<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, 1997.
The Fund had net assets of $197,816,383 and 722 active shareholders as of
December 31, 1997.
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, 1997
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- -------
Other Tax Exempt Investments (15.72%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,000,000 California School Cash Reserve Program Authority 07/02/98 3.80% $ 5,021,472 MIG-1 SP-1+
5,000,000 City of Ontario (San Bernadino County, CA) TRAN - Series 1997 06/30/98 3.77 5,015,933 SP-1+
10,000,000 County of Los Angeles, CA - Series 1997-98A 06/30/98 3.80 10,030,686 MIG-1 SP-1+
4,000,000 Fontana Unified School District County of San Bernadino, CA
TRAN 1997 07/10/98 3.89 4,012,234 SP-1+
2,000,000 Los Angeles Community College
District Los Angeles County, CA TRAN 1997-98 07/02/98 3.85 2,005,718 Aa SP-1+
5,000,000 The City of Los Angeles, CA TRAN 1997 06/30/98 3.83 5,014,630 MIG-1 SP-1+
----------- -----------
31,000,000 Total Other Tax Exempt Investments 31,100,673
----------- -----------
<CAPTION>
Other Variable Rate Demand Instruments (b) (64.27%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 7,000,000 Alameda County, CA IDR Refunding Bonds
(Hoover Universal Inc. Project) - Series 1994
LOC Johnson Control 06/01/04 4.85% $ 7,000,000 VMIG-1
1,500,000 California EDFA (Kuhnash Properties/Arkay Plastics, CA) (c)
LOC PNC Bank, N.A. 04/01/17 4.15 1,500,000
1,500,000 California EDFA IDRB (Serra Mission Project)
LOC US National Bank of Oregon 08/01/27 4.90 1,500,000 A1
400,000 California Health Facilities (Sutter Health) - Series 90A
LOC Morgan Guaranty Trust Company 03/01/20 4.80 400,000 VMIG-1 A1+
1,600,000 California PCFA PCR (Pacific Gas & Electric) - Series F
LOC Banque Nationale de Paris 11/01/26 4.75 1,600,000 A1+
2,900,000 California PCFA Refunding PCRB
(Pacific Gas & Electric Company) - Series 1997A
LOC Toronto-Dominion Bank 12/01/18 4.75 2,900,000 A1+
3,800,000 California PCFA Refunding RB
(Atlantic Richfield Company Project) - Series 1994A 12/01/24 5.00 3,800,000 VMIG-1 A1
6,900,000 City of Anaheim, CA (1993 Refunding Projects)
AMBAC Insured 08/01/19 3.35 6,900,000 VMIG-1 A1+
3,000,000 City of Freemont, CA MHRB
(Mission Wells Project) - Series 1985E
LOC Bayerische Landesbank Girozentrale 09/01/14 3.95 3,000,000 A1+
1,000,000 City of Irvine Assessment District #94-13
(Oak Creek) Limited Obligation Improvement Bond
LOC Canadian Imperial Bank of Commerce 09/02/22 5.00 1,000,000 VMIG-1 A1+
2,760,000 City of Los Angeles IDRB (Cereal Food Processors, Inc. Project)
LOC Commerzbank A.G. 12/01/05 4.00 2,760,000 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 (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,500,000 City of San Jose, MHRB
(Siena Renaissance Square Apartments) - Series 1996A
LOC Bank One Arizona, N.A. 12/01/29 3.60% $ 1,500,000 VMIG-1
2,000,000 Clipper, CA Tax Exempt Trust COPS - Series 1996-1 Class A
MBIA Insured 07/04/20 4.12 2,000,000 Aaa AAA
1,800,000 Community Redevelopment Agency of the City of Grand Terrace
LOC Industrial Bank of Japan, Ltd. 12/01/11 4.20 1,800,000 A1
2,460,000 County of Contra Costa
(GNMA Collateralized Del Norte Place Apartments
LOC Sumitomo Bank, Ltd. 10/20/28 4.90 2,460,000 A2
6,500,000 County of Contra Costa Multifamily Mortgage Refinancing Bonds
Fannie Mae Collateralized 11/15/22 3.35 6,500,000 A1+
1,000,000 County of Kings, CA Housing Authority MHRB
(Edgewater Isle Apartments) - Series 1996A
LOC Wells Fargo Bank, N.A. 06/01/07 3.65 1,000,000 VMIG-1
1,675,000 County of Santa Clara, CA MHRB
(Grove Garden Apartments) - Series 1997A
Fannie Mae Collateralized 02/15/27 3.95 1,675,000 AAA
1,400,000 Fullerton, CA IDA RB (PCL Packaging)
LOC Bank of Nova Scotia 12/01/04 3.55 1,400,000 A1+
2,000,000 Housing Authority of the County of Riverside MHRB
(Amanda Park Apartment Project) - Series 1989
LOC Corestates Bank, N.A. 05/01/19 3.95 2,000,000 VMIG-1
1,100,000 IDA of the City of Los Angeles IDRB
(Keystone Engineering Company Project) - Series 1997
LOC Bank of Hawaii 08/01/22 3.95 1,100,000 A1
2,140,000 IDA of the City of Los Angeles IRB
(Kairak, Inc. Project) - Series 1997
LOC Bank of Hawaii 07/01/22 3.95 2,140,000 A1
1,000,000 Irwindale, CA IDRB
(TOYS R' US, Incorporated Project) - Series 1984
LOC Bankers Trust Company 12/01/19 4.28 1,000,000 A1
3,000,000 Los Angeles County, CA HFA MHRB
(Sand Canyon Ranch Project) - Series F
LOC Citibank 11/01/06 3.35 3,000,000 A1+
6,000,000 Ontario, CA IDA (LD Brinkman & Co.)
LOC Union Bank of California 04/01/15 4.85 6,000,000 P1
1,000,000 Orange County, CA (Radnor Aragon Corporation)
LOC Toronto-Dominion Bank 08/01/19 4.28 1,000,000 P1
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1997
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- -------
Other Variable Rate Demand Instruments (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,500,000 Otay Water District (1996 Capital Project)
LOC Landesbank Hessen 09/01/26 3.45% $ 2,500,000 VMIG-1 A1+
305,000 Oxnard, CA (Channel Island Business Center Project)
LOC Wells Fargo Bank, N.A. 07/01/05 4.33 305,000 VMIG-1
4,500,000 Rohnert Park, CA MHRB (Crossbrook Apartments Project) - Series A
Fannie Mae Collateralized 06/15/25 3.35 4,500,000 A1+
9,000,000 Sacramento County, CA MHRB (Shadowood Apartments Project)
LOC General Electric Capital Corporation 12/01/22 3.60 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 3.40 2,000,000 VMIG-1 A1+
2,200,000 San Francisco-South Beach 19 Redevelopment Agency
LOC Bank Of Tokyo - Mitsubishi Bank, Ltd. 12/01/16 4.03 2,200,000 VMIG-1
6,000,000 Southeast Resource Recovery Facilities
California Lease Revenue - Series A
LOC Industrial Bank of Japan, Ltd. 12/01/18 4.00 6,000,000 VMIG-1 A1
2,000,000 Southern California Public Power Authority 1996
Subordinate Refunding RB (Southern Trans Project)
FSA Insured 07/01/23 3.35 2,000,000 VMIG-1 A1+
8,900,000 Southern California Public Power Authority Transmission Project RB
(1991 Subordinate)
AMBAC Insured 07/01/19 3.35 8,900,000 VMIG-1 A1+
3,000,000 State of California GO RB
MBIA Insured 09/01/21 4.15 3,000,000 A1+
1,500,000 The City of Los Angeles MHRB
(Coral Wood County Project) - Series 1995D
LOC Union Bank of California 11/01/25 3.60 1,500,000 VMIG-1
2,990,000 The City of Los Angeles MHRB
(Orangewood County Project) - Series 1995C
LOC Union Bank of California 11/01/25 3.60 2,990,000 VMIG-1
3,215,000 Town of Windsor MHRB (Oakmount at Windsor Project) - Series A
LOC Banque Paribas 08/01/25 4.35 3,215,000 A1
6,500,000 Trust Receipts, State of California RAN - Series 1997 06/30/98 4.50 6,500,000 VMIG-1
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 4.20 2,500,000 Aa3
</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 (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,000,000 West Basin Municipal Water District ADR COPS
(Recycled Water Project-Phase II) - 1997C
LOC Bayerische Vereinsbank, A.G. 08/01/27 3.50% $ 1,000,000 VMIG-1
1,100,000 Western Riverside County Regional
Wastewater Authority RB - Series 1996
LOC National Westminster Bank PLC 04/01/28 5.00 1,100,000 VMIG-1 A1+
----------- -----------
127,145,000 Total Other Variable Rate Demand Instruments 127,145,000
=========== ===========
<CAPTION>
Put Bond (d) (1.89%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,745,000 California PCFA PCR (Chevron USA Incorporated Project) 11/15/98 3.85% $ 3,745,000 Aa2 AA
----------- -----------
3,745,000 Total Put Bond 3,745,000
=========== ===========
<CAPTION>
Revenue Bond (0.52%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,020,000 City of Bakerfield, CA Sewer RB - Series 1997 (c)
FGIC Insured 09/15/98 3.75% $ 1,020,000
----------- -----------
1,020,000 Total Revenue Bond 1,020,000
=========== ===========
<CAPTION>
Tax Exempt Commercial Paper (11.45%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,000,000 California PCFA PCR (Pacific Gas & Electric Company)
LOC Morgan Guaranty Trust Company 03/04/98 3.50% $ 2,000,000 A1+
5,000,000 California PCR (Southern California Edison) - Series B 02/19/98 3.70 5,000,000 P1 A1
3,700,000 Orange County Water District, CA
LOC Union Bank of Switzerland 01/21/98 3.50 3,700,000 P1 A1+
3,000,000 Sacramento Municipal Utilities District, CA - Series 1
LOC Bayerische Landesbank Girozentrale 02/11/98 3.45 3,000,000 P1 A1+
3,000,000 The City of Long Beach Harbor Department - Series A 02/12/98 3.70 3,000,000 P1 A1+
5,000,000 The Regents of the University of California 03/31/98 3.55 5,000,000 P1 A1+
945,000 The Regents of the University of California - Series A 03/11/98 3.55 945,000 P1 A1+
----------- -----------
22,645,000 Total Tax Exempt Commercial Paper 22,645,000
=========== ===========
<CAPTION>
Variable Rate Demand Instruments - Private Placements (4.85%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,745,000 Gene E. Lynn Nursing Home (c)
LOC Bank of America 12/01/15 5.48% $ 3,745,000
1,888,000 IDA County Riverside, CA IDRB
(National RV Incorporated Project)
LOC Union Bank of California 12/01/03 5.10 1,888,000 P1 A1+
2,410,000 Kent Trust Project - Series 84B (c)
LOC Comerica Bank 12/01/14 4.68 2,410,000
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
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CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1997
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- -------
Variable Rate Demand Instruments - Private Placements (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,545,000 Nob Hill Venture - Series 84 (c)
LOC Wells Fargo Bank, N.A. 12/01/09 4.68% $ 1,545,000
----------- -------------
9,588,000 Total Variable Rate Demand Instruments - Private Placements 9,588,000
-------------
----------- Total Investments (98.70%) (Cost $195,243,673+) 195,243,673
Cash and other assets in excess of liabilities (1.30%) 2,572,710
-------------
Net Assets (100.00%) $ 197,816,383
=============
Net Asset Value, offering and redemption price per share:
Class A Shares, 182,667,523 Shares Outstanding (Note 3) $ 1.00
=============
Class B Shares, 15,164,472 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) Securities that are not rated which the Fund's Board of Directors has
deemed 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:
<S> <C> <C> <C> <C> <C>
ADR = Adjustable Rates IRB = Industrial Revenue Bond
COPS = Certificates of Participations LOC = Letter of Credit
EDFA = Economic Development Finance Authority MBIA = Municipal Bond Insurance Association
FGIC = Financial Guaranteed Insurance Company MHRB = Multi-Family Housing Revenue Bond
FSA = Financial Securities Assurance PCFA = Pollution Control Finance Authority
GNMA = Government National Mortgage Association PCR = Pollution Control Revenue
GO = General Obligation PCRB = Pollution Control Revenue Bond
HFA = Housing Finance Agency RAN = Revenue Anticipation Note
IDA = Industrial Development Authority RB = Revenue Bond
IDR = Industrial Development Revenue TRAN = Tax and Revenue Anticipation Note
IDRB = Industrial Development Revenue Bond
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
===============================================================================
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Income:
Interest...................................................................... $ 8,350,564
Expenses: (Note 2) -------------
Investment management fee.................................................... 693,398
Administration fee........................................................... 485,378
Shareholder servicing fee.................................................... 440,891
Custodian expenses........................................................... 22,556
Shareholder servicing and related shareholder expenses....................... 210,859
Legal, compliance and filing fees............................................ 31,398
Audit and accounting......................................................... 84,945
Directors' fees.............................................................. 9,485
Other........................................................................ 17,612
-------------
Total expenses........................................................... 1,996,522
Less: Fees waived (Note 2)............................................... ( 124,425)
Expenses paid indirectly (Note 2)................................. ( 14,078)
-------------
Net expenses............................................................. 1,858,019
-------------
Net investment income........................................................... 6,492,545
-------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments......................................... -0-
-------------
Increase in net assets from operations.......................................... $ 6,492,545
=============
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997 AND 1996
===============================================================================
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income...................................... $ 6,492,545 $ 5,368,563
Net realized gain (loss) on investments.................... -0- -0-
------------ -------------
Increase in net assets from operations.......................... 6,492,545 5,368,563
Dividends to shareholders from net investment income:
Class A.................................................... ( 6,161,959)* ( 5,355,010)*
Class B.................................................... ( 330,586)* ( 13,553)*
Capital share transactions (Note 3):
Class A.................................................... ( 23,295,068) 34,138,724
Class B.................................................... 11,728,628 3,435,844
------------- -------------
Total increase (decrease).................................. ( 11,566,440) 37,574,568
Net assets:
Beginning of year.......................................... 209,382,823 171,808,255
------------- -------------
End of year................................................ $ 197,816,383 $ 209,382,823
============= =============
* 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 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, 1997, the Manager voluntarily waived
management fees of $124,425.
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 $112,341 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 offsets of
$14,078.
3. Capital Stock.
At December 31, 1997, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $197,831,995. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year Year
Class A Ended Ended
- ------- December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Sold................................... 399,357,386 387,317,948
Issued on reinvestment of dividends.... 5,069,582 3,615,939
Redeemed............................... ( 427,722,036) ( 356,795,163)
------------- ------------
Net increase (decrease)................ ( 23,295,068) 34,138,724
============= ============
Year October 9, 1996
Class B Ended (Commencement of Sales) to
- ------- December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Sold................................... 118,418,604 6,012,221
Issued on reinvestment of dividends.... 301,856 12,875
Redeemed............................... ( 106,991,832) ( 2,589,252)
------------- ------------
Net increase........................... 11,728,628 3,435,844
============= ============
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses at December 31, 1997 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 50% 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. Financial Highlights.
CLASS A Year Ended December 31,
- ------- -------------------------------------------------------------------------------
1997 1996 1995 1994 1993
--------- ---------- ---------- ---------- -----------
<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........................ 0.028 0.027 0.032 0.024 0.021
Less distributions:
Dividends from net investment income ( 0.028) ( 0.027) ( 0.032) ( 0.024) ( 0.021)
------- ------- ------- ------- -------
Net asset value, end of year.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return.................................... 2.84% 2.76% 3.28% 2.45% 2.16%
Ratios/Supplemental Data
Net assets, end of year (000)................... $182,653 $205,947 $171,808 $105,120 $117,260
Ratios to average net assets:
Expenses, net of fees waived................. 0.82% 0.75% 0.67% 0.56% 0.35%
Net investment income........................ 2.80% 2.73% 3.24% 2.40% 2.14%
Management, administration and shareholder
servicing fees waived...................... 0.05% 0.08% 0.22% 0.28% 0.54%
Expense offsets.............................. -- 0.01% 0.01% -- --
<CAPTION>
Year October 9, 1996
CLASS B Ended (Commencement of Sales) to
- ------- December 31,1997 December 31, 1996
---------------- -----------------
<S> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period............ $ 1.00 $ 1.00
-------- --------
Income from investment operations:
Net investment income........................ 0.030 0.004
Less distributions:
Dividends from net investment income......... ( 0.030) ( 0.004)
------- -------
Net asset value, end of period.................. $ 1.00 $ 1.00
======== ========
Total Return.................................... 3.08% 3.08%*
Ratios/Supplemental Data
Net assets, end of period (000)................. $ 15,163 $ 3,436
Ratios to average net assets:
Expenses, net of fees waived................. 0.58% 0.56%*
Net investment income........................ 3.10% 3.09%*
Management fees waived....................... 0.05% 0.06%*
Expense offsets.............................. -- 0.01%
* Annualized
</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, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, 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
California Daily Tax Free Income Fund, Inc. as of December 31, 1997, the results
of its operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles.
\S\ McGladrey & Pullen, LLP
New York, New York
January 23, 1998
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CALIFORNIA
DAILY
TAX FREE
INCOME
FUND, INC.
Annual Report
December 31, 1997
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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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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
801 Pennsylvania
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services, L.P.
600 Fifth Avenue
New York, New York 10020
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