<PAGE>
- --------------------------------------------------------------------------------
NORTH CAROLINA
DAILY MUNICIPAL 600 FIFTH AVENUE, NEW YORK, N.Y. 10020
INCOME FUND, INC. 212/830-5200
================================================================================
Dear Shareholder:
We are pleased to present the annual report of North Carolina Daily Municipal
Income Fund, Inc. for the year ended August 31, 1999.
The Fund had net assets of $251,585,899 and 2,939 active shareholders as of
August 31, 1999.
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, 1999
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- --------
Other Tax Exempt Investments (6.74%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,000,000 Bertie County, NC Water District IV, GO Water BAN (b)
Guaranteed by Federal Housing Administration 10/20/99 2.95% $ 2,000,316
1,410,000 Charlotte, NC COPS (Equipment Acquisition Project) (b) 09/01/99 3.50 1,410,000
1,000,000 Durham County, NC GO (b) 04/01/00 2.94 1,007,106
1,000,000 Mecklenburg County, NC
Collateralized by U.S. Government Securities 04/01/00 3.23 1,019,295 Aaa AAA
1,075,000 North Carolina Medical Care Commission
(Duke University Health System) (b) 06/01/00 3.14 1,082,815
3,000,000 North Carolina State Public School Bond (b) 04/01/00 2.98 3,024,905
1,100,000 River Bend, NC BAN (Water & Sanitary Sewer) (b) 02/02/00 3.27 1,100,899
1,530,000 Robeson County, NC GO (b)
Insured by FSA 03/01/00 2.94 1,535,952
3,330,000 Sampson County, NC Water and Sewage District BAN (b) 03/01/00 3.15 3,330,810
1,455,000 Walnut Grove, NC BAN (b)
Guaranteed by Federal Housing Administration 09/22/99 2.97 1,455,164
------------ ------------
16,900,000 Total Other Tax Exempt Investments 16,967,262
------------ ------------
<CAPTION>
Other Variable Rate Demand Instruments (c) (76.84%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,000,000 Alamance County, NC Industrial Facilities & PCFA
LOC PNC Bank, N.A. 04/01/15 3.05% $ 2,000,000 VMIG-1
3,000,000 Beaufort, NC PCRB (Texas Gulf Inc.) - Series 1985 (b)
LOC Societe Generale 12/01/00 3.30 3,000,000
2,000,000 Burke County, NC Industrial Facilities & PCFA IDRB (Jobs Project)
LOC Wachovia Bank & Trust Co., N.A. 06/01/02 3.40 2,000,000 A1+
2,500,000 Chapel Hill School of Medicine (Ambulatory Health Clinic) 07/01/12 3.35 2,500,000 A1+
10,700,000 City of Charlotte, NC Airport Refunding Bonds - Series A
Insured by MBIA Insurance Corp. 07/01/17 3.30 10,700,000 VMIG-1 A1
700,000 Cleveland County, NC Industrial Facilities
(Curtis Wright Flight System) (b)
LOC Bank of Nova Scotia 11/01/23 3.35 700,000
1,000,000 Columbus County, NC (Conflandey Project) (b)
LOC Bank Nationale de Paris 01/01/15 3.45 1,000,000
1,500,000 Department of State Treasurer, State of North Carolina
LOC Merrill Lynch 03/01/11 3.32 1,500,000 A1+
880,000 Durham County, NC Public Improvement GO Bonds 05/01/07 3.25 880,000 VMIG-1 A2
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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================================================================================
<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>
$ 1,900,000 Durham County, NC Public Improvement GO Bonds 02/01/10 3.20% $ 1,900,000 VMIG-1 A1+
5,000,000 Granville County, NC Industrial Facilities & PCFA
(Mayville Metal Product Project) (b)
LOC Toronto-Dominion Bank 05/23/20 3.45 5,000,000
2,200,000 Halifax County, NC Industrial Facilities & PCFA
(Habson Partners Roanoke Valley)
LOC Credit Suisse First Boston 12/01/19 3.10 2,200,000 A1
6,170,000 Halifax County, NC Industrial Facilities
(Roanoke - Lights Gas & Electricity)
LOC Credit Suisse First Boston 06/01/21 3.05 6,170,000 A1+
2,700,000 Harnett County, NC Industrial Facilities & PCFA IDRB
(Edwards Brothers Inc. Project) (b)
LOC Wachovia Bank & Trust Co., N.A. 01/01/07 3.30 2,700,000
6,000,000 Herford County, NC Industrial Facilities
(Easco Corporation Project) (b)
LOC Bank of America 11/01/13 3.40 6,000,000
1,000,000 Iredell County, NC PCFA IDRB (Jet Corr Inc.) (b)
LOC National Bank of Detroit 09/01/99 3.40 1,000,000
1,000,000 Johnson County, NC Industrial Facilities & Pollution Control IDRB (b)
LOC PNC Bank, N.A. 03/01/11 3.40 1,000,000
3,800,000 Lenoir County, NC Industrial Facilities
(West Co. of Nebraska Inc.) - Series 1985 (b)
LOC Dresdner Bank, A.G. 10/01/05 3.35 3,800,000
900,000 Lincoln County, NC Industrial Facilities & PCFA RB
(Leucadia Inc. Project)
LOC National Bank of Canada 09/01/00 3.40 900,000 P1
8,395,000 Martin County, NC Industrial Facilities
(Weyerhaeuser Company Project) 06/01/04 3.35 8,395,000 A1
1,000,000 Mecklenberg County, NC Industrial Facilities & PCFA
(EDG Comb Metals) (b)
LOC Wells Fargo Bank, N.A. 12/01/09 3.20 1,000,000
1,500,000 Mecklenburg County, NC Industrial Facilities & PCFA
(Griffith Micro Science Project)
LOC ABN AMRO Bank N.V. 11/01/07 3.30 1,500,000 A1+
2,850,000 Mecklenburg County, NC Industrial Facilities & PCFA IDRB
(Otto Industry) (b)
LOC Bank of Austria 10/01/08 3.40 2,850,000
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1999
================================================================================
<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>
$ 1,800,000 Mecklenburg County, NC PCFA IDRB (Virkler Company) (b)
LOC First Union National Bank 12/01/04 3.35% $ 1,800,000
900,000 Mecklenberg County, NC - Series C (b)
LOC Union Bank of Switzerland 12/01/08 3.30 900,000
1,000,000 Mecklenberg County, NC - Series C 02/01/18 3.20 1,000,000 VMIG-1 A1+
5,000,000 Moore County, NC Industrial Facilities & PCFA RB
(Perdue Farm Project) - Series 1990
LOC Rabobank Nederland 06/01/10 3.20 5,000,000 P1 A1+
5,000,000 North Carolina Eastern Municipal Power Agency ROCS
(Power System ROCS - Series 46) 12/04/18 3.34 5,000,000 A1+
2,700,000 North Carolina Educational Facilities (Davidson College Project) (b) 12/01/04 3.30 2,700,000
1,000,000 North Carolina Educational Facilities Finance Agency RB
(Elton College)
LOC Bank of America 01/01/19 3.20 1,000,000 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
1,500,000 North Carolina Educational Facilities Finance Authority
(Bowman Grey School Medical Project)
LOC Wachovia Bank & Trust Co., N.A. 09/01/20 3.25 1,500,000 VMIG-1
7,000,000 North Carolina Educational Facilities Finance Authority
(Duke University) - Series 1987A 12/01/17 3.15 7,000,000 VMIG-1 A1+
3,300,000 North Carolina Educational Facilities Finance Authority
(Duke University) - Series 1991B 12/01/21 3.15 3,300,000 VMIG-1 A1+
1,100,000 North Carolina Medical Care Commission (Angel Medical Center, Inc.)
LOC First Union National Bank 10/01/16 3.20 1,100,000 A1
3,300,000 North Carolina Medical Care Commission (Duke University Hospital) 06/01/15 3.15 3,300,000 VMIG-1 A1+
5,000,000 North Carolina Medical Care Commission
(J. Authur Dosher Memorial Hospital)
LOC Branch Bank & Trust 05/01/18 3.30 5,000,000 A1
2,500,000 North Carolina Medical Care Commission
(Lutheran Services for the Aging)
LOC Branch Bank & Trust 03/01/28 3.25 2,500,000 A1
4,000,000 North Carolina Medical Care Commission Health Care Facilities RB
(Pungo District Hospital) (b)
LOC Centura Bank & Norwest Bank 12/01/18 3.25 4,000,000
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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================================================================================
<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>
$ 12,600,000 North Carolina Medical Care Commission Health System RB
(Updates Catholic Health Project)
Insured by AMBAC Indemnity Corp. 11/15/28 3.32% $ 12,600,000 VMIG-1 A1+
6,900,000 North Carolina Medical Care Commission HRB
(Park Ridge Hospital Project)
LOC Suntrust Bank 08/15/18 3.25 6,900,000 A1
8,000,000 North Carolina Medical Care
Commission Retirement Community RB - Series B
LOC LaSalle National Bank 11/15/09 3.25 8,000,000 A1+
21,995,000 North Carolina State Certificates - Series 38 04/01/13 3.31 21,995,000 VMIG-1
700,000 Piedmont Triad, NC Airport Authority
(The Cessna Aircraft Company)
LOC Bank of America 10/01/12 3.40 700,000 A1+
1,230,000 Puerto Rico Commonwealth GO Bond
(Puerto Rico Electric Power Authority)
Insured by MBIA Insurance Corp. 07/01/23 3.02 1,230,000 VMIG-1
500,000 Randolph County, NC Industrial Facilities & PCFA (b)
LOC Bank One 09/01/05 3.40 500,000
1,000,000 Sampson County, NC Industrial Facilities & PCFA IDRB
(DuBose Strapping) (b)
LOC First Union National Bank 07/01/07 3.40 1,000,000
1,075,000 State of North Carolina
LOC Merrill Lynch 03/01/16 3.36 1,075,000 A1+
7,600,000 Wake County, NC Industrial Facilities & PCFA - Series B
LOC Bank of New York 06/15/14 3.05 7,600,000 VMIG-1 A1+
3,000,000 Wake County, NC Industrial Facilities & PCFA
(Carolina Power & Light Co.)
LOC First National Bank of Chicago 06/15/14 3.10 3,000,000 A1+
1,005,000 Wake County, NC Industrial Facilities & PCFA
(Carolina Power & Light Co.)
LOC Wachovia Bank & Trust Co., N.A. 05/01/15 3.30 1,005,000 P1 A1+
3,700,000 Wake County, NC Industrial Facilities & PCFA
(Carolina Power & Light Co.)
LOC First Union National Bank 09/01/15 3.25 3,700,000 P1 A1
6,525,000 Warren County, NC Industrial Facilities & PCFA IDRB
(Glen Raven Mills Project) (b)
LOC Wachovia Bank & Trust Co., N.A. 05/01/08 3.30 6,525,000
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1999
================================================================================
<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>
$ 2,195,000 Winston-Salem, NC COPS - Series 1988 07/01/09 3.35% $ 2,195,000 VMIG-1 A1+
500,000 Winston-Salem, NC GO Bond 06/01/07 3.20 500,000 VMIG-1 A1+
------------ ------------
193,320,000 Total Other Variable Rate Demand Instruments 193,320,000
------------ ------------
<CAPTION>
Put Bonds (d)(4.11%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 500,000 Cabarrus County, NC Development Corportion
(Installment Financing Contract)
Insured by AMBAC Indemnity Corp. 06/01/00 4.60% $ 504,544 Aaa AAA
4,025,000 North Carolina Industrial Facilities & PCFA (GVK America Inc.) (b)
LOC Union Bank of Switzerland 12/01/99 3.50 4,025,000
600,000 North Carolina Industrial Facilities & PCFA RB
(Greer Labs Incorporated Project)
LOC First Union National Bank 12/01/99 3.75 600,000 A1+
2,700,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Reynolds Metals Corporation) (b)
(Merck & Co. Inc. Proj.) - Series 1983A 12/01/99 2.90 2,700,000
2,500,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Reynolds Metals Corporation)
LOC ABN AMRO Bank N.V. 09/01/99 3.60 2,500,000 VMIG-1 A1+
------------ ------------
10,325,000 Total Put Bonds 10,329,544
------------ ------------
<CAPTION>
Revenue Bonds (1.88%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 730,000 North Carolina Medical Care Commission (b)
Insured by AMBAC Indemnity Corp. 11/01/99 4.00% $ 731,131
4,000,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Abbott Laboratories) - Series 83A 03/01/00 2.90 4,000,000 Aa1 AAA
------------ ------------
4,730,000 Total Revenue Bonds 4,731,131
------------ ------------
<CAPTION>
Tax Exempt Commercial Paper (9.99%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,100,000 City of Winston-Salem, NC (Summit Square Garden)
Guaranteed by Federal Housing Administration 10/14/99 3.20% $ 1,100,000 A1+
1,120,000 City of Winston-Salem, NC (Water and Sewer System) - Series 1989
Guaranteed by Federal Housing Administration 10/14/99 3.20 1,120,000 A1+
2,000,000 North Carolina Eastern Municipal Power Agency
LOC Canadian Imperial Bank of Commerce 09/02/99 3.15 2,000,000 P1 A1+
1,600,000 North Carolina Eastern Municipal Power Agency
LOC Canadian Imperial Bank of Commerce 09/09/99 3.15 1,600,000 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>
$ 1,500,000 North Carolina Eastern Municipal Power Agency
LOC Canadian Imperial Bank of Commerce 10/06/99 3.45% $ 1,500,000 P1 A1+
3,500,000 North Carolina Eastern Municipal Power Agency
LOC Canadian Imperial Bank of Commerce 10/07/99 3.30 3,500,000 P1 A1+
2,000,000 North Carolina Eastern Municipal Power Agency
LOC Canadian Imperial Bank of Commerce 10/07/99 3.40 2,000,000 P1 A1+
4,300,000 North Carolina Municipal Power Agency #1 (Catawba Project)
LOC Morgan Guaranty & Union Bank of Switzerland 09/08/99 3.15 4,300,000 P1 A1+
5,000,000 North Carolina Municipal Power Agency #1 (Catawba Project)
LOC Morgan Guaranty & Union Bank of Switzerland 09/23/99 3.40 5,000,000 P1 A1+
2,000,000 North Carolina Municipal Power Agency #1 (Catawba Project)
LOC Morgan Guaranty & Union Bank of Switzerland 10/13/99 3.20 2,000,000 P1 A1+
1,000,000 North Carolina Municipal Power Agency #1 (Catawba Project)
LOC Morgan Guaranty & Union Bank of Switzerland 10/13/99 3.25 1,000,000 P1 A1+
------------ ------------
25,120,000 Total Tax Exempt Commercial Paper 25,120,000
------------ ------------
Total Investments (99.56%) (Cost $250,467,937+) $250,467,937
Cash and Other Assets in Excess of Liabilities (0.44%) 1,117,962
------------
Net Assets (100.00%), 251,587,029 Shares Outstanding (Note 3) $251,585,899
============
Net Asset Value, offering and redemption price per share $ 1.00
============
+ Aggregate cost for federal income tax purpose is identical.
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1999
================================================================================
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 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 PCFA = Pollution Control Finance Authority
FSA = Financial Security Assurance PCRB = Pollution Control Revenue Bond
GO = General Obligation RB = Revenue Bond
HRB = Hospital Revenue Bond ROCS = Reset Option Certificates
IDRB = Industrial Development Revenue Bond
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1999
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest....................................................................$ 8,237,732
-----------------
Expenses: (Note 2)
Investment management fee................................................... 1,020,511
Shareholder servicing fee .................................................. 637,819
Administration fee.......................................................... 535,768
Custodian expenses.......................................................... 42,142
Shareholder servicing and related shareholder expenses...................... 144,361
Legal, compliance and filing fees........................................... 57,511
Audit and accounting........................................................ 57,505
Directors' fees............................................................. 6,319
Other....................................................................... 17,576
-----------------
Total expenses........................................................... 2,519,512
Less: Fees waived (Note 2)...............................................( 256,446)
Less: Expenses paid indirectly (Note 2)..................................( 242)
-----------------
Net expenses............................................................. 2,262,824
-----------------
Net investment income.......................................................... 5,974,908
-----------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments........................................ 173
-----------------
Increase in net assets from operations.........................................$ 5,975,081
=================
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED AUGUST 31, 1999 AND 1998
================================================================================
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income.......................................... $ 5,974,908 $ 6,360,678
Net realized gain (loss) on investments........................ 173 5
--------------- ---------------
Increase in net assets from operations............................ 5,975,081 6,360,683
Dividends to shareholders from net investment income:
Class A........................................................ ( 5,974,908)* ( 6,360,678)*
Capital share transactions (Note 3):
Class A........................................................ 20,913,148 33,319,530
--------------- ---------------
Total increase............................................... 20,913,321 33,319,535
Net assets:
Beginning of year.............................................. 230,672,578 197,353,043
--------------- ---------------
End of year.................................................... $ 251,585,899 $ 230,672,578
=============== ===============
* 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. (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 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 .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, 1999, the Manager voluntarily waived
administration fees of $256,446.
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 $127,613 paid to Reich & Tang
Services, Inc., an affiliate of the Manager, as servicing agent to the Fund.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are expense offsets of $242.
3. Capital Stock.
At August 31, 1999, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $251,587,029. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year Year
Class A Ended Ended
------- August 31, 1999 August 31, 1998
--------------- ---------------
<S> <C> <C>
Sold............................................. 729,645,489 646,778,294
Issued on reinvestment of dividends.............. 3,033,259 3,510,899
Redeemed......................................... ( 711,765,600) ( 616,969,663)
--------------- ---------------
Net increase..................................... 20,913,148 33,319,530
=============== ===============
</TABLE>
There were no Class B shares transactions during the year ended August 31, 1999
and no shares were outstanding as of August 31, 1999.
4. Sales of Securities.
Accumulated undistributed realized losses at August 31, 1999 amounted to $1,130.
Such amount represents tax basis capital losses which may be carried forward to
offset future capital gains. Such losses expire August 31, 2001.
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 56% 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.
- -------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
6. Financial Highlights.
Year Ended August 31,
Class A ------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<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....................... 0.024 0.028 0.028 0.029 0.030
Less distributions:
Dividends from net investment
income.................................... ( 0.024) ( 0.028) ( 0.028) ( 0.029) ( 0.030)
-------- -------- -------- -------- --------
Net asset value, end of year................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return................................... 2.38% 2.82% 2.82% 2.87% 3.04%
Ratios/Supplemental Data
Net assets, end of year (000).................. $251,586 $230,673 $197,353 $172,385 $164,256
Ratios to average net assets:
Expenses (Net of fees waived)................ 0.89% 0.85% 0.80% 0.80% 0.78%
Net investment income........................ 2.34% 2.77% 2.78% 2.82% 3.01%
Management, shareholder servicing
and Administration fees waived ............. 0.10% 0.13% 0.18% 0.20% 0.24%
</TABLE>
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<PAGE>
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NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
NOTES TO FINANICAL STATEMENTS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
6. Financial Highlights. (Continued)
December 12, 1994
Class B (Commencement of Operations) to
- ------- August 31, 1995
---------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C>
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 (Net of fees waived)........................... 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.
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To the Board of Directors and Shareholders of
North Carolina Daily Municipal Income Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
North Carolina Daily Municipal Income Fund, Inc. (the "Fund") at August 31,
1999, and the results of its operations, the changes in its net assets and the
financial highlights for the year then ended, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at August 31, 1999 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above. The financial statements for the year ended August 31, 1998,
including the financial highlights for each of the four years in the period then
ended, were audited by other independent accountants whose report dated
September 25, 1998 expressed an unqualified opinion on those financial
statements.
PricewaterhouseCoopers LLP
New York, New York
September 30, 1999
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<PAGE>
- --------------------------------------------------------------------------------
NORTH CAROLINA DAILY MUNICIPAL INCOME FUND, INC.
CHANGE IN INDEPENDENT ACCOUNTANTS
================================================================================
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey) resigned as independent
auditors of the Fund pursuant to an agreement by PricewaterhouseCoopers LLP
(PwC) to acquire McGladrey's investment company practice. The McGladrey partners
and professionals serving the Fund at the time of the acquisition have joined
PwC.
The reports of McGladrey on the financial statements of the Fund during the past
two fiscal years contained no adverse opinion or a disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
In connection with its audits for the two most recent fiscal years and through
August 13, 1999, there were no disagreements with McGladrey on any matter of
accounting principle or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
McGladrey would have caused it to make reference to the subject matter of
disagreement in connection with its report.
Effective August 13, 1999, the Fund, with the approval of its Board of Directors
and its Audit Committee, engaged PwC as its independent auditors.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NORTH CAROLINA
DAILY
MUNICIPAL
INCOME
FUND, INC.
Annual Report
August 31, 1999
- --------------------------------------------------------------------------------
<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.
- -----------------------------------------------------
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
801 Pennsylvania
Kansas City, Missouri 64105
Transfer Agent & Dividend
Disbursing Agent
Reich & Tang Services, Inc.
600 Fifth Avenue
New York, New York 10020
NC899A
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<PAGE>
