<PAGE>
- --------------------------------------------------------------------------------
Reich & Tang 600 FIFTH AVENUE, NEW YORK, N.Y. 10020
EQUITY FUND, INC. (212) 830-5200
================================================================================
January 19, 2000
Dear Shareholder:
This was by far the most frustrating period for a smaller-capitalization value
investor in the entire decade. As the well-publicized indices rolled to record
levels day after day, the vast majority of companies were left behind, including
many of our holdings. After earning stellar returns in the first six months, our
investment portfolio delivered second half performance plagued by declining
stock prices, regardless of the companies' underlying fundamental outlook. We
have seen two-tiered markets before, but never with the current magnitude of the
differential between the favored and the ignored. In the fourth quarter the
Reich & Tang Equity Fund gained 0.7% while the relevant indices appreciated on
average 17% in just three months. A breakdown of the Russell Midcap Index helps
illustrate the bifurcation in the market. While the Russell Midcap Growth Index
was up 51% for the year, and 39% for the quarter, the value component was up
only 3.8% in the quarter and ended the year down 0.1%.
The Fund's net asset value on December 31, 1999 was $11.54 per share after
accounting for a quarterly distribution of $3.0192 per share, comprised of
$0.0007 in income dividends, $0.5385 in short term capital gains and $2.48 in
long-term capital gains.
The year just ended was marked by the greatest one-year return in any major
investment index in the US markets in the 20th century, with the NASDAQ
composite up 86%. Unfortunately we (smaller cap value) were not invited to the
rousing millennium-ending party. While the broad indices were driven to record
levels by unprecedented runs in a handful of the largest technology players, and
the floodgates opened with countless Internet IPO one-day wonders, we, on the
other hand, saw our worst six-month relative performance versus the Russell
Midcap since the second half of 1993, trailing it by an even greater sum than we
outperformed it in the second quarter of the year.
We have once again used this period to purchase the shares of the best available
opportunities in the expectation that this rift cannot continue and that the
rationale for praising a small subset of companies at the expense of all others
is unsustainable and reversible. While we had our share of setbacks in the
quarter, led by the earnings shortfalls announced by York International, Policy
Management Systems, Steris Corp., Department 56 Inc., and Walter Industries, we
were able to cull further from the list of less attractive opportunities and
focus our dollars on the most egregious valuation discrepancies among the
attractive, vibrant businesses in our universe. We have pushed the top ten to
higher levels and have removed several longstanding laggards from the portfolio
as a result.
Our intention is to continue to upgrade the portfolio as we have done since
mid-1998, when we first saw a series of abbreviated cycles of rapid price
declines followed by quick rallies in our stocks. The lack of predictability on
the turning point has been proven repeatedly and we must prepare the portfolio
to participate fully in the next revaluation opportunity. This requires us to
continue to take advantage of the unsustainable dichotomy in corporate
valuations.
For the year, we added a large number of new names, 29, while eliminating 26. As
we remained fully invested for most of the year, our turnover was higher than
normal. Our best performing ideas included Nine West, Unisource Worldwide and
Varian, Inc. this year and MSC Industrial Direct, Varian Medical and Harman
International during the quarter. While the worst laggards for the year were
Burlington Industries, Fruit of the Loom and Walter Industries, we suffered a
greater setback as eight of our top holdings in 1999 showed exceptional earnings
growth, up 18% on average, but the share declined in price last year. With
continued double-digit growth expected in 2000, while these shares trade at 11x
current year earnings, negative returns from these holdings penalized
performance significantly.
Indications of how much of a frenzy has taken place in the Internet world can
best be seen from C-Cor, a small provider of cable television transmission
equipment. One year ago this company had sales of $170M and a valuation of $125M
and was viewed as a capable manufacturer of transmission devices. In just one
year its value has risen tenfold and the company is now valued at over one and a
quarter billion dollars. What could explain such a miraculous transformation?
Of course it lies in their acquisition of a money-losing operation that allowed
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
them to change their name to C-Cor.Net. As a result of the deal they now have
lower earnings than before along with the promise of owning a provider of
Internet-enabling technical services, but are now valued at a multiple of 77
times the reduced income total. The company's total value has increased over one
billion dollars, fueled by the cachet of being an Internet player. It is to no
one's surprise that we are perplexed by such sudden and grossly overdone
increases in the value of select companies. Equally bothersome, we remain hugely
frustrated as investments we have made in a number of companies remain
completely ignored even in instances where those companies have considerable
participation in the "new economy", such as Reynolds and Reynolds and Modis
Professional Services. We are not blind to the changing world but we cannot
rationalize that the principles of profitable growth should be violated on a
permanent basis to justify the bubble that has taken place in the
technology-driven investment arena today.
Another vivid example of the blindness caused by the Internet is the recent ride
of Lands' End, a former holding of ours. The market spent 1998 focusing on the
lack of growth in their core apparel catalog business and the bloated
inventories they had accumulated during the year. Its valuation had bottomed in
the fourth quarter of that year at around $15. But the magic elixir of the
Internet cures all that ails a company and soon after reaching bottom, the word
began to spread that LE was in fact a major beneficiary of the Net
transformation of retail as we all know it. They were viewed no longer as a
dowdy purveyor of conservative clothes but as an e-commerce marketplace leader
all the world could envy. This helped push their shares into uncharted territory
as the stock peaked at $84 just one year later. With the recent report that
sales have declined 18% in the first half of the holiday season, the
transformation of LE remains unclear and the supporters of the stock have
dropped it faster than Newton's apple, to $32 currently, a 62% drop in just two
months. This may be just an isolated example but we believe the episode does
prove the levels to which people can get temporarily carried away with their own
hype, and the violent declines that follow.
Despite such flagrant examples of market excess we cannot rationalize our recent
performance in these terms only. We have fallen short of our own abilities to
deliver the consistent, superior returns that our clients expect and deserve. In
view of the changed environment, we have taken considerable time to review our
approach, objectives, and implementation in trying to add value in such a
topsy-turvy world. In fact it was this examination of recent and long-term
actions that formed the basis for our thesis this quarter entitled "Lessons
Learned in the 1990's". After considerable discussion and debate we have come to
realize that our process is not archaic and our structure is not obsolete but
our decision-making can and will be the focus of improvement. We affirm our
collective belief in our investment philosophy, but our self-examination process
helped us to identify some flaws in execution. We have set the course for better
implementation of the ideas we uncover and better management of the investments
we already own. We need to recognize that the markets are more demanding of
companies and less forgiving of mistakes. So, while we intend to stay true to
our belief in long-term investments backed by original fundamental research to
uncover superior unrecognized smaller enterprises, we must be more effective in
timing and sizing these commitments in order to deliver better returns to our
clients.
Certainly, these are the times that test our investment souls. While others have
not just ignored risk but embraced it with all their might, WE CAN NOT. The gold
rush mentality of the Internet world is undeniably exciting, but the question
remains the sustainability of unprecedented valuations achieved by unprofitable,
cash-gorging companies with unproven concepts and untested management. The
viability of too many of these players is extremely suspect and we believe that
reckoning day will soon be here. Our role, however, is not to play Chicken
Little but to recognize the disparity in company valuations and to focus on what
makes long-term sense, and to us that means profitable, cash-generating, growing
companies that are self-funded, leaders in their respective niches, which are
improving their returns and for now are languishing in their valuations within a
frenzied euphoria called the market.
Sincerely,
\s\Richard E. Smith III \s\Steven M. Wilson
Richard E. Smith III Steven M. Wilson
Chairman President
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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>
01/01/90 10,000.00 10,000.00
12/31/90 9,691.00 9,417.00
12/31/91 12,638.00 11,587.00
12/31/92 13,599.00 13,481.00
12/31/93 14,968.00 15,342.00
12/31/94 15,166.00 15,603.00
12/31/95 20,865.00 19,996.00
12/31/96 26,656.00 23,369.00
12/31/97 34,215.00 26,587.00
12/31/98 43,993.00 27,270.00
12/31/99 53,250.00 27,367.00
<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 0.36% 11.89% 10.66% 13.40%
S & P 500 Index 21.04% 28.56% 18.20% 19.07%
- ----------------------------------- ---------------- ---------------- -------------- -----------------------
Past performance is not predictive of future performance.
</TABLE>
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<PAGE>
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REICH & TANG EQUITY FUND, INC.
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ------
Common Stocks (99.40%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Apparel (4.52%)
Jones Apparel Group, Inc.* 57,000 $ 1,546,125
--------------
Auto Original Equipment (0.89%)
OEA Inc.* 62,500 304,688
--------------
Business Equipment & Supplies (5.26%)
Reynolds & Reynolds 80,000 1,800,000
--------------
Business Services (3.75%)
Modis Professional Services* 90,000 1,282,500
--------------
Chemicals - Diversified (2.84%)
Cabot Corporation 25,000 509,375
OMNOVA Solutions 59,500 461,125
--------------
970,500
--------------
Chemicals - Specialty (2.15%)
International Specialty Products* 80,000 735,000
--------------
Computers Software and Services (2.39%)
Policy Management Systems* 32,000 818,000
--------------
Diversified Manufacturing (3.81%)
Carlisle Companies Inc. 11,000 396,000
GenCorp 31,500 311,062
Teleflex Inc. 19,000 594,938
--------------
1,302,000
--------------
Drugs (1.60%)
Rexall Sundown* 53,000 548,219
--------------
Educational Services (0.90%)
ITT Educational Services, Inc.* 20,000 308,750
--------------
Electronics (5.58%)
Harman International 34,000 1,908,250
--------------
Electronic Components (1.29%)
General Semiconductor Inc.* 31,000 439,813
--------------
Food Processing (3.52%)
Universal Foods Corp. 59,000 1,202,125
--------------
Giftware & Houseware (1.32%)
Department 56 Inc.* 20,000 452,500
--------------
</TABLE>
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The accompanying notes are an integral part of these financial statements.
<PAGE>
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================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ------
Common Stocks (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Home Building (1.58%)
Walter Industries 50,000 $ 540,625
--------------
Home Furnishing (1.31%)
Shaw Industries 29,000 447,688
--------------
Household Products (7.65%)
Blyth Industries* 39,000 957,938
Lancaster Colony Corporation 50,000 1,656,250
--------------
2,614,188
--------------
Industrial Equipment (2.47%)
UNOVA Inc.* 65,000 845,000
--------------
Industrial Materials (1.82%)
Minerals Technologies Inc. 15,500 620,969
--------------
Industrial Services (6.58%)
Harsco Corp. 40,000 1,270,000
MSC Industrial Direct Co.* 74,000 980,500
--------------
2,250,500
--------------
Insurance (Prop/Casualty) (1.46%)
LaSalle Re Holding Ltd. 30,200 498,300
--------------
Lodging and Entertainment (2.47%)
Fairfield Communities Inc.* 78,500 843,875
--------------
Medical Equipment (4.47%)
STERIS Corporation* 24,000 247,500
Varian Medical Systems* 43,000 1,281,937
--------------
1,529,437
--------------
Metal Fabrications (5.38%)
Kaydon Corporation 20,000 536,250
Mueller Industries* 36,000 1,305,000
--------------
1,841,250
--------------
Packaging & Containers (3.57%)
Ball Corporation 31,000 1,220,625
--------------
Precision Instruments (6.59%)
Gerber Scientific 21,500 471,656
Roper Industries Inc. 28,000 1,058,750
Thermo Electron Corporation* 25,000 375,000
Varian Inc.* 15,500 349,234
--------------
2,254,640
--------------
</TABLE>
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The accompanying notes are an integral part of these financial statements.
<PAGE>
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REICH & TANG EQUITY FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1999
================================================================================
<TABLE>
<CAPTION>
Value
Shares (Note 1)
------ ------
Common Stocks (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Refrigeration Systems (6.48%)
Hussman International 29,500 $ 444,344
York International Corp. 64,500 1,769,719
--------------
2,214,063
--------------
Restaurants (0.31%)
CBRL Group Inc. 10,900 105,764
--------------
Retail - Specialty (1.47%)
Claire's Stores Inc. 22,500 503,437
--------------
Security Services (0.97%)
Sensormatic Electronics* 19,000 331,312
--------------
Textiles (1.48%)
Burlington Industries Inc.* 126,500 506,000
--------------
Toiletries/Cosmetics (2.23%)
Alberto-Culver Co. Class A 35,000 761,250
--------------
Trucking (1.29%)
Yellow Corporation* 26,000 439,562
--------------
Total Common Stocks (Cost $30,018,998) $ 33,986,955
--------------
Face
Amount
------
<CAPTION>
Short-Term Investments (1.42%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements (1.42%)
Morgan (J.P.) Securities Inc., 2.50%, due 01/03/00 (Collateralized by $499,000,
Federal Home Loan Bank, due 01/26/00) $487,000 $ 487,000
--------------
Total Short-Term Investments (Cost $487,000) $ 487,000
--------------
Total Investments (100.82%) (Cost $30,505,998+) 34,473,955
Liabilities in Excess of Cash and Other Assets (-0.82%) ( 280,732)
--------------
Net Assets (100.00%) 2,963,452 shares outstanding (Note 3) $ 34,193,223
==============
Net asset value, offering and redemption price per share $ 11.54
==============
</TABLE>
* Non-income producing.
+ Aggregate cost for federal income tax purposes is $30,558,883. Aggregate
unrealized appreciation and depreciation are, based on cost for Federal
income tax purposes, $5,341,086 and $1,426,014 respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
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REICH & TANG EQUITY FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Dividends...................................................................... $ 465,443
Interest....................................................................... 131,382
----------------
Total income.............................................................. 596,825
----------------
Expenses: (Note 2)
Investment management fee...................................................... 356,215
Administration fee............................................................. 89,054
Distribution expenses.......................................................... 5,778
Custodian fees................................................................. 11,196
Shareholder servicing and related shareholder expenses......................... 34,611
Legal, compliance and filing fees.............................................. 29,606
Audit and accounting........................................................... 39,215
Directors' fees and expenses................................................... 13,984
Other.......................................................................... 3,007
----------------
Total expenses............................................................ 582,666
Less:
Expenses paid indirectly......................................... ( 1,978)
Fees waived...................................................... ( 45,940)
----------------
Net expenses.............................................................. 534,748
----------------
Net investment income............................................................. 62,077
----------------
<CAPTION>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain on investments.................................................. 7,442,590
Net change in unrealized appreciation (depreciation) of investments............... ( 8,209,121)
----------------
Net gain (loss) on investments................................................. ( 766,531)
----------------
Increase (decrease) in net assets from operations................................. ($ 704,454)
================
</TABLE>
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The accompanying notes are an integral part of these financial statements.
<PAGE>
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REICH & TANG EQUITY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1999 AND 1998
================================================================================
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income........................................................$ 62,077 $ 214,767
Net realized gain on investments............................................. 7,442,590 9,882,217
Net change in unrealized appreciation (depreciation) of investments..........( 8,209,121) ( 9,072,161)
---------------- ----------------
Increase (decrease) in net assets from operations............................( 704,454) 1,024,823
Distributions from:
Net investment income........................................................( 62,077) ( 214,919)
Net realized gain on investments.............................................( 7,323,427) ( 9,882,217)
In excess of net realized gain............................................... -- ( 168,629)
Return of capital............................................................( 18,136) --
Capital share transactions (Note 3)............................................( 14,314,659) ( 22,696,457)
---------------- ----------------
Total increase (decrease)....................................................( 22,422,753) ( 31,937,399)
Net Assets:
Beginning of year............................................................ 56,615,976 88,553,375
---------------- ----------------
End of year .................................................................$ 34,193,223 $ 56,615,976
================ ================
</TABLE>
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The accompanying notes are an integral part of these financial statements.
<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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REICH & TANG EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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 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 $22,639.
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 $22,271 paid to Reich & Tang
Services, L.P. an affiliate of the Manager as servicing agent for the Fund.
Included in the same caption are expense offsets of $1,978.
3. Capital Stock.
At December 31, 1999 100,000,000 shares of $.001 par value stock were authorized
and capital paid in amounted to $30,278,151. Transactions in capital stock were
as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------------------- -----------------------------
Shares Amount Shares Amount
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sold........................................ 2,929,217 $42,082,644 3,023,076 $51,191,834
Issued on reinvestment of dividends......... 561,572 6,421,982 603,572 8,811,830
Redeemed.................................... ( 4,416,911) ( 62,819,285) ( 4,869,968) ( 82,700,121)
----------- ----------- ----------- -----------
Net increase (decrease)..................... ( 926,122) ($14,314,659) ( 1,243,320) ($22,696,457)
=========== =========== =========== ===========
</TABLE>
4. Investment Transactions.
Purchases and sales of investment securities, other than short-term investments,
totaled $27,708,528 and $46,404,645, respectively. At December 31, 1999,
distributions in excess of net realized gains amounted to $52,885.
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<PAGE>
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================================================================================
<TABLE>
<CAPTION>
5. Financial Highlights.
Year Ended December 31,
--------------------------------------------------------------------------
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........ $ 14.56 $ 17.25 $ 18.10 $ 17.73 $ 15.39
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income..................... 0.02 0.05 0.11 0.15 0.22
Net realized and unrealized
gains (losses) on investments........... -- 0.39 2.38 2.83 4.10
---------- ---------- ---------- ---------- ----------
Total from investment operations.......... 0.02 0.44 2.49 2.98 4.32
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income...... ( 0.02) ( 0.05) ( 0.11) ( 0.15) ( 0.22)
Distributions from net realized gains..... ( 3.02) ( 3.03) ( 3.23) ( 2.46) ( 1.76)
In excess of net realized gain............ -- ( 0.05) -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions....................... ( 3.04) ( 3.13) ( 3.34) ( 2.61) ( 1.98)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year.............. $ 11.54 $ 14.56 $ 17.25 $ 18.10 $ 17.73
========== ========== ========== ========== ==========
Total Return.............................. 0.4% 2.6% 13.8% 16.9% 28.2%
Ratios/Supplemental Data
Net assets, end of year (000)............. $ 34,193 $ 56,616 $ 88,553 $ 91,300 $ 112,333
Ratios to average net assets:
Expenses (net of fees waived)........... 1.21%(b) 1.19% 1.21%(a) 1.22%(a) 1.15%
Net investment income................... 0.14% 0.29% 0.56% 0.79% 1.21%
Portfolio turnover rate................... 66.10% 45.79% 29.59% 31.70% 27.69%
</TABLE>
(a) Before expenses paid indirectly, equivalent to .01% of average net assets.
(b) Before expenses paid indirectly, equivalent to .004% of average net assets.
- --------------------------------------------------------------------------------
<PAGE>
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REICH & TANG EQUITY FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To the Board of Directors and Shareholders of
Reich & Tang Equity 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
Reich & Tang Equity Fund, Inc. (the "Fund") at December 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 accounting principles
generally accepted in the United States. 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 auditing standards generally
accepted in the United States 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 December 31, 1999 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above. The financial statements for the year ended December 31, 1998,
including the financial highlights for each of the periods prior to December 31,
1999 were audited by other independent accountants whose report dated January
29, 1999 expressed an unqualified opinion on those financial statements.
PricewaterhouseCoopers LLP
New York, New York
January 28, 2000
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<PAGE>
- --------------------------------------------------------------------------------
REICH & TANG EQUITY 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 most recent two 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.
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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.
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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
State Street Kansas City
801 Pennsylvania
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services, Inc.
600 Fifth Avenue
New York, New York 10020
RTE1299A
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<PAGE>
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Reich & Tang
EQUITY FUND, INC.
Annual Report
December 31, 1999
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