As filed with the Securities and Exchange Commission on May 29, 1998
    
                                                        Registration No. 2-96456

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                  FORM N-1A

           REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

                         Pre-Effective Amendment No.[ ]
   
                       Post-Effective Amendment No. 23 [X]
    
                                     and/or

      REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940    [X]
   
                              Amendment No. 20 [X]
    

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

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

               (Address of Principal Executive Offices) (Zip Code)

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


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

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

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

   
                  [ ]  immediately upon filing pursuant to paragraph (b)
                  [X] on June 1, 1998 pursuant to paragraph (b)
                  [ ]  60 days after filing pursuant to paragraph (a)
                  [ ]  on (date) pursuant to paragraph (a) of Rule 485
                  [ ]  75 days after filing pursuant to paragraph (a)(2)
                  [ ]  on (date) pursuant to paragraph (a)(2) of Rule 485
    

   
The  Registrant  filed a Rule 24f-2 Notice for its fiscal year ended January 31,
1998 on March 5, 1998.
    

<PAGE>

                  CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
                       Registration Statement on Form N-1A


                              CROSS-REFERENCE SHEET
                             Pursuant to Rule 404(c)

Part A
Item No.                                               Prospectus Heading


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

   
2.   Synopsis. . . . . . . . . . . . . . . . . . . .   Introduction; Table of 
                                                       Fees and Expenses
    
3.   Condensed Financial Information . . . . . . . .   Financial Highlights

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

5.   Management of the Fund  . . . . . . . . . .  . .  Management of the Fund; 
                                                       Custodian, Transfer Agent
                                                       and Dividend Agent; 
                                                       Distribution and Service
                                                       Plan
5A.  Management's Discussion of
     Fund Performance . . . . . . . . . . . . . . . .  Not Applicable

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

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


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

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


<PAGE>


Part B                                                 Caption in Statement of
Item No.                                               Additional Information


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


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

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

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

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

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

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

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

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

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

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

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

   
23.    Financial Statements  . . . . . . . . . . . . . Independent Auditor's 
                                                       Report; Statement of Net
                                                       Assets (audited),dated
                                                       January 31, 1998;
                                                       Statement of Operations
                                                       (audited), dated January
                                                       31, 1998; Statements of
                                                       Changes in Net Assets
                                                       (audited), for the fiscal
                                                       years ended January 31,
                                                       1997 and 1998; Notes  to
                                                       Financial Statements
                                                       (audited)
    


<PAGE>

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

   
June 1, 1998

Connecticut  Daily Tax Free  Income  Fund,  Inc.  (the  "Fund")  is an  open-end
management investment company that is a short-term, tax-exempt money market fund
whose  investment  objectives  are to seek as high a level  of  current  income,
exempt  from  regular  Federal  income  taxes and to the  extent  possible  from
Connecticut  personal  income  taxes,  as  is  believed  to be  consistent  with
preservation of capital, maintenance of liquidity and stability of principal. No
assurance can be given that these  objectives will be achieved.  The Fund offers
two classes of shares to the general public.  The Class A shares of the Fund are
subject to a service  fee  pursuant to the Fund's  Rule 12b-1  Distribution  and
Service Plan and are sold through financial intermediaries who provide servicing
to Class A shareholders for which they receive compensation from the Manager and
the Distributor. The Class B shares of the Fund are not subject to a service fee
and  either  are sold  directly  to the  public  or are sold  through  financial
intermediaries  that  do  not  receive  compensation  from  the  Manager  or the
Distributor. In all other respects, the Class A and Class B shares represent the
same interest in the income and assets of the Fund. The Fund is  concentrated in
securities  issued by Connecticut or entities within  Connecticut.  The Fund may
invest a significant percentage of its assets in a single issuer.  Therefore, an
investment in the Fund may be riskier than an investment in other types of money
market funds.

This  Prospectus  sets forth  concisely the  information a prospective  investor
should know before investing in the Fund.. Additional information about the Fund
has been filed with the  Securities and Exchange  Commission  (the "SEC") and is
available  upon request and without charge by calling or writing the Fund at the
address or  telephone  number set forth  above.  The  "Statement  of  Additional
Information"  bears  the same date as this  Prospectus  and is  incorporated  by
reference  into this  Prospectus in its  entirety.  The SEC maintains a web site
(http://www.sec.gov)  that contains the Statement of Additional  Information and
other  reports  and  information  regarding  the  Fund  which  have  been  filed
electronically with the SEC.

Reich & Tang Asset Management L.P. is a registered  investment  adviser and acts
as  investment  manager of the Fund.  Reich & Tang  Distributors,  Inc.  acts as
distributor of the Fund's shares and is a registered broker-dealer and member of
the National Association of Securities Dealers, Inc.An investment in the Fund is
neither  insured nor  guaranteed  by the U.S.  Government.  The Fund  intends to
maintain a stable net asset  value of $1.00 per share  although  there can be no
assurance that this value will be maintained.
    

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


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


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

<PAGE>


                           TABLE OF FEES AND EXPENSES

Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
<S>         <C>                                        <C>        <C>           <C>       <C>    

                                                                 Class A                Class B
   
             Management Fees                                       0.30%                  0.30%
             12b-1 Fees                                            0.20%                  0.00%
             Other Expenses                                        0.39%                  0.37%
                Administration Fees                     0.21%      _____        0.21%     _____
             Total Fund Operating Expenses                         0.89%                  0.67%
    


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)
   
                                        Class A            $9         $28         $49        $110
                                        Class B            $7         $21         $37         $83
    
</TABLE>

The purpose of the above fee table is to assist an investor in understanding the
various  costs and expenses  that an investor in the Fund will bear  directly or
indirectly.  For a further discussion of these fees see "Management of the Fund"
and "Distribution and Service Plan" herein.

The  figures   reflected  in  this  example   should  not  be  considered  as  a
representation  of past or future  expenses.  Actual  expenses may be greater or
less than those shown above.


<PAGE>

                              FINANCIAL HIGHLIGHTS
   
The following  financial  highlights of Connecticut  Daily Tax Free Income Fund,
Inc. have been audited by McGladrey & Pullen LLP,  Independent  Certified Public
Accountants,  whose report thereon is incorporated by reference in the Statement
of Additional Information..
    
<TABLE>
<CAPTION>
<S>                                     <C>         <C>      <C>     <C>      <C>      <C>      <C>      <C>      <C>      <C>    

CLASS A                                                       Year Ended January 31,
                                         1998       1997      1996     1995    1994    1993     1992     1991     1990     1989
                                         ----       ----      ----     ----    ----    ----     ----     ----     ----     ----
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period     $ 1.00   $ 1.00     $1.00    $1.00    $1.00   $1.00    $1.00    $1.00    $1.00   $1.00
                                         -------  ---------  ------   ------   ------  -------  -------  ------   -----   ------
Income from investment operations:
  Net investment income.......             0.027    0.026     0.030    0.023    0.017   0.021    0.035    0.049   0.054    0.044
Less distributions:
  Dividends from net investment income   ( 0.027) ( 0.026)  ( 0.030) ( 0.023) ( 0.017)( 0.021) ( 0.035) ( 0.049)( 0.054) ( 0.044)
Net asset value, end of period             $1.00    $1.00    $1.00    $1.00    $1.00   $1.00    $1.00    $1.00    $1.00    $1.00
Total Return..................              2.74%    2.59%    3.02%    2.29%    1.70%   2.12%    3.56%    5.01%    5.58%    4.53%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)$167,780 $136,606  $105,826  $81,801 $120,551 $129,297 $185,339 $178,335 $228,167 $245,529
Ratios to average net assets:
  Expenses....................              0.89%   0.91%     0.91%    0.88%    0.87%   0.86%   0.79%     0.80%    0.78%    0.79%
  Net investment income.......              2.70%   2.96%     2.96%    2.25%    1.68%   2.14%   3.51%     4.92%    5.44%    4.44%
Administration fees waived....               --      --       0.03%     --       --     0.06%    --        --       --       --
Expenses paid indirectly......               --     0.02%      --       --       --      --      --        --       --       --

                                                          Year                            October 10, 1996
CLASS B                                                   Ended                     (Commencement of offering) to
                                                   January 31, 1998                       January 31, 1997
                                                   ----------------                 ----------------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period......             $   1.00                              $  1.00
                                                       ---------                             -------
Income from investment operations:
Net investment income.....................                 0.029                                0.009
Less distributions:
Dividends from net investment income......             (   0.029)                             ( 0.009)
                                                        ---------
Net asset value, end of period............             $   1.00                              $  1.00
                                                       =========                              =======
Total Return..............................                 2.96%                                2.83%*
Ratios/Supplemental Data
Net assets, end of period (000)...........             $     4                               $    7
Ratios to average net assets:
Expenses..................................                 0.67%                                0.70%*
Net investment income.....................                 2.95%                                2.80%*
Expenses paid indirectly..................                  --                                  0.02%

*   Annualized
</TABLE>

<PAGE>

INTRODUCTION


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

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

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

The  Fund  intends  that  its  investment  portfolio  will  be  concentrated  in
Connecticut  Municipal  Obligations  and  Participation  Certificates as defined
herein. A summary of special risk factors  affecting the State of Connecticut is
set forth  under  "Connecticut  Risk  Factors"  herein and in the  Statement  of
Additional  Information.   Investment  in  the  Fund  should  be  made  with  an
understanding  of  the  risks  which  an  investment  in  Connecticut  Municipal
Obligations  may entail.  Payment of interest  and  preservation  of capital are
dependent upon the continuing ability of Connecticut  issuers 
<PAGE>

and/or  obligors of state,  municipal and public  authority debt  obligations to
meet their obligations thereunder. Investors should consider the greater risk of
the Fund's  concentration  versus the safety that comes with a less concentrated
portfolio and should  compare  yields  available on  portfolios  of  Connecticut
issues with those of more diversified  portfolios including  out-of-state issues
before making an investment decision.
    

The Fund's Board of Directors is authorized  to divide the unissued  shares into
separate  series  of  stock,  one for  each of the  Fund's  separate  investment
portfolios that may be created in the future.

INVESTMENT OBJECTIVES,
POLICIES AND RISKS

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

The Fund's  assets will be invested  primarily in high quality debt  obligations
issued by or on behalf of the State of  Connecticut,  other states,  territories
and  possessions  of  the  United  States,  and  their  authorities,   agencies,
instrumentalities and political  subdivisions,  the interest on which is, in the
opinion of bond counsel at the date of issuance,  currently  exempt from regular
Federal  income  taxation   ("Municipal   Obligations")   and  in  Participation
Certificates  (which,  in the opinion of Battle Fowler LLP, counsel to the Fund,
cause the Fund to be treated as owner of the underlying  Municipal  Obligations)
in Municipal  Obligations  purchased  from banks,  insurance  companies or other
financial  institutions  ("Participation  Certificates").  Dividends paid by the
Fund  which  are  "exempt-interest   dividends"  by  virtue  of  being  properly
designated as derived from Municipal Obligations and Participation  Certificates
in Municipal Obligations will be exempt from regular Federal income tax provided
the Fund complies with Section 852(b)(5) of Subchapter M of the Code.

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

taxable repurchase agreements.  Although the Fund will attempt to invest 100% of
its assets in Municipal Obligations, the Fund reserves the right to invest up to
20% of the value of its net assets in securities,  the interest  income on which
is subject to Federal,  state and local  income tax.  The Fund expects to invest
more than 25% of its assets in Participation  Certificates  purchased from banks
in industrial revenue bonds and other Connecticut Municipal Obligations.

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

The Fund may only purchase  securities  that have been  determined by the Fund's
Board of  Directors  to  present  minimal  credit  risks  and that are  Eligible
Securities at the time of acquisition.  The term Eligible  Securities means: (i)
Municipal Obligations with remaining maturities of 397 days or less and rated in
the two highest  short-term rating  categories by any two nationally  recognized
statistical  rating  organizations  ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal  Obligations  (collectively,  the  "Requisite
NRSROs");  (ii) Municipal  Obligations  which are subject to a Demand Feature or
Guarantee  (as such  terms are  defined  in Rule 2a-7 of the 1940 Act) and which
have  received a rating from an NRSRO,  or such  guarantor has received a rating
from an  NRSRO,  with  respect  to a  class  of debt  obligations  (or any  debt
obligation within that class) that is comparable in priority and security to the
Guarantee  (unless,  the  guarantor,   directly  or  indirectly,   controls,  is
controlled by or is under common control with the issuer of the security subject
to the Guarantee); and the issuer of the Demand Feature or Guarantee, or another
institution, has undertaken promptly to notify the holder of the security in the
event the Demand Feature or Guarantee is substituted with another Demand Feature
or Guarantee;  and (iii) unrated Municipal Obligations  determined by the Fund's
Board  of  Directors  to  be  of  comparable  quality.  In  addition,  Municipal
Obligations  with remaining  maturities of 397 days or less but that at the time
of issuance were long-term  securities  (i.e. with  maturities  greater than 366
days) are deemed  unrated and may be  purchased if such had received a long-term
rating from the Requisite NRSROs in one of the three highest rating  categories.
Provided, however, that such may not be purchased if it (i) does not satisfy the
rating  requirements set forth in the preceding sentence and (ii) has received a
long-term  rating from any NRSRO that is not within the three highest  long-term
rating categories. A determination of comparability by the Board of Directors is
made on the basis of its credit  evaluation of the issuer,  which may include an
evaluation of a letter of credit, guarantee,  insurance or other credit facility
issued in support of the Municipal  Obligations or  Participation  Certificates.
(See "Variable Rate Demand  Instruments and  Participation  Certificates" in the
Statement of Additional Information.) While there are several organizations that
currently qualify as NRSROs, two examples of NRSROs are Standard & Poor's Rating
Services, a division of The McGraw-Hill  Companies ("S&P") and Moody's Investors
Service, Inc. ("Moody's").  The two highest ratings by S&P and Moody's are "AAA"
and "AA" by S&P in the case of  long-term  bonds
<PAGE>

and notes or "Aaa" and "Aa" by Moody's  in the case of bonds;  "SP-1" and "SP-2"
by S&P or "MIG-1" and  "MIG-2" by Moody's in the case of notes;  "A-1" and "A-2"
by  S&P or  "Prime-1"  and  "Prime-2"  by  Moody's  in the  case  of  tax-exempt
commercial paper. The highest rating in the case of variable and floating demand
notes is "SP-1/AA" by S&P and "VMIG-1" by Moody's.  Such instruments may produce
a lower  yield than  would be  available  from less  highly  rated  instruments.
Subsequent to its purchase by the Fund,  the quality of an investment  may cease
to be rated or its rating may be reduced such that the investment is no longer a
First Tier  Security or is rated below the minimum  required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall promptly reassess
whether the security  presents  minimal credit risks and shall cause the Fund to
take such action as the Board of Directors determines is in the best interest of
the Fund and its  shareholders.  Reassessment,  however,  is not required if the
security  is disposed of or matures  within  five  business  days of the Manager
becoming  aware  of the new  rating  and  provided  further  that  the  Board of
Directors is subsequently notified of the Manager's actions. The term First Tier
Security  means any Eligible  Security  that:  (i) is a rated  security that has
received a short-term rating from the Requisite NRSROs in the highest short-term
rating category for debt  obligations;  (ii) is an unrated  security that is, as
determined by the Fund's Board of Directors,  to be of comparable quality; (iii)
is a security issued by a registered  investment  company that is a money market
fund; or (iv) is a government security.

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

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

All  investments  by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of
<PAGE>

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

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

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

CONNECTICUT RISK FACTORS

   
Because of the Fund's  concentration  in investments  in  Connecticut  Municipal
Obligations,  the safety of an investment in the Fund will depend importantly on
the  financial  strength of  Connecticut  and its  political  subdivisions.  The
Connecticut  economy  relies in part on  activities  that have been  subject  to
cyclical  change.  Connecticut's  economy has improved  since a recession in the
early  1990s.  The  improvements   have  been  primarily  in   non-manufacturing
industries,  whose  employment has recovered most of the losses  suffered during
the recession.  Manufacturing  employment,  however,  has continued its downward
trend.  Despite  the  recession,  the  average  per  capita  personal  income of
Connecticut  residents  has  remained  among the highest in the nation,  and the
State's  financial   performance  has  improved.   After  having  accumulated  a
$965,712,000  unappropriated  deficit as of June 30, 1991,  the General Fund has
run operating  surpluses,  based on the State's  budgetary method of accounting,
for each of the six fiscal  years  since.  However,  the  State's  high level of
tax-supported  debt  imposes a  relatively  significant  burden  on the  State's
revenue base.  There can be no assurance that general  economic  difficulties or
the  financial  circumstances  of  Connecticut  or its towns and cities will not
adversely  affect the market  value of their  obligations  or the ability of the
obligors to pay debt service on such obligations.
    

MANAGEMENT OF THE FUND

The Fund's Board of Directors  which is responsible  for the overall  management
and 
<PAGE>

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


   
The Manager is a Delaware  limited  partnership with its principal office at 600
Fifth Avenue,  New York,  New York 10020.  As of April 30, 1998, the Manager was
investment manager,  advisor or supervisor with respect to assets aggregating in
excess of $11.4 billion. The Manager acts as investment manager or administrator
of seventeen  other  registered  investment  companies and also advises  pension
trusts, profit-sharing trusts and endowments.

Effective January 1, 1998, NEIC Operating  Partnership,  L.P. ("NEICOP") was the
limited  partner  and owner of a 99.5%  interest in the  Manager  replacing  New
England Investment  Companies,  L.P. ("NEICLP") as the limited partner and owner
of  such  interest  in the  Manager,  due  to a  restructuring  by  New  England
Investment  Companies,  Inc. ("NEIC").  Subsequently,  effective March 31, 1998,
Nvest  Companies,  L.P.  ("Nvest  Companies") due to a change in name of NEICOP,
replaced  NEICOP as the  limited  partner  and owner of a 99.5%  interest in the
Manager.

Reich & Tang Asset  Management,  Inc. (an indirect  wholly-owned  subsidiary  of
Nvest  Companies) is the sole general  partner and owner of the  remaining  0.5%
interest  of  the  Manager.  Nvest  Corporation,   a  Massachusetts  Corporation
(formerly  known as New  England  Investment  Companies,  Inc.),  serves  as the
managing general partner of Nvest Companies.

Reich & Tang Asset  Management,  Inc. is an indirect  subsidiary of Metropolitan
Life Insurance Company  ("MetLife").  Also, MetLife directly and indirectly owns
approximately  47% of the outstanding  partnership  interests of Nvest Companies
and may be deemed a  "controlling  person" of the  Manager.  Reich & Tang,  Inc.
owns, directly and indirectly,  approximately 13% of the outstanding partnership
interests of Nvest Companies.

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

Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through thirteen subsidiaries, divisions
and  affiliates  offering a wide array of  investment  styles  and  products  to
institutional  clients. Its business units, in addition to the manager,  include
AEW  Capital  Management,   L.P.,  Back  Bay  Advisors,   L.P.,  Capital  Growth
Management,  Limited Partnership,  Greystone Partners,  L.P., Harris Associates,
L.P., Jurika & Voyles, L.P., Loomis, Sayles & Company,  L.P., New England Funds,
L.P., Nvest Associates,  Inc., Snyder Capital Management, L.P., Vaughan, Nelson,
Scarborough & McCullough,  L.P., and Westpeak  Investment  Advisors,  L.P. These
affiliates  in the  aggregate  are 
<PAGE>

investment advisors or managers to 80 other registered investment companies.

The recent  name change did not result in a change in control of the Manager and
has no  impact  upon  the  Manager's  performance  of its  responsibilities  and
obligations.

The Investment  Management Contract has a term which extends to January 31, 1999
and may be continued in force  thereafter  for successive  twelve-month  periods
beginning  each  February 1,  provided  that such  continuance  is  specifically
approved annually by majority vote of the Fund's  outstanding  voting securities
or by its Board of Directors,  and in either case by a majority of the directors
who are not parties to the Investment  Management Contract or interested persons
of any such party,  by votes cast in person at a meeting  called for the purpose
of voting on such matter.
    

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

   
For its services under the Investment Management Contract,  the Manager receives
from the Fund a fee  equal to .30% per  annum of the  Fund's  average  daily net
assets for managing  the Fund's  investment  portfolio  and  performing  related
services.  In addition  to its fees under the  Investment  Management  Contract,
Reich & Tang  Distributors,  Inc., (the  "Distributor"),  receives a service fee
equal to .20% per  annum of the  Fund's  average  daily  net  assets  under  the
Shareholder  Servicing  Agreement.  The fees are accrued daily and paid monthly.
Investment  management fees and operating  expenses,  which are  attributable to
both classes of the Fund,  will be allocated  daily to each Class share based on
the percentage of outstanding shares at the end of the day.
    

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

DESCRIPTION OF COMMON STOCK

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

nonassessable.  Shares are  redeemable at net asset value,  at the option of the
shareholder.

   
Under its Articles of  Incorporation,  the Fund has the right to redeem for cash
shares of stock owned by any shareholder, to the extent and at such times as the
Fund's Board of Directors  determines to be necessary or  appropriate to prevent
an undue concentration of stock ownership,  which would cause the Fund to become
a "personal  holding  company" for Federal income tax purposes.  In this regard,
the Fund may also exercise its right to reject purchase orders.  As of April 30,
1998, the amount of shares owned by all officers and directors of the Fund, as a
group, was less than 1% of the outstanding shares of the Fund.

The Class A and Class B shares of the Fund will  represent  an  interest  in the
same  portfolio  of  investments  and  will  have  identical  voting,  dividend,
liquidation and other rights, preferences,  powers,  restrictions,  limitations,
qualifications,  designations  and terms and  conditions,  except that:  (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares  will be  assessed  a  service  fee  pursuant  to the Rule  12b-1
Distribution  and Service Plan of the Fund of .20% of the Fund's  average  daily
net  assets;  (iii) only the  holders of the Class A shares  will be entitled to
vote on matters  pertaining to the Plan and any related agreements in accordance
with  provisions  of Rule 12b-1;  and (iv) the  exchange  privilege  will permit
shareholders  to exchange  their  shares only for shares of the same class of an
Exchange  Fund.  Payments  that are made under the Plan will be  calculated  and
charged  daily to the  appropriate  class prior to  determining  daily net asset
value per share and dividends/distributions.

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

DIVIDENDS AND DISTRIBUTIONS

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

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

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

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

HOW TO PURCHASE AND REDEEM SHARES

Investors who have accounts with  Participating  Organizations may invest in the
Fund through their Participating Organizations in accordance with the procedures
established   by  the   Participating   Organizations.   Certain   Participating
Organizations are compensated by the Distributor from its shareholder  servicing
fee and by the Manager  from its  management  fee for the  performance  of these
services. An investor who purchases shares through a Participating  Organization
that receives  payment from the Manager or the Distributor will become a Class A
shareholder. (See "Investments Through Participating 
<PAGE>

Organizations"  herein.) All other  investors,  and  investors who have accounts
with  Participating  Organizations  but who do not  wish to  invest  in the Fund
through their  Participating  Organizations,  may invest in the Fund directly as
Class B  shareholders  and not receive the  benefit of the  servicing  functions
performed by a Participating Organization. Class B shares may also be offered to
investors who purchase their shares through  Participating  Organizations who do
not receive  compensation  from the  Distributor or the Manager because they may
not be legally  permitted to receive such as  fiduciaries.  The Manager pays the
expenses  incurred  in  the  distribution  of  Class  B  shares.   Participating
Organizations  whose  clients  become  Class B  shareholders  will  not  receive
compensation  from the Manager or Distributor for the servicing they may provide
to their clients. (See "Direct Purchase and Redemption Procedures" herein.) With
respect to both classes of shares, the minimum initial investment in the Fund by
Participating  Organizations  is  $1,000  which  may  be  satisfied  by  initial
investments  aggregating  $1,000 by a  Participating  Organization  on behalf of
customers whose initial  investments  are less than $1,000.  The minimum initial
investment for securities  brokers,  financial  institutions  and other industry
professionals  that are not Participating  Organizations is $1,000.  The minimum
initial investment for all other investors is $5,000. Initial investments may be
made in any amount in excess of the applicable minimums.  The minimum amount for
subsequent   investments   is  $100  unless  the  investor  is  a  client  of  a
Participating   Organization  whose  clients  have  made  aggregate   subsequent
investments of $100.

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

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

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

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

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

   
The  right  of  redemption  may not be  suspended  or the date of  payment  upon
redemption  postponed for more than seven days after the shares are tendered for
redemption, except for any period during which the New York Stock Exchange, Inc.
is closed (other than  customary  weekend and holiday  closings) or during which
the SEC 
<PAGE>

determines that trading thereon is restricted, or for any period during which an
emergency (as determined by the SEC) exists as a result of which disposal by the
Fund of its portfolio securities is not reasonably practicable or as a result of
which it is not  reasonably  practicable  for the Fund fairly to  determine  the
value of its net assets, or for such other period as the SEC may by order permit
for the protection of the shareholders of the Fund.
    

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

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

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

INVESTMENTS THROUGH
PARTICIPATING ORGANIZATIONS

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

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

Participating Organizations may charge Participant Investors a fee in connection
with their use of  specialized  purchase and  redemption  procedures  offered to
Participant   Investors  by  the  Participating   Organizations.   In  addition,
Participating  Organizations offering purchase and redemption procedures similar
to those  offered to  shareholders  who invest in the Fund  directly  may impose
charges, limitations, minimums and restrictions in addition to or different from
those
<PAGE>

applicable to shareholders who invest in the Fund directly. Accordingly, the net
yield to investors who invest through  Participating  Organizations  may be less
than by investing in the Fund directly.  A Participant Investor should read this
Prospectus  in  conjunction  with the  materials  provided by the  Participating
Organization  describing the procedures under which Fund shares may be purchased
and redeemed through the Participating Organization.

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

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

DIRECT PURCHASE AND
REDEMPTION PROCEDURES

The following purchase and redemption  procedures apply to investors who wish to
invest in the Fund directly and not through Participating  Organizations.  These
investors  may  obtain a current  prospectus  and the  subscription  order  form
necessary to open an account by telephoning the Fund at the following numbers:

Within New York State                     212-830-5220
Outside New York State (toll free)        800-221-3079

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

Initial Purchases of Shares

Mail

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

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


Checks are accepted  subject to  collection  at full face value in United States
currency.  Payment by a check drawn on any member of the Federal  Reserve System
can normally be  converted  into  Federal  Funds within two business  days after
receipt of the check.  Checks drawn on a non-member bank may take  substantially
longer to convert into Federal  Funds.  An investor's 
<PAGE>

subscription will not be accepted until the Fund receives Federal Funds.

Bank Wire

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

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

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

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

Personal Delivery

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

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

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

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

Subsequent Purchases of Shares

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

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

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

<PAGE>

Redemption of Shares

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

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

Written Requests

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

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

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

Checks

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

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

Shareholders  electing the checking option are subject to the procedures,  rules
and  regulations  of the Fund's  agent  bank.  Checks  drawn on a jointly  owned
account may, at the shareholder's election,  require only one signature.  Checks
in  amounts  exceeding  the value of the  shareholder's  account
<PAGE>

at the time the check is presented for payment will not be honored. In addition,
the Fund reserves the right to charge the shareholder's  account a fee up to $20
for checks not honored as a result of an insufficient  account value.  Since the
dollar value of the account  changes  daily,  the total value of the account may
not be  determined  in advance and the  account may not be entirely  redeemed by
check.  The Fund reserves the right to terminate or modify the check  redemption
procedure at any time or to impose additional fees.

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

Telephone

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

A  shareholder   making  a  telephone   withdrawal   should  call  the  Fund  at
212-830-5220;  outside New York State at 800-221-3079  and state (i) the name of
the shareholder  appearing on the Fund's records, (ii) the shareholder's account
number with the Fund, (iii) the amount to be withdrawn, (iv) whether such amount
is to be forwarded to the shareholder's  designated bank account or address, and
(v) the name of the person  requesting the redemption.  Usually the proceeds are
sent to the designated bank account or address on the same Fund Business Day the
redemption is effected,  provided the redemption  request is received  before 12
noon,  New York City time and on the next Fund  Business  Day if the  redemption
request is received  after 12 noon,  New York City time.  The Fund  reserves the
right to terminate  or modify the  telephone  redemption  service in whole or in
part at any time and will notify shareholders accordingly.

Exchange Privilege

Shareholders  of the Fund are entitled to exchange some or all of their class of
shares in the Fund for  shares of the same  class of  certain  other  investment
companies which retain Reich & Tang Asset Management L.P. as investment  advisor
and which  participate in the exchange  privilege program with the Fund. If only
one class of shares is available in a particular  exchange fund, the shareholder
of the Fund is entitled to exchange  their  shares for the shares  available  in
that  exchange  fund.   Currently  the  exchange   privilege  program  has  been
established  between the Fund and California  Daily Tax Free Income Fund,  Inc.,
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, 
<PAGE>

the exchange  privilege  program may be extended to other  investment  companies
which retain Reich & Tang Asset Management L.P. as investment  advisor,  manager
or  administrator.  An exchange of shares in the Fund  pursuant to the  exchange
privilege  is, in effect,  a  redemption  of Fund  shares  (at net asset  value)
followed by the  purchase  of shares of the  investment  company  into which the
exchange is made (at net asset value) and may result in a shareholder  realizing
a taxable gain or loss for Federal income tax purposes.

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

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

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

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

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

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

Specified Amount Automatic Withdrawal Plan

Shareholders may elect to withdraw shares and receive payment from the Fund of a
specified  amount  of  $50  or  more  automatically  on  a  monthly,  quarterly,
semi-annual or annual basis in an amount  approved and confirmed by the Manager.
A specified amount plan payment is generally made by the Fund on the 23rd day of
each month.  Whenever  such 23rd day of a month is not a Fund  Business Day, the
payment date is the Fund Business Day  preceding  the 23rd day of the month.  In
order to make a payment,  a number of shares equal in aggregate  net asset value
to the payment amount are redeemed at their net asset value on the Fund Business
Day  immediately  preceding  the  date  of  payment.  To  the  extent  that  the
redemptions to make plan payments exceed the number of shares purchased  through
reinvestment of dividends and  distributions,  the redemptions reduce the number
of shares  purchased  on original  investment,  and may  ultimately  liquidate a
shareholder's investment.

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

DISTRIBUTION AND SERVICE PLAN

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

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

Under the Shareholder  Servicing  Agreement,  the Distributor  receives from the
Fund,  with respect only to the Class A shares,  a service fee equal to .20% per
annum  of the  Class A  shares'  average  daily  net  assets  (the  "Shareholder
Servicing  Fee")  for  providing  personal  shareholders  services  and  for the
maintenance of shareholder  accounts.  The fee is accrued daily and paid monthly
and any  portion  of the fee may be  deemed  to be used by the  Distributor  for
payments to Participating  Organizations with respect to their provision of such
services  to their  clients or  customers  who are  shareholders  of the Class A
shares of the Fund.  The Class B  shareholders  will not  receive the benefit of
such services  from  Participating  Organizations  and,  therefore,  will not be
assessed a Shareholder Servicing Fee.

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

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

   
For the fiscal year ended January 31, 1998,  the total amount spent  pursuant to
the Plan was .38% of the average  daily net assets of the Fund, of which .20% of
the average daily net assets was paid by the Fund to the  Distributor,  pursuant
to the Shareholder  Servicing  Agreement and an amount  representing .18% of the
average  daily  net  assets  was paid by the  Manager  (which  may be  deemed an
indirect payment by the Fund). Of the total amount paid by the Manager, $494,812
was utilized for broker  assistance  payments,  $6,424 for
<PAGE>

compensation  to sales  personnel,  $2,986 for travel and expenses,  $20,107 for
Prospectus printing, and $190 on miscellaneous expenses.
    

FEDERAL INCOME TAXES

   
The Fund has elected to qualify under the Code as a regulated investment company
that distributes  "exempt-interest dividends" as defined in the Code. The Fund's
policy is to distribute  as dividends  each year 100% (and in no event less than
90%) of its  tax-exempt  interest  income,  net of certain  deductions,  and its
investment  company taxable income (if any). If  distributions  are made in this
manner,  dividends  designated as derived from the interest  earned on Municipal
Obligations  are  "exempt-interest  dividends"  and are not  subject  to regular
Federal income tax although such  "exempt-interest  dividends" may be subject to
Federal alternative minimum tax. Dividends paid from taxable income, if any, and
distributions of any realized  short-term capital gains (whether from tax-exempt
or taxable  obligations)  are taxable to  shareholders  as  ordinary  income for
Federal  income  tax  purposes,  whether  received  in  cash  or  reinvested  in
additional  shares of the Fund.  The Fund does not expect to  realize  long-term
capital  gains,  and  thus  does  not  contemplate  distributing  "capital  gain
dividends" or having undistributed capital gain income within the meaning of the
Code. The Fund will inform  shareholders  of the amount and nature of its income
and gains in a written  notice  mailed to  shareholders  not later  than 60 days
after the close of the Fund's  taxable  year.  For Social  Security  recipients,
interest on tax-exempt  bonds,  including exempt interest  dividends paid by the
Fund,  is to be added to adjusted  gross income for  purposes of  computing  the
amount of Social  Security  benefits  includible  in gross  income.  Interest on
certain "private activity bonds" (generally, a bond issue in which more than 10%
of the  proceeds  are used for a  non-governmental  trade or business  and which
meets the  private  security  or payment  test,  or a bond issue which meets the
private loan financing test) issued after August 7, 1986 will constitute an item
of  tax  preference   subject  to  the  individual   alternative   minimum  tax.
Corporations will be required to include in alternative  minimum taxable income,
75% of the amount by which their adjusted current earnings (including generally,
tax-exempt   interest)   exceeds  their   alternative   minimum  taxable  income
(determined  without this item).  In  addition,  in certain  cases  Subchapter S
corporations with accumulated  earnings and profits from Subchapter C years will
be  subject  to a tax  on  "passive  investment  income,"  including  tax-exempt
interest.  Although  the Fund  intends  to  maintain a $1.00 per share net asset
value, a shareholder  may realize a taxable gain or loss upon the disposition of
shares.

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

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

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

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

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

   
Dividends  and  distributions  paid by the  Fund  that  constitute  items of tax
preference  for  purposes of the Federal  alternative  minimum  tax,  other than
exempt-interest dividends,  derived from Connecticut Municipal Obligations,  may
be subject to the net Connecticut minimum tax.
    

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

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

GENERAL INFORMATION

   
The Fund was  incorporated  under the laws of the State of  Maryland on March 8,
1985 and it is  registered  with the SEC as an  open-end  management  investment
company.
    

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

   
As a general  matter,  the Fund will not hold  annual or other  meetings  of the
Fund's shareholders.  This is because the By-Laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of the revised
investment  advisory  contracts with respect to a particular  class or series of
stock, (c) for approval of revisions to the Fund's  distribution  agreement with
respect  to a  particular  class or series of  stock,  and (d) upon the  written
request of holders or shares entitled to cast not less than 25% of all the votes
entitled to be cast at such meeting.  Annual and other  meetings may be required
with respect to such additional  matters relating to the Fund as may be required
by the 1940 Act  including  the removal of Fund  director(s)  and  communication
among  shareholders,  any registration of the Fund with the SEC or any state, or
as the Directors may consider necessary or desirable. Each Director serves until
the next meeting of the  shareholders  called for the purpose of considering the
election or reelection of such Director or of a successor to such Director,  and
until the election and qualification of his or her successor,  elected at such a
meeting, or until such Director sooner dies, 
<PAGE>

resigns, retires or is removed by the vote of the shareholders.

As the year  2000  approaches,  an issue  has  emerged  regarding  how  existing
application  software  programs and operating  systems can accommodate this date
value.  Failure to adequately address this issue could have potentially  serious
repercussions.  The Manager is in the process of working with the Fund's service
providers  to  prepare  for  the  year  2000.  Based  on  information  currently
available,  the  Manager  does not expect  that the Fund will incur  significant
operating  expenses  or be  required  to incur  material  costs to be year  2000
compliant.  Although  the Manager does not  anticipate  that the year 2000 issue
will have a material  impact of the Fund's ability to provide service at current
levels,  there can be no assurance that steps taken in preparation  for the year
2000 will be sufficient to avoid an adverse impact on the Fund.

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

NET ASSET VALUE

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

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

CUSTODIAN AND TRANSFER AGENT

   
Investors  Fiduciary  Trust Company,  801  Pennsylvania,  Kansas City,  Missouri
64105, is custodian for the Fund's cash and  securities.  Reich & Tang Services,
Inc.,  600 Fifth Avenue,  New York,  New York 10020,  is the transfer  agent and
dividend  agent for the  shares  of the  Fund.  The  Fund's  transfer  agent and
custodian do not assist in, and are not responsible  for,  investment  decisions
involving assets of the Fund.
    

<PAGE>



   

                   TABLE OF CONTENTS
  Table of Fees and Expenses...........................     CONNECTICUT
  Financial Highlights.................................     DAILY TAX
  Introduction.........................................     FREE INCOME
  Investment Objectives,                                    FUND, INC
       Policies and Risks..............................
  Connecticut Risk Factors.............................
  Management of the Fund...............................
  Description of Common Stock..........................
  Dividends and Distributions..........................
  How to Purchase and Redeem Shares....................
  Investments Through
     Participating Organizations.......................
  Direct Purchase and
     Redemption Procedures.............................
     Initial Purchases of Shares.......................      PROSPECTUS
     Electronic Funds Transfers (EFT)                        JUNE 1, 1998
       Pre-authorized Credit and Direct
        Deposit Privilege..............................
     Subsequent Purchases of Shares....................
     Redemption of Shares..............................
     Exchange Privilege................................
     Specified Amount Automatic
       Withdrawal Plan.................................
  Distribution and Service Plan........................
  Federal Income Taxes.................................
  Connecticut Income Taxes.............................
  General Information..................................
  Net Asset Value......................................
  Custodian and Transfer Agent.........................

    

<PAGE>

   
PROSPECTUS                                                         June  1, 1998
    

EVERGREEN SHARES OF CONNECTICUT
DAILY TAX FREE INCOME FUND, INC.

[GRAPHIC OMITTED]

   
         Connecticut  Daily  Tax Free  Income  Fund,  Inc.  (the  "Fund")  is an
open-end  management  investment company that is a short-term,  tax-exempt money
market fund whose  investment  objectives are to seek as high a level of current
income, exempt from regular Federal income taxes and to the extent possible from
Connecticut  personal  income  taxes,  as  is  believed  to be  consistent  with
preservation of capital, maintenance of liquidity and stability of principal. No
assurance can be given that these  objectives will be achieved.  The Fund offers
two classes of shares to the  general  public,  however  only Class A shares are
offered by this Prospectus ("the Evergreen  Shares").  The Class A shares of the
Fund are subject to a service fee pursuant to the Fund's Rule 12b-1 Distribution
and  Service  Plan and are sold  through  financial  intermediaries  who provide
servicing to Class A shareholders for which they receive  compensation  from the
Manager and the Distributor. The Class B shares of the Fund are not subject to a
service  fee and either  are sold  directly  to the  public or are sold  through
financial  intermediaries  that do not receive  compensation from the Manager or
the Distributor. In all other respects, the Class A and Class B shares represent
the same interest in the income and assets of the Fund. The Fund is concentrated
in the securities issued by Connecticut or entities within Connecticut. The Fund
may invest a significant percentage of its assets in a single issuer. Therefore,
an  investment  in the Fund may be riskier than an  investment in other types of
money market funds.

         This  Prospectus  sets forth  concisely  the  information a prospective
investor should know before investing in the Fund.. Additional information about
the Fund has been filed with the Securities and Exchange  Commission (the "SEC")
and is available  upon  request and without  charge by calling the Fund at (800)
807-2940. The "Statement of Additional  Information" bears the same date as this
Prospectus  and  is  incorporated  by  reference  into  this  Prospectus  in its
entirety.  The SEC maintains a web site  (http://www.sec.gov)  that contains the
Statement of Additional  Information and other reports and information regarding
the Fund which have been filed electronically with the SEC.

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

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

An  investment  in the  Fund is  neither  insured  nor  guaranteed  by the  U.S.
Government.  The Fund  intends to maintain a stable net asset value of $1.00 per
share  although  there can be no assurance  that this value will be  maintained.
Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank,  and the shares are not insured by the Federal  Deposit  Insurance
Corporation, the Federal Reserve Board, or any other agency.


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

This Prospectus Should Be Read And Retained By Investors For Future Reference.

<PAGE>



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

--------------------------------------------------------------------------------
                           TABLE OF FEES AND EXPENSES
--------------------------------------------------------------------------------

Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
<S>         <C>                                        <C>        <C>           <C>       <C>    

                                                                 Class A                Class B
   
             Management Fees                                       0.30%                  0.30%
             12b-1 Fees                                            0.20%                  0.00%
             Other Expenses                                        0.39%                  0.37%
                Administration Fees                     0.21%      _____        0.21%     _____
             Total Fund Operating Expenses                         0.89%                  0.67%
    


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)
   
                                        Class A            $9         $28         $49        $110
                                        Class B            $7         $21         $37         $83
    
</TABLE>

The purpose of the above fee table is to assist an investor in understanding the
various  costs and expenses  that an investor in the Fund will bear  directly or
indirectly.  For a further discussion of these fees see "Management of the Fund"
and "Distribution and Service Plan" herein.

The  figures   reflected  in  this  example   should  not  be  considered  as  a
representation  of past or future  expenses.  Actual  expenses may be greater or
less than those shown above.


<PAGE>

--------------------------------------------------------------------------------
                              FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
   
The following  financial  highlights of Connecticut  Daily Tax Free Income Fund,
Inc. have been audited by McGladrey & Pullen LLP,  Independent  Certified Public
Accountants,  whose report thereon is incorporated by reference in the Statement
of Additional Information..
    
<TABLE>
<CAPTION>
<S>                                     <C>         <C>      <C>     <C>      <C>      <C>      <C>      <C>      <C>      <C>    

CLASS A                                                       Year Ended January 31,
                                         1998       1997      1996     1995    1994    1993     1992     1991     1990     1989
                                         ----       ----      ----     ----    ----    ----     ----     ----     ----     ----
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period     $ 1.00   $ 1.00     $1.00    $1.00    $1.00   $1.00    $1.00    $1.00    $1.00   $1.00
                                         -------  ---------  ------   ------   ------  -------  -------  ------   -----   ------
Income from investment operations:
  Net investment income.......             0.027    0.026     0.030    0.023    0.017   0.021    0.035    0.049   0.054    0.044
Less distributions:
  Dividends from net investment income   ( 0.027) ( 0.026)  ( 0.030) ( 0.023) ( 0.017)( 0.021) ( 0.035) ( 0.049)( 0.054) ( 0.044)
Net asset value, end of period             $1.00    $1.00    $1.00    $1.00    $1.00   $1.00    $1.00    $1.00    $1.00    $1.00
Total Return..................              2.74%    2.59%    3.02%    2.29%    1.70%   2.12%    3.56%    5.01%    5.58%    4.53%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)$167,780 $136,606  $105,826  $81,801 $120,551 $129,297 $185,339 $178,335 $228,167 $245,529
Ratios to average net assets:
  Expenses....................              0.89%   0.91%     0.91%    0.88%    0.87%   0.86%   0.79%     0.80%    0.78%    0.79%
  Net investment income.......              2.70%   2.96%     2.96%    2.25%    1.68%   2.14%   3.51%     4.92%    5.44%    4.44%
Administration fees waived....               --      --       0.03%     --       --     0.06%    --        --       --       --
Expenses paid indirectly......               --     0.02%      --       --       --      --      --        --       --       --

                                                          Year                            October 10, 1996
CLASS B                                                   Ended                     (Commencement of offering) to
                                                   January 31, 1998                       January 31, 1997
                                                   ----------------                 ----------------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period......             $   1.00                              $  1.00
                                                       ---------                             -------
Income from investment operations:
Net investment income.....................                 0.029                                0.009
Less distributions:
Dividends from net investment income......             (   0.029)                             ( 0.009)
                                                        ---------
Net asset value, end of period............             $   1.00                              $  1.00
                                                       =========                              =======
Total Return..............................                 2.96%                                2.83%*
Ratios/Supplemental Data
Net assets, end of period (000)...........             $     4                               $    7
Ratios to average net assets:
Expenses..................................                 0.67%                                0.70%*
Net investment income.....................                 2.95%                                2.80%*
Expenses paid indirectly..................                  --                                  0.02%

*   Annualized
</TABLE>

<PAGE>


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


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

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

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

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

         Evergreen  shares are identical to other shares of the Fund,  which are
offered pursuant to a separate prospectus, with respect to investment objectives
and  yield,  but differ  with  respect to  certain  other  matters.  See "How to
Purchase and Redeem Shares" and "Shareholder Services."
<PAGE>
--------------------------------------------------------------------------------
                             INVESTMENT OBJECTIVES,
                               POLICIES AND RISKS
--------------------------------------------------------------------------------
   
         The  Fund  is an  open-end  management  investment  company  that  is a
short-term, tax-exempt money market fund whose investment objectives are to seek
as high a level of current income, exempt from regular Federal income taxes and,
to the extent  possible,  from the Connecticut  tax on the  Connecticut  taxable
income of individuals,  trusts,  and estates (the  "Connecticut  Personal Income
Tax"), as is believed to be consistent with preservation of capital, maintenance
of liquidity and stability of principal. There can be no assurance that the Fund
will achieve its investment objectives.

         The Fund's  assets  will be invested  primarily  in high  quality  debt
obligations  issued by or on behalf of the State of  Connecticut,  other states,
territories  and  possessions  of the  United  States,  and  their  authorities,
agencies,  instrumentalities and political  subdivisions,  the interest on which
is, in the opinion of bond  counsel at the date of  issuance,  currently  exempt
from  regular  Federal  income  taxation   ("Municipal   Obligations")   and  in
Participation  Certificates  in  Municipal  Obligations  purchased  from  banks,
insurance   companies   or   other   financial   institutions    ("Participation
Certificates"). Dividends paid by the Fund which are "exempt-interest dividends"
by virtue of being properly designated as derived from Municipal Obligations and
Participation  Certificates  will be exempt  from  regular  Federal  income  tax
provided the Fund complies with Section 852(b)(5) of Subchapter M of the Code.


         Although  the  Supreme  Court  has  determined  that  Congress  has the
authority to subject the interest on bonds such as the Municipal  Obligations to
Federal  income  taxation,  existing law  excludes  such  interest  from regular
Federal income tax. However,  "exempt-interest  dividends" may be subject to the
Federal   alternative   minimum  tax.  (See  "Federal   Income  Taxes"  herein.)
Exempt-interest  dividends paid by the Fund correctly identified as derived from
obligations  issued by or on behalf of the State of Connecticut or any political
subdivision  thereof,  or  public  instrumentality,  state or  local  authority,
district,  or  similar  public  entity  created  under  the laws of the State of
Connecticut or from  obligations  (such as certain  obligations  issued by or on
behalf of possessions or territories of the United States) the interest on which
Federal  law   prohibits   the  states  from  taxing   ("Connecticut   Municipal
Obligations")  will be exempt from the  Connecticut  Personal  Income Tax.  (See
"Connecticut Income Taxes" herein.) To the extent suitable Connecticut Municipal
Obligations  are not available for investment by the Fund, the Fund may purchase
Municipal   Obligations   issued   by   other   states,   their   agencies   and
instrumentalities or other obligations, the dividends designated as derived from
interest income on which will be exempt from regular Federal income tax but will
be  subject  to the  Connecticut  Personal  Income  Tax.  However,  except  as a
temporary  defensive  measure  during  periods of adverse  market  conditions as
determined by the Manager, the Fund will invest at least 65% of its total assets
in Connecticut Municipal Obligations, the exempt-interest dividends derived from
which are exempt from the Connecticut  Personal  Income Tax,  although the exact
amount of the Fund's assets  invested in such  securities will vary from time to
time. The Fund's investments may include  "when-issued"  Municipal  Obligations,
stand-by commitments and taxable repurchase  agreements.  Although the Fund will
attempt to invest 100% of its assets in Municipal Obligations, the Fund reserves
the right to invest up to 20% of the value of its net assets in securities,  the
interest income on which is subject to Federal,  state and local income tax. The
Fund expects to invest more than 25% of its assets in Participation Certificates
purchased from banks in industrial revenue bonds and other Connecticut Municipal
Obligations.


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


         The Fund may only purchase  securities that have been determined by the
Fund's Board of Directors to present  minimal credit risks and that are Eligible
Securities at the time of acquisition.  The term Eligible  Securities means: (i)
Municipal Obligations with remaining maturities of 397 days or less and rated in
the two highest  short-term rating  categories by any two nationally  recognized
statistical  rating  organizations  ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal  Obligations  (collectively,  the  "Requisite
NRSROs") (ii)  Municipal  Obligations  which are subject to a Demand  Feature or
Guarantee  (as such  terms are  defined  in Rule 2a-7 of the 1940 Act) and which
have  received a rating from an NRSRO,  or such  guarantor has received a rating
from an  NRSRO,  with  respect  to a  class  of debt  obligations  (or any  debt
obligation within that class) that is comparable in priority and security to the
Guarantee  (unless,  the  guarantor,   directly  or  indirectly,   controls,  is
controlled by or is under common control with the issuer of the security subject
to the Guarantee); and the issuer of the Demand Feature or Guarantee, or another
institution, has undertaken promptly to notify the holder of the security in the
event the Demand Feature or Guarantee is substituted with another Demand Feature
or Guarantee;  and (iii) unrated Municipal Obligations  determined by 
<PAGE>

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


         Subsequent  to its purchase by the Fund,  the quality of an  investment
may cease to be rated or its rating may be reduced such that the  investment  is
no longer a First Tier  Security  or is rated  below the  minimum  required  for
purchase by the Fund.  If this occurs,  the Board of Directors of the Fund shall
promptly  reassess whether the security  presents minimal credit risks and shall
cause the Fund to take such action as the Board of  Directors  determines  is in
the best interest of the Fund and its shareholders.  Reassessment,  however,  is
not required if the security is disposed of or matures within five business days
of the Manager  becoming  aware of the new rating and provided  further that the
Board of Directors is subsequently  notified of the Manager's actions.  The term
First Tier Security  means any Eligible  Security  that: (i) is a rated security
that has received a short-term  rating from the Requisite  NRSROs in the highest
short-term  rating category for debt  obligations;  (ii) is an unrated  security
that is, as  determined  by the Fund's Board of  Directors,  to be of comparable
quality; (iii) is a security issued by a registered investment company that is a
money market fund; or (iv) is a government security.


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


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


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


   
         The Fund  intends to  continue  to qualify as a  "regulated  investment
company" under Subchapter M of the Code. The Fund will be restricted in that, at
the close of each quarter of the taxable  year, at least 50% of the value of its
total assets must be  represented  by cash,  government  securities,  investment
company  securities and other 
<PAGE>

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

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

--------------------------------------------------------------------------------
                            CONNECTICUT RISK FACTORS
--------------------------------------------------------------------------------
   
Because of the Fund's  concentration  in investments  in  Connecticut  Municipal
Obligations,  the safety of an investment in the Fund will depend importantly on
the  financial  strength of  Connecticut  and its  political  subdivisions.  The
Connecticut  economy  relies in part on  activities  that have been  subject  to
cyclical  change.  Connecticut's  economy has improved  since a recession in the
early  1990s.  The  improvements   have  been  primarily  in   non-manufacturing
industries,  whose  employment has recovered most of the losses  suffered during
the recession.  Manufacturing  employment,  however,  has continued its downward
trend.  Despite  the  recession,  the  average  per  capita  personal  income of
Connecticut  residents  has  remained  among the highest in the nation,  and the
State's  financial   performance  has  improved.   After  having  accumulated  a
$965,712,000  unappropriated  deficit as of June 30, 1991,  the General Fund has
run operating  surpluses,  based on the State's  budgetary method of accounting,
for each of the six fiscal  years  since.  However,  the  State's  high level of
tax-supported  debt  imposes a  relatively  significant  burden  on the  State's
revenue base.  There can be no assurance that general  economic  difficulties or
the  financial  circumstances  of  Connecticut  or its towns and cities will not
adversely  affect the market  value of their  obligations  or the ability of the
obligors to pay debt service on such obligations.
    

--------------------------------------------------------------------------------
                             MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------

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

   
         The Manager is a Delaware limited partnership with its principal office
at 600 Fifth Avenue, New York, New York 10020. As of April 30, 1998, the Manager
was investment manager, adviser or supervisor with respect to assets aggregating
in  excess  of  $11.4  billion.  The  Manager  acts  as  investment  manager  or
administrator  of  seventeen  other  registered  investment  companies  and also
advises pension trusts, profit-sharing trusts and endowments.

         Effective January 1, 1998, NEIC Operating Partnership,  L.P. ("NEICOP")
was the limited  partner and owner of a 99.5% interest in the Manager  replacing
New England  Investment  Companies,  L.P.  ("NEICLP") as the limited partner and
owner of such  interest in the Manager,  due to a  restructuring  by New England
Investment  Companies,  Inc. ("NEIC").  Subsequently,  effective March 31, 1998,
Nvest  Companies,  L.P.  ("Nvest  Companies") due to a change in name of NEICOP,
replaced  NEICOP as the  limited  partner  and owner of a 99.5%  interest in the
Manager.

         Reich  &  Tang  Asset  Management,   Inc.  (an  indirect   wholly-owned
subsidiary  of Nvest  Companies)  is the sole  general  partner and owner of the
remaining  0.5%  interest of the Manager.  Nvest  Corporation,  a  Massachusetts
Corporation (formerly known as New England Investment  Companies,  Inc.), serves
as the managing general partner of Nvest Companies.
<PAGE>

     Reich  &  Tang  Asset  Management,   Inc.  is  an  indirect  subsidiary  of
Metropolitan  Life Insurance  Company  ("MetLife").  Also,  MetLife directly and
indirectly owns  approximately 47% of the outstanding  partnership  interests of
Nvest Companies and may be deemed a "controlling person" of the Manager. Reich &
Tang, Inc. owns,  directly and indirectly,  approximately 13% of the outstanding
partnership interests of Nvest Companies.

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

         Nvest  Companies  is a  holding  company  offering  a  broad  array  of
investment  styles  across a wide  range of asset  categories  through  thirteen
subsidiaries,  divisions  and  affiliates  offering a wide  array of  investment
styles and products to institutional clients. Its business units, in addition to
the manager,  include AEW Capital  Management,  L.P.,  Back Bay Advisors,  L.P.,
Capital Growth Management, Limited Partnership, Greystone Partners, L.P., Harris
Associates,  L.P., Jurika & Voyles,  L.P., Loomis,  Sayles & Company,  L.P., New
England Funds, L.P., Nvest Associates,  Inc., Snyder Capital  Management,  L.P.,
Vaughan,  Nelson,  Scarborough  &  McCullough,  L.P.,  and  Westpeak  Investment
Advisors,  L.P.  These  affiliates in the aggregate are  investment  advisors or
managers to 80 other registered investment companies.

         The  recent  name  change  did not result in a change in control of the
Manager and has no impact upon the Manager's performance of its responsibilities
and obligations.

         The Investment  Management Contract has a term which extends to January
31, 1999 and may be continued in force  thereafter for  successive  twelve-month
periods   beginning   each  February  1,  provided  that  such   continuance  is
specifically approved annually by majority vote of the Fund's outstanding voting
securities or by its Board of Directors, and in either case by a majority of the
directors  who  are  not  parties  to  the  Investment  Management  Contract  or
interested  persons  of any such  party,  by votes  cast in  person at a meeting
called for the purpose of voting on such matter.
    

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

   
         For its services under the Investment Management Contract,  the Manager
receives from the Fund a fee equal to .30% per annum of the Fund's average daily
net assets for managing the Fund's investment  portfolio and performing  related
services.  In addition  to its fees under the  Investment  Management  Contract,
Reich & Tang  Distributors,  Inc., (the  "Distributor"),  receives a service fee
equal to .20% per  annum of the  Fund's  average  daily  net  assets  under  the
Shareholder  Servicing  Agreement.  The fees are accrued daily and paid monthly.
Investment  management fees and operating  expenses,  which are  attributable to
both classes of the Fund,  will be allocated daily to each Class shares based on
the percentage of outstanding shares at the end of the day.
    

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

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

         The Fund was  incorporated in Maryland on March 8, 1985. The authorized
capital  stock of the Fund consists of twenty  billion  shares of stock having a
par value of  one-tenth  of one cent  ($.001)  per share.  The  Fund's  Board of
Directors is  authorized to divide the unissued  shares into separate  series of
stock, each series  representing a separate,  additional  investment  portfolio.
Shares of all series will have identical  voting rights,  except where,  by law,
certain  matters  must be approved  by a majority of the shares of the  affected
series.  Each share of any  series of shares  when  issued  has equal  dividend,
distribution,  liquidation  and voting rights within the series for which it was
issued,  and each  fractional  share  has  those  rights  in  proportion  to the
percentage that the fractional share represents of a whole share. Generally, all
shares will be voted in the aggregate,  except if voting by class is required by
law or the matter involved  affects only one class, in which case shares will be
voted 
<PAGE>

separately by class.  There are no conversion or preemptive rights in connection
with any shares of the Fund.  All  shares,  when issued in  accordance  with the
terms  of the  offering  will  be  fully  paid  and  nonassessable.  Shares  are
redeemable at net asset value, at the option of the shareholder.

   
         Under its  Articles of  Incorporation  the Fund has the right to redeem
for cash  shares of stock  owned by any  shareholder  to the  extent and at such
times as the Fund's Board of Directors determines to be necessary or appropriate
to prevent an undue  concentration of stock ownership which would cause the Fund
to become a "personal holding company" for Federal income tax purposes.  In this
regard,  the Fund may also exercise its right to reject purchase  orders.  As of
April 30, 1998,  the amount of shares owned by all officers and directors of the
Fund, as a group, was less than 1% of the outstanding shares of the Fund.

         The Class A and Class B shares of the Fund,  will represent an interest
in the same portfolio of investments and will have identical  voting,  dividend,
liquidation and other rights, preferences,  powers,  restrictions,  limitations,
qualifications,  designations  and terms and  conditions,  except that:  (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares  will be  assessed  a  service  fee  pursuant  to the Rule  12b-1
Distribution  and Service Plan of the Fund of .20% of the Fund's  average  daily
net  assets;  (iii) only the  holders of the Class A shares  will be entitled to
vote on matters  pertaining to the Plan and any related agreements in accordance
with  provisions  of Rule 12b-1;  and (iv) the  exchange  privilege  will permit
shareholders  to exchange  their  shares only for shares of the same class of an
Exchange  Fund.  Payments that are made under the Plans will be  calculated  and
charged  daily to the  appropriate  class prior to  determining  daily net asset
value per share and dividends/distributions.
    

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

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

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

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

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

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

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

HOW TO BUY SHARES

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

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

HOW TO REDEEM SHARES

         You may "redeem", i.e., sell your shares in the Fund to the Fund on any
Fund Business Day, either directly or through your financial  intermediary.  The
price you will  receive is the net asset  value next  calculated  after the Fund
receives  your request in proper form.  Proceeds  generally  will be sent to you
within seven days.  However,  for shares recently  purchased by check,  the Fund
will not send proceeds until it is reasonably  satisfied 
<PAGE>

that the  check  has been  collected  (which  may take up to ten  days).  Once a
redemption  request has been telephoned or mailed, it is irrevocable and may not
be modified or canceled.

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

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

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

         The  telephone  redemption  service is not  available  to  shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share  Purchase  Application  and choose how the redemption
proceeds are to be paid.  Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered, or (ii) be
wired to an account with the same registration as the  shareholder's  account in
the Fund at a designated  commercial bank.  Evergreen  Service Company currently
deducts a $5.00 wire charge from all redemption  proceeds wired.  This charge is
subject to change without notice.  Redemption proceeds will be wired on the same
day if the  request  is made  prior  to 12 noon  (Eastern  time).  Such  shares,
however,  will not earn  dividends for that day.  Redemption  requests  received
after 12 noon will earn  dividends  for that day, and the proceeds will be wired
on the  following  business  day. A  shareholder  who decides  later to use this
service, or to change instructions  already given, should fill out a Shareholder
Services Form and send it to Evergreen Service Company,  P.O. Box 2121,  Boston,
Massachusetts 02106-2121, with such shareholder's signature guaranteed by a bank
or trust  company  (not a Notary  Public),  a member  firm of a  domestic  stock
exchange or by other financial  institutions  whose guarantees are acceptable to
Evergreen Service Company.  Shareholders should allow approximately ten days for
such form to be processed. The Fund will employ reasonable procedures to confirm
that  instructions  communicated  by  telephone  are genuine.  These  procedures
include  requiring  some form of  personal  identification  prior to acting upon
instructions and tape recording of telephone instructions.  If the Fund fails to
follow such  procedures,  it may be liable for any losses due to unauthorized or
fraudulent  instructions.  The Fund will not be liable for  following  telephone
instructions  reasonably believed to be genuine.  The Fund reserves the right to
refuse a telephone  redemption if it is believed  advisable to do so.  Financial
intermediaries may charge a fee for handling telephone requests.  Procedures for
redeeming Fund shares by telephone may be modified or terminated  without notice
at any time.

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

         Shareholders  wishing to use this method of redemption  should fill out
the appropriate part of the Share Purchase Application  (including the Signature
Card) and mail the completed form to Evergreen  Service Company,  P.O. Box 2121,
Boston, Massachusetts 02106-2121.  Shareholders requesting this service after an
account has been opened must contact  Evergreen Service Company since additional
documentation  will be required.  Currently there is no charge either for checks
or for the clearance of any checks. This service may be terminated or altered at
any time.
    

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EFFECT OF BANKING LAWS

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

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

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

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

         Under the Shareholder  Servicing  Agreement,  the Distributor  receives
from the Fund with  respect  only to Class A shares a service  fee equal to .20%
per annum of the Class A shares'  average  daily net  assets  (the  "Shareholder
Servicing  Fee").  The fee is accrued  daily and paid monthly and any portion of
the fee may be deemed to be used by the Distributor for purposes of distribution
of Fund shares and for payments to Participating  Organizations  with respect to
servicing their clients or customers who are  shareholders of the Class A shares
of the Fund.  The Class B  shareholders  will not  receive  the  benefit of such
services from participating  organizations and, therefore will not be assessed a
shareholder servicing fee.

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

         The Plan  provides that the Manager may make payments from time to time
from its own  resources,  which may include the  Management Fee and past profits
for the  following  purposes:  (i) to defray  the costs  of,  and to  compensate
others,  including  Participating  Organizations  with whom the  Distributor has
entered  into written  agreements,  for  performing  shareholder  servicing  and
related  administrative  functions  on behalf of the Class A shares of the Fund;
(ii) to compensate certain Participating  Organizations for providing assistance
in  distributing  the  Fund's  Class A  shares;  and  (iii) to pay the  costs of
printing and distributing the Fund's prospectus to prospective  investors and to
defray  the  cost  of the  preparation  and  printing  of  brochures  and  other
promotional materials,  mailings to prospective shareholders,  advertising,  and
other promotional activities, including the salaries and/or commissions of sales
personnel  in  connection  with  the  distribution  of the  Fund's  shares.  The
Distributor  may also make  payments  from time to time from its own  resources,
which may  include  the  Shareholder  Servicing
<PAGE>

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

   
         For the fiscal year ended  January 31,  1998,  the total  amount  spent
pursuant to the Plan for Class A shares was .38% of the average daily net assets
of the Fund,  of which .20% of the average daily net assets was paid by the Fund
to the Manager,  pursuant to the Shareholder  Servicing  Agreement and an amount
representing .18% of the average daily net assets was paid by the Manager (which
may be deemed an indirect  payment by the Fund). Of the total amount paid by the
Manager,  $494,812  was  utilized  for broker  assistance  payments,  $6,424 for
compensation  to sales  personnel,  $2,986 for travel and expenses,  $20,107 for
Prospectus printing, and $190 on miscellaneous expenses.
    

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

         The  Fund  has  elected  to  qualify  under  the  Code  as a  regulated
investment  company that distributes  "exempt-interest  dividends" as defined in
the Code. The Fund's policy is to distribute as dividends each year 100% (and in
no event  less than  90%) of its  tax-exempt  interest  income,  net of  certain
deductions, and its investment company taxable income (if any). If distributions
are made in this  manner,  dividends  designated  as derived  from the  interest
earned on Municipal  Obligations  are  "exempt-interest  dividends"  and are not
subject to regular Federal income tax although such "exempt-interest  dividends"
may be subject to Federal  alternative  minimum tax. Dividends paid from taxable
income,  if any, and  distributions  of any realized  short-term  capital  gains
(whether from tax-exempt or taxable  obligations) are taxable to shareholders as
ordinary  income for Federal  income tax purposes,  whether  received in cash or
reinvested in additional shares of the Fund. The Fund does not expect to realize
long-term  capital gains,  and thus does not contemplate  distributing  "capital
gain dividends" or having  undistributed  capital gain income within the meaning
of the Code. The Fund will inform  shareholders  of the amount and nature of its
income and gains in a written  notice mailed to  shareholders  not later than 60
days after the close of the Fund's taxable year. For Social Security recipients,
interest on tax-exempt  bonds,  including exempt interest  dividends paid by the
Fund,  is to be added to adjusted  gross  income.  Interest on certain  "private
activity bonds" (generally,  a bond issue in which more than 10% of the proceeds
are used for a  non-governmental  trade or business  and which meets the private
security or payment test, or a bond issue which meets the private loan financing
test)  issued  after August 7, 1986 will  constitute  an item of tax  preference
subject to the individual alternative minimum tax. Corporations will be required
to include in alternative  minimum  taxable  income,  75% of the amount by which
their adjusted  current  earnings  (including  generally,  tax-exempt  interest)
exceeds their alternative minimum taxable income (determined without this item).
In  addition,  in certain  cases  Subchapter  S  corporations  with  accumulated
earnings  and  profits  from  Subchapter  C years  will be  subject  to a tax on
"passive investment income," including  tax-exempt  interest.  Although the Fund
intends to maintain a $1.00 per share net asset value, a shareholder may realize
a taxable gain or loss upon the disposition of shares.

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

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

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

by the Fund are not subject to the Connecticut  tax on the  Connecticut  taxable
income of  individuals,  trusts and estates (the  "Connecticut  Personal  Income
Tax").
    
         Exempt-interest   dividends  that  are  not  derived  from  Connecticut
Municipal  Obligations  and any other  dividends of the Fund that are treated as
ordinary  income for Federal  income tax purposes are includible in a taxpayer's
tax base for the purposes of the Connecticut Personal Income Tax.

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

   
         Dividends and  distributions  paid by the Fund that constitute items of
tax preference for purposes of the Federal  alternative  minimum tax, other than
exempt-interest dividends,  derived from Connecticut Municipal Obligations,  may
be subject to the net Connecticut minimum tax.
    
         All dividends paid by the Fund, including exempt-interest dividends are
includible in gross income for purposes of the Connecticut  Corporation Business
Tax payable by  corporations.  However,  the  Corporation  Business Tax allows a
deduction for a portion of amounts  includible in gross income thereunder to the
extent they are treated as  dividends  other than  exempt-interest  dividends or
capital gain dividends for Federal income tax purposes, but disallows deductions
for expenses related to such amounts.

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

--------------------------------------------------------------------------------
                               GENERAL INFORMATION
--------------------------------------------------------------------------------
   
         The Fund was  incorporated  under the laws of the State of  Maryland on
March  8,  1985 and it is  registered  with  the SEC as an  open-end  management
investment company.
    

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

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

         As the  year  2000  approaches,  an issue  has  emerged  regarding  how
existing  application  software  programs and operating  systems can accommodate
this date value. Failure to adequately address this issue could have potentially
serious repercussions.  The Manager is in the process of working with the Fund's
service  providers to prepare for the year 2000. Based on information  currently
available,  the  Manager  does not expect  that the Fund will incur  significant
operating  expenses  or be  required  to incur  material  costs to be year  2000
compliant.  Although  the Manager does not  anticipate  that the year 2000 issue
will have a material  impact of the Fund's ability to provide service at current
levels,  there can be no assurance that steps taken in preparation  for the year
2000 will be sufficient to avoid an adverse impact on the Fund.

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

--------------------------------------------------------------------------------
                                 NET ASSET VALUE
--------------------------------------------------------------------------------
   
         The net asset value of each Class of the Fund's shares is determined as
of 12 noon,  Eastern  time,  on each Fund  Business Day. Fund Business Day means
weekdays  (Monday through Friday) except  customary  business  holidays and Good
Friday.  The net asset value of a Class is computed by dividing the value of the
Fund's net assets for such Class (i.e.,  the value of its  securities  and other
assets less its liabilities, including 
<PAGE>

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

--------------------------------------------------------------------------------
                          CUSTODIAN AND TRANSFER AGENT
--------------------------------------------------------------------------------
   
         Investors  Fiduciary  Trust  Company,  801  Pennsylvania,  Kansas City,
Missouri  64105,  is  custodian  for the Fund's cash and  securities.  Evergreen
Service  Company,  P.O.  Box  2121,  Boston,  Massachusetts  02106-2121  is  the
registrar, transfer agent and dividend disbursing agent for the Evergreen shares
of the Fund.  The Fund's  transfer agent and custodian do not assist in, and are
not responsible for, investment decisions involving assets of the Fund.
    


<PAGE>













Distributor


Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019











537621 (REV02)
6/98


<PAGE>

   
                                  [GRAPHIC OMITTED]

[GRAPHIC OMITTED]                                                     PROSPECTUS
   CHASE VISTA SELECT SHARES OF CONNECTICUT DAILY TAX FREE INCOME FUND, INC.

June 1, 1998

Connecticut  Daily Tax Free  Income  Fund,  Inc.  (the  "Fund")  is an  open-end
management investment company that is a short-term, tax-exempt money market fund
whose  investment  objectives  are to seek as high a level  of  current  income,
exempt from Federal  income taxes and to the extent  possible  from  Connecticut
personal  income taxes,  as is believed to be consistent  with  preservation  of
capital,  maintenance  of liquidity and stability of principal.  The Fund offers
two classes of shares to the  general  public,  however  only Class A shares are
offered  by this  Prospectus.  The Class A shares of the Fund are  subject  to a
service fee pursuant to the Fund's Rule 12b-1  Distribution and Service Plan and
are sold  through  financial  intermediaries  who provide  servicing  to Class A
shareholders  for which  they  receive  compensation  from the  Manager  and the
Distributor. The Class B shares of the Fund are not subject to a service fee and
either  are  sold  directly  to  the  public  or  are  sold  through   financial
intermediaries that do not receive compensation from the Manager or Distributor.
In all  other  respects,  the  Class A and  Class B  shares  represent  the same
interests in the income and assets of the Fund.  No assurance  can be given that
these objectives will be achieved.  This Prospectus  relates  exclusively to the
Chase Vista Select  shares class of the Fund.  The Fund is  concentrated  in the
securities  issued by Connecticut or entities within  Connecticut.  The Fund may
invest a significant percentage of its assets in a single issuer.  Therefore, an
investment in the Fund may be riskier than an investment in other types of money
market funds.

This  Prospectus  sets forth  concisely the  information a prospective  investor
should know before investing in the Fund. Additional  information about the Fund
has been filed with the  Securities and Exchange  Commission  (the "SEC") and is
available  upon  request  and  without  charge by  calling  1-800-34-VISTA.  The
"Statement of Additional Information" bears the same date as this Prospectus and
is  incorporated  by reference  into this  Prospectus in its  entirety.  The SEC
maintains  a web  site  (http://www.sec.gov)  that  contains  the  Statement  of
Additional  Information  and other  reports and  information  regarding the Fund
which have been filed electronically with the SEC.

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

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

An investment in the Fund is neither insured nor guaranteed by the United States
Government.  The Fund  intends to maintain a stable net asset value of $1.00 per
share  although  there can be no assurance  that this value will be  maintained.
Shares in the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank,  and the shares are not insured by the Federal  Deposit  Insurance
Corporation, the Federal Reserve Board, or any other agency.

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

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

<PAGE>

                                   TABLE OF CONTENTS



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

Table of Fees and Expenses ...............................................

Financial Highlights .....................................................

Introduction .............................................................

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

Connecticut Risk Factors ..................................................

Management of The Fund ....................................................

Description of Common Stock ...............................................

Dividends and Distributions ...............................................

How to Purchase and Redeem Shares .........................................
     Initial Purchase of Chase Vista Select Shares .........................
     Subsequent Purchases of Shares ........................................
     Redemption of Shares ..................................................
     Exchange Privilege ....................................................
     Specified Amount Automatic Withdrawal Plan ............................
     Investments Through Participating Organizations .......................

Distribution and Service Plan .............................................

Federal Income Taxes ......................................................

Connecticut Income Taxes ..................................................

General Information .......................................................

Net Asset Value ...........................................................

Custodian, Transfer Agent and Dividend Agent ..............................

<PAGE>


                           TABLE OF FEES AND EXPENSES
                     --------------------------------------
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
<S>         <C>                                        <C>        <C>           <C>       <C>    

                                                                 Class A                Class B
   
             Management Fees                                       0.30%                  0.30%
             12b-1 Fees                                            0.20%                  0.00%
             Other Expenses                                        0.39%                  0.37%
                Administration Fees                     0.21%      _____        0.21%     _____
             Total Fund Operating Expenses                         0.89%                  0.67%
    


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)
   
                                        Class A            $9         $28         $49        $110
                                        Class B            $7         $21         $37         $83
    
</TABLE>

The purpose of the above fee table is to assist an investor in understanding the
various  costs and expenses  that an investor in the Fund will bear  directly or
indirectly.  For a further discussion of these fees see "Management of the Fund"
and "Distribution and Service Plan" herein.

The  figures   reflected  in  this  example   should  not  be  considered  as  a
representation  of past or future  expenses.  Actual  expenses may be greater or
less than those shown above.


<PAGE>

                              FINANCIAL HIGHLIGHTS
                          -----------------------------
                 (for a share outstanding throughout the period)

The following  financial  highlights of Connecticut  Daily Tax Free Income Fund,
Inc. has been audited by McGladrey & Pullen LLP,  Independent  Certified  Public
Accountants, whose report
                                                        Year Ended January 31,
CLASS A                                            1998         1997        1996
-------                                          ---------    ---------   ------
Per Share Operating Performance:
(for a share outstanding throughout the period)
 Net asset value, beginning of period...........  $  1.00    $  1.00     $  1.00
                                                  ---------  ---------   -------
Income from investment operations:
   Net investment income.....................       0.027      0.026       0.030
Less distributions:
     Dividends from net investment income....... (  0.027)  (  0.026)   ( 0.030)
                                                  -------    -------     -------
Net asset value, end of period.................  $  1.00    $  1.00     $  1.00
                                                 =========    =========  =======
Total return...................................     2.74%      2.59%       3.02%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) .....  $167,780    $136,606   $105,826
Ratios to average net assets:
  Expenses.....................................     0.89%      0.91%       0.91%
  Net investment income........................     2.70%      2.56%       2.96%
  Administration fees waived...................      --         --         0.03%
  Expenses paid indirectly.....................      --        0.02%        --

                                                                    Year
                                                                    Ended
CLASS B                                                      January 31, 1998
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period...........                  $  1.00
                                                                  -------
Income from investment operations:
    Net investment income........................                   0.029
Less distributions:
    Dividends from net investment income.........                 ( 0.029)
                                                                  --------
Net asset value, end of period.................                  $  1.00
                                                                   =======
Total Return...................................                     2.96%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)......                  $      4
Ratios to average net assets:
  Expenses.....................................                     0.67%
  Net investment income........................                     2.95%
  Expenses paid indirectly.....................                       --

<PAGE>





   
thereon is incorporated by reference in the Statement of Additional Information.
    

                                  Year Ended January 31,
 1995        1994         1993         1992         1991       1990         1989
------     ---------    ---------    ---------    --------   --------     ------


$ 1.00      $ 1.00      $ 1.00       $ 1.00       $ 1.00      $ 1.00      $ 1.00
---------   ---------   ---------    ---------    --------    --------    ------

0.023        0.017        0.021        0.035        0.049       0.054      0.044

( 0.023)    ( 0.017)     ( 0.021)    ( 0.035)     ( 0.049)    ( 0.054)  ( 0.044)
-------      -------     -------     ---------    ---------   -------    -------
$ 1.00      $ 1.00       $ 1.00      $ 1.00       $ 1.00      $ 1.00      $ 1.00
========    =========    =========   =========    ========    ========   =======
  2.29%       1.70%        2.12%       3.56%        5.01%       5.58%      4.53%

$81,801    $ 120,551    $ 129,297    $ 185,339    $178,335   $228,167   $245,529

  0.88%       0.87%         0.86%+      0.79%        0.80%      0.78%      0.79%
  2.25%       1.68%         2.14%+      3.51%        4.92%      5.44%      4.44%
   --          --           0.06%        --           --         --         --
   --          --            --          --           --         --         --

                         October 10, 1996
                   (Commencement of offering) to
                         January 31, 1997
                    ---------------------------

                             $  1.00

                                0.009

                              ( 0.009)
                         ----------------
                             $  1.00
                              =======
                                2.83%

                             $       7

                               0.70%*
                               2.80%*
                               0.02%

                 * Annualized



<PAGE>


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

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

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

On any day on which the New York Stock Exchange, Inc. is open for trading ("Fund
Business Day"),  investors may, without charge by the Fund,  purchase and redeem
shares of the Fund's common stock at their net asset value next determined after
receipt of the order.  An investor's  purchase  order will be accepted after the
payment is  converted  into Federal  funds,  and shares will be issued as of the
Fund's next net asset value  determination which is made as of 12 noon, New York
City time, on each Fund  Business Day. (See
<PAGE>

"How to Purchase  and Redeem  Shares" and "Net Asset Value"  herein.)  Dividends
from  accumulated net income are declared by the Fund on each Fund Business Day.
The Fund generally pays interest dividends  monthly.  Net capital gains, if any,
will be  distributed at least annually and in no event later than within 60 days
after the end of the Fund's  fiscal year.  All dividends  and  distributions  of
capital gains are  automatically  invested in  additional  shares of the Class A
shares of the Fund unless a  shareholder  has  elected by written  notice to the
Fund to  receive  either of such  distributions  in cash.  (See  "Dividends  and
Distributions" herein.)

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

The Fund's Board of Directors is authorized  to divide the unissued  shares into
separate  series  of  stock,  one for  each of the  Fund's  separate  investment
portfolios that may be created in the future.

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

INVESTMENT OBJECTIVES, POLICIES
AND RISKS
--------------------------------
   
The Fund is an open-end  management  investment  company  
<PAGE>

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


The Fund's  assets will be invested  primarily in high quality debt  obligations
issued by or on behalf of the State of  Connecticut,  other states,  territories
and  possessions  of  the  United  States,  and  their  authorities,   agencies,
instrumentalities and political  subdivisions,  the interest on which is, in the
opinion of bond counsel at the date of issuance,  currently  exempt from regular
Federal  income  taxation   ("Municipal   Obligations")   and  in  Participation
Certificates  (which,  in the opinion of Battle Fowler LLP, counsel to the Fund,
cause the Fund to be treated as owner of the underlying  Municipal  Obligations)
in Municipal  Obligations  purchased  from banks,  insurance  companies or other
financial  institutions  ("Participation  Certificates").  Dividends paid by the
Fund  which  are  "exempt-interest   dividends"  by  virtue  of  being  properly
designated as derived from Municipal Obligations and Participation  Certificates
will be exempt from regular  Federal  income tax provided the Fund complies with
Section 852(b)(5) of Subchapter M of the Code.


Although the Supreme  Court has  determined  that  Congress has the authority to
subject  the  interest  on bonds such as the  Municipal  Obligations  to Federal
income taxation, existing law excludes such interest from regular Federal income
tax.  However,  "exempt-interest  dividends"  may  be  subject  to  the  Federal
alternative  minimum tax. (See "Federal Income Taxes"  herein.)  Exempt-interest
dividends  paid by the Fund  correctly  identified  as derived from  obligations
issued by or on behalf of the State of Connecticut or any political  subdivision
thereof,  or public  instrumentality,  state or local  authority,  district,  or
similar public entity created under the laws of the State of Connecticut or from
obligations (such as certain  obligations  issued by or on behalf of possessions
or territories of the United States) the interest on which Federal law prohibits
the states from taxing ("Connecticut Municipal Obligations") will be exempt from
the Connecticut Personal Income Tax. (See "Connecticut Income Taxes" herein.) To
the extent  suitable  Connecticut  Municipal  Obligations  are not available for
investment by the Fund, the Fund may purchase  Municipal  Obligations  issued by
other states,  their agencies and  instrumentalities  or other obligations,  the
dividends  designated  as derived from  interest  income on which will be exempt
from regular Federal income tax but will be subject to the Connecticut  Personal
Income Tax. However,  except as a temporary
<PAGE>

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

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


The Fund may only purchase  securities  that have been  determined by the Fund's
Board of  Directors  to  present  minimal  credit  risks  and that are  Eligible
Securities at the time of acquisition.  The term Eligible  Securities means: (i)
Municipal Obligations with remaining maturities of 397 days or less and rated in
the two highest  short-term rating  categories by any two nationally  recognized
statistical  rating  organizations  ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal  Obligations  (collectively,  the  "Requisite
NRSROs");  (ii) Municipal  Obligations  which are subject to a Demand Feature or
Guarantee  (as such  terms are  defined  in Rule 2a-7 of the 1940 Act) and which
have  received a rating from an NRSRO,  or such  guarantor has received a rating
from an  NRSRO,  with  respect  to a  class  of debt  obligations  (or any  debt
obligation within that class) that is comparable in priority and security to the
Guarantee  (unless,  the  guarantor,   directly  or  indirectly,   controls,  is
controlled by or is under common control with the issuer of the security 
<PAGE>

subject to the Guarantee); and the issuer of the Demand Feature or Guarantee, or
another  institution,  has  undertaken  promptly  to  notify  the  holder of the
security  in the event the  Demand  Feature or  Guarantee  is  substituted  with
another Demand  Feature or Guarantee;  and (iii) unrated  Municipal  Obligations
determined  by the Fund's  Board of Directors to be of  comparable  quality.  In
addition,  Municipal  Obligations with remaining  maturities of 397 days or less
but that at the time of issuance were long-term securities (i.e. with maturities
greater  than 366 days) are  deemed  unrated  and may be  purchased  if such had
received  a  long-term  rating  from the  Requisite  NRSROs  in one of the three
highest rating categories.  Provided, however, that such may not be purchased if
it (i) does not  satisfy  the  rating  requirements  set forth in the  preceding
sentence  and (ii) has  received a  long-term  rating from any NRSRO that is not
within  the three  highest  long-term  rating  categories.  A  determination  of
comparability  by the  Board of  Directors  is made on the  basis of its  credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support of the Municipal
Obligations   or   Participation   Certificates.   (See  "Variable  Rate  Demand
Instruments  and  Participation  Certificates"  in the  Statement of  Additional
Information.)  While there are several  organizations  that currently qualify as
NRSROs, two examples of NRSROs are Standard & Poor's Rating Services, a division
of the  McGraw-Hill  Companies  ("S&P")  and  Moody's  Investors  Service,  Inc.
("Moody's").  The two  highest  ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in the
case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in the
case of notes;  "A-1" and "A-2" by S&P or "Prime-1"  and "Prime-2" by Moody's in
the case of  tax-exempt  commercial  paper.  The  highest  rating in the case of
variable and floating  demand notes is "SP-1/AA" by S&P and "VMIG-1" by Moody's.
Such  instruments  may produce a lower yield than would be  available  from less
highly rated instruments. Subsequent to its purchase by the Fund, the quality of
an  investment  may cease to be rated or its rating may be reduced such that the
investment  is no longer a First Tier  Security  or is rated  below the  minimum
required for purchase by the Fund. If this occurs, the Board of Directors of the
Fund shall reassess  promptly whether the security presents minimal credit risks
and  shall  cause  the  Fund to take  such  action  as the  Board  of  Directors
determines  is  in  the  best  interest  of  the  Fund  and  its   shareholders.
Reassessment, however, is not required if the security is disposed of or matures
within five  business days of the Manager  becoming  aware of the new rating and
provided  further that the Board of Directors  is  subsequently  notified of the
Manager's  actions.  The term First Tier  Security  means any Eligible  Security
that:  (i) is a rated  security  that has received a 
<PAGE>

short-term  rating from the Requisite  NRSROs in the highest  short-term  rating
category  for  debt  obligations;  (ii)  is an  unrated  security  that  is,  as
determined by the Fund's Board of Directors,  to be of comparable quality; (iii)
is a security issued by a registered  investment  company that is a money market
fund; or (iv) is a government security.

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


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


All  investments  by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund's
portfolio (on a  dollar-weighted  basis) will be 90 
<PAGE>

days or less.  The  maturities of variable rate demand  instruments  held in the
Fund's  portfolio will be deemed to be the longer of the period  required before
the  Fund  is  entitled  to  receive  payment  of the  principal  amount  of the
instrument  through demand, or the period remaining until the next interest rate
adjustment, although the stated maturities may be in excess of 397 days.


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


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


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

   
Because of the Fund's  concentration  in investments  in  Connecticut  Municipal
Obligations,  the safety of an investment in the Fund will depend importantly on
the  financial  strength of  Connecticut  and its  political  subdivisions.  The
Connecticut  economy  relies in part on  activities  that have been  subject  to
cyclical  change.  Connecticut's  economy has improved  since a recession in the
early  1990s.  The  improvements   have  been  primarily  in   non-manufacturing
industries,  whose  employment has recovered most of the losses 
<PAGE>

suffered during the recession.  Manufacturing employment, however, has continued
its  downward  trend.  Despite the  recession,  the average per capita  personal
income of  Connecticut  residents has remained  among the highest in the nation,
and the State's financial  performance has improved.  After having accumulated a
$965,712,000  unappropriated  deficit as of June 30, 1991,  the General Fund has
run operating  surpluses,  based on the State's  budgetary method of accounting,
for each of the six fiscal  years  since.  However,  the  State's  high level of
tax-supported  debt  imposes a  relatively  significant  burden  on the  State's
revenue base.  There can be no assurance that general  economic  difficulties or
the  financial  circumstances  of  Connecticut  or its towns and cities will not
adversely  affect the market  value of their  obligations  or the ability of the
obligors to pay debt service on such obligations.
    


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

   
The Manager is a Delaware  limited  partnership with its principal office at 600
Fifth Avenue,  New York,  New York 10020.  As of April 30, 1998, the Manager was
investment manager,  advisor or supervisor with respect to assets aggregating in
excess of $11.4 billion. The Manager acts as investment manager or administrator
of seventeen  other  registered  investment  companies and also advises  pension
trusts, profit-sharing trusts and endowments.





Effective January 1, 1998, NEIC Operating  Partnership,  L.P. ("NEICOP") was the
limited  partner  and owner of a 99.5%  interest in the  Manager  replacing  New
England Investment  Companies,  L.P. ("NEICLP") as the limited partner and owner
of  such  interest  in the  Manager,  due  to a  restructuring  by  New  England
Investment  Companies,  Inc. ("NEIC").  Subsequently,  effective March 31, 1998,
Nvest  Companies,  L.P.  ("Nvest  Companies") due to a change in name of NEICOP,
replaced  NEICOP as the  limited  partner  and owner of a 99.5%  interest in the
Manager.
<PAGE>

Reich & Tang Asset  Management,  Inc. (an indirect  wholly-owned  subsidiary  of
Nvest  Companies) is the sole general  partner and owner of the  remaining  0.5%
interest  of  the  Manager.  Nvest  Corporation,   a  Massachusetts  Corporation
(formerly  known as New  England  Investment  Companies,  Inc.),  serves  as the
managing general partner of Nvest Companies.

Reich & Tang Asset  Management,  Inc. is an indirect  subsidiary of Metropolitan
Life Insurance Company  ("MetLife").  Also, MetLife directly and indirectly owns
approximately  47% of the outstanding  partnership  interests of Nvest Companies
and may be deemed a  "controlling  person" of the  Manager.  Reich & Tang,  Inc.
owns, directly and indirectly,  approximately 13% of the outstanding partnership
interests of Nvest Companies.

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

Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through thirteen subsidiaries, divisions
and  affiliates  offering a wide array of  investment  styles  and  products  to
institutional  clients. Its business units, in addition to the manager,  include
AEW  Capital  Management,   L.P.,  Back  Bay  Advisors,   L.P.,  Capital  Growth
Management,  Limited Partnership,  Greystone Partners,  L.P., Harris Associates,
L.P., Jurika & Voyles, L.P., Loomis, Sayles & Company,  L.P., New England Funds,
L.P., Nvest Associates,  Inc., Snyder Capital Management, L.P., Vaughan, Nelson,
Scarborough & McCullough,  L.P., and Westpeak  Investment  Advisors,  L.P. These
affiliates  in the  aggregate  are  investment  advisors or managers to 80 other
registered investment companies.

The recent  name change did not result in a change in control of the Manager and
has no  impact  upon  the  Manager's  performance  of its  responsibilities  and
obligations.

The Investment  Management Contract has a term which extends to January 31, 1999
and may be continued in force  thereafter  for successive  twelve-month  periods
beginning  each  February 1,  provided  that such  continuance  is  specifically
approved annually by majority vote of the Fund's  outstanding  voting securities
or by 
<PAGE>

its Board of  Directors,  and in either case by a majority of the  directors who
are not parties to the Investment  Management  Contract or interested persons of
any such party,  by votes cast in person at a meeting  called for the purpose of
voting on such matter.
    

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

   
For its services under the Investment Management Contract,  the Manager receives
from the Fund a fee  equal to .30% per  annum of the  Fund's  average  daily net
assets for managing  the Fund's  investment  portfolio  and  performing  related
services.  In addition  to its fees under the  Investment  Management  Contract,
Reich & Tang  Distributors,  Inc. (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.  Investment
management fees and operating expenses which are attributable to both classes of
the Fund will be allocated  daily to each Class share based on the percentage of
outstanding shares at the end of the day.
    

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

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

The Fund was  incorporated in Maryland on March 8, 1985. The authorized  capital
stock of the Fund consists of twenty  billion shares of stock having a par value
of  one-tenth  of one cent  ($.001) per share.  The Fund's Board of Directors is
authorized  to divide the unissued  shares into separate  series of stock,  each
series representing a separate,  additional investment portfolio.  Shares of all
series will have identical voting rights,  except where, by law, certain matters
must be approved by a majority of the shares of the affected series.  Each share
of  any  series  of  shares  when  issued  has  equal  dividend, 
<PAGE>

distribution,  liquidation  and voting rights within the series for which it was
issued,  and each  fractional  share  has  those  rights  in  proportion  to the
percentage that the fractional share represents of a whole share.  Generally all
shares will be voted in the  aggregate  except if voting by class is required by
law or the matter involved  affects only one class, in which case shares will be
voted  separately by class.  There are no  conversion  or  preemptive  rights in
connection  with any shares of the Fund.  All shares,  when issued in accordance
with the terms of the offering, will be fully paid and nonassessable. Shares are
redeemable at net asset value, at the option of the shareholder.


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


   
Under its  Articles of  Incorporation  the Fund has the right to redeem for cash
shares of stock owned by any  shareholder to the extent and at such times as the
Fund's Board of Directors  determines to be necessary or  appropriate to prevent
an undue concentration of stock ownership which would cause the Fund to become a
"personal holding company" for Federal income tax purposes.  In this regard, the
Fund may also  exercise  its right to reject  purchase  orders.  As of April 30,
1998, the amount of shares owned by all officers and directors of the Fund, as a
group, was less than 1% of the outstanding shares of the Fund.


The Class A and Class B shares of the Fund will  represent  an  interest  in the
same  portfolio  of  investments  and  will  have  identical  voting,  dividend,
liquidation and other rights, preferences,  powers,  restrictions,  limitations,
qualifications,  designations  and terms and  conditions,  except that:  (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares  will be  assessed  a  service  fee  pursuant  to the Rule  12b-1
Distribution  and Service Plan of the Fund of .20% of the Fund's  average  daily
net  assets;  (iii) only the  holders of the Class A shares  will be entitled to
vote on matters  pertaining to the Plan and any related agreements in accordance
with  provisions  of Rule 12b-1;  and (iv) the  exchange  privilege  will permit
shareholders  to exchange  their  shares only for shares of the same class of an
Exchange  Fund.  Payments  that are made under the Plan will be  calculated  and
charged  daily to the  appropriate  class prior 
<PAGE>

to determining daily net asset value per share and dividends/distributions.
    


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


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

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

All dividends and distributions of capital gains are  automatically  invested in
additional  Fund  shares of the same Class of shares  immediately  upon  payment
thereof  unless a  shareholder  has  elected  by  written  notice to the Fund to
receive  either of such  distributions  in cash.  The Class A shares will bear a
service  fee under the Plan.  As a result,  the net income of and the  dividends
payable to the Class A shares will be lower than the net income of and dividends
payable  to the  Class B shares  of the Fund.  Dividends  paid to each  Class of
shares of the Fund will,  however,  be declared and paid on the same days at the
same times and,  except as noted with respect to the service fees payable  under
the Plan, will be determined in the same manner and paid in the same amounts.


   
HOW TO PURCHASE AND REDEEM SHARES
    

Investors may invest in Chase Vista Select shares through VFD or through dealers
with whom VFD has entered into  agreements for this purpose as described  herein
and those who have accounts with  Participating  Organizations may invest in the
Chase  Vista  Select  shares  through  their   Participating   Organizations  in
accordance with the procedures  established by the Participating  Organizations.
(See "Investments  Through  Participating  Organizations"  herein.) Only Class A
shares are offered through this Prospectus.  Certain Participating Organizations
are compensated by the Distributor from its shareholder servicing fee and by the
Manager  from its  management  fee for the  performance  of these  services.  An
investor who purchases shares through a Participating Organization that receives
payment from the Manager or the  Distributor  will become a Class A shareholder.
All  other  investors,  and  investors  who  have  accounts  with  Participating
Organizations  but  who  do  not  wish  to  invest  in the  Fund  through  their
Participating  Organizations,  may  invest  in the  Fund  directly  as  Class  B
shareholders and not receive the 
<PAGE>

benefit of the servicing  functions  performed by a Participating  Organization.
Class B shares  may also be offered  to  investors  who  purchase  their  shares
through  Participating  Organizations  who do not receive  compensation from the
Distributor or the Manager because they may not be legally  permitted to receive
such as fiduciaries.  The Manager pays the expenses incurred in the distribution
of Class B shares.  Participating  Organizations  whose  clients  become Class B
shareholders  will not receive  compensation from the Manager or Distributor for
the servicing they may provide to their clients.  The minimum initial investment
in the Chase Vista Select shares is $2,500.  Initial  investments may be made in
any  amount  in  excess of the  applicable  minimums.  The  minimum  amount  for
subsequent investments is $100.


The Fund sells and redeems its shares on a  continuing  basis at their net asset
value  and  does not  impose  a charge  for  either  sales or  redemptions.  All
transactions in Fund shares are effected through the Fund's transfer agent which
accepts orders for purchases and redemptions from  Participating  Organizations,
VFD,  and from  dealers  with  whom VFD has  entered  into  agreements  for this
purpose.


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


Shares  will be issued as of the first  determination  of the  Fund's  net asset
value per share for each Class made after acceptance of the investor's  purchase
order at the net asset  value per share  next  determined  after  receipt of the
purchase  order.  Shares  begin  accruing  income  dividends on the day they are
purchased.  The Fund  reserves  the right to  reject  any  subscription  for its
shares. Certificates for Fund shares will not be issued to an investor.


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


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

dividends accrued to the date of such redemption will be paid to the shareholder
along with the proceeds of the redemption.

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


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


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


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

INITIAL PURCHASES OF
CHASE VISTA SELECT SHARES

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

Mail. To purchase shares of the Chase Vista Select Shares,  investors may send a
check made payable to "Chase Vista Select Shares of  Connecticut  Daily Tax Free
Income Fund, Inc." along with a completed subscription order form to:

Chase Vista Select
Connecticut Daily Tax Free Income 
<PAGE>
Fund, Inc.
P. O. Box 419392
Kansas City, Missouri 64141-6392

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

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


DST Systems, Inc.
ABA #1010-0362-1
CHASE VISTA FUNDS
DDA # 751-1-629
For Connecticut Daily Tax Free
     Income Fund, Inc.
Account of
Fund Account #
SS #/Tax ID #


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


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


SUBSEQUENT PURCHASES
OF SHARES

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

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

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

REDEMPTION OF SHARES

   
A redemption is effected  immediately  following,  and at a price  determined in
accordance  with,  the next  determination  of net asset value per share of each
Class following  receipt by the Fund's  transfer agent of the redemption  order.
Normally,  payment for  redeemed  shares is made on the same Fund  Business  Day
after the redemption is effected,  provided the  redemption  request is received
prior to 12 noon,  New York City 
<PAGE>

time and on the next Fund  Business  Day if the  redemption  request is received
after 12 noon,  New York City time.  However,  redemption  requests  will not be
effected  unless the check  (including a certified  or cashier's  check) used to
purchase  the shares has been  cleared  for payment by the  investor's  bank and
converted  into Federal  Funds.  A bank check will be  considered by the Fund to
have cleared 15 days after it is deposited by the Fund.
    

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

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

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

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

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

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


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


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


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

<PAGE>
A  shareholder   making  a  telephone   withdrawal   should  call  the  Fund  at
1-800-34-VISTA and state (i) the name of the shareholder appearing on the Fund's
records,  (ii) the shareholder's  account number with the Fund, (iii) the amount
to  be  withdrawn,   (iv)  whether  such  amount  is  to  be  forwarded  to  the
shareholder's designated bank account or address, and (v) the name of the person
requesting the redemption.  Usually the proceeds are sent to the designated bank
account or address on the same Fund  Business  Day the  redemption  is effected,
provided the redemption  request is received  before 12 noon, New York City time
and on the next Fund Business Day if the redemption request is received after 12
noon, New York City time. The Fund reserves the right to terminate or modify the
telephone  redemption  service  in whole or in part at any time and will  notify
shareholders accordingly.

EXCHANGE PRIVILEGE

Shareholders  of the  Chase  Vista  Select  shares of the Fund may  exchange  at
relative  net asset value for Vista  Shares of any Chase Vista Money Market Fund
and the Chase Vista Select  shares of any Reich & Tang  sponsored  funds and may
exchange at relative net asset value plus any applicable sales charges,  for the
shares of the non-money  market Chase Vista Funds,  in accordance with the terms
of the then-current prospectus of the fund being acquired. The prospectus of the
Chase Vista Fund into which shares are being exchanged  should be read carefully
prior to any  exchange  and  retained  for  future  reference.  With  respect to
exchanges into a fund which charges a front-end sales charge,  such sales charge
will not be applicable if the  shareholder  previously  acquired his Chase Vista
Select shares by exchange from such fund.  Under the Exchange  Privilege,  Chase
Vista  Select  shares may be  exchanged  for shares of other funds only if those
funds are  registered  in the states where the exchange may legally be made.  In
addition,  the account  registration  for the Chase Vista Funds into which Chase
Vista Select shares are being exchanged must be identical to that of the account
registration  for the Fund  from  which  shares  are  being  redeemed.  Any such
exchange  may  create a gain or loss to be  recognized  for  Federal  income tax
purposes.  Normally,  shares of the fund to be  acquired  are  purchased  on the
redemption  date,  but such  purchase  may be delayed by either  Fund up to five
business  days if the Fund  determines  that it would be  disadvantageous  by an
immediate transfer of the proceeds. (This privilege may be amended or terminated
at any time  following 60 days' prior notice.)  Arrangements  have been made for
the  acceptance  of  instructions  by  telephone  to exchange  shares if certain
preauthorizations   or  indemnifications  are  accepted  and  on  file.  Further
information is available from the Transfer Agent.

SPECIFIED AMOUNT AUTOMATIC WITHDRAWAL PLAN

Shareholders  who own  $10,000  or more of the  shares  of the Fund may elect to
withdraw shares and 
<PAGE>

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

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


INVESTMENTS THROUGH
PARTICIPATING ORGANIZATIONS


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


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


Participating Organizations may charge Participant Investors a fee in connection
with their use of  specialized  purchase and  redemption  procedures  offered to
Participant   Investors  by  the  Participating   Organizations.   In  addition,
Participating  Organizations offering purchase and redemption procedures similar
to those  offered to  shareholders  
<PAGE>

who invest in the Fund directly may impose  charges,  limitations,  minimums and
restrictions  in addition to or different from those  applicable to shareholders
who invest in the Fund  directly.  Accordingly,  the net yield to investors  who
invest through Participating  Organizations may be less than by investing in the
Fund directly. A Participant Investor should read this Prospectus in conjunction
with the materials  provided by the  Participating  Organization  describing the
procedures  under which Chase Vista Select  shares may be purchased and redeemed
through the Participating Organization.

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

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

DISTRIBUTION AND
SERVICE PLAN
---------------------------------
   
Pursuant  to Rule  12b-1  under  the  1940  Act,  the SEC has  required  that an
investment  company which bears any direct or indirect  expense of  distributing
its shares must do so only in  accordance  with a plan  permitted by Rule 12b-1.
The Fund's Board of Directors has adopted a  distribution  and service plan (the
"Plan") and, pursuant to the Plan, the Fund and Reich & Tang Distributors,  Inc.
(the "Distributor") have entered into a Distribution Agreement and a Shareholder
Servicing Agreement (with respect to Class A shares of the Fund only).
    
Under the Distribution Agreement, the Distributor, for nominal 
<PAGE>

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

Under the Shareholder  Servicing  Agreement,  the Distributor  receives from the
Fund with  respect to Class A shares only, a service fee equal to .20% per annum
of the Class A shares'  average  daily net assets  (the  "Shareholder  Servicing
Fee") for  providing  personal  shareholders  services  and for  maintenance  of
shareholder accounts.  The fee is accrued daily and paid monthly and any portion
of the  fee  may be  deemed  to be  used  by the  Distributor  for  purposes  of
distribution of Fund shares and for payments to Participating Organizations with
respect to their  provision of such  services to their  clients or customers who
are  shareholders  of the Class A shares of the Fund.  The Class B  shareholders
will not receive the benefit of such services from  Participating  Organizations
and, therefore, will not be assessed a Shareholder Servicing Fee.

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

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

Administrative Services Contract in effect for that year.

   
For the fiscal year ended January 31, 1998,  the total amount spent  pursuant to
the Plan for Class A shares  was .38% of the  average  daily  net  assets of the
Fund,  of which .20% of the average daily net assets was paid by the Fund to the
Manager,   pursuant  to  the  Shareholder  Servicing  Agreement  and  an  amount
representing .18% of the average daily net assets was paid by the Manager (which
may be deemed an indirect  payment by the Fund). Of the total amount paid by the
Manager,  $494,812  was  utilized  for broker  assistance  payments,  $6,424 for
compensation  to sales  personnel,  $2,986 for travel and expenses,  $20,107 for
Prospectus printing, and $190 on miscellaneous expenses.
    

FEDERAL INCOME TAXES
------------------------------------
The Fund has elected to qualify under the Code as a regulated investment company
that intends to distribute  "exempt-interest  dividends" as defined in the Code.
The Fund's policy is to distribute as dividends  each year 100% (and in no event
less than 90%) of its tax-exempt interest income, net of certain deductions, and
its investment  company  taxable income (if any). If  distributions  are made in
this  manner,  dividends  designated  as  derived  from the  interest  earned on
Municipal  Obligations  are  "exempt-interest  dividends" and are not subject to
regular  Federal  income tax although such  "exempt-interest  dividends"  may be
subject to Federal  alternative minimum tax. Dividends paid from taxable income,
if any, and distributions of any realized short-term capital gains (whether from
tax-exempt  or taxable  obligations)  are  taxable to  shareholders  as ordinary
income for Federal income tax purposes,  whether  received in cash or reinvested
in additional  shares of the Fund. The Fund does not expect to realize long-term
capital  gains,  and  thus  does  not  contemplate  distributing  "capital  gain
dividends" or having undistributed capital gain income within the meaning of the
Code. The Fund will inform  shareholders  of the amount and nature of its income
and gains in a written  notice  mailed to  shareholders  not later  than 60 days
after the close of the Fund's  taxable  year.  For Social  Security  recipients,
interest on tax-exempt  bonds,  including exempt interest  dividends paid by the
Fund,  is to be added to adjusted  gross income for  purposes of  computing  the
amount of Social  Security  benefits  includible  in gross  income.  Interest on
certain "private activity bonds" (generally, a bond issue in which more than 10%
of the  proceeds  are used for a  non-governmental  trade or business  and which
meets the private  securities  or payment  test, or a bond issue which meets the
private loan financing test) issued after August 7, 1986 will constitute an item
of tax  preference  subject  to  the  individual  alternative  minimum  tax  and
increases the individual  alternative minimum tax. Corporations will be required
to include as an item of tax preference for purposes of the alternative  minimum
tax,  75% of the amount by which  their  adjusted  current  earnings  (including
generally, tax-exempt interest) exceeds their
<PAGE>

alternative  minimum  taxable  income  (determined  without this tax  preference
item). In addition,  in certain cases Subchapter S corporations with accumulated
earnings  and  profits  from  Subchapter  C years  will be  subject  to a tax on
"passive investment income," including  tax-exempt  interest.  Although the Fund
intends to maintain a $1.00 per share net asset value, a shareholder may realize
a taxable gain or loss upon the disposition of shares.

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

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

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

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

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

   
Dividends  and  distributions  paid by the  Fund  that  constitute  items of tax
preference  for  purposes of the Federal  alternative  minimum  tax,  other than
exempt-interest dividends,  derived from Connecticut Municipal Obligations,  may
be subject to the net Connecticut minimum tax.
    

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

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

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

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

   
As the year  2000  approaches,  an issue  has  emerged  regarding  how  existing
application  software  programs and operating  systems can accommodate this date
value.  Failure to adequately address this issue could have potentially  serious
repercussions.  The Manager is in the process of working with the Fund's service
providers  to  prepare  for  the  year  2000.  Based  on  information  currently
available,  the  Manager  does not expect  that the Fund will incur  significant
operating  expenses  or be  required  to incur  material  costs to be year  2000
compliant.  Although  the Manager does not  anticipate  that the year 2000 issue
will have a material  impact of the Fund's ability to provide service at current
levels,  there can be no assurance that steps taken in preparation  for the year
2000 will be sufficient to avoid an adverse impact on the Fund.

As a general  matter,  the Fund will not hold  annual or other  meetings  
<PAGE>

of the Fund's shareholders.  This is because the By-Laws of the Fund provide for
annual meetings only (a) for the election of directors,  (b) for approval of the
revised  investment  advisory  contracts  with respect to a particular  class or
series of stock,  (c) for  approval  of  revisions  to the  Fund's  distribution
agreement  with respect to a particular  class or series of stock,  and (d) upon
the written  request of holders or shares  entitled to cast not less than 25% of
all the votes entitled to be cast at such meeting. Annual and other meetings may
be required with respect to such additional  matters relating to the Fund as may
be  required  by the 1940 Act  including  the  removal of Fund  director(s)  and
communication among  shareholders,  any registration of the Fund with the SEC or
any state,  or as the  Directors  may  consider  necessary  or  desirable.  Each
Director  serves  until the next  meeting  of the  shareholders  called  for the
purpose of  considering  the  election or  reelection  of such  Director or of a
successor to such Director,  and until the election and  qualification of his or
her successor,  elected at such a meeting,  or until such Director  sooner dies,
resigns, retires or is removed by the vote of the shareholders.

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

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

The Fund's portfolio securities are valued at their amortized cost in compliance
with the  provisions of Rule 2a-7 under the 1940 Act.  Amortized  cost valuation
involves  valuing an instrument at its cost and  thereafter  assuming a constant
amortization to maturity of any discount or premium,  except that if fluctuating
interest  rates cause the market  value of the Fund's  portfolio to deviate more
than 1/2 of 1% from the value  determined  on the basis of amortized  cost,  the
Board of  Directors  will  consider  whether  any  action  should be  initiated.
Although the  amortized  cost method  provides  certainty in  valuation,  it may
result in periods  during  which the value of an  instrument  is higher or lower
than the price an investment  company would receive if the instrument were sold.
The Fund  intends  to  maintain  a stable  net  asset  value at $1.00  per share
although there can 
<PAGE>

be no assurance that this will be achieved.

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

   
Investors  Fiduciary  Trust Company,  801  Pennsylvania , Kansas City,  Missouri
64105 is custodian for the Fund's cash and  securities.  DST Systems,  Inc., 127
West 10th  Street,  Kansas  City,  Missouri  64105,  is the  transfer  agent and
dividend  agent for the Chase  Vista  Select  shares  of the  Fund.  The  Fund's
custodian  and transfer  agents do not assist in, and are not  responsible  for,
investment decisions involving assets of the Fund.
    






<PAGE>





(This Page Intentionally Left Blank)



<PAGE>

   
                                [GRAPHIC OMITTED]
    


            Chase Vista Service Center
            P.O. Box 419392
            Kansas City, Missouri 64141-6392






   
CVSCT-1-698
    



<PAGE>

--------------------------------------------------------------------------------
CONNECTICUT                                 600 FIFTH AVENUE, NEW YORK, NY 10020
DAILY TAX FREE                                                    (212) 830-5220
INCOME FUND, INC.
================================================================================
                       STATEMENT OF ADDITIONAL INFORMATION
   
                                  June 1, 1998
    

            Relating to Connecticut Daily Tax Free Income Fund, Inc.,
    Evergreen Shares of Connecticut Daily Tax Free Income Fund, Inc., and the
      Chase Vista Select Shares of Connecticut Daily Tax Free Income, Inc.
                        Prospectuses dated June 1 , 1998
   

This Statement of Additional  Information,  although not in itself a Prospectus,
expands upon and supplements the information contained in the current Prospectus
of Connecticut Daily Tax Free Income Fund, Inc., Evergreen Shares of Connecticut
Daily Tax Free Income Fund,  Inc. and Chase Vista Select  Shares of  Connecticut
Daily Tax Free Income Fund, Inc. (collectively, the "Funds"), dated June 1, 1998
and should be read in  conjunction  with the respective  Prospectus.  The Fund's
Prospectus may be obtained,  without charge, from any Participating Organization
or by writing or calling the Fund.  This Statement of Additional  Information is
incorporated by reference into the respective Prospectus in its entirety.


If you wish to invest in Evergreen  Shares of Connecticut  Daily Tax Free Income
Fund,  Inc.,  you should  obtain a separate  prospectus  by writing to Evergreen
Service Company, P.O. Box 2121, Boston,  Massachusetts  02106-2121 or by calling
(800) 807-2840.


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

   
<TABLE>
<CAPTION>
<S>                                       <C>  <C>                                   <C>
                                Table of Contents
----------------------------------------------------------------------------------------
Investment Objectives,
Policies and Risks............................  Manager.................................
Description of Municipal Obligations..........  Expense Limitation......................
  Variable Rate Demand Instruments              Management of the Fund..................
     and Participation Certificates...........  Compensation Table......................
  When-Issued Securities......................  Counsel and Auditors....................
  Stand-by Commitments........................  Distribution and Service Plan...........
Taxable Securities............................  Description of Common Stock.............
  Repurchase Agreements.......................  Federal Income Taxes....................
Connecticut Risk Factors......................  Connecticut Income Taxes................
Investment Restrictions.......................  Custodian and Transfer Agent............
Portfolio Transactions........................  Financial Statements....................
How to Purchase and Redeem Shares.............  Description of Ratings..................
Net Asset Value...............................  Taxable Equivalent Yield Table..........
Yield Quotations..............................
    
</TABLE>

<PAGE>

INVESTMENT OBJECTIVES, POLICIES AND RISKS

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

The Fund's  assets will be invested  primarily in high quality debt  obligations
issued by or on behalf of the State of  Connecticut,  other states,  territories
and  possessions  of  the  United  States,  and  their  authorities,   agencies,
instrumentalities and political subdivisions, the interest on which currently is
exempt from regular Federal income  taxation  ("Municipal  Obligations")  and in
Participation  Certificates  in  Municipal  Obligations  purchased  from  banks,
insurance   companies   or   other   financial   institutions    ("Participation
Certificates"). Dividends paid by the Fund which are "exempt-interest dividends"
by virtue of being  properly  designated  as having been derived from  Municipal
Obligations and  Participation  Certificates  will be exempt from Federal income
tax provided the Fund  complies  with Section  852(b)(5) of  Subchapter M of the
Internal  Revenue Code of 1986, as amended,  (the "Code").  Although the Supreme
Court has determined  that Congress has the authority to subject the interest on
bonds such as the Municipal  Obligations  to regular  Federal  income  taxation,
existing  law  excludes  such  interest  from  Federal   income  tax.   However,
"exempt-interest  dividends" may be subject to the Federal  alternative  minimum
tax. (See "Federal Income Taxes" herein.)
    

Exempt-interest  dividends paid by the Fund correctly identified as derived from
obligations  issued by or on behalf of the State of  Connecticut,  any political
subdivision  thereof,  or  public  instrumentality,  state or  local  authority,
district, or similar public entity created under the laws of Connecticut or from
obligations (such as certain  obligations  issued by or on behalf of possessions
or territories of the United States) the interest on which Federal law prohibits
the states from taxing ("Connecticut Municipal Obligations") will be exempt from
the Connecticut Personal Income Tax. (See "Connecticut Income Taxes" herein.) To
the extent  suitable  Connecticut  Municipal  Obligations  are not available for
investment by the Fund, the Fund may purchase  Municipal  Obligations  issued by
other states,  their agencies and  instrumentalities  or other obligations,  the
dividends  designated  as derived from  interest  income on which will be exempt
from Federal income tax but will be subject to the  Connecticut  Personal Income
Tax.  Except as a temporary  defensive  measure during periods of adverse market
conditions as  determined  by the Manager,  the Fund will invest at least 65% of
its assets in Connecticut Municipal Obligations,  the exempt-interest  dividends
derived from which are exempt from the Connecticut Personal Income Tax, although
the exact amount of the Fund's assets invested in such securities will vary from
time to time.  The  Fund  seeks  to  maintain  an  investment  portfolio  with a
dollar-weighted  average maturity of 90 days or less and to value its investment
portfolio at amortized  cost and maintain a net asset value at a $1.00 per share
for each class.  There can be no assurance  that this value will be  maintained.
The Fund may hold  uninvested  cash  reserves  pending  investment.  The  Fund's
investments   may  include   "when-issued"   Municipal   Obligations,   stand-by
commitments and taxable repurchase agreements.

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

The Fund may only purchase  securities  that have been  determined by the Fund's
Board of  Directors  to  present  minimal  credit  risks  and that are  Eligible
Securities at the time of acquisition.  The term Eligible  Securities means: (i)
Municipal Obligations with remaining maturities of 397 days or less and rated in
the two highest  short-term rating  categories by any two nationally  recognized
statistical  rating  organizations  ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal  Obligations  (collectively,  the  "Requisite
NRSROs") (acquisition in the latter situation must also be ratified by the Board
of
<PAGE>

Directors);  (ii) Municipal Obligations which are subject to a Demand Feature or
Guarantee  (as such  terms are  defined  in Rule 2a-7 of the 1940 Act) and which
have  received a rating from an NRSRO,  or such  guarantor has received a rating
from an  NRSRO,  with  respect  to a  class  of debt  obligations  (or any  debt
obligation within that class) that is comparable in priority and security to the
Guarantee  (unless,  the  guarantor,   directly  or  indirectly,   controls,  is
controlled by or is under common control with the issuer of the security subject
to the Guarantee); and the issuer of the Demand Feature or Guarantee, or another
institution, has undertaken promptly to notify the holder of the security in the
event the Demand Feature or Guarantee is substituted with another Demand Feature
or Guarantee;  and (iii) unrated Municipal Obligations  determined by the Fund's
Board  of  Directors  to  be  of  comparable  quality.  In  addition,  Municipal
Obligations  with remaining  maturities of 397 days or less but that at the time
of issuance were long-term  securities  (i.e. with  maturities  greater than 366
days) are deemed  unrated and may be  purchased if such had received a long-term
rating from the Requisite NRSROs in one of the three highest rating  categories.
Provided, however, that such may not be purchased if it (i) does not satisfy the
rating  requirements set forth in the preceding sentence and (ii) has received a
long-term  rating from any NRSRO that is not within the three highest  long-term
rating categories. A determination of comparability by the Board of Directors is
made on the basis of its credit  evaluation of the issuer,  which may include an
evaluation of a letter of credit, Guarantee,  insurance or other credit facility
issued in support of the Municipal  Obligations or  Participation  Certificates.
(See "Variable Rate Demand Instruments and Participation Certificates " herein.)
While there are several  organizations  that  currently  qualify as NRSROs,  two
examples  of NRSROs are  Standard & Poor's  Rating  Services,  a division of the
McGraw-Hill  Companies ("S&P") and Moody's Investors Service,  Inc. ("Moody's").
The two highest ratings by S&P and Moody's are "AAA" and "AA" by S&P in the case
of long-term  bonds and "Aaa" and "Aa" by Moody's in the case of bonds;  "MIG-1"
and "MIG-2" by Moody's in the case of notes; "A-1" and "A-2" by S&P or "Prime-1"
and  "Prime-2"  by  Moody's in the case of  tax-exempt  commercial  paper.  Such
instruments  may produce a lower yield than would be available  from less highly
rated  instruments.  The Fund's Board of Trustees has determined  that Municipal
Obligations  which are backed by the credit of the  Federal  Government  will be
considered to have a rating  equivalent to Moody's "Aaa".  (See  "Description of
Ratings" herein.) The highest rating in the case of variable and floating demand
notes is "SP-1/AA" by S&P or "VMIG-1" by Moody's. Such instruments may produce a
lower yield than would be  available  from less highly  rated  instruments.  The
Fund's Board of Directors has determined  that  obligations  which are backed by
the credit of the Federal  government  (the interest on which is not exempt from
Federal  income  taxation)  will be  considered  to have a rating  equivalent to
Moody's "Aaa". (See "Description of Ratings" herein.)
    


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


   
With respect to 75% of its total assets,  the Fund shall invest not more than 5%
of its total  assets in  Municipal  Obligations  or  Participation  Certificates
issued by a single  issuer.  Provided,  however,  the Fund shall not invest more
than  5%  of  its  total  assets  in  Municipal   Obligations  or  Participation
Certificates issued by a single issuer,  unless Municipal  Obligations are First
Tier Securities.  The  concentration in Municipal  Obligations and Participation
Certificates  may present  greater risks than in the case of a more  diversified
company.  The Fund  intends to  continue to qualify as a  "regulated  investment
company" under  Subchapter M of the Code. The Fund will be restricted in that at
the close of each quarter of the taxable  year, at least 50% of the value of its
total assets must be  represented  by cash,  government  securities,  investment
company  securities and other securities limited in respect of any one issuer to
not more than 5% in value of the  total  assets of the Fund and to not more than
10% of the outstanding  voting  securities of such issuer.  In addition,  at the
close of each  quarter of its  taxable  year,  not more than 25% in value of the
Fund's  total  assets may be invested  in  securities  of one issuer  other than
government  securities.  The  limitations  described in this  paragraph  are not
fundamental  policies and may be revised to the extent applicable Federal income
tax requirements are revised. (See "Federal Income Taxes" herein.)
    

DESCRIPTION OF MUNICIPAL OBLIGATIONS

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

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

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

     The two  principal  classifications  of  Municipal  Bonds are "general
     obligation" and "revenue"  bonds.  General  obligation bonds are secured by
     the issuer's  pledge of its faith,  credit and taxing power for the payment
     of principal  and  interest.  Issuers of general  obligation  bonds include
     states, counties, cities, towns and other governmental units. The principal
     of, and interest on,  revenue bonds are payable from the income of specific
     projects or  authorities  and  generally  are not supported by the issuer's
     general power to levy taxes. In some cases,  revenues derived from specific
     taxes are pledged to support payments on a revenue bond.
   
     In addition,  certain kinds of "private  activity bonds" are issued by
     public  authorities  to provide  funding  for  various  privately  operated
     industrial  facilities  (hereinafter  referred  to as  "industrial  revenue
     bonds" or "IRBs").  Interest on the IRBs is generally exempt,  with certain
     exceptions,  from regular  Federal income tax pursuant to Section 103(a) of
     the Code,  provided the issuer and corporate  obligor  thereof  continue to
     meet certain conditions.  (See "Federal Income Taxes" herein.) IRBs are, in
     most cases, revenue bonds and do not generally constitute the pledge of the
     credit of the  issuer of such  bonds.  The  payment  of the  principal  and
     interest on IRBs usually  depends  solely on the ability of the user of the
     facilities  financed by the bonds or other  guarantor to meet its financial
     obligations  and,  in certain  instances,  the pledge of real and  personal
     property as security  for  payment.  If there is no  established  secondary
     market for the IRBs,  the IRBs or the  Participation  Certificates  in IRBs
     purchased by the Fund will be supported by letters of credit, Guarantees or
     insurance  that meet the  definition of Eligible  Securities at the time of
     acquisition  stated  herein and  provide  the Demand  Feature  which may be
     exercised by the Fund to provide liquidity.  Shareholders  should note that
     the  Fund  may  invest  in  IRBs  acquired  in  transactions   involving  a
     Participating  Organization.  In accordance with  investment  restriction 6
     herein,  the Fund is permitted to invest up to 10% of the portfolio in high
     quality,  short-term  Municipal  Obligations  (including  IRBs) meeting the
     definition of Eligible  Securities at the time of acquisition  that may not
     be readily marketable or have a liquidity feature.
    


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

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

4)   Municipal  Leases,  which  may take  the form of a lease or an  installment
     purchase  or  conditional   sale  contract,   issued  by  state  and  local
     governments  and  authorities  to acquire a wide variety of  equipment  and
     facilities  such  as  fire  and  sanitation  vehicles,   telecommunications
     equipment  and other  capital  assets.  Municipal  Leases  frequently  have
     special risks not normally  associated  with general  obligation or revenue
     bonds. Leases and installment purchase or conditional sale contracts (which
     normally  provide for title to the leased asset to pass  eventually  to the
     governmental  issuer) have evolved as a means for  governmental  issuers to
     acquire  property and  equipment  without  meeting the  constitutional  and
     statutory   requirements  for  the  issuance  of  debt.  The  debt-issuance
     limitations  of many  state  constitutions  and  statutes  are deemed to be
     inapplicable  because  of the  inclusion  in many  leases or  contracts  of
     "non-appropriation"  clauses that provide that the governmental  issuer has
     no obligation to make future  payments  under the lease or contract  unless
     money is appropriated for such purpose by the appropriate  legislative body
     on a yearly or other  periodic  basis.  To reduce this risk,  the Fund will
     only purchase Municipal Leases subject to a non-appropriation  clause where
     the payment of principal and accrued interest is backed by an unconditional
     irrevocable  letter of credit,  a guarantee,  insurance or other comparable
     undertaking of an approved financial institution.  These types of municipal
     leases may be  considered  

     illiquid and subject to the 10%  limitation of investments in illiquid
     securities set forth under "Investment  Restrictions" contained herein. The
     Board of  Directors  may adopt  guidelines  and delegate to the Manager the
     daily  function of  determining  and  monitoring the liquidity of municipal
     leases.  In  making  such  determination,  the Board  and the  Manager  may
     consider  such factors as the frequency of trades for the  obligation,  the
     number of  dealers  willing to  purchase  or sell the  obligations  and the
     number of other potential  buyers and the nature of the marketplace for the
     obligations,  including the time needed to dispose of the  obligations  and
     the method of soliciting offers. If the Board determines that any municipal
     leases are  illiquid,  such lease will be subject to the 10%  limitation on
     investments in illiquid securities.

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

   
Subsequent to its purchase by the Fund, a rated  Municipal  Obligation may cease
to be rated or its rating may be reduced such that the investment is no longer a
First Tier  Security or is rated below the minimum  required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall promptly reassess
whether the Municipal  Obligation  presents minimal credit risks and shall cause
the Fund to take such action as the Board of  Directors  determines  in the best
interest of the Fund and its shareholders. However, reassessment is not required
if the Municipal  Obligation is disposed of or matures within five business days
of the Manager  becoming  aware of the new rating and provided  further that the
Board of Directors is subsequently notified of the Manager's actions.

In addition,  in the event that a Municipal  Obligation  (1) is in default,  (2)
ceases to be an Eligible  Security,  or (3) there is a determination  that it no
longer  presents  minimal  credit risks,  or an event of insolvency  occurs with
respect to the issuer of a  portfolio  security  or the  provider  of any Demand
Feature or Guarantee, the Fund will dispose of the Municipal Obligation absent a
determination  by the Fund's Board of Directors  that  disposal of the Municipal
Obligation would not be in the best interests of the Fund. In the event that the
Municipal  Obligation  is  disposed  of,  such  disposal  shall occur as soon as
practicable  consistent with achieving an orderly  disposition by sale, exercise
of any Demand Feature or otherwise.  In the event of a default with respect to a
Municipal Obligation which immediately before default accounted for 1/2 of 1% or
more of the Fund's total assets,  the Fund shall promptly  notify the Securities
and  Exchange  Commission  (the "SEC") of such fact and of the actions  that the
Fund intends to take in response to the situation. Certain Municipal Obligations
issued by  instrumentalities  of the United States  government are not backed by
the  full  faith  and  credit  of the  United  States  Treasury  but only by the
creditworthiness  of the  instrumentality.  Where  necessary  to ensure that the
Municipal Obligations are Eligible Securities,  or where the obligations are not
freely  transferable,  the Fund  will  require  that the  obligation  to pay the
principal and accrued  interest be backed by a Guarantee  that would qualify the
investment as an Eligible Security.
    

Variable Rate Demand Instruments and Participation Certificates

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

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


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


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

The recent period has seen fluctuations in interest rates,  particularly  "prime
rates" charged by banks. While the value of the underlying  variable rate demand
instruments  may change with changes in interest rates  generally,  the variable
rate nature of the underlying  variable rate demand  instruments should minimize
changes in value of the instruments.  Accordingly, as interest rates decrease or
increase,  the  potential  for capital  appreciation  and the risk of  potential
capital  depreciation  is less than would be the case with a portfolio  of fixed
income securities. The portfolio may contain variable rate demand instruments on
which stated minimum or maximum rates,  or maximum rates set by state law, which
limit the degree to which interest on such variable rate demand  instruments may
fluctuate; to the extent state law contains such limits,  increases or decreases
in value may be somewhat  greater  than would be the case  without  such limits.
Additionally,  the  portfolio  may contain  variable  rate demand  Participation
Certificates in fixed rate Municipal Obligations.  The fixed rate of interest on
these  Municipal  Obligations  will be a  ceiling  on the  variable  rate of the
participation  certificate.  In the event that interest rates  increased so that
the variable  rate  exceeded the fixed rate on the  Municipal  Obligations,  the
Municipal Obligations could no longer be valued at par and may cause the Fund to
take corrective  action,  including the elimination of the instruments  from the
portfolio.  Because the adjustment

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

of interest rates on the variable rate demand instruments is made in relation to
movements  of the  applicable  banks'  "prime  rates",  or other  interest  rate
adjustment  index,  the variable rate demand  instruments  are not comparable to
long-term  fixed rate  securities.  Accordingly,  interest rates on the variable
rate demand  instruments  may be higher or lower than  current  market rates for
fixed rate obligations of comparable quality with similar maturities.
    

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

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

When-Issued Securities

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

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

Stand-by Commitments

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

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

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

The Fund expects that stand-by  commitments  generally will be available without
the payment of any direct or indirect  consideration.  However, if necessary and
advisable,  the Fund may pay for stand-by  commitments either separately in cash
or by paying a higher price for portfolio  securities which are acquired subject
to such a commitment  (thus reducing the yield to maturity  otherwise  available
for the same securities). The total amount paid in either manner for outstanding
stand-by  commitments held in the Fund's portfolio would not exceed 1/2 of 1% of
the value of the Fund's total assets calculated  immediately after each stand-by
commitment was acquired.


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


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

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

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

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

TAXABLE SECURITIES

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

Repurchase Agreements

The Fund may  invest  in  instruments  subject  to  repurchase  agreements  with
securities  dealers or member  banks of the Federal  Reserve  System.  Under the
terms of a typical  repurchase  agreement,  the Fund would acquire an underlying
debt  instrument for a relatively  short period (usually not more than one week)
subject to an obligation of the seller to repurchase  and the Fund to resell the
instrument at a fixed price and time,  thereby  determining the yield during the
Fund's  holding  period.  This results in a fixed rate of return  insulated from
market fluctuations during such period. A repurchase agreement is subject to the
risk that the seller may fail to repurchase the security.  Repurchase agreements
may be deemed to be loans under the 1940 Act. All repurchase  agreements entered
into by the Fund shall be fully collateralized at all times during the period of
the  agreement in that the value of the  underlying  security  shall be at least
equal to the amount of the loan, including the accrued interest thereon, 
<PAGE>

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

CONNECTICUT RISK FACTORS

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

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

   
Manufacturing has historically been of prime economic importance to Connecticut.
The State's manufacturing industry is diversified, with transportation equipment
(primarily aircraft engines,  helicopters and submarines) the dominant industry,
followed by non-electrical  machinery,  fabricated metal products and electrical
machinery. As a result of a rise in employment in service-related industries and
a decline in manufacturing employment, however, manufacturing accounted for only
17.39%  of  total   non-agricultural   employment   in   Connecticut   in  1996.
Defense-related   business  represents  a  relatively  high  proportion  of  the
manufacturing  sector. On a per capita basis, defense awards to Connecticut have
traditionally  been among the highest in the nation,  and  reductions in defense
spending have had a substantial adverse impact on Connecticut's economy.

The average annual unemployment rate in Connecticut increased from a low of 3.0%
in 1988 to a high of 7.6% in 1992 and,  after a number of  important  changes in
the method of calculation,  was reported to be 5.8% in 1996.  Average per capita
personal  income of Connecticut  residents  increased in every year from 1987 to
1996,  rising  from  $21,592  to  $33,875.   However,   pockets  of  significant
unemployment and poverty exist in several Connecticut cities and towns.

At the end of the  1990-1991  fiscal  year,  the  General  Fund had  accumulated
unappropriated deficit of $966,712,000.  For the six fiscal years ended June 30,
1997, the General Fund ran operating  surpluses,  based on the State's budgetary
method of accounting, of approximately $110,200,000,  $113,500,000, $19,700,000,
$80,500,000,  $250,000,000 and $262,600,000,  respectively. General Fund budgets
for the  biennium  ending June 30,  1999,  were  adopted in 1997.  General  Fund
expenditures  and revenues are budgeted to be approximately  $9,550,000,000  and
$9,700,000,000  for the 1997-1998 and 1998-1999 fiscal years,  respectively,  an
increase  of more  than 35%  from the  budgeted  expenditures  of  approximately
$7,008,000,000 for the 1991-1992 fiscal year.

During the 1991,  the State  issued a total of  $965,710,000  Economic  Recovery
Notes.  The notes were to be payable no later than June 30, 1996, but as part of
the budget adopted for the biennium  ending June 30, 1997,  payment of the notes
scheduled to be paid during the 1995-1996 fiscal year was rescheduled to be made
over the four fiscal  years  ending June 30, 1999.  The  outstanding  notes were
$157,055,000 as of December 1, 1997.

The State's primary method for financing capital projects is through the sale of
general obligation bonds. These bonds are backed by the full faith and credit of
the State.  As of  December 1, 1997,  the State had  authorized  direct  general
obligation bond indebtedness totaling  $1,460,239,000,  of which $10,159,950,000
had been approved for issuance by the State Bond  commission and  $9,181,272,000
had been  issued.  As of  December  1, 1997,  State  direct  general  obligation
indebtedness outstanding was $6,475,986,251.

In 1995,  the State  established  the  University of  Connecticut  as a separate
corporate   entity  to  issue  bonds  and   construct   certain   infrastructure
improvements.  The University is authorized to issue bonds totaling $962,000,000
to finance the improvements.  The University's  bonds will be secured by s State
debt  service   commitment,   the  aggregate  
<PAGE>

amount of which is limited to  $382,000,000  for bonds issued in the four fiscal
years ending June 30, 1999, and  $580,000,000 for bonds issued in the six fiscal
years ending June 30, 2005.

In addition,  the State has limited or  contingent  liability  on a  significant
amount of other bonds. Such bonds have been issued by the following quasi-public
agencies: the Connecticut Housing Finance Authority, the Connecticut Development
Authority,  the Connecticut  Higher Education  Supplemental Loan Authority,  the
Connecticut   Resources  Recovery  Authority  and  the  Connecticut  Health  and
Educational Facilities Authority. Such bonds have also been issued by the cities
of Bridgeport and West Haven and the Southeastern  Connecticut  Water Authority.
As of December 1, 1997,  the amount of the bonds  outstanding on which the State
has limited or contingent liability totaled $4,000,900,000.

In 1984,  the State  established  a program to plan,  construct  and improve the
State's  transportation system (other than Bradley International  Airport).  The
total cost of the program  through June 30, 2002,  is currently  estimated to be
$12.3 billion, to be met from federal,  state and local funds. The State expects
to finance most of its $5.1  billion  share of such cost by issuing $4.6 billion
of special tax obligation  ("STO") bonds.  The STO bonds are payable solely from
specified motor fuel taxes, motor vehicle receipts, and license,  permit and fee
revenues  pledged  therefore  and credited to the Special  Transportation  Fund,
which was established to budget and account for such revenues.

As of December 1, 1997, the General  Assembly had authorized  $4,302,700,000  of
such STO bonds, of which $3,894,700,000 new money borrowings had been issued. It
is anticipated that additional STO bonds will be authorized  annually in amounts
necessary to finance and to complete the infrastructure program. Such additional
bonds may have equal rank with the  outstanding  bonds provided  certain pledged
revenue  coverage  requirements  are met. The State expects to continue to offer
bonds for this program.

The State's general  obligation  bonds are rated AA- by Standard & Poors and Aa3
by Moody's.  On March 17, 1995, Fitch reduced its ratings of the State's general
obligation bonds from AA+ to AA.

The State,  its officers and its employees are defendants in numerous  lawsuits.
Although it is not  possible to  determine  the outcome of these  lawsuits,  the
Attorney  General  has opined that an adverse  decision in any of the  following
cases might have a significant impact on the State's financial  position:  (i) a
class action by the Connecticut  Criminal Defense Lawyers Association claiming a
campaign of illegal  surveillance  activity and seeking  damages and  injunctive
relief;  (ii)an action on behalf of all persons with traumatic  brain injury who
have been placed in certain  State  hospitals  alleged  not to provide  adequate
treatment and training,  and seeking placement in community residential settings
with appropriate support services;  (iii) litigation  involving claims by Indian
tribes to a portion  of the  State's  land  area;  and (iv) an action by certain
students and  municipalities  claiming  that the State's  formula for  financing
public  education  violates the State's  Constitution  and seeking a declaratory
judgment and injunctive relief.

As a result of litigation on behalf of black and Hispanic school children in the
City of  Hartford  seeking  "integrated  education"  with the  Greater  Hartford
metropolitan  area,  on July 9,  1996,  the State  Supreme  Court  directed  the
legislature  to  develop  appropriate  measures  to remedy the racial and ethnic
segregation in the Hartford public  schools.  The fiscal impact of this decision
might be significant but is not determinable at this time.

General  obligation bonds issued by municipalities are payable primarily from ad
valorem taxes on property located in the municipality. A municipality's property
tax base is subject to many  factors  outside the  control of the  municipality,
including  the  decline  in  Connecticut's   manufacturing   industry.   Certain
Connecticut  municipalities have experienced severe fiscal difficulties and have
reported  operating and accumulated  deficits.  The most notable of these is the
City of Bridgeport, which filed a bankruptcy petition on June 7, 1991. The State
opposed the  petition.  The United States  Bankruptcy  Court for the District of
Connecticut  held that  Bridgeport  has authority to file such petition but that
its  petition  should  be  dismissed  on the  grounds  that  Bridgeport  was not
insolvent  when the  petition  was  filed.  State  legislation  enacted  in 1993
prohibits municipal  bankruptcy filings without the prior written consent of the
Governor.

In addition to general  obligation  bonds backed by the full faith and credit of
the  municipality,  certain  municipal  authorities  finance projects by issuing
bonds that are not considered to be debts of the municipality. Such bonds may be
repaid only from revenues of the financed  project,  the revenues from which may
be insufficient to service the related debt obligations.

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

INVESTMENT  RESTRICTIONS
    

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

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

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

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

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

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

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

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

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

     9)   Purchase more than 10% of all outstanding voting securities of any one
          issuer or invest in companies for the purpose of exercising control.
   
     10)  Invest more than 25% of its assets in the  securities  of "issuers" in
          any single  industry,  provided that the Fund may invest more than 25%
          of its  assets in  Participation  Certificates  and there  shall be no
          limitation on the purchase of those  Municipal  Obligations  and other
          obligations issued or guaranteed by the United States government,  its
          agencies  or  instrumentalities.  When the assets and  revenues  of an
          agency, authority,  instrumentality or other political subdivision are
          separate from those of the government  creating the issuing entity and
          a security  is backed  only by the assets and  revenues of the entity,
          the  entity  would be  deemed to be the sole  issuer of the  security.
          Similarly,  in the case of an industrial revenue bond, if that bond is
          backed only by the assets and revenues of the  non-governmental  user,
          then such non-governmental user would be deemed to be the sole issuer.
          If,  however,  in either case,  the creating  government or some other
          entity,  such as an  insurance  company  or other  corporate  obligor,
          guarantees  a security  or a bank  issues a letter of  credit,  such a
          Guarantee or letter of credit would be considered a separate  security
          and would be treated as an issue of such  government,  other entity or
          bank. Immediately after the acquisition of any securities subject to a
          Demand  Feature or  Guarantee  (as such terms are defined in Rule 2a-7
          under the Investment  Company Act of 1940), with respect to 75% of the
          total assets of the Fund,  not more than 10% of the Fund's  assets may
          be invested in  securities  that are subject to a Guarantee  or Demand
          Feature from the same institution.  However,  the Fund may only invest
          more than 10% of its assets in  securities  subject to a Guarantee  or
          Demand Feature issued by a non-controlled person.
    
<PAGE>

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

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

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

PORTFOLIO TRANSACTIONS

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

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

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

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

HOW TO PURCHASE AND REDEEM SHARES

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

NET ASSET VALUE

   
The Fund  does not  determine  net asset  value  per share of each  class on the
following  holidays:  New Year's Day,  Martin Luther King, Jr. Day,  Presidents'
Day, Good Friday,  Memorial Day,  Independence Day, Labor Day,  Thanksgiving Day
and Christmas Day.
    

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

The Fund's portfolio securities are valued at their amortized cost in compliance
with the  provisions of Rule 2a-7 under the 1940 Act.  Amortized  cost valuation
involves  valuing an instrument at its cost and  thereafter  assuming a constant
amortization to maturity of any discount or premium,  except that if fluctuating
interest  rates cause the market  value of the Fund's  portfolio to deviate more
than 1/2 of 1% from the value  determined  on the basis of amortized  cost,  the
Board of Directors  will consider 
<PAGE>

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

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

YIELD QUOTATIONS

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

The Fund's  "effective  yield"  for each  Class is  obtained  by  adjusting  its
"current  yield"  to  give  effect  to the  compounding  nature  of  the  Fund's
portfolio,  as follows:  the  unannualized  base period return is compounded and
brought  out to the nearest  one  hundredth  of one percent by adding one to the
base  period  return,  raising  the sum to a power equal to 365 divided by 7 and
subtracting one from the result,  i.e.,  effective yield = (base period return +
1)365/7 - 1.
    

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

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

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

   
The Fund's  Class A shares  yield for the seven day period  ended April 30, 1998
was 2.99% which is equivalent to an effective yield of 3.03%. The Fund's Class B
shares commenced  operation on October 10, 1996. The Fund's Class B shares yield
for the seven day period ended April 30, 1998 was 3.18% which is  equivalent  to
an effective yield of 3.23%.
    

MANAGER

   
The  investment  manager for the Fund is Reich & Tang Asset  Management  L.P., a
Delaware  limited  partnership with principal  offices at 600 Fifth Avenue,  New
York,  New York 10020 (the  "Manager").  As of April 30,  1998,  the Manager was
investment manager, adviser, or supervisor with respect to assets aggregating in
excess of $11.4 billion. In addition to the Fund, the 
<PAGE>

Manager  acts  as  investment  manager  and  administrator  of  seventeen  other
investment  companies and also advises pension trusts,  profit-sharing trust and
endowments.

Effective January 1, 1998, NEIC Operating  Partnership,  L.P. ("NEICOP") was the
limited  partner  and owner of a 99.5%  interest in the  Manager  replacing  New
England Investment  Companies,  L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager due to a restructuring by New England Investment
Companies,  Inc.  ("NEIC").  Subsequently,   effective  March  31,  1998,  Nvest
Companies,  L.P. ("Nvest Companies") due to a change in name of NEICOP, replaces
NEICOP as the limited partner and owner of a 99.5% interest in the Manager.

Reich & Tang Asset  Management,  Inc. (an indirect  wholly-owned  subsidiary  of
Nvest  Companies) is the sole general  partner and owner of the  remaining  0.5%
interest  of  the  Manager.  Nvest  Corporation,   a  Massachusetts  Corporation
(formerly  known as New  England  Investment  Companies,  Inc.),  serves  as the
managing general partner of Nvest Companies.

Reich & Tang Asset  Management,  Inc. is an indirect  subsidiary of Metropolitan
Life Insurance Company  ("MetLife").  Also, MetLife directly and indirectly owns
approximately  47% of the outstanding  partnership  interests of Nvest Companies
and may be deemed a  "controlling  person" of the  Manager.  Reich & Tang,  Inc.
owns, directly and indirectly,  approximately 13% of the outstanding partnership
interests of Nvest Companies.

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

Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through thirteen subsidiaries, divisions
and  affiliates  offering a wide array of  investment  styles  and  products  to
institutional  clients. Its business units, in addition to the manager,  include
AEW  Capital  Management,   L.P.,  Back  Bay  Advisors,   L.P.,  Capital  Growth
Management,  Limited Partnership,  Greystone Partners,  L.P., Harris Associates,
L.P., Jurika & Voyles, L.P., Loomis, Sayles & Company,  L.P., New England Funds,
L.P., Nvest Associates,  Inc., Snyder Capital Management, L.P., Vaughan, Nelson,
Scarborough & McCullough,  L.P., and Westpeak  Investment  Advisors,  L.P. These
affiliates  in the  aggregate  are  investment  advisors or managers to 80 other
registered investment companies.

The recent  name change did not result in a change in control of the Manager and
has no  impact  upon  the  Manager's  performance  of its  responsibilities  and
obligations.

The Investment Management Contract has a term which extends to January 31, 1999,
and may be continued in force  thereafter  for successive  twelve-month  periods
beginning  each  February 1,  provided  that such  continuance  is  specifically
approved annually by majority vote of the Fund's  outstanding  voting securities
or by its Board of Directors,  and in either case by a majority of the directors
who are not parties to the Investment  Management Contract or interested persons
of any such party,  by votes cast in person at a meeting  called for the purpose
of voting on such matter.
    

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

   
The Manager provides persons  satisfactory to the Board of Directors of the Fund
to serve as  officers  of the Fund.  Such  officers,  as well as  certain  other
employees  and  directors  of the Fund,  may be directors or officers of Reich &
Tang Asset Management, Inc., or employees of the Manager or its affiliates.
    

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

   
For its services under the Investment Management Contract,  the Manager receives
from the Fund a fee  equal to .30% per  annum of the  Fund's  average  daily net
assets (the "Management Fee") for managing the Fund's  investment  portfolio and
performing  related  administrative  and  clerical  services.  Pursuant  to  the
Investment  Management  Contract,  for the fiscal years ended  January 31, 1996,
1997 and 1998,  the Manager  received  fees of  $278,564,  $360,874 and $416,312
respectively.  The 
<PAGE>

fees are accrued daily and paid monthly.  Any portion of the total fees received
by  the  Manager  may  be  used  by  the  Manager  to  provide  shareholder  and
administrative services. (See "Distribution and Service Plan" herein.)
    

Investment management fees and operating expenses which are attributable to both
Classes  of the  Fund  will be  allocated  daily  to  each  Class  based  on the
percentage of outstanding shares at the end of the day.  Additional  shareholder
services  provided  by  Participating  Organizations  to  Class  A  shareholders
pursuant  to  the  Plan  shall  be  compensated  by  the  Distributor  from  its
shareholder  servicing  fee,  the Manager from its  management  fee and the Fund
itself.  Expenses  incurred  in the  distribution  of  Class  B  shares  and the
Servicing of Class B shares shall be paid by the Manager.

   
Pursuant to the  Administrative  Services  Contract  with the Fund,  the Manager
performs clerical, accounting supervision,  office service and related functions
for the  Fund and  provides  the Fund  with  personnel  to:  (i)  supervise  the
performance of bookkeeping  and related  services by Investors  Fiduciary  Trust
Company,  the Fund's bookkeeping agent; (ii) prepare reports to and filings with
regulatory  authorities;  and (iii) perform such other  services as the Fund may
from time to time request of the Manager.  The personnel rendering such services
may be employees of the Manager,  of its  affiliates or of other  organizations.
For its  services  under  the  Administrative  Services  Contract,  the  Manager
receives from the Fund a fee equal to .21% per annum of the Fund's average daily
net assets.  For the Fund's  fiscal year ended  January  31,  1998,  the Manager
received under the Administrative Services Contract a fee of $291,418.
    

Expense Limitation

   
The Manager has agreed to  reimburse  the Fund for its  expenses  (exclusive  of
interest,  taxes, brokerage and extraordinary expenses) which in any year exceed
the limits on investment  company expenses  prescribed by any state in which the
Fund's  shares are  qualified  for sale.  For the purpose of this  obligation to
reimburse expenses,  the Fund's annual expenses are estimated and accrued daily,
and any  appropriate  estimated  payments  are  made to it on a  monthly  basis.
Subject to the  obligations  of the Manager to reimburse the Fund for its excess
expenses as  described  above,  the Fund has,  under the  Investment  Management
Contract,  confirmed  its  obligation  for  payment  of all its other  expenses,
including  taxes,  brokerage  fees and  commissions,  commitment  fees,  certain
insurance  premiums,  interest  charges and expenses of the custodian,  transfer
agent  and  dividend  disbursing  agent's  fees,   telecommunications  expenses,
auditing and legal expenses,  accounting  services or recordkeeping  agent fees,
costs  of  forming  the  corporation  and   maintaining   corporate   existence,
compensation of directors, officers and employees of the Fund and costs of other
personnel  performing  services for the Fund who are not officers of the general
partner  of  the  Manager  or  its  affiliates,   costs  of  investor  services,
shareholders'  reports  and  corporate  meetings,   SEC  registration  fees  and
expenses,  state  securities laws  registration  fees and expenses,  expenses of
preparing  and  printing  the  Fund's   prospectus   for  delivery  to  existing
shareholders and of printing application forms for shareholder accounts, and the
fees  payable to the Manager  under the  Investment  Management  Contract.  As a
result of the recent passage of the National  Securities Markets Improvement Act
of 1996, all state expense limitations have been eliminated at this time.
    

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

MANAGEMENT OF THE FUND

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

   
Steven W. Duff, 44 - President and Director of the Fund,  has been  President of
Mutual Funds division of the Manager since September 1994. Mr. Duff was formerly
Director of Mutual Fund  Administration  at NationsBank  which he was associated
with from June 1981 to August 1994. Mr. Duff is President and a Director of Back
Bay Funds,  Inc.,  California Daily Tax Free Income Fund, Inc.,  Cortland Trust,
Inc.,  Daily Tax Free Income Fund,  Inc.,  Michigan  Daily Tax Free Income Fund,
Inc.,  New Jersey Daily  Municipal  Income Fund,  Inc.,  New York Daily Tax Free
Income Fund,  Inc., North Carolina Daily Municipal Income Fund, Inc., Short Term
Income Fund, Inc. and Virginia Daily Municipal Income Fund, Inc.,  President and
a Trustee of Florida Daily  Municipal  Income Fund,  Institutional  Daily Income
Fund and Pennsylvania  Daily Municipal Income Fund,  Executive Vice President of
Reich & Tang Equity Fund, Inc. and President and Chief Executive  Officer of Tax
Exempt Proceeds Fund, Inc. and a Director of Pax World Money Market Fund, Inc.

Dr. W. Giles Mellon,  67 - Director of the Fund,  has been Professor of Business
Administration  in the Graduate  School of Management,  Rutgers  University with
which he has been  associated  since  1966.  His  address is Rutgers  University
Graduate 
<PAGE>

School of  Management,  180 University  Avenue,  Newark,  New Jersey 07102.  Dr.
Mellon is also a Director  of Back Bay Funds,  Inc.,  California  Daily Tax Free
Income Fund,  Inc.,  Daily Tax Free Income Fund,  Inc.,  Delafield  Fund,  Inc.,
Michigan  Daily Tax Free Income Fund,  Inc., New Jersey Daily  Municipal  Income
Fund,  Inc.,  North Carolina Daily Municipal  Income Fund, Inc., Pax World Money
Market Fund,  Inc., Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc.
and Virginia Daily  Municipal  Income Fund,  Inc. and a Trustee of Florida Daily
Municipal Income Fund,  Institutional  Daily Income Fund and Pennsylvania  Daily
Municipal Income Fund.

Robert  Straniere,  57 - Director of the Fund, has been a member of the New York
State  Assembly and a partner with Straniere Law Firm since 1981. His address is
182 Rose Avenue, Staten Island, New York 10306. Mr. Straniere is also a Director
of Back Bay Funds, Inc.,  California Daily Tax Free Income Fund, Inc., Daily Tax
Free Income Fund, Inc.,  Delafield Fund, Inc.,  Lifecycle Funds, Inc.,  Michigan
Daily Tax Free Income Fund,  Inc., New Jersey Daily Municipal Income Fund, Inc.,
North Carolina Daily Municipal  Income Fund,  Inc., Pax World Money Market Fund,
Inc.,  Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc. and Virginia
Daily  Municipal  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,  59 - Director  of the Fund,  was  Director  of Shaw  Investment
Management  (UK)  Limited  from 1994 to October  1995 and  formerly  was General
Partner of Abacus Partners  Limited  Partnership (a general partner of a venture
capital  investment  firm) since 1984. His address is 29 Alden Road,  Greenwich,
Connecticut   06831.  Dr.  Wong  is  a  Director  of  Republic  Telecom  Systems
Corporation (provider of telecommunications equipment) since January 1989 and of
TelWatch,  Inc. (provider of network management software) since August 1989. Dr.
Wong is also a  Director  of Back Bay  Funds,  Inc.,  California  Daily Tax Free
Income Fund,  Inc.,  Daily Tax Free Income Fund,  Inc.,  Delafield  Fund,  Inc.,
Michigan  Daily Tax Free Income Fund,  Inc., New Jersey Daily  Municipal  Income
Fund,  Inc.,  North Carolina Daily Municipal  Income Fund, Inc., Pax World Money
Market Fund,  Inc., Reich & Tang Equity Fund, Inc., Short Term Income Fund, Inc.
and Virginia Daily Municipal  Income Fund,  Inc., and a Trustee of Florida Daily
Municipal Income Fund,  Institutional  Daily Income Fund and Pennsylvania  Daily
Municipal Income Fund.

Molly Flewharty, 47 - Vice President of the Fund, has been Vice President of the
Reich & Tang Mutual Funds  division of the Manager  since  September  1993.  Ms.
Flewharty  was  formerly  Vice  President  of Reich & Tang,  Inc.  which she was
associated with from December 1977 to September 1993. Ms. Flewharty is also Vice
President of Back Bay Funds, Inc.,  California Daily Tax Free Income Fund, Inc.,
Cortland Trust,  Inc., Daily Tax Free Income Fund,  Inc.,  Delafield Fund, Inc.,
Florida Daily Municipal Income Fund,  Institutional  Daily Income Fund, Michigan
Daily Tax Free Income Fund,  Inc., New Jersey Daily Municipal Income Fund, Inc.,
New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund,  Inc., Pax World Money Market Fund,  Inc.,  Pennsylvania  Daily  Municipal
Income Fund,  Reich & Tang Equity Fund,  Inc., Tax Exempt  Proceeds Fund,  Inc.,
Short Term Income Fund, Inc. and Virginia Daily Municipal Income Fund, Inc.

Lesley M. Jones, 49 - Vice President of the Fund, has been Senior Vice President
of the Reich & Tang Mutual Funds division of the Manager since  September  1993.
Ms. Jones was formerly Senior Vice President of Reich & Tang, Inc. which she was
associated  with from April 1973 to  September  1993.  Ms.  Jones is also a Vice
President of Back Bay Funds, Inc.,  California Daily Tax Free Income Fund, Inc.,
Daily Tax Free Income Fund, Inc.,  Delafield Fund, Inc., Florida Daily Municipal
Income Fund,  Institutional  Daily Income Fund,  Michigan  Daily Tax Free Income
Fund,  Inc., New Jersey Daily  Municipal  Income Fund,  Inc., New York Daily Tax
Free Income Fund,  Inc.,  North Carolina Daily Municipal  Income Fund, Inc., Pax
World Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich &
Tang Equity  Fund,  Inc.,  Short Term  Income  Fund,  Inc.  and  Virginia  Daily
Municipal Income Fund, Inc.

Dana E.  Messina,  41 - Vice  President  of the Fund,  has been  Executive  Vice
President of the Reich & Tang Mutual Funds division of the Manager since January
1995 and was Vice President from September 1993 to January 1995. Ms. Messina was
formerly Vice President of Reich & Tang, Inc. which she was associated with from
December 1980 to September  1993. Ms. Messina is also Vice President of Back Bay
Funds, Inc.,  California Daily Tax Free Income Fund, Inc., Cortland Trust, Inc.,
Daily Tax Free Income Fund, Inc.,  Delafield Fund, Inc., Florida Daily Municipal
Income Fund,  Institutional  Daily Income Fund,  Michigan  Daily Tax Free Income
Fund,  Inc., New Jersey Daily  Municipal  Income Fund,  Inc., New York Daily Tax
Free Income Fund,  Inc.,  North Carolina Daily Municipal  Income Fund, Inc., Pax
World Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich &
Tang Equity Fund,  Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund,
Inc. and Virginia Daily Municipal Income Fund, Inc.

Bernadette N. Finn, 50 - Secretary of the Fund, is Vice  President and Assistant
Secretary  of the  Reich & Tang  Mutual  Funds  division  of the  Manager  since
September 1993. Ms. Finn was formerly Vice President and Assistant  Secretary of
Reich & Tang,  Inc.  which  she  was  associated  with  from  September  1970 to
September 1993. Ms. Finn is also Secretary of Back Bay Funds,  Inc.,  California
Daily Tax Free Income Fund,  Inc.,  Cortland Trust,  Inc., Daily Tax Free Income
Fund, Inc., Florida Daily 
<PAGE>

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., Pax World Money Market Fund,
Inc.,  Pennsylvania Daily Municipal Income Fund, Tax Exempt Proceeds Fund, Inc.,
and Virginia Daily Municipal  Income Fund,  Inc., a Vice President and Secretary
of Delafield Fund,  Inc.,  Institutional  Daily Income Fund, Reich & Tang Equity
Fund, Inc. and Short Term Income Fund, Inc.

Richard De Sanctis,  40 - Treasurer of the Fund, is Vice President and Treasurer
of the Manager since September  1993. Mr. De Sanctis was formerly  Controller of
Reich & Tang,  Inc. from January 1991 to September 1993. He is also Treasurer of
Back Bay Funds,  Inc.,  California  Daily Tax Free Income Fund,  Inc., Daily Tax
Free Income Fund,  Inc.,  Delafield Fund,  Inc.,  Florida Daily Municipal Income
Fund,  Institutional  Daily  Income Fund,  Michigan  Daily Tax Free Income Fund,
Inc.,  New Jersey Daily  Municipal  Income Fund,  Inc.,  New York Daily Tax Free
Income Fund,  Inc.,  North Carolina Daily Municipal Income Fund, Inc., Pax World
Money Market Fund, Inc.,  Pennsylvania Daily Municipal Income Fund, Reich & Tang
Equity Fund,  Inc., Tax Exempt Proceeds Fund, Inc., Short Term Income Fund, Inc.
and Virginia Daily Municipal  Income Fund, Inc. and Vice President and Treasurer
of Cortland Trust, Inc.
    

   
Rosanne Holtzer,  33 - Assistant  Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly  Manager  of  Fund  Accounting  for  the  Manager  with  which  she was
associated  with from June 1986.  She is also  Assistant  Treasurer  of Back Bay
Funds, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income
Fund,  Inc.,   Delafield  Fund,  Inc.,  Florida  Daily  Municipal  Income  Fund,
Institutional  Daily Income Fund, Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal  Income Fund,  Inc., New York Daily Tax Free Income Fund,
Inc.,  North Carolina Daily Municipal  Income Fund, Inc., Pax World Money Market
Fund, Inc.,  Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund,
Inc.,  Short Term Income Fund,  Inc., and Virginia Daily Municipal  Income Fund,
Inc. and is Vice President and Assistant Treasurer of Cortland Trust, Inc.

The Fund paid an aggregate remuneration of $15,000 to its directors with respect
to the fiscal year ended January 31, 1998,  all of which  consisted of aggregate
directors' fees paid to the three disinterested directors, pursuant to the terms
of the Investment Management Contract.  (See "Manager" herein.) See Compensation
Table below.
    

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

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

Name of              Aggregate                 Pension or              Estimated Annual           Total Compensation
 Person,         Compensation from         Retirement Benefits           Benefits upon            from Fund and Fund
Position       Registrant for Fiscal       Accrued as Part of             Retirement                Complex Paid to
                        Year                  Fund Expenses                                            Directors
   
W. Giles Mellon,
Director             $5,000.00                      0                          0                    $52,250 (14 Funds)

Robert Straniere,              
Director             $5,000.00                      0                          0                    $52,250 (14 Funds)
                     
Dr. Yung  Wong,
Director             $5,000.00                      0                          0                    $52,250 (14 Funds)
    
</TABLE>

   
* The total  compensation  paid to such persons by the Fund and Fund Complex for
the fiscal year ending  January  31, 1998 (and,  with  respect to certain of the
funds in the Fund  Complex,  estimated  to be paid during the fiscal year ending
January 31, 1998). The parenthetical  number represents the number of investment
companies (including the Fund) from which such person receives compensation that
are considered part of the same Fund complex as the Fund,  because,  among other
things, they have a common investment advisor.
    

COUNSEL AND AUDITORS

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

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

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

DISTRIBUTION AND SERVICE PLAN

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

Effective  October  3,  1996,  a  majority  of the  Fund's  Board of  Directors,
including  independent  directors,  approved  the  creation of a second class of
shares of the Fund's  outstanding  common stock.  In furtherance of this action,
the Board of Directors has  reclassified the common stock of the Fund into Class
A and Class B shares. The Class A shares will be offered to investors who desire
certain additional  shareholder  services from Participating  Organizations that
are compensated by the Fund's Manager and Distributor for such services.

For its services  under the  Shareholder  Servicing  Agreement  (with respect to
Class A shares),  the Distributor receives from the Fund a fee equal to .20% per
annum of the Fund's average daily net assets of Class A shares (the "Shareholder
Servicing  Fee").  The fee is accrued  daily and paid monthly and any portion of
the fee may be deemed to be used by the Distributor for purposes of distribution
of  only  the  Fund's  Class  A  shares  and  for   payments  to   Participating
Organizations with respect to servicing their clients or customers who are Class
A  shareholders  of the Fund.  The Class B  shareholders  will not  receive  the
benefit of such services from Participating  Organizations and, therefore,  will
not be assessed a Shareholder Servicing Fee.

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

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

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

   
In accordance  with Rule 12b-1,  the Plan  provides that all written  agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating   Organizations  or  other   organizations   must  be  in  a  form
satisfactory  to the Fund's Board of Directors.  In addition,  the Plan requires
the Fund and the  Distributor to prepare,  at least  quarterly,  written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.

The following  applies only to Class A shares of the Fund. For the Fund's fiscal
year ended January 31, 1998,  the amount  payable to the  Distributor  under the
Distribution  and  Service  Plan and  Shareholder  Servicing  Agreement  adopted
thereunder  pursuant to the Rule under the 1940 Act, totaled  $277,469,  none of
which was waived.  During this same  period the  Manager  and  Distributor  made
payments under the Plan totaling  $524,519,  of which $494,812 was paid to or on
behalf of  Participating  Organizations.  The excess of such  payments  over the
total payments the Distributor  received from the Fund  represents  distribution
expenses  funded  by the  Manager  and  Distributor  from  their  own  resources
including the Management Fee.

The Board of Directors,  including a majority of the non-interested directors as
defined in the 1940 Act,  initially approved the Plan on April 29, 1985 and most
recently  approved  the Plan on January   ,  1998 to  continue  in effect  until
January  31,  1999.  The  Plan  
<PAGE>

provides that it may continue in effect for successive  annual periods  provided
it is approved by the  shareholders  or by the Board of  Directors,  including a
majority of directors who are not interested persons of the Fund and who have no
direct or indirect  interest in the  operation of the Plan or in the  agreements
related to the Plan.  The Plan  further  provides  that it may not be amended to
increase  materially  the costs which may be spent by the Fund for  distribution
pursuant  to the Plan  without  shareholder  approval,  and the  other  material
amendments  must be approved by the  directors  in the manner  described  in the
preceding  sentence.  The  Plan  may be  terminated  at any  time by a vote of a
majority  of the  disinterested  directors  of the  Fund or the  Fund's  Class A
shareholders.
    

DESCRIPTION OF COMMON STOCK

   
The authorized  capital stock of the Fund,  which was  incorporated  on March 8,
1985 in Maryland,  consists of twenty billion shares of stock having a par value
of  one-tenth  of one cent  ($.001)  per share.  Each share has equal  dividend,
distribution,  liquidation  and voting  rights and a fractional  share has those
rights in proportion to the percentage that the fractional share represents of a
whole share.  Shares will be voted in the aggregate.  There are no conversion or
preemptive  rights in connection  with any shares of the Fund. All shares,  when
issued in  accordance  with the  terms of the  offering  will be fully  paid and
non-assessable.  Shares are redeemable at net asset value,  at the option of the
shareholder. The Fund is subdivided into two classes of stock, Class A and Class
B. Each  share,  regardless  of class,  will  represent  an interest in the same
portfolio of investments and will have identical voting,  dividend,  liquidation
and   other   rights,   preferences,    powers,    restrictions,    limitations,
qualifications,  designations  and terms and  conditions,  except that:  (i) the
Class A and Class B shares will have different class designations; (ii) only the
Class A shares  will be  assessed  a  service  fee  pursuant  to the Rule  12b-1
Distribution  and Service Plan of the Fund of .20% of the Fund's  average  daily
net assets;  (iii) only the  holders of the Class A shares  would be entitled to
vote on matters  pertaining to the Plan and any related agreements in accordance
with  provisions  of Rule 12b-1;  and (iv) the  exchange  privilege  will permit
shareholders  to exchange  their  shares only for shares of the same class of an
Exchange  Fund.  Payments that are made under the Plans will be  calculated  and
charged  daily to the  appropriate  class prior to  determining  daily net asset
value per share and  dividends/distributions.  As of April 30,  1998  there were
149,258,519  shares of the Fund's Class A shares outstanding and 4,366 shares of
the  Fund's  Class B shares  outstanding.  As of April 30,  1997,  the amount of
shares owned by all officers and  directors of the Fund as a group was less than
1% of the outstanding shares of the Fund. Set forth below is certain information
as to persons who owned 5% or more of the Fund's  outstanding shares as of April
30, 1997.
    

                                                                       Nature of
Name and Address                           % of class                  ownership

Class A
   
IFTC/Vista Mutual Funds                       26.15%                      Record
c/o Vista Institutional Department
127 West 10th Street
Kansas City, MO 64105

Evergreen Investment Services                 13.46%                      Record
201 S. College Street-Suite 600
Charlotte, NC 28288-1195

Investors Fiduciary Trust Company              6.95%                      Record
210 W. 10th Street - 8th Floor
Kansas City, MO 64105-1614

Dawson Samberg Capital Management             14.12%                      Record
354 Pequot Avenue
Southport, CT 06490-1345

Neuberger & Berman                             6.59%                      Record
55 Water Street-27th Floor
New York, NY 10041-0001
<PAGE>

Class B

Lewco Securities Corp.                        84.18%                      Record
34 Exchange Place
Jersey City, NJ 07311

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

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

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

FEDERAL INCOME TAXES

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

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

Exempt-interest  dividends are to be treated by the Fund's shareholders as items
of interest excludable from their gross income under Section 103(a) of the Code.
If a shareholder receives an exempt-interest  dividend with respect to any share
and such share has been held for six  months or less,  then any loss on the sale
or exchange of such share will be disallowed to the extent of the amount of such
exempt-interest  dividend.  The Code  provides  that  interest  on  indebtedness
incurred, or continued,  to purchase or carry certain tax-exempt securities such
as shares of the Fund is not deductible.  Therefore, among other consequences, a
certain  proportion  of interest on  indebtedness  incurred,  or  continued,  to
purchase or carry  securities on margin may not be deductible  during the period
an investor holds shares of the Fund. For Social Security  recipients,  interest
on tax-exempt bonds, including exempt-interest dividends paid by the Fund, is to
be added to adjusted gross income for purposes of computing the amount of social
security  benefits  includible  in gross  income.  The  amount of such  interest
received  must be disclosed  on the  shareholders'  Federal  income tax returns.
Taxpayers  other than  corporations  are  required  to include as an item of tax
preference  for purposes of the Federal  alternative  minimum tax all tax-exempt
interest on "private activity" bonds (generally, a bond issue in which more than
10% of the proceeds  are used in a  non-governmental  trade or business)  (other
than Section  501(c)(3) bonds) issued after August 7, 1986. Thus, this provision
will  apply to the  portion  of the  exempt-interest  dividends  from the Fund's
assets that are attributable to such post-August 7, 1986 private activity bonds,
if any such  bonds  are  acquired  by the Fund.  Corporations  are  required  to
increase their alternative  minimum taxable income by 75% of the amount by which
the adjusted  current earnings (which will include  tax-exempt  interest) of the
corporation  exceeds the alternative  minimum
<PAGE>

taxable income  (determined  without this  provision).  In addition,  in certain
cases,  Subchapter S  corporations  with  accumulated  earnings and profits from
Subchapter  C years are subject to a minimum tax on excess  "passive  investment
income" which includes tax-exempt  interest. A shareholder is advised to consult
his tax adviser with  respect to whether  exempt-interest  dividends  retain the
exclusion under Section 103(a) of the Code if such shareholder  would be treated
as a  "substantial  user" or "related  person" under Section  147(a) of the Code
with respect to some or all of the "private activity bonds," if any, held by the
Fund.

   
Although it is not intended, it is possible that the Fund may realize short-term
or long-term capital gains or losses from its portfolio  transactions.  The Fund
may also  realize  short-term  or long-term  capital  gains upon the maturity or
disposition   of  securities   acquired  at  discounts   resulting  from  market
fluctuations.  Short-term  capital  gains  will be taxable  to  shareholders  as
ordinary income when they are distributed.  Any net capital gains (the excess of
its net realized long-term capital gain over its net realized short-term capital
loss) will be  distributed  annually to the Fund's  shareholders.  The Fund will
have no tax  liability  with respect to  distributed  net capital  gains and the
distributions  will be  taxable  to  shareholders  as  long-term  capital  gains
regardless of how long the  shareholders  have held Fund shares.  However,  Fund
shareholders  who at the time of a net capital gain  distribution  have not held
their Fund  shares for more than six  months,  and who  subsequently  dispose of
those  shares at a loss,  will be  required  to treat  such loss as a  long-term
capital loss, to the extent of such net capital gain distribution. Distributions
of net capital gain will be designated as a "capital gain dividend" in a written
notice mailed to the Fund's  shareholders not later than 60 days after the close
of the Fund's taxable year. Capital gains realized by corporations are generally
taxed at the same rate as ordinary income. However,  capital gains dividends are
taxable at a maximum  rate of 28% to  non-corporate  shareholders  if the Fund's
holding  period is more than 12 months and 20% if the Fund's  holding  period is
more than 18 months,  without regard to the length of time shares have been held
by the holder.  Corresponding  maximum rate and holding  period rules apply with
respect to capital gains realized by a holder on the disposition of shares.
    

The Fund intends to distribute at least 90% of its  investment  company  taxable
income (taxable income subject to certain adjustments exclusive of the excess of
its net long-term  capital gain over its net  short-term  capital loss) for each
taxable  year.   The  Fund  will  be  subject  to  Federal  income  tax  on  any
undistributed  investment  company taxable income.  To the extent such income is
distributed it will be taxable to shareholders as ordinary income. Expenses paid
or incurred by the Fund will be allocated between  tax-exempt and taxable income
in the same  proportion as the amount of the Fund's  tax-exempt  income bears to
the total of such  exempt  income  and its gross  income  (excluding  from gross
income the excess of capital  gains over capital  losses).  If the Fund does not
distribute  at least 98% of its ordinary  income and 98% of its capital gain net
income for a taxable year, the Fund will be subject to a nondeductible 4% excise
tax on the excess of such amounts over the amounts actually distributed.

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

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

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

The Code  provides  that the interest on  indebtedness  incurred or continued to
purchase or carry shares of the Fund is not deductible.  Therefore,  among other
consequences,  a certain  proportion of interest on  indebtedness  incurred,  or
continued  to  purchase or carry  securities  may not be  deductible  during the
period an investor holds shares of the Fund. P.L. 99-514 expands the application
of this rule as it applies to financial institutions,  effective with respect to
Fund shares  acquired  after  December  31, 1986.  The Clinton  Administration's
Revenue  Proposals  for fiscal  years 1999 would  extend this  provision  to all
financial intermediaries effective for taxable years beginning after the date of
enactment  with  respect to  obligations  acquired on or after the date of first
committee action.
    

From time to time, proposals have been introduced before Congress to restrict or
eliminate   the  Federal   income  tax   exemption  for  interest  on  Municipal
Obligations.  If such a proposal were introduced and enacted in the future,  the
ability of the Fund to pay 
<PAGE>

exempt-interest  dividends  would  be  adversely  affected  and the  Fund  would
re-evaluate its investment  objectives and policies and consider  changes in the
structure.

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

CONNECTICUT INCOME TAXES

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

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

Exempt-interest  dividends,  except  those  derived from  Connecticut  Municipal
Obligations,  are subject to the net  Connecticut  minimum tax.  Exempt-interest
dividends derived from Connecticut Municipal Obligations are not exempt from the
Connecticut Corporation Business Tax payable by corporations.

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

CUSTODIAN AND TRANSFER AGENT

   
Investors  Fiduciary  Trust Company,  801  Pennsylvania,  Kansas City,  Missouri
64105, is custodian for the Fund's cash and  securities.  Reich & Tang Services,
Inc., 600 Fifth Avenue,  New York, New York 10020 is transfer agent and dividend
disbursing agent for the shares of Connecticut  Daily Tax Free Income Fund, Inc.
Evergreen Service Company,  P.O. Box 2121, Boston,  Massachusetts  02106-2121 is
the registrar,  transfer agent and dividend  disbursing  agent for the Evergreen
Shares of the Fund. DST Systems,  Inc., 801 Pennsylvania,  Kansas City, Missouri
64105 is transfer agent and dividend disbursing agent for the Chase Vista Select
shares of the Fund. The custodian and transfer  agents do not assist in, and are
not responsible for, investment decisions involving assets of the Fund.

FINANCIAL STATEMENTS

The  audited  financial  statements  for the Fund and the report of  McGladrey &
Pullen   thereon  for  the  fiscal  year  ended  January  31,  1998  are  herein
incorporated  by reference to the Fund's  Annual  Report.  The Annual  Report is
available upon request and without charge.
    


<PAGE>
DESCRIPTION OF RATINGS*

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

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

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

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

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

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

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

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

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

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

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

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

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

Standard & Poor's does not provide ratings for state and municipal notes.

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

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

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

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

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

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

<PAGE>

--------------------------------------------------------------------------------
                        CORPORATE EQUIVALENT YIELD TABLE
--------------------------------------------------------------------------------
                       1. If Your Taxable Income Bracket Is . . .
<TABLE>
<CAPTION>
<S>        <C>            <C>            <C>           <C>             <C>           <C>            <C>            <C>
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
Corporate    $0-       $50,001-      $75,001-       $100,001-       $335,001-   $10,000,001-    $15,000,001-    $18,333,334
Return    50,000        75,000       100,000         335,000      10,000,000     15,000,000      18,333,333       and over
--------------------------------------------------------------------------------------------------------------------------
                   2. Then Your Combined Income Tax Bracket Is. . .
--------------------------------------------------------------------------------------------------------------------------
Federal
Tax    15.00%      25.00%        34.00%         39.00%         34.00%          35.00%          38.00%          35.00%
Rate
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
   
State
Tax    9.50%        9.50%         9.50%          9.50%          9.50%          9.50%           9.50%           9.50%
Rate
    
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
   
Combined
Marginal
Tax    23.08%      32.13%        40.27%         44.80%         40.27%          41.18%          43.89%          41.18%
Rate
    
--------------------------------------------------------------------------------------------------------------------------
      3. Now Compare Your Tax Free Income Yields With Taxable Income Yields
--------------------------------------------------------------------------------------------------------------------------
Tax                                             Equivalent Taxable Investment Yield
Exempt                                           Requires to Match Tax Exempt Yield
Yield
---------- ---------------------------------------------------------------------------------------------------------------
   
2.00%  2.60%        2.95%         3.35%          3.62%          3.35%          3.40%           3.56%           3.40%
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
2.50%  3.25%        3.68%         4.19%          4.53%          4.19%          4.25%           4.46%           4.25%
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
3.00%  3.90%        4.42%         5.02%          5.43%          5.02%          5.10%           5.35%           5.10%
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
3.50%  4.55%        5.16%         5.86%          6.34%          5.86%          5.95%           6.24%           5.95%
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
4.00%  5.26%        5.89%         6.70%          7.25%          6.70%          6.80%           7.13%           6.80%
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
4.50%  5.85%        6.63%         7.53%          8.15%          7.53%          7.65%           8.02%           7.65%
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
5.00%  6.50%        7.37%         8.37%          9.06%          8.37%          8.50%           8.91%           8.50%
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
5.50%  7.15%        8.10%         9.21%          9.96%          9.21%          9.35%           9.80%           9.35%
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
6.00%  7.80%        8.84%        10.05%         10.87%         10.05%          10.20%          10.69%          10.20%
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
6.50%  8.45%        9.58%        10.88%         11.77%         10.88%          11.05%          11.58%          11.05%
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
7.00%  9.10%       10.31%        11.72%         12.68%         11.72%          11.90%          12.48%          11.90%
---- ----------- ------------ -------------- -------------- -------------- --------------- --------------- ---------------
    
</TABLE>

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

<PAGE>
--------------------------------------------------------------------------------
                         TAXABLE EQUIVALENT YIELD TABLE
--------------------------------------------------------------------------------
                   1. If Your Taxable Income Bracket Is . . .
--- ---------------- -------------- ----------------- ---------------- ---------
   
Single         $0-        $25,351-         $61,401-     $128,101-       $278,451
Return      25,350         61,400          128,100       278,450        and over
    
--------------------------------------------------------------------------------
   
Joint         $0-          $42,351-        $102,301-    $155,951-       $278,451
Return     42,350          102,300          155,950      278,450        and over
    
--------------------------------------------------------------------------------

                2. Then Your Combined Income Tax Bracket Is . . .
--------------------------------------------------------------------------------
Federal
Tax Rate    15.00%        28.00%           31.00%         36.00%          39.60%
--------------------------------------------------------------------------------
State
Tax Rate     4.50%         4.50%            4.50%          4.50%           4.50%
--------------------------------------------------------------------------------
Combined
Marginal    18.83%        31.24%           34.11%         38.88%          42.32%
Tax Rate
--------------------------------------------------------------------------------

                   3. Now Compare Your Tax Free Income Yields
                           With Taxable Income Yields
--------------------------------------------------------------------------------
Tax Exempt
Yield                           Equivalent Taxable Investment Yield

 2.00%       2.46%       2.91%           3.04%            3.27%           3.47%
--------------------------------------------------------------------------------
 2.50%       3.08%       3.64%           3.79%            4.09%           4.33%
--------------------------------------------------------------------------------
 3.00%       3.70%       4.36%           4.55%            4.91%           5.20%
--------------------------------------------------------------------------------
 3.50%       4.31%       5.09%           5.31%            5.73%           6.07%
--------------------------------------------------------------------------------
 4.00%       4.93%       5.82%           6.07%            6.54%           6.93%
--------------------------------------------------------------------------------
 4.50%       5.54%       6.54%           6.83%            7.36%           7.80%
--------------------------------------------------------------------------------
 5.00%       6.16%       7.27%           7.59%            8.18%           8.67%
--------------------------------------------------------------------------------
 5.50%       6.78%       8.00%           8.35%            9.00%           9.54%
--------------------------------------------------------------------------------
 6.00%       7.39%       8.73%           9.11%            9.82%          10.40%
--------------------------------------------------------------------------------
 6.50%       8.01%       9.45%           9.86%           10.63%          11.27%
--------------------------------------------------------------------------------
 7.00%       8.62%      10.18%          10.62%           11.45%          12.14%
--------------------------------------------------------------------------------

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

<PAGE>


                  CONNECTICUT DAILY TAX FREE INCOME FUND, INC.

                           PART C - OTHER INFORMATION

Item 24. Financial Statements and Exhibits.

(A)  Financial Statements.

     Included in Prospectus - Part A:

     (1)  Table of Fees and Expenses

     (2)  Financial Highlights

     Included in Statement of Additional Information - Part B:

   
     (1)  Report  of  McGladrey  &  Pullen,  LLP  independent  certified  public
          accountants, dated February 26, 1998.

     (2)  Statement of Net Assets (audited),dated January 31, 1998.

     (3)  Statement of Operations (audited),dated January 31, 1998.

     (4)  Statements  of Changes in Net Assets  (audited),for  the fiscal  years
          ended January 1997 and 1998.
    

     (5)  Notes to Financial Statements (audited).

(B) Exhibits.

   
     (1)  Articles  of  Incorporation,  dated  March 7, 1985,  and an  Amendment
          thereto, dated December 31, 1993, of the Registrant. (Refiled herewith
          for Edgar purposes only)

     (2)  By-Laws of the Registrant. (Refiled herewith for Edgar purposes only)
    

     (3)  Not applicable.

   
     (4)  Form of  certificate  for shares of Common Stock,  par value $.001 per
          share, of the Registrant. (Refiled herewith for Edgar purposes only)

     (5)  Form of Investment  Management  Contract  between the  Registrant  and
          Reich & Tang Asset Management L.P. filed with Post-Effective Amendment
          No.  22  to  said   Registration   Statement  on  May  31,  1997,  and
          incorporated herein by reference.

     (6)  Form of Distribution Agreement between the Registrant and Reich & Tang
          Distributors, Inc., filed as Exhibit 15.2 herein.
    

     (7)  Not applicable.

   
     (8)  Custody  Agreement  dated May 26,  1995,  between the  Registrant  and
          Investors  Fiduciary  Trust  Company.   (Refiled  herewith  for  Edgar
          purposes only)
    

     (9)  Not applicable.

                                       C-1


<PAGE>

   
     (10) Opinion of Battle  Fowler LLP,  dated May 13, 1985, as to the legality
          of the Securities  being  registered,  including  their consent to the
          filing  thereof  and to the  use of  their  name  under  the  headings
          "Federal  Income  Taxes" in the  Prospectus  and in the  Statement  of
          Additional  Information,  and under the heading "Counsel and Auditors"
          in the  Statement of  Additional  Information.  (Refiled  herewith for
          Edgar purposes only)

   (11.1) Opinion of Day,  Berry & Howard,  dated May 13, 1985, and Consent of
          Day,  Berry & Howard,  dated May 10,  1995,  to the use of their  name
          under the heading  "Connecticut Income Taxes" in the Prospectus and in
          the  Statement  of  Additional  Information,  and  under  the  heading
          "Counsel and  Auditors" in the  Statement of  Additional  Information.
          (Refiled herewith for Edgar purposes only)
    

   (11.2) Consent of Certified Public Accountants, filed herein.

   
   (11.3) Powers of Attorney,  dated May 13, 1985,  of Principal  Officers and
          Directors of the  Registrant.  (Refiled  herewith  for Edgar  purposes
          only)
    
     (12) Not applicable.

   
     (13) Written assurance,  dated May 13, 1985, of Reich & Tang, Inc. that its
          purchase  of  shares of the  Registrant  was for  investment  purposes
          without any present  intention of redeeming or reselling.  (Refiled 
          herewith for Edgar purposes only)
    

     (14) Not applicable.

   
   (15.1) Form of Distribution and Service Plan pursuant to Rule 12b-1 under the
          Investment Company Act of 1940, filed with Post-Effective Amendment
          No.  22  to  said   Registration   Statement  on  May  31,  1997,  and
          incorporated herein by reference.

   (15.2) Form of  Distribution  Agreement  between the Registrant and Reich &
          Tang Distributors, Inc., filed herein.

   (15.3) Form of Shareholder  Servicing  Agreement between the Registrant and
          Reich & Tang Distributors, Inc., filed herein.

   (15.4) Form of Administrative  Services Contract between the Registrant and
          Reich & Tang Distributors, Inc., filed herein.

     (16) Not Applicable

     (17) Financial Data Schedule (For EDGAR purposes only).
    

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

          None.

Item 26.  Number of Holders of Securities.

   
                                           Number of Record Holders
              Title of Class                 as of April 30, 1998
              --------------                ---------------------
              Class A Common Stock
              (par value $.001)                      538

              Class B Common Stock
              (par value $.001)                      2
    


                                       C-2




<PAGE>



Item 27. Indemnification.

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


Item 28. Business and Other Connections of Investment Advisor.

   
     The description of Reich & Tang Asset  Management  L.P.  ("RTAM") under the
caption "Management of the Fund" in the Prospectus and "Manager" and "Management
of the Fund" in the Statement of Additional Information constituting parts A and
B,  respectively,  of this  Post-Effective  Amendment No. 23 to the Registration
Statement are incorporated herein by reference.

     Effective January 1, 1998, NEIC Operating Partnership,  L.P. ("NEICOP") was
the limited  partner and owner of a 99.5% interest in the Manager  replacing New
England Investment  Companies,  L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager due to a restructuring by New England Investment
Companies,  Inc.  ("NEIC").   Subsequently,   effective  March  31,  1998  Nvest
Companies, L.P. ("Nvest Companies") due to a change in the name NEICOP, replaces
NEICOP as the  limited  partner and owner of a 99.5%  interest  in the  manager.
Reich & Tang Asset  Management,  Inc. (an indirect  wholly-owned  subsidiary  of
Nvest  Companies)  is the sole general  partner and owner of the  remaining  .5%
interest  of the  Manager.  Nvest  Corporation  (formerly  known as New  England
Investment Companies Inc.) a Massachusetts  corporation,  serves as the managing
general partner of Nvest Companies.

     Reich  &  Tang  Asset  Management,   Inc.  is  an  indirect  subsidiary  of
Metropolitan Life Insurance Company ("MetLife"). MetLife directly and indirectly
owns  approximately  47% of  the  outstanding  partnership  interests  of  Nvest
Companies,  and may be deemed a  "controlling  person" of the  Manager.  Reich &
Tang,  Inc. owns directly and indirectly  approximately  13% of the  outstanding
partnership interests of Nvest Companies.

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

     Peter S. Voss,  President,  Chief Executive Officer and a Director of Nvest
Corporation  (formerly  New England  Investment  Companies,  Inc.) since October
1992,  Chairman of the Board of Nvest  Corporation  since December  1992,  Group
Executive  Vice  President,  Bank of America,  responsible  for the global asset
management  private  banking  businesses,  from  April  1992  to  October  1992,
Executive Vice President of Security  Pacific Bank, and Chief Executive  Officer
of Security Pacific Hoare Govett Companies a wholly-owned subsidiary of Security
Pacific Corporation,  from April 1988 to April 1992, Director of The New England
since March  1993,  Chairman of the Board of  Directors  of NEIC's  subsidiaries
other than Loomis, Sayles & Company, L.P. ("Loomis") and Back Bay Advisors, L.P.
("Back  Bay"),  where he  serves as a  Director,  and  Chairman  of the Board of
Trustees of all of the mutual funds in the TNE Fund Group and the Zenith  Funds.
G. Neil Ryland, Executive Vice President,  Treasurer and Chief Financial Officer
Nvest Corporation since July 1993,  Executive Vice President and Chief Financial
Officer of The Boston Company, a diversified financial services





                                       C-3




<PAGE>

company,  from March 1989 until July 1993, from September 1985 to December 1988,
Mr. Ryland was employed by Kenner Parker Toys, Inc. as Senior Vice President and
Chief Financial Officer. Edward N. Wadsworth,  Executive Vice President, General
Counsel,  Clerk and Secretary of Nvest  Corporation  since December 1989, Senior
Vice President and Associate  General Counsel of The New England from 1984 until
December 1992, and Secretary of Westpeak and Draycott and the Treasurer of Nvest
Corporation.  Lorraine  C.  Hysler has been  Secretary  of RTAM since July 1994,
Assistant  Secretary of NEIC since  September 1993, Vice President of the Mutual
Funds Group of NEICLP from September 1993 until July 1994, and Vice President of
Reich & Tang Mutual Funds since July 1994. Ms. Hysler joined Reich & Tang,  Inc.
in May 1977 and  served as  Secretary  from April  1987  until  September  1993.
Richard E. Smith, III has been a Director of RTAM since July 1994, President and
Chief Operating Officer of the Capital  Management Group of NEICLP from May 1994
until July 1994,  President and Director of RTAM since July 1994,  President and
Chief  Operating  Officer  of the Chief  Operating  Officer  of the Reich & Tang
Capital Management Group since July 1994,  Executive Vice President and Director
of Rhode Island  Hospital  Trust from March 1993 to May 1994,  President,  Chief
Executive  Officer and Director of USF&G Review  Management  Corp.  from January
1988 until  September  1992.  Steven W. Duff has been a  Director  of RTAM since
October 1994, President and Chief Executive Officer of Reich & Tang Mutual Funds
since August 1994,  Senior Vice  President of  NationsBank  from June 1981 until
August  1994,  Mr. Duff is  President  and a Director  of Back Bay Funds,  Inc.,
California Daily Tax Free Income Fund, Inc.,  Connecticut  Daily Tax Free Income
Fund, Inc.,  Cortland Trust,  Inc.,  Daily Tax Free Income Fund, Inc.,  Michigan
Daily Tax Free Income Fund,  Inc., New Jersey Daily Municipal Income Fund, Inc.,
New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund,  Inc., Pax World Money Market Fund, Inc., Short Term Income Fund, Inc. and
Virginia  Daily  Municipal   Income  Fund,   Inc.,   President  and  Trustee  of
Institutional  Daily Municipal Income Fund,  Pennsylvania Daily Municipal Income
Fund,  President and Chief Executive  Officer of Tax Exempt Proceeds Fund, Inc.,
and Executive  Vice  President of Reich & Tang Equity Fund,  Inc.  Bernadette N.
Finn has been Vice  President/Compliance of RTAM since July 1994, Vice President
of Mutual Funds  Division of NEICLP from  September  1993 until July 1994,  Vice
President of Reich & Tang Mutual Funds since July 1994.  Ms. Finn joined Reich &
Tang,  Inc. in September  1970 and served as Vice  President from September 1982
until May 1987 and as Vice President and Assistant Secretary from May 1987 until
September 1993. Ms. Finn is also Secretary  ofBack Bay Funds,  Inc.,  California
Daily Tax Free Income Fund, Inc.,  Connecticut Daily Tax Free Income Fund, Inc.,
Cortland Trust,  Inc.,  Delafield Fund,  Inc., Daily Tax Free Income Fund, Inc.,
Institutional Daily Municipal Income Fund, Michigan Daily Tax Free Income Funds,
Inc.,  New Jersey Daily  Municipal  Income Fund,  Inc.,  New York Daily Tax Free
Income Fund,  Inc.,  North Carolina Daily Municipal Income Fund, Inc., Pax World
Money Market Fund,  Inc.,  Pennsylvania  Daily Municipal Income Fund, Tax Exempt
Proceeds  Fund,  Inc. and Virginia  Daily  Municipal  Income Fund,  Inc., a Vice
President and Secretary of Reich & Tang Equity Fund, Inc., and Short Term Income
Fund,  Inc.  Richard  De  Sanctis  has been  Treasurer  of RTAM since July 1994,
Assistant  Treasurer of NEIC since  September  1993 and  Treasurer of the Mutual
Funds  Group of NEICLP from  September  1993 until July 1994,  Treasurer  of the
Reich & Tang Mutual Funds since July 1994.  Mr. De Sanctis  joined Reich & Tang,
Inc. in  December  1990 and served as  Controller  of Reich & Tang,  Inc.,  from
January 1991 to September  1993. . Mr. De Sanctis is also  Treasurer  ofBack Bay
Funds, Inc., California Daily Tax Free Income Fund, Inc.,  Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,  Delafield Fund, Inc.,
Institutional  Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund,
Inc.,  New Jersey Daily  Municipal  Income Fund,  Inc.,  New York Daily Tax Free
Income Fund,  Inc.,  North Carolina Daily Municipal Income Fund, Inc., Pax World
Money Market Fund, Inc.,  Pennsylvania Daily Municipal Income Fund, Reich & Tang
Equity Fund,  Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc.
and Virginia  Daily  Municipal  Income  Fund,  Inc.  and is Vice  President  and
Treasurer of Cortland Trust,  Inc.  Richard I. Weiner has been Vice President of
RTAM since July 1994, has been Vice President of NEIC since September 1993, Vice
President of the Capital Management Group of NEIC from September 1993 until July
1994, Vice President of Reich & Tang Asset  Management L.P.  Capital  Management
Group since July 1994.  Mr. Weiner joined Reich & Tang,  Inc. in August 1970 and
has served as a Vice President since  September  1982.  Rosanne Holtzer has been
Vice President of the Mutual Funds division of the Manager since December 1997.

                                       C-4
<PAGE>

Ms. Holtzer was formerly  Manager of Fund  Accounting for the Manager with which
she was  associated  with from June  1986,  in  addition  she is also  Assistant
Treasurer of Back Bay Funds, Inc.,  California Daily Tax Free Income Fund, Inc.,
Connecticut  Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund,  Institutional  Daily
Income  Fund,  Michigan  Daily Tax Free  Income  Fund,  Inc.,  New Jersey  Daily
Municipal  Income Fund,  Inc., New York Daily Tax Free Income Fund,  Inc., North
Carolina Daily Municipal  Income Fund,  Inc., Pax World Money Market Fund, Inc.,
Pennsylvania  Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short
Term Income Fund,  Inc.,  Tax Exempt  Proceeds  Fund,  Inc.  and Virginia  Daily
Municipal  Income Fund,  Inc. and is Vice  President and Assistant  Treasurer of
Cortland Trust, Inc.
    

Item 29. Principal Underwriters.

   
         (a) Reich & Tang Distributors,  Inc., the Registrant's distributor,  is
also  distributor  for Back Bay Funds,  Inc.,  California  Daily Tax Free Income
Fund, Inc.,  Cortland Trust,  Inc., Daily Tax Free Income Fund, Inc.,  Delafield
Fund,  Inc.,  Florida Daily Municipal  Income Fund,  Institutional  Daily Income
Fund,  Michigan  Daily Tax Free Income Fund,  Inc.,  New Jersey Daily  Municipal
Income Fund,  Inc.,  New York Daily Tax Free Income Fund,  Inc.,  North Carolina
Daily  Municipal   Income  Fund,  Inc.,  Pax  World  Money  Market  Fund,  Inc.,
Pennsylvania  Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Short
Term Income Fund,  Inc.,  Tax Exempt  Proceeds  Fund,  Inc.  and Virginia  Daily
Municipal Income Fund, Inc.

         (b) The  following  are the  directors  and  officers  of  Reich & Tang
Distributors,  Inc.. The principal business address of Messrs. Voss, Ryland, and
Wadsworth is 399 Boylston  Street,  Boston,  Massachusetts  02116. For all other
persons,  the principal business address is 600 Fifth Avenue, New York, New York
10020.
    

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

   
Peter S. Voss              Director                     None
G. Neal Ryland             Director                     None
Edward N. Wadsworth        Executive Officer            None
Richard E. Smith III       President and Director       Chairman
Steven W. Duff             Director                     Executive Vice President
Bernadette N. Finn         Vice President               Secretary
Robert F. Hoerle           Managing Director            None
Lorraine C. Hysler         Secretary                    None
Richard De Sanctis         Treasurer                    Treasurer
Richard I. Weiner          Vice President               None
Rosanne Holtzer            Vice President               Assistant Treasurer
    


         (c)      Not applicable.


Item 30. Location of Accounts and Records.

   
         Accounts,  books and  other  documents  required  to be  maintained  by
Section 31(a) of the  Investment  Company Act of 1940 and the Rules  promulgated
thereunder are maintained in the physical possession of the Registrant; at Reich
& Tang Asset  Management  L.P., 600 Fifth Avenue,  New York, New York 10020, the
Registrant's  manager at Investors  Fiduciary Trust Company,  801  Pennsylvania,
Kansas City,  Missouri 64105,  the Registrant's  custodian;  and at Reich & Tang
Services,  Inc., 600 Fifth Avenue,  New York, New York 10020,  the  Registrant's
transfer agent and dividend disbursing agent.


                                       C-5
    

<PAGE>

Item 31. Management Services.

                  Not applicable.


Item 32. Undertakings.

         (a)      Not applicable.

         (b)      Not applicable.






   
                                       C-6
    




<PAGE>
                                   SIGNATURES

   
         Pursuant  to the  requirements  of the  Securities  Act of 1933 and the
Investment  Company Act of 1940, the  Registrant  certifies that it meets all of
the  requirements  for  effectiveness  of this  Post-Effective  Amendment to its
Registration  Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective  Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, and State of New York, on the 29th day of May, 1998.
    


                                    CONNECTICUT DAILY TAX FREE INCOME FUND, INC.



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


   
         Pursuant  to the  requirements  of the  Securities  Act of  1933,  this
Post-Effective  Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on May 29, 1998.
    


         SIGNATURE                                  TITLE

(1)      Principal Executive
         Officer


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

(2)      Principal Financial and
         Accounting Officer

         /s/Richard De Sanctis                       Treasurer
         Richard De Sanctis


(3)      Majority of Directors


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


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


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

   
*    Executed  copies of the Power of  Attorney  dated May 13,  1985 are refiled
     herewith for Edgar purposes only.