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VIRGINIA
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 Virginia Daily Municipal Income
Fund, Inc. for the period July 14, 1998 (Commencement of Sales) through
September 30,1998.
The Fund had net assets of $3,113,959 and 1 active shareholder as of September
30, 1998.
Thank you for your support and we look forward to continuing to serve your cash
management needs.
Sincerely,
\S\Steven W. Duff
Steven W. Duff
President
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VIRGINIA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1998
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<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- -------
Other Tax Exempt Investments (16.25%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 City of Chesapeake, VA
GO Public Improvement Bonds - Series 1998 (b) 08/01/99 3.46% $ 101,260
100,000 County of Prince William, VA GO Public Improvement Bonds (b) 08/01/99 3.47 100,727
150,000 Loudoun County, VA COPS (b) 12/15/98 3.67 150,881
150,000 Southeast Public Service Authority, VA (Regional Waste System)
MBIA Insured 07/01/99 3.51 153,335 Aaa AAA
----------- -----------
500,000 Total Other Tax Exempt Investments 506,203
----------- -----------
<CAPTION>
Other Variable Rate Demand Instruments (c) (78.84%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 150,000 Capital Region Airport Community, VA (Richmond International Airport)
AMBAC Indemnity 07/01/25 3.45% $ 150,000 VMIG-1 A1+
300,000 Charles City and County, VA IDA (Chamber Development of Virginia, Inc.)
LOC Morgan Guaranty Trust Company 10/01/04 3.70 300,000 VMIG-1
150,000 City of Norfolk, VA IDA
LOC Branch Bank & Trust Company 09/01/20 4.05 150,000 A1
100,000 Fairfax, VA IDA (Fairfax Hospital System, Inc.) 10/01/25 3.45 100,000 VMIG-1 A1+
100,000 Hampton Roads Regional Jail Authority (Hampton Roads) - Series B
LOC Wachovia Bank, N.A. 07/01/16 3.45 100,000 VMIG-1 A1+
150,000 King George County, VA IDA (Birchwood Power Partners) - Series A
LOC Credit Suisse First Boston 10/01/24 4.20 150,000 A1+
150,000 Oyster Point, VA Development Corporation
(Jefferson Point Development Project) 11/01/11 4.35 150,000 A1+
200,000 Peninsula Port Authority, VA
(Dominion Terminal Association Project) - Series 1987D
LOC Barclays Bank 07/01/16 4.15 200,000 P1 A1+
250,000 Peninsula Port Authority, VA
(Dominion Terminal Association Project) - Series 1987C
LOC National Westminster Bank PLC 07/01/16 4.10 250,000 VMIG-1
200,000 Peninsula Port Authority, VA (Zeigler Coal Project) - Series 1997
LOC Bank of America 05/01/22 4.25 200,000 A1+
150,000 Petersburg Virginia Hospital (Hospital Facilities - Southside)
LOC First Union National Bank 07/01/17 4.10 150,000 A1
145,000 Puerto Rico Ana Mendez University System Project
(Industrial Tourist Education)
LOC Banco Santander 10/01/21 3.20 145,000 A1+
</TABLE>
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See Notes to Financial Statements.
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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>
$ 260,000 Richmond, VA IDA RB (Virginia Union University Project)
LOC Nationsbank 08/01/19 4.00% $ 260,000 A1+
150,000 Virginia College Building Authority (University of Richmond Project) 11/01/26 3.60 150,000 VMIG-1
----------- -----------
2,455,000 Total Other Variable Rate Demand Instruments 2,455,000
----------- -----------
<CAPTION>
Tax Exempt Commercial Paper (4.82%)
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<S> <C> <C> <C> <C> <C> <C>
$ 150,000 Puerto Rico Government Development 10/15/98 3.10% $ 150,000 A1+
----------- -----------
150,000 Total Tax Exempt Commercial Paper 150,000
----------- -----------
Total Investments (99.91%) (Cost $3,111,203+) 3,111,203
Cash and Other Assets, Net of Liabilities (0.09%) 2,756
-----------
Net Assets (100.00%) $ 3,113,959
===========
Net Asset Value, offering and redemption price per share:
Class A Shares, 3,113,959 Shares Outstanding (Note 3) $ 1.00
===========
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
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See Notes to Financial Statements.
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VIRGINIA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
SEPTEMBER 30, 1998
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FOOTNOTES:
(a) The ratings noted for variable rate demand instruments are those of the
bank whose letter of credit secures such instruments or guarantor of the
bond. P1 and A1+ are the highest ratings assigned for tax exempt commercial
paper.
(b) Securities that are not rated have been determined by the Fund's Board of
Directors to be of comparable quality to the rated securities in which the
Fund may invest.
(c) Securities payable on demand at par including accrued interest (usually
with seven days notice) and where indicated are 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.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
COPS = Certificates of Participation LOC = Letter of Credit
GO = General Obligation RB = Revenue Bond
IDA = Industrial Development Authority
</TABLE>
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See Notes to Financial Statements.
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VIRGINIA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF OPERATIONS
JULY 14, 1998 (COMMENCEMENT OF SALES) THROUGH SEPTEMBER 30, 1998
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<TABLE>
<CAPTION>
INVESTMENT INCOME
Income:
<S> <C>
Interest.............................................................. $ 22,972
--------------
Expenses: (Note 2)
Investment management fee............................................. 2,689
Administration fee.................................................... 1,411
Distribution fee...................................................... 1,680
Custodian expenses.................................................... 275
Shareholder servicing and related shareholder expenses................ 381
Legal, compliance and filing fees..................................... 12,064
Audit and accounting.................................................. 19,810
Directors' fees....................................................... 6,012
Organization costs.................................................... 34,120
Other................................................................. 794
--------------
Total expenses...................................................... 79,236
Less: Fees waived (Note 2).......................................... ( 4,100)
Expense paid indirectly (Note 2)............................. ( 2,011)
Expenses reimbursed (Note 2).................................. ( 68,084)
--------------
Net expenses........................................................ 5,041
--------------
Net investment income..................................................... 17,931
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments.................................... -0-
--------------
Increase in net assets from operations..................................... $ 17,931
==============
</TABLE>
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See Notes to Financial Statements.
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VIRGINIA DAILY MUNICIPAL INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
July 14, 1998
(Commencement of Sales)
through
September 30, 1998
------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
<S> <C>
Net investment income...................................... $ 17,931
Net realized gain (loss) on investments.................... -0-
-------------
Increase in net assets from operations......................... 17,931
Dividends to shareholders from net investment income:
Class A.................................................... ( 17,931)*
Capital share transactions (Note 3)
Class A.................................................... 3,013,959
-------------
Total increase (decrease)................................ 3,013,959
Net assets:
Beginning of period........................................ 100,000
-------------
End of period.............................................. $ 3,113,959
=============
* Designated as exempt-interest dividends for federal income tax purposes.
</TABLE>
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See Notes to Financial Statements.
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VIRGINIA DAILY MUNICIPAL INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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1. Summary of Accounting Policies.
Virginia Daily Municipal Income Fund, Inc. is a no-load, non-diversified,
open-end management investment company registered under the Investment Company
Act of 1940. This 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. Class
specific expenses of the Fund were limited to distribution fees and transfer
agent expenses. In all other respects the Class A and Class B shares represent
the same interest in the income and assets of the Fund. As of September 30, 1998
there were no class B shares outstanding. 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), equal to .40% of the Fund's
average daily net assets.
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VIRGINIA DAILY MUNICIPAL INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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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 the Distribution and Service Plan adopted under Securities and
Exchange Commission Rule 12b-1, the Fund and Reich & Tang Distributors, Inc.,
(the Distributor), an affiliate of the Manager, have entered into a Distribution
Agreement and a Shareholder Servicing Agreement, only with respect to its Class
A shares. For its services under the Shareholder Servicing Agreement, the
Distributor receives from the Fund, only with respect to its Class A shares a
service fee equal to .25% of the Fund's average daily net assets.
For the period ended September 30, 1998 the Manager voluntarily waived
investment management fees and administration fees of $2,689 and $1,411,
respectively. In addition, although not required to do so, the Manager has
agreed to reimburse expenses amounting to $68,084.
Included under the caption "Custodian expenses" and "Audit and accounting" are
expense offsets of $2,011.
Fees are paid to Trustees who are unaffiliated with the Manager on the basis of
$1,000 per annum plus $250 per meeting attended.
3. Capital Stock.
At September 30, 1998, an 20,000,000,000 of shares of $.001 par stock were
authorized and capital paid in amounted to $3,113,959. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
July 14, 1998
(Commencement of Sales)
through
September 30, 1998
------------------
Class A
<S> <C>
Sold.................................... 3,000,000
Issued on reinvestment of dividends..... 13,959
Redeemed................................ -0-
------------
Net increase (decrease)................. 3,013,959
============
</TABLE>
4. Concentration of Credit Risk.
The Fund invests primarily in obligations of political subdivisions of the State
of Virginia and, accordingly, is subject to the credit risk associated with the
non-performance of such issuers. Approximately 61% 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.
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<TABLE>
<CAPTION>
5. Financial Highlights.
July 14, 1998
Class A (Commencement of Sales)
- ------- September 30, 1998
------------------
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..................................... 0.006
Less distributions:
Dividends from net investment income...................... ( 0.006)
----------
Net asset value, end of period................................ $ 1.00
==========
Total Return.................................................. 2.70%*
Ratios/Supplemental Data
Net assets, end of period (000)............................... $ 3,114
Ratios to average net assets:
Expenses (net of fees waived and expenses reimbursed)..... 1.05%*
Net investment income..................................... 2.67%*
Management and administration fees waived................. 0.61%*
Expenses reimbursed....................................... 10.13%*
Expense offsets........................................... 0.30%*
* Annualized
</TABLE>
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VIRGINIA DAILY MUNICIPAL INCOME FUND, INC.
INDEPENDENT AUDITOR'S REPORT
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The Board of Directors and Shareholders
Virginia Daily Municipal Income Fund, Inc.
We have audited the accompanying statement of net assets of Virginia Daily
Municipal Income Fund, Inc. as of September 30, 1998, and the related statement
of operations, the statement of changes in net assets, and the financial
highlights for period from July 14, 1998 (Commencement of sales) to September
30, 1998. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit 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 September 30, 1998,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides 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
Virginia Daily Municipal Income Fund, Inc. as of September 30, 1998, the results
of its operations, the changes in its net assets and the financial highlights
for the period from July 14, 1998 to September 30, 1998, in conformity with
generally accepted accounting principles.
\s\McGladrey & Pullen, LLP
New York, New York
October 16, 1998
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VIRGINIA
DAILY
MUNICIPAL
INCOME
FUND, INC.
Annual Report
September 30, 1998
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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.
- -----------------------------------------------------
Virginia 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
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