<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, 1998.
The Fund had net assets of $240,105,544 and 766 active shareholders as of
December 31, 1998.
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, 1998
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- --------
Other Tax Exempt Investments (19.98%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,000,000 Berkley Unified School District TRAN - 1998 06/30/99 3.52% $ 4,008,053 SP-1+
10,000,000 City of Ontario
(San Bernadino County, CA) TRAN - Series 1997 06/30/99 3.50 10,004,668 SP-1+
4,700,000 City of Placentia, Orange County, CA TRAN - Series 1998 (c) 07/20/99 3.57 4,709,284
1,352,000 Eureka, CA Housing Authority (Eureka Senior Housing & Bayville) (c)
LOC Federal Home Loan Bank 07/01/99 3.85 1,352,000
10,000,000 Oakland, CA TRAN 09/30/99 3.13 10,077,810 MIG-1 SP-1+
3,260,000 Riverside County, CA Val Verde Unified School District 10/26/99 2.99 3,261,770 SP-1+
2,500,000 Stanislaus County Office of Education TRAN - Series 1998 07/30/99 3.60 2,511,601 SP-1+
12,000,000 State of California RAN 1998-1999 06/30/99 3.12 12,048,259 MIG-1 A1+
- ------------ ------------
47,812,000 Total Other Tax Exempt Investments 47,973,445
- ------------ ------------
<CAPTION>
Other Variable Rate Demand Instruments (b) (65.03%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,700,000 Association for Bay Area Government Nonprofit Corporation, CA
LOC Banque Nationale de Paris 10/01/27 5.15% 1,700,000 A1
15,000,000 California Community College Trust Receipts - Series 1998F 09/30/99 3.95 15,000,000 A1+
3,500,000 California EDFA (Fricke-Parks Press, Inc. Project)
LOC US Bank, N.A. 05/01/23 3.85 3,500,000 A1
1,500,000 California EDFA IDRB
(Kuhnash Properties/Arkay Plastics Project) (c)
LOC PNC Bank, N.A. 04/01/17 3.90 1,500,000
400,000 California HEFA (Sutter Health) - Series 1990B
LOC Morgan Guaranty Trust Company 03/01/20 5.10 400,000 VMIG-1 A1+
5,300,000 California PCFA (Southern California Edison) 02/28/08 5.20 5,300,000 VMIG-1 A1
1,500,000 California PCRB (Pacific Gas & Electric)
LOC Rabobank Nederland 12/01/16 4.00 1,500,000 A1+
2,500,000 California State EDFA IDRB (Sierra Mission Project)
LOC US National Bank of Oregon 08/01/27 5.15 2,500,000 A1
2,000,000 California State EDFA IDRB
(Standard Abrasives Manufacturing Project)
LOC Bank of America 03/01/23 3.85 2,000,000 A1+
2,000,000 California Statewide Communities Development (Karcher Properties)
LOC Bayerische HypoVereins Bank, A.G. 12/01/19 3.85 2,000,000 VMIG-1
5,000,000 California Statewide Communities Development Authority COPS
(North California Retired Officers Community) - Series 1996
LOC Dresdner Bank 06/01/26 5.05 5,000,000 VMIG-1
1,200,000 Carlsbad, CA MHRB (La Costa Apartments Project) - Series A
LOC Bank of America 06/01/11 3.45 1,200,000 VMIG-1
</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>
$ 6,600,000 City of Anaheim, CA COPS (1993 Refunding Projects)
AMBAC Insured 08/01/19 3.65% $ 6,600,000 VMIG-1 A1+
1,000,000 City of Freemont, CA COPS
(Family Resource Center Finance Project)
LOC Kredietbank 08/01/28 3.75 1,000,000 A1+
2,945,000 City of Freemont, CA MHRB (Mission Wells Project) - Series 1985E
LOC Bayerische Landesbank Girozentrale 09/01/14 3.70 2,945,000 A1+
2,500,000 City of Hemet, CA MHRB
(Sunwest Resort Village Project) - Series 1986B
LOC Federal Home Loan Bank 07/01/06 3.85 2,500,000 A1+
800,000 City of Irvine, CA Limited Obligation Improvement Bond
(Oak Creek Project) - Series 1997
LOC Canadian Imperial Bank of Commerce 09/02/22 5.10 800,000 VMIG-1 A1+
2,240,000 City of Los Angeles, CA IDRB
(Cereal Food Processors, Inc. Project) - Series 1995
LOC Commerce Bank N.A. 12/01/05 4.05 2,240,000 A1
1,500,000 City of San Jose, CA MHRB
(Siena at Renaissance Square Apartments) - Series 1996A
LOC Key Bank 12/01/29 4.00 1,500,000 VMIG-1
2,000,000 Clipper, CA Tax Exempt Trust COPS - Series 1996-1 Class A
MBIA Insured 07/04/00 4.00 2,000,000 Aaa AAA
6,400,000 County of Contra Costa, CA MHRB
(Riverside Apartments Project) - Series 1992
Fannie Mae Collateralized 11/15/22 3.85 6,400,000 A1+
1,000,000 County of Kings, CA MHRB
(Edgewater Isle Apartments) - Series 1996A
LOC Wells Fargo Bank, N.A. 06/01/07 3.75 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 3.80 1,675,000 A1+
1,400,000 Fullerton, CA IDA RB (PCL Packaging Inc. Project) - Series 1984
LOC Bank of Nova Scotia 12/01/04 3.65 1,400,000 A1+
6,000,000 Hayward, CA MHRB (Barrington Hills - A)
Fannie Mae Collateralized 06/15/25 3.85 6,000,000 A1+
1,500,000 Housing Authority of the County of Los Angeles MHRB
(Malibu Meadows Project) - Series 1998B
Fannie Mae Collateralized 04/15/28 3.80 1,500,000 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1998
================================================================================
<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>
$2,000,000 Housing Authority of Riverside County
(Amanda Park Apartment Project)
LOC Freddie Mac 01/15/29 3.60% $ 2,000,000 VMIG-1
1,000,000 Irwindale, CA IDRB
(TOYS R'US, Inc. Project) - Series 1984 (c)
LOC Bankers Trust Company 12/01/19 4.12 1,000,000
1,900,000 Irvine California Public Facility
(Infrastructure Authority Lease Capital)
LOC Bayerische HypoVereins Bank, A.G. 11/01/10 3.70 1,900,000 VMIG-1
2,000,000 Irvine Ranch Water District, CA #'s 105, 140, 240, & 250
LOC Commerzbank A.G. 01/01/21 5.10 2,000,000 VMIG-1 A1+
1,000,000 Los Angeles, CA Regional Improvement Authority
(Los Angeles International Airport)
LOC Wachovia Bank, N.A. 12/01/24 4.85 1,000,000 P1
3,000,000 Los Angeles County, CA HFA MHRB
(Sand Canyon Ranch Project) - Series 1985F
LOC Citibank, N.A. 11/01/06 3.50 3,000,000 A1+
2,500,000 Los Angeles County, CA IDA (P&C Poultry Distributors) (c)
LOC Comerica Bank 06/01/23 4.20 2,500,000
3,000,000 Los Angeles International Airport Improvement Corporation
LOC Societe Generale 12/01/25 4.85 3,000,000 A1+
6,700,000 Oakland, CA Joint Powers Financing Authority
(Lease Revenues) - Series A-1
FSA Insured 08/01/21 3.90 6,700,000 VMIG-1 A1+
1,000,000 Orange County, CA (Radnor/Aragon Corporation)
LOC Toronto-Dominion Bank 08/01/19 4.12 1,000,000 P1
5,765,000 Orange County, CA Reset Option Certificates
Local Transporatation - Series 1998-28
MBIA Insured 08/05/08 4.00 5,765,000 A1+
1,000,000 Orange County, CA Sanitation District COPS
FGIC Insured 08/01/17 5.00 1,000,000 VMIG-1 A1+
2,500,000 Otay, CA Water District COPS - Series 1996
LOC Landesbank Hessen 09/01/26 3.90 2,500,000 VMIG-1 A1+
305,000 Oxnard, CA
(Channel Island Business Center Project) - Series 1985
LOC Wells Fargo Bank, N.A. 07/01/05 3.87 305,000 VMIG-1
4,500,000 Rohnert Park, CA MHRB
(Crossbrook Apartments Project) - Series 1995A
Fannie Mae Collateralized 06/15/25 3.85 4,500,000 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>
$ 9,000,000 Sacramento County, CA MHRB
(Crossbrook Apartments Project) - Series 1992A
LOC General Electric Capital Corporation 12/01/22 4.10% $ 9,000,000 A1+
1,900,000 San Bernadino County, CA COPS
(County Center Refinancing Project) - Series 1996
LOC Canadian Imperial Bank of Commerce 07/01/15 3.75 1,900,000 VMIG-1 A1+
2,000,000 San Diego, CA MHRB (University Town Center Apartment)
LOC Bank of America 10/01/15 3.70 2,000,000 VMIG-1
3,000,000 Santa Clara County, CA Transit District - Series 1985A
AMBAC Insured 06/01/15 3.60 3,000,000 AAA
2,000,000 Southern California Public Power Authority RB
(Southern Transmission Project) - Series 1996B
FSA Insured 07/01/23 3.80 2,000,000 VMIG-1 A1+
4,800,000 Southern California Public Power Authority RB
(Public Power Transmission Project) - Series 1991
AMBAC Insured 07/01/19 3.65 4,800,000 VMIG-1 A1+
3,000,000 State of California GO RB
MBIA Insured 09/01/21 4.00 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 4.65 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 4.65 2,990,000 VMIG-1
3,115,000 Town of Windsor MHRB (Oakmount at Windsor Project) - Series A
LOC Banque Paribas 08/01/25 4.30 3,115,000 A1
900,000 Tustin, CA Improvement Bond Act 1915
(Reassessment District No. 95-2-A)
LOC Kredietbank 09/02/13 5.10 900,000 VMIG-1 A1+
2,500,000 Visalia, CA IDRB (Savannah Foods) (c)
LOC Suntrust Bank 06/01/05 4.00 2,500,000
1,000,000 West Basin Municipal Water District ADR COPS
(Recycled Water Project-Phase II) - Series 1997C
LOC Bayerische HypoVereins Bank, A.G. 08/01/27 3.60 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 5.10 1,100,000 VMIG-1 A1+
- ------------ ------------
156,135,000 Total Other Variable Rate Demand Instruments 156,135,000
- ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- --------
Put Bonds (d) (1.98%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,000,000 California HFA Single Family Variable Rate Bonds II - Series 1998B
FGIC Insured 04/01/99 3.60% $ 1,000,000 VMIG-1 A1+
3,745,000 California PCFA PCR (Chevron USA Incorporated Project) (c) 11/15/99 3.10 3,745,000
- ----------- ------------
4,745,000 Total Put Bonds 4,745,000
- ----------- ------------
<CAPTION>
Tax Exempt Commercial Paper (8.04%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,000,000 California PCR (Southern California Edison) - Series B 03/10/99 3.00% $ 4,000,000 P1 A1
2,000,000 California PCR (Southern California Edison) - Series E
LOC Morgan Guaranty Trust Company 02/11/99 3.00 2,000,000 A1+
4,300,000 City of Los Angeles, CA Department of Water & Power
LOC Bank of Nova Scotia/Toronto-Dominion Bank 03/08/99 2.80 4,300,000 P1 A1+
5,000,000 San Francisco Bay Area Transit
LOC United Bank of Switzerland 04/06/99 2.70 5,000,000 P1 A1+
3,000,000 The City of Long Beach Harbor Department - Series A 03/09/99 2.95 3,000,000 P1 A1+
1,000,000 The Regents of the University of California - Series A 02/17/99 2.80 1,000,000 P1 A1+
----------- ------------
19,300,000 Total Tax Exempt Commercial Paper 19,300,000
----------- ------------
<CAPTION>
Variable Rate Demand Instruments - Private Placements (3.82%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,625,000 Gene E. Lynn Nursing Home (c)
LOC Bank of America 12/01/15 5.48% $ 3,625,000
1,742,000 IDA County Riverside, CA IDRB (National RV Incorporated Project)
LOC Union Bank of California 12/01/03 4.65 1,742,000 P1 A1+
2,350,000 Kent Trust Project - Series 84B (c)
LOC Comerica Bank 12/01/14 3.87 2,350,000
1,465,000 Nob Hill Venture (City of Morgan Hill) - Series 84 (c)
LOC Wells Fargo Bank, N.A. 12/01/09 3.87 1,465,000
----------- ------------
9,182,000 Total Variable Rate Demand Instruments - Private Placements 9,182,000
----------- ------------
Total Investments (98.85%) (Cost $237,335,445+) $237,335,445
Cash and other assets in excess of liabilities (1.15%) 2,770,099
------------
Net Assets (100.00%) $240,105,544
============
Net Asset Value, offering and redemption price per share:
Class A Shares, 209,929,765 Shares Outstanding (Note 3) $ 1.00
============
Class B Shares, 30,191,391 Shares Outstanding (Note 3) $ 1.00
============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
FOOTNOTES:
(a) Unless the variable rate demand instruments are assigned their own ratings,
the ratings are those of the holding company of the bank whose letter of
credit guarantees the issue or the insurance company who insures the issue.
All letters of credit and insurance are irrevocable and direct pay covering
both principal and interest. Certain issuers have either a line of credit,
a liquidity facility, a standby purchase agreement or some other financing
mechanism to ensure the remarketing of the securities. This is not a
guarantee and does not serve to insure or collateralize the issue.
(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 Funds Board of Directors has
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:
<S> <C> <C><C> <C> <C><C>
ADR = Adjustable Rates IDRB = Industrial Development Revenue Bond
AMBAC = American Municipal Bond Assurance LOC = Letter of Credit
COPS = Certificates of Participations MBIA = Municipal Bond Insurance Association
EDFA = Economic Development Finance Authority MHRB = Multi-Family Housing Revenue Bond
FGIC = Financial Guaranteed Insurance Company PCFA = Pollution Control Finance Authority
FSA = Financial Securities Assurance PCRB = Pollution Control Revenue Bond
GO = General Obligation PCR = Pollution Control Revenue
HEFA = Health & Educational Facility Authority RB = Revenue Bond
HFA = Housing Finance Agency RAN = Revenue Anticipation Note
IDA = Industrial Development Authority TRAN = Tax and Revenue Anticipation Note
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest...................................................................... $ 8,054,069
------------------
Expenses: (Note 2)
Investment management fee.................................................... 729,716
Administration fee........................................................... 510,801
Shareholder servicing fee.................................................... 428,343
Custodian expenses........................................................... 20,357
Shareholder servicing and related shareholder expenses....................... 188,701
Legal, compliance and filing fees............................................ 83,660
Audit and accounting......................................................... 85,840
Directors' fees.............................................................. 9,040
Other........................................................................ 17,345
------------------
Total expenses........................................................... 2,073,803
Less: Fees waived (Note 2)............................................... ( 21,472)
Expenses paid indirectly (Note 2).................................. ( 1,993)
------------------
Net expenses............................................................. 2,050,338
------------------
Net investment income........................................................... 6,003,731
------------------
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments......................................... -0-
------------------
Increase in net assets from operations.......................................... $ 6,003,731
------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
================================================================================
<TABLE>
<CAPTION>
1998 1997
--------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income...................................... $ 6,003,731 $ 6,492,545
Net realized gain (loss) on investments.................... -0- -0-
--------------- ----------------
Increase in net assets from operations......................... 6,003,731 6,492,545
<CAPTION>
<S> <C> <C>
Dividends to shareholders from net investment income:
Class A.................................................... ( 5,213,015)* ( 6,161,959)*
Class B.................................................... ( 790,716)* ( 330,586)*
Capital share transactions (Note 3):
Class A.................................................... 27,262,242 ( 23,295,068)
Class B.................................................... 15,026,919 11,728,628
--------------- ----------------
Total increase (decrease).................................. 42,289,161 ( 11,566,440)
Net assets:
Beginning of year.......................................... 197,816,383 209,382,823
--------------- ----------------
End of year................................................ $ 240,105,544 $ 197,816,383
=============== ================
* 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>
- --------------------------------------------------------------------------------
================================================================================
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, Inc. (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, 1998, the Manager voluntarily waived
management fees of $21,472.
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 $111,948 paid to Reich & Tang
Services, Inc., 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 $1,993.
3. Capital Stock.
At December 31, 1998, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $240,121,156. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year Year
Class A Ended Ended
- ------- December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Sold................................... 453,337,599 399,357,386
Issued on reinvestment of dividends.... 3,740,509 5,069,582
Redeemed............................... ( 429,815,866) ( 427,722,036)
------------- -------------
Net increase (decrease)................ 27,262,242 ( 23,295,068)
============= =============
<CAPTION>
Year Year
Class B Ended Ended
- ------- December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Sold................................... 143,875,423 118,418,604
Issued on reinvestment of dividends.... 699,564 301,856
Redeemed............................... ( 129,548,068) ( 106,991,832)
------------- -------------
Net increase (decrease)................ 15,026,919 11,728,628
============= =============
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses at December 31, 1998 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 39% 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>
- --------------------------------------------------------------------------------
CALIFORNIA DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
6. Financial Highlights.
Year Ended December 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................... 0.025 0.028 0.027 0.032 0.024
Less distributions:
Dividends from net investment income.... ( 0.025) ( 0.028) ( 0.027) ( 0.032) ( 0.024)
-------- -------- -------- -------- --------
Net asset value, end of year................ $ 1. 00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return................................ 2.48% 2.84% 2.76% 3.28% 2.45%
Ratios/Supplemental Data
Net assets, end of year (000)............... $209,916 $182,653 $205,947 $171,808 $105,120
Ratios to average net assets:
Expenses (net of fees waived)+.......... 0.88% 0.82% 0.75% 0.67% 0.56%
Net investment income................... 2.43% 2.80% 2.73% 3.24% 2.40%
Management fees waived.................. 0.01% 0.05% 0.08% 0.22% 0.28%
Expense offsets......................... -- -- 0.01% 0.01% --
<CAPTION>
Year Ended
Class B December 31, October 9, 1996
- ------ ------------------------- (Commencement of Sales) to
1998 1997 December 31, 1996
--------- --------- ------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........ $ 1.00 $ 1.00 $ 1.00
--------- --------- --------
Income from investment operations:
Net investment income................... 0.027 0.030 0.004
Less distributions:
Dividends from net investment income ( 0.027) ( 0.030) ( 0.004)
--------- --------- --------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00
========= ========= ========
Total Return................................ 2.76% 3.08% 3.08%*
Ratios/Supplemental Data
Net assets, end of period (000)............. $ 30,190 $ 15,163 $ 3,436
Ratios to average net assets:
Expenses (net of fees waived)+.......... 0.60% 0.58% 0.56%*
Net investment income................... 2.72% 3.10% 3.09%*
Management fees waived.................. 0.01% 0.05% 0.06%*
Expense offsets......................... -- -- 0.01%*
* Annualized
+ Includes expense offsets
</TABLE>
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<PAGE>
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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, 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
December 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
California Daily Tax Free Income Fund, Inc. as of December 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
January 29, 1999
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CALIFORNIA
DAILY
TAX FREE
INCOME
FUND, INC.
Annual Report
December 31, 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.
- ------------------------------------------------------
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, Inc.
600 Fifth Avenue
New York, New York 10020
CAL1298AN
- --------------------------------------------------------------------------------
<PAGE>
