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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, 1997 through August 31, 1997.
The Fund had net assets of $51,848,570 and 326 active shareholders as of August
31, 1997.
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, 1997
(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 (11.67%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,000,000 Deer Park, MI School District GO
U.S. Government Guaranteed 06/01/98 3.67% $1,033,305 AA
1,000,000 Michigan Municipal Bond Authority - Series B 07/02/98 3.75 1,005,595 SP-1+
2,000,000 Michigan Municipal Bond Authority - Series B 07/02/98 3.78 2,010,709 SP-1+
2,000,000 Michigan State Notes 09/30/97 3.44 2,001,553 MIG-1 SP-1+
----------- -----------
6,000,000 Total Other Tax Exempt Investments 6,051,162
----------- -----------
<CAPTION>
Other Variable Rate Demand Instruments (b) (65.13%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 935,000 Birmingham, MI EDC Limited Obligation RB
(Brown St. Assoc. Project) - Series 1983
LOC Michigan National Bank 12/01/18 3.73% $ 935,000 A1
1,000,000 Dearborn, MI EDC
LOC Mellon Bank, N.A. 03/01/25 3.30 1,000,000 A1
700,000 Delta County, MI EDC (Mead Paper) - Series C
LOC Bank of Nova Scotia 12/01/23 3.70 700,000 P1
2,000,000 EDC Farmington Hills - Carefour
LOC Bankers Trust Company 09/01/15 3.48 2,000,000 A1
1,500,000 Holland, MI Economic Development
LOC Industrial Bank of Japan, Ltd. 03/01/13 3.80 1,500,000 A1
2,500,000 Jackson County, MI EDC (Thrifty Leoni)
LOC First National Bank of Chicago 12/01/14 3.48 2,500,000 Aa3
2,000,000 Michigan Higher Student Loan - Series XII F
AMBAC Insured 10/01/20 3.35 2,000,000 VMIG-1
1,000,000 Michigan JDA (Gordon Food Services) - Series 1985
LOC Rabobank Nederland 08/01/15 3.35 1,000,000 Aaa
1,500,000 Michigan JDA (Kentwood Residence Association)
LOC First Bank Systems 11/01/14 3.75 1,500,000 A1
1,000,000 Michigan JDA (Kentwood Residence Association)
LOC First Bank Systems 11/01/14 3.75 1,000,000 A1
1,000,000 Michigan JDA (Mazda Motors)
LOC Sumitomo Bank, Ltd. 10/01/08 3.60 1,000,000 VMIG-1
2,435,000 Michigan State (Allied Signal) 04/01/99 3.45 2,435,000 A1
1,000,000 Michigan State Strategic Fund Limited Obligation RB
(Advance Plastics Corp. Project) (c)
LOC Comerica Bank 09/01/16 3.55 1,000,000
</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)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 500,000 Michigan State Strategic Fund Limited Obligation RB
(Detroit Edison Company)
LOC Barclays Bank PLC 09/01/30 3.60% $ 500,000 P1 A1+
1,000,000 Michigan State Strategic Fund Limited Obligation RB
(Morrell Inc. Project) (c)
LOC Comerica Bank 05/01/22 3.55 1,000,000
2,000,000 Michigan State Strategic Fund Limited Obligation
(Louisiana Pacific Corporation)
LOC Wachovia Bank & Trust Co., N.A. 09/01/09 3.40 2,000,000 Aa2
400,000 Michigan Strategic Fund
(National Rubber Michigan Incorporated Project)
LOC National Bank of Canada 09/01/11 3.50 400,000 P1
700,000 Michigan Strategic Fund
(Pilot Industry Incorporated Project)
LOC First National Bank of Chicago 06/01/01 3.85 700,000 P1 A1+
2,000,000 Michigan Strategic Fund (Sugar Company)
LOC Trust Co. Bank of Atlanta 11/01/03 3.40 2,000,000 Aa3
1,000,000 Michigan Strategic Fund Limited Obligation RB
(Mechanics Uniform Rental Co. Proj.) - Series 95 (c)
LOC First National Bank of Chicago 08/01/15 3.55 1,000,000
1,000,000 Michigan Strategic Fund PCRB
(Consumers Power Company Project) - Series 1993A
LOC Canadian Imperial Bank of Commerce 06/15/10 3.60 1,000,000 A1+
2,500,000 Michigan Strategic Fund, Limited Obligation RB
(Pioneer Metal Finishing Mich. Inc. Proj.)
LOC National City Bank, Northwest 11/01/08 3.50 2,500,000 P1 A1
3,500,000 Monroe County, MI EDC (Detroit Edison) - Series CC
LOC Barclays Bank PLC 10/01/24 3.60 3,500,000 P1
600,000 Royal Oak, MI HFA Hospital RB
(William Beaument Hospital) - Series L 01/01/27 3.65 600,000 VMIG-1
- ----------- -----------
33,770,000 Total Other Variable Rate Demand Instruments 33,770,000
- ----------- -----------
<CAPTION>
Put Bonds (d) (8.68%)
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<S> <C> <C> <C> <C> <C> <C>
$2,500,000 Michigan Strategic Fund
(Donnelly Corporation Project) - Series 1988
LOC ABN AMRO Bank N.V. 10/01/97 4.00% $ 2,500,000 P1 A1+
</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, 1997
(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) (Continued)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,000,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Abbott Laboratories) - Series 83A 03/01/98 3.75% $ 1,000,000 Aa1 AAA
1,000,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Reynolds Metals Corporation)
LOC ABN AMRO Bank N.V. 09/01/97 3.80 1,000,000 P1 A1+
- ----------- -----------
4,500,000 Total Put Bonds 4,500,000
- ----------- -----------
<CAPTION>
Tax Exempt Commercial Paper (9.16%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,650,000 Delta County, MI (Mead Paper)
LOC Union Bank of Switzerland 09/04/97 3.70% $ 1,650,000 P1
2,100,000 EDC Delta Michigan (Mead Escanaba) - Series A
LOC Swiss Bank Corp. 09/04/97 3.70 2,100,000 P1
1,000,000 Puerto Rico Government Development Bank 09/11/97 3.65 1,000,000 A1+
- ----------- -----------
4,750,000 Total Tax Exempt Commercial Paper 4,750,000
- ----------- -----------
<CAPTION>
Variable Rate Demand Instruments - Private Placements (b) (5.09%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 136,000 Charlevoix, MI (Hoskins)
LOC Chase Manhattan Bank, N.A. 11/01/99 5.53% $ 136,000 P1 A1
2,500,000 EDC Kalamazoo (WBC Properties Limited Partnership Project) - Series 1985
LOC Old Kent Bank & Trust Co. 09/01/15 3.45 2,500,000 P1 A1+
- ----------- -----------
2,636,000 Total Variable Rate Demand Instruments - Private Placements 2,636,000
- ----------- -----------
Total Investments (99.73%) (Cost $51,707,162+) 51,707,162
Cash and Other Assets in Excess in Liabilities (0.27%) 141,408
-----------
Net Assets (100.00%) $51,848,570
===========
Net asset value, offering and redemption price per share:
Class A shares, 51,862,184 shares outstanding (Note 3) $ 1.00
===========
Class B shares, 5,135 shares outstanding (Note 3) $ 1.00
===========
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
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See Notes to Financial Statements.
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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>
EDC = Export Development Corporation PCFA = Pollution Control Finance Authority
GO = General Obligation PCRB = Pollution Control Revenue Bond
HFA = Hospital Finance Authority RB = Revenue Bond
LOC = Letter of Credit
</TABLE>
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See Notes to Financial Statements.
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1997
(UNAUDITED)
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<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest................................................................... $ 910,645
---------------------
Expenses: (Note 2)
Investment management fee.................................................. 72,532
Administration fee......................................................... 50,773
Shareholder servicing fee (Class A)........................................ 48,350
Custodian expenses......................................................... 4,978
Shareholder servicing and related shareholder expenses..................... 17,806
Legal, compliance and filing fees.......................................... 13,289
Audit and accounting....................................................... 34,401
Directors' fees............................................................ 3,156
Other...................................................................... 1,935
---------------------
Total expenses........................................................... 247,220
Less fees waived....................................................... ( 50,773)
Less expenses paid indirectly.......................................... ( 614)
---------------------
Net expenses........................................................... 195,833
---------------------
Net investment income........................................................... 714,812
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments......................................... 42
---------------------
Increase in net assets from operations.......................................... $ 714,854
=====================
</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, 1997 Year Ended
(Unaudited) February 28, 1997
--------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C>
Operations:
Net investment income....................................... $ 714,812 $ 1,527,663
Net realized gain (loss) on investments..................... 42 1,221
-------------- --------------
Increase in net assets from operations...................... 714,854 1,528,884
Dividends to shareholders from net investment income
Class A..................................................... ( 714,731)* ( 1,527,603)*
Class B..................................................... ( 81)* ( 60)*
Capital share transactions (Note 3)
Class A..................................................... 6,700,839 ( 12,368,505)
Class B..................................................... 80 5,055
-------------- ---------------
Total increase (decrease)............................... 6,700,961 ( 12,362,229)
Net assets:
Beginning of period......................................... 45,147,609 57,509,838
-------------- --------------
End of period............................................... $ 51,848,570 $ 45,147,609
============== ==============
* Designated as exempt-interest dividends for Federal income tax purposes.
</TABLE>
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See Notes to Financial Statements.
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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 has two classes of stock authorized, Class A and Class B.
The Class A shares are subject to a service fee pursuant to the Distribution and
Service Plan. The Class B shares are not subject to a service fee. Additionally,
the Fund may allocate among its classes certain expenses, to the extent
allowable to specific classes, including transfer agent fees, government
registration fees, certain printing and postage costs, and administrative and
legal expenses. Class Specific expenses of the Fund were limited to distribution
fees and minor transfer agent expenses. In all other respects the Class A and
Class B shares represent the same interest in the income and assets of the Fund.
Distribution of Class B shares commenced on October 10, 1996 and all Fund shares
outstanding before October 10, 1996 were designated as Class A shares. 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.
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.
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<PAGE>
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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 period ended August 31, 1997, the Manager voluntarily waived
investment management fees of $50,773.
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 $12,040 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 caption "Shareholder servicing
and related shareholder expenses" are expense offsets of $614.
3. Capital Stock.
At August 31, 1997, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $51,867,319. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Six Months Year
Class A Ended Ended
August 31, 1997 February 28, 1997
--------------- -----------------
<S> <C> <C>
Sold........................................ 48,124,452 122,798,906
Issued on reinvestment of dividends......... 679,422 1,492,802
Redeemed.................................... ( 42,103,035) ( 136,660,213)
------------------ -------------------
Net increase (decrease)..................... 6,700,839 ( 12,368,505)
================== ==================
<CAPTION>
Six Months October 10, 1996
Class B Ended (Commencement of Sales) to
August 31, 1997 February 28, 1997
--------------- -----------------
<S> <C> <C>
Sold........................................ -- 5,000
Issued on reinvestment of dividends......... 80 55
Redeemed.................................... -- --
------------------ -------------------
Net increase (decrease)..................... 80 5,055
================== ===================
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses at August 31, 1997 amounted to
$18,749. This amount represents tax basis capital losses 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 75% 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
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
================================================================================
5. Concentration of Credit Risk. (Continued)
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.
6. Financial Highlights.
<TABLE>
<CAPTION>
Six Months Ended Year Ended Year Ended Year Ended
Class A August 31, February 28, February 29, February 28,
- ------- ----------- ------------ ------------ ------------------------------------
1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
(for a share outstanding throughout the period)
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..................... 0.015 0.028 0.032 0.025 0.019 0.023
Less distributions:
Dividends from net investment income...... ( 0.015 ) ( 0.028 ) ( 0.032 ) ( 0.025 ) ( 0.019 ) ( 0.023 )
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total Return................................ 3.00%* 2.82% 3.23% 2.56% 1.88% 2.33%
Ratios/Supplemental Data
Net assets, end of period (000)............. $ 51,843 $ 45,143 $ 57,510 $ 55,324 $ 68,401 $ 83,101
Ratios to average net assets:
Expenses.................................. 0.81%* 0.82% 0.82% 0.75% 0.74% 0.68%
Net investment income..................... 2.96%* 2.79% 3.17% 2.53% 1.86% 2.32%
Management, administration and shareholder
servicing fees waived................... 0.21% 0.08% 0.10% 0.28% 0.30% 0.25%
Expenses paid indirectly.................. 0.00% 0.01% 0.02% -- -- --
<CAPTION>
Six Months October 10, 1996
Class B Ended (Commencement of Sales) to
- ------- August 31, 1997 February 28, 1997
--------------- -----------------
<S> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period................................ $ 1.00 $ 1.00
---------- ----------
Income from investment operations:
Net investment income 0.016 0.012
Less distributions:
Dividends from net investment income ( 0.016) ( 0.012)
---------- ----------
Net asset value, end of period....................................... $ 1.00 $ 1.00
========== ==========
Total Return......................................................... 3.20%* 3.08%*
Ratios/Supplemental Data
Net assets, end of period (000)...................................... 5 5
Ratios to average net assets:
Expenses........................................................... 0.62%* 0.60%*
Net investment income.............................................. 3.15%* 3.04%*
Management, administration and shareholder servicing fees waived... 0.21% 0.08%
Expenses paid indirectly........................................... 0.00% 0.01%
* Annualized
</TABLE>
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<PAGE>
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MICHIGAN
DAILY
TAX FREE
INCOME
FUND, INC.
Semi-Annual Report
August 31, 1997
(Unaudited)
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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.
- -----------------------------------------------------
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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<PAGE>
