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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, 1998 through August 31, 1998.
The Fund had net assets of $23,267,675 and 302 active shareholders as of August
31, 1998.
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, 1998
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- -------
Other Tax Exempt Investments (11.16%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,595,000 Michigan Municipal Bond Authority 09/18/98 4.34% $ 2,595,694 SP-1+
----------- -----------
2,595,000 Total Other Tax Exempt Investments 2,595,694
----------- -----------
<CAPTION>
Other Variable Rate Demand Instruments (b) (47.36%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 920,000 Birmingham, MI EDC Limited Obligation RB
(Brown Street Assoc. Project) - Series 1983 (c)
LOC Michigan National Bank 12/01/18 3.67% $ 920,000
1,000,000 Delta County, MI EDC Environmental Improvement RB
(Mead Escanaba Paper) - Series C
LOC Bank of Nova Scotia 12/01/23 3.30 1,000,000 P1
100,000 Delta County, MI EDC Environmental Improvement RB
(Mead Escanaba Paper) - Series E
LOC Bank of Nova Scotia 12/01/23 3.25 100,000 P1
1,000,000 Farmington Hills, MI EDC EDRB
(Carefour Corp. Project) - Series 1985 (c)
LOC Bankers Trust Company 09/01/15 3.42 1,000,000
1,000,000 Michigan JDA IDRB
(Michigan Sugar Sebewaing Project) - Series 1985 (c)
LOC Suntrust Bank 09/01/00 3.35 1,000,000
1,000,000 Michigan State HFA HRB (Daughters of Charity National
Health System - Providence Hospital Project) - Series 1997E 11/01/11 3.15 1,000,000 VMIG-1 A1+
1,100,000 Michigan State Hospital Equipment Loan Program
LOC First of America 12/01/23 3.30 1,100,000 VMIG-1
200,000 Michigan State Strategic Fund Limited Obligation RB
(Pioneer Metal Finishing Inc. Project) - Series 1996
LOC Barclays Bank 09/01/30 3.35 200,000 P1 A1+
2,400,000 Michigan State Strategic Fund Limited Obligation RB
(Pioneer Metal Finishing Inc. Project) - Series 1996
LOC National City Bank, Northwest 11/01/08 3.45 2,400,000 A1
700,000 Michigan State Strategic Fund PCRB
(Consumers Power Company Project) - Series 1993A
LOC Canadian Imperial Bank of Commerce 06/15/10 3.35 700,000 A1+
400,000 Michigan State Strategic Fund RB
(National Rubber Michigan Incorporated Project)
LOC National Bank of Canada 09/01/11 3.40 400,000 P1 A1
500,000 Michigan State Strategic Fund RB (Pilot Industry Inc. Project) (c)
LOC National Bank of Detroit 06/01/01 3.45 500,000
300,000 Royal Oak Michigan HFA RB (William Beaumont Hospital) 01/01/03 3.25 300,000 VMIG1 A1+
400,000 Royal Oak Michigan HFA RB (William Beaumont Hospital) 01/01/27 3.25 400,000 VMIG1 A1+
----------- -----------
11,020,000 Total Other Variable Rate Demand Instruments 11,020,000
----------- -----------
</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
------ ---- ----- ------ ------- -------
Put Bonds (d) (10.74%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,500,000 Michigan Strategic Fund (Donnelly Corp. Project) - Series 1988
LOC Dresdner Bank A.G. 10/01/98 3.90% $ 1,500,000 P1 A1+
1,000,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Abbott Laboratories) - Series 1983A 03/01/99 3.55 1,000,000 Aa1 AAA
----------- -----------
2,500,000 Total Put Bonds 2,500,000
----------- -----------
<CAPTION>
Revenue Bond (3.03%)
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<S> <C> <C> <C> <C> <C> <C>
$ 700,000 Michigan State Underground Storage Tank (c)
AMBAC Insured 05/01/99 3.68% $ 705,400
----------- -----------
700,000 Total Revenue Bond 705,400
----------- -----------
<CAPTION>
Tax Exempt Commercial Paper (14.61%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,200,000 Delta County, MI EDC (Mead Escanaba Paper) - Series A
LOC Union Bank of Switzerland 09/24/98 3.45% $ 1,200,000 P1
1,200,000 Delta County, MI EDC (Mead Escanaba Paper) - Series B
LOC Morgan Guaranty Trust Company 09/24/98 3.45 1,200,000 P1
1,000,000 Puerto Rico Government Development Bank 10/15/98 3.00 1,000,000 A1+
----------- -----------
3,400,000 Total Tax Exempt Commercial Paper 3,400,000
----------- -----------
<CAPTION>
Variable Rate Demand Instruments - Private Placements (b) (11.09%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 80,000 Charlevoix, MI (Hoskins)
LOC Chase Manhattan Bank, N.A. 11/01/99 5.52% $ 80,000 P1 A1
2,500,000 Kalamazoo County, MI Limited Obligation RB
(WBC Properties Limited Partnership Project) - Series 1985
LOC Old Kent Bank & Trust Co. 09/01/15 3.35 2,500,000 P1 A1
----------- -----------
2,580,000 Total Variable Rate Demand Instruments - Private Placements 2,580,000
----------- -----------
Total Investments (97.99%) (Cost $22,801,094+) 22,801,094
Cash and Other Assets in Excess of Liabilities (2.01%) 466,581
-----------
Net Assets (100.00%), 23,287,867 shares outstanding - Class A (Note 3) $23,267,675
===========
Net assets Value, offering and redemption price per share: $ 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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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1998
(UNAUDITED)
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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 = Export Development Corporation JDA = Job Development Authority
EDRB = Educational Development Revenue Bond PCFA = Pollution Control Finance Authority
HFA = Hospital Finance Authority PCRB = Pollution Control Revenue Bond
HRB = Hospital Revenue Bond RB = Revenue Bond
IDRB = Industrial Development Revenue Bond
</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, 1998
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest..................................................................... $ 586,292
---------------
Expenses: (Note 2)
Investment management fee.................................................... 47,725
Administration fee........................................................... 33,408
Shareholder servicing fee (Class A).......................................... 31,817
Custodian expenses........................................................... 6,147
Shareholder servicing and related shareholder expenses....................... 14,478
Legal, compliance and filing fees............................................ 14,719
Audit and accounting......................................................... 25,257
Directors' fees.............................................................. 3,012
Other........................................................................ 1,949
---------------
Total expenses............................................................. 178,512
Less fees waived.......................................................... ( 49,335)
Less expenses paid indirectly............................................. ( 297)
---------------
Net expenses.............................................................. 128,880
---------------
Net investment income.......................................................... 457,412
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments........................................ ( 1,444)
---------------
Increase in net assets from operations......................................... $ 455,968
===============
</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, 1998 Year Ended
(Unaudited) February 28, 1998
--------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C>
Operations:
Net investment income....................................... $ 457,412 $ 1,408,041
Net realized gain (loss) on investments..................... ( 1,444) 43
--------------- ---------------
Increase in net assets from operations...................... 455,968 1,480,084
Dividends to shareholders from net investment income
Class A..................................................... ( 457,412)* ( 1,479,951)*
Class B..................................................... ( -- )* ( 90)*
Capital share transactions (Note 3)
Class A..................................................... ( 28,323,928) 6,450,450
Class B..................................................... ( -- ) ( 5,055)
--------------- ---------------
Total increase (decrease)............................... ( 28,325,372) 6,445,438
Net assets:
Beginning of period......................................... 51,593,047 45,147,609
--------------- ---------------
End of period............................................... $ 23,267,675 $ 51,593,047
=============== ===============
</TABLE>
* Designated as exempt-interest dividends for federal income tax purposes.
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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)
================================================================================
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 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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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
================================================================================
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, Inc. (the Distributor) have
entered into a Distribution Agreement and a Shareholder Servicing Agreement,
only with respect to Class A shares of the Fund. For its services under the
Shareholder Servicing Agreement, the Distributor receives from the Fund with
respect only to the Class A shares 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, 1998, the Manager voluntarily waived
investment management fees and administration fees of $38,972 and $10,363,
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.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $7,960 paid to Reich & Tang
Services, Inc., 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 $297.
3. Capital Stock.
At August 31, 1998, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $23,287,867. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Class A Six Months Ended Year Ended
August 31, 1998 February 28, 1998
--------------- -----------------
<S> <C> <C>
Sold........................................ 28,100,598 82,174,625
Issued on reinvestment of dividends......... 463,955 1,437,833
Redeemed.................................... ( 56,888,481) ( 77,162,008)
--------------- ---------------
Net increase (decrease)..................... ( 28,323,928) 6,450,450
=============== ===============
Class B Year Ended
February 28, 1998
-----------------
<S> <C>
Sold........................................ --
Issued on reinvestment of dividends......... 92
Redeemed.................................... ( 5,147)
---------------
Net increase (decrease)..................... ( 5,055)
===============
There were no Class B shares outstanding as of August 31, 1998 and February 28, 1998.
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses at August 31, 1998 amounted to
$20,192. Of this amount, $18,748 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 69% 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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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>
Year Ended Year Ended Year Ended
Class A Six Months February 28, February 29, February 28,
- ------- Ended ----------------- ------------ -----------------
August 31, 1998 1998 1997 1996 1995 1994
--------------- ------- ------- ------- ------- -------
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...................... 0.015 0.030 0.028 0.032 0.025 0.019
Less distributions:
Dividends from net investment income....... ( 0.015) ( 0.030) ( 0.028) ( 0.032) ( 0.025) ( 0.019)
------- ------- ------- ------- ------- -------
Net asset value, end of period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total Return................................. 2.94%* 3.00% 2.82% 3.23% 2.56% 1.88%
Ratios/Supplemental Data
Net assets, end of period (000).............. $ 23,268 $ 51,593 $ 45,143 $ 57,510 $ 55,324 $ 68,401
Ratios to average net assets:
Expenses (net of fees waived).............. 0.81%* 0.81% 0.82% 0.82% 0.75% 0.74%
Net investment income...................... 2.88%* 2.96% 2.79% 3.17% 2.53% 1.86%
Management, administration and
shareholder servicing fees waived 0.31%* 0.21% 0.08% 0.10% 0.28% 0.30%
Expenses paid indirectly................... 0.00% 0.00% 0.01% 0.02% 0.00% 0.00%
Year October 10, 1996
Class B Ended (Commencement of Sales) to
- ------- February 28, 1998 February 28, 1997
----------------- -----------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C>
Net asset value, beginning of period................... $ 1.00 $ 1.00
-------- --------
Income from investment operations:
Net investment income................................ 0.018 0.012
Less distributions:
Dividends from net investment income................. ( 0.018 ) ( 0.012 )
-------- --------
Net asset value, end of period......................... $ 1.00 $ 1.00
======== ========
Total Return........................................... 3.19%* 3.08%*
Ratios/Supplemental Data
Net assets, end of period (000)........................ -0- 5
Ratios to average net assets:
Expenses (net of fees waived)........................ 0.62%* 0.60%*
Net investment income................................ 3.15%* 3.04%*
Management and administration fees waived............ 0.21%* 0.08%*
Expenses paid indirectly............................. 0.00% 0.01%*
* Annualized
</TABLE>
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MICHIGAN
DAILY
TAX FREE
INCOME
FUND, INC.
Semi-Annual Report
August 31, 1998
(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
801 Pennsylvania
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services, Inc.
600 Fifth Avenue
New York, New York 10020
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