<PAGE>
- --------------------------------------------------------------------------------
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, 1997. As of the end of the year, the Fund had net
assets of $563,235,547 and 4,953 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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS
OCTOBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
Face Value Standard
Amount Yield (Note 1) Moody's & Poor's
------ ----- -------- ------- ------
Variable Rate Demand Instruments -
Participations (c) (3.52%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2,517,239 The Bank of New York LOC covering eight issues
due 10-01-98 through 05-01-01 4.95% to 5.10% $ 2,517,239 P1 A1+
14,398,695 Chase Manhattan Bank LOC covering twelve issues
due 11-10-98 through 05-01-13 4.67% to 5.52% 14,398,695 P1 A1+
1,320,021 The First National Bank of Maryland LOC covering six issues
due 09-15-00 through 09-15-02 5.10% 1,320,021 P1 A1
158,583 LaSalle National Bank LOC covering one issue due 07-01-00 5.10% 158,583 P1 A1+
1,450,000 PNC Bank, N.A. LOC covering one issue due 07-01-03 6.90% 1,450,000 P1
------------ ------------
19,844,538 Total Variable Rate Demand Instruments - Participations 19,844,538
------------ ------------
<CAPTION>
Variable Rate Demand Instruments -
Private Placements (c) (14.47%)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 1,472,000 Banc One Arizona LOC covering three issues
due 01-01-99 through 04-01-05 5.52% $ 1,472,000 P1 A1
12,946,000 Bank of Tokyo, Ltd. LOC covering four issues
due 12-01-09 through 12-01-15 5.10% to 5.52% 12,946,000 P1 A1+
215,832 Central Trust Company LOC Backed by Bank of New York
LOC covering two issues due 01-01-99 5.10% 215,832 P1 A1
1,562,769 Comerica Bank - Detroit LOC covering four issues
due 02-01-00 through 05-01-05 5.10% 1,562,769 P1 A1
1,500,000 Credit Suisse LOC covering one issue due 12/01/00 5.10% 1,500,000 P1 A1+
6,000,000 Creditanstalt-Bankverein LOC covering two issues
due 11-01-05 through 06-01-10 5.10% 6,000,000 P1 A1+
2,000,000 Dresdner Bank AG LOC covering two issues
due 12-28-14 through 08-01-15 5.10% 2,000,000 P1 A1+
5,825,000 The First National Bank of Maryland LOC covering two issues
due 07-01-04 through 12-01-20 3.85% to 5.52% 5,825,000 P1 A1
3,095,305 The Huntington National Bank LOC covering two issues
due 12-01-98 through 10-01-05 3.70% to 5.78% 3,095,305 P1 A1
1,148,333 Key Bank, N.A. LOC covering one issue due 07-01-15 5.10% 1,148,333 P1 A1
299,066 Nations Bank, N.A. LOC covering one issue due 12-01-99 5.52% 299,066 P1 A1
3,196,000 PNC, N.A. LOC covering two issues due 12-01-00 through 06-30-02 5.52% 3,196,000 P1 A1+
3,430,000 Norwest Bank, N.A. LOC covering three issues
due 07-01-00 through 12-01-15 5.27% to 5.52% 3,430,000 P1 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
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>
$ 23,069,200 Seattle-First National Bank
LOC Backed by Bank of America NT & SA LOC
covering eleven issues due 12-15-00 through 11-15-15 5.52% $ 23,069,200 P1 A1
1,455,000 State Street Bank & Trust Company
LOC covering one issue due 01-01-02 5.10% 1,455,000 P1 A1+
1,600,000 Wells Fargo Bank, N.A. LOC covering two issues
due 12-15-04 through 08-01-05 5.18% 1,600,000 P1 A1+
4,000,000 York Bank and Trust covering one issue due 12-01-14 (b) 3.95% 4,000,000
8,689,380 Zion's National Bank Liquidity Facility covering one issue
due 12-10-15 5.52% 8,689,380 P2 A2
------------ ------------
81,503,885 Total Variable Rate Demand Instruments - Private Placements 81,503,885
------------ ------------
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ----- ------- ------
Other Tax Exempt Investments (15.12%)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 9,075,000 Campbell County School District Number 1
State of Wyoming TAW - Series 1997 06/29/98 3.84% $ 9,089,230 SP-1+
10,000,000 County of Los Angeles 1997-98 TRAN - Series A 06/30/98 3.80 10,040,971 MIG-1 SP-1+
8,500,000 District of Columbia TRAN
LOC Union Bank of Switzerland/Morgan Guaranty Trust Company 09/30/98 3.82 8,546,686 VMIG-1 SP-1+
5,000,000 Essex County, New Jersey BAN - Series A 08/07/98 3.85 5,012,750 MIG-1
4,490,000 GO Bond & GAN (City of Ankeny, Iowa) (b) 06/01/98 3.84 4,498,714
5,000,000 Michigan Municipal Bond Authority Revenue Notes - Series B 07/02/98 3.75 5,022,251 SP-1+
1,000,000 Middleton - Cross Plains Area School District, Wisconsin TRAN (b)08/26/98 3.96 1,001,929
4,000,000 Pennsylvania State University - Series 1996A 11/25/97 3.58 4,002,036 MIG-1
2,300,000 Pennsylvania- Harris Madison
Ind. School Corporation - Temp Time Warrants (b) 12/31/97 3.65 2,301,409
3,300,000 School District of Greenfield TRAN (b) 09/30/98 3.90 3,315,781
2,000,000 School District of Greenville County, South Carolina (b) 03/01/98 3.72 2,005,327
5,000,000 School District of the City of Detroit, Wayne County, Michigan
State School Aid Notes 1997 05/01/98 3.85 5,014,249 SP-1+
2,500,000 State of California RAN 06/30/98 3.80 2,510,304 MIG-1 SP-1+
5,000,000 State of New Mexico 1997-98 TRAN - Series 1997 06/30/98 3.82 5,019,849 MIG-1 SP-1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ----- ------- ------
Other Tax Exempt Investments (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,500,000 State of Texas TRAN - Series 1997 08/31/98 3.80% $ 2,517,869 MIG-1 SP-1+
3,800,000 Sweetwater County School District #1
State of Wyoming TAW - Series 1997 06/30/98 3.85 3,805,963 SP-1
5,000,000 The City of Jersey City (Hudson County, NJ) 03/06/98 3.67 5,006,488 SP-1+
2,750,000 Thomas County, Georgia TAN (b) 12/31/97 3.81 2,751,690
3,700,000 Weber County, Utah TRAN - Series 1997B (b) 12/31/97 3.82 3,700,000
------------ ------------
84,915,000 Total Other Tax Exempt Investments 85,163,496
------------ ------------
<CAPTION>
Other Variable Rate Demand Instruments (c) (47.95%)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 1,660,000 Baldwin County, GA (William Barnet and Son Project)
LOC Fleet National Bank & Trust 12/01/99 4.02% $ 1,660,000 A1
2,000,000 Butler County IDA (Lutheran Welfare) - Series 1996A
LOC PNC Bank, N.A. 11/01/16 3.65 2,000,000 A1
3,000,000 Carlton, WI PCRB - Project B (Wisconsin Power & Light) 09/01/05 4.00 3,000,000 VMIG-1 A1+
3,700,000 Chelan County, Washington Public Utilities District #001
(Chelan Hydro) - Series A
MBIA Insured 06/01/15 3.55 3,700,000 VMIG-1 A1+
1,000,000 City of Jacksonville, FL PCR Refunding Business - Series 1995
(Florida Power & Light Company Project) 05/01/29 4.00 1,000,000 VMIG-1 A1
4,130,000 Clarksville, TN Public Building Authority Pooled Financing RB
LOC Nationsbank 06/01/24 3.65 4,130,000 A1+
5,000,000 Colorado HFA (Grant Plaza Project)
LOC Bankers Trust Company 11/01/09 3.77 5,000,000 VMIG-1
3,000,000 Connecticut EDA (Connecticut Light & Power) 1993A
LOC Deutsche Bank, A.G. 09/01/28 3.60 3,000,000 VMIG-1 A1+
2,250,000 County of Franklin, OH RB - Series 1997F
(The Villas at Saint Therese Project) (b)
LOC Fifth Third Bank 10/01/22 3.85 2,250,000
7,050,000 Coweta County, GA Development Authority RB
(Jack Eckerd Project) (b)
LOC Union Bank of Switzerland 03/01/09 4.00 7,050,000
14,600,000 DeKalb County, GA Housing Authority
LOC Union Bank of Switzerland 12/01/07 3.65 14,600,000 A1+
2,200,000 Delaware County, PA IDA - Series 1995 (British Petroleum) 10/01/19 4.00 2,200,000 P1 A1+
1,200,000 Delaware County, PA IDA (British Petroleum) 12/01/19 4.00 1,200,000 P1 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ----- ------- ------
Other Variable Rate Demand Instruments (c) (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,000,000 Florida State Municipal Power Agency RB (Stanton Project)
MBIA Insured 10/01/19 3.65% $ 5,000,000 A1
10,000,000 Hammond, LA IDB (Eckerds Warehouse Project)(b)
LOC Union Bank of Switzerland 05/01/13 4.00 10,000,000
5,000,000 Harris County, Texas
Health Facility Development Corporation - Series 1994
(Methodist Hospital) 12/01/25 4.00 5,000,000 A1+
1,200,000 Hillsborough County, FL IDA PCR
(Tampa Electric Company Cannon) 05/15/18 4.00 1,200,000 VMIG-1 A1+
4,700,000 Illinois Charitabulls Development Finance Authority
(James Jordan Boys & Girls Club & Family Life Center Project) - Series 1995
LOC American National Bank & Trust /LaSalle National Bank 08/01/30 3.60 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
5,400,000 Illinois Health Facility (Resurrection Hospital) 05/01/11 4.00 5,400,000 VMIG-1
19,400,000 Illinois Museum of Contemporary Art 1994
LOC Northern Trust\Harris Trust\LaSalle\NB of Detroi 02/01/29 3.60 19,400,000 VMIG-1 A1+
13,400,000 Illinois HFA RB - Series 1995 (Northwestern Memorial Hospital) 08/15/25 4.00 13,400,000 A1+
2,000,000 Irvine Ranch California Water District - Series B
LOC Morgan Guaranty Trust Company 10/01/09 3.60 2,000,000 VMIG-1 A1+
3,000,000 Jackson County, MI EDC (Thrifty Leoni)
LOC First National Bank of Chicago 12/01/14 3.77 3,000,000 Aa3
2,700,000 Jacksonville, Florida HFA HRB (Baptist Medical Center Project)
MBIA Insured 06/01/08 4.15 2,700,000 VMIG-1 A1+
1,200,000 Jacksonville, Florida HFA (Baptist Health PPTY's Project)
LOC Barnett Bank 06/01/20 4.20 1,200,000 A1
5,000,000 Kansas Department TRAN - Series - 1994B 09/01/14 3.55 5,000,000 VMIG-1 A1+
3,585,000 Maryland IDFA EDRB (The Barre School Facility)
LOC Nationsbank 07/01/14 3.65 3,585,000 A1+
7,400,000 Massachusetts State HEFA RB (Harvard University) 08/01/17 3.50 7,400,000 VMIG-1 A1+
1,170,000 Mecklenberg County, NC (Aplix, Inc.) (b)
LOC Wachovia Bank & Trust Co., N.A. 12/01/99 3.60 1,170,000
5,300,000 Michigan Strategic Fund PCR Consumers Power 1993A
LOC Canadian Imperial Bank of Commerce 06/15/10 4.00 5,300,000 A1+
5,510,000 Missouri State HEFA (Barnes Hospital)
LOC Morgan Guaranty Trust Company 12/01/15 3.65 5,510,000 VMIG-1 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ----- ------- ------
Other Variable Rate Demand Instruments (c) (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,000,000 Monroe County, Michigan EDC LTD Obligation RB (Detroit Edison)
LOC Barclays Bank 10/01/24 4.00% $ 1,000,000 P1
8,000,000 Montgomery County, MD Housing Opportunity Commission
LOC General Electric Capital Corporation 11/01/07 3.75 8,000,000 A1+
2,200,000 Montgomery County, TX
(Houston Area Residential Center Project) - Series 1985
LOC Banque Nationale 12/01/15 3.80 2,200,000 A1
4,710,000 Montgomery County, MD EDC RB
(Brooke Grove Foundations, Incorporated Facilities) - Series 1995
LOC First National Bank of Maryland 01/01/16 4.00 4,710,000 A1
4,000,000 New Jersey Turnpike RB - Series 1991D
LOC Societe Generale 01/01/18 3.25 4,000,000 VMIG-1 A1+
1,000,000 New Mexico State Highway Commission Adjustable Tender
Subordinate Lien Tax Revenue Highway Bonds - Series 1996
FSA Insured 06/15/11 3.60 1,000,000 VMIG-1 A1+
2,400,000 Orange County, FL Health Facilities (Mayflower Project) '88
LOC Rabobank Nederland 03/01/18 3.75 2,400,000 A1+
2,600,000 Oyster Point, VA Development Corporation - Series 1991
LOC Perpetual Savings 11/01/11 4.00 2,600,000 A1+
5,000,000 Pasco County, FL School Board COP
AMBAC Insured 08/01/26 3.60 5,000,000 VMIG-1 A1+
1,900,000 Peninsula Ports Authority Virginia Coal Term RB - 1987 C
(Dominion Terminal Project)
LOC Barclays Bank, PLC. 07/01/16 4.00 1,900,000 P1
7,350,000 Phoenix, AZ IDA MHRB Refunding
(Bell Square Apartments Project) - Series 1995
LOC General Electric Capital Corporation 06/01/25 3.80 7,350,000 A1+
3,500,000 Phoenix, AZ IDA MHRB Refunding
(Paradise Lake Apartment Projects) - Series 1995
LOC General Electric Capital Corporation 07/01/25 3.80 3,500,000 A1+
4,500,000 Pinellas County, FL Health Facilities (Pooled Hospital Loan Project)
LOC Chase Manhattan Bank 12/01/15 4.00 4,500,000 VMIG-1 A1
12,400,000 Pitkin County, CO IDA (Aspen Skiing Co. Project) - Series A
LOC First National Bank of Chicago 04/01/16 4.00 12,400,000 A1+
2,675,000 Polk County, FL IDA PCRB (IMC Fertilizer Incorporation Project)
LOC Rabobank Nederland 02/01/00 3.65 2,675,000 P1
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ----- ------- ------
Other Variable Rate Demand Instruments (c) (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,650,000 Prince Georges County, MD EDC RB (b)
LOC Fleet National Bank & Trust 09/30/15 5.52% $ 2,650,000
2,700,000 Roanoke, VA IDA Hospital - Series A (Carilion Health System) 07/01/27 4.00 2,700,000 VMIG-1 A1+
2,875,000 St. Cloud, MN Commercial Development (Kelly Inn Project) (b)
LOC First Bank of South Dakota 04/01/13 3.70 2,875,000
7,500,000 St. Lucie County, FL PCRB (Florida Power & Light Project) 03/01/27 4.00 7,500,000 VMIG-1 A1+
4,900,000 San Antonio, TX IDA (Rivercenter Project)
LOC First Bank of South Dakota 12/01/12 3.65 4,900,000 A1
2,900,000 Salina, KS (Dillards Project) (b)
LOC First Bank of South Dakota 12/01/14 3.90 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
2,000,000 Southgate, MI EDC EDRB (Trust Realty Corp. Project)
LOC Bankers Trust Company 10/01/18 3.77 2,000,000 A1
5,100,000 State of Ohio Environmental Improvement (U.S. Steel Corp. USX)
LOC PNC Bank, N.A. 12/01/01 3.65 5,100,000 P1
1,910,000 Terre Haute, IN EDRB (Westminster Village Terre Haute Inc.) (b)
LOC Huntington National Bank 07/01/01 4.15 1,910,000
5,500,000 Trust Receipts, State of California RAN - Series 1997 06/30/98 4.00 5,500,000 VMIG-1
7,000,000 City of Valdez Alaska Marine Terminal TRAN - Series 1994B 05/01/31 3.75 7,000,000 VMIG-1 A1
1,900,000 University of North Florida
LOC First Union 11/01/24 3.70 1,900,000 VMIG-1
------------ ------------
270,055,000 Total Other Variable Rate Demand Instruments 270,055,000
------------ ------------
<CAPTION>
Put Bonds (d) (5.81%)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 2,700,000 Alleghany, PA IDA - Series 1992A (Duquesne Light Company)
LOC Canadian Imperial Bank of Commerce 10/21/98 3.85% $ 2,700,000 P1 A1
2,160,000 Butler County IDA (Lutheran Welfare) - Series 1996A
LOC PNC Bank, N.A. 11/03/97 4.25 2,160,000 A1
3,900,000 California Higher Education Loan Authority
Student Loan Revenue 1991 - Series A
LOC National Westminster Bank 07/01/98 4.00 3,900,000 VMIG-1
10,000,000 Connecticut State Special Assessment Unemployment
Compensation Advance RB - Series 1993C (CURBS)
FGIC Insured 07/01/98 3.90 10,000,000 VMIG-1 A1+
9,945,000 DeKalb County, GA MHRB - Series 1985L
LOC Amsouth Bank N.A. 12/01/97 3.90 9,945,000 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ----- ------- ------
Put Bonds (d) (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,000,000 Joliet Illinois Gas Supply Revenue - Peoples Gas & Light 10/01/98 3.87% $ 4,000,000 VMIG-1
------------ ------------
32,705,000 Total Put Bonds 32,705,000
------------ ------------
<CAPTION>
Tax Exempt Commercial Paper (13.61%)
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 4,000,000 Baltimore, MD Metropolitan District BAN - Series 1995 03/05/98 3.70% $ 4,000,000 P1 A1+
2,000,000 City of Burlington, KS Customized Purchase PCRB
(Kansas City Power and Light Company Project) - Series 1987A
LOC Toronto Dominion 02/19/98(d)3.75 2,000,000 A1+
9,600,000 City of Burlington, KS Customized Purchase PCRB
(Kansas City Power and Light Company Project) - Series 1987B
LOC Toronto Dominion 12/09/97(d)3.65 9,600,000 A1+
10,000,000 City of Houston, TX Water & Sewer System - Series A 02/10/98 3.80 10,000,000 P1 A1
10,000,000 City of Houston, TX - Series A 12/17/97 3.75 10,000,000 P1 A1+
8,000,000 Illinois HFA Adjusted Demand RB
(Victory Health Services Project) - Series 1989C
LOC First National Bank of Chicago 01/30/98(d)3.75 8,000,000 VMIG-1
3,000,000 Intermountain Power Agency
Revenue and Revenue Refunding Bonds
LOC Swiss Bank Corporation 02/25/98 3.70 3,000,000 VMIG-1 A1+
2,500,000 Lincoln County, WY PCRB
(Pacific Corporation Project) - Series 1991
LOC Union Bank of Switzerland 02/17/98(d)3.80 2,500,000 VMIG-1 A1+
3,500,000 Municipal Gas Authority of Georgia Revenue Bonds - Series D
(Southern Portfolio Project)
LOC Wachovia Bank 11/19/97(d)3.65 3,500,000 A1+
4,000,000 New York City Municipal Water Finance Authority - Series 3
LOC Bank of Nova Scotia / Toronto Dominion Bank 11/06/97 3.80 4,000,000 P1 A1+
6,300,000 North Carolina Eastern Municipal Power Agency RB - Series 1988B
(Power System RB)
LOC Morgan Guaranty / Union Bank of Switzerland 12/03/97(d)3.70 6,300,000 P1 A1+
3,000,000 Special Fund of the Industrial Commission of Arizona
FGIC Insured 11/19/97 3.45 3,000,000 VMIG-1 A1
500,000 Special Fund of the Industrial Commission of Arizona
FGIC Insured 11/19/97 3.80 500,000 VMIG-1 A1
2,000,000 State of Connecticut HEFA RB - Series S
(Yale University Issue) 11/05/97 3.50 2,000,000 VMIG-1 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ----- ------- ------
Tax Exempt Commercial Paper (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,250,000 State of Louisiana - Series 1991 - A
LOC Credit Local de France 11/19/97 3.65% $ 4,250,000 VMIG-1 A1+
4,000,000 State of Texas TRAN - Series 1997B 04/06/98 3.70 4,000,000 P1 A1+
------------ ------------
76,650,000 Total Tax Exempt Commercial Paper 76,650,000
------------ ------------
Total Investments (100.48%)(Cost $565,921,919+) 565,921,919
Liabilities in Excess of Cash and Other Assets (-0.48%) ( 2,686,372)
------------
Net Assets (100.00%) $563,235,547
============
Class A Shares, 390,013,358 Shares Outstanding (Note 3) $ 1.00
============
Class B Shares, 173,390,838 Shares Outstanding (Note 3) $ 1.00
============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
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 for the put bonds is the next put date.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
BAN = Bond Anticipation Note IDB = Industrial Development Bond
COP = Certificate of Participation IDFA = Industrial Development Finance Authority
EDA = Economic Development Authority MHRB = Multifamily Housing Revenue Bond
EDC = Economic Development Corporation PCR = Pollution Control Revenue
EDRB = Economic Development Revenue Bond PCRB = Pollution Control Revenue Bond
GAN = Grant Anticipation Note RAN = Revenue Anticipation Note
GO = General Obligation RB = Revenue Bond
HEFA = Hospital & Education Finance Authority TAN = Tax Anticipation Note
HFA = Housing Finance Authority TAW = Tax Anticipation Warrant
HRB = Hospital Revenue Bond TRAN = Tax and Revenue Anticipation Note
IDA = Industrial Development Authority
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest................................................................................ $ 23,251,385
-------------
Expenses: (Note 2)
Investment management fee............................................................... 1,916,931
Administration Fee...................................................................... 1,238,632
Distribution fee (Class A).............................................................. 1,057,762
Custodian expenses...................................................................... 75,650
Shareholder servicing and related shareholder expenses.................................. 389,660
Legal, compliance and filing fees....................................................... 79,421
Audit and accounting.................................................................... 147,980
Directors' fees......................................................................... 28,007
Other................................................................................... 23,438
-------------
Total expenses........................................................................ 4,957,481
Expenses paid indirectly (Note 2)..................................................... ( 6,750)
-------------
Net expenses.......................................................................... 4,950,731
-------------
Net investment income....................................................................... 18,300,654
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments..................................................... -0-
-------------
Increase in net assets from operations...................................................... $ 18,300,654
=============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDING OCTOBER 31, 1997 AND 1996
================================================================================
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income......................................... $ 18,300,654 $ 20,241,886
Net realized gain (loss) on investments....................... -0- ( 95,536)
--------------- ---------------
Increase in net assets from operations........................ 18,300,654 20,146,350
Dividends to shareholders from net investment income
Class A....................................................... ( 12,820,890)* ( 14,058,285)*
Class B....................................................... ( 5,479,764)* ( 6,183,601)*
Capital share transactions (Note 3)
Class A....................................................... ( 58,788,395) ( 10,229,577)
Class B....................................................... 12,390,842 ( 5,683,693)
--------------- ---------------
Total increase (decrease)................................. ( 46,397,553) ( 16,008,806)
Net assets:
Beginning of year............................................. 609,633,100 625,641,906
--------------- ---------------
End of year................................................... $ 563,235,547 $ 609,633,100
=============== ===============
* 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 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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
2. Investment Management Fees and Other Transactions with Affiliates
(Continued).
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 up to $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.
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 $293,595 paid to Reich & Tang
Services L.P., an affiliate of the Manager as servicing agent for the Fund.
Also, included under this caption are expense offsets of $6,750.
3. Capital Stock.
At October 31, 1997, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $563,237,083. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year Year
Ended Ended
October 31, 1997 October 31, 1996
---------------- ----------------
Class A
<S> <C> <C>
Sold...................................... 1,047,420,480 1,485,899,847
Issued on reinvestment of dividends....... 11,105,086 11,960,037
Redeemed.................................. (1,117,313,961) (1,508,089,461)
------------- -------------
Net increase (decrease)................... ( 58,788,395) ( 10,229,577)
============= =============
Class B
<S> <C> <C>
Sold...................................... 702,069,192 1,028,483,308
Issued on reinvestment of dividends....... 4,978,557 5,806,308
Redeemed.................................. ( 694,656,907) (1,039,973,309)
------------- -------------
Net increase (decrease)................... 12,390,842 ( 5,683,693)
============= =============
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses at October 31, 1997 amounted to
$1,536. Such losses may be carried forward to offset capital gains through
October 31, 2004.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
5. Financial Highlights.
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
Class A -------- -------- -------- -------- --------
- -------
<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 0.031 0.034 0.023 0.022
Less distributions:
Dividends from net investment
income............................... ( 0.031) ( 0.031) ( 0.034) ( 0.023) ( 0.022)
-------- -------- -------- -------- --------
Net asset value, end of year................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return................................ 3.08% 3.09% 3.46% 2.35% 2.24%
Ratios/Supplemental Data
Net assets, end of year (000)............... $389,897 $448,647 $458,942 $541,106 $606,497
Ratios to average net assets:
Expenses................................. 0.91%+ 0.90%+ 0.89%+ 0.88% 0.90%
Net investment income.................... 3.03% 3.05% 3.41% 2.31% 2.22%
Expenses paid indirectly................. 0.00% 0.01% 0.01% - -
<CAPTION>
Year Ended October 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
Class B(a) -------- -------- -------- -------- --------
- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income.................... 0.033 0.033 0.037 0.026 0.023
Less distributions:
Dividends from net investment
income............................... ( 0.033) ( 0.033) ( 0.037) ( 0.026) ( 0.023)
-------- -------- -------- -------- --------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return................................ 3.34% 3.35% 3.71% 2.60% 2.49%*
Ratios/Supplemental Data
Net assets, end of period (000)............. $173,339 $160,986 $166,700 $142,006 $137,248
Ratios to average net assets:
Expenses................................. 0.66%+ 0.66%+ 0.64%+ 0.63% 0.65%*
Net investment income.................... 3.29% 3.30% 3.66% 2.56% 2.45%*
Expenses paid indirectly................. 0.00% 0.01% 0.01% - -
* Annualized
+ Includes expenses paid indirectly
(a) Commencement of sales November 23, 1992.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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, 1997, 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 financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights 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 financial
highlights 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, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Daily
Tax Free Income Fund, Inc. as of October 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
November 26, 1997
- -------------------------------------------------------------------------------
<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
801 Pennsylvania
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services L.P.
600 Fifth Avenue
New York, NY 10020
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DAILY
TAX FREE
INCOME
FUND, INC.
Annual Report
October 31, 1997
- --------------------------------------------------------------------------------
<PAGE>
