<PAGE>
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DAILY
TAX FREE
INCOME
FUND, INC.
Annual Report
October 31, 1996
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<PAGE>
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DAILY TAX FREE 600 FIFTH AVENUE, NEW YORK, NY 10020
INCOME FUND, INC. 212-830-5200
================================================================================
Dear Shareholder:
We are pleased to present the annual report of Daily Tax Free Income Fund, Inc.
for the year ended October 31, 1996. As of the end of the year, the Fund had net
assets of $609,633,100 and 5,033 active shareholders.
We thank you for your support of Daily Tax Free Income Fund, Inc. and look
forward to continuing to serve your cash management needs.
Sincerely,
\s\Steven W. Duff
Steven W. Duff
President
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<PAGE>
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DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS
OCTOBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------
Face Value Standard
Amount Yield (Note 1) Moody's & Poor's
------ ----- ------ ------- ------
Variable Rate Demand Instruments -
Participations (c) (4.95%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 3,037,519 The Bank of New York LOC covering eight issues
due 10-01-98 through 05-01-01 4.86% to 4.95% $ 3,037,519 P1 A1+
18,002,636 Chase Manhattan Bank LOC covering fifteen issues
due 11-10-98 through 05-01-13 4.53% to 5.50% 18,002,636 P1 A1+
1,655,812 The First National Bank of Maryland LOC covering seven issues
due 11-15-96 through 09-15-02 4.95% 1,655,812 P1 A1
216,250 LaSalle National Bank LOC covering one issue due 07-01-00 4.95% 216,250 P1 A1+
7,282,250 PNC Bank, N.A. LOC covering three issues due 07-29-97
through 10-15-13 5.28% to 6.90% 7,282,250 P1
- ------------ -----------
30,194,467 Total Variable Rate Demand Instruments - Participations 30,194,467
- ------------ -----------
<CAPTION>
Variable Rate Demand Instruments -
Private Placements (c) (16.79%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 10,361,167 Banc One Arizona LOC covering five issues due 01-01-99
through 01-01-11 5.36% $ 10,361,167 P1 A1
13,176,000 Bank of Tokyo, Ltd. LOC covering four issues due 12-01-09
through 12-01-15 4.95% to 5.36% 13,176,000 P1 A1+
322,499 Central Trust Company LOC Backed by Bank of New York
LOC covering two issues due 01-01-99 4.95% 322,499 P1 A1
1,927,472 Comerica Bank - Detroit LOC covering four issues
due 02-01-00 through 05-01-05 4.95% 1,927,472 P1 A1
1,500,000 Credit Suisse LOC covering one issue due 12-01-00 4.95% 1,500,000 P1 A1+
6,000,000 Creditanstalt-Bankverein LOC covering two issues
due 11-01-05 through 06-01-10 4.95% 6,000,000 P1 A1+
2,000,000 Dresdner Bank AG LOC covering two issues
due 12-28-14 through 08-01-15 4.95% 2,000,000 P1 A1+
9,240,000 The First National Bank of Maryland LOC covering three issues
due 07-01-04 through 12-01-20 3.65% to 5.36% 9,240,000 P1 A1
3,418,285 The Huntington National Bank LOC covering two issues
due 12-01-98 through 10-01-05 3.80% to 5.61% 3,418,285 P1 A1
1,215,000 Key Bank, N.A. LOC covering one issue due 07-01-15 4.95% 1,215,000 P1 A1
459,062 Nations Bank, N.A. LOC covering one issue due 12-01-99 5.36% 459,062 P1 A1
3,824,000 PNC, N.A. LOC covering two issues due 12-01-00 through 06-30-02 5.36% 3,824,000 P1 A1+
3,771,000 Norwest Bank, N.A. LOC covering three issues
due 07-01-00 through 12-01-15 5.11% to 5.36% 3,771,000 P1 A1+
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------
Face Value Standard
Amount Yield (Note 1) Moody's & Poor's
------ ----- ------ ------- ------
Variable Rate Demand Instruments -
Private Placements (c) (Continued)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 27,156,000 Seattle-First National Bank LOC Backed by Bank of America
NT & SA LOC covering twelve issues due 12-15-00 through 11-15-15 5.36% $ 27,156,000 P1 A1
1,690,000 State Street Bank & Trust Company
LOC covering one issue due 01-01-02 4.95% 1,690,000 P1 A1+
1,800,000 Wells Fargo Bank, N.A. LOC covering two issues
due 12-15-04 through 08-01-05 5.03% 1,800,000 P1 A1+
4,000,000 York Bank and Trust covering one issue due 12-01-14 (b) 3.75% 4,000,000
10,480,293 Zion's National Bank Liquidity Facility covering one issue
due 12-10-15 5.36% 10,480,293 P2 A2
----------- ------------
102,340,778 Total Variable Rate Demand Instruments - Private Placements 102,340,778
----------- ------------
<CAPTION>
Ratings (a)
----------------
Face Maturity Standard
Amount Date Yield Value Moody's & Poor's
------ ---- ----- ----- ------- ------
Other Tax Exempt Investments (14.04%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,350,000 Brentwood, NY UFSD TAN (b) 06/30/97 4.04% $ 2,355,863
5,290,000 Campbell County School District #1
State of Wyoming TAN- Series 1996 06/30/97 3.94 5,306,799 SP-1+
5,000,000 Colorado State General Fund Revenue TRAN - Series A 06/27/97 3.78 5,020,405 MIG-1 SP-1+
10,000,000 Commonwealth of Kentucky State Property and Building
Commission Revenue and Revenue Refunding Bonds (Project #59) 11/01/96 4.50 10,000,000 A+
1,000,000 Douglas County, WA TAN - Series 1996A (b) 12/15/96 4.00 1,000,000
3,000,000 Iowa School Corporations Warrant Certificates 1996-97 - Series A
FSA Insured 06/27/97 3.90 3,015,043 MIG-1 SP-1+
2,500,000 Mansfield City School District, OH (Richland County) TAN 06/27/97 3.94 2,507,839 A
10,000,000 Michigan Municipal Bond Authority Revenue Notes-Series 1996 A 07/03/97 3.85 10,038,572 SP-1+
5,000,000 Ocean County, NJ BAN 06/20/97 3.82 5,011,423 MIG-1
5,490,000 Richfield, MN Independent School District #280 TAN
- Series 1996 (b) 03/07/97 3.47 5,497,321
5,000,000 State of Idaho TAN - Series 1996 06/30/97 3.85 5,019,054 MIG-1+ SP-1+
4,000,000 State of Maine GO TAN 06/27/97 3.82 4,015,682 MIG-1+ SP-1+
24,150,000 State of Texas TRAN - Series 1996 08/29/97 3.89 24,303,739 MIG-1 SP-1+
2,500,000 Tennesee Local Development Authority
State Loan Program RAN - Series 1996A 05/29/97 3.57 2,505,239 MIG-1 SP-1+
----------- -----------
85,280,000 Total Other Tax Exempt Investments 85,596,979
----------- -----------
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Standard
Amount Date Yield Value Moody's & Poor's
------ ---- ----- ----- ------- ------
Other Variable Rate Demand Instruments (c) (48.33%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,200,000 Alleghany County, PA Hospital Development Authority RB
(Alleghany General Hospital) - Series B
LOC Morgan Guaranty Trust Company 09/01/10 3.55% $ 1,200,000 VMIG-1 A1+
4,000,000 Alameda County, CA IDRB
(Hoover Universal Incorporated Project) - Series 1994 06/01/04 3.40 4,000,000 VMIG-1 A1+
2,230,000 Baldwin County, GA (William Barnet and Son Project)
LOC Fleet National Bank & Trust 12/01/99 3.87 2,230,000 A1
3,100,000 Broward County, FL HFA MHRB (Sanctuary Apartments Project)
LOC PNC Bank, N.A. 02/01/09 3.60 3,100,000 VMIG-1
5,000,000 Burke County, GADA PCRB (Georgia Power Company Vogtle) 09/01/26 3.65 5,000,000 P1 A1+
12,500,000 Carlton, WI (Wisconsin Power & Light) - Series B 09/01/05 3.65 12,500,000 P1 A1+
3,800,000 Chelan County, Washington Public Utilities District #001
(Chelan Hydro) - Series A
MBIA Insured 06/01/15 3.45 3,800,000 VMIG-1 A1+
1,000,000 City of Atlantic Beach, FL (Fleet Landing)
LOC Barnett Bank 10/01/24 3.65 1,000,000 VMIG-1
4,470,000 Clarksville, TN Public Building Authority Pooled Financing RB
LOC Nationsbank 06/01/24 3.65 4,470,000 A1
6,400,000 Clayton, MO IDRB (Bailey Court Project)
LOC Bankers Trust Company 01/01/09 3.65 6,400,000 VMIG-1
5,000,000 Colorado HFA (Grant Plaza Project)
LOC Bankers Trust Company 11/01/09 3.62 5,000,000 VMIG-1
3,900,000 Connecticut, Development Authority
(Connecticut Light & Power) - Series 1993A
LOC Deutsche Bank 09/01/28 3.55 3,900,000 VMIG-1 A1+
6,600,000 County of Contra Costa, MHRB Mortgage Refunding
(Rivershore Apartments) - Series 1992B
Fannie Mae (Unconditional Guaranty) 11/15/22 3.40 6,600,000 A1+
7,050,000 Coweta County, GA Development Authority RB
(Jack Eckerd Project) (b)
LOC Union Bank of Switzerland 03/01/09 3.65 7,050,000
3,600,000 Dade County, FL HFA MHRB
(Gable Point Apartment Project) - Series 1995C
Fannie Mae (Unconditional Guaranty) 05/15/05 3.50 3,600,000 A1+
14,600,000 DeKalb County, GA Housing Authority
LOC Bank of Montreal 12/01/07 3.60 14,600,000 A1+
</TABLE>
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See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Standard
Amount Date Yield Value Moody's & Poor's
------ ---- ----- ----- ------- ------
Other Variable Rate Demand Instruments (c) (Continued)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 7,200,000 Delaware County, PA IDA PCR
(Philadelphia Electric Company - A)
LOC Toronto Dominion 08/01/16 3.60% $ 7,200,000 P1 A1+
2,300,000 St. John's County, FL Hospital RB
(Flagler Hospital, Incorporated) - Series 1986A
LOC Kredietbank 08/01/16 3.55 2,300,000 VMIG-1
1,900,000 Florida HFA MHRB
(Monterey Meadows Apartment Project) - Series 1985
LOC Citibank 12/01/07 3.50 1,900,000 A1+
1,400,000 Greensboro, NC (Greensboro Coliseum) - Series A 12/01/15 3.50 1,400,000 A1+
835,000 Gulf Breeze, FL RB Series - 1985B
FGIC Insured 12/01/15 3.50 835,000 VMIG-1 A1+
10,000,000 Hammond, LA IDB (Eckerds Warehouse Project) (b)
LOC Union Bank of Switzerland 05/01/13 3.65 10,000,000
4,700,000 Illinois Charitabulls Development Finance Authority
(James Jordan Boys & Girls Club &
Family Life Center Project) - Series 1995 LOC American National
Bank & Trust Company of Chicago/LaSalle National Bank 08/01/30 3.65 4,700,000 A1+
6,000,000 Illinois IDFA Chicago Educational Television
LOC Harris Trust & Savings Bank 11/01/14 3.60 6,000,000 VMIG-1
16,500,000 Illinois HFA (Northwestern Memorial Hospital) - Series 1995 08/15/25 3.60 16,500,000 VMIG-1 A1+
800,000 Illinois Health Facility (Resurrection Hospital) 05/01/11 3.65 800,000 VMIG-1 A1+
19,400,000 Illinois Museum of Contemporary Art 1994
LOC Northern Trust\Harris Trust\LaSalle National
\National Bank of Detroit 02/01/29 3.60 19,400,000 VMIG-1 A1+
5,000,000 Jackson County, MI EDC (Thrifty Leoni)
LOC First National Bank of Chicago 12/01/14 3.62 5,000,000 P1 A1+
600,000 Jacksonville, FL HFA RB (Baptist Health Property Project)
LOC Barnett Bank 06/01/20 3.65 600,000 A1
3,800,000 Jacksonville, FL HFA RB (Baptist Medical Center Project)
MBIA Insured 06/01/08 3.60 3,800,000 VMIG-1 A1+
5,000,000 Kansas Department TRAN Series - 1994B 09/01/14 3.50 5,000,000 VMIG-1 A1+
4,000,000 Little Rock, AR Metrocenter Improvement Dist.
(Little Rock Newspaper Inc.)
LOC Bank of New York 12/01/25 3.65 4,000,000 A1
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Standard
Amount Date Yield Value Moody's & Poor's
------ ---- ----- ----- ------- ------
Other Variable Rate Demand Instruments (c) (Continued)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,720,000 Maryland IDFA EDRB (The Barre School Facility)
LOC Nationsbank 07/01/14 3.65% $ 3,720,000 A1
1,470,000 Mecklenberg County, NC (Aplix, Inc.)
LOC Wachovia Bank & Trust Co., N.A. 12/01/99 3.50 1,470,000 P1 A1+
5,200,000 Michigan State Strategic Fund PCR
(Consumer Power) - Series 1993A
LOC Canadian Imperial Bank of Commerce 06/15/10 3.55 5,200,000 A1+
5,710,000 Missouri State HEFA (Barnes Hospital)
LOC Morgan Guaranty Trust Company 12/01/15 3.55 5,710,000 P1 A1+
8,000,000 Montgomery County, MD Housing Opportunity Commission
LOC General Electric Capital Corporation 11/01/07 3.70 8,000,000 A1+
2,000,000 Montgomery County, TX
(Houston Area Residential Center Project) - Series 1985
LOC Morgan (J.P.) Securities, Inc. 12/01/15 3.65 2,000,000 A1+
4,850,000 Montgomery County, MD EDC RB
(Brooke Grove Foundations, Incorporated Facilities) - Series 1995
LOC First National Bank of Maryland 01/01/16 3.80 4,850,000 P1
4,200,000 North Carolina Medical Care Commission Hospital RB
(NC Baptist Hospital Project) - Series B 06/1/22 3.50 4,200,000 VMIG-1 A1+
1,000,000 Orange County, FL HFA (Adventist)
LOC Banque Paribas 11/15/14 3.65 1,000,000 VMIG-1 A1
7,740,000 Orange County, FL
(Mayflower Retirement Community Project) - Series 1988
LOC Rabobank Nederland 03/01/18 3.65 7,740,000 A1
2,600,000 Oyster Point, VA Development Corporation - Series 1991
LOC Perpetual Savings 11/01/11 4.00 2,600,000 A1+
2,000,000 Palm Beach County, FL - Series 1995
(Northern Gallery of Art Project)
LOC Northern Trust 05/01/25 3.60 2,000,000 A1+
7,350,000 Phoenix, AZ IDA MHRB Refunding
(Bell Square Apartments Project) - Series 1995
LOC General Electric Capital Corporation 06/01/25 3.75 7,350,000 A1+
3,500,000 Phoenix, AZ IDA MHRB
(Paradise Lakes Apartments Project) - Series 1995
LOC General Electric Capital Corporation 07/01/25 3.75 3,500,000 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Standard
Amount Date Yield Value Moody's & Poor's
------ ---- ----- ----- ------- ------
Other Variable Rate Demand Instruments (c) (Continued)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,190,000 Pinellas County, FL HFA - Series 1987 (St. Mark Village Project)
LOC Nationsbank 03/01/17 3.55% $ 5,190,000 A1
12,890,000 Pitkin County, CO IDA (Aspen Skiing Co. Project) - Series A
LOC First National Bank of Chicago 04/01/16 3.65 12,890,000 A1+
2,000,000 Polk County FL IDA PCR (IMC Fertilizer Incorporated Project)
LOC Rabobank Nederland 02/01/00 3.55 2,000,000 P1
2,700,000 Prince Georges County, MD EDC RB
LOC Fleet National Bank & Trust 09/30/15 5.36 2,700,000 P1 A1
2,995,000 St. Cloud, MN Commercial Development RFDG
(Kelly Inn Project) (b)
LOC First Bank of South Dakota 04/01/13 3.60 2,995,000
5,500,000 St. Lucie County, FL PCRB
(Florida Power & Light Company Project) 03/01/27 3.55 5,500,000 VMIG-1 A1+
5,100,000 San Antonio, TX IDA (Rivercenter Project)
LOC PNC Bank, N.A. 12/01/12 3.65 5,100,000 AA3
2,900,000 Salina, KS (Dillards Project) (b)
LOC Boatmens National Bank of St. Louis 12/01/14 3.75 2,900,000
2,130,000 County of Sarpy, NE PCR Refunding Bond
(Allied Signal Inc. Project) - Series 1995 07/01/13 3.75 2,130,000 A1
4,000,000 Suffolk County, NY Water Authoriy BAN 12/06/99 3.45 4,000,000 VMIG-1
2,000,000 Southgate, MI EDC EDRB (Trust Realty Corp. Project) (b)
LOC Bankers Trust Company 10/01/18 3.62 2,000,000
5,100,000 State of Ohio Environmental Improvement (U.S. Steel Corp. USX)
LOC PNC Bank, N.A. 12/01/01 3.85 5,100,000 P1
1,910,000 Terre Haute, IN EDRB (Westminster Village Terre Haute Inc.)
LOC Huntington National Bank 07/01/01 4.00 1,910,000 P1 A1
7,000,000 City of Valdez Alaska Marine Terminal TRAN - Series 1994B 05/01/31 3.65 7,000,000 P1 A1
----------- -----------
294,640,000 Total Other Variable Rate Demand Instruments 294,640,000
----------- -----------
<CAPTION>
Put Bonds (d) (3.91%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 9,860,000 DeKalb County, GA MHRB - Series 1985L
LOC Amsouth Bank N.A. 12/01/96 3.95% $ 9,860,000 A1+
4,000,000 Joliet Illinois Gas Supply Revenue - Peoples Gas, Light & Core 10/01/97 3.95 4,000,000 VMIG-1
10,000,000 State of Connecticut Special Assessment - Series 1993C
FGIC Insured 07/01/97 3.90 10,000,000 VMIG-1 A1+
----------- -----------
23,860,000 Total Put Bonds 23,860,000
----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
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DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Standard
Amount Date Yield Value Moody's & Poor's
------ ---- ----- ----- ------- ------
Tax Exempt Commercial Paper (11.80%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,000,000 Baltimore, MD Metropolitan District BAN - Series 1995 12/04/96 3.40% $ 4,000,000 P1 A1+
6,000,000 Burke County, GA (Oglethorpe Power Co.) (d)
LOC Credit Suisse 11/20/96 3.25 6,000,000 P1 A1+
1,150,000 Burke County, GA (Oglethorpe Power Co.)
LOC Credit Suisse 11/20/96 3.55 1,150,000 P1 A1+
6,100,000 City of Burlington, KS Customized Purchase PCRB (d)
(Kansas City Power and Light Company Project) - Series 1987B
LOC Deutsche Bank 02/12/97 3.60 6,100,000 P1 A1+
9,600,000 City of Burlington, KS Customized Purchase PCRB (d)
(Kansas City Power and Light Company Project) - Series 1987B
LOC Deutsche Bank 11/12/96 3.60 9,600,000 P1 A1+
10,000,000 City of Houston, Texas - Series A 01/29/97 3.50 10,000,000 P1 A1+
5,000,000 Illinois HFA Adjusted Demand RB (d)
(Victory Health Services Project) - Series 1989C
LOC First National Bank of Chicago 12/05/96 3.60 5,000,000 VMIG-1
6,400,000 Intermountain Power Agency
Revenue and Revenue Refunding Bonds
LOC Swiss Bank Corporation 11/14/96 3.50 6,400,000 VMIG-1 A1+
8,000,000 Lincoln County, WY PCRB
(Pacific Corporation Project) (d) - Series 1991
LOC Union Bank of Switzerland 02/05/97 3.60 8,000,000 VMIG-1 A1+
2,500,000 Mashan Tucket (Western) Pequot Tribe Teep - Series 1996
LOC Bank of America 12/27/96 3.50 2,500,000 P1 A1+
4,000,000 New York City Municipal Water Finance Authority - Series 3
LOC Bank of Nova Scotia / Toronto Dominion Bank 12/31/96 3.45 4,000,000 P1 A1+
7,190,000 North Carolina Eastern Municipal Power Agency RB (d) - Series 1988B
LOC Morgan Guaranty / Union Bank of Switzerland 11/19/96 3.60 7,190,000 P1 A1
2,000,000 Orlando, FL Waste Water System RB (d) - Series 1990A 11/21/96 3.50 2,000,000 VMIG-1 A1+
----------- ------------
71,940,000 Total Tax Exempt Commercial Paper 71,940,000
----------- ------------
Total Investments (99.82%)(Cost $608,572,224+) 608,572,224
Cash and Other Assets, Net of Liabilities (0.18%) 1,060,876
------------
Net Assets (100.00%) $609,633,100
============
Class A Shares, 448,801,753 Shares Outstanding (Note 3) $ 1.00
============
Class B Shares, 160,999,996 Shares Outstanding (Note 3) $ 1.00
============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
FOOTNOTES:
(a) The ratings noted for variable rate demand instruments are those of the bank
whose letter of credit secures such instruments or the guarantor of the
bond. P1 and A1+ are the highest ratings assigned for tax exempt commercial
paper.
(b) Securities that are not rated which the Fund's Board of Directors has
determined to be of comparable quality to the rated securities in which the
Fund invests.
(c) Securities payable on demand at par including accrued interest (usually with
seven days notice) and unconditionally secured as to principal and interest
by a bank letter of credit. The interest rates are adjustable and are based
on bank prime rates or other interest rate adjustment indices. The rate
shown is the rate in effect at the date of this statement.
(d) The maturity date indicated is the next put date.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
DA = Development Authority MHRB = Multifamily Housing Revenue Bond
EDC = Economic Development Corporation PCFA = Pollution Control Finance Authority
EDRB = Economic Development Revenue Bond PCR = Pollution Control Revenue
HEFA = Hospital & Education Finance Authority PCRB = Pollution Control Revenue Bond
HFA = Housing Finance Authority RAN = Revenue Anticipation Note
IDA = Industrial Development Authority RB = Revenue Bond
IDB = Industrial Development Bond RFDG = Revenue Refunding
IDFA = Industrial Development Finance Authority TAN = Tax Anticipation Note
IDRB = Industrial Development Revenue Bond TRAN = Tax and Revenue Anticipation Note
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1996
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest................................................................................ $ 25,625,324
------------
Expenses: (Note 2)
Investment management fee............................................................... 2,102,979
Administration Fee...................................................................... 1,353,623
Distribution fee (Class A).............................................................. 1,150,449
Custodian expenses...................................................................... 87,515
Shareholder servicing and related shareholder expenses.................................. 354,346
Legal, compliance and filing fees....................................................... 114,641
Audit and accounting.................................................................... 176,924
Directors' fees......................................................................... 28,630
Other................................................................................... 28,876
------------
Total expenses........................................................................ 5,397,983
Expenses paid indirectly.............................................................. ( 14,545)
------------
Net expenses.......................................................................... 5,383,438
------------
Net investment income....................................................................... 20,241,886
</TABLE>
<TABLE>
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments..................................................... ( 95,536)
------------
Increase in net assets from operations...................................................... $ 20,146,350
============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED OCTOBER 31, 1996 AND 1995
===============================================================================
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income......................................... $ 20,241,886 $ 22,594,489
Net realized gain (loss) on investments....................... ( 95,536) 165,639
--------------- ---------------
Increase in net assets from operations........................ 20,146,350 22,760,128
Dividends to shareholders from net investment income
Class A....................................................... ( 14,058,285)* ( 17,048,352)*
Class B....................................................... ( 6,183,601)* ( 546,137)*
Capital share transactions (Note 3)
Class A....................................................... ( 10,229,577) ( 82,290,952)
Class B....................................................... ( 5,683,693) 24,655,030
--------------- ---------------
Total increase (decrease)................................. ( 16,008,806) ( 57,470,283)
Net assets:
Beginning of year............................................. 625,641,906 683,112,189
--------------- ---------------
End of year................................................... $ 609,633,100 $ 625,641,906
=============== ===============
* Designated as exempt-interest dividends for federal income tax purposes.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. Summary of Accounting Policies.
Daily Tax Free Income Fund, Inc. is a no-load, diversified, open-end management
investment company registered under the Investment Company Act of 1940. The Fund
is a short term, tax exempt money market fund. The Fund has two classes of stock
authorized, Class A and Class B. The Class A shares are subject to a service fee
pursuant to the Distribution and Service Plan. The Class B shares are not
subject to a service fee. Additionally, the Fund may allocate among its classes
certain expenses to the extent allowable to specific classes, including transfer
agent fees, government registration fees, certain printing and postage costs,
and administrative and legal expenses. Class Specific expenses of the Fund were
limited to distribution fees and minor transfer agent expenses. In all other
respects, the Class A and Class B shares represent the same interest in the
income and assets of the Fund. Distribution of Class B shares commenced November
23, 1992. The Fund's financial statements are prepared in accordance with
generally accepted accounting principles for investment companies as follows:
a) Valuation of Securities -
Investments are valued at amortized cost. Under this valuation method, a
portfolio instrument is valued at cost and any discount or premium is
amortized on a constant basis to the maturity of the instrument. The
maturity of variable rate demand instruments is deemed to be the longer of
the period required before the Fund is entitled to receive payment of the
principal amount or the period remaining until the next interest rate
adjustment.
b) Federal Income Taxes -
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its tax exempt and taxable income to its shareholders. Therefore, no
provision for federal income tax is required.
c) Dividends and Distributions -
Dividends from investment income (excluding capital gains and losses, if
any, and amortization of market discount) are declared daily and paid
monthly. Distributions of net capital gains, if any, realized on sales of
investments are made after the close of the Fund's fiscal year, as declared
by the Fund's Board of Directors.
d) Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
e) General -
Securities transactions are recorded on a trade date basis. Interest income
is accrued as earned. Realized gains and losses from securities
transactions are recorded on the identified cost basis.
2. Investment Management Fees and Other Transactions with Affiliates.
Under the Investment Management Contract, the Fund pays an investment management
fee to Reich & Tang Asset Management L.P. (Manager) at the annual rate of .325%
of the Fund's average daily net assets not in excess of $750 million plus .30%
of such assets in excess of $750 million. The Manager is required to reimburse
the Fund for its expenses (exclusive of interest, taxes, brokerage, and
extraordinary expenses) to the extent that such expenses, including the
investment management and the shareholder servicing and administration fees, for
any fiscal year exceed the lesser of (i)
<PAGE>
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===============================================================================
2. Investment Management Fees and Other Transactions with Affiliates
(Continued).
1 1/2% of the Fund's average net assets or (ii) the limits on investment company
expenses prescribed by any state in which the Fund's shares are qualified for
sale. No such reimbursement was required for the year ended October 31, 1996.
Pursuant to an Administrative Services Agreement, the Fund pays to the Manager
an annual fee of .21% of the Fund's average daily net assets of $1.25 billion,
plus .20% of such assets in excess of $1.25 billion but not in excess of $1.5
billion, plus .19% of such assets in excess of $1.5 billion. Prior to December
1, 1995, the administration fee was .20%, .19% and .18%., respectively.
Pursuant to a Distribution and Service Plan adopted under Securities and
Exchange Commission Rule 12b-1, the Fund and Reich & Tang Distributors L.P. (the
Distributor) entered into a Distribution Agreement and a Shareholder Servicing
Agreement, only with respect to the Class A shares of the Fund. For its services
under the Shareholder Servicing Agreement, the Distributor receives from the
Fund with respect only to the Class A shares, a fee equal to .25% of the Fund's
average daily net assets.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$6,000 per annum plus $750 per meeting attended.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $189,088 paid to Reich & Tang
Services L.P., an affiliate of the Manager as servicing agent for the Fund.
Included in the Statement Operations under the caption "Shareholder servicing
and related shareholder expenses" are expense offsets of $14,545.
3. Capital Stock.
At October 31, 1996, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $609,634,636. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year Year
Ended Ended
October 31, 1996 October 31, 1995
---------------- ----------------
Class A
<S> <C> <C>
Sold 1,485,899,847 2,061,020,405
Issued on reinvestment of dividends....... 11,960,037 14,036,481
Redeemed.................................. (1,508,089,461) (2,157,347,838)
------------- -------------
Net increase (decrease)................... ( 10,229,577) ( 82,290,952)
============= =============
Class B
Sold...................................... 1,028,483,308 1,126,403,552
Issued on reinvestment of dividends....... 5,806,308 5,123,928
Redeemed.................................. (1,039,973,309) (1,106,872,450)
------------- -------------
Net increase (decrease)................... ( 5,683,693) 24,655,030
============= =============
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses at October 31, 1996 amounted to
$1,536. Such losses may be carried forward to offset future capital gains
through October 31, 2004.
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<PAGE>
- -------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
5. Selected Financial Information.
<TABLE>
<CAPTION>
CLASS A Year Ended October 31,
- ------- --------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------- ------------ ------------- ----------
<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........... 0.031 0.034 0.023 0.022 0.029
Less distributions:
Dividends from net investment income ( 0.031 ) ( 0.034 ) ( 0.023 ) ( 0.022 ) ( 0.029)
------------ ------------ ------------ ------------- ------------
Net asset value, end of year....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============= ============
Total Return....................... 3.09% 3.46% 2.35% 2.24% 2.98%
Ratios/Supplemental Data
Net assets, end of year (000)...... $ 448,647 $ 458,942 $ 541,106 $ 606,497 $ 666,484
Ratios to average net assets:
Expenses........................ 0.90%(b) 0.89%(b) 0.88% 0.90% 0.82%
Net investment income........... 3.05% 3.41% 2.31% 2.22% 2.94%
</TABLE>
<TABLE>
<CAPTION>
CLASS B (a) Year Ended October 31,
- ------- ----------------------------------------------------------------
1996 1995 1994 1993
------------ ----------- ----------- ----------
<S> <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
------------ ------------ ------------ -------------
Income from investment operations:
Net investment income........... 0.033 0.037 0.026 0.023
Less distributions:
Dividends from net investment income ( 0.033 ) ( 0.037 ) ( 0.026 ) ( 0.023 )
------------ ------------ ------------ -------------
Net asset value, end of year....... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ =============
Total Return....................... 3.35% 3.71% 2.60% 2.49%*
Ratios/Supplemental Data
Net assets, end of year (000)...... $ 160,986 $ 166,700 $ 142,006 $ 137,248
Ratios to average net assets:
Expenses........................ 0.66%(b) 0.64%(b) 0.63% 0.65%*
Net investment income........... 3.30% 3.66% 2.56% 2.45%*
</TABLE>
* Annualized
(a) Commencement of sales November 23, 1992.
(b) Includes expense offsets equivalent to .01% of average net assets.
- -------------------------------------------------------------------------------
<PAGE>
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DAILY TAX FREE INCOME FUND, INC.
INDEPENDENT AUDITOR'S REPORT
===============================================================================
The Board of Directors and Shareholders
Daily Tax Free Income Fund, Inc.
We have audited the accompanying statement of net assets of Daily Tax Free
Income Fund, Inc. as of October 31, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the selected financial
information for each of the five years in the period then ended. These financial
statements and selected financial information are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and selected financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of Daily Tax Free Income Fund, Inc. as of October 31, 1996, the results
of its operations, the changes in its net assets and the selected financial
information for the periods indicated, in conformity with generally accepted
accounting principles.
\s\McGladrey & Pullen, LLP
New York, New York
December 6, 1996
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by an effective prospectus, which includes
information regarding the Fund's objectives and policies, experience of its
management, marketability of shares, and other information.
- --------------------------------------------------------------------------------
Daily Tax Free Income Fund, Inc.
600 Fifth Avenue
New York, New York 10020
Manager
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
Custodian,
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Transfer Agent
& Dividend Disbursing Agent
Reich & Tang Services L.P.
600 Fifth Avenue
New York, New York 10020
- -------------------------------------------------------------------------------
<PAGE>
