<PAGE>
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MICHIGAN
DAILY TAX FREE 600 FIFTH AVENUE, NEW YORK, NY 10020
INCOME FUND, INC. (212) 830-5200
================================================================================
Dear Shareholder:
We are pleased to present the semi-annual report of Michigan Daily Tax Free
Income Fund, Inc. for the period March 1, 2000 through August 31, 2000.
The Fund had net assets of $2,540,167 and 14 active shareholders as of August
31, 2000.
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, 2000
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- --------
Variable Rate Demand Instruments (b) (102.36%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 Berkeley County, SC PCRB
(Amoco Chemical Company Project) - Series 1994 07/01/12 4.30% $ 100,000 VMIG-1 A1+
200,000 Brazoria County, TX Brazos River Harbor Navigation District
(Venture Project)
LOC Chase Manhattan Bank, N.A. 11/01/18 4.45 200,000 VMIG-1 A1+
100,000 Burke County, GA PCRB
(Georgia Power Company Plant V) 07/01/24 4.30 100,000 VMIG-1 A1
100,000 Calcasieu Parish, LA
Industrial Development Board Environmental RB
(Citgo Petroleum Corporation) - Series 1996
LOC Westdeutche Landesbank 07/01/26 4.45 100,000 P1 A1+
100,000 Dade County, FL IDA Facilities RB
(Florida Power and Light Company) - Series 1993 06/01/21 4.30 100,000 VMIG-1 A1+
100,000 Delaware County, PA IDA Airport Facilities RB
(UPS Project) - Series 1985 12/01/15 4.25 100,000 A1+
300,000 Dinwiddie County, VA IDA (Chaparral Steel Project) - Series A
LOC Bank of America 08/01/29 4.50 300,000 VMIG-1 A1+
100,000 District of Columbia GO - Series 1992A-1
LOC Societe Generale 10/01/07 4.35 100,000 VMIG-1 A1+
100,000 Floyd County, GA Development Authority
(Georgia Kraft Company Project) - Series 1985
LOC Banque Nationale de Paris 12/01/15 4.45 100,000 P1
100,000 Gulf Coast, TX Waste Disposal Authority (Bayer Corporation) 05/01/27 4.45 100,000 P1 A1+
100,000 Gwinnett County, GA Development Authority (Volvo Project) (c)
LOC Union Bank of Switzerland 08/01/06 4.40 100,000
100,000 Hapeville, GA Development Authority IDRB
(Hapeville Hotel Limited)
LOC Deutsche Bank 11/01/15 4.25 100,000 P1
100,000 Illinois HFA RB (Elmhurst Hospital) - Series A 01/01/28 4.40 100,000 VMIG-1
100,000 Jacksonville, FL Electric Authority RB
(Electric System) - Series B 10/01/10 4.30 100,000 VMIG-1 A1+
100,000 Los Angeles, CA Regional Airport
(American Airlines Los Angeles International)
LOC Wachovia Bank & Trust Co., N.A. 12/01/24 4.35 100,000 P1
100,000 Missouri State HEFA
(Washington University) - Series B 02/01/40 4.30 100,000 VMIG-1 A1+
100,000 New York City, NY GO - Series E-2
LOC Morgan Guaranty Trust Company 08/01/20 4.30 100,000 VMIG-1 A1+
</TABLE>
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The accompanying notes are an integral part of these financial statements.
<PAGE>
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<TABLE>
<CAPTION>
Ratings (a)
-----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- --------
Variable Rate Demand Instruments (b) (Continued)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 NYS Thruway Authority General RB
Insured by FGIC 01/01/24 4.15% $ 200,000 VMIG-1 A1+
100,000 Ohio State PCRB (Sohio Water) 05/01/22 4.30 100,000 A1+
100,000 Port Authority of NY & NJ Special Obligation RB
(Versatile Structure Obligation) 08/01/24 4.05 100,000 VMIG-1 A1+
100,000 Stevenson, AL Industrial Development Board
(Mead Corporation Project)
LOC Credit Suisse First Boston 11/01/16 4.25 100,000 A1+
100,000 Texas Water Development Board - Series A 03/01/15 4.30 100,000 VMIG-1 A1+
----------- -----------
2,600,000 Total Variable Rate Demand Instruments 2,600,000
----------- -----------
Total Investments (102.36%) (Cost $2,600,000+) 2,600,000
Liabilities in Excess of Cash and Other Assets (-2.36%) ( 59,833)
-----------
Net Assets (100.00%), 2,544,670 shares outstanding - Class A (Note 3) $ 2,540,167
===========
Net Asset Value, offering and redemption price per share: $ 1.00
===========
</TABLE>
+ Aggregate cost for federal income tax purposes is identical.
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The accompanying notes are an integral part of these financial statements.
<PAGE>
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 2000
(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.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
FGIC = Financial Guaranty Insurance Company IDRB = Industrial Development Revenue Bond
GO = General Obligation LOC = Letter of Credit
HEFA = Health and Education Facilities Authority PCRB = Pollution Control Revenue Bond
HFA = Hospital Finance Authority RB = Revenue Bond
IDA = Industrial Development Authority
</TABLE>
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The accompanying notes are an integral part of these financial statements.
<PAGE>
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 2000
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest...................................................................... $ 336,188
---------------------
Expenses: (Note 2)
Investment management fee..................................................... 24,596
Administration fee............................................................ 17,218
Shareholder servicing fee (Class A)........................................... 16,398
Custodian expenses............................................................ 3,920
Shareholder servicing and related shareholder expenses........................ 7,304
Legal, compliance and filing fees............................................. 12,119
Audit and accounting.......................................................... 23,744
Directors' fees............................................................... 3,000
---------------------
Total expenses.............................................................. 108,299
Less: Fees waived......................................................... ( 58,212)
---------------------
Net expenses.............................................................. 50,087
---------------------
Net investment income........................................................... 286,101
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments......................................... ( 918)
---------------------
Increase in net assets from operations.......................................... $ 285,183
=====================
</TABLE>
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The accompanying notes are an integral part of these financial statements.
<PAGE>
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MICHIGAN DAILY TAX FREE INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Six Months Ended
August 31, 2000 Year Ended
(Unaudited) February 29, 2000
----------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C>
Operations:
Net investment income....................................... $ 286,101 $ 526,137
Net realized gain (loss) on investments..................... ( 918) --
---------------- -----------------
Increase in net assets from operations...................... 285,183 526,137
Dividends to shareholders from net investment income
Class A..................................................... ( 269,494)* 526,137)*
Capital share transactions (Note 3)
Class A..................................................... ( 21,949,639) 4,304,963
---------------- -----------------
Total increase (decrease)............................... ( 21,933,950) 4,304,963
Net assets:
Beginning of period......................................... 24,474,117 20,169,154
---------------- -----------------
End of period (including undistributed net investment
income of $16,607 & $0, respectively)....................... $ 2,540,167 $ 24,474,117
================ ================
</TABLE>
* Designated as exempt-interest dividends for federal income tax purposes.
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The accompanying notes are an integral part of these financial statements.
<PAGE>
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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 accounting principles generally accepted in the United States of
America 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 accounting
principles generally accepted in the United States of America 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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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 a fee
equal to .20% of the Fund's average daily net assets with respect only to the
Class A shares. There were no additional expenses borne by the Fund pursuant to
the Distribution Plan.
During the period ended August 31, 2000, the Manager voluntarily waived
investment management fees and administration fees of $24,596 and $17,218,
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.
During the period ended August 31, 2000, the Distributor voluntarily waived
shareholder servicing fees for $16,398.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $1,030 paid to Reich & Tang
Services, Inc., an affiliate of the Manager, as shareholder servicing agent for
the Fund.
3. Capital Stock.
At August 31, 2000, 20,000,000,000 shares of $.001 par value stock were
authorized and capital paid in amounted to $2,527,535. Transactions in capital
stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Class A Six Months Ended Year Ended
August 31, 2000 February 29, 2000
--------------- -----------------
<S> <C> <C>
Sold........................................ 18,637,305 51,158,068
Issued on reinvestment of dividends......... 258,893 482,812
Redeemed.................................... ( 40,845,837) ( 47,335,917)
----------------- -----------------
Net increase (decrease)..................... ( 21,949,639) 4,304,963
================= =================
</TABLE>
There were no Class B shares outstanding as of August 31, 2000 and February 29,
2000.
4. Sales of Securities.
Accumulated undistributed realized losses at August 31, 2000 amounted to $3,975.
Of this amount $3,057 represents tax basis capital losses which may be carried
forward to offset future capital gains. Such losses expire between February 28,
2001 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 58% of these investments are
further secured, as to principal and interest, by credit enhancements such as
letters of credit, municipal bond insurance and guarantees issued by financial
institutions. The Fund maintains a policy of monitoring its exposure by
reviewing the credit worthiness of the issuers, as well as that of the financial
institutions issuing the credit enhancements, and by limiting the amount of
holdings with credit enhancements from one financial institution.
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<PAGE>
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6. Financial Highlights.
<TABLE>
<CAPTION>
Year
Six Months Year Ended Year
Ended Ended February 28, Ended
Class A August 31, February 29, ---------------------------------- February 29,
------- 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- --------
<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..................... 0.016 0.026 0.027 0.030 0.028 0.032
Less distributions:
Dividends from net investment income...... ( 0.016) ( 0.026) ( 0.027) ( 0.030) ( 0.028) ( 0.032)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return................................ 1.66%** 2.58% 2.72% 3.00% 2.82% 3.23%
Ratios/Supplemental Data
Net assets, end of period (000)............. $ 2,540 $ 24,474 $ 20,169 $ 51,593 $ 45,143 $ 57,510
Ratios to average net assets:
Expenses (net of fees waived)+............ 0.61%* 0.81% 0.81% 0.81% 0.82% 0.82%
Net investment income..................... 3.49%* 2.56% 2.72% 2.96% 2.79% 3.17%
Management, administration and
shareholder servicing fees waived....... 0.71%* 0.36% 0.39% 0.21% 0.08% 0.10%
Expenses paid indirectly.................. 0.00% 0.00% 0.00% 0.00% 0.01% 0.02%
<CAPTION>
Year October 10, 1996
Class B Ended (Commencement of Sales) to
------- February 28, 1998 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................................ 0.018 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%*
</TABLE>
* Annualized
** Not Annualized
+ Expenses paid indirectly
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[This Page Intentionally Left Blank.]
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MICHIGAN
DAILY
TAX FREE
INCOME
FUND, INC.
Semi-Annual Report
August 31, 2000
(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
State Street Kansas City
801 Pennsylvania
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services, Inc.
600 Fifth Avenue
New York, New York 10020
MI800S
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