<PAGE>
- --------------------------------------------------------------------------------
Reich & Tang 600 FIFTH AVENUE, NEW YORK, N.Y. 10020
EQUITY FUND, INC. (212) 830-5200
================================================================================
January 19, 1999
Dear Shareholder:
The year just ended was certainly a wild one with an unprecedented level of
volatility and a record disparity of performance between an elite group of the
largest companies and the rest of the investment universe, which lagged well
behind. Against this backdrop the results of the Reich & Tang Equity Fund ended
the year positive due to the strong recovery experienced during the fourth
quarter. On the heels of a sizable decline in the third quarter, the subsequent
rebound was the best three months ever for the Equity Fund and the best in 12
years for the market overall. In the quarter, the Reich & Tang Equity Fund was
up 22.0%, exceeding the returns of both the Russell Mid Cap Index and the
Russell Small Cap 2000 Index as well. This more than offset the significant
decline experienced in the third quarter and left the full year's return at a
positive 2.6%. While this trailed the mid cap indices, it showed a marked
improvement as the actions we undertook in the second half of the year are
beginning to have an impact. We have worked diligently to upgrade the portfolio
by eliminating those long standing holdings that had failed to reach their
original potential. We have chosen to replace those positions with our most
active new-additions effort in years. Over the course of 1998, 19 new names were
added in a move to improve the quality of the opportunities within the
portfolio.
The Fund's net asset value on December 31, 1998 was $14.56 per share after
accounting for a quarterly distribution of $3.0917 per share, comprised of
$0.0123 in current dividends, and $3.0794 in long-term capital gains.
As the market showed amazing resilience and shrugged off the malaise of the
third quarter, we saw a sharp recovery in stock prices after an early bottom in
October. By becoming more concentrated in our best ideas when prices were
depressed, we fully participated in the rally and saw significant rebounds in
the prices of our positions, especially those names we aggressively added to.
Over the last three months the ten best performing holdings rose on average 43%
led by Wang Labs (+53%), Shaw Industries (+49%) and CommScope (+45%). Another
key contributor was First Brands (+70%), our best performing stock in the
quarter. Although just added to the portfolio in the third quarter at under $20,
it led the way due to the Clorox takeover announced in October at $39. Just as
with Camco earlier this year, the attractiveness of many of our companies, due
to their strong market niches and free cash flow, keeps the corporate buyers
coming back again and again. Scientific-Atlanta was another excellent example of
capturing profits during the quarter. While the stock price was nearly flat for
the quarter, it actually did a round trip, falling 40% on the second of October
where we more than doubled the size of our previously small holding. Only three
months later we saw a full recovery, as by year end their share price was up 90%
from the low point where we bought our shares.
The year was a very active one with much higher turnover then normal for the
Fund. The driver was the extreme price volatility of individual securities
throughout the year. The key to the year's strong finish was the willingness to
step up and buy the most attractive companies in the industries we know the best
at the cheapest prices in years. We try to take advantage of the opportunities
as they present themselves and this paid off well come the fourth quarter. But
this is all history.
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<PAGE>
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What does all this mean going forward? The last few years have been quite
frustrating, as the larger capitalization stocks continue to outperform all
other asset classes. Even the slowdown of corporate profit growth to minimal
levels in 1998 didn't keep the large cap dominated market from steamrolling to
another boom year. This marks the fourth straight year the largest cap stocks
have led the way. This year they left the smaller cap universe completely in the
dust as the relative performance discrepancy was at a 20-year record, with the
S&P 500 Index outperforming the Russell 2000 by over 31 percentage points in
1998. Despite very modest earnings gains, on average the largest companies saw
over a 20% P/E expansion while the smaller companies suffered an overall P/E
contraction. So now the P/E gap is also at record levels.
Even more surprising is how the market treated its favored sons and daughters
when they disappointed the world with less than expected earnings throughout the
year. The three most popular culprits, Coca-Cola, Gillette, and Disney, all
reported lower earnings than expected and despite the shortfalls these three
companies, on average, traded at a 41 multiple of their current earnings. So
with little if any earnings growth in 1998 and projected for 1999, these
companies trade at three times the multiple of our top holdings which have
greater than 10% annual earnings growth in the same two-year period.
Perhaps at this stage it makes sense to reiterate some of the core principles of
the Reich & Tang approach to investment management. Despite the wide-swinging
gyrations in the marketplace, we remain steadfast in our adherence to some basic
principles and beliefs. These include targeting the smaller and mid sized
domestic companies, those between $500 million and $5 billion in capitalization.
Our investment horizon is decidedly long-term with an average holding period of
three years. We believe deeply in concentrating on the underlying business
dynamics of the individual companies. To do that properly, we must emphasize our
own extensive original research as we focus on neglected, misunderstood or
ignored companies. We must clearly understand not only the available
opportunity, but also the inherent risks in any investment we contemplate.
Valuations are critical in this process and while not rigidly defined by
formula, they are driven by current and expected cash flow, earnings, and
returns on assets for the enterprise.
We search for companies that can achieve sustainable earnings growth in the low
to mid teens. We will find these opportunities in the nooks and crannies ignored
by others due to the size or complexity of the idea or its inherent lack of
appeal. We must stick to what we know, know it well, and accept that this may
leave us out of the hot concept du jour. We have to be disciplined sellers,
based not only on price targets but also on an objective appraisal of company
progress, recognizing changing fundamentals and acting upon them. In this
endeavor, we have shown improvement. Our recent aggressive purging of stagnant
ideas from the portfolio is an acknowledgment of that shortcoming. All five
analyst/managers on our staff perform both hands-on research as generalists and
the portfolio decision making, which is a matter of individual conviction
augmented by input from one's experienced colleagues.
Not surprisingly our best efforts alone will not lead to superior performance.
The recent run up of larger cap stocks to the downright exclusion of all other
shares has been a difficult period for any smaller cap manager. Recent bouts of
extreme volatility only serve to reinforce our deep-seated belief that we must
stick to our knitting. Obviously, there is room to improve our execution in
appraising our ideas and with recent efforts we believe the necessary
adjustments are being made to refine our decision making. However, we have no
intention of abandoning our core beliefs. We remain confident that just as
smaller cap stocks had their multiyear run on several occasions over the last 20
years, the tide will shift to a more level playing field and we will be there.
In the meantime, improvement in our own process and execution will serve us well
regardless of the investment environment.
It is not surprising that as value-driven investors we continue to focus on
smaller cap companies even as they float farther out of the investing
mainstream. As long as other investors remain unwilling to recognize superior
growth at discount prices, we will continue to take advantage of the obvious
- --------------------------------------------------------------------------------
<PAGE>
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discrepancy. Furthermore, with as many questions remaining unanswered at the end
of 1998, as there were at the beginning of the year, we remain convinced that
concentrating on a limited number of special situations is essential. Targeting
those strong companies that remain misunderstood and underappreciated should
provide acceptable appreciation in a frenetic environment, while still earning
positive performance if we revert back to more normal returns like those seen
before this unprecedented run.
In summary, 1998 was a very active year marked by more new additions to the
portfolio then any other year in the Fund's history. The opportunities in the
smaller cap end of the market remain extremely attractive and we remain
diligent, focused and aggressive in our efforts to uncover the best potential
ideas. Our goal is adding value without undue risk in an overall market
environment that seems frothy, speculative, and unsustainable at the high
capitalization end and throughout the high tech fringes. We look forward to the
challenges ahead.
Sincerely,
\s\Richard E. Smith III
Richard E. Smith III
Chairman
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<PAGE>
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<TABLE>
<CAPTION>
REICH & TANG EQUITY FUND, INC.
Performance Comparison Chart
Comparison of change in value of $10,000 investment in Reich & Tang
Equity Fund, Inc. and the S & P 500 Index
The chart below represents the omitted graph.
INCEPTION S & P 500 R & T Equity
<S> <C> <C>
01/01/89 10,000.00 10,000.00
12/31/89 13,169.00 11,787.00
12/31/90 12,762.00 11,099.00
12/31/91 16,644.00 13,658.00
12/31/92 17,909.00 15,890.00
12/31/93 19,712.00 18,084.00
12/31/94 19,973.00 18,390.99
12/31/95 27,478.00 23,568.00
12/31/96 33,787.00 27,545.00
12/31/97 45,060.00 31,337.00
12/31/98 57,937.00 32,142.00
<CAPTION>
Past performance is not predictive of future performance.
- ---------------------------------------------------------------------------------------------------
Average Annual Returns
- ----------------------------------------------- ---------------------------------------------------
Since Inception
One Year Five-Year Ten-Year 1/9/85
----------------- ---------------- -------------- -------------------
<S> <C> <C> <C> <C>
Reich & Tang Equity Fund 2.57% 12.19% 12.38% 14.39%
S & P 500 Index 28.58% 24.06% 19.21% 18.93%
- ----------------------------- ----------------- ---------------- -------------- -------------------
</TABLE>
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<PAGE>
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REICH & TANG EQUITY FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ------
Common Stocks (94.49%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace/Defense (2.84%)
Sundstrand Corporation 31,000 $ 1,608,125
--------------
Apparel (0.72%)
Fruit of the Loom, Inc.* 29,400 406,088
--------------
Auto Original Equipment (0.74%)
OEA Inc. 35,200 415,800
--------------
Auto Parts - Replacements (2.10%)
Federal - Mogul Corporation 20,000 1,190,000
--------------
Business Equipment & Supplies (6.47%)
Reynolds & Reynolds 125,000 2,867,188
Unisource Worldwide, Inc. 110,000 797,500
--------------
3,664,688
--------------
Communications Equipment (7.40%)
CommScope Inc.* 150,000 2,521,875
Scientific-Atlanta Inc. 73,000 1,665,312
--------------
4,187,187
--------------
Computer and Computer Services (6.65%)
Policy Management Systems* 20,000 1,010,000
Wang Laboratories, Inc.* 99,600 2,757,675
--------------
3,767,675
--------------
Consumer Durables (1.45%)
Harman International 21,500 819,687
--------------
Consumer Non-Durables (2.84%)
Lancaster Colony Corporation 50,000 1,606,250
--------------
Converted Paper Products (4.49%)
Sonoco Products Company 67,920 2,012,130
Wausau-Mosinee Paper Corp. 30,000 530,625
--------------
2,542,755
--------------
Drugs (1.19%)
Rexall Sundown* 48,500 675,968
--------------
Electrical Equipment (2.04%)
Magnetek Inc.* 100,000 1,156,250
--------------
Electronics (2.60%)
General Semiconductor Inc.* 180,000 1,473,750
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Staatements
<PAGE>
- --------------------------------------------------------------------------------
REICH & TANG EQUITY FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ------
Common Stocks (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Energy (2.70%)
Kerr-McGee Corporation 40,000 $ 1,530,000
---------------
Food Processing (1.16%)
Universal Foods Corp. 24,000 658,500
---------------
Grocery (1.31%)
Food Lion, Inc. Class A 70,000 743,750
---------------
Homebuilding (2.33%)
Walter Industries* 86,000 1,316,875
---------------
Home Furnishings (3.64%)
Shaw Industries 85,000 2,061,250
---------------
Industrial Products (5.39%)
Albany International 30,906 585,282
BMC Industries Inc. 75,000 468,750
GenCorp 22,000 548,625
UNOVA Inc.* 79,900 1,448,188
---------------
3,050,845
---------------
Industrial Services (3.23%)
Harsco Corp. 60,000 1,826,250
---------------
Insurance (Prop/Casualty) (2.16%)
Trenwick Group Inc. 37,500 1,223,438
---------------
Machinery (6.95%)
Roper Industries Inc. 55,000 1,120,625
York International Corp. 69,000 2,816,063
---------------
3,936,688
---------------
Medical Supplies & Equipment (2.35%)
St. Jude Medical Inc.* 48,000 1,329,000
---------------
Newspaper (2.42%)
Lee Enterprises, Inc. 43,500 1,370,250
---------------
Packaging & Containers (3.96%)
Ball Corporation 49,000 2,241,750
---------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Staatements
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ------
Common Stocks (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Precision Instruments (8.28%)
Snap-On Tools Corp. 44,000 $ 1,531,750
Teleflex Inc. 37,000 1,688,125
Varian Associates 38,700 1,465,763
-------------
4,685,638
-------------
Retail Store (1.47%)
Nine West Group Inc.* 53,500 832,594
-------------
Specialty Chemicals (1.20%)
International Specialty Products* 50,000 678,125
-------------
Steel (General) (2.69%)
Allegheny Teledyne, Inc. 74,500 1,522,593
-------------
Textiles (1.72%)
Burlington Industries Inc.* 88,500 973,500
-------------
Total Common Stocks (Cost $41,318,191) $ 53,495,269
-------------
Face
Amount
------
<CAPTION>
Short-Term Investments (8.33%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements (8.33%)
Morgan (J.P.) Securities Inc., 4.75%, due 01/04/99 (Collateralized by $2,836,000,
U.S. Treasury Bond, 11.250%, due 02/15/15) $4,717,000 $ 4,717,000
-------------
Total Short-Term Investments (Cost $4,717,000) $ 4,717,000
-------------
Total Investments (102.82%) (Cost $46,035,191+) 58,212,269
Liabilities in Excess of Cash and Other Assets (-2.82%) ( 1,596,293)
-------------
Net Assets (100.00%) 3,889,574 shares outstanding (Note 3) $ 56,615,976
=============
Net asset value, offering and redemption price per share $ 14.56
=============
* Non-income producing.
+ Aggregate cost for federal income tax purposes is $46,207,239. Aggregate
unrealized appreciation and depreciation are, based on cost for Federal
income tax purposes, $13,464,708 and $1,459,678 respectively.
</TABLE>
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See Notes to Financial Staatements
<PAGE>
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REICH & TANG EQUITY FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Dividends...................................................................... $ 946,064
Interest....................................................................... 137,180
---------------
Total income.............................................................. 1,083,244
---------------
Expenses: (Note 2)
Investment management fee...................................................... 586,073
Administration fee............................................................. 146,518
Distribution expenses.......................................................... 11,235
Custodian fees................................................................. 11,181
Shareholder servicing and related shareholder expenses......................... 43,870
Legal, compliance and filing fees.............................................. 18,839
Audit and accounting........................................................... 35,459
Directors' fees and expenses................................................... 12,040
Other.......................................................................... 3,262
---------------
Total expenses............................................................ 868,477
---------------
Net investment income............................................................. 214,767
---------------
<CAPTION>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain on investments.................................................. 9,882,217
Net change in unrealized appreciation (depreciation) of investments............... ( 9,072,161)
---------------
Net gain on investments........................................................ 810,056
---------------
Increase in net assets from operations............................................ $ 1,024,823
===============
</TABLE>
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See Notes to Financial Staatements
<PAGE>
- --------------------------------------------------------------------------------
REICH & TANG EQUITY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
================================================================================
<TABLE>
<CAPTION>
1998 1997
----------- ----------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income........................................................$ 214,767 $ 516,508
Net realized gain on investments............................................. 9,882,217 14,165,978
Net change in unrealized appreciation (depreciation) of investments..........( 9,072,161) ( 2,380,486)
---------------- ----------------
Increase in net assets from operations....................................... 1,024,823 12,302,000
Distributions from:
Net investment income........................................................( 214,919) ( 516,546)
Net realized gain on investments.............................................( 9,882,217) ( 14,163,425)
In excess of net realized gain...............................................( 168,629) --
Capital share transactions (Note 3)............................................( 22,696,457) ( 369,108)
---------------- ----------------
Total increase (decrease)....................................................( 31,937,399) ( 2,747,079)
Net Assets:
Beginning of year............................................................ 88,553,375 91,300,454
---------------- ----------------
End of year .................................................................$ 56,615,976 $ 88,553,375
================ ================
</TABLE>
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See Notes to Financial Staatements
<PAGE>
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REICH & TANG EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Summary of Accounting Policies.
Reich & Tang Equity Fund, Inc. is a no-load, diversified, open-end management
investment company registered under the Investment Company Act of 1940. The
investment objective of the Fund is to seek growth of capital by investing
primarily in equity securities which management of the Fund believes to be
undervalued. Its financial statements are prepared in accordance with generally
accepted accounting principles for investment companies as follows:
a) Valuation of Securities -
Securities traded on a national securities exchange or admitted to trading
on the National Association of Securities Dealers Inc. Automated Quotations
National List are valued at the last reported sales price on the last
business day of the fiscal period. Common stocks for which no sale was
reported on that date and over-the-counter securities, are valued at the
mean between the last reported bid and asked prices. United States
Government obligations and other debt instruments having sixty days or less
remaining until maturity are stated at amortized cost. Debt instruments
having a remaining maturity of more than sixty days will be valued at the
highest bid price obtained from a dealer maintaining an active market in
that security or on the basis of prices obtained from a pricing service
approved as reliable by the Board of Directors. All other investment
assets, including restricted and not readily marketable securities, are
valued in such manner as the Board of Directors in good faith deems
appropriate to reflect their fair market value.
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 taxable income to its shareholders. Therefore, no provision for
federal income tax is required.
c) 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.
d) General -
Securities transactions are recorded on the trade date basis. Interest
income is accrued as earned and dividend income is recorded on the
ex-dividend date. Realized gains and losses from securities transactions
are recorded on the identified cost basis. Dividends and capital gain
distributions to shareholders, which are determined in accordance with
income tax regulations, are recorded on the ex-dividend date. Distributions
which exceed net realized capital gains for financial reporting purposes
but not for tax purposes are reported as distributions in excess of net
realized gains and are primarily due to differing treatments for deferral
of wash sales. It is the Fund's policy to take possession of securities as
collateral under repurchase agreements and to determine on a daily basis
that the value of such securities plus accrued interest are sufficient to
cover the value of the repurchase agreements.
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<PAGE>
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================================================================================
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") equal to .80% of the
Fund's average daily net assets. Effective February 1, 1999 through July 31,
1999, the Manager has voluntarily agreed to reduce its fee to .60% of the Fund's
average daily net assets.
Pursuant to an Administrative Services Agreement, the Fund pays to the Manager
an annual fee of .20% of the Fund's average daily net assets.
Pursuant to a Distribution and Service Plan adopted under Securities and
Exchange Commission Rule 12b-1, the Fund may pay certain costs associated with
the distribution of the Fund's shares subject to a limit of 0.05% of the Fund's
average net assets.
Brokerage commissions paid during the year to Reich & Tang Distributors, Inc.
amounted to $27,866.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$2,000 per annum plus $500 per meeting attended.
Included in the statement of operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $36,672 paid to Reich & Tang
Services, L.P. an affiliate of the Manager as servicing agent for the Fund.
3. Capital Stock.
At December 31, 1998 100,000,000 shares of $.001 par value stock were authorized
and capital paid in amounted to $44,610,946. Transactions in capital stock were
as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
------------------------------- -------------------------------
Shares Amount Shares Amount
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Sold........................................ 3,023,076 $51,191,834 3,012,372 $57,159,466
Issued on reinvestment of dividends......... 603,572 8,811,830 767,092 13,280,049
Redeemed.................................... ( 4,869,968) ( 82,700,121) ( 3,690,748) ( 70,808,623)
------------ ----------- ------------ -----------
Net increase (decrease)..................... ( 1,243,320) ($22,696,457) 88,716 ($ 369,108)
============ =========== ============ ===========
</TABLE>
4. Investment Transactions.
Purchases and sales of investment securities, other than short-term investments,
totaled $32,340,560 and $66,496,782, respectively.
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<PAGE>
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REICH & TANG EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
5. Financial Highlights.
Year Ended December 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Per Share Operating Performance
(for a share outstanding throughout the year)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year. $ 17.25 $ 18.10 $ 17.73 $ 15.39 $ 17.61
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income.............. 0.05 0.11 0.15 0.22 0.24
Net realized and unrealized
gains (losses) on investments... 0.39 2.38 2.83 4.10 0.05
--------- --------- --------- --------- ---------
Total from investment operations... 0.44 2.49 2.98 4.32 0.29
--------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income ( 0.05) ( 0.11) ( 0.15) ( 0.22) ( 0.24)
Distributions from net realized gains ( 3.03) ( 3.23) ( 2.46) ( 1.76) ( 2.27)
In excess of net realized gain..... ( 0.05) -- -- -- --
--------- --------- --------- --------- ---------
Total distributions................ ( 3.13) ( 3.34) ( 2.61) ( 1.98) ( 2.51)
--------- --------- --------- --------- ---------
Net asset value, end of year....... $ 14.56 $ 17.25 $ 18.10 $ 17.73 $ 15.39
========= ========= ========= ========= =========
Total Return....................... 2.6% 13.8% 16.9% 28.2% 1.7%
Ratios/Supplemental Data
Net assets, end of year (000)...... $ 56,616 $ 88,553 $ 91,300 $ 112,333 $ 90,639
Ratios to average net assets:
Expenses........................ 1.19% 1.21%(a) 1.22%(a) 1.15% 1.17%
Net investment income........... 0.29% 0.56% 0.79% 1.21% 1.35%
Portfolio turnover rate............ 45.79% 29.59% 31.70% 27.69% 25.80%
(a) Includes expenses paid indirectly, equivalent to .01% of average net assets.
</TABLE>
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<PAGE>
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REICH & TANG EQUITY FUND, INC.
INDEPENDENT AUDITOR'S REPORT
================================================================================
The Board of Directors and Shareholders
Reich & Tang Equity Fund, Inc.
We have audited the accompanying statement of net assets of Reich & Tang Equity
Fund, Inc. as of December 31, 1998 and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998 by correspondence with the custodian and brokers. 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 Reich
& Tang Equity Fund, Inc. as of December 31, 1998, the results of its operations,
the changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles.
\s\McGladrey & Pullen, LLP
New York, New York
January 29, 1999
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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.
- ------------------------------------------------------
Reich & Tang Equity 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
RTE1298AN
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<PAGE>
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Reich & Tang
EQUITY FUND, INC.
Annual Report
December 31, 1998
- --------------------------------------------------------------------------------
<PAGE>
