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MICHIGAN
DAILY
TAX FREE
INCOME
FUND, INC.
Semi-Annual Report
August 31, 1996
(Unaudited)
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<PAGE>
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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 semi-annual report of Michigan Daily Tax Free
Income Fund, Inc. for the period March 1, 1996 through August 31, 1996.
The Fund had net assets of $56,564,019 and 354 active shareholders as of August
31, 1996. Dividends earned on a share held throughout the period were $.014
which, when adjusted for the compounding effect of the reinvestment of
dividends, represents a 2.78% 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 W. Duff
Steven W. Duff
President
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS
AUGUST 31,1996
(UNAUDITED)
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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 (12.78%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 550,000 Dearborn, MI Sewage Disposal System
MBIA Insured 04/01/97 3.61% $ 559,842 Aaa AAA
1,650,000 Delta County, MI EDC (Mead Paper) - Series B
LOC Union Bank of Switzerland 10/09/96 3.30 1,650,000 P1
2,000,000 Michigan Municipal Bond Authority - Series B 07/25/97 3.90 2,009,420 SP-1+
1,000,000 Michigan Municipal Bond Authority RN - Series 1995C 09/06/96 3.89 1,000,043 SP-1+
2,000,000 Michigan Municipal Bond Authority RN - Series 1996A 07/03/97 3.85 2,009,580 SP-1+
- ----------- -----------
7,200,000 Total Other Tax Exempt Investments 7,228,885
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<CAPTION>
Other Variable Rate Demand Instruments (b) (66.44%)
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<C> <C> <C> <C> <C> <C> <C>
$ 945,000 Birmingham, MI EDC Limited Obligation RB
(Brown St. Assoc. Project) - Series 1983
LOC Michigan National Bank 12/01/18 3.88% $ 945,000 A1
2,000,000 City of Detroit, MI Water Supply System RB
Second Lien Bonds - Series 1995 07/01/25 3.60 2,000,000 A1+
1,000,000 Dearborn, MI EDC
LOC Mellon Bank, N.A. 03/01/25 3.55 1,000,000 A1
800,000 Detroit Water Bond 1993
FGIC Insured 07/01/13 3.50 800,000 VMIG-1 A1+
2,000,000 EDC Farmington Hills - Carefour
LOC Bankers Trust Company 09/01/15 3.62 2,000,000 A1
600,000 Grand Rapids, MI (Water Supply)
LOC Societe Generale 01/01/20 3.35 600,000 VMIG-1
1,500,000 Holland, MI EDC
LOC Industrial Bank of Japan, Ltd. 03/01/13 3.85 1,500,000 A1
3,000,000 Jackson County, MI EDC (Thrifty Leoni)
LOC First National Bank of Chicago/ National Bank of Detroit 12/01/14 3.63 3,000,000 Aa2
600,000 Melvindale, MI EDC (Des Jardin)
LOC First National Bank of Chicago/ National Bank of Detroit 09/01/00 3.75 600,000 P1
1,000,000 Michigan JDA (Gordon Food Services) - Series 1985
LOC Rabobank Nederland 08/01/15 3.40 1,000,000 Aaa
2,500,000 Michigan JDA (Kentwood Residence Association)
LOC First Bank Systems 11/01/14 3.70 2,500,000 A1
1,000,000 Michigan JDA (Mazda Motors)
LOC Sumitomo Bank, Ltd. 10/01/08 3.65 1,000,000 VMIG-1
</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 (b) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 2,435,000 Michigan State (Allied Signal) 04/01/99 3.60% $ 2,435,000 A1
1,000,000 Michigan State HDA (Harbortown LTD Dividend)
LOC Bankers Trust Company 06/01/04 3.63 1,000,000 VMIG-1
1,000,000 Michigan State HDA Rental Housing RB - Series 1994C
LOC Credit Suisse 10/01/23 3.50 1,000,000 A1+
2,000,000 Michigan State Strategic Fund Ltd. Obligation
(Louisiana Pacific Corporation)
LOC Wachovia Bank & Trust Co., N.A. 09/01/09 3.55 2,000,000 Aa2
1,000,000 Michigan Strategic Fund (Grayling Generating Project)
LOC Barclays Bank PLC 01/01/14 3.55 1,000,000 VMIG-1
600,000 Michigan Strategic Fund (Natech Group) (c)
LOC First National Bank of Chicago/ National Bank of Detroit 08/01/02 3.75 600,000
2,000,000 Michigan Strategic Fund
(National Rubber Incorporated Project)
LOC National Bank of Canada 09/01/11 3.65 2,000,000 P1
700,000 Michigan Strategic Fund
(Pilot Industry Incorporated Project)
LOC First National Bank of Chicago/ National Bank of Detroit 06/01/99 3.90 700,000 P1 A1+
2,000,000 Michigan Strategic Fund (Sugar Company)
LOC Trust Co. Bank of Georgia 11/01/03 3.50 2,000,000 Aa3
600,000 Michigan Strategic Fund (Wayne Disposal Project)
LOC Comerica Bank 04/01/99 3.70 600,000 A1
1,000,000 Michigan Strategic Fund Limited Obligation RB
(Mechanics Uniform Rental Company Project) - Series 1995 (c)
LOC Comerica Bank 08/01/15 3.65 1,000,000
1,000,000 Michigan Strategic Fund PCRB
(Consumers Power) - Series 1993A
LOC Canadian Imperial Bank of Commerce 06/15/10 3.65 1,000,000 A1+
1,300,000 Regents of University of Michigan RB
(Medical Care Plan) - Series A 12/01/27 3.85 1,300,000 VMIG-1 A1+
2,000,000 Royal Oak, MI HFA HRB
(William Beaumont Hospital) - Series J (c) 01/01/03 3.75 2,000,000
2,000,000 Van Buren, MI (Daiken Clutch)
LOC Sanwa Bank, Ltd. 03/01/97 4.00 2,000,000 Aa3
---------- ----------
37,580,000 Total Other Variable Rate Demand Instruments 37,580,000
---------- ----------
</TABLE>
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See Notes to Financial Statements.
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
(UNAUDITED)
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<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- ------
Put Bonds (d) (7.95%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 2,500,000 Michigan Strategic Fund
(Donnelly Corporation Project) - Series 1988
LOC ABN AMRO Bank N.V. 10/01/96 3.80% $ 2,500,000 P1 A1+
1,000,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Reynolds Metals Corporation)
LOC ABN AMRO Bank N.V. 09/01/96 3.60 1,000,000 VMIG-1 A1+
1,000,000 Township of Bruce, MI HFA
(Sisters of Charity Health Care System)
LOC Morgan Guaranty Trust Company 11/01/96 3.65 1,000,000 VMIG-1 A1+
- ----------- -----------
4,500,000 Total Put Bonds 4,500,000
- ----------- -----------
<CAPTION>
Revenue Bond (1.77%)
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<C> <C> <C> <C> <C> <C> <C>
$ 1,000,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Abbott Laboratories) - Series 83A 03/01/97 3.41% $ 1,000,000 Aa1 AAA
- ----------- -----------
1,000,000 Total Revenue Bond 1,000,000
- ----------- -----------
<CAPTION>
Tax Exempt Commercial Paper (6.19%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 1,400,000 Delta County, MI (Mead Paper) - Series B
LOC Union Bank of Switzerland 10/16/96 3.45% $ 1,400,000 P1
2,100,000 Delta County, MI EDC (Mead Escanaba) - Series A
LOC Swiss Bank Corporation 10/23/96 3.50 2,100,000 P1
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3,500,000 Total Tax Exempt Commercial Paper 3,500,000
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<CAPTION>
Variable Rate Demand Instruments - Private Placements (b) (4.76%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 192,000 Charlevoix, MI (Hoskins)
LOC Chase Manhattan Bank, N.A. 11/01/99 5.36% $ 192,000 P1 A1
2,500,000 Kalamazoo, MI EDC
(WBC Properties Limited Partnership Project) - Series 1985
LOC Old Kent Bank & Trust Co. 09/01/15 3.60 2,500,000 P1 A1+
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2,692,000 Total Variable Rate Demand Instruments - Private Placements 2,692,000
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Total Investments (99.89%) Cost ($56,500,885+) 56,500,885
Cash and Other Assets, In Excess of Liabilities (0.11%) 63,134
-----------
Net Assets, (100%) 56,582,809 Shares Outstanding (Note 3) $56,564,019
-----------
Net Asset Value, Offering and Redemption Price Per Share $ 1.00
===========
+ Aggregate cost for federal income tax purposes is $56,498,455.
</TABLE>
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See Notes to Financial Statements.
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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 the guarantor of
the bond. P1 and A1+ are the highest ratings assigned for tax exempt
commercial paper.
(b) Securities payable on demand at par including accrued interest (usually
with seven days notice) and 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.
(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.
(d) The maturity date indicated is the next put date.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
EDC = Economic Development Corporation PCFA = Pollution Control Finance Authority
HDA = Health Development Authority PCRB = Pollution Control Revenue Bond
HFA = Hospital Finance Authority RB = Revenue Bond
HRB = Hospital Revenue Bond RN = Revenue Note
JDA = Job Development Authority
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1996
(UNAUDITED)
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<TABLE>
<CAPTION>
INVESTMENT INCOME
Income:
<S> <C>
Interest...................................................................... $ 1,035,760
---------------------
Expenses: (Note 2)
Investment management fee..................................................... 87,398
Administration fee............................................................ 61,179
Shareholder servicing fee..................................................... 58,265
Custodian expenses............................................................ 2,944
Shareholder servicing and related shareholder expenses........................ 13,335
Legal, compliance and filing fees............................................. 10,803
Audit and accounting.......................................................... 25,860
Directors fees............................................................... 2,439
Other......................................................................... 1,995
---------------------
Total expenses.............................................................. 264,218
Less fees waived.......................................................... ( 23,306)
Expenses paid indirectly.................................................. ( 4,898)
---------------------
Net expenses.............................................................. 236,014
---------------------
Net investment income........................................................... 799,746
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments......................................... 1,222
---------------------
Increase in net assets from operations.......................................... $ 800,968
=====================
</TABLE>
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See Notes to Financial Statements.
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
Six Months Ended
August 31, 1996 Year Ended
(Unaudited) February 29, 1996
--------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
<S> <C> <C>
Operations:
Net investment income..................................... $ 799,746 $ 1,862,142
Net realized gain (loss) on investments................... 1,222 1,208
---------------- ---------------
Increase in net assets from operations.................... 800,968 1,863,350
Dividends to shareholders from net investment income........ ( 799,746)* ( 1,862,142)*
Capital share transactions (Note 3)......................... ( 947,041) 2,184,435
---------------- ---------------
Total increase (decrease)............................. ( 945,819) 2,185,643
Net assets:
Beginning of period....................................... 57,509,838 55,324,195
---------------- ---------------
End of period............................................. $ 56,564,019 $ 57,509,838
================ ===============
* Designated as exempt-interest dividends for Federal income tax purposes.
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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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. The Fund is a short-term, tax exempt money fund. 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) 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. (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 period ended
August 31, 1996.
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 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 .
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<PAGE>
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2. Investment Management Fees and Other Transactions with Affiliates
(Continued).
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 period ended August 31, 1996, the Distributor voluntarily waived
shareholder servicing fees of $23,306.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$1,000 per annum plus $250 per meeting attended.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $9,926 paid to Reich & Tang
Services L.P., an affiliate of the Manager, as servicing agent for the Fund.
Included in the Statement of Operations under the captions "Custodian expenses"
and "Shareholder servicing and related shareholder expenses" are expense offsets
of $4,898.
3. Capital Stock.
At August 31, 1996, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $56,582,809. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
August 31, 1996 February 29, 1996
--------------- -----------------
<S> <C> <C>
Sold........................................ 66,752,334 142,903,415
Issued on reinvestment of dividends......... 759,081 1,817,407
Redeemed.................................... ( 68,458,456) ( 142,536,387)
----------------- ------------------
Net increase (decrease)..................... ( 947,041) 2,184,435
================= ==================
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses at August 31, 1996 amounted to
$18,790. At August 31, 1996 the Fund had tax basis capital losses of $21,220
which may be carried forward to offset future capital gains. Such losses expire
between February 29, 2000 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 73% 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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<PAGE>
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
===============================================================================
6. Selected Financial Information.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended Year Ended Year Ended
August 31, February 29, February 28, February 29,
-------------- -------------- --------------------------------- ------------
1996 1996 1995 1994 1993 1992
-------------- -------------- ------ -------- ---------- ------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ------------- --------- --------- --------- -----------
Income from investment operations:
Net investment income........... 0.014 0.032 0.025 0.019 0.023 0.038
Dividends from net investment income ( 0.014) ( 0.032) ( 0.025) ( 0.019) ( 0.023) ( 0.038)
----------- ------------- --------- --------- --------- -----------
Net asset value, end of period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ============= ========= ========= ========= ============
Total Return.................... 2.78%* 3.23% 2.56% 1.88% 2.33% 3.82%
Ratios/Supplemental Data
Net assets, end of period (000). $ 56,564 $ 57,510 $ 55,324 $ 68,401 $ 83,101 $ 119,535
Ratios to average net assets:
Expenses........................ .83%*(a)(b) 0.82%(a)(b) 0.75%(b) 0.74%(b) 0.68%(b) 0.64%(b)
Net investment income........... 2.75%*(b) 3.17%(b) 2.53%(b) 1.86%(b) 2.32%(b) 3.73%(b)
* Annualized
(a) Includes custodian fees paid indirectly equivalent to .02% and .02% of
average net assets.
(b) Net of investment management, administration and shareholder servicing fees
waived equivalent to .08%, .10%, .28%, .30%, .25%, and .25% of average net
assets.
</TABLE>
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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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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
Reich & Tang Services L.P.
600 Fifth Avenue
New York, New York 10020
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