<PAGE>
- --------------------------------------------------------------------------------
CALIFORNIA
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 California Daily Tax Free Income
Fund, Inc. for the year ended December 31, 1996.
The Fund had net assets of $209,382,823 and 760 active shareholders as of
December 31, 1996.
Thank you for your support and we look forward to continuing to serve your cash
management needs.
Sincerely,
\S\ Steven W. Duff
Steven W. Duff
President
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poors
------ ---- ----- -------- ------- -----
Other Tax Exempt Investments (20.12%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,000,000 Alameda County, CA City of Alameda TRAN - Series 1996
07/01/97 3.70% $ 5,005,934 MIG-1
5,000,000 Butte County Office of Education
State of California 1996-1997 RAN 08/20/97 3.87 5,017,581 SP-1+
5,000,000 California Community College
Financing Authority 1996 TRAN - Series A 07/02/97 3.80 5,021,481 SP-1+
5,000,000 California School Cash Reserve Program
Authority Pool Bonds - Series 1996A 07/02/97 3.80 5,021,481 MIG-1 SP-1+
2,000,000 County of Riverside, CA 1996-97 TRAN - Series A
LOC Toronto-Dominion Bank 06/30/97 3.85 2,005,655 MIG-1 SP-1+
10,000,000 Los Angeles County, CA TRAN - Series A 06/30/97 3.80 10,030,686 MIG-1 SP-1+
10,000,000 State of California 1996-1997 RAN 06/30/97 3.92 10,024,995 MIG-1 SP-1+
---------- ----------
42,000,000 Total Other Tax Exempt Investments 42,127,813
---------- ----------
<CAPTION>
Other Variable Rate Demand Instruments (b) (64.42%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 9,000,000 Alameda County, CA IDRB
(Hoover Universal Inc. Project) - Series 1994
LOC Johnson Control 06/01/04 4.75% $ 9,000,000 VMIG-1 A1
2,000,000 California HFFA (St. Francis Memorial Hospital)
LOC Bank of America 11/01/19 4.05 2,000,000 VMIG-1
400,000 California Health Facilities (Sutter Health) - Series B
LOC Morgan Guaranty Trust Company 03/01/20 5.10 400,000 VMIG-1 A1+
3,800,000 California PCFA Refunding RB
(Atlantic Richfield Company Project) - Series 1994A 12/01/24 4.85 3,800,000 VMIG-1 A1
700,000 California PCFA Refunding RB
(Southern California Edison) - Series A 02/28/08 4.70 700,000 VMIG-1 A1
1,100,000 California PCFA Refunding RB
(Southern California Edison) - Series D 02/28/08 4.70 1,100,000 P1 A1+
4,000,000 California PCRB
(Pacific Gas & Electric Corporation) - Series 1996C
LOC Bank of America 11/01/26 4.75 4,000,000 A1+
2,400,000 California PCRB Financial Authority
(Southern California Edison) - Series B 02/28/08 4.70 2,400,000 VMIG-1 A1+
2,300,000 California PCRB Financial Authority
(Southern California Edison) - Series C 02/28/08 4.70 2,300,000 P1 A1+
5,955,000 California State Wide Communities Development Authority Irvine Apt.
Fannie Mae Collateralized 05/15/25 3.90 5,955,000 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poors
------ ---- ----- -------- ------- -----
Other Variable Rate Demand Instruments (b) (Continued)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,500,000 California Statewide Commission Development Authority
(Karcher Properties) - Series 1994C
LOC Bayerische Vereinsbank, A.G. 12/01/19 4.00% $ 2,500,000 VMIG-1
7,200,000 City of Anaheim, CA
(1993 Refunding Projects)
AMBAC Insured 08/01/19 3.90 7,200,000 VMIG-1 A1+
3,000,000 City of Los Angeles IDRB
(Cereal Food Processors, Inc. Project)
LOC Commerzbank A.G. 12/01/05 4.10 3,000,000 A1
1,500,000 City of San Jose, MHRB
(Siena Renaissance Square Apartments) - Series 1996A 12/01/29 4.20 1,500,000 VMIG-1
2,000,000 Clipper, CA Tax Exempt Trust
(Certificates of Participation) - Series 1996-1 Class A
MBIA Insured 07/04/20 4.11 2,000,000 Aaa AAA
2,510,000 County of Contra Costa
(GNMA Collateralized Del Norte Place Apartments)
LOC Sumitomo Bank, Ltd. 10/20/28 4.35 2,510,000 A1
1,000,000 County of Kings, CA Housing Authority MHRB
(Edgewater Isle Apartments) - Series 1996A
LOC First Interstate Bank of California 06/01/07 4.15 1,000,000 VMIG-1
1,400,000 Fullerton, CA IDA RB (PCL Packaging)
LOC Bank of Nova Scotia 12/01/04 4.05 1,400,000 A1+
1,000,000 Irwindale, CA IDRB
(TOYS R' US, Incorporated Project) - Series 1984
LOC Bankers Trust Company 12/01/19 4.13 1,000,000 Aa2
3,000,000 Los Angeles County, CA HFA MHRB
(Sand Canyon Ranch Project) - Series F
LOC Citibank 11/01/06 3.00 3,000,000 A1+
5,700,000 Los Angeles County, CA TRAN
Common Sales Tax Revenue - Series A
FGIC Insured 07/01/12 3.90 5,700,000 VMIG-1 A1+
1,000,000 Los Angeles, CA (Harbor Cove Project)
LOC Citibank 10/01/06 3.00 1,000,000 A1
9,000,000 Ontario, CA IDA (LD Brinkman & Co.)
LOC Barclays Bank PLC 04/01/15 4.75 9,000,000 P1
600,000 Orange County, CA (Irvine Ranch Water District)
LOC Landesbank Hessen 10/01/99 4.85 600,000 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996
===============================================================================
<TABLE>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poors
------ ---- ----- -------- ------- -----
Other Variable Rate Demand Instruments (b) (Continued)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,000,000 Orange County, CA (Radnor Aragon Corporation)
LOC Bank of Nova Scotia 08/01/19 4.13% $ 1,000,000 Aa2
2,500,000 Otay Water District (1996 Capitol Project)
LOC Landesbank Hessen 09/01/26 3.90 2,500,000 VMIG-1 A1+
305,000 Oxnard, CA (Channel Island Business Center Project)
LOC Wells Fargo Bank, N.A. 07/01/05 4.38 305,000 VMIG-1
2,000,000 Petaluma Community Development Commission MHRB
(Oakmont at Petaluma Project)
LOC Banque Paribas 04/01/26 4.40 2,000,000 A1
2,500,000 Riverside County, CA TRAN - Series B
LOC Toronto-Dominion Bank 06/30/97 3.90 2,500,000 VMIG-1 A1+
4,500,000 Rohnert Park, CA MHRB
(Crossbrook Apartments Project) - Series A 06/15/25 4.05 4,500,000 A1+
9,000,000 Sacramento County, CA MHRB
(Shadowood Apartments Project)
LOC General Electric Capital Corporation 12/01/22 4.30 9,000,000 A1+
2,000,000 San Bernadino County, CA
(1996 County Center Refinancing Project)
LOC Canadian Imperial Bank of Commerce 07/01/15 4.00 2,000,000 VMIG-1 A1+
2,300,000 Santa Clara County, CA
El Camino Hospital District
(Medical Control Project)
LOC National Westminster Bank PLC 08/01/15 2.70 2,300,000 VMIG-1
6,000,000 Southeast Resource Recovery Facilities
California Lease Revenue - Series A
LOC Industrial Bank of Japan, Ltd. 12/01/18 4.10 6,000,000 VMIG-1 A1
2,000,000 Southern California Public Power Auth 1996
Subordinate Refunding RB (Southern Trans Project)
FSA Insured 07/01/23 4.00 2,000,000 VMIG-1 A1+
2,000,000 Southern California Public Power Authority
Power Project Refunding RB
(Palo Verde Project)
AMBAC Insured 07/01/09 3.90 2,000,000 VMIG-1 A1+
9,000,000 Southern California Public Power Authority
Transmission Project RB (1991 Subordinate)
LOC Swiss Bank Corp 07/01/19 3.90 9,000,000 P1 A1+
3,000,000 State of California - Various Purpose GO RB 09/01/21 4.05 3,000,000 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poors
------ ---- ----- -------- ------- -----
Other Variable Rate Demand Instruments (b) (Continued)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,100,000 The City of Los Angeles MHRB
(Coral Wood County Project) - Series 1995D
LOC Union Bank of California 11/01/25 4.25% $ 2,100,000 VMIG-1
3,700,000 The City of Los Angeles MHRB
(Orangewood County Project) - Series 1995C
LOC Union Bank of California 11/01/25 4.25 3,700,000 VMIG-1
3,315,000 Town of Windsor Variable Rate Demand MHRB
(Oakmount at Windsor Project)
LOC Banque Paribas 08/01/25 4.40 3,315,000 A1
1,000,000 Tustin, CA Improvement Bond Act 1915
(Reassessment District No. 95-2-A)
LOC Kredietbank 09/02/13 5.00 1,000,000 VMIG-1 A1+
2,500,000 Visalia, CA IDRB (Savannah Foods)
LOC Trust Co. Bank of Atlanta 06/01/05 4.15 2,500,000 Aa3
1,100,000 Western Riverside County,
Regional Wastewater Authority RB - 1996
LOC National Westminster Bank PLC 04/01/28 5.00 1,100,000 VMIG-1 A1+
----------- -----------
134,885,000 Total Other Variable Rate Demand Instruments 134,885,000
----------- -----------
<CAPTION>
Put Bonds (c) (1.79%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,000,000 California PCFA PCR (Chevron USA Incorporated Project)11/15/97 3.68% $ 1,001,685 Aa2 AA
2,745,000 California PCFA PCR (Chevron USA Incorporated Project)11/15/97 3.90 2,745,000 Aa2 AA
----------- ------------
3,745,000 Total Put Bonds 3,746,685
----------- ------------
<CAPTION>
Tax Exempt Commercial Paper (11.84%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,000,000 California PCR Southern California Edison - Series B
LOC Morgan Guaranty Trust Company 03/06/97 3.35% $ 2,000,000 A1+
5,000,000 California Pollution Control Finance (c)
Southern California Edison) - Series B 02/05/97 3.50 5,000,000 P1 A1
3,300,000 Puerto Rico Government Development Bank 02/06/97 3.55 3,300,000 A1+
2,500,000 Puerto Rico Government Development Bank 02/07/97 3.55 2,500,000 A1+
3,000,000 The City of Long Beach Harbor Department
CP Series - A 04/03/97 3.50 3,000,000 P1 A1+
5,000,000 The Regents of the University of California
CP Series - A 03/13/97 3.45 5,000,000 P1 A1+
4,000,000 West & Central Water Basin Finance Authority
(Water Basin Municipal Water District) 02/11/97 3.40 4,000,000 P1 A1+
----------- -----------
24,800,000 Total Tax Exempt Commercial Paper 24,800,000
----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poors
------ ---- ----- -------- ------- -----
Variable Rate Demand Instruments - Private Placements (b) (4.04%)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,955,000 Gene E. Lynn Nursing Home
LOC Bank of America 12/01/15 5.32% $ 3,955,000 P1 A1+
2,034,000 IDA County Riverside, CA IDRB (National RV Incorporated Project)
LOC Union Bank of California 12/01/03 4.95 2,034,000 P1 A1+
2,465,000 Kent Trust Project Series 84B
LOC Comerica Bank 12/01/14 4.54 2,465,000 P1 A1
----------- -----------
8,454,000 Total Variable Rate Demand Instruments - Private Placements 8,454,000
----------- -----------
Total Investments (102.21%) (Cost $214,013,498+) 214,013,498
Liabilities in Excess of Cash and Other Assets (-2.21%) ( 4,630,675)
-----------
Net Assets (100.00%) $209,382,823
============
Net Asset Value, offering and redemption price per share:
Class A Shares, 205,962,591 Shares Outstanding (Note 3) $ 1.00
===========
Class B Shares, 3,435,844 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 payable on demand at par including accrued interest (usually
with seven days notice) and, if indicated, 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) The maturity date indicated is the next put date.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
GNMA = Government National Mortgage Association PCFA = Pollution Control Finance Authority
GO = Government Obligation PCR = Pollution Control Revenue
HFFA = Health Facility Finance Authority PCRB = Pollution Control Revenue Bond
HFA = Housing Finance Agency RAN = Revenue Anticipation Note
IDA = Industrial Development Authority RB = Revenue Bond
IDRB = Industrial Development Revenue Bond TRAN = Tax and Revenue Anticipation Note
MHRB = Multi-Family Housing Revenue Bond
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
===============================================================================
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Income:
Interest.............................................................................. $ 6,820,300
-------------------
Expenses: (Note 2)
Investment management fee............................................................ 589,504
Administration fee................................................................... 412,653
Shareholder servicing fee (Class A).................................................. 392,125
Custodian expenses................................................................... 15,411
Shareholder servicing and related shareholder expenses............................... 139,680
Legal, compliance and filing fees.................................................... 23,636
Audit and accounting................................................................. 51,137
Directors' fees...................................................................... 8,705
Other................................................................................ 6,624
-------------------
Total expenses................................................................... 1,639,475
Less: Fees waived (Note 2)....................................................... ( 160,414)
Expenses paid indirectly (Note 2).......................................... ( 27,324)
-------------------
Net expenses..................................................................... 1,451,737
-------------------
Net investment income.................................................................. 5,368,563
-------------------
<CAPTION>
<S> <C>
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments................................................ -0-
-------------------
Increase in net assets from operations................................................. $ 5,368,563
===================
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 AND 1995
===============================================================================
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income...................................... $ 5,368,563 $ 3,471,410
Net realized gain (loss) on investments.................... -0- -0-
------------- ------------
Increase in net assets from operations.......................... 5,368,563 3,471,410
Dividends to shareholders from net investment income:
Class A.................................................... ( 5,355,010)* ( 3,471,410)*
Class B.................................................... ( 13,553)* -0-
Capital share transactions (Note 3):
Class A.................................................... 34,138,724 66,687,982
Class B.................................................... 3,435,844 -0-
------------ ------------
Total increase (decrease).................................. 37,574,568 66,687,982
Net assets:
Beginning of year.......................................... 171,808,255 105,120,273
------------ ------------
End of year................................................ $209,382,823 $171,808,255
============ ============
* Designated as exempt-interest dividends for federal income tax purposes.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Summary of Accounting Policies.
California 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 has two classes of stock authorized, Class A and Class B.
The Class A shares are subject to a service fee pursuant to the Distribution and
Service Plan. The Class B shares are not subject to a service fee. Additionally,
the Fund may allocate among its classes certain expenses, to the extent
allowable to specific classes, including transfer agent fees, government
registration fees, certain printing and postage costs, and administrative and
legal expenses. Class Specific expenses of the Fund were limited to distribution
fees and minor transfer agent expenses. In all other respects the Class A and
Class B shares represent the same interest in the income and assets of the Fund.
Distribution for Class B shares commenced on October 9, 1996 and all Fund shares
outstanding before October 9, 1996 were designated as Class A shares. 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.
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.
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
2. Investment Management Fees and Other Transactions with Affiliates(Continued).
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,
only with respect to 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 .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 December 31, 1996, the Manager and the Distributor
voluntarily waived management fees, administration fees and shareholder
servicing fees of $27,514, $2,832 and $130,068, respectively.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$2,000 per annum plus $250 per meeting attended.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $74,743 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 captions "Custodian expenses"
and "Shareholder servicing and related shareholder expenses" are expense offsets
of $27,324.
3. Capital Stock.
At December 31, 1996, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $209,398,435. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------ ---------------
Year Year October 9, 1996
Ended Ended (Commencement of Offering)
December 31, 1996 December 31, 1995 to December 31, 1996
----------------- ----------------- --------------------
<S> <C> <C> <C>
Sold.................................. 387,317,948 378,553,200 6,012,221
Issued on reinvestment of dividends... 3,615,939 2,706,820 12,875
Redeemed.............................. ( 356,795,163) ( 314,572,038) ( 2,589,252)
----------------- ----------------- --------------
Net increase ......................... 34,138,724 ( 66,687,982) 3,435,844
================= ================= ==============
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses at December 31, 1996 amounted to
$15,612. This amount represents tax basis capital losses which may be carried
forward to offset future capital gains. Such losses expire December 31, 1999
through December 31, 2002.
5. Concentration of Credit Risk.
The Fund invests primarily in obligations of political subdivisions of the State
of California and, accordingly, is subject to the credit risk associated with
the non-performance of such issuers. Approximately 48% 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.
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
6. Selected Financial Information.
CLASS A Year Ended December 31,
- ------- -------------------------------------------------------------------------------
1996 1995 1994 1993 1992
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout
the period)
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income.......... 0.027 0.032 0.024 0.021 0.023
Less distributions:
Dividends from net investment income
( 0.027) ( 0.032) ( 0.024) ( 0.021) ( 0.023)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Return..................... 2.76% 3.28% 2.45% 2.16% 2.35%
Ratios/Supplemental Data
Net assets, end of year (000).... $ 205,947 $ 171,808 $ 105,120 $ 117,260 $ 90,795
Ratios to average net assets:
Expenses....................... 0.75%(a)(c) 0.67%(a)(c) 0.56%(a) 0.35%(a) 0.68%(a)
Net investment income.......... 2.73%(a) 3.24%(a) 2.40%(a) 2.14%(a) 2.34%(a)
<CAPTION>
October 9, 1996
CLASS B (Commencement of Sales) to
- ------- December 31, 1996
---------------------------
<S> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period............. $ 1.00
-----------
Income from investment operations:
Net investment income.......................... 0.004
Less distributions:
Dividends from net investment income............ 0.004
-----------
Net asset value, end of period................... $ 1.000
===========
Total Return..................................... 3.08%*
Ratios/Supplemental Data
Net assets, end of period (000).................. $ 3,436
Ratios to average net assets:
Expenses....................................... 0.56%*(b)(c)
Net investment income.......................... 3.09%*(b)
* Annualized
(a) Net of management, administration and shareholder servicing fees waived
equivalent to .08%, .22%, .28%, .54% and .29% of average net assets.
(b) Net of management fees waived equivalent to .06% of average net assets.
(c) Includes expense offsets equivalent to .01% of average net assets.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
INDEPENDENT AUDITOR'S REPORT
===============================================================================
The Board of Directors and Shareholders
California Daily Tax Free Income Fund, Inc.
We have audited the accompanying statement of net assets of California Daily Tax
Free Income Fund, Inc. as of December 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 December 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 California Daily Tax Free Income Fund, Inc. as of December 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 10, 1997
- -------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CALIFORNIA
DAILY
TAX FREE
INCOME
FUND, INC.
Annual Report
December 31, 1996
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by an effective prospectus, which includes
information regarding the Fund's objectives and policies, experience of its
management, marketability of shares, and other information.
- --------------------------------------------------------------------------------
California Daily Tax Free Income Fund, Inc.
600 Fifth Avenue
New York, New York 10020
Manager
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
Custodian
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services L.P.
600 Fifth Avenue
New York, New York 10020
- -------------------------------------------------------------------------------
<PAGE>
