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CONNECTICUT
DAILY
TAX FREE
INCOME
FUND, INC.
Annual Report
January 31, 1996
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<PAGE>
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CONNECTICUT
DAILY TAX FREE 600 FIFTH AVENUE, NEW YORK, N.Y. 10020
INCOME FUND, INC. 212/830-5200
===============================================================================
Dear Shareholder:
We are pleased to present the annual report of Connecticut Daily Tax Free Income
Fund, Inc. for the year ended January 31, 1996.
The Fund had net assets of $105,826,006 and 414 active shareholders as of
January 31, 1996. Dividends earned on a share held throughout the year were
$.030 which, when adjusted for the compounding effect of the reinvestment of
dividends, represents a 3.02% yield on an annual basis.
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
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<PAGE>
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CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS
JANUARY 31, 1996
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<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Standard
Amount Date Yield Value Moody's & Poors
------ ---- ----- ----- ------- -----
Other Tax Exempt Investments (12.23%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 1,460,000 Darien, CT BAN (c) 08/14/96 3.54% $ 1,463,003
2,250,000 Montville, CT BAN (c) 01/28/97 3.23 2,250,625
1,775,000 Shelton, CT BAN (c) 06/04/96 3.32 1,775,408
2,000,000 State of Connecticut Regional School District Number 15
(Towns of Middlebury & Southbury) (c) 02/15/96 3.43 2,000,037
2,000,000 Town of Madison, CT GO BAN (c) 03/27/96 3.99 2,000,578
3,450,000 Town of Westport, CT BAN (c) 06/14/96 3.40 3,450,555
- ----------- -----------
12,935,000 Total Other Tax Exempt Investments 12,940,206
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<CAPTION>
Other Variable Rate Demand Investments (b) (51.73%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 5,100,000 Connecticut Development Authority
(Exeter Energy Project) - Series 1989B
LOC Sanwa Bank, Ltd. 12/01/19 3.30% $ 5,100,000 A1
400,000 Connecticut Development Authority
(Exeter Energy Project) - Series 1989C
LOC Sanwa Bank, Ltd. 12/01/19 3.30 400,000 A1
3,600,000 Connecticut HEFA (Bridgeport Hospital) - Series B
(Escrowed in treasuries for call on 02/07/96) (c)
LOC Fuji Bank, Ltd. 07/01/25 3.90 3,600,000
6,700,000 Connecticut HFA Housing Mortgage Finance Program
AMBAC Insured 05/15/18 3.10 6,700,000 A1+
2,000,000 Connecticut PCR Refunding Bond
(CT Light & Power Company Project)
LOC Union Bank of Switzerland 09/01/28 3.30 2,000,000 VMIG-1 A1+
8,900,000 Connecticut State Development Authority
(CT Light & Power Company Project) - Series 1993A
LOC Deutsche Bank A.G. 09/01/28 3.00 8,900,000 VMIG-1 A1+
3,200,000 Connecticut State Development Authority
(Corporation for Independent Living Project)
LOC Chemical Bank 07/01/15 3.15 3,200,000 VMIG-1
3,500,000 Connecticut State Development Authority
(Western Mass Electric Company) - Series 1993A
LOC Union Bank of Switzerland 09/01/25 3.00 3,500,000 VMIG-1 A1+
1,300,000 Connecticut State Development Authority IDRB
(Columbia Diamond Ring)
LOC Barclays Bank PLC 09/01/08 4.15 1,300,000 P1 A1+
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Standard
Amount Date Yield Value Moody's & Poors
------ ---- ----- ----- ------- -----
Other Variable Rate Demand Investments (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 6,000,000 Connecticut State Development Authority IDRB
(Gerber Scientific Incorporated)
LOC Wachovia Bank & Trust Co., N.A. 12/01/14 3.35% $ 6,000,000 A1+
1,500,000 Connecticut State Development Authority IDRB
(Rand Whitney Container Board L.P.)
LOC Chase Manhattan Bank, N.A. 08/01/23 2.90 1,500,000 P1 A1
500,000 Connecticut State Development Authority IDRB
(Solid Waste Exeter Project)
LOC Sanwa Bank, Ltd. 12/01/19 3.30 500,000 A1
1,200,000 Connecticut State Development Authority IDRB
(Vitta Corporation Project)
LOC Barclays Bank PLC 09/01/09 4.15 1,200,000 P1 A1+
1,600,000 Connecticut State Special Tax Obligation RB
(Second Lien Transportation Infrastructure)
LOC Commerzbank A.G. 12/01/10 2.90 1,600,000 VMIG-1 A1+
3,845,000 Hartford County, CT RDA (Underwood Tower Project) (c)
LOC Financial Security Assurance, Inc. 06/01/20 3.30 3,845,000
1,400,000 State of Connecticut HEFA - Series A
LOC Credit Locale de France 07/01/24 2.90 1,400,000 VMIG-1
4,000,000 State of Connecticut Special Assessment Unemployment
Compensation Advance Fund RB - Series 1993B
LOC Mitsubishi Bank, Ltd. 11/01/01 3.35 4,000,000 VMIG-1 A1+
- ----------- -----------
54,745,000 Total Other Variable Rate Demand Instruments 54,745,000
- ----------- -----------
<CAPTION>
Put Bonds (d) (16.55%)
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<C> <C> <C> <C> <C> <C> <C>
$ 1,800,000 Connecticut State HEFA (Yale University) - Series E
FGIC Insured 06/01/96 4.00% $ 1,800,000 VMIG-1 A1+
2,000,000 Connecticut State HFA Housing Mortgage Finance Program Bond 04/15/96 3.75 2,000,000 MIG-1 SP-1+
3,860,000 Connecticut State RRA Bond
(Wallingford Resource Recovery) - Series 1986
LOC National Westminster Bank PLC 11/14/96 3.85 3,860,000 P1 A1+
5,000,000 Connecticut State Special Assessment Unemployment
Compensation Advance Fund RB - Series 1993C
FGIC Insured 07/01/96 3.82 5,000,594 VMIG-1 A1+
4,860,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Reynolds Metals Corporation)
LOC ABN AMRO Bank N.V. 09/01/96 3.73 4,858,645 VMIG-1 A1+
- ----------- -----------
17,520,000 Total Put Bonds 17,519,239
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</TABLE>
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See Notes to Financial Statements.
<PAGE>
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CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
JANUARY 31, 1996
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<TABLE>
<CAPTION>
Ratings (a)
---------------
Face Maturity Standard
Amount Date Yield Value Moody's & Poors
------ ---- ----- ----- ------- -----
Revenue Bonds (3.96%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 3,300,000 South Central Connecticut Regional Water System RB (c)
Escrowed in U.S. Treasury Securities 08/01/96 3.62% $ 3,418,636
750,000 University of Puerto Rico RB (c)
Escrowed in U.S. Treasury Securities 06/01/96 3.55 774,344
- ----------- -----------
4,050,000 Total Revenue Bonds 4,192,980
- ----------- -----------
<CAPTION>
Tax Exempt Commercial Paper (14.16%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 980,000 Connecticut HFA Mortgage Project - 1989 Series D 02/13/96 3.75% $ 980,000 A1+
1,000,000 Connecticut HFA Mortgage Project - 1990 Series C 02/09/96 3.60 1,000,000 VMIG-1 A1+
1,000,000 Connecticut State HEFA (Yale University) - Series L 02/09/96 3.45 1,000,000 VMIG-1 A1+
1,000,000 Connecticut State HEFA (Yale University) - Series L 03/01/96 3.15 1,000,000 VMIG-1 A1+
3,000,000 Connecticut State HEFA (Yale University) - Series M 04/12/96 3.25 3,000,000 VMIG-1 A1+
7,000,000 Puerto Rico Government Development Bank 02/16/96 3.15 7,000,000 A1+
1,000,000 Puerto Rico Government Development Bank 03/01/96 3.05 1,000,000 A1+
- ----------- -----------
14,980,000 Total Tax Exempt Commercial Paper 14,980,000
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<CAPTION>
Variable Rate Demand Instruments - Participations (b) (1.35%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 908,289 Connecticut State Development Authority IDRB (Nefco Holding)
LOC Chemical Bank 11/01/00 5.53% $ 908,289 P1 A1
519,152 Connecticut State Development Authority IDRB
(The Finlay Brothers Project)
LOC Chemical Bank 10/01/00 5.53 519,152 P1 A1
- ----------- -----------
1,427,441 Total Variable Rate Demand Instruments - Participations 1,427,441
- ----------- -----------
Total Investments (99.98%) (Cost $105,804,866+) 105,804,866
Cash and Other Assets in Excess of Liabilities (.02%) 21,140
-----------
Net Assets (100%), 105,843,655 Shares Outstanding (Note 3) $105,826,006
============
Net Asset Value, offering and redemption price per share $ 1.00
============
+ Aggregate cost for federal income tax purposes is $105,804,205.
</TABLE>
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See Notes to Financial Statements.
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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 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.
(c) Securities that are not rated which the Fund's Board of Directors have
determined to be of comparable quality to those rated securities in which
the Fund invests.
(d) The maturity date indicated is the next put date.
<TABLE>
<CAPTION>
KEY:
<C> <C> <C> <C> <C> <C>
BAN = Bond Anticipation PCFA = Pollution Control Finance Authority
GO = General Obligation PCR = Pollution Control Revenue
HEFA = Health and Education Facilities Authority RB = Revenue Bond
HFA = Housing Finance Authority RDA = Revenue Development Authority
IDRB = Industrial Development Revenue Bond RRA = Resource Recovery Authority
LOC = Letter of Credit
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1996
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<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest...................................................................... $ 3,591,042
-------------------
Expenses: (Note 2)
Investment management fee.................................................... 278,564
Administration fee........................................................... 187,517
Shareholder servicing fee.................................................... 185,710
Custodian expenses........................................................... 17,836
Shareholder servicing and related shareholder expenses....................... 75,497
Legal, compliance and filing fees............................................ 27,873
Audit and accounting......................................................... 77,630
Directors' fees.............................................................. 16,728
Other........................................................................ 7,105
------------------
Total expenses........................................................... 874,460
Less:
Expenses paid indirectly............................................... ( 3,075)
Fees waived............................................................ ( 27,856)
------------------
Net expenses....................................................... 843,529
------------------
Net investment income........................................................ 2,747,513
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments......................................... 2,987
------------------
Increase in net assets from operations.......................................... $ 2,750,500
==================
</TABLE>
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See Notes to Financial Statements.
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CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED JANUARY 31, 1996 AND 1995
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<TABLE>
<CAPTION>
1996 1995
---- ----
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income........................................... $ 2,747,513 $ 1,801,080
Net realized gain (loss) on investments........................ 2,987 2,109
--------------- ---------------
Increase (decrease) in net assets from operations.................... 2,750,500 1,803,189
Dividends to shareholders from net investment income................. ( 2,747,513)* ( 1,801,080)*
Capital share transactions (Note 3).................................. 24,022,159 ( 38,752,190)
--------------- ---------------
Total increase (decrease)....................................... 24,025,146 ( 38,750,081)
Net assets:
Beginning of year............................................... 81,800,860 120,550,941
--------------- ---------------
End of year..................................................... $ 105,826,006 $ 81,800,860
=============== ===============
* Designated as exempt-interest dividends for federal income tax purposes.
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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1. Summary of Accounting Policies.
Connecticut Daily Tax Free Income Fund, Inc. is a no-load, non-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. Its
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 .30%
of the Fund's average daily net assets. The Manager has agreed to reimburse the
Fund for its expenses (exclusive of interest, taxes, brokerage, and
extraordinary expenses) which in any year exceed 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
January 31, 1996.
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<PAGE>
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2. Investment Management Fees and Other Transactions with Affiliates
(Continued).
Pursuant to an Administrative Services Contract the Fund pays to the Manager an
annual fee of .21% of the Fund's average daily net assets. Prior to December 1,
1995, the administration fee was .20%.
The Manager is a wholly-owned subsidiary of New England Investment Companies,
L.P. ("NEIC"). On August 16, 1995, New England Mutual Life Insurance Company
("The New England"), the owner of NEIC's general partner and a majority owner of
the limited partnership interest in NEIC, entered into an agreement to merge
with Metropolitan Life Insurance Company ("MetLife"), with MetLife to be the
survivor of the merger. The merger is subject to several conditions, including
the required approval, by shareholders of the Fund of a proposed new investment
advisory agreement, intended to take effect at the time of the merger. The new
agreement will be substantially similar to the existing agreement.
Pursuant to a Distribution Plan adopted under Securities and Exchange Commission
Rule 12b-1, the Fund and Reich & Tang Distributors L.P. (the Distributor) have
entered into a Distribution Agreement and a Shareholder Servicing Agreement. For
its services under the Shareholder Servicing Agreement, the Distributor receives
from the Fund a fee equal to .20% of the Fund's average daily net assets. There
were no additional expenses borne by the Fund pursuant to the Distribution Plan.
During the year ended January 31, 1996, the Manager voluntarily waived
administration fees of $27,856.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$3,000 per annum plus $500 per meeting attended.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $5,983 paid to Reich & Tang
Services L.P., an affiliate of the Manager, as servicing agent for the Fund.
Included in the Statement of Operations under the caption "Custodian expenses"
are expense offsets of $3,075.
3. Capital Stock.
At January 31, 1996, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $105,825,345. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year Year
Ended Ended
January 31, 1996 January 31, 1995
---------------- ----------------
<S> <C> <C>
Sold........................................... 230,071,612 190,586,219
Issued on investment of dividends.............. 2,456,633 1,674,156
Redeemed....................................... ( 208,506,086) ( 231,012,565)
------------------ -------------------
Net increase (decrease)........................ 24,022,159 ( 38,752,190)
================== ===================
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized gains at January 31, 1996 amounted to $661.
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<PAGE>
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CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
5. Concentration of Credit Risk.
The Fund invests primarily in obligations of political subdivisions of the State
of Connecticut and, accordingly, is subject to the credit risk associated with
the non-performance of such issuers. Approximately 56% of these investments are
further secured, as to principal and interest, by letters of credit issued by
financial institutions. The Fund maintains a policy of monitoring its exposure
by reviewing the creditworthiness of the issuers, as well as that of the
financial institutions issuing the letters of credit, and by limiting the amount
of holdings with letters of credit from one financial institution.
6. Selected Financial Information.
<TABLE>
<CAPTION>
Year Ended January 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ -----
Per Share Operating Performance:
(for a share outstanding throughout the year)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- ---------
Income from investment operations:
Net investment income.................. 0.030 0.023 0.017 0.021 0.035
Less distributions:
Dividends from net investment income ( 0.030) ( 0.023) ( 0.017) ( 0.021) ( 0.035)
-------- -------- --------- --------- --------
Net asset value, end of year.............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ========= ========= ========= ========
Total Return.............................. 3.02% 2.29% 1.70% 2.12% 3.56%
Ratios/Supplemental Data
Net assets, end of year (000)............. $105,826 $81,801 $120,551 $129,297 $185,339
Ratios to average net assets:
Expenses.............................. .91%+ .88% 0.87% 0.86%++ 0.79%
Net investment income................. 2.96%+ 2.25% 1.68% 2.14%++ 3.51%
+ Net of administration fees waived equivalent to .03% of average net assets.
++ Net of shareholder servicing fees waived equivalent to .06% of average net assets.
</TABLE>
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<PAGE>
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CONNECTICUT DAILY TAX FREE INCOME FUND, INC.
INDEPENDENT AUDITOR'S REPORT
===============================================================================
The Board of Directors and Shareholders
Connecticut Daily Tax Free Income Fund, Inc.
We have audited the accompanying statement of net assets of Connecticut Daily
Tax Free Income Fund, Inc. as of January 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 January 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 Connecticut Daily Tax Free Income Fund, Inc. as of January 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
February 22, 1996
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<PAGE>
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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.
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Connecticut 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, Transfer & Dividend
Disbursing Agent
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
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