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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, 1999.
The Fund had net assets of $20,169,154 and 262 active shareholders as of
February 28, 1999.
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
FEBRUARY 28, 1999
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- -------
Other Variable Rate Demand Instruments (b) (56.30%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 905,000 Birmingham, MI EDC IDRB Limited Obligation RB
(Brown Street Association Project) - Series 1983 (c)
LOC Michigan National Bank 12/01/18 3.12% $ 905,000
800,000 Delta City, MI EDC Environmental Improvement RB
(Mead Escanaba Paper) - Series 1985F
LOC Bank of Nova Scotia 12/01/13 3.25 800,000 P1
200,000 Delta County, MI EDC Environmental Improvement RB
(Mead Escanaba Paper) - Series C
LOC Bank of Nova Scotia 12/01/23 3.10 200,000 P1
900,000 Delta City, MI EDC Environmental Improvement RB
(Mead Escanaba Paper) - Series D
LOC Credit Suisse First Boston 12/01/23 3.25 900,000 P1
300,000 Detroit, MI Water Supply System RB - Series 1993
FGIC Insured 07/01/13 2.95 300,000 VMIG-1 A1+
950,000 Michigan State HFA HRB
(Daughters of Charity National Health System -
Providence Hospital Project) - Series 1997E 11/01/11 2.95 950,000 VMIG-1 A1+
500,000 Michigan State HFA RB (Mt. Clemens General Hospital)
LOC Comerica Bank - Detroit 08/15/15 2.95 500,000 VMIG-1
900,000 Michigan State Hospital Equipment Loan Program
LOC First of America 12/01/23 3.00 900,000 VMIG-1
2,200,000 Michigan State Strategic Fund Limited Obligation RB
(Pioneer Metal Finishing Inc. Project) - Series 1996
LOC National City Bank, Northwest 11/01/08 3.05 2,200,000 A1
800,000 Michigan State Strategic Fund PCRB
(Consumer's Power Company Project) - Series 1993A
LOC Canadian Imperial Bank of Commerce 06/15/10 3.25 800,000 A1+
1,200,000 Michigan State Strategic Fund (Detroit Edison)
MBIA Insured 09/01/25 2.97 1,200,000 A1+
400,000 Michigan State Strategic Fund RB
(National Rubber Michigan Inc. Project)
LOC National Bank of Canada 09/01/11 2.95 400,000 P1 A1
500,000 Michigan State Strategic Fund RB
(Pilot Industry Inc. Project) (c)
LOC National Bank of Detroit 06/01/01 2.50 500,000
300,000 Midland County, MI EDC Limited Obligation RB
(Dow Chemical Project ) - Series B 12/01/15 3.20 300,000 P1 A1
</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>
$ 400,000 Royal Oak Michigan HFA RB (William Beaumont Hospital) 01/01/03 3.25% $ 400,000 VMIG-1 A1+
100,000 Royal Oak Michigan HFA RB (William Beaumont Hospital) 01/01/27 3.25 100,000 VMIG-1 A1+
------------ ------------
11,355,000 Total Other Variable Rate Demand Instruments 11,355,000
------------ ------------
<CAPTION>
Put Bonds (d) (12.40%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,500,000 Michigan Strategic Fund
(Donnelly Corporation Project) - Series 1988
LOC Dresdner Bank A.G. (c) 04/01/99 3.75% $ 1,500,000
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 (3.48%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 700,000 Michigan State Underground Storage Tank (c)
AMBAC Insured 05/01/99 3.77% $ 701,361
------------ ------------
700,000 Total Revenue Bond 701,361
------------ ------------
<CAPTION>
Tax Exempt Commercial Paper (13.88%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 900,000 Delta County, MI EDC (Mead Escanaba Paper) - Series A
LOC Union Bank of Switzerland 03/03/99 2.40% $ 900,000 P1
900,000 Delta County, MI EDC (Mead Escanaba Paper) - Series B
LOC Morgan Guaranty Trust Company 03/03/99 2.40 900,000 P1
1,000,000 Puerto Rico Government Development Bank 03/04/99 2.60 1,000,000 A1+
------------ ------------
2,800,000 Total Tax Exempt Commercial Paper 2,800,000
------------ ------------
<CAPTION>
Variable Rate Demand Instruments - Private Placements (b) (12.65%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 52,000 Charlevoix, MI (Hoskins)
LOC Chase Manhattan Bank, N.A. 11/01/99 5.36% $ 52,000 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 3.00 2,500,000 P1 A1
------------ ------------
2,552,000 Total Variable Rate Demand Instruments - Private Placements 2,552,000
------------ ------------
Total Investments (98.71%) (Cost $19,908,361+) $ 19,908,361
Cash and Other Assets, Net of Liabilities (1.29%) 260,793
------------
Net Assets (100.00%), 20,189,346 shares outstanding - Class A (Note 3) $ 20,169,154
============
Net Asset 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)
FEBRUARY 28, 1999
================================================================================
FOOTNOTES:
(a) Unless the variable rate demand instruments are assigned their own ratings,
the ratings are those of the holding company of the bank whose letter of
credit guarantees the issue or the insurance company who insures the issue.
All letters of credit and insurance are irrevocable and direct pay covering
both principal and interest. Certain issuers have either a line of credit,
a liquidity facility, a standby purchase agreement or some other financing
mechanism to ensure the remarketing of the securities. This is not a
guarantee and does not serve to insure or collateralize the issue.
(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>
AMBAC = American Municipal Bond Assurance Corporation IDRB = Industrial Development Revenue Bond
EDC = Export Development Corporation LOC = Letter of Credit
FGIC = Financial Guaranty Insurance Company MBIA = Municipal Bond Insurance Association
HFA = Hospital Finance Authority PCFA = Pollution Control Finance Authority
HRB = Hospital Revenue Bond PCRB = Pollution Control Revenue Bond
RB = 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
YEAR ENDED FEBRUARY 28, 1999
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<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest...................................................................... $ 955,532
---------------------
Expenses: (Note 2)
Investment management fee..................................................... 81,236
Administration fee............................................................ 56,865
Shareholder servicing fee (Class A)........................................... 54,158
Custodian expenses............................................................ 11,316
Shareholder servicing and related shareholder expenses........................ 28,718
Legal, compliance and filing fees............................................. 19,701
Audit and accounting.......................................................... 63,185
Directors' fees............................................................... 6,204
Other......................................................................... 4,653
---------------------
Total expenses.............................................................. 326,036
Less fees waived......................................................... ( 106,303)
Less expenses paid indirectly............................................ ( 373)
---------------------
Net expenses............................................................. 219,360
---------------------
Net investment income........................................................... 736,172
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments......................................... ( 1,444)
---------------------
Increase in net assets from operations.......................................... $ 734,728
=====================
</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
YEARS ENDED FEBRUARY 28, 1999 AND 1998
================================================================================
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income......................................... $ 736,172 $ 1,480,041
Net realized gain (loss) on investments....................... ( 1,444) 43
--------------- ---------------
Increase in net assets from operations........................ 734,728 1,480,084
Dividends to shareholders from net investment income
Class A....................................................... ( 736,172)* ( 1,479,951)*
Class B....................................................... ( -- )* ( 90)*
Capital share transactions (Note 3)
Class A....................................................... ( 31,422,449) 6,450,450
Class B....................................................... ( -- ) ( 5,055)
--------------- ---------------
Total increase (decrease)................................. ( 31,423,893) 6,445,438
Net assets:
Beginning of year............................................. 51,593,047 45,147,609
--------------- ---------------
End of year................................................... $ 20,169,154 $ 51,593,047
=============== ===============
* 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
================================================================================
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 shareholder
service 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 market 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)
================================================================================
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 year ended February 28, 1999, the Manager voluntarily waived
investment management fees and administration fees of $72,482 and $33,821,
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 $13,585 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 $373.
3. Capital Stock.
At February 28, 1999, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $20,189,346. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year Year
Ended Ended
Class A February 28, 1999 February 28, 1998
----------------- -----------------
<S> <C> <C>
Sold...................................... 41,985,901 82,174,625
Issued on reinvestment of dividends....... 739,801 1,437,833
Redeemed.................................. ( 74,148,151) ( 77,162,008)
-------------- --------------
Net increase (decrease)................... ( 31,422,449) 6,450,450
============== ==============
<CAPTION>
Year Ended
Class B February 28, 1998
-----------------
<S> <C>
Sold...................................... --
Issued on reinvestment of dividends....... 92
Redeemed.................................. ( 5,147)
-------------
Net increase (decrease)................... ( 5,055)
=============
</TABLE>
There were no Class B shares outstanding as of February 28, 1999 and 1998.
4. Sales of Securities.
Accumulated undistributed realized losses at February 28, 1999 amounted to
$20,192. 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, 2007.
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 monitoring its exposure
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5. Concentration of Credit Risk. (Continued)
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.
<TABLE>
<CAPTION>
6. Financial Highlights.
Year Ended Year Ended Year Ended
Class A February 28, February 29, February 28,
------- ---------------------------------- ------------ ------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the year)
Net asset value, beginning of year.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income................... 0.027 0.030 0.028 0.032 0.025
Less distributions:
Dividends from net investment income.... ( 0.027) ( 0.030) ( 0.028) ( 0.032) ( 0.025)
-------- -------- -------- -------- --------
Net asset value, end of year................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return................................ 2.72% 3.00% 2.82% 3.23% 2.56%
Ratios/Supplemental Data
Net assets, end of period (000)............. $ 20,169 $ 51,593 $ 45,143 $ 57,510 $ 55,324
Ratios to average net assets:
Expenses (net of fees waived)........... 0.81% 0.81% 0.82% 0.82% 0.75%
Net investment income................... 2.72% 2.96% 2.79% 3.17% 2.53%
Management and administration
fees waived............................ 0.39% 0.21% 0.08% 0.10% 0.28%
Expenses paid indirectly................ 0.00% 0.00% 0.01% 0.02% 0.00%
<CAPTION>
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.
INDEPENDENT AUDITOR'S REPORT
================================================================================
The Board of Directors and Shareholders
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, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights 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 financial
highlights 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, 1999, 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 financial highlights referred to
above present fairly, in all material respects, the financial position of
Michigan Daily Tax Free Income Fund, Inc. as of February 28, 1999, and the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
\s\McGladrey & Pullen, LLP
New York, New York
March 26, 1999
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MICHIGAN
DAILY
TAX FREE
INCOME
FUND, INC.
Annual Report
February 28, 1999
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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
MICH299A
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