<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, 1998.
The Fund had net assets of $593,740,983 and 4,412 active shareholders.
We thank you for your support 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, 1998
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Value Standard
Amount Yield (Note 1) Moody's & Poor's
------ ----- ------ ------- -------
Variable Rate Demand Instruments - Participations (2.99%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 806,000 The Bank of New York LOC covering six issues
due 01-01-99 through 05-01-01 4.72% to 5.10% $ 806,000 P1 A1+
11,052,903 Chase Manhattan Bank LOC covering ten issues
due 11-10-98 through 05-01-13 4.40% to 5.20% 11,052,903 P1 A1+
675,156 The First National Bank of Maryland LOC
covering five issues due 09-15-00 through 09-15-02 5.10% 675,156 P1 A1
4,000,000 North Carolina State University due 10-01-99 3.70% 4,000,000
1,235,000 PNC Bank, N.A. LOC covering one issue due 07-01-03 6.00% 1,235,000 P1 A1
----------- -------------
17,769,059 Total Variable Rate Demand instruments - Participations 17,769,059
----------- -------------
<CAPTION>
Variable Rate Demand Instruments - Private Placements (10.51%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,310,000 Banc One Arizona LOC covering two issues
due 01-01-99 through 04-01-05 5.20% $ 1,310,000 P1 A1
1,500,000 Banque Nationale de Paris LOC covering one issue due 12-01-00 5.10% 1,500,000 P1 A1+
16,666 Central Trust Company LOC Backed by Bank of New York LOC
covering one issue due 01-01-99 4.95% 16,666 P1 A1
1,166,337 Comerica Bank - Detroit LOC covering four issues
due 02-01-00 through 05-01-05 4.80% 1,166,337 P1 A1
2,000,000 Creditanstalt-Bankverein LOC covering one issue due 06-01-10 5.10% 2,000,000 P1 A1+
1,500,000 Dresdner Bank AG LOC covering one issue due 12-28-14 4.95% 1,500,000 P1 A1+
5,600,000 The First National Bank of Maryland LOC
covering two issues due 07-01-04 through 12-01-20 3.25% to 5.52% 5,600,000 P1 A1
2,752,325 The Huntington National Bank LOC
covering two issues due 12-01-98 through 10-01-05 3.25% to 5.78% 2,752,325 P1 A1
1,081,666 Key Bank, N.A. LOC covering one issue due 07-01-15 4.95% 1,081,666 P1 A1
139,069 NationsBank, N.A. LOC covering one issue due 12-01-99 5.20% 139,069 P1 A1
594,000 Norwest Bank, N.A. LOC covering two issues
due 07-01-00 through 07-01-01 5.11% to 5.36% 594,000 P1 A1+
2,546,000 PNC Bank, N.A. LOC covering two issues
due 12-01-00 through 06-30-02 5.20% 2,546,000 P1 A1+
12,687,500 Seattle-First National Bank LOC
Backed by Bank of America NT & SA LOC
covering seven issues due 12-15-00 through 11-15-15 5.20% 12,687,500 P1 A1
4,000,000 Societe Generale LOC covering one issue due 11-01-05 4.95% 4,000,000 P1 A1+
1,205,000 State Street Bank & Trust Company LOC
covering one issue due 01-01-02 4.80% 1,205,000 P1 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Value Standard
Amount Yield (Note 1) Moody's & Poor's
------ ----- ------ ------- -------
Variable Rate Demand Instruments - Private Placements (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11,316,000 Union Bank of California LOC covering three issues
due 12-01-15 4.80% $ 11,316,000 P1 A1+
1,400,000 Wells Fargo Bank, N.A. LOC
covering two issues due 12-15-04 through 08-01-05 4.88% 1,400,000 P1 A1+
3,875,000 York Bank and Trust LOC covering one issue due 12-01-14 3.20% 3,875,000 P1 A1
7,722,248 Zion's National Bank Liquidity Facility covering one issue due 12-10-15 5.52% 7,722,248 P1 A2
----------- ------------
62,411,811 Total Variable Rate Demand instruments - Private Placements 62,411,811
----------- ------------
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- -------
<CAPTION>
Other Tax Exempt Investments (18.45%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,500,000 Berrien County, MI Benton Harbor Area Schools (b) 08/25/99 3.61% $ 4,503,497
4,000,000 Broward County, WI Howard-Suamico School District TAN (b) 08/23/99 3.57 4,011,955
9,015,000 Campbell County, WY School District Number 1 TAW - Series 1997 06/25/99 3.75 9,026,153 SP-1+
5,000,000 City of Philadelphia, PA TRAN 06/30/99 3.59 5,019,484 MIG-1 SP-1+
600,000 City of Chesapeake, VA Public Improvement GO - Series 1998 (b) 08/01/99 3.46 606,763
6,990,000 City of Westbrook, ME GO BAN Series 1998 (b) 02/01/99 3.57 6,995,890
1,340,000 Clark County, Vancover, WA School District (b) 12/01/98 3.25 1,340,156
4,900,000 Coralville, IA GO BAN - Series 1998F 05/01/99 3.83 4,900,000 MIG-1
1,445,000 County of Adams Gettysbury, PA TRAN (b) 12/31/98 3.81 1,445,490
8,600,000 Floyd County, GA 1998 TAN (b) 12/31/98 3.70 8,600,000
1,650,000 Grafton, WI School District TRAN (b) 09/30/99 3.21 1,657,253
5,000,000 Jersey City, NJ BAN 01/15/99 3.71 5,002,452 MIG-1 SP-1+
2,500,000 Kenosha, WI Unified School District TRAN 09/28/99 3.38 2,500,000 MIG-1
2,500,000 Maple Dale, WI Indian Hill School District TRAN (b) 08/20/99 3.66 2,505,779
4,500,000 Marshalltown, IA
Community School District Bond Anticipation Warrants (b) 06/24/99 3.75 4,505,539
3,000,000 Ohio School District 1998
Cash Flow Borrowing Program COP - Series A 12/31/98 3.52 3,002,692 MIG-1 SP-1+
9,800,000 Overland Park, KS - Series 1998 (b) 05/01/99 3.74 9,804,123
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1998
================================================================================
<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>
$ 16,000,000 State of California RAN - Series 1998-99 06/30/99 2.96% $ 16,102,872 MIG-1 A1+
4,000,000 State of Illinois RAN 08/01/99 3.19 4,034,873 Aa2 AA
1,435,000 State of Missouri HEFA RAN - Series 1998D
LOC Allied Irish Bank 04/07/99 3.67 1,438,134 SP-1
2,000,000 State of Tennessee GO Bonds 05/01/99 3.23 2,016,486 AAA Aaa
4,300,000 Sun Praire, WI Area School District TRAN - Series 1998 (b) 08/23/99 3.63 4,302,333
2,500,000 Weber County, UT TRAN (b) 12/31/98 3.59 2,502,372
3,700,000 Winnebago County, Neenah, WI Joint School TRAN (b) 08/31/99 3.01 3,710,449
------------ ------------
109,275,000 Total Other Tax Exempt Investments 109,534,745
------------ ------------
<CAPTION>
Other Variable Rate Demand Instruments (58.74%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 7,000,000 Alameda County, CA IDRB (Hoover Universal Inc. Project) 06/01/04 3.70% $ 7,000,000 VMIG-1 A2
1,000,000 Angelina & Neches River, TX
Industrial Development Corporation Solid Waste RB
LOC Credit Suisse First Boston 05/01/14 3.70 1,000,000 P1
800,000 Baldwin County, GA IDA RB
(William Barnet and Son Project)
LOC Fleet National Bank & Trust 12/01/99 3.47 800,000 A1
1,000,000 Bartow County, GA Development Authority PCR
(Georgia Power Company Plant) 03/01/24 3.70 1,000,000 VMIG-1 A1+
4,700,000 Brazos River, TX Harbor Naval District
(Badishce Corporation Facility)
LOC Credit Suisse First Boston 12/01/19 3.50 4,700,000 A1+
3,000,000 Burke County, GA Development Authority
(Georgia Power Company) 09/01/25 3.65 3,000,000 VMIG-1 A+
1,000,000 Carlton, WI Environmental Improvement
(Wisconsin Power & Light) 10/01/00 3.70 1,000,000 VMIG-1 A1+
3,600,000 Chelan County, WA Public Utilities District #001
(Chelan Hydro Project) - Series A
MBIA Insured 06/01/15 3.05 3,600,000 VMIG-1 A1+
1,500,000 Chester County, PA 1997 Archdiocese of Philadelphia
LOC Corestates Bank 07/01/27 3.75 1,500,000 VMIG-1
1,000,000 City of Atlantic Beach, FL (Fleet Landing Project) RB
LOC Barnett Bank 10/01/24 3.75 1,000,000 VMIG-1
5,300,000 City of Burlington, KS Environmental Improvement
(Kansas City Power & Light Co.) 09/01/15 3.25 5,300,000 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
------ ---- ----- ------ ------- -------
Other Variable Rate Demand Instruments (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,135,000 City of Hammond, IN PCRB (Amoco Oil Company Project) 02/01/22 3.70% $ 1,135,000 VMIG-1 A1+
3,000,000 City of Jacksonville, FL IDRB - Series 1989 University of Florida,
Health Science Center Jacksonville Faculty Practice Association
LOC Barnett Bank 07/01/19 3.35 3,000,000 VMIG-1
2,500,000 City of Jacksonville, FL PCR Refunding Bonds - Series 1995
(Florida Power & Light Company) 05/01/29 3.70 2,500,000 VMIG-1 A1+
7,000,000 City of Valdez, AK Marine Terminal TRAN - Series 1994B 05/01/31 3.25 7,000,000 VMIG-1 A1
3,820,000 Clarksville, TN Public Building Authority Pooled Financing RB
LOC NationsBank 06/01/24 3.15 3,820,000 A1+
150,000 Cobb County, GA MHRB (Greenhouse Frey Apartments Project)
Fannie Mae Collateralized 09/15/26 3.20 150,000 A1+
5,000,000 Colorado HFA (Grant Plaza Project) - Series 1991A
LOC Bankers Trust Company 11/01/09 3.22 5,000,000 VMIG-1
5,000,000 Cuyahoga County, OH HRB (The Cleveland Clinic Foundation)
AMBAC Insured 01/01/16 3.15 5,000,000 VMIG-1 A1+
5,100,000 Cuyahoga County, OH HRB
(The Cleveland Clinic Foundation) - Series D 01/01/26 3.70 5,100,000 VMIG-1 A1+
3,500,000 Dade County, FL IDA Facility (Florida Power & Light Co.) 06/01/21 3.70 3,500,000 VMIG-1 A1+
14,600,000 DeKalb County, GA Housing Authority
LOC Bank of Montreal 12/01/07 3.10 14,600,000 A1+
800,000 Delaware County, PA IDA Airport Facilities RB (UPS Project) 12/01/15 3.60 800,000 A1+
2,200,000 Delaware County, PA IDA - Series 1995 (British Petroleum) 10/01/19 3.70 2,200,000 P1 A1+
1,700,000 Delaware County, PA IDA PCRB (Philadelphia Electric Company)
LOC Toronto-Dominion Bank 08/01/16 3.65 1,700,000 P1 A1+
2,000,000 Delta County, MI EDC (Mead Escanaba) - Series D
LOC Bank of Nova Scotia 12/01/13 3.70 2,000,000 P1
100,000 Fairfax, VA IDA (Fairfax Hospital System, Inc.) 10/01/25 3.10 100,000 VMIG-1 A1+
5,000,000 Florida State Municipal Power Agency RB (Stanton Project)
MBIA Insured 10/01/19 3.00 5,000,000 AAA A1
2,000,000 Florida State MHRB
(Monterey Meadows Apartments Project) - Series 1985YY
LOC Citibank 12/01/07 3.10 2,000,000 A1+
2,250,000 Franklin County, OH RB - Series 1997F
(The Villas at Saint Therse Project) (b)
LOC Fifth Third Bank 10/01/22 3.15 2,250,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- -------
Other Variable Rate Demand Instruments (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,000,000 Gulf Coast, TX Waste Disposal (Armco Inc. Project) (b)
LOC Chase Manhattan Bank 12/01/08 3.15% $ 2,000,000
1,200,000 Hammond, LA IDRB (Eckerds Warehouse Project) (b)
LOC Union Bank of Switzerland 05/01/13 3.70 1,200,000
2,000,000 Harris County, TX Health Facility Development Corporation
(Methodist Hospital Project) - Series 1994 12/01/25 3.70 2,000,000 A1+
8,250,000 Hillsborough County, FL IDA Pollution Control
(Tampa Electric Company Gannon) 05/15/18 3.70 8,250,000 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 Company of Chicago/
LaSalle National Bank 08/01/30 3.10 4,700,000 A1+
10,500,000 Illinois HEFA (Northwestern Memorial Hospital) 08/15/25 3.70 10,500,000 VMIG-1 A1+
4,500,000 Illinois HFA RB (Resurrection Health Care System) 05/01/11 3.70 4,500,000 VMIG-1
6,000,000 Illinois IDFA (Chicago Educational Television) - Series 1994A
LOC Harris Trust & Savings Bank 11/01/14 3.10 6,000,000 VMIG-1
19,400,000 Illinois Museum of Contemporary Art 1994
LOC Northern Trust\Harris Trust\LaSalle National\
National Bank of Detroit 02/01/29 3.10 19,400,000 VMIG-1 A1+
1,000,000 Irvine Ranch, CA Water District#s 105,140,240 & 25
LOC Commerzbank 01/01/21 3.55 1,000,000 VMIG-1 A1+
4,000,000 Irvine Ranch, CA Water District
LOC Landesbank Hessen 10/01/04 3.45 4,000,000 A1+
5,000,000 Irvine Ranch, CA Water District
LOC Toronto Dominion Bank 06/01/15 3.45 5,000,000 VMIG-1 A1+
3,000,000 Jackson County, MI EDC (Thrifty Leoni) (b)
LOC First National Bank of Chicago 12/01/14 3.22 3,000,000
2,500,000 Jacksonville, FL HFA (River Garden Project)
LOC First Union National Bank 02/01/18 3.05 2,500,000 A1
5,000,000 Kentucky Economic Development Finance Authority
(Pooled Hospital Loan Program) 08/01/18 3.30 5,000,000 A1+
3,100,000 Maricopa County, AZ (Arizona Public Service Palo)
LOC Bank of America 05/01/29 3.70 3,100,000 P1 A1+
1,000,000 Maricopa County, AZ (Arizona Public Service Company)
LOC Morgan Guaranty Trust Company 05/01/29 3.70 1,000,000 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 (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,445,000 Maryland IDFA EDRB (The Barre School Facility)
LOC NationsBank 07/01/14 3.15% $ 3,445,000 A1+
7,200,000 Massachusetts State HEFA RB (Harvard University) 08/01/17 3.00 7,200,000 VMIG-1 A1+
870,000 Mecklenberg County, NC PCFA (Aplix, Inc.) (b)
LOC Wachovia Bank & Trust Co., N.A. 12/01/99 3.10 870,000
4,000,000 Michigan Strategic Fund Limited Obligation RB
(Detroit Edison Co.) - Series CC
LOC Barclays Bank PLC 09/01/30 3.70 4,000,000 P1 A1+
5,410,000 Missouri State HEFA (Barnes Hospital)
LOC Morgan Guaranty Trust Company 12/01/15 3.15 5,410,000 VMIG-1 A1+
3,100,000 Monroe County, MI Limited Obligation RB
(Detroit Edison Co.) - Series CC
LOC Barclays Bank PLC 10/01/24 3.70 3,100,000 P1
8,000,000 Montgomery County, MD Housing Opportunity Commission
LOC General Electric Capital Corporation 11/01/07 3.20 8,000,000 A1+
1,900,000 Montgomery County, TX IDRB
(Houston Area Residential Center Project) - Series 1985
LOC Banque Nationale de Paris 12/01/15 3.30 1,900,000 A1
4,570,000 Montgomery County, MD EDC RB
(Brooke Grove Foundations, Incorporated Facilities) - Series 1995
LOC First National Bank of Maryland 01/01/16 3.20 4,570,000 A1
1,000,000 New Mexico State Highway Commission Adjustable Tender
Subordinate Lien Tax Revenue Highway Bonds - Series 1996
FSA Insured 06/15/11 3.05 1,000,000 VMIG-1 A1+
5,500,000 New York State Energy Research & Development Authority
LOC First National Bank of Chicago 10/01/29 3.65 5,500,000 VMIG-1 A1+
3,300,000 North Carolina Medical Care Commission Hospital RB
(Duke University Project) 06/01/15 3.05 3,300,000 VMIG-1 A1+
1,500,000 North Carolina Medical Care Commission Hospital
(The Givens Estates Inc. Project)
LOC First Union National Bank 12/01/26 3.70 1,500,000 VMIG-1
4,600,000 Orange County, FL Educational Facilities RB
(Rollins College Project)
LOC Barnett Bank 05/01/25 3.15 4,600,000 VMIG-1
2,100,000 Orange County, FL Health Facilities - Adventist
LOC SunTrust Bank 11/15/14 3.10 2,100,000 VMIG-1 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- -------
Other Variable Rate Demand Instruments (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,715,000 Orange County, FL HFA MHRB (Post Fountains Project)
FNMA Collateralized 06/01/25 3.15% $ 3,715,000 A1+
4,500,000 Orange County, FL HFA (Smokewood/SunKey Apartments)
LOC Citibank 12/01/22 3.15 4,500,000 A1+
5,000,000 Orange County HFA MHRB Refunding - Series 1997F
(Post Lake Project)
FNMA Collaterlized 06/01/25 3.15 5,000,000 A1+
2,000,000 Palm Beach County, FL RB - Series 1997
(Jewish Community Campus Group)
AMBAC Insured 03/01/27 3.05 2,000,000 A1+
8,000,000 Paso County, FL School Board COP
AMBAC Insured 08/01/26 3.05 8,000,000 VMIG-1 A1+
1,650,000 Penninsula Port Authority of Virginia Coal Terminal RB - 1987C
(Dominion Terminal Project)
LOC National Westminster Bank PLC 07/01/16 3.65 1,650,000 VMIG-1
500,000 Penninsula Port Authority of Virginia Coal Terminal RB - 1987D
(Dominion Terminal Project)
LOC Barclays Bank PLC 07/01/16 3.70 500,000 P1 A1+
1,450,000 Petersburg, VA HRB
LOC First Union National Bank 07/01/17 3.70 1,450,000 A1
1,000,000 Philadelphia, PA Hospital & Higher Facility HRB
(Friends Hospital) - Series A (b)
LOC PNC Bank, N.A. 03/01/06 3.15 1,000,000
7,350,000 Phoenix, AZ IDA MHRB Refunding
(Bell Square Apartments Project) - Series 1995
LOC General Electric Capital Corporation 06/01/25 3.20 7,350,000 A1+
3,500,000 Phoenix, AZ IDA MHRB Refunding
(Paradise Lake Apartments Project) - Series 1995
LOC General Electric Capital Corporation 07/01/25 3.20 3,500,000 A1+
4,500,000 Pinellas County, FL Health Facilities (Pooled Hospital Loan Project)
LOC Chase Manhattan Bank 12/01/15 3.70 4,500,000 VMIG-1 A1+
4,950,000 Pinellas County, FL Health Facilities (St. Mark's Village Project)
LOC NationsBank 03/01/17 3.25 4,950,000 A1+
2,000,000 Pitkin County, CO IDA (Aspen Skiing Company Project) - Series A
LOC First National Bank of Chicago 04/01/16 3.70 2,000,000 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 (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 950,000 Polk County, FL IDA Pollution Control Refunding
(Florida Convention Center Project)
LOC Toronto-Dominion Bank 01/01/11 3.45% $ 950,000 P1
2,675,000 Polk County, FL IDA Pollution Control Refunding
(IMC Fertilizer Inc. Project)
LOC Rabobank Nederland 02/01/00 3.15 2,675,000 P1
2,600,000 Prince George County, MD EDC RB (b)
LOC Fleet National Bank & Trust 09/30/15 5.52 2,600,000
5,000,000 Raleigh Durham, NC Airport Authority
(American Airlines) - Series 1995 A
LOC NationsBank 11/01/15 3.70 5,000,000 A1+
850,000 Richmond, VA Capital Region Airport (Richmond International Airport)
AMBAC Insured 07/01/25 3.05 850,000 VMIG-1 A1+
1,400,000 Roanoke, VA IDRB Roanoke Memorial Hospital (Carillion Health) 07/01/27 3.70 1,400,000 VMIG-1 A1+
1,000,000 Royal Oak Michigan HFA HRB (William Beaumont Hospital) 01/01/27 3.70 1,000,000 VMIG-1 A1+
2,750,000 St. Cloud, MN Commercial Development (Kelly Inn Project) (b)
LOC First Bank of South Dakota 04/01/13 3.20 2,750,000
4,500,000 St. Lucie County, FL PCRB (Florida Power & Light Project) 03/01/27 3.70 4,500,000 VMIG-1 A1+
2,900,000 Salina, KS (Dillards Project) (b)
LOC NationsBank 12/01/14 3.35 2,900,000
1,600,000 Salt Lake City, UT PCRB (Service Station Holdings Project) 08/01/07 3.70 1,600,000 P1 A1+
1,600,000 Salt Lake City, UT PCRB (Service Station Holdings Project) 02/01/08 3.70 1,600,000 P1 A1+
1,100,000 Santa Ana, CA Health Facility RB (Multi Model - Town & Country)
LOC Banque Nationale de Paris 10/01/20 3.60 1,100,000 A1
4,700,000 San Antonio, TX IDA (Rivercenter Project) (b)
LOC PNC Bank, N.A. 12/01/12 3.15 4,700,000
2,130,000 Sarpy County, NE PCRB (Allied Signal, Inc. Project) - Series 1995 07/01/13 3.25 2,130,000 A1
2,000,000 Southgate, MI EDC EDRB (Trust Realty Corporation Project)
LOC Bankers Trust Company 10/01/18 3.22 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 3.70 5,100,000 P1
10,000,000 State of Texas TRAN 08/31/99 3.95 10,000,000 VMIG-1
2,000,000 Sublette County, WY (Exxon Project) - Series 1994 11/01/14 3.70 2,000,000 P1 A1+
3,000,000 Tampa, FL Health Care Facilities
(Lifelink Foundation Inc. Project) (b)
LOC SunTrust Bank 08/01/22 3.15 3,000,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- -------
Other Variable Rate Demand Instruments (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,785,000 Terre Haute, IN EDRB (Westminister Village Terre Haute Inc.) (b)
LOC Huntington National Bank 07/01/01 3.60% $ 1,785,000
800,000 Virginia College Building Authority
(University of Richmond Project) 11/01/26 3.10 800,000 VMIG-1
1,800,000 Wisconsin HEFA RB - Series 1997 (Alverno College Project)
LOC Allied Irish Banks 11/01/17 3.70 1,800,000 VMIG-1
------------ ------------
348,755,000 Total Other Variable Rate Demand Instruments 348,755,000
------------ ------------
<CAPTION>
Put Bonds (4.01%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,900,000 California Higher Education Loan Authority
Student Loan Revenue 1991 - Series A
LOC National Westminster Bank 07/01/99 3.65% $ 3,900,000 VMIG-1
10,000,000 Connecticut State Special Assessment Unemployment
Compensation Advance RB - Series 1993C
FGIC Insured 07/01/99 3.65 10,000,000 VMIG-1 A1+
9,945,000 DeKalb County, GA MHRB - Series 1985L
LOC Amsouth Bank N.A. 12/01/98 3.90 9,945,000 A1+
------------ ------------
23,845,000 Total Put Bonds 23,845,000
------------ ------------
<CAPTION>
Tax Exempt Commercial Paper (5.00%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,700,000 Alleghany, PA IDA (Duquense Light Company)
LOC Canadian Imperial Bank of Commerce 01/28/99 3.05% $ 2,700,000 A1+
8,000,000 Baltimore, MD Metropolitan District BAN - Series 1995
(Kansas City Power and Light Company Project) - Series 1987A 02/10/99 3.20 8,000,000 P1 A1+
5,000,000 Development Authority of Burke County, GA
(Ogelthorpe Power ) - Series 1998A
AMBAC Insured 12/10/98 3.50 5,000,000 MIG-1 A1+
3,000,000 Intermountain Power Agency Power Supply Revenue and
Revenue Refunding Bonds - Series 1985F
AMBAC Insured 12/16/98 3.35 3,000,000 MIG-1 A1+
2,820,000 Maricopa, AZ PCRB (Southern California Edison Company) 11/17/98 3.45 2,820,000 P1 A1
6,000,000 New York City, NY GO Bonds
LOC Commerzbank 11/30/98 3.20 6,000,000 P1 A1+
2,160,000 Rochester, MN (Mayo Foundation) - Series 1998E 11/17/98 3.50 2,160,000 A1+
------------ ------------
29,680,000 Total Tax Exempt Commercial Paper 29,680,000
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- -------
Revenue Bond (0.50%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,950,000 Lake Charles Harbor & Terminal District RB - Series 1983
(Reynolds Metal Company Project)
LOC ABN AMRO 12/01/98 3.85% $ 2,950,000 A1+
------------ ------------
2,950,000 Total Revenue Bond 2,950,000
------------ ------------
Total Investments (100.20%) (Cost $594,945,615+) $594,945,615
Liabilities in Excess of Cash And Other Assets (-0.20%) ( 1,204,632)
------------
Net Assets (100.00%) $593,740,983
============
Net Asset Value, offering and redemption price per share:
Class A Shares, 363,397,844 Shares Outstanding (Note 3) $ 1.00
============
Class B Shares, 230,511,035 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 IDRB = Industrial Development Revenue Bond
COP = Certificate of Participation MHRB = Multifamily Housing Revenue Bond
EDC = Economic Development Corporation PCFA = Pollution Control Finance Authority
EDRB = Economic Development Revenue Bond PCR = Pollution Control Revenue
GO = General Obligation PCRB = Pollution Control Revenue Bond
HEFA = Hospital & Education Finance Authority RAN = Revenue Anticipation Note
HFA = Housing Finance Authority RB = Revenue Bond
HRB = Hospital Revenue Bond TAN = Tax Anticipation Note
IDA = Industrial Development Authority TAW = Tax Anticipation Warrant
IDFA = Industrial Development Finance Authority 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, 1998
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest................................................................................ $ 22,282,127
-------------
Expenses: (Note 2)
Investment management fee............................................................... 1,893,168
Administration Fee...................................................................... 1,223,278
Distribution fee (Class A).............................................................. 940,148
Custodian expenses...................................................................... 69,832
Shareholder servicing and related shareholder expenses.................................. 442,470
Legal, compliance and filing fees....................................................... 155,435
Audit and accounting.................................................................... 134,154
Directors' fees......................................................................... 27,107
Other................................................................................... 32,130
-------------
Total expenses........................................................................ 4,917,722
Expenses paid indirectly (Note 3)..................................................... ( 123)
-------------
Net expenses.......................................................................... 4,917,599
-------------
Net investment income...................................................................... 17,364,528
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments.................................................... 753
-------------
Increase in net assets from operations..................................................... $ 17,365,281
=============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDING OCTOBER 31, 1998 AND 1997
================================================================================
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income......................................... $ 17,364,528 $ 18,300,654
Net realized gain (loss) on investments....................... 753 -0-
--------------- ---------------
Increase in net assets from operations........................ 17,365,281 18,300,654
Dividends to shareholders from net investment income
Class A....................................................... ( 10,851,302)* ( 12,820,890)*
Class B....................................................... ( 6,513,226)* ( 5,479,764)*
Capital share transactions (Note 3)
Class A....................................................... ( 26,615,514) ( 58,788,395)
Class B....................................................... 57,120,197 12,390,842
--------------- ---------------
Total increase (decrease)................................. 30,505,436 ( 46,397,553)
Net assets:
Beginning of year............................................. 563,235,547 609,633,100
--------------- ---------------
End of year................................................... $ 593,740,983 $ 563,235,547
=============== ===============
* 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, Inc.
(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 $292,091 paid to Reich & Tang
Services, Inc., an affiliate of the Manager as servicing agent for the Fund.
Also, included under this caption are expense offsets of $123.
3. Capital Stock.
At October 31, 1998, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $593,741,766. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year Year
Ended Ended
October 31, 1998 October 31, 1997
---------------- ----------------
Class A
<S> <C> <C>
Sold...................................... 718,249,277 1,047,420,480
Issued on reinvestment of dividends....... 9,599,093 11,105,086
Redeemed.................................. ( 754,463,884) ( 1,117,313,961)
-------------- --------------
Net increase (decrease)................... ( 26,615,514) ( 58,788,395)
============== ==============
<CAPTION>
Class B
<S> <C> <C>
Sold...................................... 434,799,484 702,069,192
Issued on reinvestment of dividends....... 6,175,752 4,978,557
Redeemed.................................. ( 383,855,039) ( 694,656,907)
-------------- --------------
Net increase (decrease)................... 57,120,197 ( 12,390,842)
============== ==============
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses at October 31, 1998 amounted to $783.
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)
================================================================================
<TABLE>
<CAPTION>
5. Financial Highlights.
Year Ended October 31,
Class A -------------------------------------------------------------
- ------- 1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<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.................. 0.029 0.031 0.031 0.034 0.023
Less distributions:
Dividends from net investment
income............................. ( 0.029) ( 0.031) ( 0.031) ( 0.034) ( 0.023)
-------- -------- -------- -------- --------
Net asset value, end of year.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return.............................. 2.92% 3.08% 3.09% 3.46% 2.35%
Ratios/Supplemental Data
Net assets, end of year (000)............. $ 363,295 $ 389,897 $ 448,647 $ 458,942 $ 541,106
Ratios to average net assets:
Expenses (Includes expenses paid
indirectly)........................ 0.94% 0.91% 0.90% 0.89% 0.88%
Net investment income.................. 2.89% 3.03% 3.05% 3.41% 2.31%
Expenses paid indirectly............... 0.00% 0.00% 0.01% 0.01% 0.00%
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
5. Financial Highlights. (Continued)
Year Ended October 31,
Class B -------------------------------------------------------------
- ------- 1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<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.................. 0.032 0.033 0.033 0.037 0.026
Less distributions:
Dividends from net investment
income.............................. ( 0.032) ( 0.033) ( 0.033) ( 0.037) ( 0.026)
-------- -------- -------- -------- --------
Net asset value, end of year............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return............................. 3.21% 3.34% 3.35% 3.71% 2.60%
Ratios/Supplemental Data
Net assets, end of year (000)............ $ 230,446 $ 173,339 $160,986 $166,700 $ 142,006
Ratios to average net assets:
Expenses (Includes expenses paid
indirectly)......................... 0.67% 0.66% 0.66% 0.64% 0.63%
Net investment income.................. 3.15% 3.29% 3.30% 3.66% 2.56%
Expenses paid indirectly............... 0.00% 0.00% 0.01% 0.01% 0.00%
</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, 1998, 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, 1998, 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 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, 1998, 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
December 4, 1998
- -------------------------------------------------------------------------------
<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, Inc.
600 Fifth Avenue
New York, NY 10020
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DAILY
TAX FREE
INCOME
FUND, INC.
Annual Report
October 31, 1998
- --------------------------------------------------------------------------------
<PAGE>
