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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, 1999 through August 31, 1999.
The Fund had net assets of $19,731,178 and 230 active shareholders as of August
31, 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
AUGUST 31, 1999
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- -------
Other Tax Exempt Investments (10.27%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,000,000 Detroit City School District, MI 06/01/00 3.15% $ 1,005,800 SP-1+
1,000,000 Michigan Municipal Bond Authority
(Local Loans for Qualified Schools) (c) 05/15/00 3.01 1,020,884
----------- -----------
2,000,000 Total Other Tax Exempt Investments 2,026,684
----------- -----------
<CAPTION>
Other Variable Rate Demand Instruments (b) (47.41%)
- ------------------------------------------------------------------------------------------------------------------------------------
<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 3.57% $ 905,000
300,000 Delta County, MI EDC (Mead Escanaba Paper Company)
LOC Bank of Nova Scotia 12/01/23 3.00 300,000 P1
300,000 Delta County, MI (Mead Escanaba Paper Company) - Series 1985 F
LOC Bank of Nova Scotia 12/01/13 3.00 300,000 P1
300,000 Detroit, MI Water Supply System RB - Series 1993
Insured by FGIC 07/01/13 3.25 300,000 VMIG-1 A1+
950,000 Michigan State HFA HRB
(Daughters of Charity National Health System -
Providence Hospital Project) - Series 1997E 11/01/11 3.20 950,000 VMIG-1 A1+
1,400,000 Michigan State HFA RB (Mt. Clemens General Hospital)
LOC Comerica Bank - Detroit 08/15/15 3.20 1,400,000 VMIG-1
900,000 Michigan State Hospital Equipment Loan Program
LOC First of America 12/01/23 3.32 900,000 VMIG-1
200,000 Michigan State Strategic Fund (Detroit Edison)
Insured by MBIA Insurance Corp. 09/01/25 3.32 200,000 A1+
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 3.45 2,200,000 A1
900,000 Michigan State Strategic Fund PCR
(Consumer's Power Co. Proj.)
LOC Canadian Imperial Bank of Commerce 06/15/10 2.95 900,000 A1+
400,000 Michigan State Strategic Fund RB
(National Rubber Michigan Inc. Project)
LOC National Bank of Canada 09/01/11 3.35 400,000 P1 A1
400,000 Michigan State Strategic Fund RB
(Pilot Industry Inc. Project) (c)
LOC National Bank of Detroit 06/01/01 3.35 400,000
200,000 Township of Cornell, MI EDC (Mead Escanaba)
LOC Swiss Bank 11/01/16 3.05 200,000 A1+
----------- -----------
9,355,000 Total Other Variable Rate Demand Instruments 9,355,000
----------- -----------
</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) (12.67%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,500,000 Michigan Strategic Fund
(Donnelly Corporation Project) - Series 1988 (c)
LOC Dresdner Bank A.G. 10/01/99 3.50% $ 1,500,000
1,000,000 Puerto Rico Industrial Medical & Environmental PCFA RB
(Abbott Laboratories) - Series 1983A 03/01/00 2.90 1,000,000 Aa1 AAA
----------- -----------
2,500,000 Total Put Bonds 2,500,000
----------- -----------
<CAPTION>
Revenue Bonds (3.19%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 600,000 Michigan State HFA (Oakwood Hospital Obligation Group)
Collateralized by U.S. Government Obligations 07/01/00 3.53 % $ 628,238 Aaa AAA
----------- -----------
600,000 Total Revenue Bonds 628,238
----------- -----------
<CAPTION>
Tax Exempt Commercial Paper (13.68%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 900,000 Delta County, MI EDC (Mead Escanaba Paper) - Series A
LOC Morgan Guaranty Trust Company 11/09/99 3.20% $ 900,000 P1
900,000 Delta County, MI EDC (Mead Escanaba Paper) - Series B
LOC Union Bank of Switzerland 10/05/99 3.20 900,000 P1
900,000 Puerto Rico Government Development Bank 11/09/99 3.05 900,000 A1+
----------- -----------
2,700,000 Total Tax Exempt Commercial Paper 2,700,000
----------- -----------
<CAPTION>
Variable Rate Demand Instruments - Private Placements (b) (12.79%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 24,000 Charlevoix, MI (Hoskins)
LOC Chase Manhattan Bank, N.A. 11/01/99 5.36% $ 24,000 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 3.30 2,500,000 P1 A1
----------- -----------
2,524,000 Total Variable Rate Demand Instruments - Private Placements 2,524,000
----------- -----------
Total Investments (100.01%) (Cost $19,733,922+) 19,733,922
Liabilities in Excess of Cash and Other Assets (-0.01%) ( 2,744)
-----------
Net Assets (100.00%), 19,751,370 shares outstanding - Class A (Note 3) $19,731,178
===========
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)
AUGUST 31, 1999
(UNAUDITED)
================================================================================
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>
EDC = Export Development Corporation LOC = Letter of Credit
FGIC = Financial Guaranty Insurance Company PCFA = Pollution Control Finance Authority
HFA = Hospital Finance Authority PCR = Pollution Control Revenue
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, 1999
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest...................................................................... $ 323,044
---------------------
Expenses: (Note 2)
Investment management fee..................................................... 30,264
Administration fee............................................................ 21,185
Shareholder servicing fee (Class A)........................................... 20,176
Custodian expenses............................................................ 1,818
Shareholder servicing and related shareholder expenses........................ 9,141
Legal, compliance and filing fees............................................. 10,187
Audit and accounting.......................................................... 20,822
Directors' fees............................................................... 3,267
Other......................................................................... 1,104
---------------------
Total expenses.............................................................. 117,964
Less fees waived.......................................................... ( 36,317)
---------------------
Net expenses.............................................................. 81,647
---------------------
Net investment income.......................................................... 241,397
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments........................................ -0-
---------------------
Increase in net assets from operations......................................... $ 241,397
=====================
</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, 1999 Year Ended
(Unaudited) February 28, 1999
--------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C>
Operations:
Net investment income....................................... $ 241,397 $ 736,172
Net realized gain (loss) on investments..................... -- ( 1,444)
--------------- ---------------
Increase in net assets from operations...................... 241,397 734,728
Dividends to shareholders from net investment income
Class A..................................................... ( 241,397)* ( 736,172)*
Capital share transactions (Note 3)
Class A..................................................... ( 437,976) ( 31,422,449)
--------------- ---------------
Total increase (decrease)............................... ( 437,976) ( 31,423,893)
Net assets:
Beginning of period......................................... 20,169,154 51,593,047
--------------- ---------------
End of period............................................... $ 19,731,178 $ 20,169,154
=============== ===============
* 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)
================================================================================
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, 1999, the Manager voluntarily waived
investment management fees and administration fees of $15,132 and $21,185,
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 $3,010 paid to Reich & Tang
Services, Inc., an affiliate of the Manager, as servicing agent for the Fund.
3. Capital Stock.
At August 31, 1999, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $19,751,370. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Class A Six Months Ended Year Ended
August 31, 1999 February 28, 1999
--------------- -----------------
<S> <C> <C>
Sold........................................ 19,976,290 41,985,901
Issued on reinvestment of dividends......... 218,820 739,801
Redeemed.................................... ( 20,633,086) ( 74,148,151)
---------------- ----------------
Net increase (decrease)..................... ( 437,976) ( 31,422,449)
================ ================
There were no Class B shares outstanding as of August 31, 1999 and February 28, 1999.
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses at August 31, 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 70% of these investments are
further secured, as to principal and interest, by letters of credit issued by
financial institutions. The Fund maintains a policy of monitoring its exposure
by reviewing the creditworthiness of the issuers, as well as that of the
financial institutions issuing the letters of credit, and by limiting the amount
of holdings with letters of credit from one financial institution.
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<TABLE>
<CAPTION>
6. Financial Highlights.
Year Ended Year Ended Year Ended
Six Months February 28, February 29, February 28,
Class A Ended --------------------------------- ------------ ------------
------- August 31, 1999 1999 1998 1997 1996 1995
--------------- -------- -------- -------- -------- --------
<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.................... 0.012 0.027 0.030 0.028 0.032 0.025
Less distributions:
Dividends from net investment income..... ( 0.012) ( 0.027) ( 0.030) ( 0.028) ( 0.032) ( 0.025)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return................................ 2.41%* 2.72% 3.00% 2.82% 3.23% 2.56%
Ratios/Supplemental Data
Net assets, end of period (000)............. $ 19,731 $ 20,169 $ 51,593 $ 45,143 $ 57,510 $ 55,324
Ratios to average net assets:
Expenses (net of fees waived)............ 0.81%* 0.81% 0.81% 0.82% 0.82% 0.75%
Net investment income.................... 2.39%* 2.72% 2.96% 2.79% 3.17% 2.53%
Management, administration and
shareholder servicing fees waived...... 0.36%* 0.39% 0.21% 0.08% 0.10% 0.28%
Expenses paid indirectly................. 0.00% 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.
CHANGE IN INDEPENDENT ACCOUNTANTS
================================================================================
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey) resigned as independent
auditors of the Fund pursuant to an agreement by PricewaterhouseCoopers LLP
(PwC) to acquire McGladrey's investment company practice. The McGladrey partners
and professionals serving the Fund at the time of the acquisition have joined
PwC.
The reports of McGladrey on the financial statements of the Fund during the past
two fiscal years contained no adverse opinion or a disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
In connection with its audits for the two most recent fiscal years and through
August 13, 1999, there were no disagreements with McGladrey on any matter of
accounting principle or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
McGladrey would have caused it to make reference to the subject matter of
disagreement in connection with its report.
Effective August 13, 1999, the Fund, with the approval of its Board of Directors
and its Audit Committee, engaged PwC as its independent auditors.
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MICHIGAN
DAILY
TAX FREE
INCOME
FUND, INC.
Semi-Annual Report
August 31, 1999
(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
MICH899S
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