributor to
prepare, at least quarterly, written reports for the Board of Trustees setting
forth all amounts expended for distribution purposes by the Trust and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.

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

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

Pursuant to the Plan, the Trust has entered into a Distribution Agreement and a
Shareholder Servicing Agreement with the Distributor. Under the Distribution
Agreement, the Distributor, as agent for the Trust, solicits orders for the
purchase of the Trust's shares, provided that any subscriptions and orders will
not be binding on the Trust until accepted by the Trust as principal. The
Distributor receives nominal compensation under this agreement.

For its services under the Shareholder Servicing Agreement, the Distributor
receives from the Trust a fee equal to .25% per annum of the Trust's average
daily net assets. The fee is accrued daily and paid monthly and any portion or

7
<PAGE>

all of the fee may be deemed to be used by the Distributor for purposes of
distribution of the Trust's shares, including payments to organizations whose
customers or clients are shareholders of the Trust ("Participating
Organizations") for performing shareholder servicing and related administrative
functions not performed by the Trust, its transfer agent or the Distributor.

For the Trust's fiscal years ended February 28, 1993, 1994 and 1995, the fees
under the Shareholder Servicing Agreement were $44,869, $50,567 and $46,826,
respectively. All of such amounts were voluntarily waived by the Manager and the
Distributor, as the case may be, and therefore, the Trust paid no fees under the
Shareholder Servicing Agreement with respect to such years. The Distributor has
agreed to waive all or, depending on the asset growth of the Trust, a portion of
its fee under the Shareholder Servicing Agreement until such time as the net
assets of the Trust exceed $20 million. The Distributor will not be obligated to
waive such fees after such time.

The Board of Trustees most recently approved the Plan on January 26, 1995 to be
effective until February 29, 1996. The Plan was also approved by the
Shareholders of the Trust at a meeting held on July 23, 1993. The Distribution
Agreement between the Trust and the Distributor provides that it shall terminate
automatically in the event of its assignment.

EXPENSES OF THE TRUST

The Manager has agreed to reimburse the Trust for its expenses (exclusive of
interest, taxes, brokerage, and extraordinary expenses) which in any year exceed
the limits prescribed by any state in which the Trust's shares are qualified for
sale. The Trust may elect not to qualify its shares for sale in every state. The
Manager of the Trust believes that currently the most restrictive expense ratio
limitation imposed by any state is 21/2% of the first $30 million of the Trust's
average net assets, 2% of the next $70 million of its average net assets and
11/2% of its average net assets in excess of $100 million. For the purpose of
this limitation, expenses shall include the fees payable to the Manager and the
amortization of organization expenses. For the purpose of this obligation to
reimburse expenses, the Trust's annual expenses are estimated and accrued daily,
and any appropriate estimated payments are made to it on a monthly basis.

Subject to the Manager's obligations to pay for services performed by officers
of the Manager or its affiliates and for investment management services and
certain distribution and promotional expenses and to reimburse the Trust for its
excess expenses as described above under the Investment Management Contract, the
Trust has assumed responsibility for payment of all of its other expenses,
including (a) brokerage and commission expenses, (b) Federal, state and local
taxes, including issue and transfer taxes incurred by or levied on the Trust,
(c) certain insurance premiums, (d) interest charges on borrowings, (e) charges
and expenses of the Trust's custodian, (f) charges and expenses of persons
performing issuance, redemption, transfer and dividend disbursing functions for
the Trust, (g) recurring and nonrecurring legal and accounting expenses,
including the determination of net asset value per share and the maintenance of
portfolio and general accounting records, (h) costs of organizing and
maintaining the Trust's existence as a trust, (i) compensation, including
Trustees' fees, of any of the Trust's Trustees, officers or employees who are
not officers of Reich & Tang Asset Management, Inc., and costs of other
personnel providing services to the Trust, (j) costs of shareholders' reports,
proxy solicitations, and Trust meetings, (k) expenses of servicing shareholders
and shareholder accounts, (l) fees and expenses of registering the Trust's
shares under the appropriate Federal securities laws and of qualifying those
shares under applicable state securities laws, including expenses attendant upon
the initial registration and qualifications of the Trust's shares and attendant
upon renewals of, or amendments to, those registrations and qualifications, (m)
expenses of printing the Trust's prospectuses and statements of additional
information and (n) payment of the fees provided for in the Investment
Management Contract, Administrative Services Contract and the Shareholder
Servicing Agreement. In addition, under the Trust's distribution and service
plan, the Trust may pay for certain costs relating to the distribution of Trust
shares.

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

PORTFOLIO TRANSACTIONS

The Trust's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer or from an underwriter or market maker for the securities. There usually
are no brokerage commissions paid for such purchases. The Trust has paid no
brokerage commissions since its formation. Any transaction for which the Trust
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

8
<PAGE>

the issuer to the underwriter, and purchases from dealers serving as market
makers include the spread between the bid and asked price.

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 Trust rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price.

Investment decisions for the Trust 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 Trust 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 Trust or the size of the position
obtainable for the Trust. In addition, when purchases or sales of the same
security for the Trust and for other investment companies managed by the Manager
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantages available to large denomination purchasers or
sellers.

No portfolio transactions are executed with the Manager or any of its
affiliates, acting either as principal or as paid broker.

YIELD AND TOTAL RETURN QUOTATIONS

From time to time the Trust advertises its "yield" and "total return." The
Trust's yield for any 30-day (or one month) period is computed by dividing the
net investment income per share earned during such period by the maximum public
offering price per share on the last day of the period, and then annualizing
such 30-day (or one month) yield in accordance with a formula prescribed by the
Securities and Exchange Commission which provides for compounding on a
semi-annual basis. Advertisements of the Trust's total return disclose its
average annual compounded total return for a most recent completed one year
period and the period since inception. The Trust's total return for this period
is computed, through the use of a formula prescribed by the Securities and
Exchange Commission, by finding the average annual compounded rate of return
over the period that would equate an assumed initial amount invested to the
value of such investment at the end of the period. For purposes of computing
total return, income dividends and capital gains distributions paid on shares of
the Trust are assumed to have been reinvested when received.

The Trust's yield for the month ended February 28, 1995, was 4.87%. The Trust's
total return for the twelve months ended February 28, 1995 was 1.23%. The
Trust's average annual compounded total return for the period February 27, 1986
(inception of operations) through February 28, 1995 was 8.22%.

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

Advertisements quoting performance rankings of the Trust as measured by
financial publications or by independent organizations such as Lipper Analytical
Services, Inc., and advertisements presenting the historical record of payments
of income dividends by the Trust may also from time to time be sent to investors
or placed in newspaper, magazines or other media on behalf of the Trust.

REDEMPTION OF SHARES

Payment of the redemption price for shares redeemed may be made either in cash
or in portfolio securities (selected in the discretion of the Board of Trustees
of the Trust and taken at their value used in determining the Trust's net asset
value per share as described under "Net Asset Value" in the Prospectus), or
partly in cash and partly in portfolio securities. However, payments will be
made wholly in cash unless the Board of Trustees believes that economic
conditions exist which would make such a practice detrimental to the best
interests of the Trust. If payment for shares redeemed is made wholly or partly
in portfolio securities, brokerage costs may be incurred by the investor in
converting the securities to cash. The Trust will not distribute in kind
portfolio securities that are not readily marketable. The Trust has filed a
formal election with the Securities and Exchange Commission pursuant to which
the Trust will only effect a redemption in portfolio securities where $250,000
or 1% of the Trust's total net assets, whichever is less, during any 90-day
period. In the opinion of the Trust's management, however, the amount of a
redemption request would have to be significantly greater than $250,000 or 1% of
total net assets before a redemption wholly or partly in portfolio securities
was made.

9
<PAGE>

NET ASSET VALUE

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

DESCRIPTION OF SHARES

On May 31, 1995 there were 463,020 shares of beneficial interest outstanding. As
of May 31, 1995 the amount of shares owned by all the officers and Trustees of
the Trust as a group was less than 1% of the outstanding shares of the Trust.
Set forth below is certain information as to persons who owned 5% or more of the
Trust's outstanding shares of beneficial interest as of May 31, 1995:

% of Nature of
Name and Address Shares Ownership

Sandler O'Neill & Partners L.P. 12.47 Record
Profit Sharing 401K Plan
Two World Trade Center
New York, NY 10048

Morris & McVeigh Profit Sharing Plan 06.81 Record
ATTN: Nancy Lau
767 Third Avenue
New York, NY 10017

Marcia Reich Walsh 06.79 Beneficial
21 Elm Street
Hyde Park, MA 02136

Fulton Companies Deferred 05.47 Record
Savings & Profit Sharing Plan
C.o Michaels Simmons
Port & Jefferson Streets
Pulaski, NY 13142

COUNSEL, AUDITORS, CUSTODIAN AND TRANSFER AGENT

Legal matters in connection with the issuance of shares of beneficial interest
of the Trust are passed upon by Battle Fowler LLP, 75 East 55th Street, New
York, New York 10022. Sullivan & Worchester, Massachusetts counsel to the Trust,
has delivered an opinion as to certain matters relating to Massachusetts law.

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

DST Systems, Inc., 127 West 10th Street, Kansas City, Missouri 64105, is the
custodian for the Trust's cash and securities and, is the transfer agent and
dividend agent for the shares of the Trust. The Trust's transfer agent and
custodian does not assist in and is not responsible for any investment decisions
involving assets of the Trust.

GENERAL INFORMATION

Establishment of Additional Series

Trustees are authorized to reclassify and issue any unissued shares in any
number of additional series without shareholder approval. Accordingly, the
Trustees in the future, for reasons such as the desire to establish one or more
additional portfolios with different investment objectives, policies or
restrictions, may create additional series of shares. Any issuance of shares of
another series would be governed by the 1940 Act and the laws of the
Commonwealth of Massachusetts. If shares of another series were issued in
connection with the creation of a second portfolio, each share of either
portfolio would normally be entitled to one vote for all purposes. Generally,
shares of both portfolios would vote as a single series on matters, such as the
election of Trustees, that affected both portfolios in substantially the same
manner. As to matters affecting each portfolio differently, such as approval of
the Investment Management Contract, shares of each portfolio would vote as
separate series.

Potential Liability

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that

10
<PAGE>

expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them.

Further Information

For further information with respect to the Trust and the shares offered hereby,
reference is made to the registration statement filed with the Securities and
Exchange Commission, including all exhibits hereto. Such information may be
examined at the Securities and Exchange Commission and copies nay be obtained
upon payment of certain fees.

11
<PAGE>

- -------------------------------------------------------------------------------
REICH & TANG GOVERNMENT SECURITIES TRUST
INDEPENDENT AUDITOR'S REPORT
===============================================================================

The Board of Trustees and Shareholders
Reich & Tang Government Securities Trust

We have audited the accompanying statement of net assets of Reich & Tang
Government Securities Trust as of February 28, 1995, 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 February 28, 1995, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of Reich & Tang Government Securities Trust as of February 28, 1995,
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
March 28, 1995

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

12
<PAGE>

- -------------------------------------------------------------------------------
REICH & TANG GOVERNMENT SECURITIES TRUST
STATEMENT OF NET ASSETS
FEBRUARY 28, 1995
===============================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date (Note 1)
------ ---- --------

U.S. Government Obligations (69.64%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$ 1,000,000 U.S. Treasury Bills, 4.050% 03/09/1995 $ 998,685
425,000 U.S. Treasury Note, 4.625 08/15/1995 422,012
500,000 U.S. Treasury Note, 4.625 08/15/1995 496,485
525,000 U.S. Treasury Note, 4.625 08/15/1995 521,309
1,700,000 U.S. Treasury Note, 4.625 08/15/1995 1,688,047
2,200,000 U.S. Treasury Note, 4.375 08/15/1996 2,131,938
1,800,000 U.S. Treasury Note, 6.500 04/30/1999 1,766,250
--------------- -------------
8,150,000 Total U.S. Government Obligations (Cost $8,123,211) 8,024,726
--------------- -------------
<CAPTION>
Repurchase Agreements (9.10%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,048,000 Fuji Securities, Inc., 6.02%, (Collateralized by
$1,040,000 U.S Treasury Notes, 7.375%, due 5/15/96) 03/01/1995 $ 1,048,000
--------------- --------------
1,048,000 Total Repurchase Agreements (Cost $1,048,000) 1,048,000
--------------- --------------
Total Investments (78.74%) (Cost $9,171,211+) 9,072,726
Cash and Other Assets in Excess of Liabilities (21.26%) 2,450,553
--------------
Net Assets (100.00%), 1,185,131 shares outstanding (Note 4) $ 11,523,279
==============
Net asset value, offering and redemption price per share $ 9.72
==============

+ Aggregate cost for federal income tax purposes is identical.
Aggregate unrealized appreciation and depreciation of investments are $0
and 98,485, respectively.

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

13
<PAGE>

- -------------------------------------------------------------------------------
REICH & TANG GOVERNMENT SECURITIES TRUST
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995
===============================================================================

INVESTMENT INCOME

Income:
<S> <C>
Interest....................................................................... $ 1,012,640
---------------
Expenses: (Note 2)
Management fees................................................................ 13,141
Custodian, shareholder servicing and related shareholder expenses.............. 32,933
Audit and accounting........................................................... 41,708
Legal, compliance and filing fees.............................................. 9,325
Trustees' fees................................................................. 6,000
Miscellaneous.................................................................. 879
---------------
Total expenses............................................................ 103,986
Less: Reimbursement of expenses from Manager (Note 2).......................... ( 837)
---------------
Net expenses.............................................................. 103,149
---------------
Net investment income............................................................. 909,491
---------------
<CAPTION>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments........................................... ( 502,521)
Change in unrealized appreciation (depreciation) of investments................... ( 166,365)
---------------
Net gain (loss) on investments................................................. ( 668,886)
---------------
Increase in net assets from operations............................................ $ 240,605
==============
</TABLE>

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

14
<PAGE>
- -------------------------------------------------------------------------------
REICH & TANG GOVERNMENT SECURITIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
===============================================================================

Year Ended Year Ended
February 28, 1995 February 28, 1994
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS

<S> <C> <C>
Operations:

Net investment income........................................ $ 909,491 $ 904,850

Net realized gain (loss) on investments...................... ( 502,521) 1,255,659

Change in unrealized appreciation
(depreciation) of investments............................ ( 166,365) ( 1,097,898)
--------------- ---------------

Increase (decrease) in net assets from operations............ 240,605 1,062,611

Distributions from:

Net investment income........................................ ( 909,489) ( 904,850)

Net realized gains on investments............................ ( 520,431) ( 1,011,899)

Transactions in shares of beneficial interest (Note 4)............ ( 6,603,335) 4,203
--------------- ---------------

Total increase (decrease).................................... ( 7,792,650) ( 849,935)

Net assets:

Beginning of year............................................ 19,315,929 20,165,864
---------------- ---------------

End of year.................................................. $ 11,523,279 $ 19,315,929
================ ===============
</TABLE>

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

15
<PAGE>

- -------------------------------------------------------------------------------
REICH & TANG GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS
===============================================================================

1. Summary of Accounting Policies.

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

a) Valuation of Securities -
Debt securities are normally valued at the last quoted bid price for those
debt securities for which the over-the-counter market is the primary
market. Short-term obligations having remaining maturities of less than 60
days are valued at amortized cost, which approximates market value. As
authorized by the Board of Trustees, debt securities (other than short-term
obligations) may be valued on the basis of valuations furnished by a
pricing service which determines valuations based upon market transactions
for normal, institutional-size trading units of such securities.

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

c) General -
Securities transactions are recorded on the trade date basis. Interest
income is accrued as earned. Discount and premium on securities purchased
are amortized over the life of the respective securities. Realized gains
and losses from securities transactions are recorded on the identified cost
basis. Dividends and capital gain distributions to shareholders are
recorded on the ex-dividend date. It is the Trust's policy to take
possession of securities as collateral under repurchase agreements and to
determine on a daily basis that the value of such securities are sufficient
to cover the value of the repurchase agreements.

2. Investment Advisory Fees and Other Transactions with Affiliates.

Under the Investment Management Contract, the Fund pays an investment management
fee to Reich & Tang Asset Management, L.P. ("The Manager") equal to .35% of the
Fund's average daily net assets. The Manager is required to reimburse the Fund
for its expenses (exclusive of interest, taxes, brokerage, and extraordinary
expenses) to the extent that such expenses, including the management fee, for
any fiscal year exceed 2 1/2% of the first $30 million of its average net
assets, 2% of the $70 million of its average net assets and 1 1/2% of its
average net assets in excess of $100 million.

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

Pursuant to a Distribution Plan adopted under Securities and Exchange Commission
Rule 12b-1, the Trust 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 Trust an annual fee equal to .25% of the Trust's average daily net
assets. There were no additional expenses borne by the Trust pursuant to the
Distribution Plan.

During the year ended February 28, 1995, the Manager waived investment
management fees and administration fees of $52,415, and $37,461 and the
Distributor waived shareholder servicing fees of $46,826 respectively.

3. Investment Transactions.

Purchases and sales of investment securities, other than short-term investments,
totaled $4,248,656 and $14,690,350, respectively. Accumulated undistributed
realized losses at February 28, 1995 amounted to $502,521.

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

16
<PAGE>

- -------------------------------------------------------------------------------
REICH & TANG GOVERNMENT SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================

4. Transactions in Shares of Beneficial Interest.

At February 28, 1995, an unlimited number of shares of beneficial interest ($.01
par value) were authorized and capital paid in amounted to $12,124,283.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>

Year Ended Year Ended
February 28, 1995 February 28, 1994
----------------- -----------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sold.................................... 378,277 $ 3,810,651 147,309 $ 1,586,793
Issued on reinvestment of dividends 141,342 1,376,763 175,312 1,874,587
Redeemed................................ ( 1,196,489) ( 11,790,749) ( 322,178) ( 3,457,177)
------------ -------------- ----------- -------------
Net increase (decrease)................. ( 676,870) ($ 6,603,335) 443 $ 4,203
============ ============== =========== =============
</TABLE>

5. Selected Financial Information.

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