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MICHIGAN
DAILY
TAX FREE
INCOME
FUND, INC.
Annual Report
February 28, 1995
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<PAGE>
1
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MICHIGAN
DAILY TAX FREE 600 FIFTH AVENUE, NEW YORK, NY 10020
INCOME FUND, INC. (212) 830-5200
===============================================================================
Dear Shareholder:
We are pleased to present the annual report of Michigan Daily Tax Free
Income Fund, Inc. for the year ended February 28, 1995.
The Fund had net assets of $55,324,195 and 366 active shareholders as of
February 28, 1995. Dividends earned on a share held throughout the period were
$0.025 which, when adjusted for the compounding effect of the reinvestment of
dividends, represents a 2.56% yield on an annual basis.
We thank you for your support and look forward to continuing to serve your cash
management needs. Sincerely,
/s/Steven Duff
Steven Duff
President
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2
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS
FEBRUARY 28, 1995
===============================================================================
<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Tax Exempt Investments (10.86%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 2,000,000 Detroit Wayne County School 1994 05/01/95 3.92% $ 2,003,437 SP-1+
1,000,000 Kalamazoo City School District 04/04/95 3.50 1,000,042 MIG-1
1,000,000 Michigan G.O. School Loans 1994 B(c) 04/11/95 3.71 1,000,552
2,000,000 Michigan Municipal Bond Authority
Revenue Notes Series 1994A 05/05/95 3.45 2,002,579 SP-1+
- ------------ -----------
6,000,000 Total Other Tax Exempt Investments 6,006,610
- ------------ -----------
<CAPTION>
Other Variable Rate Demand Instruments (b) (61.70%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 1,000,000 Birmingham, MI EDC Limited Obligation RB
(Brown St. Assoc. Proj. ) - Series 1983
LOC Bankers Trust Company 12/01/18 4.48% $ 1,000,000 Aa2
2,000,000 City of Saline EDC
LOC Fuji Bank, Ltd. 02/01/08 4.55 2,000,000 P1 A1+
1,000,000 Dearborn, MI EDC
LOC Mellon Bank, N.A. 03/01/25 4.20 1,000,000 A1
800,000 Detroit Water Bond 1993
FGIC Insured 07/01/13 4.05 800,000 VMIG-1 A1+
1,000,000 Detroit, MI (Central Ind. Park)
LOC Citibank 10/01/10 3.85 1,000,000 A1+
500,000 Detroit, MI (Tax Finance Authority)
LOC Citibank 10/01/10 3.85 500,000 P1 A1+
2,000,000 EDC Farmington Hills - Carefour
LOC Bankers Trust Company 09/01/15 4.23 2,000,000 Aa
1,500,000 Holland, MI Economic Development
LOC Industrial Bank of Japan, Ltd. 03/01/13 3.90 1,500,000 A1+
1,000,000 Jackson County, MI EDC (Thrifty Leoni)
LOC Westpac Banking Corp. 12/01/14 4.48 1,000,000 P1 A1+
2,000,000 Jackson County, MI EDC (Thrifty Leoni)
LOC Bankers Trust Company 12/01/14 4.48 2,000,000 Aa2
800,000 Melvindale, MI EDC (Des Jardin)
LOC National Bank of Detroit 09/01/00 4.20 800,000 P1 A1+
900,000 Michigan JDA (Andersons Project)
LOC Morgan Guaranty Trust Company 09/01/25 3.95 900,000 P1 A1+
1,000,000 Michigan JDA (Gordon Food Services) - Series 85
LOC Rabobank Nederland 08/01/15 4.13 1,000,000 P1 A1+
</TABLE>
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See Notes to Financial Statements.
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3
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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 (b) (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,500,000 Michigan JDA (Kentwood Residence Association) 11/01/14 4.10% $ 2,500,000 A1
1,000,000 Michigan JDA (Mazda Motors)
LOC Sumitomo Bank, Ltd. 10/01/08 4.25 1,000,000 P1 A1+
2,435,000 Michigan State (Allied Signal) 04/01/99 4.30 2,435,000 A1
800,000 Michigan State Housing Authority
LOC Sumitomo Bank, Ltd. 10/01/23 4.10 800,000 VMIG-1 A1
1,000,000 Michigan State Housing Development Authority Rental
Housing Revenue Bonds 1994 Series C
LOC Credit Suisse 10/01/23 3.85 1,000,000 A1+
2,000,000 Michigan State Strategic Fund Ltd. Obligation (Louisiana Pacific Corp.)
LOC Wachovia Bank & Trust Co., N.A. 12/01/09 4.05 2,000,000 Aa2
1,000,000 Michigan Strategic Fund (Grayling Generating Project)
LOC Barclays Bank PLC 01/01/14 4.10 1,000,000 VMIG-1
800,000 Michigan Strategic Fund (Natech Group)
LOC National Bank of Detroit 08/01/02 4.20 800,000 P1 A1+
800,000 Michigan Strategic Fund (Pilot Ind., Inc. Project)
LOC National Bank of Detroit 06/01/99 4.50 800,000 P1 A1+
2,000,000 Michigan Strategic Fund (Sugar Co.)
LOC Trust Co. Bank of Atlanta 11/01/03 4.05 2,000,000 Aa
800,000 Michigan Strategic Fund (Uniflow Cap. Project)
LOC National Bank of Detroit 06/01/02 4.50 800,000 P1 A1+
1,000,000 Michigan Strategic Fund (Wayne Disposal Project)
LOC Comerica Bank 04/01/99 4.25 1,000,000 P1 A1
500,000 Michigan Strategic Fund PCR Consumers Power Co.
LOC Canadian Imperial Bank of Commerce 06/15/10 3.80 500,000 P1 A1+
2,000,000 Van Buren, MI (Daiken Clutch)
LOC Sanwa Bank, Ltd. 03/01/97 4.60 2,000,000 P1 A1+
- ------------ ----------
34,135,000 Total Other Variable Rate Demand Instruments 34,135,000
- ------------ ----------
<CAPTION>
Put Bonds (6.93%)
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<C> <C> <C> <C> <C> <C> <C>
$ 1,335,000 Grosse Point Park, MI
LOC Comerica Bank 08/01/95 4.50% $1,335,000 P1
2,500,000 Michigan Stragtegic Fund (Donnelly Corp.)
LOC ABN-AMRO Bank N.V. 04/03/95 4.20 2,500,000 P1 A1+
--------- ---------
3,835,000 Total Put Bonds 3,835,000
---------
</TABLE>
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See Notes to Financial Statements.
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4
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
FEBRUARY 28, 1995
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<TABLE>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------- ------- ------
Revenue Bonds (5.43%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 1,000,000 Michigan Municipal Bond Authority RN,
Series 1994 B 07/20/95 3.95% $ 1,002,785 SP-1+
1,000,000 Michigan Municipal Bond Authority RN,
Series 1994C
LOC Credit Suisse 09/08/95 3.95 1,005,029 SP-1+
1,000,000 Puerto Rico Industrial Medical & Environmental
PCFA RB (Abbot Laboratories) 03/01/95 2.60 1,000,000 Aaa AAA
- ----------- ----------
3,000,000 Total Revenue Bonds 3,007,814
- ----------- ----------
<CAPTION>
Tax Exempt Commercial Paper (7.23%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 1,000,000 Delta County, MI EDC (Mead Paper) - Series B
LOC Union Bank of Switzerland 03/02/95 3.75% $ 1,000,000 P1
500,000 Delta County, MI EDC (Mead Paper) - Series B
LOC Union Bank of Switzerland 03/07/95 3.75 500,000 P1
500,000 Delta County, MI EDC (Mead Paper) - Series B
LOC Union Bank of Switzerland 03/13/95 3.70 500,000 P1
500,000 Delta County, Michigan A EDC (Mead Escanaba)
LOC Swiss Bank Corp. 04/10/95 4.05 500,000 P1
500,000 Michigan State Strategic Fund
(Dow Chemical Co. Project) 03/09/95 3.85 500,000 P1
1,000,000 Michigan Strategic Fund Series 1985
(Dow Chemical Co.) 05/08/95 4.10 1,000,000 P1 A1
- ----------- -----------
4,000,000 Total Tax Exempt Commerical Paper 4,000,000
- ----------- -----------
<CAPTION>
Variable Rate Demand Instruments - Private Placements (b) (5.02%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 276,000 Charlevoix, MI (Hoskins)
LOC Chemical Bank 11/01/99 5.85% $ 276,000 P1 A1
2,500,000 EDC Kalamazoo WBC Prop
LOC Old Kent Bank & Trust Co. 09/01/15 4.50 2,500,000 A1
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2,776,000 Total Variable Rate Demand Instruments - Private Placements 2,776,000
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Total Investments (97.17%) Cost ($53,760,424+) 53,760,424
Cash and Other Assets, In Excess of Liabilities (2.83%) 1,563,771
-----------
Net Assets, (100%) 55,345,415 Shares Outstanding (Note 3) $ 55,324,195
===========
Net Asset Value, Offering and Redemption Price Per Share $ 1.00
===========
</TABLE>
+ Aggregate cost for federal income tax purposes is $53,752,614.
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See Notes to Financial Statements.
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5
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FOOTNOTES:
(a) Unless the variable rate demand instruments are assigned their own ratings,
the ratings noted are those of the bank whose letter of credit
collateralized such instruments. P1 and A1+ are the highest ratings for tax
exempt commercial paper.
(b) Securities payable on demand at par including accrued interest (usually with
seven days notice) and where 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 fo this
statement.
(c) Securities that are not rated which the Fund's Board of Directors have
determined to be of comparable quality to those rated securities in which
the Fund invests.
<TABLE>
<CAPTION>
KEY:
<S> <C><C> <C> <C> <C>
BAN = Bond Anticipation Note PCFA = Pollution Control Finance Authority
CI = Certificate of Indeptedness PCRB = Pollution Control Revenue Bond
CLN = Construction Loan Note RAN = Revenue Anticipation Note
EDC = Export Development Corporation RAW = Revenue Anticipation Warrant
FAN = Fund Anticipation Note RB = Revenue Bond
GAN = Grant Anticipation Note RN = Revenue Note
HRB = Hospital Revenue Bond TAN = Tax Anticipation Note
IDRB= Industrial Development Revenue Bond TLN = Tax Loan Note
JDA = Job Development Authority TRAN = Tax and Revenue Anticipation Note
</TABLE>
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See Notes to Financial Statements.
<PAGE>
6
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995
===============================================================================
<TABLE>
INVESTMENT INCOME
<S> <C>
Income:
Interest........................................................... $ 1,878,053
-----------------
Expenses: (Note 2)
Investment management fee.......................................... 172,637
Administration fee................................................. 65,645
Custodian, shareholder servicing and related shareholder expenses.. 96,102
Legal, compliance and filing fees.................................. 16,052
Audit and accounting............................................... 68,938
Directors' fees.................................................... 6,000
Other.............................................................. 3,806
-----------------
Total expenses.................................................... 429,180
-----------------
Net investment income................................................ 1,448,873
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments.............................. 7,920
-----------------
Increase in net assets from operations............................... $ 1,456,793
=================
</TABLE>
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See Notes to Financial Statements.
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7
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED FEBRUARY 28, 1995 AND 1994
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<TABLE>
<CAPTION>
1995 1994
---------- ----------
INCREASE (DECREASE) IN NET ASSETS FROM:
<S> <C> <C>
Operations:
Net investment income.......................... $ 1,448,873 $ 1,267,220
Net realized gain (loss) on investments........ 7,920 400
------------- -------------
Increase in net assets from operations......... 1,456,793 1,267,620
Dividends to shareholders from net investment income ( 1,448,873)* ( 1,267,220)*
Capital share transactions (Note 3).............. ( 13,084,637) ( 14,700,320)
-------------- -------------
Total increase (decrease)................... ( 13,076,717) ( 14,699,920)
Net assets:
Beginning of year.............................. 68,400,912 83,100,832
------------- --------------
End of year.................................... $ 55,324,195 $ 68,400,912
============= ==============
</TABLE>
* Designated as exempt-interest dividends for Federal income tax purposes.
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See Notes to Financial Statements.
<PAGE>
8
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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1. Summary of Accounting Policies
Michigan Daily Tax Free Income Fund, Inc. is a no-load, non-diversified,
open-end management investment company registered under the Investment Company
Act of 1940. Its 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) General -
Securities transactions are recorded on a trade date basis. Interest income
is accrued as earned. Realized gains and losses from securities transactions
are recorded on the identified cost basis.
2. Investment Management Fees and Other Transactions with Affiliates.
Under the Investment Management Contract, the Fund pays an investment management
fee to Reich & Tang Asset Management, L.P. (the Manager) at the annual rate of
.30% of the Fund's average daily net assets. The Manager is required to
reimburse the Fund for its expenses (exclusive of interest, taxes, brokerage,
and extraordinary expenses) which in any year exceed the limits on investment
company expenses prescribed by any state in which the Fund's shares are
qualified for sale. No such reimbursement was required for the year ended
February 28, 1995.
Pursuant to an Administrative Services Contract the Fund pays to the Manager an
annual fee of .20% of the Fund's average daily net assets.
<PAGE>
9
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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 L.P. (the Distributor) have
entered into a Distribution Agreement and a Shareholder Servicing Agreement. For
its services under the Shareholder Servicing Agreement, the Distributor receives
from the Fund a fee equal to .20% 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 February 28, 1995, the Manager and the Distributor
voluntarily waived administration and shareholder servicing fees of $48,861 and
$113,627, respectively.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$1,000 per annum plus $250 per meeting attended.
3. Capital Stock.
At February 28, 1995, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $55,345,415. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year Year
Ended Ended
February 28, 1995 February 28, 1994
----------------- -----------------
<S> <C> <C>
Sold................................ 134,147,344 273,786,670
Issued on investment of dividends... 1,369,892 1,145,040
Redeemed............................ ( 148,601,873) ( 289,632,030)
-------------- --------------
Net increase (decrease)............. ( 13,084,637) ( 14,700,320)
============== ==============
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses at February 28, 1995 amounted to
$21,220. At February 28, 1995 the Fund had tax basis capital losses of $29,030
which may be carried forward to offset future capital gains. Such losses expire
between February 29, 1996 and February 28, 2001.
5. Concentration of Credit Risk.
The Fund invests primarily in obligations of political subdivisions of the State
of Michigan and, accordingly, is subject to the credit risk associated with the
non-performance of such issuers. Approximately 70% 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 creditworthiness 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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10
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
6. Selected Financial Information.
<TABLE>
Year Ended Year Ended Year Ended
February 28, February 29, February 28,
-------------------------------- ------------ ------------
1995 1994 1993 1992 1991
<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....................... 0.025 0.019 0.023 0.038 0.055
Dividends from net investment income ( 0.025) ( 0.019) ( 0.023) ( 0.038) ( 0.55)
-------- -------- -------- ------- -------
Net asset value, end of year. .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ========= ========= ========
Total Return................................ 2.56% 1.88% 2.33% 3.82% 5.64%
<CAPTION>
Ratios/Supplemental Data
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) .............. $ 55,324 $ 68,401 $ 83,101 $ 119,535 $119,770
Ratios to average net assets:
Expenses.................................... 0.75%+ 0.74%+ 0.68%+ 0.64%+ 0.39%+
Net investment income....................... 2.53%+ 1.86%+ 2.32%+ 3.73%+ 5.45%+
</TABLE>
+ Net of investment management, administration and shareholder servicing
fees waived equivalent to .28%, .30%, .25%, .25% amd .49% of average net assets.
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11
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
INDEPENDENT AUDITOR'S REPORT
===============================================================================
The Board of Directors and Shareholders
The Michigan Daily Tax Free Income Fund, Inc.
We have audited the accompanying statement of net assets of Michigan Daily Tax
Free Income Fund, Inc. as of February 28, 1995, 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 selected financial
information for each of the five years in the period then ended. These financial
statements and selected financial information are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and selected financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected
financial information 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 February 28, 1995, 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of Michigan Daily Tax Free Income Fund, Inc. as of February 28, 1995,
the results of its operations, the changes in its net assets and the selected
financial information for the periods indicated, in conformity with generally
accepted accounting principles.
/s/McGladrey & Pullen, LLP
New York, New York
March 27, 1995
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<PAGE>
12
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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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Michigan Daily Tax Free 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
127 West 10th Street
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Supervised Service Company
811 Main Street
Kansas City, Missouri 64105
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