<PAGE>
- -------------------------------------------------------------------------------
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, 1997.
The Fund had net assets of $197,353,043 and 3,083 active shareholders as of
August 31, 1997. Dividends earned on a share held throughout the period were
$.028 which, when adjusted for the compounding effect of the reinvestment of
dividends, represents a 2.82% 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
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS
AUGUST 31, 1997
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
------------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- ------
Other Tax Exempt Investments (15.01%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,700,000 Cabarrus County, NC GO Bond (b)
MBIA Insured 02/01/98 3.48% $ 1,711,086
545,000 Charlotte, NC Water and Sewer
Pre-Refunded In Government Securities 10/01/97 3.43 546,361 Aaa AAA
1,920,000 City of Thomasville, NC Combined Enterprise System Revenue BAN 12/01/97 3.70 1,920,000 MIG-1
2,000,000 County of Johnson, NC COPS
(Johnson County Schools Judicial Annex & Healthcare Proj.) - Series 96
MBIA Insured 09/01/97 3.84 2,000,000 Aaa AAA
6,300,000 Cumberland County, NC BAN (b)
MBIA Insured 10/01/97 3.49 6,300,482
4,650,000 Duplin County, NC County Water District Water BAN (b)
FHA Insured 02/25/98 3.63 4,651,502
1,900,000 East Craven Water and Sewer District Water BAN (b)
FHA Insured 05/13/98 3.66 1,900,756
2,250,000 Hertford County, NC Northern Rural Water District BAN (b) 10/29/97 3.49 2,250,513
2,831,000 Lee County, NC Water and Sewer District #1 Water BAN (b)
FHA Insured 05/20/98 3.65 2,831,566
430,000 North Carolina Medical Care Commission Hospital RB
(Wilson Memorial Hospital Project)
AMBAC Insured 11/01/97 3.40 430,000 Aaa AAA
435,000 North Carolina Medical Care Hospital RB
(Presbyterian Hospital Project)
Escrowed In U.S. Government Securities 10/01/97 3.60 435,923 Aaa AAA
2,136,500 Scotland County, NC Water District 1 BAN (b) 11/05/97 3.31 2,137,962
2,500,000 Town of Hillsborough, NC GO Water Anticipation Notes (b) 02/25/98 3.62 2,500,802
- ----------- -----------
29,597,500 Total Other Tax Exempt Investments 29,616,953
- ----------- -----------
<CAPTION>
Other Variable Rate Demand Instruments (c) (66.29%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,000,000 Alamance County, NC (SCI Manufacturing)
LOC PNC Bank, N.A. 04/01/15 3.80% $ 2,000,000 P1
3,000,000 Beaufort, NC PCRB (Texas Gulf Inc.) - Series 1985
LOC Societe Generale 12/01/00 3.45 3,000,000 Aaa
2,000,000 Burke County, NC PCFA (Jobs Project)
LOC Wachovia Bank & Trust Co., N.A. 06/01/02 3.50 2,000,000 A1+
3,500,000 Charlotte Mecklenburg Hospital Authority Health Care RB - Series B 01/15/26 3.20 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>
$ 2,000,000 Charlotte Mecklenburg Hospital Authority Health Care RB - Series D 01/15/26 3.25% $ 2,000,000 VMIG-1 A1
6,805,000 Charlotte, NC Airport RB
MBIA Insured 07/01/16 3.25 6,805,000 VMIG-1 A1
1,100,000 City of Ashville, NC
LOC Wachovia Bank & Trust Co., N.A. 07/01/03 3.25 1,100,000 VMIG-1 A1+
880,000 Durham County, NC Public Improvement GO Bonds
LOC Sumitomo Bank, Ltd. 05/01/07 3.20 880,000 VMIG-1 A1
2,200,000 Durham, NC Public Improvement 02/01/10 3.30 2,200,000 VMIG-1 A1+
900,000 Durham, NC Water & Sewer Utility System
LOC Wachovia Bank & Trust Co., N.A. 12/01/15 3.35 900,000 VMIG-1 A1+
3,700,000 East Carolina University, NC University RB
(Dowdy-Ficklen Stadium Project)
LOC Wachovia Bank & Trust Co., N.A. 05/01/17 3.25 3,700,000 VMIG-1
160,000 Gaston County, NC PCFA (Keystone Carbon Company)
LOC Mellon Bank, N.A. 09/01/00 3.55 160,000 P1 A1
5,000,000 Granville County, NC Industrial Facilities PCFA (b)
(Mayville Metal Product Project)
LOC Toronto-Dominion Bank 05/23/20 3.60 5,000,000
650,000 Greensboro, NC Public Improvement - Series B 04/01/10 3.30 650,000 VMIG-1 A1+
1,500,000 Guilford County, NC (Bonset America)
LOC Dai-Ichi Kangyo Bank, Ltd. & Industrial Bank of Japan 05/01/09 3.75 1,500,000 A1
900,000 Halifax County, NC Industrial Facilities PCFA (Westmoreland) (b)
LOC Credit Suisse 12/01/19 3.85 900,000
3,000,000 Harnett County, NC Industrial Facilities PCFA IDRB (b)
(Edwards Brothers Inc. Project)
LOC Wachovia Bank & Trust Co., N.A. 01/01/07 3.50 3,000,000
1,200,000 Iredell County, NC (Jet Corr Inc.) (b)
LOC National Bank of Canada 09/01/99 3.55 1,200,000
1,100,000 Iredell County, NC Industrial Facilities PCFA RB (Purina Mills Inc.)
LOC Bank of Nova Scotia 07/01/20 3.45 1,100,000 A1+
1,000,000 Johnson County, NC Industrial Facilities & Pollution Control IDRB (b)
LOC PNC Bank, N.A. 03/01/11 3.60 1,000,000
3,800,000 Lenoir County, NC Industrial Facilities (b)
(West Co. of Nebraska Inc.) - Series 1985
LOC Dresdner Bank A.G. 10/01/05 3.45 3,800,000
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1997
===============================================================================
<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>
$ 1,300,000 Lincoln County, NC Industrial Facilities PCFA RB (General Marble)
LOC National Bank of Canada 09/01/00 3.55% $ 1,300,000 P1 A1
1,000,000 Mecklenberg County, NC Industrial Facilities & PCFA (b)
(EDG Comb Metals)
LOC BNP US Finance Corp 12/01/09 3.35 1,000,000
1,500,000 Mecklenburg County, NC (Otto Industry)
LOC Rabobank Nederland 10/01/08 3.55 1,500,000 P1
2,000,000 Mecklenburg County, NC IDRB (Virkler Company) (b)
LOC First Union National Bank 12/01/04 3.60 2,000,000
1,500,000 Mecklenburg County, NC Idustrial Facilities & PCFA
(Griffith Micro Science Project)
LOC ABN AMRO Bank N.V. 11/01/07 3.45 1,500,000 A1+
2,000,000 Moore County, NC (Perdue Farm Project)
LOC Rabobank Nederland 06/01/10 3.30 2,000,000 P1 A1+
7,000,000 NC Medical Care Commission Retirement Community RB - Series B
LOC LaSalle National Bank 11/15/09 3.38 7,000,000 A1+
1,500,000 NC Medical Care Community Hospital
(Pooled Equipment Financing Project) - Series 1985
MBIA Insured 12/01/25 3.25 1,500,000 VMIG-1 A1+
3,000,000 NC Medical Care Community Hospital
(Pooled Equipment Financing Project) - Series 1985
MBIA Insured 12/01/25 3.55 3,000,000 VMIG-1 A1+
2,800,000 North Carolina Education Facilities (Davidson College Project) (b) 12/01/04 3.40 2,800,000
2,525,000 North Carolina Education Facilities Finance Agency RB
(Wake Forest University Project) 01/01/09 3.30 2,525,000 VMIG-1
5,000,000 North Carolina Educational Facilities Agency RB (Elon College)
LOC Nations Bank 01/01/19 3.25 5,000,000 VMIG-1 A1+
1,000,000 North Carolina Educational Facilities Finance Agency RB
(Gardner Webb University)
LOC First Union National Bank 07/01/17 3.20 1,000,000 A1
3,900,000 North Carolina Medical Care Commission (Carol Woods)
LOC Bank of Scotland 04/01/21 3.70 3,900,000 VMIG-1 A1+
1,400,000 North Carolina Medical Care Commission - Series 1991B
LOC First Union National Bank 10/01/13 3.70 1,400,000 VMIG-1
2,150,000 North Carolina Medical Care Commission HRB
(Duke University Project) - Series A 06/01/23 3.30 2,150,000 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>
$ 3,000,000 North Carolina Medical Care Commission HRB
(NC Baptist Hospital Project) - Series 1992B 06/01/22 3.35% $ 3,000,000 VMIG-1 A1+
3,100,000 North Carolina Medical Care Commission VRD HRB
(Park Ridge Hospital Project)
LOC Nations Bank 08/15/18 3.38 3,100,000 A1
900,000 Pasquotank County, NC Ind. Fac. PCFA IDRB (b)
(J.W. Jones Lumber Co., Inc. Proj) - Series 95
LOC Wachovia Bank & Trust Co., N.A. 10/01/10 3.50 900,000
3,100,000 Person County, NC PCRB
(Carolina Power and Light Solid Waste Disposal) - Series 1986
LOC Fuji Bank, Ltd. 11/01/16 3.95 3,100,000 VMIG-1
800,000 Piedmont Triad, NC Airport Authority
(The Cessna Aircraft Company)
LOC Nations Bank 09/01/12 3.55 800,000 A1
7,500,000 Raleigh-Durham, NC Airport Authority Special Facilities Refunding RB
(American Airlines Inc.) - Series 1995A
LOC Royal Bank of Canada 11/01/15 3.75 7,500,000 A1+
800,000 Raleigh-Durham, NC Airport Authority Special Facilities Refunding RB
(American Airlines Inc.) - Series 1995A
LOC Royal Bank of Canada 11/01/05 3.75 800,000 A1+
700,000 Randolph County, NC Industrial Facilities & PCFA (b)
LOC Bank One Ohio 09/01/05 3.60 700,000
1,000,000 Samson County, NC Industrial Facilities & PCFA (b)
(DuBose Strapping)
FHA Insured 07/01/07 3.45 1,000,000
750,000 Samson County, NC PCFA (Dubose Strapping)
LOC First Union National Bank 02/01/99 3.60 750,000 P1
6,400,000 University of North Carolina
Chapel Hill School of Medicine Ambulatory Care Clinic 07/01/12 3.20 6,400,000 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 3.40 1,000,000
10,600,000 Wake County, NC Industrial Facilities PCFA
(Carolina Power and Light) - Series A
LOC Credit Suisse 05/01/15 3.30 10,600,000 P1 A1+
2,200,000 Warren County, NC Industrial Facilities
(Glen Raven Mills Project) (b)
LOC Wachovia Bank & Trust Co., N.A. 05/01/06 3.50 2,200,000
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
- -------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1997
===============================================================================
<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>
$ 2,515,000 Winston-Salem, NC COPS - Series 1988 07/01/09 3.30% $ 2,515,000 A1+
500,000 Winston-Salem, NC GO Bond 06/01/07 3.40 500,000 VMIG-1 A1+
- ----------- -----------
130,835,000 Total Other Variable Rate Demand Instruments 130,835,000
- ----------- -----------
<CAPTION>
Put Bonds (d) (3.68%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,265,000 North Carolina Industrial Facilities PCFA (GVK America Inc.)
LOC Union Bank of Switzerland 12/01/97 3.80% $ 2,265,000 AAA
800,000 North Carolina Industrial Facilities PCFA RB
(Greer Labs Incorporated Project)
LOC First Union National Bank 12/01/97 4.00 800,000 A+
2,700,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Merck & Co. Inc. Proj.) - Series 83A 12/01/97 4.00 2,700,000 Aaa AAA
1,500,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Reynolds Metals Corporation)
LOC ABN AMRO N.V. 09/01/97 3.80 1,500,000 VMIG-1 A1+
- ----------- -----------
7,265,000 Total Put Bonds 7,265,000
---------- -----------
<CAPTION>
Revenue Bond (1.52%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,000,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Abbott Laboratories) - Series 83A 03/01/98 3.75% $ 3,000,000 Aa1 AAA
- ----------- -----------
3,000,000 Total Revenue Bond 3,000,000
- ----------- -----------
<CAPTION>
Tax Exempt Commercial Paper (15.91%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,275,000 City of Winston, NC (Summit Garden Apartment Project) - Series 1989
FHA Insured 09/10/97 3.75% $ 1,275,000 A1+
5,000,000 North Carolina Eastern Municipal Power - Series B
LOC Morgan Guaranty & Union Bank of Switzerland 10/09/97 3.80 5,000,000 A1+
1,000,000 North Carolina Eastern Municipal Power Agency
LOC Canadian Imperial Bank of Commerce 11/19/97 3.75 1,000,000 P1 A1+
5,315,000 North Carolina Municipal Electric (Catawba)
LOC Morgan Guaranty & Union Bank of Switzerland 09/11/97 3.75 5,315,000 P1 A1+
9,500,000 North Carolina Municipal Electric (Catawba)
LOC Morgan Guaranty & Union Bank of Switzerland 10/07/97 3.55 9,500,000 P1 A1+
700,000 North Carolina Municipal Electric (Catawba)
LOC Morgan Guaranty & Union Bank of Switzerland 11/18/97 3.65 700,000 P1 A1+
2,600,000 North Carolina Municipal Electric (Catawba)
LOC Morgan Guaranty & Union Bank of Switzerland 11/18/97 3.70 2,600,000 P1 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>
$ 1,000,000 North Carolina Municipal Power Agency #1 (Catawba Project)
LOC Morgan Guaranty & Union Bank of Switzerland 11/18/97 3.75% $ 1,000,000 P1 A1+
2,000,000 North Carolina Municipal Power Agency #1 (Catawba Project) 11/20/97 3.60 2,000,000 P1 A1+
LOC Morgan Guaranty & Union Bank Of Switzerland
3,000,000 Puerto Rico Government Development Bank 10/08/97 3.65 3,000,000 A1+
- ----------- -----------
31,390,000 Total Tax Exempt Commercial Paper 31,390,000
- ----------- -----------
Total Investments (102.41%) (Cost $202,106,953+) 202,106,953
Liabilities in Excess of Cash and Other Assets (-2.41%) ( 4,753,910)
-----------
Net Assets (100.00%), 197,354,351 Shares Outstanding - Class A (Note 3) $197,353,043
============
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
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1997
===============================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest.................................................................... $ 6,929,984
------------
Expenses: (Note 2)
Investment management fee................................................... 773,593
Shareholder servicing fee................................................... 483,495
Administration fee.......................................................... 406,136
Custodian expenses.......................................................... 20,763
Shareholder servicing and related shareholder expenses...................... 116,978
Legal, compliance and filing fees........................................... 29,582
Audit and accounting........................................................ 56,447
Directors' fees............................................................. 6,376
Other....................................................................... 10,271
------------
Total expenses.......................................................... 1,903,641
Less: Fees waived (Note 2).............................................. ( 356,429)
Expenses paid indirectly (Note 2)................................ ( 29)
------------
Net expenses............................................................ 1,547,183
------------
Net investment income........................................................... 5,382,801
------------
<CAPTION>
<S> <C>
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments......................................... 16
------------
Increase in net assets from operations.......................................... $ 5,382,817
============
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED AUGUST 31, 1997 AND 1996
===============================================================================
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income.......................................... $ 5,382,801 $ 5,202,678
Net realized gain on investments............................... 16 3,417
--------------- ----------------
Increase in net assets from operations............................. 5,382,817 5,206,095
Dividends to shareholders from net investment income:
Class A........................................................ ( 5,382,801)* ( 5,202,678)*
Capital share transactions (Note 3):
Class A........................................................ 24,967,548 8,126,540
---------------- ---------------
Total increase............................................... 24,967,564 8,129,957
Net assets:
Beginning of year.............................................. 172,385,479 164,255,522
--------------- ----------------
End of year.................................................... $ 197,353,043 $ 172,385,479
=============== ================
* 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. 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. 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.
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
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.
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, 1997, the Manager voluntarily waived
administration fees of $356,429.
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 $96,923 paid to Reich & Tang
Services, L.P., an affiliate of the Manager, as servicing agent for the Fund.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are expense offsets of $29.
3. Capital Stock.
At August 31, 1997, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $197,354,351. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Class A Year Year
Ended Ended
August 31, 1997 August 31, 1996
--------------- ---------------
<S> <C> <C>
Sold................................................... 514,655,437 500,625,735
Issued on reinvestment of dividends.................... 2,802,982 2,474,924
Redeemed............................................... ( 492,490,871) ( 494,974,119)
---------------- ----------------
Net increase........................................... 24,967,548 8,126,540
================ ================
</TABLE>
There were no Class B shares transactions during the fiscal years ended August
31, 1997 and 1996 and no shares were outstanding as of August 31, 1997.
4. Sales of Securities.
Accumulated undistributed realized losses at August 31, 1997 amounted to $1,308.
Such amount represents tax basis capital losses which may be carried forward to
offset future capital gains. Such losses expire August 31, 2001.
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
5. Concentration of Credit Risk.
The Fund invests primarily in obligations of political subdivisions of the State
of 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. Financial Highlights.
<TABLE>
<CAPTION>
Year Ended August 31,
-------------------------------------------------------------
Class A
- ------- 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 0.029 0.030 0.018 0.019
Less distributions:
Dividends from net investment
income........................ (0.028) (0.029) (0.030) (0.018) (0.019)
--------- -------- -------- -------- --------
Net asset value, end of year............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ========= ========= ========
Total Return............................. 2.82% 2.87% 3.04% 1.86% 1.94%
Ratios/Supplemental Data
Net assets, end of year (000)............ $ 197,353 $172,385 $ 164,256 $ 122,820 $ 93,294
Ratios to average net assets:
Expenses.............................. 0.80% 0.80% 0.78% 0.75% 0.71%
Net investment income................. 2.78% 2.82% 3.01% 1.85% 1.91%
Management, shareholder servicing
and administration fees waived ..... 0.18% 0.20% 0.24% 0.29% 0.35%
</TABLE>
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===============================================================================
<TABLE>
<CAPTION>
6. Financial Highlights. (Continued)
December 12, 1994
Class B (Commencement of Operations) to
- ------ August 31, 1995
---------------
<S> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period...................... $ 1.00
---------
Income from investment operations:
Net investment income.................................. 0.024
Less distributions:
Dividends from net investment income................... ( 0.024)
---------
Net asset value, end of period............................ $ 1.00
=========
Total Return.............................................. 3.48%*
Ratios/Supplemental Data
Net assets, end of period (000)........................... -0-
Ratios to average net assets:
Expenses............................................... 0.51%*
Net investment income.................................. 3.40%*
Management and administration fees waived ............. 0.20%*
* Annualized
</TABLE>
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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, 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 highlands 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 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
August 31, 1997, by correspondence with the custodian and broker. 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 North
Carolina Daily Municipal Income Fund, Inc. as of August 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
September 30, 1997
<PAGE>
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[This Page is Intentionally Left Blank.]
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<PAGE>
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- -----------------------------------------------------
This report is submitted for the general
information of the shareholders of the Fund. It is
not authorized for distribution to prospective
investors in the Fund unless preceded or
accompanied by an effective prospectus, which
includes information regarding the Fund's
objectives and policies, experience of its
management, marketability of shares, and other
information.
- -----------------------------------------------------
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 & Tang Services, L.P.
600 Fifth Avenue
New York, New York 10020
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<PAGE>
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NORTH
CAROLINA
DAILY
MUNICIPAL
INCOME
FUND, INC.
Annual Report
August 31, 1997
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<PAGE>
