As filed with the Securities and Exchange  Commission on May 30, 2008 Securities
                                                    Act Registration No. 2-96546

                                Investment Company Act Registration No. 811-4265

                       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. 35                     [X]

                                     and/or

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


                                   Amendment No.   32                      [X]
                                                  ----


                  CONNECTICUT DAILY TAX FREE 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) 830-5220



                                 Christine Manna

                     c/o 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>


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

      CONNECTICUT DAILY TAX                     600 FIFTH AVENUE
      FREE 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 federal income tax and, to the extent possible, from
Connecticut personal 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 Capital Structure
     and Performance                                     9   Shareholder Information

  5  Risk/Return Summary:  Fee Table                    19   Distribution Arrangements

  6  Investment Objectives, Principal Investment        21   Financial Highlights
     Strategies and Related Risks
============================================================================================================
</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 federal income
tax and, to the extent possible, from Connecticut personal income tax, as is
believed to be consistent with preservation of capital, maintenance of
liquidity, and stability of principal. There can be no assurance that the Fund
will achieve its investment objectives.


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

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

(i) Connecticut, 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 Connecticut Municipal Obligations, including Participation
Certificates therein. Participation Certificates evidence ownership of an
interest in the underlying Municipal Obligations and are 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 Connecticut 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 Connecticut Municipal Obligations may entail. Payment
     of interest and preservation of capital are dependent upon the continuing
     ability of Connecticut issuers and/or obligors of state, municipal and
     public authority debt obligations to meet their payment obligations. Risk
     factors affecting the State of Connecticut are described in "Connecticut
     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 some of 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>


  Connecticut Daily Tax Free Income Fund, Inc. - Class A (1)(2)(3)
<TABLE>
<CAPTION>
[GRAPHIC OMITTED]

Calendar Year End   % Total Return
-----------------   ---------------
<S>                   <C>
1998                2.55%
1999                2.30%
2000                3.04%
2001                1.87%
2002                0.58%
2003                0.17%
2004                0.27%
2005                1.43%
2006                2.42%
2007                2.65%

</TABLE>

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



(1)   As of March 31, 2008, the Class A shares of the Fund had a year to date
      return of 0.44%.


(2)   The Fund's highest quarterly return for its Class A shares was 0.81% for
      the quarter ended December 31, 2000; the lowest quarterly return for its
      Class A shares was 0.01% for the quarter ended March 31, 2004.

(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                                2.65%               2.86%
     Five Years                              1.38%               1.58%
     Ten Years                               1.72%               1.92%
     Since Inception*                        2.70%               2.03%

     ________________________________
<FN>
     * The inception date for the Class A shares was May 23, 1985, and for the
     Class B shares was October 10, 1996.

</FN>
</TABLE>

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

                                       4
<PAGE>

--------------------------------------------------------------------------------
                                    FEE TABLE
--------------------------------------------------------------------------------

This table describes the fees and expenses that you may pay if you buy and hold
shares in 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>

<TABLE>
<CAPTION>

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


<S>                                          <C>        <C>       <C>         <C>
                                                   Class A Shares         Class B Shares
                                                   --------------         --------------
Management Fees*..........................             0.30%                 0.30%
Distribution and Service (12b-1) Fees.....             0.20%                 None
Other Expenses............................             0.50%                 0.50%
  Administration Fees*....................   0.21%                0.21%
                                                       -----                ------
Total Annual Fund Operating Expenses*.....              1.00%                0.80%

</TABLE>


<TABLE>
<CAPTION>

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:

<S>       <C>               <C>        <C>          <C>         <C>

                            1 Year     3 Years      5 Years      10 Years
          Class A:          $102       $318         $552         $1,225
          Class B:          $ 82       $255         $444         $  990

</TABLE>


                                       5
<PAGE>

II.  INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS

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

     The Fund is a tax-exempt money market fund that seeks as high a level of
current income exempt from federal income tax and, to the extent possible, from
Connecticut personal 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 federal and Connecticut personal 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
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.

     Included in the same 20% of net assets in taxable securities, the Fund may
also purchase Municipal Obligations whose interest income may be subject to the
federal alternative minimum tax.


     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 Connecticut 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.


     To the extent suitable Connecticut 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 issuer at the date of issuance, exempt from
federal income tax but, under current law, will be subject to Connecticut
personal income tax.


     The Fund will invest primarily in Connecticut 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 the Municipal Obligations 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 but 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 Connecticut 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 Connecticut Municipal
Obligations, the safety of an investment in the Fund will depend substantially
upon the financial strength of Connecticut and its political subdivisions.

     The primary purpose of investing in a portfolio of Connecticut Municipal
Obligations is the special tax treatment accorded Connecticut resident
individual investors. Payment of interest and preservation of principal,
however, are dependent upon the continuing ability of the Connecticut issuers
and/or obligors of state, municipal and public authority debt obligations to
meet their obligations thereunder. Investors should consider the greater risk of
the Fund's concentration versus the safety that comes with a less concentrated
investment portfolio and should compare yields available on portfolios of
Connecticut issues with those of more diversified portfolios, including
out-of-state issues, before making an investment decision.

                                       7
<PAGE>

     Because the Fund may concentrate in Participation Certificates that 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. 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). These factors 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 annual report for the period
ended January 31, 2008.

     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 Contract and the


                                       8
<PAGE>



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 for 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 of shares 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 their 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 a Participating
Organization 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

                                       10
<PAGE>

Participant Investor during the period covered by the statement, and (iii) the
income earned by 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 "Connecticut Daily
Tax Free Income Fund, Inc." along with a completed Fund application to:

     Connecticut Daily Tax Free 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 telephone the Fund at the above
number to obtain a new account number and then instruct a member

                                       11
<PAGE>

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 Connecticut Daily Tax Free
        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:


     Connecticut Daily Tax Free 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 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

                                       12
<PAGE>

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:

     Connecticut Daily Tax Free 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
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

                                       13
<PAGE>

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 the shareholders at their addresses 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 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

                                       14
<PAGE>

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 Authorization
Withdrawal form. The election may also be made, changed or terminated at any
later time by sending a signature guaranteed written request to the Fund's
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


                                       15
<PAGE>


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 the 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., Delafield Fund, Inc., Florida Daily Municipal
Income Fund, New Jersey Daily Municipal Income Fund, Inc. 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 available to
shareholders resident in any state in which shares of the investment company
being acquired may legally be sold. Shares of the same Class may be exchanged
only between investment company accounts registered in identical names. Before
making an exchange, the investor should review the current prospectus of the
investment company into which the exchange is to be made. 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:

     Connecticut Daily Tax Free 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)

                                       16
<PAGE>

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.

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 as exempt interest dividends 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.

                                       17
<PAGE>

      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.
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.


Connecticut Income Taxes
------------------------

     The designation of all or a portion of a dividend paid by the Fund as an
"exempt-interest dividend" under the Code does not necessarily result in the
exemption of such amount from tax under the laws of any state or local taxing
authority. However, in the opinion of Day Pitney LLP, special Connecticut tax
counsel to the Fund, dividends paid by the Fund that qualify as exempt-interest
dividends for federal income tax purposes and that are correctly designated by
the Fund as derived from obligations issued by or on behalf of the State of
Connecticut, its political subdivisions, or any public instrumentality, state or
local authority, district or similar public entity created under Connecticut law
("Connecticut Municipal Obligations") or from obligations the interest on which
Connecticut is prohibited from taxing by federal law ("Territorial Municipal
Obligations") are not subject to the Connecticut tax on the Connecticut taxable
income of individuals, trusts and estates (the "Connecticut Personal Income
Tax").

     Exempt-interest dividends that are not derived from Connecticut Municipal
Obligations or Territorial Municipal Obligations and any other dividends of the
Fund that are treated as ordinary income for federal income tax purposes are
includible in a taxpayer's tax base for purposes of the Connecticut Personal
Income Tax. Investors should review the Statement of Additional Information for
further discussion of exempt-interest dividends.

                                       18
<PAGE>

     While capital gain dividends are not anticipated by the Fund, capital gain
dividends, whether received in cash or reinvested in additional shares of the
Fund, and amounts, if any, in respect of undistributed long-term capital gains
of the Fund, would be includible in a taxpayer's tax base for purposes of the
Connecticut Personal Income Tax, as would gains, if any, recognized upon the
redemption, sale, or exchange of shares of the Fund, except that, in the case of
taxpayers holding shares of the Fund as capital assets, amounts treated as
capital gain dividends for federal income tax purposes that are derived from
Connecticut Municipal Obligations are not subject to the tax.

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

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


     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 advisors 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.

                                       19
<PAGE>

     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 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.


                                       20
<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>

                                                                                       Years Ended January 31,
                                                                   ------------------------------------------------------------
Class A shares                                                       2008          2007         2006        2005         2004
--------------                                                     --------       -------      ------      ------       -------
<S>                                                                 <C>          <C>          <C>          <C>          <C>
Per Share Operating Performance:
(for a share outstanding throughout the year)
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        0.000        0.000         --          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.....................................................      2.61%        2.48%        1.54%        0.33%        0.15%
Ratios/Supplemental Data
Net assets, end of year (000's)..................................  $  65,088     $ 56,603     $ 60,992     $  70,077    $  74,910
Ratios to average net assets:
  Expenses (net of fees waived) (a) .............................      1.00%        0.98%        0.93%        0.93%        0.93%
  Net investment income..........................................      2.55%        2.42%        1.51%        0.32%        0.15%
  Management & Administration fees waived........................       --          0.15%         --           --           --
  Shareholder servicing fees waived..............................       --           --           --          0.01%        0.02%
  Expenses paid indirectly.......................................      0.00%        0.00%        0.00%        0.00%        0.00%

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


                                       21
<PAGE>
--------------------------------------------------------------------------------

VI.  FINANCIAL HIGHLIGHTS (Continued)

<TABLE>
<CAPTION>
                                                                                       Years Ended January 31,
                                                                   ------------------------------------------------------------
Class B shares                                                       2008          2007         2006        2005         2004
--------------                                                     --------       -------      ------      ------       -------
<S>                                                                 <C>          <C>          <C>          <C>          <C>
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year...............................   $   1.00      $  1.00      $  1.00      $  1.00      $  1.00
                                                                   ---------     --------     --------     --------     --------
Income from investment operations:
    Net investment income........................................      0.028        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.............................      0.028        0.027        0.017        0.005        0.003
Less distributions from:
    Dividends from net investment income.........................     (0.028)      (0.027)      (0.017)      (0.005)      (0.003)
    Net realized gains on investments............................      0.000        0.000        0.000         --          0.000
                                                                   ---------     --------     --------     --------     --------
Total Distributions..............................................     (0.028)      (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.....................................................      2.81%        2.69%        1.75%        0.52%        0.33%
Ratios/Supplemental Data
Net assets, end of year (000's)..................................  $  20,736     $ 21,429     $ 25,192     $  25,482    $  22,735
Ratios to average net assets:
  Expenses (net of fees waived) (a) .............................      0.80%        0.78%        0.73%        0.74%        0.76%
  Net investment income..........................................      2.78%        2.62%        1.73%        0.54%        0.32%
  Management & Administration fees waived........................       --          0.15%         --           --           --
  Expenses paid indirectly.......................................      0.00%        0.00%        0.00%        0.00%        0.00%

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

</TABLE>

                                       22
<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.


                       THIS IS NOT PART OF THE PROSPECTUS

<PAGE>

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



A Statement of Additional Information (SAI)
dated May 30, 2008, includes additional
information about the Fund and its
investments and is incorporated by                      CONNECTICUT
reference into this Prospectus.                         DAILY TAX
Further information about Fund                          FREE INCOME
investments is available in the                         FUND, INC.
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.

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

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                            PROSPECTUS
Commission. Information on the                                May 30, 2008
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. 811-4265

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


 CT5/08P

--------------------------------------------------------------------------------
<PAGE>
-------------------------------------------------------------------------------
CONNECTICUT
DAILY TAX FREE                              600 Fifth Avenue, New York, NY 10020
INCOME FUND, INC.                           (212) 830-5345
                                            (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 Prospectus
of the Connecticut Daily Tax Free 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 Prospectus 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 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 March 8, 1985, 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 federal income tax and, to the extent possible,
from Connecticut personal income tax, as is believed to be consistent with
preservation of capital, maintenance of liquidity and stability of principal.
There can be no assurance that the Fund will achieve its investment objectives.


The following discussion expands upon the description of the Fund's investment
objectives and policies in each of the Prospectuses.

The Fund's assets will be invested primarily in (i) high quality debt
obligations issued by or on behalf of the State of Connecticut, other states,
territories and possessions of the United States and their authorities,
agencies, instrumentalities and political subdivisions, the interest on which
is, in the opinion of bond counsel to the issuer at the date of issuance,
currently exempt from federal income taxation and in (ii) Participation
Certificates in Municipal Obligations purchased from banks, insurance companies
or other financial institutions which cause the Fund to be treated as the owner
of an interest in the underlying municipal obligations for federal income tax
purposes. 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 regular 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.

Taxable securities, the interest income on which is subject to federal, state
and local income tax, will not exceed 20% of the value of the Fund's net assets.
Under current law, exempt-interest dividends that are correctly identified by
the Fund as derived from obligations issued by or on behalf of the State of
Connecticut or its local governments or other political subdivisions, or their
instrumentalities, authorities, districts or similar public entities created
under Connecticut law ("Connecticut Municipal Obligations") will be exempt from
the Connecticut Personal Income Tax. Exempt-interest dividends correctly
identified by the Fund as derived from obligations of Puerto Rico, Guam and the
United States Virgin Islands, as well as any other types of obligations that
Connecticut is prohibited from taxing under the Constitution or the laws of the
United States of America ("Territorial Municipal Obligations"), also should be
exempt from the Connecticut Personal Income Tax provided the Fund complies with
applicable Connecticut laws. (See "Connecticut Income Taxes" herein.) To the
extent suitable Connecticut 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 on these will be designated by the Fund as
derived from interest income which will be, in the opinion of bond counsel to
the issuer at the date of issuance, exempt from federal income tax, under
current law, but will be subject to the Connecticut Personal Income Tax. Except
as a temporary defensive measure during periods of adverse market conditions as
determined by Reich & Tang Asset Management, LLC (the "Manager"), the Fund will
invest primarily in Connecticut Municipal Obligations. The Fund seeks to
maintain an investment portfolio with a dollar-weighted average maturity of 90
days or less and to value its investment portfolio at amortized cost and
maintain a net asset value at $1.00 per share. There can be no assurance that
this value will be maintained.


The Fund may hold uninvested cash reserves pending investment. The Fund's
investments may include "when-issued" Municipal Obligations, stand-by
commitments and taxable repurchase agreements. Although the Fund will attempt to
invest 100% of its total assets in Municipal Obligations, the Fund reserves the
right to invest up to 20% of

                                       2
<PAGE>

the value of its net assets in securities, the interest income on which is
subject to federal, state and local income tax. The Fund may invest more than
25% of its assets in Participation Certificates purchased from banks in
industrial revenue bonds and other Connecticut 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 Connecticut Municipal Obligations, an investment
in Fund shares should be made with an understanding of the characteristics of
the banking industry and the risks which such an investment may entail. (See
"Variable Rate Demand Instruments and Participation Certificates" herein.) The
investment objectives of the Fund described in the preceding paragraphs of this
section 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 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 are rated in the two highest short-term rating categories
by any two nationally recognized statistical rating organizations ("NRSROs") or
in such categories by the only NRSRO that has rated the Municipal Obligations
(collectively, the "Requisite NRSROs"); 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 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 investment 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

                                       3
<PAGE>

credit risks, or an event of insolvency occurs with respect to the issuer of a
portfolio security or the provider of any Demand Feature or Guarantee, the Fund
will dispose of the security absent a determination by the Fund's Board of
Directors that disposal of the security would not be in the best interests of
the Fund. 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
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 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 Code. For the Fund to
qualify, at the close of each quarter of the 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 which is 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 issuance 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

                                       4
<PAGE>

     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 Connecticut issuers.

(3)  Municipal Commercial Paper that is an Eligible Security at the time of
     acquisition. Issues of Municipal Commercial Paper typically represent very
     short-term, unsecured, negotiable promissory notes. These obligations are
     often issued to meet seasonal working capital needs of municipalities or to
     provide interim construction financing. 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
<PAGE>

(5)  Any other federal tax-exempt obligations, and to the extent possible,
     Connecticut 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 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 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 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


                                      6
<PAGE>

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.

In view of the possible "concentration" of the Fund in Participation
Certificates in Connecticut Municipal Obligations, which may be secured by bank
letters of credit or guarantees, an investment in the Fund should be made with
an understanding of the characteristics of the banking industry and the risks
which such an investment may entail. Banks are subject to extensive governmental
regulations which may limit both the amounts and types of loans and other
financial commitments which may be made and interest rates and fees which may be
charged. The profitability of this industry is largely dependent upon the
availability and cost of capital funds for the purpose of financing lending
operations under prevailing money market conditions. Also, general economic
conditions play an important part in the operations of this industry and
exposure to credit losses arising from possible financial difficulties of
borrowers might affect a bank's ability to meet its obligations under a letter
of credit. The Fund may invest 25% or more of 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.


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

                                       7
<PAGE>

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
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

                                       8
<PAGE>

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 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 and Connecticut 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.

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 creditworthy. Under the terms of a
typical

                                       9
<PAGE>

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.

Connecticut Risk Factors


The following represents special considerations regarding investment in
Connecticut Municipal Obligations. This information provides only a brief
summary, does not purport to be a complete description and is largely based on
information drawn from Official Statements relating to securities offerings of
the State of Connecticut available as of the date of this Statement of
Additional Information. The Fund has not independently verified the accuracy and
completeness of the information contained in such Official Statements.

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

Connecticut is highly urbanized, with a 2007 population density of 723 persons
per square mile, as compared to 85 for the United States as a whole. Of the
eight counties in the State, 75% of the population resides within Hartford,
Fairfield and New Haven counties. Per capita personal income of the State's
residents, historically among the highest in the nation, increased in every year
from 1996 to 2006 with the exception of 2002, rising from $32,424 to $50,787.
However, pockets of significant unemployment and poverty exist in several of the
State's most important cities and towns.

Manufacturing has historically been of prime economic importance to Connecticut
but has declined during the last decade. The State's manufacturing sector is
diversified, with the construction of transportation equipment (primarily
aircraft engines and submarines) being the dominant industry, followed by
fabricated metals, computers and electronics, and machinery. As a result of a
rise in employment in service-related industries and the decline in
manufacturing employment, manufacturing accounted for only approximately 11.5%
of total non-agricultural employment in Connecticut in 2006; it was 10.4% for
the nation. Defense-related business has represented a relatively high
proportion of the manufacturing sector, but reductions in defense spending have
considerably reduced this sector's significance in Connecticut's economy since
the early 1980s. The average annual unemployment rate in Connecticut decreased
from 5.3% in 1996 to 2.3% in 2000 but rose to 5.5% for 2003. For 2007, the
average unemployment rate in Connecticut fell to 4.6%. In May 2005 the U.S.
Department of Defense


                                       10
<PAGE>

announced its preliminary list of bases recommended for closure or realignment,
which included for closure the U.S. Naval Submarine Base New London in Groton,
Connecticut. The closure of the base could have a significant impact on the
economy of Southeastern Connecticut. The State made arguments to the Base
Realignment and Closure ("BRAC") Commission for reconsideration of the proposed
closure. In August 2005 the BRAC Commission recommended to take the U.S. Naval
Submarine Base New London off of the list of bases recommended for closure and
realignment. The President of the United States and Congress accepted the BRAC
Commission's recommendation and the base was not closed in that round of
closings.

At the end of the 1990-91 fiscal year, the General Fund had an accumulated
unappropriated deficit of approximately $965.7 million. For the ten fiscal years
ended June 30, 2001, the General Fund ran operating surpluses, based on the
State's budgetary method of accounting, of approximately $110.2 million, $113.5
million, $19.7 million, $80.5 million, $250 million, $262.6 million, $312.9
million, $71.8 million, $300.4 million, and $30.7 million, respectively. The
General Fund ran operating deficits in the 2001-02 and 2002-03 fiscal years of
approximately $817.1 million and $96.6 million, respectively. The 2001-02 fiscal
year deficit was met by the transfer of the $594.7 million balance in the Budget
Reserve Fund and the issuance on December 19, 2002 of Economic Recovery Notes to
meet the remainder of the deficit. The 2002-03 fiscal year deficit was met by
the issuance on June 24, 2004 of additional Economic Recovery Notes. For the
subsequent four fiscal years ending June 30, 2007, the General Fund ran
operating surpluses of $302.2 million, $363.9 million, $446.5 million and $269.2
million, respectively. These surplus balances have been transferred to the
Budget Reserve Fund, bringing the balance in the Budget Reserve Fund to $1,381.7
million. Per Section 4-30a of the Connecticut General Statutes, any
unappropriated surplus, up to ten percent of General Fund expenditures, must be
deposited into the Budget Reserve Fund.

The General Assembly adjourned its legislative session on June 6, 2007 without
the adoption of a biennial budget for the 2007-08 and 2008-09 fiscal years. The
General Assembly did pass and the Governor signed into law: (i) bond
authorizations in an aggregate principal amount not to exceed $160.0 million for
various energy related purposes, projects and programs, (ii) a bond
authorization in the aggregate principal amount not exceeding $5.0 million
dollars per year to fund the Energy Conservation Loan Fund, and (ii) a special
tax obligation bond authorization in an aggregate principal amount not exceeding
$54.0 million dollars for capital resurfacing and related reconstruction
projects. The General Assembly also passed and the Governor signed into law a
bill authorizing the issuance of pension obligation bonds to fund up to $2.0
billion of the unfunded accrued liability in the Teachers' Retirement Fund. The
proposal would also require the State while the bonds are outstanding to
annually appropriate the actuarially-determined annual required contribution to
the Teachers' Retirement Fund. The General Assembly in a special session passed
and the Governor signed into law, various bond acts which resulted in a net
increase in general obligation bond authorizations of $1,623.1 million to take
effect in the 2007-08 fiscal year and $1,369.9 million to take effect in the
2008-09 fiscal year. There are existing bond authorizations which will take
effect during the biennium, including $20 million in each year of the biennium
to fund the Housing Trust Fund and $115 million to take effect in fiscal year
2007-08 and $140 million take effect in fiscal year 2008-09 for UCONN 2000 as
amended by the bond acts signed into law.

In a June 2007 special session, the General Assembly passed, and the Governor
subsequently signed into law on June 26, 2007, the biennial budget for fiscal
years 2007-08 and 2008-09. The budget for fiscal year 2007-08 includes General
Fund revenues of $16,315.6 million and net appropriations of $16,314.9 million,
resulting in a projected surplus of $0.7 million. The budget for fiscal year
2008-09 includes General Fund revenues of $17,073.1 million and net
appropriations of $17,072.3 million, resulting in a projected surplus of $0.8
million. In a September 2007 special session, the General Assembly made an
additional appropriation of $0.7 million for clean contracting standards,
thereby reducing the projected General Fund surplus for the 2008-09 fiscal year
to $0.1 million. The

                                       11
<PAGE>

General Assembly also included in the biennial budget (i) the appropriation of
$613.7 million of the anticipated fiscal year 2006-07 General Fund surplus funds
to pay for various spending items including, $300 million to fund a portion of
the State's contribution to the Teachers' Retirement Fund and $85 million for
debt retirement, (ii) a reduction of lapses in the amount of $96.6 million and
(iii) a transfer of $80 million of the anticipated fiscal year 2006-07 General
Fund surplus to the budget for fiscal year ending June 30, 2009, resulting in a
net reduction in the anticipated 2006-07 surplus of $790.3 million. According to
estimates of the Office of Fiscal Analysis, approximately $471.9 million of the
appropriations are for one-time purposes and approximately $318.4 million of the
appropriations are for on-going purposes. The budget is $690.4 million above the
expenditure cap in fiscal year 2007-08 and $28.9 million below the expenditure
cap in fiscal year 2008-09. However, in accordance with the provisions of
Article XXVIII of the Amendments to the Constitution, the Governor issued a
declaration to exceed the State's expenditure cap in fiscal year 2007-08. This
declaration has been ratified by a three-fifths vote of each house of the
General Assembly.

In accordance with Section 2-36b of the Connecticut General Statutes, in advance
of biennial budget preparations the Office of Policy and Management and the
Legislative Office of Fiscal Analysis submitted reports to the General Assembly
on November 15, 2007 regarding projections of revenues and expenditures for a
five year period. The reports projected General Fund deficits for fiscal years
ending 2008-09, 2009-10 and 2010-11 fiscal years of up to approximately three
percent of the General Fund expenditures for each such fiscal year. Those
projections were preliminary and based in part on budget requests from various
state departments and agencies prior to preparation of the Governor's biennial
budget proposal for the 2007-2009 biennium. The Office of Policy and Management
refined such projections in preparing the Governor's budget proposal submitted
to the General Assembly in February 2008. The Comptroller in a report dated May
1, 2008, estimated the General Fund as of the period ending March 31, 2008 to
have an operating deficit of $67.7 million for the 2007-08 fiscal year. The
Office of Policy and Management in its May 20, 2008 monthly estimates to the
Comptroller as of the period ending April 30, 2008, estimated the General Fund
to have an operating deficit of $52.9 million for the 2007-08 fiscal year.

The General Assembly did not make any Midterm Budget Adjustments for the 2008-09
fiscal year in the legislative session which ended May 7, 2008. The State has a
balanced budget requirement and an expenditures cap. The Office of Policy and
Management in its May 20, 2008 monthly estimates letter to the Comptroller
estimated an operating deficit in the General Fund of almost $150 million for
the 2008-09 fiscal year, and that at the direction of the Governor it is working
on adjustments to balance the 2008-09 fiscal year budget.

In July 2003, the State implemented the first phase of a new, fully integrated,
Internet based, financial management and human resources system. The
implementation problems with the financial management software system caused a
delay in the preparation of financial statements and reports for the 2004-05 and
the 2005-06 fiscal years. The Comptroller's Office has completed the audited
legal accounting basis (modified cash) financial statements and audited
statements prepared in accordance with generally accepted accounting principles
(GAAP) for the State for the 2005-06 fiscal year. There was a delay of the
State's submission to the U.S. Department of Health & Human Services of its
Single Audit for the 2006-06 fiscal year pursuant to OMB Circular No. A-133. The
State received an extension until May 31, 2007, and the State submitted the
Single Audit before that date. The State was unable to make timely provision to
the nationally recognized municipal securities repositories (the "NRMSIRs") by
February 28, 2005, February 28, 2006 or February 28, 2007, respectively, of
audits of its financial statements for the 2003-04, the 2004-05 and the 2005-06
fiscal years and, for the 2003-04 and the 2004-05 fiscal years, of certain
operating data comparisons, as required by the State's various continuing
disclosure agreements entered into in accordance with Securities and Exchange
Commission Rule 15c2-12 in connection with certain of its prior bond issues. On
or prior to February 28, 2005, February 28, 2006 and February 28, 2007,
respectively, the State filed with the NRMSIRs various financial statements and
certain other operating data for the 2003-04, the 2004-05 and the 2005-06 fiscal
years, which had not been audited, but which the State believed to be accurate
in all material respects. The State did file the audited financial statements
with the


                                       12
<PAGE>

NRMSIRs promptly after the audits became available. The State complied with its
annual filing requirements for the 2006-07 fiscal year.

The State's primary method for financing capital projects is through the sale of
general obligation bonds. These bonds are backed by the full faith and credit of
the State. As of February 1, 2008, the State had authorized direct general
obligation bond indebtedness, including pension obligation bonds, totaling
approximately $23,908.5 million, of which $21,987.7 million had been approved
for issuance by the State Bond Commission and $18,032.5 million had been issued.
As of February 1, 2008, net State direct general obligation indebtedness
outstanding (including lease financings) was approximately $10,387.0 million. In
April 2008 the State issued $2,276.6 million taxable general obligation bonds to
partially fund the unfunded accrued liability in the Teacher's Retirement Fund
and to pay other costs related to the financing, and issued $50 million taxable
general obligation refunding bonds. In the legislative session which ended May
7, 2008, the General Assembly passed a bill authorizing an additional $20
million in bonds for school construction projects, bringing the total
authorization for bonds which take effect in the 2008-09 fiscal year for such
projects to $623 million. In addition, such bill authorizes $3 million in bonds
for start-up costs related to the development of new interdistrict magnet school
programs. The bill requires the signature of the Governor to become law, which
as of May 22, 2008 had not yet occurred.

In addition, the State has limited or contingent liability on a significant
amount of other bonds. Such bonds have been issued by the following quasi-public
agencies: the Connecticut Development Authority, the Connecticut Health and
Educational Facilities Authority, the Connecticut Higher Education Supplemental
Loan Authority, the Connecticut Housing Finance Authority, the Connecticut
Resources Recovery Authority and the Capital City Economic Development
Authority. Such bonds have also been issued by the City of Waterbury and the
Southeastern Connecticut Water Authority. As of February 2, 2008, the amount of
bonds outstanding on which the State has limited or contingent liability totaled
$4,189.1 million.

The State is obligated to various cities, towns and regional school districts to
fund certain of the costs of construction and alteration of school buildings or
to support part of the debt service payments on municipal and district debt
issued to fund the State's share of such costs. As of June 30, 2007, the
Commissioner of Education estimates that current grant obligations under the
progress payment basis program established in 1997 are approximately $2.8
billion. In the legislative session which ended May 7, 2008, the General
Assembly passed a bill authorizing new school construction grant commitments in
connection with this program of $531.5 million which take effect in the 2008-09
fiscal year. The bill requires the signature of the Governor to become law,
which as of May 22, 2008 had not yet occurred. As of June 30, 2007, the State is
obligated under the pre-1997 program for approximately $548.0 million in
aggregate principal installment and interest payments with respect to municipal
and district debt. Funding for these payments may come from future State direct
general obligation bond sales. No new grant commitment can be authorized under
the pre-1977 program.

The State's general obligation bonds are rated Aa3 by Moody's Investors Service
("Moody's") and AA by both Standard & Poor's Rating Services ("S&P") and Fitch
Ratings.

The State Employees' Retirement Fund is the largest system maintained by the
State with approximately 52,438 active members, 1,693 inactive (vested) members
and 37,420 retired members as of June 30, 2007. With the exception of the
2003-04 fiscal year, since the 1978-79 fiscal year payments into the fund and
investment income in each fiscal year have been sufficient to meet benefits paid
from the fund in that year. The most recent actuarial valuation of November 2006
indicated that, as of June 30, 2006, the State Employees' Retirement Fund had
unfunded accrued liabilities of $7,879.0 million and a funded ratio of 53.2% on
a projected basis. The actuarial valuation determined the following employer
contribution requirements: (i) $663.9 million for the 2006-07 fiscal

                                       13
<PAGE>

year, (ii) $716.9 million for the 2007-08 fiscal year, and (iii) $753.7 million
for the 2008-09 fiscal year. The State met its annual contribution requirement
for the 2006-07 fiscal year. It is anticipated that the employer contribution
requirement for the 2007-08 fiscal year will be fully met from the budgeted
State contribution amount and grant reimbursements from Federal and other funds.
On October 2, 2007 the State Supreme Court held that the Retirement Commission's
treatment of the State employees' final pro-rated longevity payments was
incorrect, and such payment should be included as additions to "base salary" for
purposes retirement income. The court's ruling will result in a relatively
modest additional cost to the State.

The Teachers' Retirement Fund provides benefits for any teacher, principal,
supervisor or superintendent in the public school systems of the State, with
certain exceptions. As of June 30, 2007, there were approximately 62,990 active
and former employees with accrued and accruing benefits and approximately 28,042
retired members. With the exception of the 2003-04 and 2004-05 fiscal years,
since the 1978-79 fiscal year payments into the fund and investment income in
each fiscal year have been sufficient to meet benefits paid from the fund in
that year. The most recent actuarial valuation dated November 29, 2006 indicated
that, as of June 30, 2006, the Teachers' Retirement Fund had unfunded accrued
liabilities of $6,922.5 million and a funded ratio of 59.5% on a projected
basis. The actuarial valuation determined the following employer contribution
requirements: (i) $425.3 million for the 2006-07 fiscal year, (ii) $518.6
million for the 2007-08 fiscal year, and (iii) $539.3 million for the 2008-09
fiscal year. The budgeted State contribution of $412.1 million for the 2006-07
fiscal year is less than the actuarial valuation amount of $425.3 million. To
meet the State's annual contribution requirement for the 2007-08 and 2008-09
fiscal years, $518.6 million and $539.3 million, respectively, have been
appropriated. Public Act No. 07-186, which authorized the issuance of pension
obligation bonds to fund up to $2 billion of the unfunded accrued liability in
the Teacher's Retirement Fund, also made changes to the funding of cost of
living adjustments for pension benefits. One preliminary report estimated that
these changes could increase the unfunded actuarial accrued liability by
approximately $1.0 billion. This preliminary estimate was based on various
assumptions and no assurances can be given that subsequent projections or the
next actuarial report will not result in a higher or lower estimate. However,
based on this projection, the issuance of the $2 billion pension obligation
bonds would result in a net decrease in the unfunded actuarial accrued liability
of approximately $1 billion. In April 2008 the State issued $2,276.6 million
taxable general obligation bonds to partially fund the unfunded accrued
liability in the Teacher's Retirement Fund and to pay other costs related to the
financing.

The State provides post-retirement health care and life insurance benefits to
all employees who retire from State employment. The State finances the cost of
such benefits on a pay-as-you-go basis; as such, the State has not established
any fund for the accumulation of assets with which to pay post-retirement health
care and life insurance benefits in future years. The State will need to make
significant General Fund appropriations for such benefits each fiscal year. For
the 2007-08 fiscal year, $442.9 million was appropriated. Implementation of
Governmental Accounting Standards Board ("GASB") Statement No. 45 regarding
accounting and financial reporting for postemployment benefits other than
pensions will require the State to obtain an analysis of the unfunded actuarial
accrued liability of such post-retirement health care and life insurance
benefits and to recognize the annual required contribution to fund that
actuarial liability in its financial statements commencing with those for the
2007-08 fiscal year. In an actuarial report dated March 2007, the actuarial
accrued liability for post-retirement health care and life insurance benefits
for persons covered under the State Employees Retirement System and other State
retirement systems, excluding the Teachers' Retirement System, was estimated as
of April 1, 2006 to range from $11.4 billion to $21.7 billion. The amounts
depend upon various assumptions including those with respect to medical cost
inflation rates, the establishment of a trust to fund those liabilities, the
amount of initial and annual amounts deposited in such a trust and discount
rates. The amount of the annual required contribution under these various
assumptions ranges from $1.0 billion to $1.6 billion for the 2006-07 fiscal
year.


                                       14
<PAGE>

The State makes a General Fund appropriation to the Teachers' Retirement Fund to
cover the portion of retiree health insurance costs which is not funded from the
amounts available in the Teachers' Retirement Health Insurance Fund. The amount
of $22.9 million has been appropriated for such purpose for the 2007-08 fiscal
year. No fund has been established for the accumulation of assets with which to
pay such benefits in future years; therefore, significant General Fund
appropriations will be required for each fiscal year. Implementation of GASB
Statement No. 45 will require the State to obtain an analysis of the unfunded
actuarial accrued liability of such retiree health insurance benefits and to
recognize the annual required contribution to fund that actuarial liability in
its financial statements commencing with those for the 2007-08 fiscal year. The
State Teachers' Retirement Board has received an actuarial valuation of the
State's liability with respect to post-retirement health care benefits for
members of the Teachers' Retirement Fund. The report indicates an actuarial
accrued liability as of June 30, 2006 of $2.2 billion on an unfunded basis,
based upon certain stated assumptions. The actuarial valuation determined a
$111.7 million employer contribution requirement for the 2006-07 fiscal year.
The valuation noted that if the plan were prefunded the actuarial accrued
liability as of June 30, 2006 would be reduced to $1.3 billion, based upon
certain stated assumptions, which would result in a $60.4 million employer
contribution requirement for the 2006-07 fiscal year.

On June 21, 2004, Governor John G. Rowland announced that he would resign as
Governor of the State, effective July 1, 2004. Pursuant to the State
Constitution, he has been succeeded as Governor by the Lieutenant Governor, M.
Jodi Rell, who is a member of the same party as Governor Rowland and was elected
Lieutenant Governor with him at the last regular general election. On December
23, 2004, former Governor Rowland pleaded guilty to one federal charge of
conspiracy to commit honest services mail fraud and tax fraud. There is an
ongoing federal investigation of the former Rowland administration regarding
alleged improprieties with contract awards.

The State, its officers, and its employees are defendants in numerous legal
proceedings. Although it is not possible to determine the outcome of these legal
proceedings, the State's Attorney General has opined that an adverse decision in
any of the following cases might have a significant impact on the State's
financial position: (i) an action seeking to represent a class of certain
Medicaid recipients, claiming that the Commissioner of the Department of Social
Services fails to provide them adequate access to dental services and to
adequately compensate providers of such services, and seeking declaratory and
injunctive relief plus attorneys' fees and costs (currently awaiting court
approval of a tentative settlement); (ii) a purported class-actions on behalf of
laid-off State employees alleging that they were laid off in violation of their
constitutional rights and claiming back wages, damages, attorneys' fees, and
costs; (iii) a petition to compel arbitration against the State filed by three
manufacturers that agreed to participate in the 1998 Master Settlement Agreement
("MSA") entered into by Connecticut and nearly all other states and territories
to resolve litigation claims against the major domestic tobacco manufacturers,
contending that the State has not diligently enforced its obligations under the
MSA to enforce statutory requirements against non-participating manufacturers,
which arbitration could result in the reduction or elimination of payments that
the State receives under the MSA for any year that the State was found not to
have diligently enforced its obligations; (iv) a purported class-action on
behalf of similarly situated students in selected school districts claiming that
the State's primary statutory mechanism for the distribution of State aid for
public schools currently fails to ensure both substantially equal educational
opportunities and a suitable education for these students as purportedly
reflected by both the educational challenges they face and their poor
performance on state standardized measures, and seeking a declaratory judgment,
an injunction against the operation of the current system, an order that a new
system be devised, the appointment of a special master to oversee such
activities, continuing court jurisdiction and attorneys' fees and costs; (v) a
dispute over the terms of an Exit Plan with respect to judicial oversight of the
operations of the State Department of Children and Families pursuant to a 1991
federal court-ordered consent decree in an action involving a plaintiff class of
children in the child welfare system; (vi) litigation involving claims by Indian
tribes and alleged Indian tribes to State land or


                                       15
<PAGE>

sovereignty over portions of the State's land area; (vii) arbitration
proceedings initiated by a contractor against the State's Department of
Transportation pursuant to State statute alleging breaches of contract in
connection with both a bridge construction project in New Haven and a separate
construction project in Bridgeport; and (viii) a purported class-action on
behalf of individuals with mental illness in nursing facilities in the State
claiming that the State has violated the Americans with Disabilities Act by
failing to provide services to them in the most integrated setting appropriate
to their needs, which the Court dismissed for lack of standing but left open the
ability of proper plaintiffs to replead.

As a result of litigation on behalf of black and Hispanic school children in the
City of Hartford seeking "integrated education" within the Greater Hartford
metropolitan area, in July 1996 the State Supreme Court directed the legislature
to develop appropriate measures to remedy the racial and ethnic segregation in
the Hartford public schools. In December 2000 the plaintiffs filed a motion
seeking to have the Superior Court monitor the State's compliance with the 1996
Supreme Court decision. A hearing was held in April 2002, and the case was
settled early in 2003. Under the settlement agreement, the State was required
over a four year period to open two new magnet schools in the Hartford area in
each year, to substantially increase the voluntary interdistrict busing program
in that area, and to work collaboratively with the plaintiffs in planning for
the period following the four year period. At the time of the settlement the
anticipated cost of compliance over the four year period was $45.0 million,
exclusive of school renovation/construction costs. In August 2004 the plaintiffs
filed a motion seeking an order that the defendants had materially breached the
judicially and legislatively approved settlement. Although the motion remains
pending, the parties have recently informed the Court that they are not
presently in need of a ruling on the issues raised. In August 2006, the City of
Hartford moved to intervene in the case, and in January 2007 the Court granted
that motion. In July 2007 the plaintiffs filed a motion for order to enforce the
judgment and to order a remedy alleging that the State remains in material
non-compliance with the 1996 mandate. In November 2007 the Superior Court began
a hearing on the plaintiffs' motion and in January 2008 completed that hearing.
A decision remains pending. In May 2008, a tentative settlement was approved by
the General Assembly, and is now awaiting court approval.

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

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

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


                                       16
<PAGE>

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 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 exceed 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

                                       17
<PAGE>

   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 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

                                       18
<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.

                                       19
<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.
---------------------- --------   ------------- ------------------------------------------------  --------------    ---------------
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.
---------------------- --------   ------------- ------------------------------------------------  --------------    ---------------

</TABLE>

                                       20
<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:
---------------------- ---------  ------------- ------------------------------------------------  --------------    ---------------

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    1993 -     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>

                                       21
<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 $5,782 to its directors with respect
to the period ended January 31, 2008, all of which consisted of directors' fees
paid to the 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
Daily Income Fund, the Florida Daily Municipal Income Fund, and the New Jersey
Municipal Income Fund, Inc. in accordance with the Manager's discretion.
Directors who are affiliated with the Manager do not receive compensation from
the Fund. (See "Compensation Table.")


                                       22
<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,                 $630                        0                       0                  $69,500 (5 Funds)
Director

Carl Frischling,                  $595                        0                       0                  $57,244 (5 Funds)
Director

Edward A. Kuczmarski              $840                        0                       0                  $109,775 (10 Funds)
Director

William Lerner,                   $708                        0                       0                  $75,999 (5 Funds)
Director

Dr. W. Giles Mellon,              $729                        0                       0                  $82,500 (9 Funds)
Director

James L. Schultz,                 $630                        0                       0                  $69,500 (5 Funds)
Director

Robert Straniere,                 $766                        0                       0                  $86,900 (9 Funds)
Director

Dr. Yung Wong,                    $884                        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 62,288,678 Class A shares outstanding and
16,044,582 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 the Fund's outstanding shares as of April 30,
2008:


                                       23
<PAGE>

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

Lehman Brothers                                 16.97%               Record
For the Exclusive Benefit of Customers
70 Hudson Street - 7th Floor
Jersey City, NJ 07302

ICCC                                            11.89%               Record
Attn: Commissions/Special Services
210 West 10th Street
Kansas City, MO 64105


BNY as Agent for                                11.14%              Beneficial
Dana J. Mcavity
37 Peasant Lane
Greenwich, CT 06830-3811

Pershing                                         8.28%               Record
One Pershing Plaza
Jersey City, NJ 07399

BNY as Agent for                                 7.54%              Beneficial
Elizabeth M. Harvey
663 Ponus Rdg.
New Canann, CT 06840-3422

BNY as Agent for                                 5.61%              Beneficial
V. Frank Pottow
8 Grahampton Lane
Greenwich, CT 06840-3859


Class B Shares


William B. Sawch                                37.72%              Beneficial
146 Lyons Plain Rd.
Weston, CT 06883-3021

Oppenheimer & Co.                               36.86%               Record
For the Benefit of Various Customers
125 Board Street
New York, NY 10004

Edward J. Mastoloni                              7.49%              Beneficial
10 Rincard Terrace
Greenwich, CT 06831-3212


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.

                                       24
<PAGE>

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.
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 December 6, 2007, 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 January 31, 2009. The contract may
be continued in force for successive twelve-month periods beginning each
February 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          $251,882           $0             $251,882
--------------------------------------------------------------------------------
     January 31, 2007          $283,393           $46,261        $237,132
--------------------------------------------------------------------------------
     January 31, 2006          $377,473           $0             $377,473
--------------------------------------------------------------------------------


                                       25
<PAGE>


The Fund's net assets at the close of business on January 31, 2008 totaled
$85,823,718.

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:


                               Administrative Fees

     Fiscal Year Ended         Payable            Waived           Paid

--------------------------------------------------------------------------------
     January 31, 2008          $176,317              $0          $176,317
--------------------------------------------------------------------------------
     January 31, 2007          $198,375            $92,959       $105,416
--------------------------------------------------------------------------------
     January 31, 2006          $264,231              $0          $264,231
--------------------------------------------------------------------------------



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 Organizations to
Fund 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, or by the Manager from its own
resources, which includes the management fee, administrative service 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 such distribution
related services.

Under the Shareholder Servicing Agreements, the Distributor receives from the
Fund a 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.

                                       26
<PAGE>

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 purposes of 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:


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

-------------------------------------------------------------------------- -------------------- ----------------- -----------------
                                                                                 CLASS A             CLASS B         MORGAN CLASS
                                                                                 SHARES              SHARES             SHARES
                                                                           -------------------- ----------------- -----------------
                                                                           -------------------- ----------------- -----------------
TOTAL FEES PAID BY EACH CLASS OF THE FUND UNDER THE PLANS:                        $122,652             $0               $161
-------------------------------------------------------------------------- -------------------- ----------------- -----------------
PAYMENTS MADE BY THE MANAGER AND DISTRIBUTOR TO OR ON BEHALF OF                   $242,133          $46,897             $523
PARTICIPATING ORGANIZATIONS:
-------------------------------------------------------------------------- -------------------- ----------------- -----------------
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:                                                                  $973               $973               $0
-------------------------------------------------------------------------- -------------------- ----------------- -----------------
    COMPENSATION TO UNDERWRITERS:                                                   $0                 $0                $0
-------------------------------------------------------------------------- -------------------- ----------------- -----------------
    COMPENSATION TO BROKER-DEALERS:                                               $242,133          $46,897             $523
-------------------------------------------------------------------------- -------------------- ----------------- -----------------
    COMPENSATION TO SALES PERSONNEL:                                               $3,553            $3,553              $0
-------------------------------------------------------------------------- -------------------- ----------------- -----------------
    INTEREST, CARRYING OR OTHER FINANCING CHARGES:                                  $0                 $0                $0
-------------------------------------------------------------------------- -------------------- ----------------- -----------------
    TRAVEL AND ENTERTAINMENT FOR SALES PERSONNEL:                                  $246               $246               $0
-------------------------------------------------------------------------- -------------------- ----------------- -----------------
    MISCELLANEOUS EXPENSES:                                                         $77                $77               $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 0.40% 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 0.20% 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 0.23% 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 of shares 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

                                       27
<PAGE>


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 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 Class A and Morgan
Class 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 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
Organization 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 Service Agreement 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.

_________________________________________________
*The Morgan Class Shares liquidated May 24, 2007.


                                       28
<PAGE>

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 December 6, 2007 to
continue in effect until January 31, 2009.* Thereafter, the Class A and Class B
Plan may continue in effect for successive annual periods commencing February 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 Plan or in the agreements related to the Plan. The Class A
and Class B Plan further provides that it may not be amended to increase
materially the costs which may be spent by the Fund pursuant to the Class A and
Class B 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 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.

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 Fund's 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 agent 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                               $30,674                    0.05%
------------------------------------ ------------------------- -----------------
Class B Shares                               $11,279                    0.05%
------------------------------------ ------------------------- -----------------
Morgan Class Shares                            $41                      0.05%
------------------------------------ ------------------------- -----------------
------------------------------------ ------------------------- -----------------
Total Transfer Agency Fees                   $41,994
------------------------------------ ------------------------- -----------------

___________________________________
*The Morgan Class Plan was last approved on  December 7, 2006, to continue in
effect until January 31, 2008.  The Morgan Class Shares liquidated May 24, 2007.


                                       29
<PAGE>

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 Connecticut law are passed upon by
Day Pitney LLP, 242 Trumbull Street, Hartford, CT 06103-1212.


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 not of a fee charged by the issuing institution for
servicing the underlying obligation and issuing the Participation Certificate,
letter of credit, guarantee or insurance and providing the demand repurchase
feature.

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

Investment decisions for the Fund 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


                                       30
<PAGE>

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 unaffected 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. Unless specifically requested by an
investor, the Fund will not issue certificates evidencing Fund shares.

As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
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 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 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 per share on (i) any day in 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,

                                       31
<PAGE>

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 Connecticut law as a regulated investment company that
distributes exempt-interest dividends. It intends to continue to so qualify as
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

                                       32
<PAGE>

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.

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.

                                       33
<PAGE>

Dividends and distributions to shareholders will be treated in the same manner
for federal and Connecticut 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.

Connecticut Income Taxes

The designation of all or a portion of a dividend paid by the Fund as an
"exempt-interest dividend" under the Code does not necessarily result in the
exemption of such amount from tax under the laws of any state or local taxing
authority. However, in the opinion of Day Pitney LLP, special Connecticut tax
counsel to the Fund, dividends paid by the Fund that qualify as exempt-interest
dividends for federal income tax purposes and that are correctly designated by
the Fund as derived from obligations issued by or on behalf of the State of
Connecticut, its political subdivisions, or any public instrumentality, state or
local authority, district or similar public entity created under Connecticut law
("Connecticut Municipal Obligations") or from obligations the interest on which
Connecticut is prohibited from taxing by federal law ("Territorial Municipal
Obligations") are not subject to the Connecticut tax on the Connecticut taxable
income of individuals, trusts and estates (the "Connecticut Personal Income
Tax").

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

While capital gain dividends are not anticipated by the Fund, capital gain
dividends, whether received in cash or reinvested in additional shares of the
Fund and amounts, if any, in respect of undistributed long-term capital gains of
the Fund, would be includible in a taxpayer's tax base for purposes of the
Connecticut Personal Income Tax, as would gains, if any, recognized upon the
redemption, sale, or exchange of shares of the Fund, except that, in the case of
taxpayers holding shares of the Fund as capital assets, amounts treated as
capital gain dividends for federal income tax purposes that are derived from
Connecticut Municipal Obligations are not subject to the tax.

Dividends and distributions paid by the Fund that constitute items of tax
preference for purposes of the federal

                                       34
<PAGE>

alternative minimum tax, other than exempt-interest dividends derived from
Connecticut Municipal Obligations or Territorial Municipal Obligations, may be
subject to the net Connecticut minimum tax.

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


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 advisors with respect to the
treatment of distributions from 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 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
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 Fund 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.


                                       35
<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.


                                       36
<PAGE>

<TABLE>
<CAPTION>

                                                      CORPORATE 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>

Corporate            $0-     $50,001-      $75,001-     $100,001-    $335,001-    $10,000,001-     $15,000,001-      $18,333,334
Return           50,000        75,000      100,000       335,000    10,000,000     15,000,000       18,333,333        and over
------------------------------------------------------------------------------------------------------------------------------------

                                                 2. Then Your Combined Income Tax Bracket Is . . .

------------------------------------------------------------------------------------------------------------------------------------
Federal
Tax Rate        15.00%      25.00%        34.00%        39.00%        34.00%          35.00%          38.00%           35.00%
------------------------------------------------------------------------------------------------------------------------------------
State
Tax Rate         7.50%      7.50%         7.50%         7.50%          7.50%          7.50%            7.50%            7.50%
------------------------------------------------------------------------------------------------------------------------------------
Combined
Marginal
Tax Rate        21.38%      30.63%        38.95%        43.58%        38.95%          39.88%          42.65%           39.88%
------------------------------------------------------------------------------------------------------------------------------------

                                       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%       1.27%      1.44%       1.64%         1.77%         1.64%            1.66%               1.74%              1.66%
------------------------------------------------------------------------------------------------------------------------------------

     1.50%       1.91%      2.16%       2.46%         2.66%         2.46%            2.49%               2.62%              2.49%
------------------------------------------------------------------------------------------------------------------------------------

     2.00%       2.54%      2.88%       3.28%         3.54%         3.28%            3.33%               3.49%              3.33%
------------------------------------------------------------------------------------------------------------------------------------

     2.50%       3.18%      3.60%       4.10%         4.43%         4.10%            4.16%               4.36%              4.16%
------------------------------------------------------------------------------------------------------------------------------------

     3.00%       3.82%      4.32%       4.91%         5.32%         4.91%            4.99%               5.23%              4.99%
------------------------------------------------------------------------------------------------------------------------------------

     3.50%       4.45%      5.05%       5.73%         6.20%         5.73%            5.82%               6.10%              5.82%
------------------------------------------------------------------------------------------------------------------------------------

     4.00%       5.09%      5.77%       6.55%         7.09%         6.55%            6.65%               6.97%              6.65%
------------------------------------------------------------------------------------------------------------------------------------

     4.50%       5.72%      6.49%       7.37%         7.98%         7.37%            7.48%               7.85%              7.48%
------------------------------------------------------------------------------------------------------------------------------------

     5.00%       6.36%      7.21%       8.19%         8.86%         8.19%            8.32%               8.72%              8.32%
------------------------------------------------------------------------------------------------------------------------------------

     5.50%       7.00%      7.93%       9.01%         9.75%         9.01%            9.15%               9.59%              9.15%
------------------------------------------------------------------------------------------------------------------------------------

     6.00%       7.63%      8.65%       9.83%         10.63%        9.83%            9.98%              10.46%              9.98%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                       37
<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>

Single                 $8,026-            $10,001-           $32,551-           $78,851-           $164,551-          $357,701
Return                  10,000              32,550             78,850            164,550             357,700           and over
------------------------------------------------------------------------------------------------------------------------------------

Joint                 $16,051-           $20,001-            $65,101-          $131,451-           $200,301-          $357,701
Return                  20,000             65,100             131,450            200,300             357,700           and over

------------------------------------------------------------------------------------------------------------------------------------
                                           2. Then Your Combined Income Tax Rate Is . . .
------------------------------------------------------------------------------------------------------------------------------------

Federal
Tax Rate               15.00%            15.00%               25.00%             28.00%            33.00%              35.00%
------------------------------------------------------------------------------------------------------------------------------------

State
Tax Rate                3.00%             5.00%                5.00%              5.00%             5.00%               5.00%
------------------------------------------------------------------------------------------------------------------------------------

Combined
Tax Rate               17.55%            19.25%                 28.75%           31.60%            36.35%              38.25%
------------------------------------------------------------------------------------------------------------------------------------
                               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%               1.21%              1.24%               1.40%              1.46%              1.57%            1.62%
------------------------------------------------------------------------------------------------------------------------------------

      1.50%               1.82%              1.86%               2.11%              2.19%              2.36%            2.43%
------------------------------------------------------------------------------------------------------------------------------------

      2.00%               2.43%              2.48%               2.81%              2.92%              3.14%            3.24%
------------------------------------------------------------------------------------------------------------------------------------

      2.50%               3.03%              3.10%               3.51%              3.65%              3.93%            4.05%
------------------------------------------------------------------------------------------------------------------------------------

      3.00%               3.64%              3.72%               4.21%              4.39%              4.71%            4.86%
------------------------------------------------------------------------------------------------------------------------------------

      3.50%               4.24%              4.33%               4.91%              5.12%              5.50%            5.67%
------------------------------------------------------------------------------------------------------------------------------------

      4.00%               4.85%              4.95%               5.61%              5.85%              6.28%            6.48%
------------------------------------------------------------------------------------------------------------------------------------

      4.50%               5.46%              5.57%               6.32%              6.58%              7.07%            7.29%
------------------------------------------------------------------------------------------------------------------------------------

      5.00%               6.06%              6.19%               7.02%              7.31%              7.86%            8.10%
------------------------------------------------------------------------------------------------------------------------------------

      5.50%               6.67%              6.81%               7.72%              8.04%              8.64%            8.91%
------------------------------------------------------------------------------------------------------------------------------------

      6.00%               7.28%              7.43%               8.42%              8.77%              9.43%            9.72%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

<PAGE>

                                     PART C
                                OTHER INFORMATION
Item 23. Exhibits.

   (a)            Articles of Incorporation of the Registrant filed with
                  Post-Effective Amendment No. 23 to the Registration Statement
                  on Form N-1A on May 29, 1998, and incorporated herein by
                  reference.

   (a.1)          Articles Supplementary of the Registrant filed with the
                  Maryland State Department of Assessments and Taxation on
                  November 29, 2001 filed with Post-Effective Amendment No. 31
                  to the Registration Statement on Form N-1A on May 28, 2004,
                  and incorporated herein by reference.

    (b)           Amended and Restated By-Laws of Registrant filed with
                  Post-Effective Amendment No. 28 to the Registration Statement
                  on Form N-1A filed on May 31, 2001, 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. 23 to the Registration Statement on Form N-1A on
                  May 29, 1998, 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. 28 to the Registration
                  Statement on Form N-1A on May 31, 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. 31 to the Registration Statement
                  on Form N-1A on May 28, 2004, and incorporated herein by
                  reference.

  (e.1)           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 of Shares, filed with Post-Effective Amendment
                  No. 28 to the Registration Statement on Form N-1A filed on May
                  31, 2001, and incorporated herein by reference.

  (e.2)           Amendment dated January 29, 2004 to the Distribution Agreement
                  for the J.P. Morgan Select Class of Shares filed with
                  Post-Effective Amendment No. 31 to the Registration Statement
                  on Form N-1A on May 28, 2004, 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. 33 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. 34 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 Registrant and Reich & Tang Asset Management, LLC
                  (formerly Reich & Tang Asset Management L.P.) filed with
                  Post-Effective Amendment No. 28 to the Registration Statement
                  on Form N-1A on May 31, 2001, and incorporated herein by
                  reference.

                                       C-1


<PAGE>

   (h.1)          Fund Accounting Agreement between the Registrant and The Bank
                  of New York filed with Post-Effective Amendment No. 32 to the
                  Registration Statement on Form N-1A on May 27, 2005, and
                  incorporated herein by reference.


   (h.2)          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. 34 to the Registration
                  Statement on Form N-1A on May 31, 2007, and incorporated
                  herein by reference.

   (h.3)          Cash Management Agreement and Related Services Agreement
                  between the Registrant and The Bank of New York Mellon filed
                  with Post-Effective Amendment No. 32 to the Registration
                  Statement on Form N-1A on May 27, 2005, and incorporated
                  herein by reference.

    (h.4)         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. 34 to the Registration Statement
                  on Form N-1A on May 31, 2007, and incorporated herein by
                  reference.

    (h.5)         Form of Transfer Agency Agreement and Addendum to the Transfer
                  Agency Agreement between the Registrant and Reich & Tang
                  Distributors, Inc. filed with Post-Effective Amendment No. 29
                  to the Registration Statement on Form N-1A on May 31, 2002,
                  and incorporated herein by reference.


   (i)            Opinion of Battle Fowler LLP as to the legality of the
                  securities being registered, including their consent to the
                  filing thereof and to the use of their name in the Prospectus
                  filed with Post-Effective Amendment No. 23 to the Registration
                  Statement on Form N-1A on May 29, 1998, and incorporated
                  herein by reference.

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


   (i.2)          Opinion  of Day, Berry & Howard, dated May 13, 1985, and
                  Consent of Day, Berry & Howard, dated May 10, 1995, to the use
                  of their name under the heading "Connecticut Income Taxes" in
                  the Prospectus and in the Statement of Additional Information,
                  and under the heading "Counsel and Independent Registered
                  Public Accounting Firm" in the Statement of Additional
                  Information filed with Post-Effective Amendment No. 23 to the
                  Registration Statement on Form N-1A on May 29, 1998, and
                  incorporated herein by reference.

   (j)            Consent of Independent Registered Public Accounting Firm.

   (k)            Audited Financial Statements, for 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. 23 to the Registration Statement
                  on Form N-1A on May 29, 1998, and incorporated herein by
                  reference.

   (m)            Distribution and Service Plan pursuant to Rule 12b-1 under the
                  Investment Company Act of 1940 filed with Post-Effective
                  Amendment No. 31 to the Registration Statement on Form N-1A on
                  May 28, 2004, and incorporated herein by reference.

   (m.1)          Distribution and Service Plan pursuant to Rule 12b-1 for the
                  J.P. Morgan Select Class of Shares filed with Post-Effective
                  Amendment No. 31 to the Registration Statement on Form N-1A on
                  May 28, 2004, and incorporated herein by reference.

                                       C-2


<PAGE>

   (m.2)          Shareholder Servicing Agreement dated October 30, 2000,
                  between the Registrant and Reich & Tang Distributors, Inc.
                  filed with Post-Effective Amendment No. 28 to the Registration
                  Statement on Form N-1A on May 31, 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 of Shares filed with Post-Effective
                  Amendment No. 28 to the Registration Statement on Form N-1A on
                  May 31, 2001, and incorporated herein by reference.

   (m.4)          Amendment dated January 29, 2004 to the Shareholder Servicing
                  Agreement for the J.P. Morgan Select Class Shares filed with
                  Post-Effective Amendment No. 31 to the Registration Statement
                  on Form N-1A on May 28, 2004, 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 of Shares (see Exhibit e.1).


   (m.7)          Amendment dated January 29, 2004 to the Distribution Agreement
                  for the J.P. Morgan Select Class of Shares (see Exhibit e.2).

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

   (o)            Reserved.

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

   (q)            Powers of Attorney of Directors of Registrant.

                                       C-3


<PAGE>

Item 24. Persons controlled by or Under Common Control with the Fund.


        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., Daily Income Fund, Delafield Fund, Inc., Florida Daily Municipal
Income Fund, New Jersey Daily Municipal Income Fund, Inc., 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. 29 to the
Registration Statement on Form N-1A filed with the Commission on May 31, 2002.

Item 26.   Business and Other Connections of Investment Advisor.

        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 AM"). 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.

                                       C-4

<PAGE>

        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.


        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.

                                      C-5
<PAGE>

        Christine Manna is a Vice President and Assistant Secretary of RTAM.
Ms. Manna has been associated with RTAM since June 1995. 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-6

<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., Daily Income
Fund, Florida Daily Municipal Income Fund, New Jersey Daily Municipal Income
Fund, Inc., 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 business 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, 100 Barclay Street, New
York, N Y 10286, the Registrant's custodian; and at Reich & 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-7


<PAGE>

                                   SIGNATURES


         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, and State of New York, on the 30th day of May, 2008.


                                    CONNECTICUT DAILY TAX FREE 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 use of their name in
      the Registration Statement.

(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.