<PAGE>
- -------------------------------------------------------------------------------
PENNSYLVANIA
DAILY MUNICIPAL 600 FIFTH AVENUE, NEW YORK, NY 10020
INCOME FUND 212-830-5200
===============================================================================
Dear Shareholder:
We are pleased to present the semi-annual report of Pennsylvania Daily Municipal
Income Fund for the period December 1, 1996 through May 31,1997.
The Fund had net assets of $36,705,921 and 1,380 active shareholders as of May
31, 1997.
Thank you for your support and we look forward to continuing to serve your cash
management needs.
Sincerely,
\S\Steven W. Duff
Steven W. Duff
President
- -------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
STATEMENT OF NET ASSETS
MAY 31, 1997
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- ------
Other Tax Exempt Investments (16.45%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,800,000 City of Philadelphia, PA TRAN - Series A 1996 to 1997 06/30/97 3.90 % $ 1,800,730 MIG-1 SP-1
700,000 Luzerne County, PA Flood Protection Program
MBIA Insured 07/15/97 3.85 700,484 Aaa AAA
265,000 Pennsylvania Intergovernmental
Cooperational Authority (PICA) - Series 1996
FGIC Insured 06/15/97 3.65 265,119 Aaa AAA
250,000 Pennsylvania ST Higher Education Facility Authority RB - Series F
AMBAC Insured 12/15/97 3.85 251,303 Aaa AAA
1,000,000 Pennsylvania Turnpike RB - Series L
MBIA Insured 06/01/97 5.95 1,000,000 Aaa AAA
1,000,000 Philadelphia, PA School District TRAN 06/30/97 3.94 1,000,369 MIG-1 SP-1
1,000,000 University of Pittsburgh, PA (University Capital Project) - Series A
Pre-Refunded in Government Securities 06/01/97 3.80 1,020,000 AAA
----------- -----------
6,015,000 Total Other Tax Exempt Investments 6,038,005
----------- -----------
<CAPTION>
Other Variable Rate Demand Instruments (c) (66.12%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 Alleghany County, PA ACES (Alleghany Hospital) - Series 1988C
LOC PNC Bank 03/01/13 3.90% $ 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
2,000,000 Beaver County, PA IDA
LOC Barclays Bank PLC 08/01/20 3.80 2,000,000 P1 A1+
700,000 Butler County, PA IDA
(Armco Incorporated Project) - Series 1996A (b)
LOC Chase Manhattan Bank, N.A. 06/01/20 4.10 700,000
1,500,000 Chester County, PA HEFA(Barclay Friends Project) - Series A
LOC Bank of Ireland 08/01/25 3.90 1,500,000 VMIG-1 A1
2,000,000 City of York General Authority (Adjusted Rate Pooled Financing)
LOC First Union National Bank 09/01/26 3.90 2,000,000 A1
1,900,000 Clarion County, PA EDA (Piney Creek) - Series A
LOC Swiss Bank Corp. 12/01/11 3.95 1,900,000 VMIG-1 A1+
370,000 Clinton County, PA Municipal Authority HRB
(Lock Haven Hospital Project) - Series 1991A (b)
LOC Mellon Bank, N.A. 09/01/07 4.20 370,000
1,000,000 College Township IDA
LOC Wachovia Bank & Trust Co., N.A. 11/01/11 3.90 1,000,000 A1+
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<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>
$ 500,000 Delaware County, PA IDA (Scott Paper Company) - Series A 12/01/18 3.90% $ 500,000 P1 A1+
700,000 Delaware County, PA IDA
(United Parcel Service Project) - Series 1985 12/01/15 3.95 700,000 P1 A1+
1,400,000 Delaware County, PA IDA PCRB
(Philadelphia Electric Co.) - Series A
LOC Toronto-Dominion Bank 08/01/16 3.95 1,400,000 P1 A1+
2,000,000 Geisinger Authority, PA Health System
(Geisinger Health System) - Series 1992B 07/01/22 4.05 2,000,000 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 3.90 500,000 P1
1,950,000 Montgomery County, PA Redevelopment Authority MHRB
(Glenmore Associates Project)
Fannie Mae Collateralized 11/15/25 3.95 1,950,000 A1+
1,000,000 North Eastern Pennsylvania HEFA RB
(All Health Pooled Fin. Prog.)
LOC Chase Manhattan Bank, N.A. 07/01/26 4.00 1,000,000 VMIG-1
1,000,000 Pennsylvania Higher Education Assistance Agency
Student Loan Adjustable Rate RB - Series 1997A
LOC Student Loan Marketing Association 03/01/27 4.10 1,000,000 VMIG-1
100,000 Pennsylvania State EDA (B&W Ebensburg Project)
LOC Swiss Bank Corp. 12/01/11 3.95 100,000 VMIG-1
1,100,000 Pennsylvania State Higher Education
Assistance Agency Student Loan 07/01/18 3.95 1,100,000 VMIG-1 A1+
1,200,000 Philadelphia, PA HEFA Hospital RB
(Children's Hospital of Philadelphia) - Series A 03/01/27 4.05 1,200,000 VMIG-1 A1+
1,000,000 Sewickley Valley Hospital Authority, PA RN
(D.T. Watson Rehabilitation Hospital)
LOC PNC Bank 10/01/97 4.25 1,000,000 P1 A1
1,250,000 York County, PA IDA Limited Obligation RB
(Metal Exchange Corporation Project) (b)
LOC Comerica Bank 06/01/06 4.15 1,250,000
----------- -----------
24,270,000 Total Other Variable Rate Demand Instruments 24,270,000
----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
STATEMENT OF NET ASSETS (CONTINUED)
MAY 31, 1997
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Ratings (a)
Face Maturity Value Standard
Amount Date Yield (Note 1) Moody's & Poor's
------ ---- ----- ------ ------- ------
Put Bonds (d) (7.36%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,700,000 Alleghany County, PA
LOC Canadian Imperial Bank of Commerce 10/30/97 3.65% $ 2,700,000 P1 A1
----------- -----------
2,700,000 Total Put Bonds 2,700,000
----------- -----------
<CAPTION>
Tax Exempt Commercial Paper (8.99%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,500,000 Montgomery County, PA IDA PCR Refunding Bonds
(Peco Energy Co. Project) - Series 1994 B
LOC Deutsche Bank A.G. 07/16/97 3.45% $ 1,500,000 P1 A1+
1,800,000 Venango IDA PA Resource Recovery RB
(Scrubgrass Project) - Series A
LOC National Westminster Bank 07/10/97 3.50 1,800,000 P1 A1+
----------- -----------
3,300,000 Total Tax Exempt Commercial Paper 3,300,000
----------- -----------
Total Investments (98.92%) (Cost 36,308,005+) 36,308,005
Cash and Other Assets, Net of Liabilities (1.08%) 397,916
-----------
Net Assets (100.00%) $ 36,705,921
===========
Net Asset Value, offering and redemption price per share:
Class A shares,36,701,766 shares outstanding (Note 3) $ 1.00
===========
Class B shares, 5,097 shares outstanding (Note 3) $ 1.00
===========
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
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 TRAN = Tax and Revenue Anticipation Note
HEFA = Health & Education Finance Authority MHRB = Muti-family Housing Revenue Bond
HRB = Hospital Revenue Bond PCRB = Pollution Control Revenue Bond
IDA = Industrial Development Authority RB = Revenue Bond
RN = Revenue Note
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Income:
Interest.................................................................... $ 702,828
----------
Expenses: (Note 2)
Investment management fee................................................... 76,733
Administration fee.......................................................... 40,285
Distribution fee............................................................ 47,952
Custodian fee............................................................... 2,458
Shareholder servicing and related shareholder expenses...................... 20,487
Legal, compliance and filing fees........................................... 5,375
Audit and accounting........................................................ 21,892
Trustees' fees.............................................................. 3,000
Amortization of organization expenses....................................... 4,910
Other....................................................................... 1,009
----------
Total expenses............................................................ 224,101
Less: Fees waived (Note 2)................................................ ( 89,826)
----------
Net expenses.............................................................. 134,275
----------
Net investment income........................................................... 568,553
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C>
Net realized gain (loss) on investments........................................ -0-
----------
Increase in net assets from operations......................................... $ 568,553
==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Six Months
Ended Year
May 31, 1997 Ended
(Unaudited) November 30, 1996
--------- -----------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income......................................... $ 568,553 $ 1,189,585
Net realized gain (loss) on investments....................... -0- -0-
------------ -------------
Increase in net assets from operations............................ 568,553 1,189,585
Dividends to shareholders from net investment income:
Class A....................................................... ( 568,472)* ( 1,189,561)*
Class B....................................................... ( 81)* ( 24)*
Capital share transactions (Note 3)
Class A...................................................... 365,869 ( 4,645,246)
Class B...................................................... 80 5,017
------------ -------------
Total increase (decrease)................................. 365,949 ( 4,640,229)
Net assets:
Beginning of period........................................... 36,339,972 40,980,201
------------ -------------
End of period................................................. $ 36,705,921 $ 36,339,972
============ =============
* Designated as exempt-interest dividends for federal income tax purposes.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
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. 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 minor 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 for 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's 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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
2. Investment Management Fees and Other Transactions with Affiliates
(Continued).
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.
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, 1997 the Manager voluntarily waived investment
management fees and administration fees of $51,460 and $38,366, respectively.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $12,321 paid to Reich & Tang
Services L.P., an affiliate of the Manager, as servicing agent for the Fund.
Fees are paid to Trustees who are unaffiliated with the Manager on the basis of
$1,000 per annum plus $250 per meeting attended.
3. Capital Stock.
At May 31, 1997, an unlimited number of shares of beneficial interest ($.01 par
value) were authorized and capital paid in amounted to $36,706,863. Transactions
in capital stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Six Months Year
Class A Ended Ended
- ------- May 31, 1997 November 30, 1996
-------------- -----------------
<S> <C> <C>
Sold 56,513,746 150,377,896
Issued on reinvestment of dividends....... 474,179 932,450
Redeemed.................................. ( 56,622,056) ( 155,955,592)
----------- ------------
Net increase (decrease)................... 365,869 ( 4,645,246)
=========== ============
<CAPTION>
Six Months October 10, 1996
Class B Ended (Commencement of Sales) to
- ------- May 31, 1997 November 30, 1996
-------------- -----------------
<S> <C> <C>
Sold...................................... -- 5,100
Issued on reinvestment of dividends....... 80 17
Redeemed.................................. -- ( 100)
----------- ------------
Net increase (decrease)................... 80 5,017
=========== ============
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PENNSYLVANIA DAILY MUNICIPAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
================================================================================
4. Sales of Securities.
Accumulated undistributed realized losses at May 31, 1997 amounted to $942. This
amount represents tax basis capital losses which may be carried forward to
offset future gains. Such losses expire between November 30, 2000 and November
30, 2001.
5. 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.
6. Financial Highlights.
<TABLE>
<CAPTION>
Year Ended November 30, December 16, 1992
Six Months ------------------------------------- (Commencement of
Class A Ended Operations) to
- ------- May 31, 1997 1996 1995 1994 November 30, 1993
-------------- -------- -------- -------- -----------------
<S> <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
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income....................... 0.015 0.030 0.034 0.024 0.022
Less distributions:
Dividends from net investment income........ ( 0.015) ( 0.030) ( 0.034) ( 0.024) ( 0.022)
-------- -------- -------- -------- --------
Net asset value, end of period. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.................................. 3.02%* 3.01% 3.50% 2.44% 2.28%
Ratios/Supplemental Data
Net assets, end of period (000) $ 36,701 $ 36,335 $ 40,980 $ 43,559 $ 38,817
Ratios to average net assets:
Expenses.................................... 0.70%* 0.68% 0.59% 0.49% 0.22%
Net investment income....................... 2.96%* 2.97% 3.44% 2.44% 2.26%
Management administration & shareholder
servicing fee waived.................... 0.47%* 0.49% 0.61% 0.68% 0.85%
Expenses reimbursed......................... - - - - 0.33%
Expense offsets............................. 0.00% 0.01% - - -
*Annualized
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<CAPTION>
6. Financial Highlights. (Continued)
Six October 10, 1996
Months (Commencement of
Class B Ended (Offering) to
- ------- May 31, 1997 November 30, 1996
------------ -----------------
<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....................... 0.016 0.005
Less distributions:
Dividends from net investment income........ ( 0.016) ( 0.005)
-------- ---------
Net asset value, end of period. $ 1.00 $ 1.00
========= =========
Total Return.................................. 3.29%* 3.25%*
Ratios/Supplemental Data
Net assets, end of period (000) $ 5 $ 5
Ratios to average net assets:
Expenses.................................... 0.44%* 0.42%*
Net investment income....................... 3.24%* 3.21%*
Management administration fee waived........ 0.47%* 0.27%*
Expenses offsets............................ 0.00% 0.01%*
* Annualized
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------------------------------------
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.
- ------------------------------------------------------
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, New York 10020
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PENNSYLVANIA
DAILY
MUNICIPAL
INCOME
FUND
Semi-Annual Report
May 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
<PAGE>