As filed with the Securities and Exchange Commission on May 30, 2008

                                        Securities Act Registration No. 33-36317
                                Investment Company Act Registration No. 811-6152


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM N-1A

                  REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933   [X]


                              Pre-Effective Amendment No.                   [ ]
                                                           -----


                             Post-Effective Amendment No.   21              [X]
                                                           ---


                                     and/or


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



                                    Amendment No.   22                      [X]
                                                   -----


                        (Check appropriate box or boxes)

                  NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.
               (Exact Name of Registrant as Specified in Charter)

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

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


                                 Christine Manna

                       Reich & Tang Asset Management, LLC
                                600 Fifth Avenue
                            New York, New York 10020
                     (Name and Address of Agent for Service)

                 Copy to:     MICHAEL R. ROSELLA, ESQ.
                              Paul, Hastings, Janofsky & Walker LLP
                              75 East 55th Street
                              New York, New York 10022
                              (212) 318-6800

Approximate Date of Proposed Public Offering:  As soon as practicable after this
Registration Statement becomes effective.

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


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

If appropriate, check the following box:

             [ ] this post-effective amendment designates a new effective date
                 for a previously filed post-effective amendment.

<PAGE>
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   NEW JERSEY DAILY                                   600 FIFTH AVENUE
   MUNICIPAL INCOME FUND, INC.                        NEW YORK, NY 10020
   Class A Shares; Class B Shares                     (212) 830-5345
                                                      (800) 433-1918 (Toll Free)

================================================================================
--------------------------------------------------------------------------------

  PROSPECTUS

  May 30, 2008



  A money market fund whose investment objectives are to seek as high a level of
  current income exempt from regular federal income tax and, to the extent
  possible, from New Jersey gross income tax, as is believed to be consistent
  with preservation of capital, maintenance of liquidity and stability of
  principal.


  The Securities and Exchange Commission has not approved or disapproved these
  securities or passed upon the adequacy of this prospectus. Any representation
  to the contrary is a criminal offense.

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

 TABLE OF CONTENTS
==========================================================================================
  2   Risk/Return Summary: Investments, Risks          8   Management, Organization and
      and Performance                                      Capital Structure

  5   Risk/Return Summary: Fee Table                   9   Shareholder Information

  6   Investment Objectives, Principal Investment     20   Distribution Arrangements
      Strategies and Related Risks                    22   Financial Highlights
==========================================================================================
</TABLE>

The Notice of the Reich & Tang Privacy Policy is included with this Prospectus
but is not part of the Prospectus.

<PAGE>

I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE

Investment Objectives
---------------------

     The Fund seeks as high a level of current income exempt from regular
federal income tax and, to the extent possible, from New Jersey gross 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.

Principal Investment Strategies
-------------------------------

     The Fund intends to achieve its investment objectives by investing
primarily in short-term, high quality, debt obligations of:

(i)  New Jersey, and its political subdivisions;

(ii) Puerto Rico, Guam and other United States Territories, and their political
     subdivisions; and

(iii) other states.

     These debt obligations, including Participation Certificates therein, are
collectively referred to throughout this Prospectus as Municipal Obligations.

     The Fund is a money market fund and seeks to maintain an investment
portfolio with a dollar-weighted average maturity of 90 days or less, to value
its investment portfolio at amortized cost and to maintain a net asset value of
$1.00 per share.

     The Fund intends to concentrate (i.e., invest 25% or more of the Fund's net
assets) in New Jersey Municipal Obligations, including Participation
Certificates therein. Participation Certificates evidence ownership of an
interest in the underlying Municipal Obligations, purchased from banks,
insurance companies, or other financial institutions.

Principal Risks
---------------

o    Although the Fund seeks to preserve the value of your investment at $1.00
     per share, it is possible to lose money by investing in the Fund.

o    The value of the Fund's shares and the securities held by the Fund can each
     decline in value.

o    The amount of income the Fund generates will vary with changes in
     prevailing interest rates.

o    An investment in the Fund is not a bank deposit and is not insured or
     guaranteed by the Federal Deposit Insurance Corporation or any other
     governmental agency.

o    Because the Fund intends to concentrate in New Jersey Municipal
     Obligations, including Participation Certificates, investors should also
     consider the greater risk of the Fund's concentration versus the safety
     that comes with a less concentrated investment portfolio.

o    Because the Fund may invest in Participation Certificates, investors should
     understand the characteristics of the banking industry and the risks that
     such investments entail.

o    An investment in the Fund should be made with an understanding of the risks
     that an investment in New Jersey Municipal Obligations may entail. Payment
     of interest and preservation of capital are dependent upon the continuing
     ability of New Jersey issuers and/or obligors of state, municipal and
     public authority debt obligations to meet their payment obligations. Risk
     factors affecting the State of New Jersey are described in "New Jersey Risk
     Factors" in the Statement of Additional Information.


o    Because the Fund reserves the right to invest up to 20% of its net assets
     in taxable securities, investors should understand that the income
     generated by the Fund may be subject to taxation including the federal
     alternative minimum tax.


                                        2
<PAGE>

o    The payment of interest and preservation of capital are dependent upon the
     continuing ability of issuers to meet payment obligations.

Risk/Return Bar Chart and Table
-------------------------------

     The following bar chart and table may assist you in deciding whether to
invest in the Fund. The bar chart shows the change in the annual total returns
of the Fund's Class A shares for the last ten calendar years. The table shows
the Fund's average annual total return for the last one, five, ten year and
since inception periods for each Class of shares. While analyzing this
information, please note that the Fund's past performance is not an indicator of
how the Fund will perform in the future. The current 7-day yield for each Class
may be obtained by calling the Fund at (212) 830-5345 or toll free at (800)
433-1918.


                                       3
<PAGE>

--------------------------------------------------------------------------------
[GRAPHIC OMITTED]

<TABLE>
<CAPTION>
   New Jersey Daily Municipal Income Fund, Inc. - Class A Shares (1)(2)(3)

[GRAPHIC OMITTED]

CALENDAR YEAR END        % TOTAL RETURN
<S>                        <C>

1998                     2.58%
1999                     2.33%
2000                     3.11%
2001                     1.81%
2002                     0.56%
2003                     0.15%
2004                     0.28%
2005                     1.44%
2006                     2.46%
2007                     2.72%
</TABLE>


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


(1)   As of March 31, 2008, the Class A shares of the Fund had a year to date
      return of 0.46%.

(2)   The Fund's highest quarterly return for the Class A shares was 0.81% for
      the quarter ended June 30, 2000; the lowest quarterly return for the
      Class A shares was 0.02% for the quarter ended September 30, 2003.


(3)   Participating Organizations may charge a fee to investors for purchasing
      and redeeming shares. Therefore, the net return to such investors may be
      less than if they had invested in the Fund directly.


<TABLE>
<CAPTION>


      Average Annual Total Returns - For the periods ended December 31, 2007

                                             Class A                 Class B
   <S>                                        <C>                      <C>

   One Year                                   2.72%                    2.93%
   Five Years                                 1.41%                    1.60%
   Ten Years                                  1.74%                    1.94%
   Since Inception *                          2.20%                    2.09%


____________________

<FN>
  *   The inception date for the Class A shares was October 26, 1990, and for
      the Class B shares was February 9, 1996.
</FN>
</TABLE>

                                       4
<PAGE>
--------------------------------------------------------------------------------
                                    FEE TABLE
--------------------------------------------------------------------------------

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<CAPTION>

Shareholder Fees
(fees paid directly from your investment)

<S>                                                           <C>

Sales Charge (Load) Imposed on Purchases...........          None
Wire Redemption Fee................................          $15.00*

<FN>
* There is a $15.00 fee for all wire redemptions of less than $10,000.
</FN>
</TABLE>

Annual Fund Operating Expenses
------------------------------
(expenses that are deducted from Fund assets)

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

ANNUAL FUND OPERATING EXPENSES
------------------------------
(expenses that are deducted from Fund assets)
                                                        Class A Shares                Class B Shares
Management Fees....................................           0.30%                         0.30%
Distribution and Service (12b-1) Fees..............           0.20%                         0.00%

Other Expenses.....................................           0.48%                         0.47%
  Administration Fees..............................  0.21%                         0.21%
                                                              -------                       ------
Total Annual Fund Operating Expenses...............           0.98%                         0.77%

</TABLE>

Example

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other money market funds.

The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:


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

                  1 Year       3 Years     5 Years      10 Years
Class A:           $100         $312        $542         $1,201
Class B:           $ 79         $246        $428         $  954


</TABLE>


                                       5
<PAGE>
II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS

Investment Objectives
---------------------

     The Fund is a tax-exempt money market fund whose investment objectives are
to seek as high a level of current income exempt from regular federal income tax
and, to the extent possible, from New Jersey gross income tax, as is believed to
be consistent with preservation of capital, maintenance of liquidity and
stability of principal.

     The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund.

Principal Investment Strategies
-------------------------------


     Although the Fund will attempt to invest 100% of its total assets in
Municipal Obligations and Participation Certifications therein, the Fund, under
normal circumstances, will invest at least 80% of its net assets, plus the
amount of any borrowings for investment purposes, in Municipal Obligations, the
income from which is exempt from both regular federal and New Jersey gross
income tax. This policy is fundamental and may not be changed without
shareholder approval.


     With respect to 20% of its net assets, the Fund may purchase taxable
securities, including Municipal Obligations, whose interest income is subject to
regular federal, state and local income tax. The kinds of taxable securities in
which the Fund may invest are limited to short-term, fixed income securities as
more fully described in "Description of the Fund and Its Investment and Risks -
Taxable Securities" in the Statement of Additional Information.


     The Fund may also invest in Participation Certificates in Municipal
Obligations. Participation Certificates represent the Fund's interest in a
Municipal Obligation that is held by another entity (i.e., banks, insurance
companies or other financial institutions). Instead of purchasing a Municipal
Obligation directly, the Fund purchases and holds an undivided interest in a
Municipal Obligation that is held by a third party. The Fund's interest in the
underlying Municipal Obligation is proportionate to the Fund's participation
interest. Ownership of the Participation Certificates generally causes the Fund
to be treated as the owner of an interest in the underlying Municipal
Obligations for federal income tax purposes.


     The Fund may invest more than 25% of its assets in Participation
Certificates in Industrial Revenue Bonds and other New Jersey Municipal
Obligations, provided, however, that such investments may not exceed 25% of the
Fund's total assets to the extent that (i) the interest and principal on such
instruments are payable solely from the revenues or assets of a private project
or private entity, and (ii) such instruments are not guaranteed by a state,
state agency, or a political subdivision thereof.

     The Fund may purchase, without limit, securities and Participation
Certificates whose interest income may be subject to federal alternative minimum
tax.


     To the extent suitable New Jersey Municipal Obligations and territorial
Municipal Obligations are not available for investment by the Fund, the Fund may
purchase Municipal Obligations issued by other states, their agencies and
instrumentalities. The dividends derived from these investments will be
designated by the Fund as derived from interest income that will be, in the
opinion of bond counsel to the issuers at the date of issuance, exempt from
federal income tax, but, under current law, will be subject to New Jersey income
tax.


     The Fund will invest primarily in New Jersey Municipal Obligations. As a
temporary defensive measure the Fund may, from time to time, invest in
securities that are inconsistent with its principal investment strategies or
remain uninvested in an attempt to respond to adverse market, economic,
political or other conditions as determined by the Fund's investment manager.
Such a temporary defensive position may cause the Fund to not achieve its
investment objectives.

                                       6
<PAGE>


     With respect to 75% of its total assets, the Fund shall invest not more
than 5% of its total assets in Municipal Obligations issued by a single issuer.
The Fund shall not invest more than 5% of its total assets in Municipal
Obligations issued by a single issuer unless they are of the highest quality,
and in no event shall such investments exceed, in the aggregate, 50% of the
value of the Fund's total assets.


     With respect to 75% of its total assets, the Fund shall invest not more
than 10% of its total assets in Municipal Obligations backed by a demand feature
or guarantee from the same institution.

     The Fund's investments may also include "when-issued" Municipal Obligations
and stand-by commitments.

     The Fund's investment manager considers the following factors when buying
and selling securities for the Fund's portfolio: (i) the availability of cash,
(ii) redemption requests, (iii) yield management, and (iv) credit management.

     In order to maintain a share price of $1.00, the Fund must comply with
certain industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other requirements pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities which have or are deemed to have a remaining maturity
of 397 days or less. Also, the average maturity for all securities contained in
the Fund, on a dollar-weighted basis, will be 90 days or less.

     The Fund will only invest in either securities that have been rated (or
whose issuers have been rated) in the highest short-term rating category by
nationally recognized statistical rating organizations, or are unrated
securities that have been determined by the Fund's investment manager to be of
comparable quality.

     For a more detailed description of (i) the securities in which the Fund
will invest, (ii) fundamental investment restrictions, and (iii) industry
regulations governing credit quality and maturity, please refer to the Statement
of Additional Information.

Risks
-----

     The Fund complies with industry-standard requirements on the quality,
maturity and diversification of its investments, which are designed to help
maintain a $1.00 share price. A significant change in interest rates or a
default on the Fund's investments could cause its share price (and the value of
your investment) to change.

     By investing in liquid, short-term, high quality investments that have high
quality credit support from banks, insurance companies or other financial
institutions (i.e., Participation Certificates and other variable rate demand
instruments), the Fund's management believes that it can protect the Fund
against credit risks that may exist on long-term New Jersey Municipal
Obligations. However, the Fund may still be exposed to the credit risk of the
institution providing the investment. Changes in the credit quality of the
provider could affect the value of the security and your investment in the Fund.

     Because of the Fund's concentration in investments in New Jersey Municipal
Obligations, the safety of your investment will depend substantially upon the
financial strength of New Jersey and its political subdivisions.

     The primary purpose of investing in a portfolio of New Jersey Municipal
Obligations is the special tax treatment accorded New Jersey resident individual
investors. Payment of interest and preservation of principal, however, are
dependent upon the continuing ability of the New Jersey 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 New Jersey issues
with those of more diversified portfolios, including out-of-state issues, before
making an investment decision.

     Because the Fund may concentrate in Participation Certificates that may be
secured by bank letters of credit or guarantees, an

                                       7
<PAGE>

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. These characteristics and risks include extensive governmental
regulations, changes in the availability and cost of capital funds, and general
economic conditions (see "Description of the Fund and Its Investments and Risks
- Variable Rate Demand Instruments and Participation Certificates" in the
Statement of Additional Information) that may limit both the amounts and types
of loans and other financial commitments that may be made and the interest rates
and fees that may be charged. The profitability of the banking 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
operation 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.

Portfolio Holdings
------------------

    A schedule of the Fund's complete portfolio holdings, current as of
month-end, will be available on the Fund's website no earlier than 5 days after
the end of each month. This information will remain available on the website at
least until updated for the next month or until the Fund files with the
Securities and Exchange Commission ("SEC") its semi-annual/annual shareholder
report or quarterly portfolio holdings report that includes such period. The
most recent schedule is available on the Fund's website at
http://www.money-funds.com/portfolioholdings or by calling toll free at (800)
433-1918. The Fund may terminate or modify this policy at any time without
further notice to shareholders. A description of the Fund's policies and
procedures with respect to the disclosure of the Fund's portfolio securities is
available in the Statement of Additional Information.

III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE


     The Fund's investment manager is Reich & Tang Asset Management, LLC (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of April 30, 2008, the Manager was the investment
manager, adviser or sub-adviser with respect to assets aggregating in excess of
$17.5 billion. The Manager has been an investment adviser since 1970 and
currently is manager or sub-adviser of seventeen portfolios of registered
investment companies, of which it acts as administrator for twelve. The Manager
also advises high net worth individuals, private funds, pension trusts,
profit-sharing trusts and endowments.

     Pursuant to the Investment Management Contract between the Fund and the
Manager, the Manager manages the Fund's portfolio of securities and makes
decisions with respect to the purchase and sale of investments, subject to the
general control of the Board of Directors of the Fund. Pursuant to the
Investment Management Contract, the Fund pays the Manager a fee equal to 0.30%
per annum of the Fund's average daily net assets for managing the Fund's
investment portfolio and performing related services. For the fiscal year ended
January 31, 2008, the Fund paid the Manager a management fee equal to 0.30% per
annum of the Fund's average daily net assets. A discussion regarding the basis
for the Board of Directors approving the continuance of the Investment
Management Contract is available in the Fund's semi-annual report for the period
ended July 31, 2007.

     Pursuant to the Administrative Services Contract between the Fund and the
Manager, the Manager provides all management and administrative services
reasonably necessary for the Fund's operation, other than those services that
the Manager provides to the Fund pursuant to the Investment Management Contract.
The Manager also provides the Fund with the personnel to perform all other
clerical and accounting type functions not performed by the Manager pursuant to
the Investment Management


                                       8
<PAGE>


Contract and the Administrative Services Contract. For its services under the
Administrative Services Contract, the Fund pays the Manager a fee equal to 0.21%
per annum of the Fund's average daily net assets. For the fiscal year ended
January 31, 2008, the Fund paid the Manager a fee for administrative services
equal to 0.21% per annum of the Fund's average daily net assets.


     The Manager, at its discretion, may voluntarily waive all or a portion of
the investment management and the administrative services fees. Any portion of
the total fees received by the Manager may be used to provide shareholder
services and for distribution of Fund shares.

     In addition, Reich & Tang Distributors, Inc., (the "Distributor"), receives
a servicing fee equal to 0.20% per annum of the average daily net assets of the
Class A shares of the Fund under the Shareholder Servicing Agreement. The fees
are accrued daily and paid monthly. Investment management fees and operating
expenses, which are attributable to both Classes of shares of the Fund, will be
allocated daily to each Class based on the percentage of shares outstanding for
each Class at the end of the day.

IV. SHAREHOLDER INFORMATION


     The Fund sells and redeems its shares on a continuing basis at net asset
value. The Fund does not impose a charge for either purchases or redemptions,
although there may be a fee imposed on certain wire redemption requests. All
transactions in Fund shares are processed through the Fund's transfer agent or
its principal underwriter, as appropriate, which accept orders for purchases and
redemptions from Participating Organizations (see "Investments Through
Participating Organizations - Purchase of Class A Shares" for a definition of
Participating Organizations) and from investors directly.


Pricing of Fund Shares
----------------------

     The net asset value of the Fund's shares is determined as of 4:00 p.m.,
Eastern time, on each Fund Business Day. Fund Business Day means weekdays
(Monday through Friday) except (i) days on which the New York Stock Exchange is
closed for trading (i.e., national holidays) and (ii) Columbus Day and Veterans'
Day. However, on certain days that the New York Stock Exchange is closed, the
Fund, at the direction of the Manager, may be open for purchases and redemptions
and will determine its net asset value. The Fund's net asset value is computed
by dividing the value of the Fund's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued, but excluding capital stock and surplus) by the total number of shares
outstanding. The Fund intends to maintain a stable net asset value at $1.00 per
share although there can be no assurance that this will be achieved.


     The Fund's portfolio securities are valued at their amortized cost in
compliance with the provisions of Rule 2a-7 under the Investment Company Act of
1940, as amended (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. If fluctuating interest rates or credit
issues 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 the
Fund would receive if the instrument were sold.


     Shares are issued as of the first determination of the Fund's net asset
value per share made after acceptance of the investor's purchase order. 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
the immediate settlement in funds of Federal Reserve member banks on deposit at
a Federal Reserve Bank (commonly known as "Federal Funds"). Fund shares begin
accruing income on the day the shares are issued to an investor.

                                       9
<PAGE>

     The Fund reserves the right to reject any purchase order of its shares. In
addition, the Fund does not accept cash, and may refuse to accept cash
equivalents (i.e., travelers cheques, money orders, cashier's checks or similar
instruments) and certain other forms of payment at its discretion. Certificates
for Fund shares will not be issued to investors.

Purchase of Fund Shares
-----------------------


     The Fund does not accept a purchase order from investors investing in the
Fund directly (i.e., not through Participating Organizations) until an
investor's payment has been converted into Federal Funds and is received by the
Fund's transfer agent, or its principal underwriter, as appropriate. Orders from
these direct investors that are accompanied by Federal Funds and received after
4:00 p.m., Eastern time, on a Fund Business Day will result in the issuance of
shares on the following Fund Business Day.


     Investors may, if they wish, invest in the Fund through Participating
Organizations with which they have accounts. Generally, all other investors, and
investors who have accounts with Participating Organizations but do not wish to
invest in the Fund through them, may invest in the Fund directly as Class B
shareholders. Class B shareholders generally do 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, because they may not be legally permitted to receive such as
fiduciaries, do not receive compensation from the Distributor or the Manager.

     The minimum initial investment in the Fund for both Classes of shares is
(i) $1,000 for purchases through Participating Organizations - this may be
satisfied by initial investments aggregating $1,000 by a Participating
Organization on behalf of their customers whose initial investments are less
than $1,000, (ii) $1,000 for securities brokers, financial institutions and
other industry professionals that are not Participating Organizations, and (iii)
$5,000 for all other investors. 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 may waive
any minimum purchase requirements.

     Each shareholder, except those purchasing through Participating
Organizations, will receive a personalized monthly statement from the Fund
listing (i) the total number of Fund shares owned as of the statement closing
date, (ii) purchases and redemptions of Fund shares, and (iii) the dividends
paid on Fund shares (including dividends paid in cash or reinvested in
additional Fund shares).

Investments Through Participating
Organizations - Purchase of Class A Shares
------------------------------------------

     Generally, investors purchasing shares through a Participating Organization
become Class A shareholders and are referred to as Participant Investors.
Participating Organizations are securities brokers, banks and financial
institutions or other industry professionals or organizations that have entered
into shareholder servicing agreements with the Distributor with respect to
investment of their customer accounts in the Fund. When instructed by a
Participant Investor to purchase or redeem Fund shares, the Participating
Organization, on behalf of the Participant Investor, transmits to the Fund's
transfer agent a purchase or redemption order, and in the case of a purchase
order, payment for the shares being purchased.

     Participating Organizations may confirm to Participant Investors each
purchase and redemption of Fund shares for their accounts. Also, Participating
Organizations may send periodic account statements to the Participant Investors
showing (i) the total number of Fund shares owned by each Participant Investor
as of the statement closing date, (ii) purchases and redemptions of Fund shares
by each Participant Investor during the period covered by the statement, and
(iii) the income earned by

                                       10
<PAGE>

Fund shares of each Participant Investor 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
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. In
addition, Participating Organizations offering purchase and redemption
procedures similar to those offered to shareholders who invest in the Fund
directly may impose charges, limitations, minimums and restrictions in addition
to or different from those applicable to shareholders who invest in the Fund
directly. Accordingly, the net yield to investors who invest through
Participating Organizations may be less than the net yield that could be
achieved by investing in the Fund directly. Participating Organizations may also
set deadlines for receipt of orders from Participant Investors that are earlier
than the order deadline of the Fund due to processing or other reasons. 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.

     Qualified Participating Organizations may transmit an investor's purchase
or redemption order to the Fund's transfer agent after 4:00 p.m., Eastern time
on the day the order is received from the investor as long as the investor has
placed his order with the Participating Organization before 4:00 p.m., Eastern
time on that day. The investor will then receive the net asset value of the
Fund's shares determined as of 4:00 p.m., Eastern time on the day he placed his
order with the qualified Participating Organization. Participating Organizations
are responsible for instituting procedures to ensure that purchase orders by
their respective clients are processed expeditiously.

Initial Direct Purchases of Class B Shares
------------------------------------------


     Investors who wish to invest in the Fund directly may obtain a current
Prospectus and the Fund application necessary to open an account by telephoning
the Fund at (212) 830-5345 or toll free at (800) 433-1918 during the hours of
8:30 a.m. to 5:30 p.m., Eastern time.


Mail and Personal Delivery
--------------------------

     Investors may send or deliver a check made payable to "New Jersey Daily
Municipal Income Fund, Inc." along with a completed Fund application to:

     New Jersey Daily Municipal Income Fund, Inc.
     c/o Reich & Tang Funds
     600 Fifth Avenue - 8th Floor
     New York, New York 10020

     Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member of the Federal Reserve System
will 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. If your check is returned unpaid due to
insufficient funds, your order will be cancelled and your account will be
charged a $20 fee for each returned check.

Bank Wire
---------

     To purchase shares of the Fund using the wire system for transmittal of
money among banks, an investor, prior to his or her initial purchase of shares,
should first telephone the Fund at (212) 830-5345 or toll free at (800) 433-1918
to obtain a Fund application necessary to open a new account. The investor
should complete and fax the Fund application along with any required
documentation to the Fund at (212) 315-1112. The original Fund application and
documentation should then be mailed to the address specified under "Mail and
Personal Delivery." The investor should then

                                       11
<PAGE>

telephone the Fund at the above number to obtain a new account number and then
instruct a member bank of the Federal Reserve System to wire the amount of the
investment immediately to:


     The Bank of New York Mellon

     ABA # 021000018
     Reich & Tang Funds
     DDA # 8900403527
     For New Jersey Daily Municipal
        Income Fund, Inc.
     Account of (Investor's Name)
                ----------------------------------
     Fund Account #
                    ------------------------------

     An account will not be opened until the Fund has received the Fund
application and required documentation in proper form and has accepted the
purchase order for its shares.

     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 4:00 p.m., Eastern time, on a
Fund Business Day will be treated as a Federal Funds payment received on that
day.

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,
including 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, please contact your broker or the Fund for
the appropriate form. You may elect at any time to terminate your participation
by notifying in writing the appropriate depositing entity and/or federal agency.
Upon notification of death or legal incapacity your participation in the
Privilege will automatically terminate. Further, the Fund may terminate your
participation in the Privilege upon 30 days' notice to you.

Subsequent Purchases of Shares
------------------------------

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


     New Jersey Daily Municipal Income Fund, Inc.
     c/o 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 application form on file with the Fund
is still applicable, a shareholder may reopen an account without filing a new
Fund application at any time during the year the shareholder's account is closed
or during the following calendar year.

Redemption of Shares
--------------------

     A redemption is effected immediately following, and at a price determined
in accordance with, the next determination of net asset value per share of the
Fund upon receipt by the Fund's transfer agent of the redemption order (and any
supporting documentation which the Fund's transfer agent may require). Normally,
payment for redeemed shares is made on the same Fund Business Day the redemption
is effected, if the redemption proceeds are paid by wire (on the next Fund
Business Day if paid by check). However, redemption payments will not be paid
out unless the check (including a certified or cashier's check) used for
investment has been cleared for payment by the investor's bank, which can take
up to 15 days after investment. Shares redeemed are not entitled to participate
in dividends declared on the day a redemption becomes effective.

     A shareholder's original Fund application permits the shareholder to redeem
by written request and to elect one or more of the additional

                                       12
<PAGE>

redemption procedures described below. A shareholder may only change the
instructions indicated on his original Fund application by transmitting a
written direction to the Fund's transfer agent. Requests to institute or change
any of the additional redemption procedures will require a signature guarantee.

     When a signature guarantee is called for, the shareholder should have
"Signature Guaranteed" stamped under his signature. It should be signed and
guaranteed by an eligible guarantor institution which includes a domestic bank,
a domestic savings and loan institution, a domestic credit union, a member bank
of the Federal Reserve System or a member firm of a national securities
exchange, pursuant to the Fund's transfer agent's standards and procedures.

Written Requests
----------------

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

     New Jersey Daily Municipal Income Fund, Inc.
     c/o Reich & Tang Funds
     600 Fifth Avenue - 8th Floor
     New York, New York 10020

     All written requests for redemption must be signed by the shareholder, in
each case with signature guaranteed, unless otherwise indicated on the Fund
application or in a subsequent written authorization.

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

Checks
------

     By making the appropriate election on their Fund application, shareholders
may request a supply of checks that may be used to effect redemptions from the
Class of shares of the Fund in which they invest. The checks, which will be
issued in the shareholder's name, are drawn on a special account maintained by
the Fund with the Fund's 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. Investors who
purchase Fund shares by check may not receive their redemption proceeds until
the check has cleared, which can take up to 15 days following the date of
purchase.

     There is no charge to the shareholder for checks provided by the Fund,
although there may be fees charged for checks provided in connection with
certain cash management programs offered through Participating Organizations.
The Fund reserves the right to impose a charge or impose a different minimum
check amount in the future.

     Shareholders electing the checking option are subject to the procedures,
rules and regulations of the Fund's agent bank governing checking accounts.
Checks drawn on a jointly owned account may, at the shareholder's election,
require only one signature. Checks in amounts exceeding the value of the
shareholder's account at the time the check is presented for payment will not be
honored. Since the dollar value of the account changes daily, the total value of
the account may not be determined in advance and the account may not be entirely
redeemed by check. Shareholders will be charged a $16 fee for any stop payment
requests, a $15 fee if the Fund is requested to deliver a supply of checks
overnight and a $4 fee for each copy of a check requested. In addition, the Fund
reserves the right to charge the shareholder's account a fee of 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

                                       13
<PAGE>

check, and/or a post-dated check. The Fund reserves the right to terminate or
modify the check redemption procedure at any time or to impose additional fees
following notification to the Fund's shareholders.

     Corporations and other entities electing the checking option are required
to furnish a certified resolution or other evidence of authorization in
accordance with the Fund's normal practices. Individuals and joint tenants are
not required to furnish any supporting documentation. 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, the Fund will provide the
shareholder with a supply of checks.

Telephone
---------


     The Fund accepts telephone requests for redemptions from shareholders who
elect this option on their Fund application. The proceeds of a telephone
redemption may be sent to shareholders at their address of record or, if in
excess of $1,000, to their bank accounts, both as set forth in the Fund
application or in a subsequent written authorization. For telephone requests for
wire redemptions of less than $10,000, the Fund charges a $15 fee. 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 at
the time of such redemption request. Failure by the Fund to employ such
reasonable procedures may cause the Fund to be liable for the losses incurred by
investors due to unauthorized or fraudulent telephone redemptions.

     A shareholder making a telephone withdrawal should call the Fund at
(212) 830-5345 or toll free at (800) 433-1918 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 of
record, and (v) the name of the person requesting the redemption. Usually, the
proceeds are sent to the designated bank account or address of record on the
same Fund Business Day the redemption is effected, if the redemption proceeds
are paid by wire (on the next Fund Business Day if paid by check). 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.


Generally
---------

     There is no redemption charge, although there may be a fee charged on
certain wire redemption requests, 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 of his or her shares of the
Fund, all dividends accrued to the date of such redemption will be paid to the
shareholder along with the proceeds of the redemption. A redemption of shares
may result in taxable income to the shareholder.

     The right of redemption generally 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 (i) any period during which the New York
Stock Exchange is closed (other than customary weekend and holiday closings),
(ii) any period during which the SEC determines that trading

                                       14
<PAGE>

thereon is restricted, (iii) 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 to fairly determine the value of its net
assets, or (iv) for such other period as the SEC may by order permit for the
protection of the shareholders of the Fund.

     The Fund and its agents reserve the right to "freeze" or "block" (that is,
disallow any further purchases or redemptions from any account) or suspend
account services in certain instances as permitted or required by applicable
laws and regulations, including applicable anti-money laundering regulations.
Examples of such instances include, but are not limited to, (i) where an
accountholder appears on the list of "blocked" entities and individuals
maintained pursuant to OFAC (Office of Foreign Assets Control) regulations, (ii)
where the Fund or its agents detect suspicious activity or suspect fraudulent or
illegal activity, or (iii) when notice has been received by the Fund or its
agents that there is a dispute between the registered or beneficial account
owners.

     The Fund reserves the right to redeem the shares of any shareholder if the
total 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. The Participating Organization
will be responsible for notifying the Participant Investor of the proposed
mandatory redemption. A shareholder or Participating Organization who receives
such notice may avoid mandatory redemption by purchasing sufficient additional
shares to increase its account value to the minimum amount during the notice
period.

     In addition, in accordance with applicable customer identification
regulations, the Fund reserves the right to redeem the shares of any shareholder
and close the shareholder's account if the Fund and its agents are unable to
verify the shareholder's identity within a reasonable time after the
shareholder's account is opened. If the Fund closes a shareholder's account in
this manner, the shares will be valued in accordance with the net asset value
next calculated after the Fund decides to close the account.

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 or quarterly
basis. The monthly or quarterly withdrawal payments of the specified amount are
made by the Fund on the date specified on the Automatic Withdrawal Authorization
form. Whenever such day of the month is not a Fund Business Day, the payment
date is the Fund Business Day preceding the day of the month specified on the
Automatic Withdrawal Authorization form. 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 application by completing an Automatic Withdrawal
Authorization form. The election may also be made, changed or terminated at any
later time by sending a signature guaranteed written request to

                                       15
<PAGE>

the transfer agent. Because the withdrawal plan involves the redemption of Fund
shares, such withdrawals may constitute taxable events to the shareholder.
However, the Fund does not expect that there will be any realized capital gains.

Dividends and Distributions
---------------------------

     The Fund declares dividends equal to all its net investment income
(excluding long-term capital gains and losses, if any, and amortization of
market discount) on each Fund Business Day and 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,
at no charge, 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 reinvestment of
capital gains or any taxable dividends does not avoid a taxable event to the
shareholder, even though such shareholder has not received a cash distribution
to pay the resulting tax, if any. See "Tax Consequences."

     Because Class A shares bear a service fee under the Fund's 12b-1 Plan, 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 on
the same days at the same times and, except as noted with respect to the service
fees payable under the Fund's 12b-1 Plan, will be determined in the same manner
and paid in the same amounts.


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 that retain Reich & Tang Asset Management, LLC as
investment manager and that participate in the exchange privilege program with
the Fund. If only one Class of shares is available in a particular exchange
fund, the shareholders of the Fund are entitled to exchange their shares for the
shares available in that exchange fund. If a particular exchange fund has more
than one available class of shares, neither of which are Class A or Class B
shares, the shareholders of the Fund are entitled to exchange their shares for a
comparable class of shares available in the exchange fund. Currently the
exchange privilege program has been established between the Fund and California
Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Florida Daily Municipal Income Fund and New York Daily Tax
Free Income Fund, Inc. In the future, the exchange privilege program may be
extended to other investment companies that retain Reich & Tang Asset
Management, LLC as investment adviser or manager.


     There is no charge for the exchange privilege or limitation as to frequency
of exchange. The minimum amount for an exchange is $1,000. However, 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 its
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

                                       16
<PAGE>

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, an investor should review the
current prospectus of the investment company into which the exchange is to be
made. An exchange will be a taxable event to an exchanging shareholder. See "Tax
Consequences."

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

     New Jersey Daily Municipal Income Fund, Inc.
     c/o Reich & Tang Funds
     600 Fifth Avenue - 8th Floor
     New York, New York 10020

or, for shareholders who have elected that option, by telephoning the Fund at
(212) 830-5345 or toll free at (800) 433-1918. The Fund reserves the right to
reject any exchange request and may modify or terminate the exchange privilege
at any time.

Frequent Trading
----------------

    The Reich & Tang family of funds discourages short-term or excessive trading
("frequent trading") of their shares by shareholders (including by means of
exchanges) and maintains procedures reasonably designed to detect and deter such
frequent trading, except with respect to the money market funds as discussed
below. Frequent trading is sometimes referred to as market timing. Market timing
may take many forms but commonly refers to arbitrage activity involving the
frequent buying and selling of mutual fund shares in order to take advantage of
the fact that there may be a lag between a change in the value of a mutual
fund's portfolio securities and the reflection of that change in the fund's
share price. Frequent trading may dilute the value of fund shares held by
long-term shareholders. Frequent trading may also interfere with the efficient
management of a fund's portfolio, as it may result in a fund maintaining higher
cash balances than it otherwise would (which would result in reduced yields for
money market funds) or cause a fund to sell portfolio securities at a time it
otherwise would not. Frequent trading may further result in increased portfolio
transaction (or brokerage) costs, administrative and other operating costs and
may cause a fund to realize taxable capital gains or harvest capital losses at a
time that it otherwise would not. For these reasons, frequent trading poses the
risk of lower returns for long-term shareholders of a fund. There is no
guarantee that these policies and procedures will be effective in detecting and
preventing frequent trading in whole or in part.

    Money market funds are not effective vehicles for market timing activity
since these types of funds seek to maintain a constant net asset value of $1.00
per share. In addition, the risks of frequent trading are not generally
applicable to money market funds because money market funds are created as cash
management vehicles which accommodate frequent inflows and outflows of cash. As
a result, money market funds are managed to accommodate such cash flows,
particularly when used as sweep vehicles, which generally eliminates the
potential for disruptive trading.

    Nonetheless, as indicated under "Pricing of Fund Shares" and "Exchange
Privilege," the Fund reserves the right to reject any purchase or exchange order
for its shares for any reason and thus may exercise such right in the event it
determines that a purchase or exchange order is disruptive to the Fund's
management or otherwise. The Fund's procedures with respect to frequent
purchases and redemptions of Fund shares by shareholders are thus limited to the
Fund exercising its right to reject purchase or exchange orders it determines in
its discretion to be disruptive. The Fund may change its policies relating to
frequent trading at any time without prior notice to shareholders.

                                       17
<PAGE>

Tax Consequences
----------------

Federal Income Taxes
--------------------


     The Fund has elected to qualify and intends to continue to qualify as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"). As a regulated investment company, dividends paid by the Fund that
are designated by the Fund and derived from Municipal Obligations and
Participation Certificates, will be exempt from regular federal income tax,
provided the Fund complies with the requirements of the Code regarding the
qualification of the Fund to pay exempt-interest dividends, but may be subject
to federal alternative minimum tax.


     The Fund may invest a portion of its assets in taxable securities the
interest income on which is subject to federal, state and local income tax or
that otherwise generate income that is not exempt from federal or state income
tax; therefore, shareholders may receive some taxable income with respect to
their shares in the Fund. Income exempt from federal income tax may nevertheless
be subject to state and local income tax.

     Dividends paid from taxable income from taxable investments, if any, and
distributions of any realized short-term capital gains (from tax-exempt or
taxable obligations) are taxable to shareholders as ordinary income, 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.

     The sale, exchange or redemption of shares will generally be the taxable
disposition of an asset that may result in taxable gain or loss for the
shareholder if the shareholder receives more or less than its adjusted tax basis
for the shares. An exchange pursuant to the exchange privilege is treated as a
sale on which the shareholder may realize a taxable gain or loss.

     For shareholders that are Social Security and Railroad Retirement
recipients, interest on tax-exempt bonds, including exempt-interest dividends
paid by the Fund, is to be added to shareholders' adjusted gross income to
determine the amount of Social Security benefits includible in their gross
income.


     Interest on certain private activity bonds 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 tax-exempt interest) exceeds
their alternative minimum taxable income (determined without this tax item). In
certain cases, shareholders that are Subchapter S corporations with accumulated
earnings and profits from Subchapter C years will be subject to a tax on
tax-exempt interest.


     With respect to variable rate demand instruments, including Participation
Certificates therein, the Fund will be treated for federal income tax purposes
as the owner of an interest in the underlying Municipal Obligations and the
interest thereon will be exempt from regular federal income taxes to the Fund to
the same extent as the interest on the underlying Municipal Obligations.


     The U.S. Supreme Court has held that there is no constitutional prohibition
against the federal government's taxing the interest earned on state or other
municipal bonds. The decision does not, however, affect the current exemption
from federal taxation of the interest earned on the Municipal Obligations.


                                       18
<PAGE>

     Investors should review the information regarding taxes in the Statement of
Additional Information.


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


New Jersey Income Taxes
-----------------------

     The following is based upon the advice of Drinker Biddle & Reath LLP,
special tax counsel to the Fund. 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.

     The Fund intends to be a "qualified investment fund" within the meaning of
the New Jersey gross income tax. The primary criteria for constituting a
"qualified investment fund" are that (i) such fund is an investment company
registered with the SEC which, for the calendar year in which the distribution
is paid, has no investments other than interest bearing obligations, obligations
issued at a discount, cash and cash items, including receivables and financial
options, futures, forward contracts, or other similar financial instruments
relating to interest-bearing obligations, obligations issued at a discount or
bond indexes related thereto and (ii) at the close of each quarter of the
taxable year, such fund has not less than 80% of the aggregate principal amount
of all of its investments, excluding financial options, futures, forward
contracts, or other similar financial instruments relating to interest-bearing
obligations, obligations issued at a discount or bond indexes related thereto to
the extent such instruments are authorized under the regulated investment
company rules under the Code, cash and cash items, which cash items shall
include receivables, in New Jersey Municipal Obligations and certain other
specified securities. Additionally, a qualified investment fund must comply with
certain continuing reporting requirements. In the opinion of Drinker Biddle &
Reath LLP, (i) assuming that the Fund constitutes a qualified investment fund
and that the Fund complies with the reporting obligations under New Jersey law
with respect to qualified investment funds, (a) distributions paid by the Fund
to a New Jersey resident individual shareholder will not be subject to the New
Jersey gross income tax to the extent that the distributions are attributable to
income received as interest on or gain from New Jersey Municipal Obligations and
(b) gain from the sale of shares in the Fund by a New Jersey resident individual
shareholder will not be subject to the New Jersey gross income tax and (ii)
distributions paid by the Fund to a New Jersey resident individual shareholder
will not be subject to the New Jersey gross income tax to the extent that the
distributions are attributable to interest earned on federal obligations.

     Although the Fund intends to maintain a $1.00 per share net asset value,
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. 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. However, if the Fund is a New Jersey qualified investment fund, any
such gains received by a New Jersey resident individual shareholder should not
be subject to the New Jersey gross income tax.

     Interest on indebtedness incurred or continued to purchase or carry Fund
Shares is not deductible either for Federal income tax purposes or New Jersey
personal income tax purposes to the extent attributable to exempt-interest
dividends.

     Exempt-interest dividends and gains paid to a corporate shareholder will be
subject to the New Jersey corporation business (franchise) tax and, if
applicable, the New Jersey corporation

                                       19
<PAGE>

income tax, and may also be subject to state taxes in states other than New
Jersey. Accordingly, investors in the Fund, including, in particular, corporate
investors which may be subject to the New Jersey corporation business
(franchise) tax and, if applicable, the New Jersey corporation income tax,
should consult their tax advisors with respect to the application of such taxes
to an investment in the Fund, to the receipt of Fund dividends and as to their
New Jersey tax situation in general.


     The U.S. Supreme Court has upheld the ability of the states to provide a
state tax exemption for interest derived from in-state municipal bonds while
subjecting interest derived from municipal bonds issued by other states and
their political subdivisions to tax. The Court's decision affirms current market
practice and should not impact the state and local income and franchise tax
treatment of distributions from the Fund as described herein.


     Shareholders are urged to consult their tax advisers with respect to the
treatment of distributions from the Fund and ownership of shares of the Fund in
their own states and localities. Investors should also review the information
regarding taxes in the Statement of Additional Information.

V. DISTRIBUTION ARRANGEMENTS

Rule 12b-1 Fees
----------------

     Investors do not pay a sales charge to purchase shares of the Fund.
However, the Fund pays shareholder servicing fees in connection with the
provision of servicing to the Class A shareholders. The Fund pays these fees
from its assets on an ongoing basis and therefore, over time, the payment of
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.

     The Fund's Board of Directors has adopted a Rule 12b-1 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 the Class A shares of the Fund only).

     Under the Distribution Agreement, the Distributor serves as distributor of
the Fund's shares and for nominal consideration (i.e., $1.00) and as agent for
the Fund, the Distributor will solicit orders for the purchase of the Fund's
shares, provided that any orders will not be binding on the Fund until accepted
by the Fund as principal.

     Under the Shareholder Servicing Agreement, the Distributor receives, with
respect to the Class A shares only, a service fee equal to 0.20% per annum of
the Class A shares' average daily net assets (the "Shareholder Servicing Fee")
for providing personal shareholder services and for the maintenance of
shareholder accounts. The fee is accrued daily and paid monthly. 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 generally 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 Distributor and Participating Organizations in carrying out their
obligations under the Shareholder Servicing Agreement with respect to Class A
shares or the Participating Organization agreement, as the case may be, and (ii)
preparing, printing and delivering the Fund's prospectus to existing
shareholders of the Fund and preparing and printing Fund applications for
shareholder accounts.

     The Plan provides that the Manager may make payments from time to time from
its own

                                       20
<PAGE>

resources, which may include the management fee, administrative services fee and
past profits for the following purposes: (i) to pay the cost of and to
compensate others, including Participating Organizations with whom the
Distributor has entered into written agreements, for performing shareholder
servicing on behalf of the Class A shares of the Fund, (ii) to compensate
Participating Organizations for providing assistance in distributing the Class A
shares of the Fund, and (iii) to pay the costs 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 of the Distributor and other
persons in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Shareholding Servicing Fee (with respect to Class A
shares) and past profits, for the purposes enumerated in (i) above. The
Distributor may determine the amount of such payments made pursuant to the Plan,
provided that such payments will not increase the amount which the Fund is
required to pay to the Manager and Distributor for any fiscal year under either
the Investment Management Contract or Administrative Services Contract in effect
for that year or under the Shareholder Servicing Agreement in effect for that
year.


     The Distributor or an affiliate may, from time to time, at its expense and
out of its own resources (a source of which may be the 12b-1 fees paid by the
Fund under the Plan), make cash payments to some but not all Participating
Organizations for shareholder services, as an incentive to sell shares of the
Fund and/or to promote retention of their customers' assets in the Fund. These
payments may be referred to as "revenue sharing," but do not change the price
paid by investors to purchase the Fund's shares or the amount the Fund receives
as proceeds from such sales. Revenue sharing payments may be made to
Participating Organizations that provide services to the Fund or its
shareholders, including (without limitation) shareholder servicing,
administration, accounting, transfer agency and/or distribution services. The
Distributor negotiates the level of payments described above to any particular
Participating Organization with each firm, based on, among other things, the
nature and level of services provided by such Participating Organization and the
significance of the overall relationship of the Participating Organization to
the Manager and its affiliates. The amount of these payments may be significant
and may create an incentive for the Participating Organization to sell shares of
the Fund to you or to recommend one fund complex over another. Please speak with
your Participating Organization to learn more about payments made to them by the
Distributor or its affiliates. Additional information regarding these payments
can be found in the Fund's Statement of Additional Information. In addition, to
the extent allowable under the Financial Industry Regulatory Authority ("FINRA")
rules and any other applicable regulations, the Distributor or an affiliate may
contribute to sales programs for certain Participating Organizations and may
provide non-cash compensation to certain Participating Organizations like
sponsorship or funding of sales seminars, tickets to sporting events, theater or
other entertainment, opportunities to participate in golf or other outings and
gift certificates for meals or by giving out merchandise at industry
conferences, which may be paid for by the Distributor or an affiliate out of its
own resources.


                                       21
<PAGE>

--------------------------------------------------------------------------------
VI. FINANCIAL HIGHLIGHTS

These financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the tables
represent the rate that an investor would have earned on an investment in the
Fund (assuming reinvestment of all dividends and distributions). This
information has been derived from the Fund's financial statements audited by
PricewaterhouseCoopers LLP, whose report, along with the Fund's financial
statements, is included in the annual report, which is available upon request.


<TABLE>
<CAPTION>
                                                                                         Year Ended
Class A shares                                                                           January 31,
---------------                                                     ----------------------------------------------------
                                                                      2008       2007       2006       2005       2004
                                                                    --------   --------   --------   --------   --------
Per Share Operating Performance:
(for a share outstanding throughout the year)
<S>                                                                 <C>        <C>        <C>        <C>        <C>
Net asset value, beginning of year............................      $ 1.00     $ 1.00     $ 1.00     $ 1.00     $ 1.00
                                                                    -------    -------    -------    -------    -------
Income from investment operations:
  Net investment income.......................................        0.026      0.025      0.015      0.003      0.001
  Net realized and unrealized gain (loss)
     on investments...........................................        0.000      0.000     (0.000)    (0.000)      --
                                                                    -------    -------    -------    -------    -------
Total from investment operations..............................        0.026      0.025      0.015      0.003      0.001
                                                                    -------    -------    -------    -------    -------
Less distributions from:
  Dividends from net investment income........................       (0.026)    (0.025)    (0.015)    (0.003)    (0.001)
  Net realized gains on investments.............................     (0.000)    ( --  )    ( --  )    (  -- )    ( --  )
                                                                    -------    -------    -------    -------    -------
Total distributions...........................................       (0.026)    (0.025)    (0.015)    (0.003)    (0.001)
                                                                    -------    -------    -------    -------    -------
Net asset value, end of year..................................      $ 1.00     $ 1.00     $ 1.00     $ 1.00     $ 1.00
                                                                    =======    =======    =======    =======    =======
Total Return..................................................        2.69%      2.52%      1.55%      0.34%      0.14%
Ratios/Supplemental Data
Net assets, end of year (000's)...............................      $53,038    $92,135    $97,702    $107,203   $96,004
Ratios to average net assets:
    Expenses (net of fees waived)(a)..........................        0.98%      0.96%      0.94%      0.93%      0.90%
    Net investment income.....................................        2.66%      2.48%      1.53%      0.34%      0.14%
    Management & Administration fees waived...................         --        0.03%       --         --         --
    Shareholder servicing fees waived.........................         --         --         --        0.00%      0.02%
    Expenses paid indirectly .................................        0.00%       --        0.00%      0.00%      0.00%


<FN>
(a)Includes expenses paid indirectly, if applicable.
</FN>
</TABLE>


                                       22
<PAGE>
--------------------------------------------------------------------------------

VI. FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>

                                                                                        Year Ended
Class B shares                                                                           January 31,
---------------                                                     ----------------------------------------------------
                                                                      2008       2007       2006       2005       2004
                                                                    --------   --------   --------   --------   --------
Per Share Operating Performance:
(for a share outstanding throughout the year)
<S>                                                                 <C>        <C>        <C>        <C>        <C>
Net asset value, beginning of year............................      $ 1.00     $ 1.00     $ 1.00     $ 1.00     $ 1.00
                                                                    -------    -------    -------    -------    -------
Income from investment operations:
  Net investment income.......................................        0.029      0.027      0.017      0.005      0.003
  Net realized and unrealized gain (loss)
     on investments...........................................        0.000      0.000     (0.000)    (0.000)      --
                                                                    -------    -------    -------    -------    -------
Total from investment operations..............................        0.029      0.027      0.017      0.005      0.003
                                                                    -------    -------    -------    -------    -------
Less distributions from:
  Dividends from net investment income........................       (0.029)    (0.027)    (0.017)    (0.005)    (0.003)
  Net realized gains on investments.............................     (0.000)    ( --  )    ( --  )    (  -- )    ( --  )
                                                                    -------    -------    -------    -------    -------
Total distributions...........................................       (0.029)    (0.027)    (0.017)    (0.005)    (0.003)
                                                                    -------    -------    -------    -------    -------
Net asset value, end of year..................................      $ 1.00     $ 1.00     $ 1.00     $ 1.00     $ 1.00
                                                                    =======    =======    =======    =======    =======
Total Return..................................................        2.90%      2.72%      1.76%      0.54%      0.32%
Ratios/Supplemental Data
Net assets, end of year (000's)...............................      $25,386    $21,934    $22,484    $15,255    $11,916
Ratios to average net assets:
    Expenses (net of fees waived)(a)..........................        0.77%      0.76%      0.74%      0.74%      0.73%
    Net investment income.....................................        2.85%      2.68%      1.74%      0.60%      0.32%
    Management & Administration fees waived...................         --        0.03%       --         --         --
    Expenses paid indirectly .................................        0.00%       --        0.00%      0.00%      0.00%



<FN>
(a) Includes expenses paid indirectly, if applicable.
</FN>
</TABLE>


                                       23
<PAGE>
--------------------------------------------------------------------------------


                     NOTICE OF REICH & TANG* PRIVACY POLICY


     We do not disclose to third parties nonpublic personal information about
current or former Reich & Tang customers, clients or mutual fund shareholders
other than as described below.


     We collect nonpublic personal information about you, such as your name,
address, social security number, account activity and account balances from your
account application and other forms that you may deliver to us. We use this
information to provide advisory services to you, to open an account for you, or
to process a transaction for your account. In order to service your account and
effect your transactions, we provide your nonpublic personal information to our
affiliates and to unaffiliated firms to effect or process transactions for you
or to assist us in servicing your account.


     We may also disclose nonpublic personal information about you to other
service providers who agree to protect the confidentiality of your information
and to use the information only for the purpose for which the disclosure is
made. We do not otherwise provide nonpublic personal information about you to
outside firms, organizations or individuals except as permitted by law.


     We restrict access to nonpublic personal information about you to those
employees who need to know that information to provide products or services to
you. We maintain physical, electronic and procedural safeguards that comply with
federal standards to guard your personal information.

__________________________________
* For  purposes  of this  notice,  "Reich & Tang"  includes:  Reich & Tang Asset
Management,  LLC, Reich & Tang Distributors,  Inc., Reich & Tang Services,  Inc.
and all  mutual  funds or other  funds  managed or advised by Reich & Tang Asset
Management, LLC.



<PAGE>

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


A Statement of Additional Information
(SAI) dated May 30, 2008, includes
additional information about the Fund                           NEW JERSEY
and its investments and is incorporated                         DAILY
by reference into this Prospectus.                              MUNICIPAL
Further information about Fund                                  INCOME
investments is available in the annual                          FUND, INC.
and semi-annual shareholder reports. You
may obtain the SAI, the annual and
semi-annual reports without charge
by calling the Fund toll free at (800)
433-1918. You may also obtain the SAI
and the annual and semi-annual reports
without charge by visiting the Fund's
website at
http://www.money-funds.com/funds/index.
To request other information about the Fund,
please call your financial intermediary or the
Fund.

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

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

A current SAI has been filed with the
Securities and Exchange Commission.
Information about the Fund (including the
SAI) is also available from the Public
Reference Room of the Securities and                     PROSPECTUS
Exchange Commission. Information on the                  May 30, 2008
operation of the Public Reference Room may
be obtained by calling the Commission
at (202) 942-8090. Fund reports and other
information about the Fund are available
on the EDGAR Database on the Commission's
Internet site at http://www.sec.gov. Copies
of this information may be obtained, after
paying a duplicating fee, by electronic
request at publicinfo@sec.gov, or by writing
the Commission's Public Reference Section,
 Washington, D.C. 20549-0102.



Investment Company Act No. 811-6152

           Reich & Tang Distributors, Inc.
                  600 Fifth Avenue
                 New York, NY 10020
                   (212) 830-5345


NJ5/08P


   NEW JERSEY
   DAILY
   MUNICIPAL
   INCOME
   FUND, INC.

                                                         PROSPECTUS

                                                        May 30, 2008


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

A Statement of Additional Information (SAI) dated May 30, 2008, includes
additional information about the Fund and its investments and is incorporated by
reference into this Prospectus. Further information about Fund investments is
available in the annual and semi-annual shareholder reports. You may obtain the
SAI, the annual and semi-annual reports without charge by calling the Fund toll
free at (800) 433-1918. You may also obtain the SAI and the annual and
semi-annual reports without charge by visiting the Fund's website at
http://www.money-funds.com/funds/index. To request other information about the
Fund, please call your financial intermediary or the Fund.



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



<PAGE>




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

A current SAI has been filed with the Securities and Exchange Commission.
Information about the Fund (including the SAI) is also available from the Public
Reference Room of the Securities and Exchange Commission. Information on the
operation of the Public Reference Room may be obtained by calling the Commission
at (202) 551-8090. Fund reports and other information about the Fund are
available on the EDGAR Database on the Commission's Internet site at
http://www.sec.gov. Copies of this information may be obtained, after paying a
duplicating fee, by electronic request at publicinfo@sec.gov, or by writing the
Commission's Public Reference Section, Washington, D.C. 20549-0104.





Investment Company Act No. 811-6152


           Reich & Tang Distributors, Inc.


                  600 Fifth Avenue
                 New York, NY 10020
                   (212) 830-5345



NJ5/08P

<PAGE>


--------------------------------------------------------------------------------
       NEW JERSEY                       600 Fifth Avenue, New York, NY 10020
       DAILY MUNICIPAL                  (212) 830-5345
       INCOME FUND, INC.                (800) 433-1918 (Toll Free)
===============================================================================

                       STATEMENT OF ADDITIONAL INFORMATION

                                  MAY 30, 2008
                           RELATING TO THE PROSPECTUS
              FOR THE CLASS A AND CLASS B SHARES DATED MAY 30, 2008

This Statement of Additional Information (SAI) is not a Prospectus. The SAI
expands upon and supplements the information contained in the current
Prospectuses of the New Jersey Daily Municipal Income Fund, Inc. (the "Fund"),
and should be read in conjunction with the Prospectus.

A Prospectus may be obtained from any Participating Organization or by writing
or calling the Fund toll free at (800) 433-1918. The audited Financial
Statements of the Fund have been incorporated by reference into the SAI from the
Fund's Annual Report. The Annual Report is available, without charge, upon
request by calling the toll free number provided. The material relating to the
purchase, redemption and pricing of shares has been incorporated by reference
into the SAI from the Fund's Prospectus.


This SAI is incorporated by reference into the Fund's Prospectuses in its
entirety.

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

<S>                                                    <C>      <C>                                                         <C>
 Fund History........................................... 2      Capital Stock and Other Securities......................    30
    Description of the Fund and Its Investments                 Purchase, Redemption and
            and Risks....................................2          Pricing of Shares...................................    31
Management of the Fund..................................19      Taxation of the Fund....................................    32
Control Persons and Principal Holders of                        Underwriters............................................    35
           Securities...................................23      Financial Statements....................................    35
Investment Advisory and Other Services..................24      Description of Ratings..................................    36
Brokerage Allocation and Other Practices................30      Taxable Equivalent Yield Tables.........................    37
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

I.  FUND HISTORY

The Fund was incorporated on July 24, 1990, in the state of Maryland.

II.  DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS

The Fund is an open-end, management investment company that is a 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 tax and, to the extent
possible, from New Jersey gross 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 following discussion expands upon the description of the Fund's investment
strategies in the Prospectus.


The Fund's assets will be invested primarily in (i) high quality debt
obligations issued by or on behalf of the State of New Jersey, 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 to the issuer at the date of issuance,
currently exempt from regular federal income taxation and in (ii) Participation
Certificates, which cause the Fund to be treated as the owner of the underlying
municipal obligations for federal income tax purposes, in municipal obligations
purchased from banks, insurance companies or other financial institutions
("Participation Certificates"). These debt obligations, including Participation
Certificates therein, are collectively referred to throughout this Statement of
Additional Information as Municipal Obligations. Dividends that are properly
designated by the Fund as derived from Municipal Obligations and Participation
Certificates will be exempt from federal income tax provided the Fund qualifies
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), and provided that at the close of each
quarter of its taxable year at least 50 percent of the value of the total assets
of the Fund consists of Municipal Obligations and certain other state and local
obligations described in Code Section 103(a). Although the Supreme Court has
determined that Congress has the authority to tax the interest on bonds such as
the Municipal Obligations, existing law excludes such interest from regular
federal income tax. However, such interest, may be subject to the federal
alternative minimum tax.

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 total 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 regular federal, state and local income
tax. The Fund may purchase, without limit, securities and Participation
Certificates whose interest income may be subject to federal alternative minimum
tax. The Fund may invest more than 25% of its assets in Participation
Certificates purchased from banks in industrial revenue bonds and other New
Jersey Municipal Obligations, provided, however, that such investments may not
exceed 25% of the Fund's total assets to the extent that (i) the interest and
principal on such instruments are payable solely from the revenues or assets of
a private project or private entity, and (ii) such instruments are not
guaranteed by a state, state agency, or a political subdivision thereof. In view
of this possible "concentration" in bank Participation Certificates in New
Jersey 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 may
not be changed unless approved by the holders of a majority of the outstanding
shares of the Fund. 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 United States dollar-denominated securities that have
been determined by Reich & Tang Asset Management, LLC (the "Manager") to present
minimal credit risks and that are Eligible Securities at the time of
acquisition. The term Eligible Securities means: (i) securities which have or
are deemed to have remaining maturities of 397 days or less and rated in the two
highest short-term rating categories by any two nationally

                                       2
<PAGE>

recognized statistical rating organizations ("NRSROs") or in such categories by
the only NRSRO that has rated the Municipal Obligations (collectively, the
"Requisite NRSROs"); or (ii) unrated securities determined by the Manager to be
of comparable quality. In addition, securities which have or are deemed to have
remaining maturities of 397 days or less but that at the time of issuance were
long-term securities (i.e., with maturities greater than 397 days) and that are
deemed unrated securities may be purchased if they have received a long-term
rating from the Requisite NRSROs in one of the three highest rating categories.
Provided, however, that such security 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 Manager 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 securities. 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, Inc. ("S&P") and Moody's
Investors Service, Inc. ("Moody's"). The two highest ratings by S&P and Moody's
are "AAA" and "AA" by S&P in the case of long-term bonds and notes or "Aaa" and
"Aa" by Moody's in the case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and
"MIG-2" by Moody's in the case of notes; "A-1" and "A-2" by S&P or "Prime-1" and
"Prime-2" by Moody's in the case of tax-exempt commercial paper. The highest
rating in the case of variable and floating demand notes is "VMIG-1" by Moody's
or "A1+" by S&P. Such instruments may produce a lower yield than would be
available from less highly rated instruments. It is the Fund's policy to only
invest in securities that have been rated (or whose issuers have been rated) in
the highest short-term rating category by the Requisite NRSROs, or are unrated
securities that have been determined by the Manager to be of comparable quality.

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

In addition, in the event that a security (i) is in default, (ii) ceases to be
an Eligible Security under Rule 2a-7 of the Investment Company Act of 1940, as
amended (the "1940 Act") or (iii) is determined to no longer present minimal
credit risks, or an event of insolvency occurs with respect to the issue 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. Disposal of the security 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 Securities and Exchange Commission
(the "SEC") of such fact and of the actions that the Fund intends to take in
response to the situation.

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


With respect to 75% of its total assets, the Fund shall invest not more than 5%
of its total assets in Municipal Obligations issued by a single issuer. 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 such
Municipal Obligations are of the highest quality, are rated in the highest
short-term rating category and in no event shall such investments exceed, in the
aggregate, 50% of the value of the Fund's total assets.

The Fund has elected to qualify and intends to continue to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
("Code"). For the Fund to qualify at the close of each quarter of the


                                       3
<PAGE>


taxable year, at least 50% of the value of its total assets must consist of
cash, government securities, regulated investment company securities and other
securities. The other securities must be 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 or regulated investment company securities or in
securities of qualified publicly traded partnerships. The limitations described
in this paragraph regarding qualification as a "regulated investment company"
are not fundamental policies and may be revised to the extent applicable federal
income tax requirements are revised. (See "Federal Income Taxes" herein.)


Description Of Municipal Obligations

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

(1)  Municipal Bonds with remaining maturities of 397 days or less that are
     Eligible Securities at the time of acquisition. Municipal Bonds are debt
     obligations of states, cities, counties, municipalities and municipal
     agencies (all of which are generally referred to as "municipalities"). They
     generally have a maturity at the time of issue of one year or more and 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 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 and
     provide the demand feature which may be exercised by the Fund at any time
     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. The Fund's
     investments may be concentrated in Municipal Notes of New Jersey 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

                                       4
<PAGE>

     obligations are often issued to meet seasonal working capital needs of
     municipalities or to provide interim construction financing. They 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. These clauses 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 obligations, and to the extent possible, New
     Jersey gross income 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 described herein and permissible under Rule 2a-7 under the 1940 Act.

Variable Rate Demand Instruments and Participation Certificates

Variable rate demand instruments that the Fund will purchase are tax-exempt
Municipal Obligations. They 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, guarantee, insurance or other credit facility 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 at any
time or at specified intervals not exceeding 397 calendar days depending upon
the terms of the instrument. Variable rate demand instruments that cannot be
disposed of properly within seven days in the ordinary course of business are
illiquid securities. The terms of the instruments provide that interest rates
are adjustable at intervals ranging from daily to up to 397 days. The
adjustments are based upon an appropriate interest rate adjustment index as
provided in the respective instruments or a negotiated market rate. 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 purchase variable rate demand

                                       5
<PAGE>

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 Manager. The Manager may determine that an
unrated variable rate demand instrument meets the Fund's high quality criteria
if it is backed by a letter of credit or guarantee or is insured by an insurer
that meets the quality criteria for the Fund stated herein or on the basis of a
credit evaluation of the underlying obligor. If an instrument is ever not deemed
to be an Eligible Security, the Fund either will sell it in the market or
exercise the demand feature.


The variable rate demand instruments in which the Fund may invest 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 Manager 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. Where applicable, the Fund can 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 (i) upon a default under the terms of the bond
documents, (ii) as needed to provide liquidity to the Fund in order to make
redemptions of Fund shares or (iii) to maintain a high quality investment
portfolio. The institutions issuing the Participation Certificates will retain a
service and letter of credit fee (where applicable) and a fee for providing the
demand repurchase feature, in an amount equal to the excess of the interest paid
on the instruments over the negotiated yield at which the participations were
purchased by the Fund. The total fees generally range from 5% to 15% of the
applicable prime rate or other interest rate index. With respect to insurance,
the Fund will attempt to have the issuer of the Participation Certificate bear
the cost of the insurance. However, the Fund retains the option to purchase
insurance if necessary, in which case the cost of insurance will be an expense
of the Fund. 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.


Because the Fund may concentrate in Participation Certificates in New Jersey
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 its net assets 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. This includes, 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.

                                       6
<PAGE>


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 values of securities
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 Fund may contain variable rate demand instruments on
which stated minimum or maximum rates, or maximum rates set by state law, limit
the degree to which interest on such variable rate demand instruments may
fluctuate; to the extent 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 increase so that the
variable rate exceeds the fixed rate on the Municipal Obligations, the Municipal
Obligations can no longer be valued at par and may cause the Fund to take
corrective action, including the elimination of the instruments from the Fund.
Because the adjustment of interest rates on the variable rate demand instruments
is made in relation to movements of the applicable banks' "prime rates," or
other interest rate adjustment index, the variable rate demand instruments are
not comparable to long-term fixed rate securities. Accordingly, interest rates
on the variable rate demand instruments may be higher or lower than current
market rates for fixed rate obligations or 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 (i) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (ii) 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 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 only makes commitments to purchase when-issued Municipal
Obligations with the intention of actually acquiring them, the Fund may sell
these securities before the settlement date if deemed advisable by the Manager.

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

                                       7
<PAGE>

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. 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 will be (i) 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 (ii) 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 will 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 will be substantially the same as the market
value of the underlying Municipal Obligation.

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

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

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

The Fund intends to acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for trading
purposes. The purpose of this practice is to permit the Fund to be fully
invested in securities the interest on which is exempt from federal income tax
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 will 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 will be valued at zero in determining net asset value. In those cases in
which the Fund pays directly or indirectly for a stand-by commitment, its cost
will be reflected as unrealized depreciation for the period during which the
commitment is held by the Fund. Stand-by commitments will 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 the Fund may enter into are subject to certain risks.
These 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

                                       8
<PAGE>

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 total assets in tax-exempt
Municipal Obligations, the Fund may invest up to 20% of the value of its net
assets in securities of the kind described below. The interest income from such
securities is subject to federal or New Jersey state income tax. The Fund may
purchase and hold such taxable securities under any one or more of the following
circumstances: (i) pending investment of proceeds of sales of Fund shares or of
portfolio securities, (ii) pending settlement of purchases of portfolio
securities, and (iii) 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): (i) obligations of the
United States Government or its agencies, instrumentalities or authorities, (ii)
commercial paper meeting the definition of Eligible Securities at the time of
acquisition, (iii) certificates of deposit of domestic banks with assets of $1
billion or more, and (iv) repurchase agreements with respect to any Municipal
Obligations or other securities which the Fund is permitted to own. The Fund may
also purchase, without limit, securities and Participation Certificates whose
interest income may be subject to federal alternative minimum tax.

Repurchase Agreements

The Fund may invest in instruments subject to repurchase agreements with
securities dealers, member banks of the Federal Reserve System and other
entities the Manager has determined are credit worthy. Under the terms of a
typical repurchase agreement, the Fund will 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.
Additionally, 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 will
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, exceeds 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.

                                       9
<PAGE>

New Jersey Risk Factors


There can be no assurance that current or future statewide or regional economic
difficulties, and the resulting impact on the State of New Jersey (the "State")
or local government finances generally, will not adversely affect the market
value of New Jersey Municipal Obligations held by the Fund or the ability of
particular issuers to make timely payments of debt service on these obligations.

All estimates and assumptions of financial and other information set forth in
this section are and will be based on information currently available, are
believed to be reasonable and are not to be construed as assurances of actual
outcomes.

State Demographic and Economic Information

New Jersey is the tenth largest state in population and the fifth smallest in
land area. With an average of 1,176 persons per square mile, it is the most
densely populated of all the states. New Jersey is located at the center of the
megalopolis which extends from Boston to Washington, and which includes over
one-fifth of the country's population.

The State's economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural areas
with selective commercial agriculture. New Jersey's principal manufacturing
industries produce chemicals and pharmaceuticals, electrical equipment and
instruments, printing, machinery and food products. Other economic activities
include business and health services, wholesale and retail trade, insurance,
tourism, petroleum refining and truck farming.

New Jersey's economy continued to expand during 2007, but at a slower pace
compared to the steady economic recovery of 2006. The State added approximately
151,600 jobs between March 2003 and December 2007. Payroll employment increased
at an average annual rate of 0.6% in 2007 after growing at 0.9% in 2005. The
level of payroll employment in December 2006 was 4.1 million. The nation as a
whole experienced a 1.9% growth in payroll employment in 2006, adding jobs at a
faster pace than New Jersey for three years in a row.

New Jersey's employment increased by 0.5% in December 2006 compared to a year
ago, adding 20,500 jobs and continuing the positive year-over-year growth trend
for the thirty-fifth consecutive month. Employment gains were primarily spread
across the service providing sectors with particularly strong growth in
professional and business services (13,100 jobs) followed by educational and
health services (12,500 jobs), and leisure and hospitality services (3,800
jobs). The total government sector grew by 5,800 jobs during this same period.

However, the State continues to suffer from job losses in manufacturing (-4,800
jobs) and downsizing in the telecommunications industry (-500 jobs)

The financial services industry lost 1,700 jobs and the construction sector lost
1,400 jobs. The subprime mortgage crisis may have negative impacts on employment
in various sectors, including, but not limited to, financial services and
construction.

New Jersey's monthly unemployment rate was 4.5% in December 2007 and remains
below the national unemployment rate. This was the forty-third time since June
2004 that the State's average unemployment rate was below 5.0%.

According to the United States Commerce Department, Bureau of Economic Analysis
in a release dated December 21, 2007, the preliminary growth rate for New
Jersey's personal income of 6.4% for the third quarter of 2007 was above the
revised growth rate of 5.1% for the second quarter of 2007. However, given the
general economic slowdown in the national economy, the average annual growth in
personal income for New Jersey is expected to show growth of less than 5.0% in
2008.

The housing sector is expected to continue to weaken in the months ahead with
housing permits in 2007 declining to approximately 25,000 units, significantly
below the level of housing permits of approximately 34,000 units in 2006.
Housing permits in 2008 are expected to decline to below 25,000 housing units
due to the


                                       10
<PAGE>


weakened housing sector. Vehicle registrations for calendar year 2007 declined
1.7% compared to 2006, following a slight decline in vehicle registrations in
2006 (-0.8%). New vehicle registrations are projected to remain below the
600,000 vehicle registration level in 2008 and 2009.

New Jersey and the nation are expected to continue to experience moderating near
term economic growth in 2008. In the Beige Book report on economic performance
released by the Federal Reserve Board on January 16, 2008, the Federal Reserve
Board was more measured in describing the trends in economic conditions,
indicating a weakening in the national economy. The latest New Jersey economic
forecasts from Global Insight, Moody's Economy.com and Rutgers University expect
continued economic growth at a moderate pace, while also indicating that
economic growth may slow down due to the subprime mortgage crisis and a slowing
housing sector.

New Jersey's economy is expected to follow the national trend in 2008.
Employment is projected to expand at an approximately 0.3% average annual rate
in 2008 and improve at an approximate 0.6% average annual growth rate in 2009.
The personal income growth rate is expected to increase at a rate of less than
5.0% in 2008 and 2009.

Inflation is expected to remain under control; however, higher energy prices are
a concern. Low interest rates have supported spending on housing and other
consumer durables in the State. Further monetary easing, expected in the short
term, may provide the necessary support for continued spending on housing and
other consumer durables.

The State and the nation may experience further near-term slow growth and the
expected pace of economic expansion may stall further if consumers, investors,
and businesses become more concerned about geopolitical tensions, energy prices,
the subprime mortgages crisis and other financial market turmoil. To a large
extent, the future direction of the economy nationally and in New Jersey hinges
on the assumptions regarding economic recession, stable energy prices and
financial markets. With the passage of the federal economic stimulus package
along with supportive monetary and fiscal policies, the long term prospects for
economic growth of the State are expected to remain stable in 2008 and beyond.

State Finance

Most State Directed Services are financed through governmental funds. The
State's governmental funds are the General Fund, the Property Tax Relief Fund,
the Special Revenue Funds and the Capital Projects Funds. The General Fund is
the State's Chief Operating Fund into which all State revenues, not otherwise
restricted by statute, are deposited and from which appropriations are made. The
Property Tax Relief Fund is used to account for revenue from the New Jersey
Gross Income Tax. The Special Revenue Funds are used to account for resources
legally restricted to expenditure for specified purposes. The Capital Project
Funds are used to account for financial resources to be used for the acquisition
or construction of major State capital facilities.

Pursuant to the State Constitution, no money may be drawn from the State
Treasury except for appropriations made by law and no law appropriating money
for any State purpose may be enacted if the appropriations contained therein,
together with all prior appropriations made for the same fiscal period, exceed
the total amount of the revenue on hand and anticipated to be available to meet
such appropriations during such fiscal period. In addition, all monies for the
support of State purposes must be provided for in one general appropriation law
covering one and the same fiscal year. The State's current Fiscal Year ends June
30th.

The budget for Fiscal Year 2007 became effective July 1, 2006. The Fiscal Year
2006 budget produced a Fund Balance in the General Fund of approximately
$1,216.7 billion at the end of Fiscal Year 2006.

The State finances certain capital projects through the sale of general
obligation bonds of the State. These bonds are backed by the full faith and
credit of the State and are both legislatively and voter-approved. Certain state
tax revenues and certain other fees are pledged to meet the principal, interest
and redemption premium payments, if any, required to fully pay the debt.

The State made appropriations for principal and interest payments for general
obligation bonds for Fiscal Years 2004 through 2006 in the amounts of $442.5
million, $270.2 million and $169.3 million, respectively. The Governor's Fiscal
Year 2008 Budget Message includes an appropriation in the amount of $427.8
million for Fiscal Year 2007 and $440.4 million for Fiscal Year 2008,
representing principal and interest payments for


                                       11
<PAGE>

general obligation bonds. The aggregate outstanding general obligation bonded
indebtedness of the State as of June 30, 2006, was almost $3.1 billion.

As of June 30, 2006, S&P, Moody's and Fitch Ratings ("Fitch") rate the State's
long-term general obligation debt "AA," "Aa3," and "AA-," respectively and the
State's short-term general obligation debt "SP-1+," "MIG 1," and "F1+,"
respectively. There is no assurance that such ratings will continue for any
given period of time or that either rating will not be suspended, lowered or
withdrawn entirely by S&P, Moody's or Fitch if, in the judgment of S&P, Moody's
or Fitch, circumstances so warrant. Any explanation of the significance of the
ratings may be obtained only from S&P, Moody's and Fitch.

Aside from its general obligation bonds, the State's "moral obligation" backs
certain obligations issued by the Higher Education Student Assistance Authority,
the New Jersey Housing and Mortgage Finance Agency and the South Jersey Port
Corporation (the "Corporation"). As of June 30, 2006, there was outstanding in
excess of $1.527 billion of moral obligation bonded indebtedness issued by such
entities, for which the maximum annual debt service was approximately $79
million for Fiscal Year 2007.

In addition to the foregoing, as of June 30, 2006, there were $3.25 billion of
bonds outstanding issued by the Tobacco Settlement Financing Corporation, Inc.
backed by the State's right to receive tobacco settlement rights. Proceeds of
these bond issuances were used to fund General Fund expenditures during Fiscal
Year 2003 and Fiscal Year 2004. Under GASB Technical Bulletin No. 2004-1, the
Tobacco Settlement Financing Corporation, Inc. has been re-classified as a
blended component unit of the State from that of a discretely presented
component unit. Bonds issued by the Tobacco Settlement Financing Corporation,
Inc. are the sole obligation of the Tobacco Settlement Financing Corporation,
Inc. and the State is not liable for any debt issued by the Tobacco Settlement
Financing Corporation, Inc. nor is the debt dependent on any dedicated stream of
revenue generated by the State.

Pending Litigation

At any given time, there are various numbers of claims and cases pending or
threatened against the State, State agencies and employees, seeking recovery of
monetary damages. In addition, at any given time, there are various numbers of
claims and cases pending against the University of Medicine and Dentistry and
its employees, seeking recovery of monetary damages that are primarily paid out
of the Self Insurance Reserve Fund created pursuant to the New Jersey Tort
Claims Act. An independent study estimated an aggregate potential exposure of
$148,600,000 for tort and medical malpractice claims pending, as of December 31,
2007. In addition, at any given time, there are various numbers of contract and
other claims against the University of Medicine and Dentistry seeking recovery
of monetary damages or other relief which, if granted, would require the
expenditure of funds. The State is unable to estimate its exposure for these
claims.

New Jersey is involved in a number of lawsuits in which adverse decisions could
materially affect revenue or expenditures. Such cases include, but are not
limited to, administrative petitions of appeal to the Commissioner of Education,
filed by several Abbott districts, regarding departmental decisions rendered on
approved programs and funding for the 2001-2002 school year and on early
childhood program plans; a regulatory taking case in which the plaintiff claims
that it is entitled to in excess of $30 million in damages for a taking of its
property without just compensation; a claim against the Commission of the New
Jersey Department of Education, the New Jersey Attorney General, the Treasurer
of the State of New Jersey, the Assistant Commission of the New Jersey
Department of Education, and the Chief Executive Officer, New Jersey Schools
Construction Corporation, for injunctive and declaratory relief striking down
provisions of State law which allegedly unconstitutionally discriminate against
children attending public charter schools in Newark; a motion requesting that
the State be ordered to comply with prior State Supreme Court directives to
remediate certain school facilities; a class action against the New Jersey
Department of Education and certain district Boards of Education alleging that
the compulsory attendance laws, mandatory attendance zones and boundaries of
each district violate the Thorough and Efficient and Equal Protection Clauses of
the New Jersey Constitution and the 14th Amendment of the United States
Constitution, when such laws are applied to keep children in failing schools
within such districts; a claim against Governor Corzine that the enactment of
the new seven percent sales tax on self-storage receipts violates several State
and Federal constitutional provisions; a claim against the

                                       12
<PAGE>

New Jersey Director, Division of Taxation, regarding taxes and fees added to the
Sales and Use Tax Act by the New Jersey State Legislature; claims by a New
Jersey Transit Corporation's contractor resulting from alleged delays caused by
New Jersey Transit and changes in the contract work in the construction of the
Southern New Jersey Light Rail Transit Project; claims alleging that the State
failed to fund the Teachers' Pension and Annuity Fund in the amount and manner
proscribed by law while increasing employee contributions; claims against the
New Jersey Department of Transportation arising from a construction contract
involving the N.J. Route 35 Shark River Bridge Replacement, by a private bus
operator against New Jersey Transit Corporation alleging that New Jersey
Transit's operation of the Montclair Connection Rail Service, together with
other NJ Transit actions, was destroying the bus operator's business; an appeal
filed by several school districts against the New Jersey Department of Education
alleging that State aid has not increased in those areas in contravention of the
formula established in the Comprehensive Educational Improvement and Financing
Act; a claim by a non-profit agency against the Department of Human Services
that it is in violation of the United States Constitution's Due Process
provision, the integration mandate of the Americans with Disabilities Act and
the federal Rehabilitation Act in relation to the rights of all patients in
state psychiatric hospitals on Conditional Extension Pending Placement status;
claims by a non-profit agency against the Commission of Human Services, claiming
that the Department of Human Services, Division of Developmental Disabilities is
in violation of the Americans with Disabilities Act, the Rehabilitation Act and
the Medicaid Act and seeking community placements for the people that are
allegedly in State-operated developmental centers while awaiting community
placement; a claim by the Professional Firefighters Association of New Jersey,
alleging that the State violated various State and Federal constitutional
provisions, statutes and common law by not funding the Police and Firemen's
Retirement System ("PFRS") for Fiscal Year 2004 and Fiscal Year 2005 in the
amount required by law, and also challenging the constitutionality of a public
law that reduces the PFRS contributions required of local employers for Fiscal
Years 2004 through 2007; a challenge, brought by Horizon Blue Cross Blue Shield
of New Jersey, contesting the New Jersey Legislature's amendment to the
insurance premiums tax, removing the availability of insurance premium tax "cap"
for health service corporations.

Financing Pensions

Virtually all of the public employees of the State and its counties,
municipalities and political subdivisions are members of pension plans
administered by the State. The State operates seven retirement plans. Public
Employees' Retirement System ("PERS") and Teachers Pension and Annuity Fund
("TPAF"), are the largest plans, together covering 474,349 of the total 522,900
active members covered by all State-administered plans. The other systems are
Police and Firemen's Retirement System ("PFRS") (45,131 active members),
Consolidated Police and Firemen's Pension Fund ("CP&FPF") (no active members),
State Police Retirement System ("SPRS") (2,999 active members), Judicial
Retirement System ("JRS") (421 active members) and Prison Officers' Pension Fund
("POPF") (no active members).

State law regulates the administration of the pension fund systems. State law
requires that all such systems are subject to actuarial valuation every year and
actuarial experience investigation every three years. Such valuations and
investigations are designed to ensure that these programs adequately recognize
the additional costs resulting from experience or legislative changes in the
benefits to be paid. As these systems are designed to be fully funded reserve
programs, any amendment increasing liabilities is met by an increase in the
normal (employer) contribution as well as the establishment of an accrued
liability to be financed over a period of years as specified in the amendatory
statute. Buck Consultants, an ACS Company serves as consulting actuary for the
PERS, PFRS, SPRS, JRS, CP&FPF and POPF, while Milliman Consultants and Actuaries
serves as consulting actuary for the TPAF.

From the Fiscal Year ended June 30, 1997 through Fiscal Year ended June 20,
2003, the State made minimal contributions to the Pension Plans because the
actuarial value of the assets in each of the Pension Plans exceeded the
actuarial accrued liability and the State used that excess as a credit against
the actuarially

                                       13
<PAGE>

recommended contributions. Beginning with the actuarial valuations of the
Pension Plans as of June 30, 2002, several of the Pension Plans (including PERS
and TPAF) suffered from adverse market conditions and the Funded Ratio of these
Pension Plans declined rapidly. As a result, the actuarial recommended
contributions in those actuarial valuations steeply increased and the State was
not financially in the position to absorb the entire amount of the actuarially
recommended contributions. As a consequence, the State adopted a "phase-in"
approach to financing the State's contributions to the Pension Plans. Under this
approach, since Fiscal Year ended June 30, 2004, which was the first year in
which these increased actuarially recommended contributions applied, the State
has not paid the aggregate actuarially recommend contributions to the Pension
Plans (taking the Pension Plans as a whole). For the Fiscal Years ended June 30,
2004, June 30, 2005, June 30, 2006, and June 30, 2007, the State paid
approximately 20%, 30%, 40%, and 57.5%, respectively, of the total actuarially
recommended contributions of all of the Pension Plans.

However, for PERS and TPAF, the State's Appropriation Acts for the Fiscal Years
ended June 30, 2004, 2005 and 2006 authorized the use of the Benefit Enhancement
Fund to cover the phase-in costs for those years. The Benefit Enhancement Fund
is a special reserve fund within PERS and TPAF to which the required normal
contributions to provide retirement benefit increases under Chapter 353, P.L.
2001 and Chapter 133, P.L. 2001 was charged. The Fund was established in the
Fiscal Year ended June 30, 2002 and credited with excess assets equivalent to
member contributions for Fiscal Years ended June 30, 2000 and 2001 by
transferring reserves in the Contingent Reserve Fund to the Benefit Enhancement
Fund. Amounts in the Benefit Enhancement Fund for each of PERS and TPAF were
calculated within the respective actuarial value of assets and the related
retirement benefits were calculated within the respective actuarial accrued
liabilities. Therefore, because the State used amounts from the Benefit
Enhancement Fund to pay its contributions in Fiscal Years ended June 30, 2004
through 2006, from an actuarial perspective, the State did not contribute any
funds to PERS or TPAF in the Fiscal Years ended June 30, 3004 and 2005 and the
State contributed minimal amounts in the Fiscal Year ended June 30, 2006. The
Benefit Enhancement Fund became fully depleted in the Fiscal Year ended June 30,
2006 and the State made a contribution to PERS and TPAF representing
approximately 57.5% of the actuarially recommended contributions of those
Pension Plans for the Fiscal Year ended June 30, 2007.

For the Fiscal Year ended June 30, 2007, the State's total contribution to the
Pension Plans was $1.082 billion. This total contribution represents
approximately 57.5% of the aggregate actuarially recommended contributions for
the State for the Pension Plans, which was approximately $1.842 billion. For the
Fiscal Year ending June 30, 2008, the State has appropriated $1.113 billion to
contribute to the Pension Plans. This amount represents approximately 50.0% of
the aggregate actuarially recommended contribution for the State for all of the
Pension Plans, which is approximately $2.158 billion. Based on the Governor's
Fiscal Year 2009 Budget Message, the State is expected to make a contribution of
$1.115 billion to the Pension Plans in Fiscal Year 2009. This estimated
contribution represents approximately 50% of the aggregate actuarially
recommended contribution for the State for all of the Pension Plans, which is
approximately $2.23 billion.

The Fund believes the information summarized above describes some of the more
significant aspects relating to the Fund. The sources of such information are
the Official Statements of securities offerings of the State of New Jersey as
well as other publicly available documents, with the most recent information
having been drawn from the Official Statement dated April 9, 2008, relating to
$309,240,000 Certificates of Participation in Basic Lease Payments by the State
of New Jersey. While the Fund has not independently verified the accuracy and
completeness of the information contained in such Official Statements, it has no
reason to believe that such information is not correct in all material aspects.


Investment Restrictions

The Fund has adopted the following fundamental investment restrictions. They may
not be changed unless approved by a majority of the outstanding shares of the
Fund. The term "majority of the outstanding shares" of the

                                       14
<PAGE>

Fund means 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 not:

(1)  Make portfolio investments other than as described under "Description of
     the Fund and Its Investments and Risks". Any other form of federal
     tax-exempt investment must meet the Fund's high quality criteria, as
     determined by the Manager, and be 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. This includes the meeting
     of redemption requests that might otherwise require the untimely
     disposition of securities, in an amount up to 15% of the value of the
     Fund's total assets (including the amount borrowed) valued at market less
     liabilities (not including the amount borrowed) at the time the borrowing
     was made. While borrowings exceed 5% of the value of the Fund's total
     assets, the Fund will not make any investments. Interest paid on borrowings
     will reduce net income.

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

(4)  Sell securities short or purchase securities on margin, or engage in the
     purchase and sale of put, call, straddle or spread options or in writing
     such options. However, securities subject to a demand obligation and
     stand-by commitments may be purchased as set forth under "Description of
     the Fund and Its Investments and Risks" herein.

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

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

(7)  Purchase or sell real estate, real estate investment trust securities,
     commodities or commodity contracts, or oil and gas interests. 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 "Description of the
     Fund and Its Investments and Risks" herein.

(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. 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 will 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-government user,
     then such non-government user will 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
     will be considered a separate security and will 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 of the 1940 Act), with respect to 75% of the total
     assets of the Fund, not

                                       15
<PAGE>

     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
     (as such term is defined in Rule 2a-7 of the 1940 Act).

(11) Invest in securities of other investment companies. 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 a 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.

Disclosure of Portfolio Holdings

The Fund's Board of Directors has adopted the Manager's policies and procedures
relating to the disclosure of Fund portfolio holdings information (the
"Policy"). The Policy prohibits the disclosure of portfolio holdings unless: (1)
the disclosure is in response to a regulatory request and the Chief Compliance
Officer ("CCO") of the Fund has authorized such disclosure; (2) the disclosure
is to a mutual fund rating or statistical agency or person performing similar
functions where there is a legitimate business purpose for such disclosure and
such entity has signed a confidentiality or similar agreement, where available,
with the Fund or its agents and the CCO of the Fund has authorized such
disclosure (procedures to monitor the use of any non-public information by these
entities may include (a) annual certifications relating to the confidentiality
of such information or (b) the conditioning of the receipt of such information
upon the entity agreeing to maintain the confidentiality of the information,
along with other representations, where such representations accompany the
transmittal of the information); (3) the disclosure is made to parties involved
in the investment process, administration or custody of the Fund, including its
Board of Directors; (4) the disclosure is in connection with (a) a quarterly,
semi-annual or annual report that is available to the public or (b) other
periodic disclosure that is publicly available; or (5) the disclosure is made
pursuant to prior written approval of the CCO of the Fund. The Manager shall not
accept on behalf of itself, its affiliates or the Fund any compensation or other
consideration in connection with the disclosure of portfolio holdings of such
Fund. Any disclosure made pursuant to Item 5 above is reported to the Board at
the next quarterly meeting. This Policy may change at any time without prior
notice to shareholders.

Subject to the Fund's policies described in Item 2 above, the Manager and/or the
Fund maintains ongoing arrangements with the following rating or statistical
agencies or agencies providing similar functions pursuant to which non-public
information about the Fund's portfolio securities holdings, including
information derived from such holdings (e.g., breakdown of portfolio holdings by
securities type, percentage of holdings subject to alternative minimum tax,
weighted average maturity of the portfolio, etc.), may be provided:

<TABLE>
<CAPTION>
<S>                                                                     <C>                     <C>
Entity and Type of Information                                          Frequency               Lag Time
------------------------------                                          ---------               --------
iMoneyNet, Inc. (information derived from the portfolio)                Weekly                  1 business day lag

Investment Company Institute (information derived from the portfolio)   Monthly                 10 business day lag

Lipper, Inc. (information derived from the portfolio)                   Quarterly               15 calendar day lag

</TABLE>

In addition, portfolio holdings information may be provided to the Fund's
service providers on an as-needed basis in connection with the services provided
to the Fund by such service providers. Information may be provided to these

                                       16
<PAGE>

parties without a time lag. Service providers that may be provided with
information concerning the Fund's portfolio holdings include the Manager and its
affiliates, legal counsel, independent registered public accounting firm,
custodian, fund accounting agent, and financial printers. Portfolio holdings
information may also be provided to the Fund's Board of Directors.

The entities to whom the Fund provides portfolio holdings information, either by
explicit arrangement or by virtue of their respective duties to the Fund, are
required to maintain the confidentiality of the information provided. Neither
the Fund nor the Manager or its affiliates receives any compensation or other
consideration in connection with these ongoing arrangements. There can be no
guarantee that the Policy will be effective in preventing the potential misuse
of confidential information regarding the Fund's portfolio holdings by
individuals or entities in possession of such information.

III.  MANAGEMENT OF THE FUND

The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, employs 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. Due to the services performed by the
Manager, the Fund currently has no employees and its officers are not required
to devote their full-time to the affairs of the Fund.


The Board has an Audit Committee that meets at least annually to assist the
Board in selecting, overseeing and setting the compensation of the Fund's
independent registered public accounting firm. The Audit Committee is
responsible for pre-approving all audit or non-audit services performed by the
independent registered public accounting firm for the Fund and for pre-approving
certain non-audit services performed by the independent registered public
accounting firm for the Manager and certain control persons of the Manager. The
Audit Committee also meets with the Fund's independent registered public
accounting firm to review the Fund's financial statements and to report on its
findings to the Board, and to provide the independent registered public
accounting firm the opportunity to report on various other matters. The Audit
Committee is chaired by Edward A. Kuczmarski, with Albert R. Dowden, Dr. W.
Giles Mellon and James L. Schultz serving as members. The Audit Committee met
five times during the fiscal year ended January 31, 2008.

The Board also has a Nominating Committee comprised of Albert R. Dowden, Carl
Frischling, Edward A. Kuczmarski, William Lerner, Dr. W. Giles Mellon, James L.
Schultz, Robert Straniere and Dr. Yung Wong to whose discretion the selection
and nomination of Directors who are not "interested persons," as defined in the
1940 Act, of the Fund is committed. The Nominating Committee held one meeting
during the fiscal year ended January 31, 2008. Nominees recommended by
shareholders are considered by the Nominating Committee to the extent required
by applicable law.

The Board also has a Compliance Oversight Committee. The Compliance Oversight
Committee is chaired by William Lerner, with Carl Frischling and Robert
Straniere serving as members. The Compliance Oversight Committee is responsible
for reviewing compliance related matters raised by the Fund's Chief Compliance
Officer. The Compliance Oversight Committee met four times during the fiscal
year ended January 31, 2008.


In addition to serving on the Fund's Nominating Committee, Dr. Yung Wong, the
Fund's Lead Independent Director, will attend Audit Committee meetings and
Compliance Oversight Committee meetings at his discretion.

The following table shows the Directors and Officers of the Fund and their
principal occupations during the past five years. Unless otherwise specified,
the address of each of the following persons is 600 Fifth Avenue, New York, New
York 10020.

                                       17
<PAGE>

<TABLE>
<CAPTION>
<S>                       <C>          <C>        <C>                    <C>                              <C>            <C>
                                                  Directors and Officers Information
---------------------- ----------- ---------------- ------------------------------------------------ --------------  -------------
  Name, Address,       Position(s) Term of Office                 Principal Occupation(s)           Number of           Other
     and Age            Held with   and Length of                       During Past                Portfolios        Directorships
                          Fund     Time Served (1)                        5 Years                    in Fund            held by
                                                                                                     Complex            Director
                                                                                                   Overseen by
                                                                                                     Director
-------------------------------   ------------- ------------------------------------------------  --------------    ---------------
Disinterested Directors:
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------

Albert R. Dowden,      Director    Since 2006   Corporate Director/Trustee for Annuity & Life Re  Director/Trustee  Director/Trustee
Age 66                                          (Holdings) Ltd., Boss Group, Ltd., Homeowners of    of seven        for Annuity &
                                                America Holding Corporation, AIM Funds and          Portfolios          Life Re
                                                CompuDyne Corporation.                                                 (Holdings)
                                                                                                                      Ltd., Boss
                                                                                                                      Group, Ltd.,
                                                                                                                     Homeowners of
                                                                                                                    America Holding
                                                                                                                      Corporation,
                                                                                                                      AIM Funds and
                                                                                                                       CompuDyne
                                                                                                                      Corporation.
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
Carl Frischling, Esq.,  Director Since 2006    Partner of Kramer Levin Naftalis & Frankel LLP (a  Director/Trustee   Director of AIM
Age 71                                         law firm) with which he has been associated with     of seven             Funds.
                                               since 1994.                                         Portfolios
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
Edward A. Kuczmarski,   Director Since 2006    Certified Public Accountant and Partner of Hays    Director/Trustee   Trustee of the
Age 58                                         & Company LLP since 1980.                            of eleven        Empire Builder
                                                                                                   Portfolios        Tax Free Bond
                                                                                                                     Fund and
                                                                                                                     Director of ISI
                                                                                                                     Funds.
---------------------- ---------   ------------- ------------------------------------------------  --------------    ---------------
William Lerner, Esq.,   Director  Since 2006   Self-employed consultant to business entities and  Director/Trustee   Director of MTM
Age 71                                         entrepreneurs for corporate governance and corporate   of seven        Technologies,
                                               secretarial services.                                 Portfolios      Inc. and Coach
                                                                                                                       Industries
                                                                                                                       Group, Inc.
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
Dr. W. Giles Mellon,    Director  Since 1987   Professor Emeritus of Business Administration in   Director/Trustee        None
Age 77                                         the Graduate School of Management, Rutgers             of ten
                                               University with which he has been associated         Portfolios
                                               since 1966.
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
James L. Schultz,       Director  Since 2006   Self-employed as a consultant.                     Director/Truste    Director of
Age 71                                                                                                of seven       Computer
                                                                                                    Portfolios       Research, Inc.
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
Robert Straniere, Esq., Director  Since 1987   Owner, Straniere Law Firm since 1980, NYS          Director/Trustee   Director of
Age 67                                         Assemblyman from 1981 to 2004.  Partner,               of ten         Sparx Japan
                                               Hantor-Davidoff law firm since May, 2006.             Portfolios      Funds.
                                               Partner, Gotham Global Group since June,
                                               2005.  President, NYC Hot Dog Co., since
                                               November, 2005.  Counsel at Fisher &
                                               Fisher from 1995 to 2006.
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
Dr. Yung Wong,          Director  Since 1987   Managing Director of Abacus Associates, an         Director/Trustee        None
Age 69                                         investment firm, since 1996.                           of ten
                                                                                                     Portfolios
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
------------------------------------------------------------------------------------------------------------------------------------
Interested Directors/Officers:
------------------------------------------------------------------------------------------------------------------------------------
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
Steven W. Duff,         Director2 Since 1994   President and Chief Executive Officer of Reich     Director/Trustee        None
Age 54                                         & Tang Asset Management, LLC (the "Manager"), a        of ten
                                               registered Investment Advisor and Chief Investment    Portfolios
                                               Officer of the Mutual Funds Division of the Manager.
                                               Mr. Duff has been associated with the Manager since
                                               August 1994.  Mr. Duff is also Director/Trustee of
                                               six other funds in the Reich & Tang Fund Complex.
                                               Prior to December 2007,  Mr. Duff was President of
                                               the Fund and President of eight other funds in the
                                               Reich & Tang Fund Complex, Director of Pax World
                                               Money Market Fund, Inc., Principal Executive Officer
                                               of Delafield Fund, Inc. and President and Chief
                                               Executive Officer of Tax Exempt Proceeds Fund, Inc.  Mr.
                                               Duff also serves as a Director of Reich & Tang Services,
                                               Inc. and Director, Chief Executive Officer and President
                                               of Reich & Tang Distributors, Inc.
---------------------- --------   ------------- ------------------------------------------------  --------------    ---------------

</TABLE>


                                       18
<PAGE>

<TABLE>
<CAPTION>
<S>                       <C>          <C>        <C>                    <C>                              <C>            <C>
                                                  Directors and Officers Information
---------------------- ----------- ---------------- ------------------------------------------------ --------------  -------------
  Name, Address,       Position(s) Term of Office                 Principal Occupation(s)           Number of           Other
     and Age            Held with   and Length of                       During Past                Portfolios        Directorships
                          Fund     Time Served (1)                        5 Years                    in Fund            held by
                                                                                                     Complex            Director
                                                                                                   Overseen by
                                                                                                     Director
-------------------------------   ------------- ------------------------------------------------  --------------    ---------------
Disinterested Directors:
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------

---------------------- --------   ------------- ------------------------------------------------  --------------    ---------------
Michael Lydon,         President  Since 2007   Executive Vice President of the Manager and        Director/Trustee       None
Age 45                 and                     President and Chief Executive Officer of the           of nine
                       Director(2)             Mutual Funds division of the Manager. Mr. Lydon       Portfolios
                                               was Vice President at Automatic Data Processing
                       Vice       2005 to      from July 2000 to December 2004.   Mr. Lydon is
                       President  2007         also President and Director/Trustee of four other
                                               funds in the Reich & Tang Fund Complex, President
                                               to New York Daily Tax Free Income Fund, Inc.,
                                               Director of Pax World Money Market Fund, Inc.,
                                               Principal Executive Officer of Delafield Fund, Inc.
                                               and President and Chief Executive Officer of Tax
                                               Exempt Proceeds Fund, Inc.  Mr. Lydon also serves
                                               as President and Chief Executive Officer for Reich &
                                               Tang Services, Inc.  Prior to December 2007, Mr.
                                               Lydon was Vice President of eleven other Funds in
                                               the Reich & Tang Fund Complex.
---------------------- --------   ------------- ------------------------------------------------  --------------    ---------------
Christopher Brancazio,  Chief       Since       Vice President, Chief Compliance Officer, AML          N/A              N/A
Age 42                  Compliance  2007        Officer and Secretary of the Manager since
                        Officer                 September 2007.  Mr. Brancazio is also Chief
                        and AML                 Compliance Officer and AML Officer of eight
                        Officer                 other funds in the Reich & Tang Fund Complex.
                                                From February 2007 to August 2007, Mr. Brancazio
                                                was a Compliance Officer at Bank of New York Asset
                                                Management.  From March 2002 to February 2007 Mr.
                                                Brancazio served as Vice President, Chief Compliance
                                                Officer, and AML Officer of Trainer Wortham & Co.
                                                Inc., and the Trainer Wortham Mutual Funds.  Mr.
                                                Brancazio also serves as Vice President, Chief
                                                Compliance Officer, AML Officer and Secretary of
                                                Reich & Tang Services, Inc. and Reich & Tang
                                                Distributors, Inc.
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
Richard De Sanctis,     Vice         Since      Executive Vice President and Chief Operating          N/A              N/A
Age 51                  President    2005       Officer of the Manager and of Reich & Tang
                                                Services, Inc. Associated with the Manager since
                        Treasurer    1992 -     1990. Mr. De Sanctis is also Vice President of
                        and          2004       eight other funds in the Reich & Tang Fund
                        Assistant               Complex and serves as Executive Vice President
                        Secretary               and Chief Financial Officer of Reich & Tang
                                                Distributors, Inc.  Prior to December 2004, Mr.
                                                De Sanctis was Treasurer and Assistant Secretary
                                                of eleven funds in the Reich & Tang Fund Complex
                                                and Vice President, Treasurer and Assistant
                                                Secretary of Cortland Trust, Inc.
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
Joseph Jerkovich,       Vice        Since       Senior Vice President and Chief Financial Officer     N/A              N/A
Age 40                  President   2008        of the Manager and of Reich & Tang Services, Inc.
                                                Associated with the Manager since September 2004.
                                                Mr. Jerkovich is Vice President of eight other funds
                                                in the Reich & Tang Fund Complex and is also Senior
                                                Vice President and Controller of Reich & Tang
                                                Distributors, Inc.
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
Christine Manna,         Secretary   Since      Vice President and Assistant Secretary of the         N/A              N/A
Age 38                               2007       Manager.  Ms. Manna is also Secretary of eight
                                                other funds in the Reich & Tang Complex.  Ms.
                                                Manna has been associated with the Manager and
                                                its predecessors since June 1995.  Ms. Manna is
                                                also Vice President and Assistant Secretary of
                                                Reich & Tang Services, Inc. and Reich & Tang
                                                Distributors, Inc.
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
Anthony Pace,           Treasurer    Since      Vice President of the Manager since September 2004.    N/A              N/A
Age 42                  and          2004       Mr. Pace was a Director of a Client Service Group at
                        Assistant               GlobeOp Financial Services, Inc. from May 2002 to
                        Secretary               August 2004 and Controller/Director of Mutual Fund
                                                Administration for Smith Barney Funds Management
                                                LLC and Solomon Brothers Asset Management Inc. from
                                                1998 to May 2002. Mr. Pace is also Treasurer and
                                                Assistant Secretary of eight other funds in the
                                                Reich & Tang Fund Complex.
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------
Robert Rickard,         Vice         Since      Senior Vice President of the Manager. Associated           N/A              N/A
Age 39                  President    2007       with the Manager since December 1991. Mr. Rickard
                                                is also Vice President of eight other funds in the
                                                Reich & Tang Fund Complex and is also Senior Vice
                                                President of Reich & Tang Distributors, Inc.
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------

<FN>
(1) Each Director will hold office for an indefinite term until the earliest of
(i) the next meeting of shareholders, if any, called for the purpose of
considering the election or re-election of such Director and until the election
and qualification of his or her successor, if any, elected at such meeting, or
(ii) the date a Director resigns or retires, or a Director is removed by the
Board of Directors or shareholders, in accordance with the Fund's Articles of
Incorporation, as amended, and Amended and Restated By-Laws. Each officer will
hold office for an indefinite term until the date he or she resigns or retires
or until their successor is elected and qualifies.

(2) Steven W. Duff and Michael P. Lydon may be deemed interested persons of the
Fund, as defined in the 1940 Act, due to their affiliation with the Manager.
</FN>

</TABLE>


                                       19
<PAGE>

<TABLE>
<CAPTION>
<S>                                      <C>            <C>                     <C>                <C>
                                                                                 Aggregate Dollar Range of Equity Securities in
                                         Dollar Range of Equity Securities in   All Funds Overseen or to be Overseen by Director
Name of Director                                       the Fund                   or Nominee in Family of Investment Companies
---------------                          ------------------------------------   ------------------------------------------------
Disinterested Directors:
-----------------------

Albert R. Dowden                                        None                                         None


Carl Frischling                                         None                                  $50,001 - $100,000


Edward A. Kuczmarski                                $1 - $10,000                              $10,001 - $50,000

William Lerner                                          None                                         None


Dr. W. Giles Mellon                                     None                                     Over $100,000


James L. Schultz                                        None                                     $1 - $10,000

Robert Straniere                                        None                                   $50,001 - $100,000

Dr. Yung Wong                                           None                                    Over $100,000

Interested Directors:

-------------------
Steven W. Duff                                          None                                    Over $100,000

Michael P.Lydon                                         None                                    Over $100,000

</TABLE>


The Fund paid an aggregate remuneration of $7,787 to its directors with respect
to the period ended January 31, 2008, all of which consisted of Directors' fees
paid to the eight disinterested Directors, pursuant to the terms of the
Investment Management Contract (see "Investment Advisory and Other Services"
herein).

Effective January 1, 2008, the Directors of the Fund not affiliated with the
Manager will be paid a fee that is to be allocated among multiple funds, as
defined below. Each Independent Director will receive an annual retainer of
$60,000 and a fee of $3,000 for each Board of Directors meeting attended. Each
Independent Director will also receive a fee of up to $1,500 at the discretion
of the Lead Independent Director for telephonic Board meetings and committee
meetings that are not held on the same day as a Board Meeting. In addition, the
Lead Independent Director will receive an additional annual fee of $13,800,
payable quarterly and the Audit Committee Chairman and Compliance Committee
Chairman will each receive an additional annual fee of $9,200, payable
quarterly. Each Independent Director will also be reimbursed for all
out-of-pocket expenses relating to attendance at such meetings. The fees noted
above are to be allocated at the discretion of the Manager among certain funds
in the Reich & Tang Fund complex. The Independent Directors' fees will be
allocated among the Fund, the California Daily Tax Free Income Fund, Inc., the
Connecticut Daily Tax Free Income Fund, Inc., the Daily Income Fund and the
Florida Daily Municipal Income Fund in accordance with the Manager's discretion.
Directors who are affiliated with the Manager do not receive compensation from
the Fund. (See "Compensation Table.")



                                       20
<PAGE>

<TABLE>
<CAPTION>
                                                             Compensation Table

                           Aggregate Compensation    Pension or Retirement       Estimated Annual       Total Compensation From
                                From the Fund      Benefits Accrued as Part  Benefits Upon Retirement  Fund and Fund Complex Paid
     Name of Person,                                   of Fund Expenses                                      to Directors*
         Position


<S>                                <C>                       <C>                     <C>                 <C>
Albert R. Dowden,                 $843                        0                       0                  $69,500 (5 Funds)
Director

Carl Frischling,                  $789                        0                       0                  $57,244 (5 Funds)
Director

Edward A. Kuczmarski              $1,139                      0                       0                  $109,775 (10 Funds)
Director

William Lerner,                   $945                        0                       0                  $75,999 (5 Funds)
Director

Dr. W. Giles Mellon,              $989                        0                       0                  $82,500 (9 Funds)
Director

James L. Schultz,                 $843                        0                       0                  $69,500 (5 Funds)
Director

Robert Straniere,                 $1,041                      0                       0                  $86,900 (9 Funds)
Director

Dr. Yung Wong,                    $1,198                      0                       0                  $100,901 (9 Funds)
Director

<FN>

* The total compensation paid to such persons by the Fund and Fund Complex for
  the fiscal year ending January 31, 2008. The parenthetical number represents
  the number of investment companies (including the Fund) from which the
  directors receive compensation. A Fund is considered to be in the same Fund
  complex if, among other things, it shares a common investment adviser with the
  Fund.
</FN>

</TABLE>

Information About Proxy Voting

Information regarding the Fund's proxy voting record for the 12 month period
ending June 30 of each year is filed with the SEC on Form N-PX no later than
August 31 of each year. The Fund's Form N-PX is available without charge, upon
request, by calling the Fund toll free at (800) 433-1918 and on the SEC's
website (http//www.sec.gov). The Fund does not presently invest in voting
securities and has therefore not adopted proxy voting policies and procedures.

IV.  CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES


On April 30, 2008 there were 53,706,189 Class A shares outstanding and
26,949,378 Class B shares outstanding. As of April 30, 2008, the amount of
shares owned by all officers and directors of the Fund, as a group, was less
than 1% of the outstanding shares. Set forth below is certain information as to
persons who owned 5% or more of any Class of the Fund's outstanding shares as of
April 30, 2008:


                                       21
<PAGE>

                                                                    Nature of
Name and Address                              % of Class            Ownership
----------------                              ----------            ---------

Class A Shares
--------------

Lehman Brothers for the Exclusive               27.19%               Record
Benefits of Customers
70 Hudson Street - 7th Floor
Jersey City, NJ 07302

ICCC                                            24.84%               Record
Attn:  Commissions/Special Services
210 West 10th Street
Kansas City, MO 64105

Pershing LLC                                    13.06%               Record
Attn: Cash Management Services
One Pershing Plaza
Jersey City, NJ 07399

Mr. Robert Newhouse Jr.                          8.42%              Beneficial
5 North Pond Drive
Short Hills, NJ 07078-3217


Class B Shares
-------------

Oppenheimer & Co.                               78.82%               Record
For the Benefit of Various Customers
125 Board Street
New York, NY 10004

Pershing LLC                                    13.85%               Record
Attn:  Cash Management Services
One Pershing Plaza
Jersey City, NJ 07399


V.  INVESTMENT ADVISORY AND OTHER SERVICES


 The investment manager for the Fund is Reich & Tang Asset Management, LLC, a
Delaware limited liability company, with principal offices at 600 Fifth Avenue,
New York, New York 10020. The Manager was, as of April 30, 2008, investment
manager, adviser, or sub-adviser with respect to assets aggregating in excess of
$17.5 billion. The Manager has been an investment adviser since 1970 and
currently is manager or sub-adviser of seventeen portfolios of registered
investment companies, of which it acts as administrator for twelve. The Manager
also advises high net worth individuals, private funds, pension trusts,
profit-sharing trusts and endowments.

The Manager is a direct subsidiary of Natixis Global Asset Management, L.P.
(formerly IXIS Asset Management US Group, L.P.) which owns, in addition to the
Manager, a number of other asset management and distribution and service
entities. Natixis Global Asset Management, L.P. is part of Natixis Global Asset
Management (formerly IXIS Asset Management Group), an international asset
management group based in Paris, France, that is ultimately owned principally,
directly or indirectly, by three large French financial services entities:
Natixis, an investment banking and financial services firm; the Caisse Nationale
des Caisses d'Epargne ("CNCE"), a financial institution owned by French regional
savings banks known as the Caisses d'Epargne; and Banque Federale des Banques
Populaires ("BFBP"), a financial institution owned by regional cooperative banks
known as the Banques Populaires. Natixis, CNCE and BFBP (the "Affiliated
Owners") each owns, directly or indirectly, other investment advisers
established in various jurisdictions. Natixis Global Asset Management, L.P.,
which owns the Manager and is indirectly owned by the Affiliated Owners, is the
direct and indirect owner of various investment advisers.


                                       22
<PAGE>

The fifteen affiliated asset management firms of Natixis Global Asset
Management, L.P., collectively, have more than $291.4 billion in assets under
management or administration as of March 31, 2008.

On March 11, 2008, the Board of Directors, including a majority of the Directors
who are not interested persons (as defined in the 1940 Act) of the Fund or the
Manager, most recently approved the continuance of the Investment Management
Contract for a term extending to April 30, 2009. The contract may be continued
in force for successive twelve-month periods beginning each May 1, provided that
such continuance is specifically approved annually by a majority vote of the
Fund's outstanding voting securities or by its Board of Directors, and in either
case by a majority of the Directors who are not parties to the Investment
Management Contract or interested persons of any such party, by votes cast in
person at a meeting called for the purpose of voting on such matter.


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 also 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, officers
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 a 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.

Under the Investment Management Contract, the Manager receives from the Fund a
fee equal to 0.30% per annum of the Fund's average daily net assets. The fees
are accrued daily and paid monthly.


Any portion of the total fees received by the Manager may be used by the Manager
to provide shareholders services and for distribution of Fund shares. For the
fiscal years ended January 31, 2008, January 31, 2007 and January 31, 2006, the
Manager received management fees as set forth in the table below:


                                    Management Fees

     Fiscal Year Ended           Payable            Waived       Paid
-----------------------------------------------------------------------------

      January 31, 2008           $292,258            $0          $292,258

-----------------------------------------------------------------------------
      January 31, 2007           $403,336          $29,647       $373,689
-----------------------------------------------------------------------------
      January 31, 2006           $455,987            $0          $455,987
-----------------------------------------------------------------------------


The Fund's net assets at the close of business on January 31, 2008 totaled
$78,423,506.

Pursuant to the Administrative Services Contract with the Fund, the Manager also
performs clerical, accounting supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of accounting related services by The Bank of New York, the Fund's
accounting 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 0.21% per annum of the Fund's average daily net assets.
For the fiscal years ended January 31, 2008, January 31, 2007 and January 31,
2006, the Manager received the administrative fees set forth in the table below:



                                       23
<PAGE>

                               Administrative Fees

     Fiscal Year Ended           Payable           Waived       Paid
----------------------------------------------------------------------------

       January 31, 2008          $204,581            $0          $204,581

----------------------------------------------------------------------------
       January 31, 2007          $282,335          $10,871       $271,464
----------------------------------------------------------------------------
       January 31, 2006          $319,191            $0          $319,191
----------------------------------------------------------------------------

The Manager at its discretion may waive its rights to any portion of the
management or the administrative services fee and may use any portion of these
fees for purposes of shareholder and administrative services and distribution of
the Fund's shares. There can be no assurance that such fees will be waived in
the future.

Investment management fees and operating expenses which are attributable to all
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 expenses for
shareholder and distribution services provided by Participating Service
Organizations to shareholders pursuant to the Distribution and Service Plans may
be compensated by the Fund's distributor from its own resources which includes
the shareholder servicing fees and past profits, and by the Manager from its own
resources which includes the management fee, administrative services fee and
past profits. Expenses incurred in the distribution of Class B shares and the
servicing of Class B shares shall be paid by the Manager. (See "Distribution and
Service Plans" herein).

Distribution and Service Plans

The Fund's Board of Directors has adopted a distribution and service plan (the
"Class A and Class B Plan") and, pursuant to the Class A and Class B Plan, the
Fund has entered into a Distribution Agreement (with respect to both Class A and
Class B) and a Shareholder Servicing Agreement (with respect to Class A only)
with the Distributor, as distributor of the Fund's shares. The Fund's Board of
Directors had also adopted a distribution and service plan for the J.P. Morgan
Select Class (the "Morgan Class") of shares (the "Morgan Class Plan" and
collectively with the Class A and Class B Plan, the "Plans") and, pursuant to
the Morgan Class Plan, the Fund had entered into a Distribution Agreement and a
Shareholder Servicing Agreement for the Morgan Class with the Distributor, as
distributor of the Fund's shares. On April 20, 2006, the Board of Directors
approved the closing of the Morgan Class. The Morgan Class liquidated effective
May 24, 2007.


Under the Distribution Agreements, the Distributor, as agent for the Fund, will
solicit orders for the purchase of the Fund's shares, provided that any
subscriptions and orders will not be binding on the Fund until accepted by the
Fund as principal. The Distribution Agreements provide that the Distributor will
receive nominal consideration (i.e., $1.00) for providing distribution related
services.


Under the Shareholder Servicing Agreements, the Distributor receives from the
Fund a service fee equal to 0.20% per annum of the Fund's average daily net
assets of the Class A shares and Morgan Class shares (the "Shareholder Servicing
Fee") for providing personal shareholder services and for the maintenance of
shareholder accounts.

The Shareholder Servicing Fee is accrued daily and paid monthly. Any portion of
the fee may be deemed to be used by the Distributor for providing servicing and
for payments to Participating Organizations with respect to servicing their
clients or customers who are Class A and Morgan Class shareholders of the Fund.
The Class B shareholders will generally not receive the benefit of such services
from Participating Organizations and, therefore, will not be assessed a
shareholder servicing fee.

The following table provides the total fees paid by each Class of the Fund
pursuant to the Plans and the manner in which payments were made pursuant to the
Plans for certain types of activities for the fiscal year ended January 31,
2008:


                                       24
<PAGE>


<TABLE>
<CAPTION>


                                                                              Class A             Class B           Morgan Class
                                                                               Shares              Shares              Shares
                                                                         ------------------- ------------------- -------------------
<S>                                                                            <C>                  <C>                 <C>
Total fees paid by each Class of the Fund under the Plans:                     $143,225              $0                $190
------------------------------------------------------------------------ ------------------- ------------------- -------------------
Payments made by the Manager and Distributor to or on behalf of
Participating Organizations:                                                   $362,048           $89,165              $616
------------------------------------------------------------------------ ------------------- ------------------- -------------------
Breakdown of payments made pursuant to the Plans for certain types of
activities:
------------------------------------------------------------------------ ------------------- ------------------- -------------------
 Advertising:                                                                     $0                 $0                  $0
------------------------------------------------------------------------ ------------------- ------------------- -------------------
 Printing and mailing of prospectuses to other than current
 shareholders:                                                                  $1,207              $1,207               $0
------------------------------------------------------------------------ ------------------- ------------------- -------------------
 Compensation to underwriters:                                                    $0                 $0                  $0
------------------------------------------------------------------------ ------------------- ------------------- -------------------
 Compensation to broker-dealers:                                               $362,048           $89,165              $616
------------------------------------------------------------------------ ------------------- ------------------- -------------------
 Compensation to sales personnel:                                               $3,275             $3,274                $0
------------------------------------------------------------------------ ------------------- ------------------- -------------------
 Interest, carrying or other financing charges:                                   $0                 $0                  $0
------------------------------------------------------------------------ ------------------- ------------------- -------------------
 Travel and entertainment for sales personnel:                                   $218               $218                 $0
------------------------------------------------------------------------ ------------------- ------------------- -------------------
 Miscellaneous Expenses:                                                         $43                $43                  $0
------------------------------------------------------------------------ ------------------- ------------------- -------------------

</TABLE>


For the fiscal year ended January 31, 2008, the total amount spent pursuant to
the Class A and Class B Plan for the Class A shares was 0.51% of the average
daily net assets of the Class A shares of the Fund, of which 0.20% of the
average daily net assets was paid by the Fund to the Distributor, pursuant to
the Shareholder Servicing Agreement, and an amount representing 0.31% was paid
by the Manager (which may be deemed an indirect payment by the Fund). The excess
of such payments over the total payments the Distributor received from the Fund
under the Class A and Class B Plan represents distribution and servicing
expenses funded by the Manager from its own resources, including the management
and administrative services fees.

For the fiscal year ended January 31, 2008, the total amount spent pursuant to
the Class A and Class B Plan for the Class B shares was 0.37% of the average
daily net assets of the Class B shares of the Fund. These payments represent
distribution and servicing expenses funded by the Manager (which may be deemed
an indirect payment by the Fund).

For the fiscal year ended January 31, 2008, the total amount spent pursuant to
the Morgan Class Plan for the Morgan Class was 0.65% of the average daily net
assets of the Morgan Class of shares of the Fund, of which 0.20% of the average
daily net assets was paid by the Fund to the Distributor, pursuant to the
Shareholder Servicing Agreement for the Morgan Class, and an amount representing
0.45% was paid by the Manager (which may be deemed an indirect payment by the
Fund). The excess of such payments over the total payments the Distributor
received from the Fund under the Morgan Class Plan represents distribution and
servicing expenses funded by the Manager from its own resources, including the
management and administrative services fees.*

The Plans and the Shareholder Servicing Agreements 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 Distributor and Participating Organizations in carrying out their
obligations under the Shareholder Servicing Agreements with respect to the Class
A Shares and Morgan Class Shares or the Participating Organization agreement, as
the case may be, and (ii) preparing, printing and delivering the Fund's
prospectus to existing shareholders of the Fund and preparing and printing Fund
application forms for shareholder accounts.

______________________________________________
*The Morgan Class shares liquidated May 24, 2007.

                                       25
<PAGE>

The Plans provide that the Manager may make payments from time to time from its
own resources, which may include the management fee, administrative services fee
and past profits for the following purposes: (i) to pay 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 and
Morgan Class shares of the Fund, (ii) to compensate certain Participating
Organizations for providing assistance in distributing the Fund's Class A and
Morgan Class shares, and (iii) to pay the costs 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 Manager, at its expense, also may from
time to time provide additional promotional incentives to Participating
Organizations who sell Fund 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 purpose enumerated in (i) above. The Distributor
may determine the amount of such payments made pursuant to the Plans, provided
that such payments will not increase the amount which the Fund is required to
pay to the Manager or the Distributor for any fiscal year under the Investment
Management Contract, Administrative Services Contract or the Shareholder
Servicing Agreements in effect for that year.

The Distributor or an affiliate may, from time to time, at its expense and out
of its own resources (a source of which may be the 12b-1 fees paid by the Fund
under the Plans), make cash payments to some but not all Participating
Organizations for shareholder services, as an incentive to sell shares of the
Fund and/or to promote retention of their customers' assets in the Fund. These
payments may be referred to as "revenue sharing," but do not change the price
paid by investors to purchase the Fund's shares or the amount the Fund receives
as proceeds from such sales. Revenue sharing payments may be to Participating
Organizations that provide services to the Fund or its shareholders, including
(without limitation) shareholder servicing, administration, accounting, transfer
agency and/or distribution services. The Distributor negotiates the level of
payments described above to any particular Participating Organization with each
firm, based on, among other things, the nature and level of services provided by
such Participating Organization and the significance of the overall relationship
of the Participating Organization to the Manager and its affiliates. The amount
of these payments may be significant and may create an incentive for the
Participating Organization to sell shares of the Fund to you or to recommend one
fund complex over another. Please speak with your Participation Organization to
learn more about payments made to them by the Distributor or its affiliates. In
addition, to the extent allowable under the Financial Industry Regulatory
Authority ("FINRA") rules and any other applicable regulations, the Distributor
or an affiliate may contribute to sales programs for certain Participating
Organizations and may provide non-cash compensation to certain Participating
Organizations like sponsorship or funding of sales seminars, tickets to sporting
events, theater or other entertainment, opportunities to participate in golf or
other outings and gift certificates for meals or by giving out merchandise at
industry conferences, which may be paid for by the Distributor or an affiliate
out of its own resources.

In accordance with Rule 12b-1, the Plans provide that all written agreements
relating to the Plans 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 Plans require
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for servicing and distribution purposes
pursuant to the Plans and identifying the servicing and distribution activities
for which those expenditures were made.

The Class A and Class B Plan was most recently approved on March 11, 2008, to
continue in effect until April 30, 2009.* Thereafter, the Class A and Class B
Plan may continue in effect for successive annual periods commencing May 1,
provided it is approved by the Class A shareholders, or by the Board of
Directors, including a majority of Directors who are not interested persons of
the Fund and who have no direct or indirect interest in the operation of the
Class A and Class B Plans or in the agreements related to the Class A and Class
B Plan. The Class A and Class B Plan further provides that they may not be
amended to increase materially the costs which may be spent by the Fund pursuant
to the Plan without Class A shareholder approval, and that other material
amendments must be approved by the Directors, including a majority of Directors
who are not interested persons of the Fund and who have

_______________________________
* The Morgan Class Plan was last approved on March 8, 2007, to continue in
  effect until April 30, 2008.  The Morgan Class shares liquidated May 24, 2007.


                                       26
<PAGE>


no direct or indirect interest in the operation of the Class A and Class B Plan.
The  Class  A and  Class B 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, respectively.

Custodian and Transfer Agent

The Bank of New York Mellon, 2 Hanson Place - 7th Floor, Brooklyn, NY 11217, is
custodian for the Fund's cash and securities. Reich & Tang Services, Inc.
("Reich & Tang"), an affiliate of the Manager, located at 600 Fifth Avenue, New
York, NY 10020, is transfer agent and dividend agent for the shares of the Fund.
As transfer agent, Reich & Tang performs various functions including the
processing of shareholder purchase, redemption and exchange transactions and the
maintenance of shareholder records regarding such transactions. As dividend
agent, Reich & Tang makes dividend payments to Fund shareholders on behalf of
the Fund and performs certain recordkeeping and reporting functions regarding
such payments. Pursuant to the Transfer Agency Agreement between Reich & Tang
and the Fund, Reich & Tang, as transfer agent and dividend agent, receives a fee
of $17.40 per account per year or a minimum of 0.05% of the monthly average net
assets of each class of 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.

For the year ended January 31, 2008 these fees amounted to:



------------------------------------ ------------------------- -----------------
                                              Amount                      %
------------------------------------ ------------------------- -----------------
Class A Shares                               $35,876                    0.05%
------------------------------------ ------------------------- -----------------
Class B Shares                               $12,839                    0.05%
------------------------------------ ------------------------- -----------------
Morgan Class Shares                            $48                      0.05%
------------------------------------ ------------------------- -----------------
------------------------------------ ------------------------- -----------------
Total Transfer Agency Fees                   $48,763
------------------------------------ ------------------------- -----------------


Counsel and Independent Registered Public Accounting Firm

Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Paul, Hastings, Janofsky & Walker LLP, 75 East 55th Street, New
York, NY 10022. Matters in connection with New Jersey law are passed upon by
Drinker Biddle & Reath LLP 500 Campus Drive, Florham Park, NJ 07932-1047.

PricewaterhouseCoopers LLP, PricewaterhouseCoopers Center, 300 Madison Avenue,
New York, NY 10017, independent registered public accounting firm, have been
selected as the independent registered public accountants for the Fund.

VI.  BROKERAGE ALLOCATION AND OTHER PRACTICES

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. Thus, the Fund will select a broker
for such a transaction based upon which broker can effect the trade 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

                                       27
<PAGE>

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 are 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 to the extent prohibited by applicable law. In addition, the Fund
will not buy bankers' acceptances, certificates of deposit or commercial paper
from the Manager or its affiliates.

VII.  CAPITAL STOCK AND OTHER SECURITIES


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 shares into separate series of
stock, one for each of the portfolios that may be created. Each share of any
series of shares when issued has equal dividend, distribution and liquidation
rights within the series for which it was issued and each fractional share has
those rights in proportion to the percentage that the fractional share
represents of a whole share. Shares of all series have identical voting rights,
except where, by law, certain matters must be approved by a majority of the
shares of the affected series. Shares will be voted in the aggregate. There are
no conversion or preemptive rights in connection with any shares of the Fund.
All shares, when issued in accordance with the terms of the offering, will be
fully paid and nonassessable. Shares are redeemable at net asset value, at the
option of the shareholder. The Fund is subdivided into three classes of common
stock, Class A, Class B and Morgan Class. Each share, regardless of class,
represents an interest in the same portfolio of investments and has identical
voting, dividend, liquidation and other rights, preferences, powers,
restrictions, limitations, qualifications, designations and terms and
conditions, except: (i) the Class A, Class B and Morgan Class Shares have
different class designations, (ii) only the Class A and Morgan Class Shares are
assessed a service fee pursuant to the Plans of the Fund of 0.20% of each Class'
shares' average daily net assets, (iii) only the holders of the Class A and
Morgan Class Shares are entitled to vote on matters pertaining to the Plans and
any related agreements in accordance with provisions of Rule 12b-1, and (iv) the
exchange privilege permits stockholders to exchange their shares only for shares
of the same class (or in the absence of such, for shares of a comparable class)
of an investment company that participates on an exchange privilege program with
the Fund. Payments that are made under the Plans will be calculated and charged
daily to the appropriate class prior to determining daily net asset value per
share and dividends/distributions.


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

The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so. In
that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. 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 Amended and Restated By-laws of the
Fund provide for annual or special meetings only (i) for the election (or
re-election) of Directors, (ii) for approval of the revised investment advisory
contracts with respect to a particular class or series of stock, (iii) for
approval of the Fund's distribution agreement with respect to a particular class
or

                                       28
<PAGE>

series of stock, and (iv) 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 his successor is
elected or qualified or until such Director sooner dies, resigns, retires or is
removed by the vote of the shareholders.

VIII.  PURCHASE, REDEMPTION AND PRICING OF SHARES

The material relating to the purchase, redemption and pricing of Fund shares for
each class of shares is located in the Shareholder Information section of each
Prospectus and is hereby incorporated by reference.

Net Asset Value

The Fund does not determine net asset value on (i) any day on which the New York
Stock Exchange is closed for trading (i.e., New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas) and (ii) on Columbus Day and Veterans' Day.
However, on certain days that the New York Stock Exchange is closed, the Fund,
at the direction of the Manager, may be open for purchases and redemptions and
will determine its net asset value.

The net asset value of the Fund's shares is determined as of 4:00 p.m., Eastern
time, on each Fund Business Day (as defined in the Prospectus). The Fund's net
asset value is computed by dividing the value of the Fund's net assets (i.e.,
the value of its securities and other assets less its liabilities, including
expenses payable or accrued but excluding capital stock and surplus) by the
total number of shares outstanding.


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


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

IX.  TAXATION OF THE FUND

Federal Income Taxes


The Fund has elected to qualify and intends to continue to qualify under the
Code and under New Jersey law as a regulated investment company that distributes
exempt-interest dividends. It intends to continue to so qualify as


                                       29
<PAGE>

long as qualification is in the best interests of its shareholders, because
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 net tax-exempt interest income. Exempt-interest dividends
are 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 excludable from the Fund's shareholders' gross
income although the amount of that interest must be disclosed on the
shareholders' federal income tax returns. A shareholder should consult his or
her tax advisor 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 with respect to some or all of the
"private activity bonds", if any, held by the Fund. 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 tax-exempt securities, such as shares of the Fund, is not deductible.
Therefore, among other consequences, a certain portion of interest on margin
indebtedness may not be deductible during the period an investor holds shares of
the Fund. 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 and Railroad Retirement benefits includable in
gross income. 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 qualified Section 501(c)(3) bonds) issued after August 7, 1986 less
any deductions (not allowable in computing federal income tax) which would have
been allowable if such interest were includable in gross income. Thus, this
provision will apply to any exempt-interest dividends from the Fund's assets
attributable to any private activity bonds 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 its alternative minimum taxable income
(determined without this provision). In addition, in certain cases, Subchapter S
corporations with accumulated earnings and profits from Subchapter C years are
subject to a tax on tax-exempt interest.


Although not intended, it is possible that the Fund may realize market discount
income, short-term or long-term capital gains or losses from its portfolio
transactions. The Fund may also realize market discount income, short-term or
long-term capital gains upon the maturity or disposition of securities acquired
at discounts resulting from market fluctuations. Accrued market discount income
and short-term capital gains will be taxable to shareholders as ordinary income
when they are distributed. Any net capital gains (the excess of net realized
long-term capital gain over 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 such 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, under current law, long-term capital gains are
taxable at a maximum rate of 15% to non-corporate shareholders for taxable years
beginning before January 1, 2011. Corresponding maximum rate and holding period
rules apply with respect to capital gains realized by a holder on the
disposition of shares.



                                       30
<PAGE>


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
net long-term capital gain over net short-term capital loss), if any, for each
taxable year. These distributions will be taxable to shareholders as ordinary
income. The Fund will be subject to federal income tax on any undistributed
investment company taxable 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 during the calendar year
at least 98% of its ordinary income determined on a calendar year basis, 98% of
its capital gain net income (generally determined on an October year end), and
100% of any income not distributed or taxed in a prior year, the Fund will be
subject to a 4% excise tax on the excess of such amounts over the amounts
actually distributed.


If a shareholder (other than a corporation) fails to provide the Fund with a
current taxpayer identification number or the Fund otherwise is informed that
backup withholding applies, the Fund is generally required to withhold 28% of
taxable interest or dividend payments and also distributions of proceeds from
the redemption of shares of the Fund as backup withholding. Backup withholding
is not an additional tax and any amounts withheld may be credited to a
shareholder's ultimate federal income tax liability if proper documentation is
supplied.

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


With respect to variable rate demand instruments, including Participation
Certificates therein, the Fund will generally be treated for federal income tax
purposes as the owner of an interest in the underlying Municipal Obligations and
the interest thereon will be exempt from regular federal income taxes to the
Fund and its shareholders to the same extent as interest on the underlying
municipal obligations.

The U.S. Supreme Court held 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 possibly tax the interest earned on such bonds in the future. The decision
does not, however, affect the current exemption from federal taxation of the
interest earned on the Municipal Obligations.

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


From time to time, proposals have been introduced before Congress to restrict or
eliminate the federal income tax exemption for interest on Municipal
Obligations. If such a proposal were introduced and enacted in the future, the
ability of the Fund to pay exempt-interest dividends would be adversely affected
and the Fund would re-evaluate its investment objective and policies and
consider changes in its structure.

The exemption from federal income tax of exempt-interest dividends does not
necessarily result in an exemption under the tax laws of any state or local
taxing authority. Shareholders are advised to consult with their tax advisors
concerning the application of state and local taxes to investments in the Fund,
which may differ from the federal income tax consequences described above.

New Jersey 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.

The Fund intends to be a "qualified investment fund" within the meaning of the
New Jersey gross income tax. The primary criteria for constituting a "qualified
investment fund" are: (i) such fund is an investment company registered with the
SEC which, for the calendar year in which the distribution is paid, has no
investments other than interest

                                       31
<PAGE>

bearing obligations, obligations issued at a discount, and cash and cash items,
including receivables and financial options, futures, forward contracts, or
other similar financial instruments relating to interest-bearing obligations,
obligations issued at a discount or bond indexes related thereto and (ii) at the
close of each quarter of the taxable year, such fund has not less than 80% of
the aggregate principal amount of all of its investments, excluding financial
options, futures, forward contracts, or other similar financial instruments
relating to interest-bearing obligations, obligations issued at a discount or
bond indexes related thereto to the extent such instruments are authorized under
the regulated investment company rules under the Code, cash and cash items,
which cash items shall include receivables, in New Jersey Municipal Obligations
and certain other specified securities. Additionally, a qualified investment
fund must comply with its reporting obligations under New Jersey law with
respect to qualified investment funds. In the opinion of Drinker Biddle & Reath
LLP, special New Jersey tax counsel to the Fund, (i) assuming that the Fund
constitutes a qualified investment fund, (a) distributions paid by the Fund to a
New Jersey resident individual shareholder will not be subject to the New Jersey
gross income tax to the extent that the distributions are attributable to income
received as interest on or gain from New Jersey Municipal Obligations, and (b)
gain from the sale of shares in the Fund by a New Jersey resident individual
shareholder will not be subject to New Jersey gross income tax and (ii)
distributions paid by the Fund to a New Jersey resident individual shareholder
will not be subject to the New Jersey gross income tax to the extent that the
distributions are attributable to interest earned on federal obligations.

Interest on indebtedness incurred or continued to purchase or carry Fund Shares
is not deductible either for Federal income tax purposes or New Jersey personal
income tax purposes to the extent attributable to exempt-interest dividends.

Exempt-interest dividends and gains paid to a corporate shareholder will be
subject to the New Jersey corporation business (franchise) tax and, if
applicable, the New Jersey corporation income tax, and may also be subject to
state taxes in states other than New Jersey. Accordingly, investors in the Fund,
including, in particular, corporate investors which may be subject to the New
Jersey corporation business (franchise) tax and, if applicable, the New Jersey
corporation income tax, should consult their tax advisors with respect to the
application of such taxes to an investment in the Fund, to the receipt of Fund
dividends and as to their New Jersey tax situation in general.


The U.S. Supreme Court has upheld the ability of the states to provide a state
tax exemption for interest derived from in-state municipal bonds while
subjecting interest derived from municipal bonds issued by other states and
their political subdivisions to tax. The Court's decision affirms current market
practice and should not impact the state and local income and franchise tax
treatment of distributions from the Fund as described herein.


Shareholders are urged to consult their tax advisers with respect to the
treatment of distributions from the Fund and ownership of shares of the Fund in
their own States and localities.

X.  UNDERWRITERS

The Fund sells and redeems its shares on a continuing basis at their net asset
value. The Fund does not impose a sales charge for either purchases or
redemptions, although there may be a fee imposed on certain wire redemption
requests. The Distributor does not receive an underwriting commission. In
effecting sales of Fund shares under the Distribution Agreements, the
Distributor, for nominal consideration (i.e., $1.00) and as agent for the Fund,
will solicit orders for the purchase of the Fund's shares, provided that any
subscriptions and orders are not binding on the Fund until accepted by the Fund
as principal.

The Glass-Steagall Act and other applicable laws and regulations prohibit banks
and other depository institutions from engaging in the business of underwriting,
selling or distributing most types of securities. On November 16, 1999,
President Clinton signed the Gramm-Leach-Bliley Act (the "Act"), repealing
certain provisions of the Glass-Steagall Act which have restricted affiliation
between banks and securities firms and amending the Bank Holding Company Act
thereby removing restrictions on banks and insurance companies. The Act grants
banks new authority to conduct certain authorized activity through financial
subsidiaries. In the opinion of the Manager, however, based on the advice of
counsel, these laws and regulations do not prohibit such depository institutions
from providing other services for investment companies such as the shareholder
servicing and related administrative functions referred to above. The Fund's
Board of Directors will consider appropriate modifications to the Fund's
operations, including discontinuance of any payments then being made under the
Plans to banks and other depository institutions, in the event of any future

                                       32
<PAGE>

change in such laws or regulations which may affect the ability of such
institutions to provide the above-mentioned services. It is not anticipated that
the discontinuance of payments to such an institution will result in loss to
shareholders or change in the Fund's net asset value. In addition, state
securities laws on this issue may differ from the interpretations of federal law
expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law.

XI.  FINANCIAL STATEMENTS


The audited financial statements for the fiscal year ended January 31, 2008 and
the report therein of PricewaterhouseCoopers LLP are herein incorporated by
reference to the Fund's Annual Report. The Annual Report is available upon
request and without charge.



                                       33
<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.

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 are
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 are as follows:


MIG-1: This designation denotes superior credit quality. Excellent protection is
afforded by established cash flows, highly reliable liquidity support, or
demonstrated broad based access to the market for refinancing.

MIG-2: This designation denotes strong credit quality. Margins of protection are
ample, although not as 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 to a small degree.

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

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

Description of Standard & Poor's Rating  Services Two Highest  Commercial  Paper
Ratings:

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

A-1: An obligor rated A-1 has a strong capacity to meet its financial
commitments. Those issues determined to possess strong safety characteristics
will be denoted with a plus (+) sign designation.

A-2: An obligor rated A-2 has a satisfactory capacity to meet its financial
commitments. 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.

                                       34
<PAGE>
<PAGE>

<TABLE>
<CAPTION>
                                      INDIVIDUAL TAXABLE EQUIVALENT YIELD TABLE

                            (Based on Tax Rates Effective Until December 31, 2008)

------------------------------------------------------------------------------------------------------------------------------------
                                                     1. If Your Taxable Income Bracket Is . . .
------------------------------------------------------------------------------------------------------------------------------------
<S>         <C>      <C>      <C>     <C>       <C>     <C>      <C>      <C>      <C>       <C>       <C>        <C>       <C>

Single     $8,026-  $20,001- $32,551-                   $35,001- $40,001- $75,001-           $78,851-  $164,551-  $357,701- $500,001
Return      20,000   32,550   35,000                     40,000   75,000   78,850            164,550    357,700    500,000  and over
------------------------------------------------------------------------------------------------------------------------------------
Joint      $16,051 $20,000-          $50,001-  $65,101- $70,001- $80,001-         $135,451- $150,001-  $200,301-  $357,701- $500,001
Return      19,999  50,000            65,100    70,000   80,000  131,450           150,000   200,300    357,700   500,000   and over

------------------------------------------------------------------------------------------------------------------------------------
                                              2. Then Your Combined Income Tax Bracket is . . .
------------------------------------------------------------------------------------------------------------------------------------
Federal
Tax Rate    15.00%   15.00%   25.00%   15.00%   25.00%   25.00%   25.00%   25.00%   28.00%   28.00%    33.00%     35.00%     35.00%
------------------------------------------------------------------------------------------------------------------------------------
State Tax
Rate         1.40%   1.75%     1.75%   2.45%     2.45%   3.50%     5.53%   6.370%   5.53%     6.37%    6.37%       6.37%      8.97%
------------------------------------------------------------------------------------------------------------------------------------
Combined
Marginal    16.19%   16.49%   26.31%   17.08%   26.84%   27.63%   29.14%   29.78%   31.98%   32.59%    37.27%     39.14%     40.83%
Tax Rate
------------------------------------------------------------------------------------------------------------------------------------
                                       3. Now Compare Your Tax Free Income Yields with Taxable Income Yields
------------------------------------------------------------------------------------------------------------------------------------
Tax Exempt                                                 Equivalent Taxable Investment Yield
   Yield                                                    Required to Match Tax Exempt Yield
------------------------------------------------------------------------------------------------------------------------------------
   1.00%     1.19%    1.20%    1.36%    1.21%    1.37%    1.38%    1.41%    1.42%   1.47%   1.48%   1.59%    1.00%   1.64%    1.69%
------------------------------------------------------------------------------------------------------------------------------------
   1.50%     1.79%    1.80%    2.04%    1.81%    2.05%    2.07%    2.12%    2.14%   2.21%   2.23%   2.39%    1.50%   2.46%    2.54%
------------------------------------------------------------------------------------------------------------------------------------
   2.00%     2.39%    2.39%    2.71%    2.41%    2.73%    2.76%    2.82%    2.85%   2.94%   2.97%   3.19%    2.00%   3.29%    3.38%
------------------------------------------------------------------------------------------------------------------------------------
   2.50%     2.98%    2.99%    3.39%    3.02%    3.42%    3.45%    3.53%    3.56%   3.68%   3.71%   3.99%    2.50%   4.11%    4.23%
------------------------------------------------------------------------------------------------------------------------------------
   3.00%     3.58%    3.59%    4.07%    3.62%    4.10%    4.15%    4.23%    4.27%   4.41%   4.45%   4.78%    3.00%   4.93%    5.07%
------------------------------------------------------------------------------------------------------------------------------------
   3.50%     4.18%    4.19%    4.75%    4.22%    4.78%    4.84%    4.94%    4.98%   5.15%   5.19%   5.58%    3.50%   5.75%    5.92%
------------------------------------------------------------------------------------------------------------------------------------
   4.00%     4.77%    4.79%    5.43%    4.82%    5.47%    5.53%    5.65%    5.70%   5.88%   5.93%   6.38%    4.00%   6.57%    6.76%
------------------------------------------------------------------------------------------------------------------------------------
   4.50%     5.37%    5.39%    6.11%    5.43%    6.15%    6.22%    6.35%    6.41%   6.62%   6.68%   7.17%    4.50%   7.39%    7.61%
------------------------------------------------------------------------------------------------------------------------------------
   5.00%     5.97%    5.99%    6.79%    6.03%    6.83%    6.91%    7.06%    7.12%   7.35%   7.42%   7.97%    5.00%   8.22%    8.45%
------------------------------------------------------------------------------------------------------------------------------------
   5.50%     6.56%    6.59%    7.46%    6.63%    7.52%    7.60%    7.76%    7.83%   8.09%   8.16%   8.77%    5.50%   9.04%    9.30%
------------------------------------------------------------------------------------------------------------------------------------
   6.00%     7.16%    7.18%    8.14%    7.24%    8.20%    8.29%    8.47%    8.54%   8.82%   8.90%   9.56%    6.00%   9.86%   10.14%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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


                                       35
<PAGE>
<TABLE>
<CAPTION>

                                         CORPORATE TAXABLE EQUIVALENT YIELD TABLE

                                  (Based on Tax Rates Effective Until December 31, 2008)

-----------------------------------------------------------------------------------------------------------------------------------
                                               1. If Your Taxable Income Bracket Is . . .
-----------------------------------------------------------------------------------------------------------------------------------
<S>   <C>             <C>         <C>           <C>            <C>             <C>              <C>         <C>           <C>

Corporate               $1-     $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 Federal Income Tax Bracket Is . . .
-----------------------------------------------------------------------------------------------------------------------------------
Federal
Tax Rate             15.00%      25.00%         34.00%         39.00%          34.00%          35.00%       38.00%       35.00%
-----------------------------------------------------------------------------------------------------------------------------------
                                  3. Now Compare Your Tax Free Income Yields With Taxable Income Yields
-----------------------------------------------------------------------------------------------------------------------------------
Tax Exempt
Yield                                                       Equivalent Taxable Investment Yield
                                                             Required to Match Tax Exempt Yield
-----------------------------------------------------------------------------------------------------------------------------------
      1.00%           1.18%       1.33%         1.52%          1.64%           1.52%            1.54%       1.61%         1.54%
-----------------------------------------------------------------------------------------------------------------------------------
      1.50%           1.76%       2.00%         2.27%          2.46%           2.27%            2.31%       2.42%         2.31%
-----------------------------------------------------------------------------------------------------------------------------------
      2.00%           2.35%       2.67%         3.03%          3.28%           3.03%            3.08%       3.23%         3.08%
-----------------------------------------------------------------------------------------------------------------------------------
      2.50%           2.94%       3.33%         3.79%          4.10%           3.79%            3.85%       4.03%         3.85%
-----------------------------------------------------------------------------------------------------------------------------------
      3.00%           3.53%       4.00%         4.55%          4.92%           4.55%            4.62%       4.84%         4.62%
-----------------------------------------------------------------------------------------------------------------------------------
      3.50%           4.12%       4.67%         5.30%          5.74%           5.30%            5.38%       5.65%         5.38%
-----------------------------------------------------------------------------------------------------------------------------------
      4.00%           4.71%       5.33%         6.06%          6.56%           6.06%            6.15%       6.45%         6.15%
-----------------------------------------------------------------------------------------------------------------------------------
      4.50%           5.29%       6.00%         6.82%          7.38%           6.82%            6.92%       7.26%         6.92%
-----------------------------------------------------------------------------------------------------------------------------------
      5.00%           5.88%       6.67%         7.58%          8.20%           7.58%            7.69%       8.06%         7.69%
-----------------------------------------------------------------------------------------------------------------------------------
      5.50%           6.47%       7.33%         8.33%          9.02%           8.33%            8.46%       8.87%         8.46%
-----------------------------------------------------------------------------------------------------------------------------------
      6.00%           7.06%       8.00%         9.09%          9.84%           9.09%            9.23%       9.68%         9.23%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                       36
<PAGE>

                           PART C - OTHER INFORMATION

ITEM 23           Exhibits.

         (a)      Amended Articles of Incorporation of the Registrant, filed
                  with the Maryland State Department of Assessments and Taxation
                  on October 11, 1990 filed with Post-Effective Amendment No. 10
                  to the Registration Statement on Form N-1A on February 26,
                  1999, and incorporated herein by reference.

         (a.1)    Articles of Amendment of the Registrant, filed with the
                  Maryland State Department of Assessments and Taxation on
                  January 12, 1994 filed with Post-Effective Amendment No. 14 to
                  the Registration Statement on Form N-1A on February 26, 1999,
                  and incorporated herein by reference.

         (a.2)    Articles Supplementary of the Registrant, filed with the
                  Maryland State Department of Assessments and Taxation on April
                  18, 2000 filed with Post-Effective Amendment No. 14 to the
                  Registration Statement on Form N-1A on January 30, 2002, and
                  incorporated herein by reference.

         (b)      Amended and Restated By-Laws of the Registrant filed with
                  Post-Effective Amendment No. 16 to the Registration Statement
                  on Form N-1A on May 30, 2003, and incorporated herein by
                  reference.

         (c)      Form of certificate for shares of Common Stock, par value
                  $.001 per share, of the Registrant filed with Post-Effective
                  Amendment No. 10 to the Registration Statement on Form N-1A on
                  February 26, 1999, and incorporated herein by reference.

         (d)      Investment Management Contract, dated October 30, 2000,
                  between the Registrant and Reich & Tang Asset Management, LLC,
                  (formerly known as Reich & Tang Asset Management, L.P.) filed
                  with Post-Effective Amendment No. 13 to the Registration
                  Statement on Form N-1A on February 28, 2001, and incorporated
                  herein by reference.

         (e)      Distribution Agreement dated October 30, 2000, between the
                  Registrant and Reich & Tang Distributors, Inc. filed with
                  Post-Effective Amendment No. 13 to the Registration Statement
                  on Form N-1A on February 28, 2001, and incorporated herein by
                  reference.

         (e.1)    Distribution Agreement dated October 30, 2000 for J.P. Morgan
                  Select Class of shares formerly known as Chase Vista Select
                  Class, between the Registrant and Reich &Tang Distributors,
                  Inc. filed with Post-Effective Amendment No. 13 to the
                  Registration Statement on Form N-1A on February 28, 2001, and
                  incorporated herein by reference.

         (e.2)    Amendment dated April 17, 2003 to the Distribution Agreement
                  for J.P. Morgan Select Class shares filed with Post-Effective
                  Amendment No. 16 to the Registration Statement on Form N-1A on
                  May 30, 2003, and incorporated herein by reference.

         (f)      Not applicable.

         (g)      Custody Agreement between the Registrant and The Bank of New
                  York Mellon filed with Post-Effective Amendment No. 19 to the
                  Registration Statement on Form N-1A on May 31, 2006, and
                  incorporated herein by reference.

         (g.1)    Amendment to the Custody Agreement dated October 16, 2006
                  between the Registrant and The Bank of New York Mellon filed
                  with Post-Effective Amendment No. 20 to the Registration
                  Statement on Form N-1A on May 31, 2007, and incorporated
                  herein by reference.

         (g.2)    Amendment to Schedule I of the Custody Agreement dated April
                  29, 2008, between the Registrant and the Bank of New York
                  Mellon.

         (g.3)    Amendment to Schedule II of the Custody Agreement dated April
                  29, 2008, between the Registrant and the Bank of New York
                  Mellon.

         (h)      Administrative Services Contract dated October 30, 2000,
                  between the Registrant and Reich & Tang Asset Management, LLC,
                  (formerly known as Reich & Tang Asset Management, L.P.) filed
                  with Post-Effective Amendment No. 13 to the Registration
                  Statement on Form N-1A on February 28, 2001, and incorporated
                  herein by reference.

         (h.1)    Transfer Agency Agreement and Addendum to the Transfer Agency
                  Agreement between the Registrant and Reich & Tang
                  Distributors, Inc. filed with Post-Effective Amendment No. 11
                  to the Registration Statement on Form N-1A on July 9, 1999,
                  and incorporated herein by reference.

         (h.2)    Fund Accounting Agreement between the Registrant and The Bank
                  of New York filed with Post-Effective Amendment No. 19 to the
                  Registration Statement on Form N-1A on May 27, 2005, and
                  incorporated herein by reference.

         (h.3)    Amendment to the Fund Accounting Agreement dated October 16,
                  2006, between the Registrant and The Bank of New York Mellon
                  filed with Post-Effective Amendment No. 20 to the Registration
                  Statement on Form N-1A on May 31, 2007, and incorporated
                  herein by reference.

                                       C-1
<PAGE>

         (h.4)    Cash Management Agreement and Related Services Agreement
                  between the Registrant and The Bank of New York Mellon filed
                  with Post-Effective Amendment No. 19 to the Registration
                  Statement on Form N-1A on May 27, 2005, and incorporated
                  herein by reference.

         (h.5)    Amendment to the Cash Management Agreement and Related
                  Services Agreement dated October 16, 2006, between the
                  Registrant and The Bank of New York Mellon filed with
                  Post-Effective Amendment No. 20 to the Registration Statement
                  on Form N-1A on May 31, 2007, and incorporated herein by
                  reference.

         (i)      Opinion of Battle Fowler LLP, as to the legality of the
                  securities being registered filed with Post-Effective
                  Amendment No. 10 to the Registration Statement on Form N-1A on
                  February 26, 1999, and incorporated herein by reference.

         (i.1)    Consent of Paul, Hastings, Janofsky & Walker LLP to the use of
                  their name in the Registration Statement.

         (i.2)    Opinion of Drinker,  Biddle & Reath LLP, as to New Jersey law,
                  including their  consent  to the  filing  thereof  and to the
                  use of their  name under the heading "New Jersey  Income
                  Taxes" in the  Prospectus  and in the  Statement of Additional
                  Information,   and  under  the  heading  "Counsel  and
                  Independent Registered Public Accounting Firm" in the
                  Statement of Additional Information.

         (j)      Consent of Independent Registered Public Accounting Firm.

         (k)      Audited Financial Statements for the fiscal year ended January
                  31, 2008 filed with Annual Report on Form N-CSR on April 9,
                  2008 and incorporated herein by reference.

         (l)      Written assurance of Reich & Tang, Inc. that its purchase of
                  shares of the Registrant was for investment purposes without
                  any present intention of redeeming or reselling filed with
                  Post-Effective Amendment No. 10 to the Registration Statement
                  on Form N-1A on February 26, 1999, and incorporated herein by
                  reference.

         (m)      Amended and Restated Distribution and Service Plan, pursuant
                  to Rule 12b-1 under the Investment Company Act of 1940 filed
                  with Post-Effective Amendment No. 16 to the Registration
                  Statement on Form N-1A on May 30, 2003, and incorporated
                  herein by reference.

         (m.1)    Amended and Restated Distribution and Service Plan, pursuant
                  to Rule 12b-1 under the Investment Company Act of 1940 for
                  J.P. Morgan Select Class of shares filed with Post-Effective
                  Amendment No. 16 to the Registration Statement on Form N-1A on
                  May 30, 2003, and incorporated herein by reference.

         (m.2)    Shareholder Servicing Agreement, dated October 30, 2000,
                  between the Registrant and Reich & Tang Distributors, Inc.
                  filed with Post-Effective Amendment No. 13 to the Registration
                  Statement on Form N-1A on February 28, 2001, and incorporated
                  herein by reference.

         (m.3)    Shareholder Servicing Agreement, dated October 30, 2000,
                  between the Registrant and Reich & Tang Distributors, Inc. for
                  the J.P. Morgan Select Class of shares formerly known as Chase
                  Vista Select Class, filed with Post-Effective Amendment No. 13
                  to the Registration Statement on Form N-1A on February 28,
                  2001, and incorporated herein by reference.

         (m.4)    Amendment dated April 17, 2003 to the Shareholder Servicing
                  Agreement for the J.P. Morgan Select Class Shares filed with
                  Post-Effective Amendment No. 16 to the Registration Statement
                  on Form N-1A on May 30, 2003 and incorporated herein by
                  reference.

         (m.5)    Distribution Agreement, dated October 30, 2000, between the
                  Registrant and Reich & Tang Distributors, Inc. (see Exhibit e)

         (m.6)    Distribution Agreement, dated October 30, 2000, between the
                  Registrant and Reich & Tang Distributors, Inc. for the J.P.
                  Morgan Select Class of shares formerly known as Chase Vista
                  Select Class (see Exhibit e.1).

         (m.7)    Amendment dated April 17, 2003, to the Distribution Agreement
                  for the J.P. Morgan Select Class Shares (see Exhibit e.2).


         (n)      Amendment No. 13 to Rule 18f-3 Multi-Class Plan.


         (o)      Reserved.

         (p)      There are no Codes of Ethics applicable to the Registrant
                  since the Registrant is a money market fund.

         (q)      Powers of Attorney of Directors of Registrant.


                                       C-2

<PAGE>

ITEM 24. Persons Controlled by or Under Common Control with Registrant.


         The following open-end management investment companies may be
considered to be under common control with the Registrant: California Daily Tax
Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily
Income Fund, Delafield Fund, Inc., Florida Daily Municipal Income Fund, New York
Daily Tax Free Income Fund, Inc., Pax World Money Market Fund, Inc. and Tax
Exempt Proceeds Fund, Inc.


ITEM 25. Indemnification.

         The Registrant incorporates herein by reference the response to Item 25
of Part C of the Registrant's Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A filed with the Commission on May 31, 2002.

ITEM 26. Business and Other Connections of Investment Adviser.

         The description of Reich & Tang Asset Management, LLC ("RTAM") under
the caption "Management, Organization and Capital Structure" in the Prospectus
and "Investment Advisory and Other Services" and "Management of the Fund" in the
Statement of Additional Information constituting parts A and B, respectively, of
this Post-Effective Amendment to the Registration Statement are incorporated
herein by reference.


         RTAM is a limited liability company that is a wholly-owned subsidiary
of Natixis Global Asset Management, L.P. ("Natixis Global"). Natixis Global AM
is the managing member and direct owner of RTAM.

         Edward Adrion is a Vice President of RTAM.  Mr. Adrion has been
associated with RTAM and its predecessors since November 1996.

         Mia Bottarini is a Vice President of RTAM. Ms. Bottarini has been
associated with RTAM and its predecessors since June 1984.

         Christopher Brancazio is Vice President, Chief Compliance Officer, AML
Officer and Secretary of RTAM since September 2007. Mr. Brancazio is also Chief
Compliance Officer and AML Officer of nine funds in the Reich & Tang Fund
Complex. These funds are all located at 600 Fifth Avenue, New York, NY 10020.
Mr. Brancazio was a Compliance Officer at Bank of New York Asset Management from
February 2007 to August 2007 and served as Vice President, Chief Compliance
Officer, and AML Officer of Trainer Wortham & Co. Inc., and the Trainer Wortham
Mutual Funds from March 2002 to February 2007. Mr. Brancazio is also Vice
President, Chief Compliance Officer, AML Officer and Secretary of Reich & Tang
Services, Inc. and Reich & Tang Distributors, Inc.

         J. Dennis Delafield is a Managing Director of RTAM. Mr. Delafield is
the Chief Executive Officer and is a Portfolio Manager/Analyst for the Delafield
Asset Management division of RTAM. Mr. Delafield has been associated with RTAM
and its predecessors since December 1991 and is also Chairman, CEO and Director
of Delafield Fund, Inc. This fund is located at 600 Fifth Avenue, New York, NY
10020.

         Richard De Sanctis is Chief Operating Officer and Executive Vice
President of RTAM. Mr. De Sanctis has been associated with RTAM and its
predecessors since December 1990. Mr. De Sanctis is also Vice President of nine
funds in the Reich and Tang Fund Complex. Mr. De Sanctis is also Director,
Executive Vice President and Chief Financial Officer of Reich & Tang
Distributors, Inc. and is Director, Executive Vice President and Chief Operating
Officer of Reich & Tang Services, Inc.

         Steven W. Duff is Manager, Chief Executive Officer and President of
RTAM and is Chief Investment Officer of the Mutual Funds division. Mr. Duff has
been associated with RTAM and its predecessors since August 1994. Mr. Duff is
also President and a Director/Trustee of seven funds in the Reich & Tang Fund
Complex and Director of Pax World Money Market Fund, Inc. These funds are all
located at 600 Fifth Avenue, New York, NY 10020. Mr. Duff also serves as a
Director, President and Chief Executive Officer of Reich & Tang Distributors,
Inc. and is a Director of Reich & Tang Services, Inc.

         Michael  Fortugno is a Vice  President and Controller of RTAM and Reich
& Tang Services, Inc. Mr. Fortugno was a Controller at Regulatory DataCorp from
August 2002 to April 2008 and served as Assistant Controller at Poseidon
Resources Corporation from July 1999 to August 2002. Mr. Fortugno is also a Vice
President of Reich & Tang Distributors, Inc.

         Barbara Francis is a Senior Vice President of RTAM.  Ms. Francis has
been associated with RTAM and its predecessors since January 1997. Ms. Francis
is also a Vice President of Reich & Tang Services, Inc.

         Christopher Gill is a Senior Vice President of RTAM and Reich & Tang
Distributors, Inc. Mr. Gill has been associated with RTAM and its predecessors
since February 1994. Mr. Gill is also a Senior Vice President and Director of
Reich & Tang Services, Inc.


                                       C-3

<PAGE>

         Thomas Hernly is a Vice President of RTAM.  Mr. Hernly has been
associated with RTAM and its predecessors since March 1996.  Mr. Hernly is also
a Vice President of Reich & Tang Services, Inc.


         Joseph Jerkovich is a Senior Vice President and Chief Financial Officer
of RTAM and Reich & Tang Services, Inc. Mr. Jerkovich has been associated with
RTAM since September 2004. Mr. Jerkovich is Vice President of nine funds in the
Reich & Tang Fund Complex and is also a Senior Vice President and Controller of
Reich & Tang Distributors, Inc.

         Cleo Kotis is a Vice President of RTAM.  Ms. Kotis has been associated
with RTAM and its predecessors since December 1993 and is also Chief Operations
Officer and Vice President of Delafield Fund, Inc. and Delafield Asset
Management. This fund is located at 600 Fifth Avenue, New York, NY 10020.

         Robert A. Krantz is a Manager of RTAM.  Mr. Krantz is also Executive
Vice President of Strategic Marketing of Natixis Advisors and Natixis
Distributors since 2004.

         Michael P. Lydon is an Executive Vice President of RTAM and President
and Chief Executive Officer of Reich & Tang Funds. Mr. Lydon has been associated
with RTAM since January 2005. Mr. Lydon is also President and Director/Trustee
of five funds in the Reich & Tang Fund Complex, President of New York Daily Tax
Free Income Fund, Inc., Director of Pax World Money Market Fund, Inc., President
and Chief Executive Officer of Tax Exempt Proceeds Fund, Inc. and Principal
Executive Officer of Delafield Fund, Inc. These funds are all located at 600
Fifth Avenue, New York, NY 10020. Mr. Lydon is also Director, Executive Vice
President and Chief Operations Officer for Reich & Tang Distributors, Inc. and
Director, President and Chief Executive Officer of Reich & Tang Services, Inc.
Prior to December 2007, Mr. Lydon was Vice President of twelve funds in the
Reich & Tang Fund Complex.

         Christine Manna is a Vice President and Assistant Secretary of RTAM.
Ms. Manna has been associated with RTAM since June1995.  Ms. Manna is also
Secretary of nine funds in the Reich & Tang Fund Complex. These funds are all
located at 600 Fifth Avenue, New York, NY 10020. Ms. Manna is also a Vice
President and Assistant Secretary of Reich & Tang Distributors, Inc. and Reich &
Tang Services, Inc.


         Andrew Mintz is a Senior Vice President of RTAM.  Mr. Mintz has been
associated with RTAM and its predecessors since March 1991. Mr. Mintz is also a
Senior Vice President of Reich & Tang Services, Inc.

         Marty O'Connor is a Vice President of RTAM.  Mr. O'Connor has been
associated with RTAM and its predecessors since March 1992. Mr. O'Connor is also
a Vice President of Reich & Tang Services, Inc.


         Anthony Pace is a Vice President of RTAM.  Mr. Pace has been associated
with RTAM and its predecessors since September 2004. Mr. Pace is also Treasurer
and Assistant Secretary of nine funds in the Reich & Tang Fund Complex. These
funds are all located at 600 Fifth Avenue, New York, NY 10020.

     Clarwin Perillo is a Vice President of RTAM. Mr. Perillo has been
associated with RTAM and its predecessors since May 1996


         Richard Preuss is a Vice President of RTAM.  Mr. Preuss has been
associated with RTAM and its predecessors since July 1986. Mr. Preuss is also a
Vice President of Reich & Tang Services, Inc.


         Robert Rickard is a Senior Vice President of RTAM.  Mr. Rickard has
been associated with RTAM since December 1991. Mr. Rickard is also Vice
President of nine funds in the Reich & Tang Fund Complex.   Mr. Rickard is also
Senior Vice President of Reich & Tang Distributors, Inc.

         Vincent Sellecchia is a Managing Director of RTAM and is Chief
Investment Officer and Chief Operating Officer of the Delafield Asset Management
division of RTAM. Mr. Sellecchia has been associated with RTAM and it's
predecessors since December 1991 and is also President of Delafield Fund, Inc.
This fund is located at 600 Fifth Avenue, New York, NY 10020.

         Naomi Friedland-Wechsler is an Executive Vice President and General
Counsel of RTAM.  Ms. Friedland-Wechsler has been associated with RTAM since
April 2006.

         Duncan Wilkinson is a Manager of RTAM. Mr. Wilkinson is also Senior
Vice President and Deputy Global Chief Financial Officer of Natixis Global Asset
Management, and has been associated with Natixis Global Asset Management since
2000.


                                       C-4
<PAGE>

ITEM 27.          PRINCIPAL UNDERWRITERS.


(a) Reich & Tang Distributors, Inc., the Registrant's distributor, is also
distributor for California Daily Tax Free Income Fund, Inc., Connecticut Daily
Tax Free Income Fund, Inc., Daily Income Fund, Florida Daily Municipal Income
Fund, New York Daily Tax Free Income Fund, Inc., Pax World Money Market Fund,
Inc. and Tax Exempt Proceeds Fund, Inc.

     (b) The following are the directors and officers of Reich & Tang
Distributors, Inc. For all persons listed below, the principal address is 600
Fifth Avenue, New York, NY 10020.

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

Name                       Positions and Offices with the Distributor                  Positions and Offices with the Registrant
----                       ------------------------------------------                  -----------------------------------------

Christopher Brancazio      Chief Compliance Officer, AML Officer, Vice President            Chief Compliance Officer and AML Officer
                           and Secretary

Richard De Sanctis         Director, Executive Vice President and Chief Financial Officer   Vice President

Steven W. Duff             Director, President and Chief Executive Officer                  Director


Christopher Gill           Senior Vice President                                            None


Joseph Jerkovich           Senior Vice President and Controller                             Vice President

Michael Lydon              Director, Executive Vice President and Chief Operations Officer  President and Director

Christine Manna            Vice President and Assistant Secretary                           Secretary

Robert Rickard             Senior Vice President                                            Vice President

</TABLE>

     (c) Not applicable.

ITEM 28. 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, LLC, 600 Fifth Avenue, New York, NY 10020, the
Registrant's manager; at The Bank of New York Mellon, 2 Hanson Place - 7th
Floor, Brooklyn, NY 11217, the Registrant's custodian; and at Reich and Tang
Services, Inc. 600 Fifth Avenue, New York, NY 10020, the Registrant's transfer
agent and dividend disbursing agent.


ITEM 29. Management Services.

         Not applicable.

ITEM 30. Undertakings.

         Not applicable.




                                       C-5

<PAGE>

                                   SIGNATURES


         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has met all 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 May 30, 2008.




                                    NEW JERSEY DAILY MUNICIPAL INCOME FUND, INC.


                       By:          Michael P. Lydon
                               /s/  Michael P. Lydon

                                    President

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

        Signature                               Capacity             Date

(1)     Principal Executive Officer


By: /s/ Michael P. Lydon                        President           May 30, 2008
        Michael P. Lydon


(2)     Principal Financial and
        Accounting Officer

By: /s/ Anthony Pace

        Anthony Pace                            Treasurer           May 30, 2008


(3)     Majority of Trustees


By:  /s/Steven W. Duff
        Steven W. Duff                          Director            May 30, 2008

By: /s/ Michael P. Lydon
        Michael P. Lydon                        Director            May 30, 2008


        Dr. W. Giles Mellon*                   Director
        Robert Straniere*                      Director
        Dr. Yung Wong*                         Director
        Edward A. Kuczmarski*                  Director
        Albert R. Dowden*                      Director
        Carl Frischling*                       Director
        William Lerner*                        Director
        James L. Schultz*                      Director

By:      ________________________

         Christine Manna
         /s/Christine Manna                                         May 30, 2008
         Attorney-in-Fact*

*        See exhibit (q) herein for Powers of Attorney.


<PAGE>
                                  Exhibit Index



(g.2)    Amendment to Schedule I of the Custody Agreement dated April 29, 2008,
         between the Registrant and the Bank of New York Mellon.

(g.3)    Amendment to Schedule II of the Custody Agreement dated April 29, 2008,
         between the Registrant and the Bank of New York Mellon.

(i.1)    Consent of Paul, Hastings, Janofsky & Walker LLP to the use of their
         name in the Registration Statement.

(i.2)    Opinion of Drinker, Biddle & Reath LLP, as to New Jersey law, including
         their consent to the filing thereof and to the use of their name under
         the heading "New Jersey Income Taxes" in the Prospectus and Statement
         of Additional Information, and under the heading "Counsel and
         Independent Registered Public Accounting Firm" in the Statement of
         Additional Information.


(j)      Consent of Independent Registered Public Accounting Firm.


(n)      Amendment No. 13 to Rule 18f-3 Multi Class Plan.

(q)      Powers of Attorney of Directors of Registrant.