<PAGE>
- -------------------------------------------------------------------------------
NORTH
CAROLINA
DAILY
MUNICIPAL
INCOME
FUND, INC.
Annual Report
August 31, 1996
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<PAGE>
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NORTH CAROLINA 600 FIFTH AVENUE, NEW YORK, N.Y. 10020
DAILY MUNICIPAL 212/830-5200
INCOME FUND, INC.
===============================================================================
Dear Shareholder:
We are pleased to present the annual report of North Carolina Daily Municipal
Income Fund, Inc. for the year ended August 31, 1996.
The Fund had net assets of $172,385,479 and 3,214 active shareholders as of
August 31, 1996. Dividends earned on a share held throughout the period were
$.029 which, when adjusted for the compounding effect of the reinvestment of
dividends, represents a 2.87% yield on an annual basis.
We thank you for your support and look forward to continuing to serve your cash
management needs.
Sincerely,
/s/ Steven W. Duff
Steven W. Duff
President
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<PAGE>
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NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS
AUGUST 31, 1996
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ---------
Other Tax Exempt Investments (9.73%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,300,000 Bertie County, NC Water BAN (b)
FHA Insured 12/18/96 3.64% $ 3,300,937
425,000 Buncomb County, NC Metropolitan Sewer Authority
Escrowed in U.S. Government Securities 07/01/97 3.80 425,000 Aaa AAA
250,000 Charlotte, NC COPS
AMBAC Insured 12/01/96 3.30 251,456 Aaa AAA
500,000 Charlotte, NC Water & Sewer 10/01/96 3.45 501,249 Aaa AAA
2,000,000 County of Johnson, NC COPS
(Johnson County Schools Judicial Annex &
Healthcare Project) - Series 1996
MBIA Insured 09/01/97 3.84 2,000,000 Aaa AAA
500,000 Durham, NC
Collateralized by U.S. Government 02/01/97 3.13 517,415 Aaa AAA
1,000,000 Greensboro, NC GO 03/01/97 3.13 1,006,934 Aa1 AAA
620,000 Harrelsville, NC Water BAN (b)
FHA Insured 09/11/96 3.51 620,080
445,000 Northampton County, NC GO Bond
MBIA Insured 06/01/97 3.67 447,395 Aaa AAA
947,500 Southern Wayne County, NC Sanitary District Sewer BAN (b)
FHA Insured 11/06/96 3.61 947,739
750,000 State of North Carolina GO
Pre-Refunded in Government 06/01/97 3.75 750,000 Aaa AAA
3,904,000 Weaverville, NC Water BAN (b)
FHA Insured 11/20/96 3.46 3,904,812
500,000 Winston-Salem, NC COPS - Series A 10/01/96 3.39 500,653 Aa1 AAA
500,000 Winston-Salem, NC COPS - Series A 10/01/96 3.64 500,580 Aa1 AAA
1,105,000 Winston-Salem, NC COPS - Series A 10/01/96 3.52 1,106,345 Aa1 AAA
- ----------- -----------
16,746,500 Total Other Tax Exempt Investments 16,780,595
- ----------- -----------
<CAPTION>
Other Variable Rate Demand Instruments (c) (67.43%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,000,000 Beaufort, NC PCRB (Texas Gulf Inc.) - Series 1985
LOC Societe Generale 12/01/00 3.60% $ 3,000,000 Aaa
700,000 Buncombe County, NC PCRB (Ashville Incorporated Project) (b)
LOC Nations Bank 06/01/07 3.70 700,000
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
- ------ ------ ----- ------- ------- -------
Other Variable Rate Demand Instruments (c) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,000,000 Burke County, NC PCFA (Jobs Project)
LOC Wachovia Bank & Trust Co., N.A. 06/01/02 3.65% $ 2,000,000 A1+
1,000,000 Charlotte Mecklenburg
Hospital Authority Health Care RB - Series B 01/15/26 3.40 1,000,000 VMIG-1 A1
2,000,000 Charlotte Mecklenburg
Hospital Authority Health Care RB - Series D 01/15/26 3.40 2,000,000 VMIG-1 A1
4,595,000 Charlotte, NC Airport RB
MBIA Insured 07/01/16 3.35 4,595,000 VMIG-1 A1+
5,000,000 County of Mecklenburg, NC 03/01/15 3.45 5,000,000 VMIG-1 A1+
2,200,000 Durham, NC Public Improvement 02/01/10 3.35 2,200,000 VMIG-1 A1+
3,500,000 Gaston County, NC Industrial Facilities PCRB
(Allibert, Inc. Project) - Series 1987
LOC Bank of Nova Scotia 01/01/12 3.60 3,500,000 A1
260,000 Gaston County, NC PCFA
(Keystone Carbon Company)
LOC Mellon Bank, N.A. 09/01/00 3.70 260,000 P1 A1
5,000,000 Granville County, NC Industrial Facilities PCFA
(Mayville Metal Product Project)
LOC PNC Bank 05/23/20 3.65 5,000,000 P1 A1
1,000,000 Greensboro, NC Public Improvement - Series B 04/01/14 3.35 1,000,000 VMIG-1 A1+
650,000 Greensboro, NC Public Improvement - Series B 04/01/10 3.35 650,000 VMIG-1 A1+
1,750,000 Greensboro, NC Public Improvement - Series B 04/01/11 3.35 1,750,000 VMIG-1 A1+
1,500,000 Guilford County, NC (Bonset America)
LOC Dai-Ichi Kangyo Bank, Ltd. & Industrial Bank of Japan 05/01/09 3.70 1,500,000 A1
3,000,000 Harnett County, NC Industrial Facilities PCFA IDRB
(Edwards Brothers Inc. Project) (b)
LOC Wachovia Bank & Trust Co., N.A. 01/01/07 3.55 3,000,000
2,000,000 Iredell County, NC (Jet Corr Inc.)
LOC National Bank of Canada 09/01/99 3.70 2,000,000 A1
1,100,000 Iredell County, NC Industrial Facilities PCFA RB
(Purina Mills Inc.)
LOC Bank of Nova Scotia 07/01/20 3.60 1,100,000 A1+
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
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NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
- ------ ------- ----- ------- ------- --------
Other Variable Rate Demand Instruments (c) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,000,000 Johnson County, NC
Industrial Facilities & Pollution Control IDRB (b)
LOC PNC Bank 03/01/11 3.70% $ 1,000,000
1,000,000 Lenoir County, NC Industrial Facilities PCFA RRRB
(Carolina Energy, LP Project)
LOC Bank of Tokyo - Mitsubishi Bank, Ltd. 07/01/22 3.75 1,000,000 VMIG-1 A1
3,800,000 Lenoir County, NC Industrial Facilities
(West Co. of Nebraska Inc.) - Series 1985 (b)
LOC Dresdner Bank A.G. 10/01/05 3.55 3,800,000
1,600,000 Lincoln County, NC Industrial Facilities PCFA RB
(General Marble)
LOC National Bank of Canada 09/01/00 3.70 1,600,000 P1 A1
1,000,000 Mecklenberg County, NC Industrial Facilities & PCFA
(EDG Comb Metals) (b)
LOC BNP U.S. Finance Corporation 12/01/09 3.50 1,000,000
1,500,000 Mecklenburg County, NC (Otto Industry)
LOC Rabobank Nederland 10/01/08 3.70 1,500,000 P1
2,000,000 Mecklenburg County, NC IDRB (Virkler Company) (b)
LOC First Union National Bank 12/01/04 3.70 2,000,000
1,500,000 Mecklenburg County, NC Industrial Facilities & PCFA
(Griffith Micro Science Project)
LOC ABN AMRO Bank N.V. 11/01/07 3.60 1,500,000 A1+
2,000,000 Moore County, NC (Perdue Farm Project)
LOC Rabobank Nederland 06/01/10 3.45 2,000,000 P1 A1+
3,000,000 North Carolina Medical Care Community Hospital
(Pooled Equipment Financing Project) - Series 1985
MBIA Insured 12/01/25 3.65 3,000,000 VMIG-1 A1+
2,900,000 North Carolina Education Facilities
(Davidson College Project) (b) 12/01/04 3.50 2,900,000
2,525,000 North Carolina Education Facilities Finance Agency RB
(Wake Forest University Project) 01/01/09 3.40 2,525,000 VMIG-1
3,500,000 North Carolina Education Facilities Finance Authority
(Duke University) - Series 1991B 12/01/21 3.45 3,500,000 VMIG-1 A1+
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
- ----- ------- ----- -------- ------- ------
Other Variable Rate Demand Instruments (c) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,150,000 North Carolina Medical Care Commission HRB
(Duke University Project) - Series A 06/01/23 3.45% $ 2,150,000 VMIG-1 A1+
3,100,000 North Carolina Medical Care Commission HRB
(Park Ridge Hospital Project)
LOC Nations Bank 08/15/18 3.45 3,100,000 A1
1,000,000 Pasquotank County, NC Industrial Facilities PCFA IDRB
(J.W. Jones Lumber Co., Inc. Project) - Series 1995 (b)
LOC Wachovia Bank & Trust Co., N.A. 10/01/10 3.55 1,000,000
900,000 Piedmont Triad, NC Airport Authority
(The Cessna Aircraft Company)
LOC Nations Bank 10/01/12 3.70 900,000 A1
14,000,000 Raleigh-Durham, NC
Airport Authority Special Facilities Refunding RB
(American Airlines Inc.) - Series 1995A
LOC Royal Bank of Canada 11/01/15 3.85 14,000,000 A1+
800,000 Randolph County, NC Industrial Facilities & PCFA (b)
LOC Bank One Ohio 09/01/05 3.70 800,000
1,250,000 Samson County, NC PCFA (Dubose Strapping)
LOC First Union National Bank 02/01/99 3.70 1,250,000 P1
1,000,000 Union County, NC Facilities Pollution Control (Square D)
LOC Morgan Guaranty Trust Company 03/01/03 3.50 1,000,000 VMIG-1
6,700,000 University of North Carolina,
Chapel Hill School of Medicine Ambulatory Care Clinic 07/01/12 3.45 6,700,000 A1+
1,000,000 University of North Carolina,
University School of Dentistry Clinic RB (b)
LOC Wachovia Bank & Trust Co., N.A. 09/01/10 3.50 1,000,000
10,600,000 Wake County, NC Industrial Facilities PCFA
(Carolina Power and Light) - Series A
LOC Credit Suisse 05/01/15 3.40 10,600,000 P1 A1+
2,300,000 Warren County, NC Industrial Facilities
(Glen Raven Mills Project) (b)
LOC Wachovia Bank & Trust Co., N.A. 05/01/06 3.55 2,300,000
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
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NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
- ------- ----- ----- ------- ------- -------
Other Variable Rate Demand Instruments (c) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,675,000 Winston-Salem, NC COPS - Series 1988 07/01/09 3.55% $ 2,675,000 A1+
500,000 Winston-Salem, NC GO Bond 06/01/07 3.50 500,000 VMIG-1 A1+
680,000 Yancey County, NC Industrial Facilities
(Avondale Mills Inc. Project)
LOC Suntrust 01/01/97 3.50 680,000 P1
- ----------- -----------
116,235,000 Total Other Variable Rate Demand Instruments 116,235,000
- ----------- -----------
<CAPTION>
Put Bonds (d) (4.39%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,465,000 North Carolina Industrial Facilities PCFA (GVK America Inc.)
LOC Union Bank of Switzerland 12/01/96 3.90% $ 2,465,000 AAA
900,000 North Carolina Industrial Facilities PCFA RB
(Greer Labs Incorporated Project)
LOC First Union National Bank 12/01/96 4.00 900,000 A+
2,700,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Merck & Co. Inc. Project) - Series 1983A 12/01/96 4.00 2,700,000 Aaa AAA
1,500,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Reynolds Metals Corporation)
LOC ABN AMRO Bank N.V. 09/01/97 3.73 1,500,720 MIG-1 A1+
- ----------- -----------
7,565,000 Total Put Bonds 7,565,720
- ----------- -----------
<CAPTION>
Revenue Bond (1.74%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,000,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Abbott Laboratories) - Series 1983A (d) 03/01/97 3.41% $ 3,000,000 Aa1 AAA
- ----------- -----------
3,000,000 Total Revenue Bond 3,000,000
---------- -----------
<CAPTION>
Tax Exempt Commercial Paper (17.17%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,275,000 City of Winston, NC
(Summit Square Garden Apartment Project) - Series 1989
FHA Insured 09/16/96 3.50% $ 1,275,000 A1+
3,000,000 City of Winston-Salem, NC (Water & Sewer System) 09/10/96 3.60 3,000,000 VMIG-1 A1+
7,000,000 North Carolina Eastern Municipal Power Agency - Series 1988B
LOC Morgan Guaranty & Union Bank of Switzerland 09/10/96 3.65 7,000,000 A1+
3,000,000 North Carolina Eastern Municipal Power Agency - Series 1988B
LOC Morgan Guaranty & Union Bank of Switzerland 09/24/96 3.25 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 & Poor's
- ------ ------ ----- ------- ------- --------
Tax Exempt Commercial Paper (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,315,000 North Carolina Municipal Electric RB (Catawba)
LOC Morgan Guaranty & Union Bank of Switzerland 09/11/96 3.45% $ 4,315,000 P1 A1+
3,000,000 North Carolina Municipal Electric RB (Catawba)
LOC Morgan Guaranty & Union Bank of Switzerland 09/18/96 3.50 3,000,000 P1 A1+
3,000,000 North Carolina Municipal Electric RB (Catawba)
LOC Morgan Guaranty & Union Bank of Switzerland 09/26/96 3.50 3,000,000 P1 A1+
5,000,000 North Carolina Municipal Power Agency#1 RB
(Catawba Project)
LOC Morgan Guaranty & Union Bank of Switzerland 09/17/96 3.45 5,000,000 P1 A1+
- ----------- -----------
29,590,000 Total Tax Exempt Commercial Paper 29,590,000
- ---------- -----------
Total Investments (100.46%)(Cost 173,171,315+) 173,171,315
Liabilities in Excess of Cash and Other Assets (-0.46%) ( 785,836)
-----------
Net Assets (100.00%), 172,386,803 Shares Outstanding - Class A (Note 3) $172,385,479
============
Net Asset Value, offering and redemption price per share $ 1.00
============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
FOOTNOTES:
(a) The ratings noted for variable rate demand instruments are those of the
bank whose letter of credit secures such instruments or the guarantor of
the bond. P1 and A1+ are the highest ratings assigned for tax exempt
commercial paper.
(b) Securities that are not rated which the Fund's Board of Directors has
determined to be of comparable quality to those rated securities in which
the Fund invests.
(c) 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.
(d) The maturity date indicated is the next put date.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
BAN = Bond Anticipation Note LOC = Letter of Credit
COPS = Certificate of Participations MBIA = Municipal Bond Insurance Association
FHA = Federal Housing Administration PCFA = Pollution Control Finance Authority
GO = General Obligation PCRB = Pollution Control Revenue Bond
HRB = Hospital Revenue Bond RB = Revenue Bond
IDRB = Industrial Development Revenue Bond RRRB = Resource Recovery Revenue Bond
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1996
===============================================================================
<TABLE>
<CAPTION>
<C> <C>
INVESTMENT INCOME
Income:
Interest.................................................................... $ 6,680,720
------------
Expenses: (Note 2)
Investment management fee................................................... 738,885
Shareholder servicing fee (Class A)......................................... 461,803
Administration fee.......................................................... 383,707
Custodian expenses.......................................................... 26,613
Shareholder servicing and related shareholder expenses...................... 121,153
Legal, compliance and filing fees........................................... 29,590
Audit and accounting........................................................ 62,517
Directors fees............................................................. 6,490
Amortization of organization expenses....................................... 8,705
Other....................................................................... 10,866
------------
Total expenses.......................................................... 1,850,329
Less: Fees waived (Note 2)............................................... ( 372,287)
------------
Net expenses............................................................. 1,478,042
------------
Net investment income........................................................... 5,202,678
------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments......................................... 3,417
------------
Increase in net assets from operations.......................................... $ 5,206,095
============
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED AUGUST 31, 1996 AND 1995
===============================================================================
<TABLE>
<CAPTION>
1996 1995
--------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
<C> <C> <C>
Net investment income.......................................... $ 5,202,678 $ 4,352,992
Net realized gain (loss) on investments........................ 3,417 498
--------------- ----------------
Increase in net assets from operations............................. 5,206,095 4,353,490
Dividends to shareholders from net investment income:
Class A........................................................ ( 5,202,678)* ( 4,328,632)*
Class B........................................................ -- ( 24,360)*
Capital share transactions (Note 3):
Class A........................................................ 8,126,540 41,434,929
Class B........................................................ -- --
--------------- ----------------
Total increase (decrease).................................... 8,129,957 41,435,427
Net assets:
Beginning of year.............................................. 164,255,522 122,820,095
--------------- ----------------
End of year.................................................... $ 172,385,479 $ 164,255,522
=============== ================
* Designated as exempt-interest dividends for federal income tax purposes.
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. Summary of Accounting Policies.
North Carolina Daily Municipal Income Fund,Inc. is a no-load, non-diversified,
open-end management investment company registered under the Investment Company
Act of 1940. The Fund is a short-term, tax exempt money market fund. 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. In all other respects, the
Class A and Class B shares represent the same interest in the income and assets
of the Fund. Distribution of Class B shares commenced December 12, 1994. The
Fund's financial statements are prepared in accordance with generally accepted
accounting principles for investment companies as follows:
a) Valuation of Securities -
Investments are valued at amortized cost. Under this valuation method, a
portfolio instrument is valued at cost and any discount or premium is
amortized on a constant basis to the maturity of the instrument. The
maturity of variable rate demand instruments is deemed to be the longer of
the period required before the Fund is entitled to receive payment of the
principal amount or the period remaining until the next interest rate
adjustment.
b) Federal Income Taxes -
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its tax exempt and taxable income to its shareholders. Therefore, no
provision for federal income tax is required.
c) Dividends and Distributions -
Dividends from investment income (excluding capital gains and losses, if
any, and amortization of market discount) are declared daily and paid
monthly. Distributions of net capital gains, if any, realized on sales of
investments are made after the close of the Fund's fiscal year, as declared
by the Fund's Board of Directors.
d) Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
e) General -
Securities transactions are recorded on a trade date basis. Interest income
is accrued as earned. Realized gains and losses from securities
transactions are recorded on the identified cost basis.
2. Investment Management Fees and Other Transactions with Affiliates.
Under the Investment Management Contract, the Fund pays an investment management
fee to Reich & Tang Asset Management L.P. (the Manager) at the annual rate of
.40% of the Fund's average daily net assets. The Manager is to reimburse the
Fund for its expenses (exclusive of interest, taxes, brokerage, and
extraordinary expenses) to the extent that such expenses, including the
investment management and the shareholder servicing and administration fees, for
any fiscal year exceed the limits on investment company expenses prescribed by
any state in which the Fund's shares are qualified for sale. No such
reimbursement was required for the year ended August 31, 1996.
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
2. Investment Management Fees and Other Transactions with Affiliates
(Continued).
Pursuant to an Administrative Services Contract the Fund pays to the Manager an
annual fee of .21% of the Fund's average daily net assets. Prior to December 1,
1995, the Administrative fee was .20%.
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 the Class A shares of the Fund. For its services under the
Shareholder Servicing Agreement, the Distributor receives from the Fund with
respect only to the Class A shares, a fee equal to .25% of the Fund's average
daily net assets. There were no additional expenses borne by the Fund pursuant
to the Distribution Plan.
During the year ended August 31, 1996, the Manager voluntarily waived investment
management fees and administration fees of $21,971 and $350,316, respectively.
Fees are paid to Trustees who are unaffiliated with the Manager on the basis of
$1,000 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 $60,376 paid to Reich & Tang
Services L.P., an affiliate of the Manager, as servicing agent for the Fund.
3. Capital Stock.
At August 31, 1996, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $172,386,803. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Class A
Year Year
Ended Ended
August 31, 1996 August 31, 1995
--------------- ---------------
<C> <C> <C>
Sold............................................... 500,625,735 621,223,319
Issued on reinvestment of dividends................ 2,474,924 2,303,648
Redeemed........................................... ( 494,974,119) ( 582,092,038)
---------------- ---------------
Net increase....................................... 8,126,540 41,434,929
================ ===============
<CAPTION>
Class B*
December 12, 1994
(Commencement of Operations)
to August 31, 1995
------------------
Sold............................................... 5,002,449
Issued on reinvestment of dividends................ 24,108
Redeemed........................................... ( 5,026,557)
----------------
Net increase....................................... -0-
================
* There were no class B shares issued during the fiscal year ended August 31, 1996 and none were outstanding as
of August 31, 1996.
</TABLE>
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
4. Sales of Securities.
Accumulated undistributed realized losses at August 31, 1996 amounted to $1,324.
Such amount represents tax basis capital losses which may be carried forward to
offset future capital gains. Such losses expire August 31, 2000.
5. Concentration of Credit Risk.
The Fund invests primarily in obligations of political subdivisions of the State
of North Carolina and, accordingly, is subject to the credit risk associated
with the non-performance of such issuers. Approximately 60% 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 credit worthiness of the issuers, as well as that of
the financial institutions issuing the letters of credit, and by limiting the
amount of holdings with letters of credit from one financial institution.
6. Selected Financial Information.
<TABLE>
<CAPTION>
(December 12, 1994 September 10, 1991
Year Year (Commencement Year Year (Commencement
Ended Ended of Operations) to Ended Ended of Operations) to
August 31, August 31, August 31, August 31, August 31, August 31,
1996 1995 1995 1994 1993 1992
--------- ---------- ---------- --------- --------- -----------
Class A Class A Class B
--------- ---------- ----------
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ----------- ----------- ---------- ---------- ------------
Income from investment operations:
Net investment income............ 0.029 0.030 0.024 0.018 0.019 0.030
Less distributions:
Dividends from net investment income 0.029 0.030 0.024 0.018 0.019 0.030
---------- ----------- ----------- ---------- ---------- ------------
Net asset value, end of period... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== =========== =========== ========== ========== ============
Total Return..................... 2.87% 3.04% 3.48%* 1.86% 1.94% 3.07%*
Ratios/Supplemental Data
Net assets, end of period (000).. $ 172,385 $ 164,256 $ -0- $ 122,820 $ 93,294 $ 75,417
Ratios to average net assets:
Expenses......................... .80%(b) .78%(a) .51%*(b) .75%(a) .71%(a) .50%*(a)
Net investment income............ 2.82%(b) 3.01%(a) 3.40%*(b) 1.85%(a) 1.91%(a) 2.82%*(a)
* Annualized
(a) Net of management, shareholder servicing and administration fees waived equivalent to .24%, .29%, .35% and .62%
of average net assets for Class A in 1995 and for the Fund in years 1994, 1993 and 1992, respectively.
(b) Net of management and administration fees waived equivalent to .20% of average net assets.
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NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
INDEPENDENT AUDITOR'S REPORT
===============================================================================
The Board of Directors and Shareholders
North Carolina Daily Municipal Income Fund, Inc.
We have audited the accompanying statement of net assets of North Carolina Daily
Municipal Income Fund, Inc. as of August 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 four years in the period then ended and the period
from September 10, 1991 (Commencement of Operations) to August 31, 1992. 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 August 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 North Carolina Daily Municipal Income Fund, Inc. as of August 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
October 2, 1996
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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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North Carolina Daily Municipal 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
811 Main Street
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Services, L.P.
600 Fifth Avenue
New York, New York 10020
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