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PENNSYLVANIA
DAILY
MUNICIPAL
INCOME
FUND
Semi-Annual Report
May 31, 1996
(Unaudited)
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<PAGE>
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PENNSYLVANIA
DAILY MUNICIPAL 600 FIFTH AVENUE, NEW YORK, NY 10020
INCOME FUND 212-830-5200
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Dear Shareholder:
We are pleased to present the semi-annual report of Pennsylvania Daily Municipal
Income Fund for the period December 1, 1995 through May 31,1996.
The Fund had net assets of $41,589,911 and 1,383 active shareholders as of May
31, 1996. Dividends earned on a share held throughout the period were $.016
which, when adjusted for the compounding effect of the reinvestment of
dividends, represents a 3.10% yield on an annual basis.
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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PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
STATEMENT OF NET ASSETS
MAY 31, 1996
(UNAUDITED)
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<TABLE>
<CAPTION>
Ratings (a)
----------------
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- -------- ------- ------
Other Tax Exempt Investments (19.44%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 800,000 Berk's and Montgomery, PA Municipal Utility Authority 08/01/96 3.44% $ 806,362 Aaa AAA
1,075,000 Chester County, PA Hospital Authority (Pheonixville Hospital)
FGIC Insured 07/01/96 3.70 1,077,842 Aaa AAA
1,275,000 Cumberland County, PA Municipal College RB
(Messiah College Project)
AMBAC Insured 10/01/96 3.55 1,275,000 Aaa AAA
265,000 Pennsylvania Intergovernmental Cooperational Authority
Series 1996
FGIC Insured 06/15/97 3.60 268,446 Aaa AAA
1,000,000 Pennsylvania Turnpike RB - Series L
MBIA Insured 06/01/97 3.53 1,021,670 Aaa AAA
1,300,000 Philadelphia, PA School District TRAN - Series 1995-96 06/28/96 3.89 1,300,471 MIG-1 SP-1
1,500,000 Temple University of the Commonwealth
System of Higher Education University Funding Obligation 05/20/97 3.65 1,512,858 SP-1+
800,000 York County, PA IDA First Mortgage
(Fairview Village Associates Project) 06/01/96 3.90 824,000 Aaa AAA
----------- -----------
8,015,000 Total Other Tax Exempt Investments 8,086,649
----------- -----------
<CAPTION>
Other Variable Rate Demand Instruments (c) (54.94%)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 Alleghany County, PA ACES
(Alleghany Hospital) - Series 1988C
LOC PNC Bank 03/01/13 3.60% $ 200,000 VMIG-1 A1+
3,200,000 Alleghany County, PA HDA RB
(Alleghany General Hospital)- Series B
LOC Morgan Guaranty Trust Company 09/01/10 3.55 3,200,000 VMIG-1 A1+
500,000 Alleghany, PA IDA
(Commercial Development Parkway Center Project) - Series A
LOC Mellon Bank, N.A. 05/01/09 3.95 500,000 A1
900,000 Alleghany County, PA
(Childrens Hospital of Pittsburgh) - Series 1985B
MBIA Insured 12/01/15 3.45 900,000 VMIG-1 A1
2,000,000 Beaver County, PA IDA
LOC Barclays Bank 08/01/20 3.65 2,000,000 P1 A1+
400,000 Chartiers Valley IDA
(Commercial Steel Corporation) - Series 1990A (b)
LOC PNC Bank 09/01/05 3.95 400,000
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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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 (c) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,900,000 Clarion County, PA EDA (Piney Creek) - Series A
LOC Swiss Bank Corp. 12/01/11 3.75% $ 1,900,000 VMIG-1 A1+
375,000 Clinton County, PA Municipal Authority HRB
(Lock Haven Hospital Project) - Series 1991A (b)
LOC Mellon Bank, N.A. 09/01/07 3.65 375,000
1,000,000 College Township IDA
LOC Wachovia Bank & Trust Co., N.A. 11/01/11 3.65 1,000,000 A1+
300,000 Delaware County, PA IDA (British Petroleum Oil Incorporated) 12/01/09 3.65 300,000 P1 A1+
100,000 Emmaus General Authority,
PA Local Government RB - Series 1989 F4
GIC-Goldman Sachs 03/01/24 3.80 100,000 A1+
1,300,000 Geisinger Authority, PA Health System
(Geisinger Health System) - Series 1992B 07/01/22 3.65 1,300,000 A1+
400,000 Jeannette, PA Health Services Authority (Jeannette Corporation)
LOC PNC Bank 07/01/99 3.95 400,000 VMIG-1
500,000 Lehigh County, PA IDA - Series 1985A
LOC Rabobank Nederland 12/01/15 3.65 500,000 P1
1,950,000 Montgomery County, PA Redevelopment Authority MHRB
(Glenmore Associates Project) 11/15/25 3.80 1,950,000 A1+
675,000 Pennsylvania Economic Development
Financing Authority RB - Series D11
LOC PNC Bank 11/01/05 3.95 675,000 A1
100,000 Pennsylvania State EDA (B&W Ebensburg Project)
LOC Swiss Bank Corp. 12/01/11 3.60 100,000 VMIG-1
1,100,000 Pennsylvania State Higher Education
Assistance Agency Student Loan 07/01/18 3.65 1,100,000 VMIG-1 A1+
2,000,000 Philadelphia, PA Hospital & HEFA
(Childrens Hospital of Philadelphia) 03/01/27 3.65 2,000,000 P1 A1+
1,000,000 Quakertown, PA Hospital Group Pooled RB
LOC First National Bank of Chicago 07/01/05 3.55 1,000,000 VMIG-1
1,000,000 Sewickley Valley Hospital Authority, PA RN
(D.T. Watson Rehabilitation Hospital) (b)
LOC PNC Bank 10/01/97 4.13 1,000,000
700,000 York County, PA IDA PCRB (Philadelphia Electric Company)
LOC Toronto-Dominion Bank 08/01/16 3.55 700,000 P1 A1+
</TABLE>
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See Notes to Financial Statements.
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PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
STATEMENT OF NET ASSETS (CONTINUED)
MAY 31, 1996
(UNAUDITED)
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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 (c) (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,250,000 York County, PA IDA Limited Obligation RB - Series 1996
(Metal Exchange Corporation Project) (b)
LOC Comerica Bank 06/01/06 4.15% $ 1,250,000
----------- -----------
22,850,000 Total Other Variable Rate Demand Instruments 22,850,000
----------- -----------
<CAPTION>
Put Bonds (d) (6.49%)
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<C> <C> <C> <C> <C> <C> <C>
$ 2,700,000 Alleghany County, PA
LOC Canadian Imperial Bank of Commerce 11/07/96 3.75% $ 2,700,000 P1 A1
----------- -----------
2,700,000 Total Put Bonds 2,700,000
----------- -----------
<CAPTION>
Tax Exempt Commercial Paper (12.99%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 1,000,000 Beaver County, PA IDA PCRB (Duquesne Light Company)
LOC Union Bank of Switzerland 08/06/96 3.65% $ 1,000,000 VMIG-1 A1+
1,800,000 Beaver County, PA IDA PCRB (Duquesne Light Company)
LOC Union Bank of Switzerland 06/27/96 3.30 1,800,000 VMIG-1 A1+
1,000,000 City of Philadelphia, PA Gas Works - Series B
LOC Canadian Imperial Bank of Commerce 06/06/96 3.75 1,000,000 P1 A1+
800,000 Venango County, PA IDA RRB (Scrubgrass Project) - Series A
LOC National Westminster Bank PLC 08/08/96 3.25 800,000 P1 A1+
800,000 Venango County, PA IDA RRB (Scrubgrass Project) - Series B
LOC National Westminster Bank PLC 07/09/96 3.60 800,000 P1 A1+
----------- -----------
5,400,000 Total Tax Exempt Commercial Paper 5,400,000
----------- -----------
<CAPTION>
Variable Rate Demand Instruments - Private Placements (c) (7.21%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 3,000,000 Pennsylvania Economic Development
Financing Authority - Series 1992E (b)
LOC First National Bank of Maryland 12/01/17 4.19% $3,000,000
----------- -----------
3,000,000 Total Variable Rate Demand Instruments - Private Placements 3,000,000
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Total Investments (101.07%) (Cost $42,036,649+) 42,036,649
Liabilities in excess of cash and other assets (-1.07%) ( 446,738)
-----------
Net Assets (100.00%), 41,590,853 Shares Outstanding $ 41,589,911
===========
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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FOOTNOTES:
(a) The ratings noted for variable rate demand instruments are those of the
bank whose letter of credit secures such instruments or guarantor of the
bond. P1 and A1+ are the highest ratings assigned for tax exempt commercial
paper.
(b) Securities that are not rated have been determined by the Fund's Board of
Trustees to be of comparable quality to the rated securities in which the
Fund may invest.
(c) Securities payable on demand at par including accrued interest (usually
with seven days notice) and where indicated are 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.
(d) The maturity date indicated for the put bonds is the next put date.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
EDA = Economic Development Authority MHRB = Muti-family Housing Revenue Bond
HEFA = Health & Education Finance Authority PCRB = Pollution Control Revenue Bond
HDA = Hospital Development Authority RB = Revenue Bond
HRB = Hospital Revenue Bond RRB = Resource Recovery Bonds
IDA = Industrial Development Authority TRAN = Tax and Revenue Anticipation Note
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31,1996
(UNAUDITED)
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<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest............................................................................. $ 779,427
--------------
Expenses: (Note 2)
Investment management fee............................................................ 84,159
Administration fee................................................................... 44,183
Distribution fee..................................................................... 52,599
Custodian fee........................................................................ 3,069
Shareholder servicing and related shareholder expenses............................... 23,890
Legal, compliance and filing fees.................................................... 7,259
Audit and accounting................................................................. 23,346
Trustees' fees....................................................................... 2,356
Amortization of organization expenses................................................ 4,937
Other................................................................................ 1,958
--------------
Total expenses..................................................................... 247,756
Less: Expenses paid indirectly (Note 2)............................................ ( 2,240)
Less: Fees waived (Note 2)......................................................... ( 109,270)
--------------
Net expenses....................................................................... 136,246
--------------
Net investment income.................................................................... 643,181
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments.................................................. -0-
--------------
Increase in net assets from operations................................................... $ 643,181
==============
</TABLE>
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See Notes to Financial Statements.
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PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
Six Months
Ended Year
May 31, 1996 Ended
(Unaudited) November 30,1995
------------ ----------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income......................................... $ 643,181 $ 1,338,881
Net realized gain (loss) on investments....................... -0- 707
--------------- ----------------
Increase in net assets from operations............................ 643,181 1,339,588
Dividends to shareholders from net investment income.............. ( 643,181) * ( 1,338,881)*
Capital share transactions (Note 3)............................... 609,710 ( 2,579,953)
--------------- ----------------
Total increase (decrease)................................. 609,710 ( 2,579,246)
Net assets:
Beginning of period........................................... 40,980,201 43,559,447
--------------- ----------------
End of period................................................. $ 41,589,911 $ 40,980,201
=============== ================
* Designated as exempt-interest dividends for federal income tax purposes.
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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1. Summary of Accounting Policies.
Pennsylvania Daily Municipal Income Fund, a Massachusetts business trust, is a
no-load, non-diversified, open-end management investment company registered
under the Investment Company Act of 1940. This 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 Trustees.
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. (Manager), equal to .40% of the Fund's
average daily net assets. The Manager is required to reimburse the Fund for its
expenses (exclusive of interest, taxes, brokerage, and extraordinary expenses)
to the extent that such expenses, including the investment management and the
shareholder servicing and administration fees, for any fiscal year exceed the
limits on investment company expenses prescribed by any state in which the
Fund's shares are qualified for sale. No such reimbursement was required for the
period ended May 31, 1996.
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 not in excess of $1.25
billion, plus .20% of such assets in excess of $1.25 billion but not in excess
of $1.5 billion, plus .19% of such assets in excess of $1.5 billion.
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<PAGE>
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2. Investment Management Fees and Other Transactions with Affiliates
(Continued).
The Manager is a wholly-owned subsidiary of New England Investment Companies,
L.P. ("NEIC"). On August 16, 1995, New England Mutual Life Insurance Company
("The New England"), the owner of NEIC's general partner and a majority owner of
the limited partnership interest in NEIC, entered into an agreement to merge
with Metropolitan Life Insurance Company ("MetLife"), with MetLife to be the
survivor of the merger. The merger is subject to several conditions, including
the required approval, by shareholders of the Fund of a proposed new investment
advisory agreement, intended to take effect at the time of the merger. The new
agreement will be substantially similar to the existing agreement.
Pursuant to a distribution and service plan adopted under Securities and
Exchange Commission Rule 12b-1, the Fund and Reich & Tang Distributors L.P.,
(the Distributor), an affiliate of the Manager, have entered into a Distribution
Agreement and a Shareholder Servicing Agreement. For its services under the
Shareholder Servicing Agreement, the Distributor receives from the Fund a fee
equal to .25% of the Fund's average daily net assets. There were no additional
expenses borne by the Fund pursuant to the Distribution Plan.
For the period ended May 31, 1996 the Manager voluntarily waived investment
management fees and administration fees and the Distributor voluntarily waived
shareholder servicing fees of $14,592, $42,079 and $52,599, respectively.
Included in the statement of operations under the caption "Custodian fee" are
expense offsets of $2,240.
Fees are paid to Trustees 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 $10,456 paid to Reich & Tang
Services L.P., an affiliate of the Manager, as servicing agent for the Fund.
3. Capital Stock.
At May 31, 1996, an unlimited number of shares of beneficial interest ($.01 par
value) were authorized and capital paid in amounted to $41,590,853. Transactions
in capital stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
May 31, 1996 November 30, 1995
------------ -----------------
<S> <C> <C>
Sold........................................ 63,266,907 125,004,714
Issued on reinvestment of dividends......... 485,371 1,130,639
Redeemed.................................... ( 63,142,568) ( 128,715,306)
---------------- ---------------
Net increase (decrease)..................... 609,710 ( 2,579,953)
================ ===============
</TABLE>
4. Concentration of Credit Risk.
The Fund invests primarily in obligations of political subdivisions of the State
of Pennsylvania and, accordingly, is subject to the credit risk associated with
the non-performance of such issuers. Approximately 63% 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 credit worthiness 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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<PAGE>
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PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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5. Sales of Securities.
Accumulated undistributed realized losses at May 31, 1996 amounted to $942 which
represents tax basis capital losses which may be carried forward to offset
future gains through November 30, 2001.
6. Selected Financial Information.
<TABLE>
<CAPTION>
December 16, 1992
Six Months Year Ended November 30, (Commencement of
-------------------------------
Ended Operations) to
May 31, 1996 1995 1994 November 30, 1993
------------- ------------- ------------ -----------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------- ------------- ------------ -------------
Income from investment operations:
Net investment income 0.016 0.034 0.024 0.022
Less distributions:
Dividends from net investment income ( 0.016) ( 0.034) ( 0.024) ( 0.022)
------------- ------------- ----------- -------------
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000
============= ============= ============ =============
Total Return....................... 3.10%* 3.50% 2.44% 2.28%*
Ratios/Supplemental Data
Net assets, end of period (000).... $ 41,590 $ 40,980 $ 43,559 $ 38,817
Ratios to average net assets:
Expenses........................ 0.66%*+^ .59%+ 0.49%+ 0.22%*+
Net investment income........... 3.06%*+ 3.44%+ 2.44%+ 2.26%*+
* Annualized
+ Net of management, administration fees and shareholder servicing fees
waived equivalent to .52%, .61%, .68%, and .85% of average net assets, plus
expenses reimbursed equivalent to .33% of average net assets for the period
December 16, 1992 (Commencement of Operations) to November 30, 1993.
^ Includes expense offsets.
</TABLE>
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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.
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Pennsylvania Daily Municipal Income Fund
600 Fifth Avenue
New York, New York 10020
Manager
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
Custodian
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services L.P.
600 Fifth Avenue
New York, NY 10020
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