As filed with the Securities and Exchange Commission on December 22, 1995.
Securities Act File No.2-65315
Investment Company File No. 811-2950
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2O549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 28 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 194O [ ]
Amendment No. 28 [X]
SHORT TERM INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue, New York, New York 10020
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 830-5200
Bernadette N. Finn
c/o Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
(Name and address of agent for service)
Copy to: MICHAEL R. ROSELLA, ESQ.
Battle Fowler LLP
75 East 55th Street
New York, N.Y. 10022
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on January 2, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
The Registrant has registered an indefinite number of securities under the
Securities Act of l933 pursuant to Section 24(f) under the Investment Company
Act of l940 as amended, and Rule 24f-2 thereunder, and the Registrant will file
a Rule 24f-2 Notice for its fiscal year ended August 31, 1995 on October 20,
1995.
<PAGE>
SHORT TERM INCOME FUND, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
(as required by Rule 4O4 (c))
PART A Location in Prospectus
Item No. (Caption)
1. Cover Page . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . Table of Fees and Expenses
3. Condensed Financial Information. . . . . Financial Highlights
4. General Description of Registrant. . . . Investment Objectives, Policies
and Policies and Risks Investment Restrictions;
General Information; Risk Factors
and Additional Investment Infor-
mation; Investment Restrictions
5. Management of the Fund . . . . . . . . . Management and Investment
Management Contract
5A. Management's Discussion of . . . . . . . Not Applicable
Fund Performance
6. Capital Stock and Other Securities . . . Dividends and Federal Income Tax
Matters
7. Purchase of Securities Being Offered . . How to Purchase and Redeem Shares
8. Redemption or Repurchase . . . . . . . . How to Purchase and Redeem Shares
9. Pending Legal Proceedings. . . . . . . . Not Applicable
<PAGE>
SHORT TERM INCOME FUND, INC.
Registration Statement on Form N-1A
Location in Statement of
PART B Additional Information
Item No. (Caption)
1O. Cover Page . . . . . . . . . . . . . . . Cover Page
11. Table of Contents. . . . . . . . . . . . Cover Page
12. General Information and History. . . . . Management and Management Contract
13. Investment Objectives and Policies . . . Investment Objectives, Policies
and Risks; Investment Restrictions
14. Management of the Fund . . . . . . . . . Management and Management Contract
15. Control Persons and Principal
Holders of Securities . . . . . . . . . Management and Management Contract
16. Investment Advisory and Other Services. Management and Management Contract
17. Brokerage Allocation . . . . . . . . . . Portfolio Transactions
18. Capital Stock and Other Securities . . . Net Asset Value
19. Purchase, Redemption and Pricing
of Securities Being Offered. . . . . . . Net Asset Value
2O. Tax Status . . . . . . . . . . . . . . . Not Applicable
21. Underwriters . . . . . . . . . . . . . . Not Applicable
22. Calculation of Yield Quotations of
Money Market Funds . . . . . . . . . . . Yield Quotations
23. Financial Statements . . . . . . . . . . Independent Auditors' Report;
Financial Statements
<PAGE>
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California Daily Tax Free Income Fund, Inc.
Connecticut Daily Tax Free Income Fund, Inc.
Daily Tax Free Income Fund, Inc.
Florida Daily Municipal Income Fund
Institutional Daily Income Fund
Michigan Daily Tax Fee Income Fund, Inc.
New Jersey Daily Municipal Income Fund, Inc.
New York Daily Tax Free Income Fund, Inc.
North Carolina Daily Municipal Income Fund, Inc.
Pennsylvania Daily Municipal Income Fund
Short Term Income Fund, Inc.
(collectively the "Funds" and individually the "Fund")
600 Fifth Avenue, New York, NY 10020
(212) 830-5200
================================================================================
SUPPLEMENT DATED OCTOBER 12, 1995
Reich & Tang Asset Management L.P., the Fund's investment advisor, is a
wholly-owned subsidiary of New England Investment Companies, L.P. ("NEIC"). New
England Mutual Life Insurance Company ("The New England") owns NEIC's sole
general partner and a majority of the limited partnership interest in NEIC. The
New England and Metropolitan Life Insurance Company ("MetLife") have entered
into an agreement to merge, with MetLife to be the survivor of the merger. The
merger is conditioned upon, among other things, approval by the policyholders of
The New England and MetLife and receipt of certain regulatory approvals. The
merger is not expected to occur until after December 31, 1995.
The merger of The New England into MetLife will constitute an "assignment" of
the existing investment advisory agreement relating to the Fund. Under the
Investment Company Act of 1940, such an "assignment" will result in the
automatic termination of the investment advisory agreement, effective at the
time of the merger. Prior to the merger, shareholders of the Fund will be asked
to approve a 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. A proxy statement describing the new agreement will be sent
to shareholders of the Fund prior to their being asked to vote on the new
agreement.
<PAGE>
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SHORT TERM 600 FIFTH AVENUE
INCOME FUND, INC. NEW YORK, N.Y. 10020
(212) 830-5220
- --------------------------------------------------------------------------------
PROSPECTUS
January 2, 1996
The objective of Short Term Income Fund, Inc. (the "Fund") is to seek as high a
level of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. The Fund pursues this objective
through two separate portfolios. The Money Market Portfolio consists of
short-term money market obligations with maturities of 397 days or less,
including bank certificates of deposit, bankers' acceptances, high quality
commercial paper and securities issued or guaranteed by the United States
Government, its agencies or instrumentalities, and repurchase agreements with
maturities of 397 days or less covering the foregoing securities. The U.S.
Government Portfolio consists solely of securities with maturities of 397 days
or less issued or guaranteed by the United States Government and repurchase
agreements with maturities of 397 days or less covering securities issued or
guaranteed by the United States Government. Each Portfolio offers two classes of
shares to the general public. The Class A shares of each Portfolio are subject
to a service fee pursuant to each Portfolio's Rule 12b-1 Distribution and
Service Plan and are sold through financial intermediaries who provide servicing
to Class A shareholders for which they receive compensation from the Manager and
the Distributor. The Class B shares of each Portfolio are not subject to a
service fee and either are sold directly to the public or are sold through
financial intermediaries that do not receive compensation from the Manager and
the Distributor. In all other respects, the Class A and Class B shares represent
the same interest in the income and assets of each respective Portfolio.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
dated January 2, 1996, containing additional and more detailed information about
the Fund, has been filed with the Securities and Exchange Commission and is
hereby incorporated by reference into this Prospectus. It is available without
charge and can be obtained by writing or telephoning the Fund's Distributor,
Reich & Tang Distributors L.P., (the "Distributor"), at the address or telephone
number set forth above.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE UNITED STATES
GOVERNMENT. THE FUND INTENDS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE ALTHOUGH THERE CAN BE NO ASSURANCE THAT THIS VALUE WILL BE MAINTAINED.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
This Prospectus should be read and retained by investors for future reference.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Money Market U.S. Government
Portfolio Portfolio
Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .17%* .17%* .26% .26%
12b-1 Fees .25% .00% .25% .00%
Other Expenses .46%* .46%* .29% .29%
Administration Fees .19%* .19*% .21% .21%
------ ------ ------- ------
Total Fund Operating Expenses .88% .63% .80% .55%
Example 1 Year 3 Years 5 Years 10 Years
- ------- ------ ------- ------- --------
You would pay the following on a $1,000
investment, assuming 5% annual return
(cumulative through the end of each year):
Money Market Portfolio
Class A $9 $28 $49 $108
Class B $6 $20 $35 $ 79
U.S. Government Portfolio
Class A $8 $26 $44 $ 99
Class B $6 $18 $31 $ 69
* After fee waivers.
The purpose of the above fee table is to assist an investor in understanding the
various costs and expenses an investor in each Portfolio of the Fund will bear
directly or indirectly. For a further discussion of these fees see "Management
and Investment Management Contract" and "Distribution and Service Plan" herein.
With respect to the Class A and Class B shares of the Money Market Portfolio,
the Manager has voluntarily waived a portion of the Management Fee and
Administration Fee; absent such waivers, the Management Fee and Administration
Fee would have been .30% and .21%, respectively. In addition, absent such
waivers, Total Fund Operating Expenses would have been for Class A, 1.03% and
Class B, .78%.
THE FIGURES REFLECTED IN THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN ABOVE.
</TABLE>
________________________________________________________________________________
2
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION
The following financial highlights of the respective classes of shares of the
Money Market Portfolio and the U.S. Government Portfolio of Short Term Income
Fund, Inc. have been examined by McGladrey & Pullen, LLP, independent certified
public accountants, whose report thereon appears in the Statement of Additional
Information and may be obtained by shareholders upon request.
Money Market Portfolio
Year Ended August 31
1995 1994 1993 1992 1991
------ ------ ------ ---- ----
Class A Class B Class A Class B Class A Class B**
------- ------- ------- -------- ------- ------
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income................ 0.047 0.050 0.029 0.031 0.027 0.021 0.041 0.063
Less distributions:
Dividends from net investment
income............................... (0.047) (0.050) (0.029) (0.031) (0.027) (0.021) (0.041) (0.063)
------- ------- ------- -------- ------- ------- ------- -------
Net asset value, end of period....... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======== ======== ======= ======= ======
Total Return......................... 4.82%++ 5.08%++ 2.93% 3.19% 2.69% 2.84%* 4.13% 6.48%
Ratios/Supplemental Data
Net assets, end of period (000)...... $661,795 $217,877 $676,756 $422,005 $706,074 $453,093 $694,635 $676,604
Ratios to average net assets:
Expenses............................. 0.88%+ 0.62%+ 0.91% 0.67% 0.91%+ 0.71%* 0.83% 0.81%
Net investment income................ 4.75% 4.90% 2.89% 3.13% 2.59%+ 2.75%* 4.03% 6.34%
1990 1989 1988 1987 1986
------ ------ ------ ------ ------
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- -------- -------
Income from investment operations:
Net investment income................ 0.078 0.083 0.064 0.055 0.067
Less distributions:
Dividends from net investment
income............................... (0.078) (0.083) (0.064) (0.055) (0.067)
------- ------- ------- -------- -------
Net asset value, end of period....... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======== =======
Total Return......................... 8.02% 8.63% 6.64% 5.63% 6.91%
Ratios/Supplemental Data
Net assets, end of period (000)...... $887,270 $818,181 $710,865 $748,899 $585,763
Ratios to average net assets:
Expenses............................. 0.76% 0.77% 0.78% 0.78% 0.78%
Net investment income................ 7.72% 8.34% 6.42% 5.52% 6.63%
* Annualized.
** Distribution of Class B shares commenced November 30, 1992.
+ Net of management and administration fees waived equivalent to 0.13% and
0.01%. In addition, in 1993 shareholder servicing fees equivalent to 0.03%
were waived only with respect to Class A.
++ Includes the effect of a capital contribution from the Manager; without the
capital contribution, the total return would have been 3.42% for Class A
and 3.69% for Class B.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION
The following financial highlights of the respective classes of shares of the
Money Market Portfolio and the U.S. Government Portfolio of Short Term Income
Fund, Inc. have been examined by McGladrey & Pullen, LLP, independent certified
public accountants, whose report thereon appears in the Statement of Additional
Information and may be obtained by shareholders upon request.
U.S. Government Portfolio
Year Ended August 31
1995 1994 1993 1992 1991
------ ------ ------ ---- ----
Class A Class B Class A Class B Class A Class B**
------- ------- ------- -------- ------- ------
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income................ 0.048 0.051 0.028 0.030 0.025 0.021 0.039 0.061
Less distributions:
Dividends from net investment
income............................... (0.048) (0.051) (0.028) (0.030) (0.025) (0.021) (0.039) (0.061)
------- ------- ------- -------- ------- ------- ------- -------
Net asset value, end of period....... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======== ======== ======= ======= ======
Total Return......................... 4.93% 5.19% 2.79% 3.04% 2.56% 2.75%* 3.98% 6.25%
Ratios/Supplemental Data
Net assets, end of period (000)...... $469,592 $306,799 $398,699 $80,196 $429,164 $101,391 $579,526 $596,085
Ratios to average net assets:
Expenses............................. 0.80% 0.55% 0.85% 0.60% 0.85% 0.63%* 0.77% 0.76%
Net investment income................ 4.83% 5.20% 2.75% 2.98% 2.52% 2.68%* 3.92% 5.96%
1990 1989 1988 1987 1986
------ ------ ------ ------ ------
Per Share Operating Performance:
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- -------- -------
Income from investment operations:
Net investment income................ 0.076 0.077 0.059 0.053 0.065
Less distributions:
Dividends from net investment
income............................... (0.076) (0.077) (0.059) (0.053) (0.065)
------- ------- ------- -------- -------
Net asset value, end of period....... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======== =======
Total Return......................... 7.79% 7.94% 6.06% 5.44% 6.67%
Ratios/Supplemental Data
Net assets, end of period (000)...... $350,088 $189,623 $225,268 $222,825 $214,934
Ratios to average net assets:
Expenses............................. 0.78% 0.73% 0.71% 0.74% 0.70%
Net investment income................ 7.41% 7.62% 5.87% 5.32% 6.43%
* Annualized.
** Distribution of Class B shares commenced November 30, 1992.
+ Net of management and administration fees waived equivalent to 0.13% and
0.01%. In addition, in 1993 shareholder servicing fees equivalent to 0.03%
were waived only with respect to Class A.
++ Includes the effect of a capital contribution from the Manager; without the
capital contribution, the total return would have been 3.42% for Class A
and 3.69% for Class B.
</TABLE>
4
<PAGE>
INVESTMENT OBJECTIVES,
POLICIES AND RISKS
Short Term Income Fund, Inc. (the "Fund") is a no-load, diversified, open-end
management investment company offering investors yields available from a managed
portfolio of money market instruments together with a high degree of liquidity.
The net asset value of each Fund share is expected to remain constant at $1.00,
although this cannot be assured.
The investment objective of the Fund is, in accordance with the investment
policies of each of the Fund's Portfolios, to provide as high a level of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. There is no assurance that the Fund will achieve its
investment objective. The investment objective of the Fund may not be changed
without shareholder approval.
Though the Fund currently has only two Portfolios, the Board of Directors of the
Fund may in the future determine to establish additional portfolios, each of
which will be consistent with the investment objective of the Fund. Set forth
below are the investment policies for each of the Fund's current Portfolios. The
investment policies for the Money Market Portfolio, as well as for any
portfolios which the Board of Directors may determine to establish in the
future, may be changed by the Board of Directors of the Fund without shareholder
approval. The investment policies for the U.S. Government Portfolio may not be
changed without shareholder approval.
The Fund may from time to time advertise its current yield and effective yield
for the two Classes of each Portfolio. The Fund's current yield is calculated by
dividing its average daily net income per share of each Class of each Portfolio
(excluding realized gains or losses) for a recent seven-day period by its
constant net asset value per share of $1.00 and annualizing the result on a
365-day basis. The Fund's effective yield is calculated by increasing its
current yield according to a formula that takes into account the compounding
effect of the reinvestment of dividends.
The Money Market Portfolio's Class A shares yield for the seven-day period ended
August 31, 1995 was 4.95%, which is equivalent to an effective yield of 5.07%.
The Money Market Portfolio's Class B shares yield for the seven-day period ended
August 31, 1995 was 5.19%, which is equivalent to an effective yield of 5.33%.
The U.S. Government Portfolio's Class A shares yield for the seven-day period
ended August 31, 1995 was 4.99%, which is equivalent to an effective yield of
5.11%. The U.S. Government Portfolio's Class B shares yield for the seven-day
period ended August 31, 1995 was 5.24%, which is equivalent to an effective
yield of 5.37%.
Money Market Portfolio
The Money Market Portfolio of the Fund is intended to attain the Fund's
investment objective through investments in the following securities, provided
they are denominated in United States dollars and have a remaining maturity of
397 days or less or are subject to a repurchase agreement calling for resale in
397 days or less. Investments in short-term instruments may, in some
circumstances, result in a lower yield than would be available from investments
in instruments with a longer term.
United States Government Securities: the Fund may purchase for inclusion in the
Money Market Portfolio short-term obligations issued or guaranteed by the United
States Government, its agencies or instrumentalities. These include issues of
the United States Treasury, such as bills, certificates of indebtedness, notes
and bonds, and issues of agencies and instrumentalities established under the
authority of an act of Congress. Some of these securities
5
<PAGE>
are supported by the full faith and credit of the United States Treasury, others
are supported by the right of the issuer to borrow from the Treasury, and still
others are supported only by the credit of the agency or instrumentality.
Bank Obligations: the Fund may purchase for inclusion in the Money Market
Portfolio certificates of deposit, time deposits and bankers' acceptances issued
by domestic banks, foreign branches of domestic banks, foreign subsidiaries of
domestic banks, and domestic and foreign branches of foreign banks. (See
"Investment Risks" herein.) Certificates of deposit are certificates
representing the obligation of a bank to repay funds deposited with it for a
specified period of time. Time deposits are non-negotiable deposits maintained
in a bank for a specified period of time (in no event longer than seven days) at
a stated interest rate. Time deposits which may be held by the Fund will not
benefit from insurance from the Federal Deposit Insurance Corporation. Bankers'
acceptances are credit instruments evidencing the obligation of a bank to pay a
draft drawn on it by a customer. These instruments reflect the obligation both
of the bank and of the drawer to pay the face amount of the instrument upon
maturity. The Money Market Portfolio limits its investments in obligations of
domestic banks, foreign branches of domestic banks and foreign subsidiaries of
domestic banks to banks having total assets in excess of one billion dollars or
the equivalent in other currencies. The Money Market Portfolio limits its
investments in obligations of domestic and foreign branches of foreign banks to
dollar denominated obligations of such banks which at the time of investment
have more than $5 billion, or the equivalent in other currencies, in total
assets and which are considered by the Fund's Board of Directors to be First
Tier Eligible Securities at the time of acquisition.
Commercial Paper and Certain Debt Obligations: the Fund may purchase for
inclusion in the Money Market Portfolio commercial paper or similar debt
obligations that have been determined by the Fund's Board of Directors to
present minimal credit risks and that are First Tier Eligible Securities at the
time of acquisition, so that the Fund is able to employ the amortized cost
method of valuation.
The term First Tier Eligible Securities means (i) securities that have remaining
maturities of 397 days or less and are rated in the highest short-term rating
category by any two nationally recognized statistical rating organizations
("NRSROs") or in such category by the only NRSRO that has rated the securities
(collectively, the "Requisite NRSROs") (acquisition in the latter situation must
also be ratified by the Board of Directors); (ii) securities that have remaining
maturities of 397 days or less but that at the time of issuance were long-term
securities and whose issuer has received from the Requisite NRSROs a rating with
respect to comparable short-term debt in the highest short-term rating category
and (iii) unrated securities determined by the Fund's Board of Directors to be
of comparable quality. Where the issuer of a long-term security with a remaining
maturity which would otherwise qualify it as a First Tier Eligible Security does
not have rated short-term debt outstanding, the long-term security is treated as
unrated but may not be purchased if it has a long-term rating from any NRSRO
that is below the two highest long-term categories. A determination of
comparability by the Board of Directors is made on the basis of its credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support of the
securities or participation certificates. While there are several organizations
that currently qualify as NRSROs, two examples of NRSROs are Standard & Poor's
Corporation ("S&P") and Moody's Investors Service, Inc., ("Moody's"). The two
highest ratings of Moody's for debt securities are "Aaa" and "Aa" and of S&P are
"AAA" and "AA". The highest rating for
6
<PAGE>
domestic and foreign commercial paper is "Prime-1" by Moody's and "A-1" by S&P
and "SP-1/AA" by S&P or "VMIG-1" and "VMIG-2" by Moody's in the case of variable
and floating rate demand notes. (See "Description of Ratings" in the Statement
of Additional Information.)
Subsequent to its purchase by the Fund, the quality of an investment may cease
to be rated or its rating may be reduced so that it ceases to be a First Tier
Eligible Security. If this occurs, the Board of Directors of the Fund shall
reassess promptly whether the security presents minimal credit risks and shall
cause the Fund to take such action as the Board of Directors determines is in
the best interest of the Fund and its shareholders. However, reassessment is not
required if the security is disposed of or matures within five business days of
the Manager becoming aware of the new rating and provided further that the Board
of Directors is subsequently notified of the Manager's actions.
In addition, in the event that a security (1) is in default, (2) ceases to be an
eligible investment under Rule 2a-7 or (3) is determined to no longer present
minimal credit risks, the Fund will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of the security
would not be in the best interest of the Fund. In the event that the security is
disposed of, it shall be disposed of as soon as practicable, consistent with
achieving an orderly disposition by sale, exercise of any demand feature, or
otherwise. In the event of a default with respect to a security which
immediately before default accounted for 1/2 of 1% or more of the Fund's total
assets, the Fund shall promptly notify the Securities and Exchange Commission of
such fact and of the actions that the Fund intends to take in response to the
situation.
Repurchase Agreements: the Fund may enter into, for inclusion in the Money
Market Portfolio, repurchase agreements providing for resale in 397 days or less
covering any of the foregoing securities which may have maturities in excess of
397 days, provided that the instruments serving as collateral for the agreements
are eligible for inclusion in the Money Market Portfolio. A repurchase agreement
arises when a buyer purchases a security and simultaneously agrees with the
vendor to resell the security to the vendor at an agreed upon time and price.
The resale price of a repurchase agreement is greater than the purchase price,
reflecting an agreed upon market rate which is effective for the period of time
the buyer's funds are invested in the security and which is not related to the
coupon rate on the purchased security.
U.S. Government Portfolio
The U.S. Government Portfolio is intended to attain the Fund's investment
objective through investments limited to obligations issued or guaranteed by the
United States Government including repurchase agreements covering those types of
obligations, provided that those obligations are denominated in United States
dollars and either have a remaining maturity of 397 days or less or are subject
to a repurchase agreement calling for resale in 397 days or less. The Fund will
enter into repurchase agreements for inclusion in the U.S. Government Portfolio
only if the instruments serving as collateral for the agreements are eligible
for inclusion in the U.S. Government Portfolio, and otherwise in accordance with
the restrictions and procedures described in the preceding paragraph.
The investment policies of the U.S. Government Portfolio may produce a lower
yield than a policy of investing in other types of instruments. The yield of the
U.S. Government Portfolio is likely to be lower than the yield of the Money
Market Portfolio.
Investment Risks
Since the Money Market Portfolio may contain securities issued by foreign
governments, or any of their political subdivisions, agencies or
7
<PAGE>
instrumentalities, and by foreign branches of domestic banks, foreign
subsidiaries of domestic banks, domestic and foreign branches of foreign banks,
and commercial paper issued by foreign issuers, the Money Market Portfolio may
be subject to additional investment risks with respect to those securities that
are different in some respects from those incurred by a fund which invests only
in debt obligations of United States domestic issuers, although such obligations
may be higher yielding when compared to the securities of United States domestic
issuers. In making foreign investments, therefore, the Money Market Portfolio
will give appropriate consideration to the following factors, among others.
Foreign securities markets generally are not as developed or efficient as those
in the United States. Securities of some foreign issuers are less liquid and
more volatile than securities of comparable United States issuers. Similarly,
volume and liquidity in most foreign securities markets are less than in the
United States and, at times, volatility of price can be greater than in the
United States. The issuers of some of these securities, such as bank
obligations, may be subject to less stringent or different regulation than are
United States issuers. In addition, there may be less publicly available
information about a non-United States issuer, and non-United States issuers
generally are not subject to uniform accounting and financial reporting
standards, practices and requirements comparable to those applicable to United
States issuers.
Because evidences of ownership of such securities usually are held outside the
United States, the Money Market Portfolio will be subject to additional risks
which include possible adverse political and economic developments, possible
seizure or nationalization of foreign deposits and possible adoption of
governmental restrictions which might adversely affect the payment of principal
and interest on the foreign securities or might restrict the payment of
principal and interest to investors located outside the country of the issuer,
whether from currency blockage or otherwise.
Furthermore, some of these securities may be subject to stamp or other excise
taxes levied by foreign governments, which have the effect of increasing the
cost of such securities and reducing the realized gain or increasing the
realized loss on such securities at the time of sale. Income earned or received
by the Money Market Portfolio from sources within foreign countries may be
reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States, however, may reduce
or eliminate such taxes. The Manager will attempt to minimize such taxes by
timing of transactions and other strategies, but there can be no assurance that
such efforts will be successful. All such taxes paid by the Money Market
Portfolio will reduce its net income available for distribution to shareholders.
The Manager will consider available yields, net of any required taxes, in
selecting foreign securities.
INVESTMENT RESTRICTIONS
The Fund operates under the following investment restrictions which, together
with the investment objective of the Fund, may not be changed without
shareholder approval and which apply to each of the Money Market Portfolio and
the U.S. Government Portfolio.
The Fund may not:
(a) invest more than 5% of the total market value of any Portfolio's assets
(determined at the time of the proposed investment and giving effect
thereto) in the securities of any one issuer other than the United States
Government, its agencies or
instrumentalities;
(b) invest more than 25% of the total market value of any Portfolio's assets
(determined at the time of the proposed investment and giving effect
thereto) in the securities of
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issuers conducting their principal business activities in any one industry;
provided, however, there is no limitation on the aggregate of a Portfolio's
investment in obligations of domestic commercial banks, savings banks and
savings and loan associations and in instruments secured by these
obligations or in obligations of the United States Government, its agencies
or its instrumentalities and in instruments secured by those obligations,
and provided further, however, that a Portfolio will not acquire securities
that are not readily marketable or repurchase agreements calling for resale
within more than seven days if, as a result thereof, more than 10% of the
value of its net assets would be invested in such securities. Not more than
5% of a Portfolio's assets may be invested in securities that are subject
to underlying puts from the same institution, and no single bank shall
issue its letter of credit and no single financial institution shall issue
a credit enhancement covering more than 5% of the total assets of a
Portfolio. However, if the puts are exercisable by the Portfolio in the
event of default on payment of principal and interest on the underlying
security, then the Portfolio may invest up to 10% of its assets in
securities underlying puts issued or guaranteed by the same institution;
additionally, a single bank can issue its letter of credit or a single
financial institution can issue a credit enhancement covering up to 10% of
the Portfolio's assets, where the puts offer the Portfolio such default
protection;
(c) make loans, except that the Fund may purchase for a Portfolio the debt
securities described above under "Investment Objectives, Policies and
Risks" and may enter into repurchase agreements as therein described;
(d) borrow money, unless the borrowing does not exceed 10% of the total market
value of the assets of the Portfolio with respect to which the borrowing is
made (determined at the time of borrowing but without giving effect
thereto) and the money is borrowed from one or more banks as a temporary
measure for extraordinary or emergency (not leveraging) purposes or to meet
unexpectedly heavy redemption requests. While borrowings exceed 5% of the
value of a Portfolio's total assets, a Portfolio will not make any
investments; and
(e) pledge, mortgage, assign or encumber any of a Portfolio's assets except to
the extent necessary to secure a borrowing permitted by clause (d) made
with respect to the Portfolio.
HOW TO PURCHASE AND REDEEM SHARES
Investors who have accounts with organizations which the Fund's Board of
Directors has determined are capable of maintaining automated data exchange
arrangements with the Fund and which have entered into agreements with the Fund
to do so ("Participating Organizations") may invest in the Fund through their
Participating Organizations. Certain Participating Organizations are compensated
by the Distributor from its shareholder servicing fee and by the Manager from
its management fee for the performance of these services. An investor who
purchases shares through a Participating Organization that receives payment from
the Manager or the Distributor will become a Class A shareholder. (See
"Investment Through Participating Organizations" herein.) All other investors,
and investors who have accounts with Participating Organizations but who do not
wish to invest in the Fund through their Participating Organizations, may invest
in the Fund directly as Class B shareholders of the Portfolios and not receive
the benefit of the servicing functions performed by a Participating
Organization. Class B shares may also be offered to investors who purchase their
shares through Participating Organizations who do not receive compensation from
the Distributor
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<PAGE>
or the Manager because they may not be legally permitted to receive such as
fiduciaries. The Manager pays the expenses incurred in the distribution of Class
B shares. Participating Organizations whose clients become Class B shareholders
will not receive compensation from the Manager or Distributor for the servicing
they may provide to their clients. (See "Other Purchase and Redemption
Procedures" herein.) With respect to both Classes of shares, the minimum initial
investment in the Fund with respect to each Portfolio is $1,000 for
Participating Organizations which are shareholders in the Fund and shareholders
who invest through Participating Organizations. The minimum initial investment
for securities brokers, financial institutions and other industry professionals
that are not Participating Organizations is also $1,000. The minimum initial
investment is $5,000 for other investors. The minimum amount for subsequent
investments is $100 for all shareholders.
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a sales charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent which
accepts orders for purchases and redemptions from Participating Organizations
and from shareholders directly.
In order to maximize earnings on its Portfolios, the Fund normally has its
assets as fully invested as is practicable. Many securities in which the Fund
invests require immediate settlement in funds of Federal Reserve member banks on
deposit at a Federal Reserve bank (commonly known as "Federal Funds").
Shares will be issued as of the first determination of the Fund's net asset
value per share made upon receipt of the investor's purchase order at the net
asset value per share next determined after receipt of the purchase order.
Except as described below in the case of certain Participating Organizations
(see "Investment Through Participating Organizations" herein), an investor's
funds will not be invested by the Fund during the period before the Fund's
receipt of Federal Funds and its issuance of Fund shares. The Fund reserves the
right to reject any subscription to its shares.
Shares are issued as of 12 noon, New York City time, on any Fund Business Day,
as defined herein, on which an order for the shares and accompanying Federal
Funds are received by the Fund's transfer agent before 12 noon. Orders
accompanied by Federal Funds and received after 12 noon on a Fund Business Day
will not result in share issuance until the following Fund Business Day. Fund
shares begin accruing income on the day the shares are issued to an investor.
There is no redemption charge, no minimum period of investment and no
restriction on frequency of withdrawals. Proceeds of redemptions are paid by
check. If a shareholder elects to redeem all the shares of the Fund he owns, all
dividends credited to the shareholder up to the date of redemption are paid to
the shareholder in addition to the proceeds of the redemption.
The date of payment upon redemption may not be postponed for more than seven
days after shares are tendered for redemption, and the right of redemption may
not be suspended, except for any period during which the New York Stock
Exchange, Inc. is closed (other than customary weekend and holiday closings) or
during which the Securities and Exchange Commission determines that trading
thereon is restricted, or for any period during which an emergency (as
determined by the Securities and Exchange Commission) exists as a result of
which disposal by the Fund of its securities is not reasonably practicable or as
a result of which it is not
10
<PAGE>
reasonably practicable for the Fund fairly to determine the value of its net
assets, or for such other period as the Securities and Exchange Commission may
by order permit for the protection of the shareholders of the Fund.
Redemption requests received by the Fund's transfer agent before 12 noon, New
York City time, on any day on which the New York Stock Exchange, Inc. is open
for trading become effective at 12 noon that day. A redemption request received
after 12 noon on any day on which the New York Stock Exchange, Inc. is open for
trading becomes effective on the next Fund Business Day. Shares redeemed are not
entitled to participate in dividends declared on the day or after the day a
redemption becomes effective.
The Fund has reserved the right to redeem the shares of any shareholder if the
net asset value of all the remaining shares in his account after a withdrawal is
less than $500. Written notice of any such mandatory redemption will be given at
least 30 days in advance to any shareholder whose account is to be redeemed or
the Fund may impose a monthly service charge of $10 on such accounts. During the
notice period any shareholder who receives such a notice may (without regard to
the normal $100 requirement for an additional investment) make a purchase of
additional shares to increase his total net asset value at least to the minimum
amount and thereby avoid such mandatory redemption.
Money Market Portfolio and
U.S. Government Portfolio
At the time of initial investment in the Fund, investors must elect on their
subscription order form the Class of shares of the Portfolio in which they wish
to invest their funds. Subject to the Portfolios' initial investment minimums
investors may divide their investment in the Fund between the Portfolios in any
manner they choose by submitting a separate subscription order form for each
Portfolio. Investors who purchase shares of the Portfolios from a Participating
Organization that is compensated for its services by the Manager and the
Distributor may purchase Class A shares of the Portfolios. Subject to a $100
minimum, shareholders in the Fund may transfer all or a portion of their shares
from one open Portfolio account to another open Portfolio account at any time.
Any transfer into a Portfolio in which the shareholder does not have an open
account must satisfy the Portfolio's initial investment minimum. Shareholders
will have a separate account with the Fund for each Portfolio in which they
invest. Certificates for Fund shares will not be issued to an investor.
Investment Through
Participating Organizations
Persons who maintain accounts with Participating Organizations may, if they
wish, invest in the Fund through such Participating Organizations. When
instructed by its customer to purchase or redeem Fund shares, the Participating
Organization, on behalf of the customer, transmits to the Fund's transfer agent
a purchase or redemption order, and in the case of a purchase order, payment for
the shares being purchased. Participating Organizations may confirm to their
customers who are shareholders in the Fund ("Participant Investors") each
purchase and redemption of Fund shares for the customers' accounts. Also,
Participating Organizations may send their customers periodic account statements
showing the total number of Fund shares owned by each customer as of the
statement closing date, purchases and redemptions of Fund shares by each
customer during the period covered by the statement and the income earned by
Fund shares of each customer during the statement period (including dividends
paid in cash or reinvested in additional Fund shares). Participant Investors
whose Participating Organizations have not undertaken to provide such
confirmations and statements will receive them from the Fund directly.
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<PAGE>
Participating Organizations may charge Participant Investors a fee in connection
with their use of specialized purchase and redemption procedures offered to
Participant Investors by the Participating Organizations. In addition,
Participating Organizations offering purchase and redemption procedures similar
to those offered to shareholders who invest in the Fund directly may impose
charges, limitations, minimums and restrictions in addition to or different from
those applicable to shareholders who invest in the Fund directly. A Participant
Investor should read this Prospectus in conjunction with the materials provided
by the Participating Organization describing the procedures under which Fund
shares may be purchased and redeemed through the Participating Organization.
In the case of qualified Participating Organizations, orders received by the
Fund's transfer agent before 12 noon, New York City time, on a Fund Business Day
(as defined herein) without accompanying Federal Funds will result in the
issuance of shares on that day provided the Federal Funds required in connection
with the orders are received by the Fund's transfer agent before 4:00 P.M., New
York City time, on that day. If such Federal Funds are received by the Fund's
transfer agent after 4:00 P.M., New York City time, on that day, shares will be
issued on the next Fund Business Day. Participating Organizations are
responsible for instituting procedures to insure that purchase orders by their
respective clients are processed expeditiously.
OTHER PURCHASE AND
REDEMPTION PROCEDURES
The following purchase and redemption procedures apply to investors who wish to
invest in the Fund directly and not through Participating Organizations. These
investors may obtain the subscription order form necessary to open an account by
telephoning the Fund at either 212-830-5220 (within New York State) or at
800-221-3079 (toll free outside New York State).
All shareholders, other than certain Participant Investors, will receive from
the Fund individual confirmations of each purchase and redemption of Fund shares
(other than draft check redemptions) and a monthly statement listing the total
number of Fund shares owned as of the statement closing date, purchases and
redemptions of Fund shares during the month covered by the statement and the
dividends paid on Fund shares of each shareholder during the statement period
(including dividends paid in cash or reinvested in additional Fund shares).
Initial Purchase of Shares
Mail
Investors may send a check made payable to "Short Term Income Fund, Inc." along
with a completed subscription order form to:
Short Term Income Fund, Inc.
c/o Reich & Tang Mutual Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member bank of the Federal Reserve
System can normally be converted into Federal Funds within two business days
after receipt of the check. Checks drawn on a non-member bank may take
substantially longer to convert into Federal Funds and to be invested in Fund
shares. An investor's subscription will not be accepted until the Fund receives
Federal Funds.
Bank Wire
To purchase shares of the Fund using the wire system for transmittal of money
among banks, an investor should first obtain a new account number by telephoning
the Fund at either 212-830-5220 (within New York State) or at 800-221-3079
(outside New York State) and then instruct a
12
<PAGE>
member commercial bank to wire money immediately to:
For Money Market Portfolio
Investors Fiduciary Trust Company
ABA #101003621
Reich & Tang Mutual Funds
DDA #890752-953-8
For Short Term Income Fund, Inc.
Money Market Portfolio
Account of (Investor's Name)
Fund Account #__________________
SS #/Tax I.D. #________________
For U.S. Government Portfolio
Investors Fiduciary Trust Company
ABA #101003621
Reich & Tang Mutual Funds
DDA #890752-953-8
For Short Term Income Fund, Inc.
U.S. Government Portfolio
Account of (Investor's Name)
Fund Account #__________________
SS #/Tax I.D. #_________________
The investor should then promptly complete and mail the subscription order form.
An investor planning to wire funds should instruct his bank to wire before 12
noon, New York City time, on the same day. There may be a charge by the
investor's bank for transmitting the money by bank wire, and there also may be a
charge for use of Federal Funds. The Fund does not charge investors in the Fund
for its receipt of wire transfers. Payment in the form of a "bank wire" received
prior to 12 noon, New York City time, on a Fund Business Day will be treated as
a Federal Funds payment received on that day.
Personal Delivery
Deliver a check made payable to "Short Term Income Fund, Inc." along with a
completed subscription order form to:
Reich & Tang Mutual Funds
600 Fifth Avenue - 9th Floor
New York, New York 10020
Electronic Funds Transfers (EFT), Pre-authorized Credit
and Direct Deposit Privilege
You may purchase shares of the Fund (minimum of $100) by having salary, dividend
payments, interest payments or any other payments designated by you, or by
having federal salary, social security, or certain veteran's, military or other
payments from the federal government, automatically deposited into your Fund
account. You can also have money debited from your checking account. To enroll
in any one of these programs, you must file with the Fund a completed EFT
Application, Pre-authorized Credit Application, or a Direct Deposit Sign-Up Form
for each type of payment that you desire to include in the Privilege. The
appropriate form may be obtained from your broker or the Fund. You may elect at
any time to terminate your participation by notifying in writing the appropriate
depositing entity and/or federal agency.Death or legal incapacity will
automatically terminate your participation in the Privilege. Further, the Fund
may terminate your participation upon 30 days' notice to you.
Subsequent Purchases of Shares
There is a $100 minimum for each subsequent purchase. All payments should
clearly indicate the shareholder's account number. Provided that the information
on the subscription order form on file with the Fund is still applicable, a
shareholder may reopen an account without filing a new subscription order form
at any time during the year the shareholder's account is closed or during the
following calendar year.
Subsequent purchases can be made either by bank wire or by personal delivery, as
indicated above, or by mailing a check to the Fund's transfer agent at:
Short Term Income Fund, Inc.
Mutual Funds Group
P.O. Box 16815
Newark, New Jersey 07101-6815
Redemption of Shares
A redemption is effected immediately following, and at a price determined in
accordance with, the next determination of net asset value per share of each
Class of each Portfolio following receipt by the Fund's transfer agent of the
redemption order (and any supporting documentation which it may require).
Normally, payment for redeemed shares is made on the Fund Business Day the
redemption is effected, provided the redemption request is received prior to 12
noon, New York City time, and on the next Fund Business Day if the redemption
request is received after 12 noon, New York City time. However, redemption
requests will not be effected unless the check (including a certified or
cashier's check) used for investment has been cleared for payment by the
investor's bank, which could take up to 15 days after investment.
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<PAGE>
A shareholder's original subscription order form permits the shareholder to
redeem by written request and to elect one or more of the additional redemption
procedures described below. A shareholder may only change the instructions
indicated on his original subscription order form by transmitting a written
direction to the Fund's transfer agent. Requests to institute or change any of
the additional redemption procedures will require a signature guarantee.
When a signature guarantee is called for, the shareholder should have "Signature
Guaranteed" stamped under his signature and guaranteed by an eligible guarantor
institution which includes a domestic bank, a domestic savings and loan
institution, a domestic credit union, a member bank of the Federal Reserve
system or a member firm of a national securities exchange, pursuant to the
Fund's transfer agent's standards and procedures.
Written Requests
Shareholders may make a redemption in any amount by sending a written request
accompanied by any certificate that may have been previously issued to the
shareholder, to:
Short Term Income Fund, Inc.
c/o Reich & Tang Mutual Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
All previously issued certificates submitted for redemption must be endorsed by
the shareholder and all written requests for redemption must be signed by the
shareholder, in each case with signature guaranteed. Normally the redemption
proceeds are paid by check mailed to the shareholder of record.
Checks
By making the appropriate election on the subscription order form, an individual
shareholder may request a supply of checks which may be used to effect
redemptions from any one or more of the Classes of shares of the Portfolios in
which the shareholder is invested. The checks will be issued in the
shareholder's name and the shareholder will receive a separate supply of checks
for each Class of shares of a Portfolio for which checks are requested. Checks
may be drawn in any amount of $250 or more and may be used like an ordinary
commercial bank check except that they may not be certified. The checks are
drawn on a special account maintained by the Fund with the agent bank. When a
check is presented to the Fund's agent bank, it instructs the transfer agent to
redeem a sufficient number of full and fractional shares in the shareholder's
account to cover the amount of the check. The cancelled check is returned to the
shareholder. The use of a check to make a withdrawal enables the shareholder in
the Fund to receive dividends on the shares to be redeemed up to the Fund
Business Day on which the check clears. Fund shares purchased by check may not
be redeemed by check until the check has cleared, which could take up to 15 days
following the date of purchase.
There is no charge to the shareholder for checks provided by the Fund. The Fund
reserves the right to impose a charge or impose a different minimum check amount
in the future, if the Board of Directors determines that doing so is in the best
interests of the Fund and its shareholders.
Shareholders electing the checking option are subject to the procedures, rules
and regulations of the Fund's agent bank governing checking accounts. Checks
drawn on a jointly owned account may, at the shareholder's election, require
only one signature. Checks in amounts exceeding the value of the shareholder's
account at the time the check is presented for payment will not be honored.
Since the dollar value of the account changes daily, the total value of the
account may not be determined in advance and the account may not be entirely
redeemed by check. In addition, the Fund reserves the right to charge the
shareholder's account a fee up to $20 for checks not honored as a result of an
14
<PAGE>
insufficient account value, a check deemed not negotiable because it has been
held longer than six months, an unsigned check and a post-dated check. The Fund
reserves the right to terminate or modify the check redemption procedure at any
time or to impose additional fees following notification to the Fund's
shareholders.
Telephone
The Fund accepts telephone requests for redemption from shareholders who elect
this option. The proceeds of a telephone redemption will be sent to the
shareholder at his address or to his bank account as set forth in the
subscription order form or in a subsequent signature guaranteed written
authorization. The Fund may accept telephone redemption instructions from any
person with respect to accounts of shareholders who elect this service, and thus
shareholders risk possible loss of dividends in the event of a telephone
redemption not authorized by them. Telephone requests to wire redemption
proceeds must be for amounts in excess of $1,000. The Fund will employ
reasonable procedures to confirm that telephone redemption instructions are
genuine, and will require that shareholders electing such option provide a form
of personal identification. The failure by the Fund to employ such reasonable
procedures may cause the Fund to be liable for any losses incurred by investors
due to telephone redemptions based upon unauthorized or fraudulent instructions.
A shareholder making a telephone withdrawal should call the Fund at
212-830-5220; outside New York State at 800-221-3079 and state (i) the name of
the shareholder appearing on the Fund's records, (ii) his account number with
the Fund, (iii) the amount to be withdrawn and (iv) the name of the person
requesting the redemption. Usually, the proceeds are sent to the investor on the
same Fund Business Day the redemption is effected, provided the redemption
request is received prior to 12 noon, New York City time and on the next Fund
Business Day if the redemption request is received after 12 noon, New York City
time. The Fund reserves the right to terminate or modify the telephone
redemption service at any time and will notify shareholders accordingly.
Specified Amount Automatic
Withdrawal Plan
Shareholders may elect to withdraw shares and receive payment from the Fund of a
specified amount of $50 or more automatically on a monthly or quarterly basis.
The monthly or quarterly withdrawal payments of the specified amount are made by
the Fund on the 23rd day of the month. Whenever such 23rd day of a month is not
a Fund Business Day, the payment date is the Fund Business Day preceding the
23rd day of the month. In order to make a payment, a number of shares equal in
aggregate net asset value to the payment amount are redeemed at their net asset
value on the Fund Business Day immediately preceding the date of payment. To the
extent that the redemptions to make plan payments exceed the number of shares
purchased through reinvestment of dividends and distributions, the redemptions
reduce the number of shares purchased on original investment, and may ultimately
liquidate a shareholder's investment.
The election to receive automatic withdrawal payments may be made at the time of
the original subscription by so indicating on the subscription order form. The
election may also be made, changed or terminated at any later time by sending a
signature guaranteed written request to the transfer agent.
Exchange Privilege
Shareholders of the Fund are entitled to exchange some or all of a Class of
shares in the Fund for the same Class of shares of certain other investment
companies which retain Reich & Tang Asset Management L.P. as investment adviser
or manager and which participate in the exchange privilege program with the
Fund. If only one Class
15
<PAGE>
of shares is available in a particular fund, the shareholder of the Fund is
entitled to exchange his or her shares for the shares available in that fund.
Currently the exchange privilege program has been established between the Fund
and California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free
Income Fund, Inc., Daily Tax Free Income Fund, Inc., Florida Daily Municipal
Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Reich & Tang Equity Fund, Inc. and Reich & Tang Government Securities
Trust. In the future, the exchange privilege program may be extended to other
investment companies which retain Reich & Tang Asset Management L.P. as adviser
or manager. An exchange of shares in the Fund pursuant to the exchange privilege
is, in effect, a redemption of Fund shares (at net asset value) followed by the
purchase of shares of the investment company into which the exchange is made (at
net asset value) and may result in a shareholder realizing a taxable gain or
loss for Federal income tax purposes.
There is no charge for the exchange privilege or limitation as to frequency of
exchanges. The minimum amount for an exchange is $1,000, except that
shareholders who are establishing a new account with an investment company
through the exchange privilege must insure that a sufficient number of shares
are exchanged to meet the minimum initial investment required for the investment
company into which the exchange is being made. Each Class of shares is exchanged
at its respective net asset value.
The exchange privilege provides shareholders of the Fund with a convenient
method to shift their investment among different investment companies when they
feel such a shift is desirable. The exchange privilege is available to
shareholders resident in any state in which shares of the investment company
being acquired may legally be sold. Shares may be exchanged only between
investment company accounts registered in identical names. Before making an
exchange, the investor should review the current prospectus of the investment
company into which the exchange is to be made. Prospectuses may be obtained by
contacting the Distributor at the address or telephone number set forth on the
cover page of this Prospectus.
Instructions for exchanges may be made by sending a signature guaranteed written
request to:
Short Term Income Fund, Inc.
c/o Reich & Tang Mutual Funds
600 Fifth Avenue - 8th Floor
New York, New York 10020
or, for shareholders who have elected that option, by telephone. The Fund
reserves the right to reject any exchange request and may modify or terminate
the exchange privilege at any time.
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund has available a form of individual retirement account ("IRA") for
investment in the Fund's shares. Individuals earning compensation generally may
make IRA contributions of up to $2,000 annually. However, the deductibility of
an individual's IRA contribution may be reduced or eliminated if the individual
or, in the case of a married individual filing jointly, either the individual or
the individual's spouse is an active participant in an employer-sponsored
retirement plan. Thus, in the case of an active participant, the deduction will
not be available for individuals with adjusted gross income above $35,000,
married couples filing a joint return with adjusted gross income above $50,000
and married couples filing separately if a spouse has adjusted gross income
above $10,000. In addition, an individual with a non-working spouse may
establish a separate IRA for the spouse and annually contribute a total
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<PAGE>
of up to $2,250 to the two IRAs, provided that no more than $2,000 may be
contributed to the IRA of either spouse. The minimum investment required to open
an IRA is $250.
Withdrawals from an IRA, other than that portion, if any, of the withdrawal
considered to be a return of the investor's non-deductible IRA contribution, are
taxed as ordinary income when received. Such withdrawals may be made without
penalty after the participant reaches age 59 1/2, and must commence shortly
after age 70 1/2. Withdrawals before age 59 1/2 or the failure to commence
withdrawals on a timely basis after age 70 1/2 may involve the payment of
certain penalties.
Fund shares may also be a suitable investment for assets of other types of
qualified pension or profit-sharing plans, including cash or deferred or salary
reduction "section 401(k) plans" which give participants the right to defer
portions of their compensation for investment on a tax-deferred basis until
distributions are made from the plans.
An investor should contact the Fund to obtain further information concerning a
Fund IRA and required disclosure statement. An investor should consult their tax
adviser as well, particularly in view of changes in the tax law.
MANAGEMENT AND INVESTMENT
MANAGEMENT CONTRACT
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Directors. The Fund's Board of Directors, which is responsible
for the overall management and supervision of the Fund, has employed Reich &
Tang Asset Management L.P. (the "Manager") to serve as investment manager of the
Fund. The Manager provides persons satisfactory to the Fund's Board of Directors
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of Reich &
Tang Asset Management, Inc., the sole general partner of the Manager or
employees of the Manager or its affiliates. Due to the services performed by the
Manager, the Fund currently has no employees and its officers are not required
to devote full-time to the affairs of the Fund. The Statement of Additional
Information contains general background information regarding each director and
principal officer of the Fund.
The Manager is a Delaware limited partnership with its principal office at 600
Fifth Avenue, New York, New York 10020. The Manager was at November 30, 1995
manager, advisor or supervisor with respect to assets aggregating approximately
$8.4 billion. The Manager acts as manager or administrator of fifteen other
investment companies and also advises pension trusts, profit sharing trusts and
endowments. New England Investment Companies, L.P. ("NEICLP") is the limited
partner and owner of a 99.5% interest in Reich & Tang Asset Management L.P., the
Manager. Reich & Tang Asset Management, Inc. (a wholly-owned subsidiary of
NEICLP) is the general partner and owner of the remaining .5% interest of the
Manager.
New England Investment Companies, Inc. ("NEIC"), a Massachusetts corporation,
serves as the sole general partner of NEICLP. The New England Mutual Life
Insurance Company ("The New England") owns approximately 67.3% of the total
partnership units outstanding of NEICLP and Reich & Tang, Inc., owns
approximately 22.6% of the outstanding partnership units of NEICLP. In addition,
NEIC is a wholly-owned subsidiary of The New England, which may be deemed a
"controlling person" of the Manager. NEIC is a holding company offering a broad
array of investment styles across a wide range of asset categories through ten
investment advisory/ management affiliates and two distribution subsidiaries
which include, in addition to the Manager, Loomis, Sayles & Company, L.P.,
Copley Real Estate Advisors, Inc., Back Bay Advisors, L.P., Marlborough Capital
Advisors, L.P., Westpeak Investment Advisors, L.P.,
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Draycott Partners, Ltd., TNE Investment Services, L.P., New England Investment
Associates, Inc., Harris Associates, and an affiliate, Capital Growth Management
Limited Partnership. These affiliates in the aggregate are investment advisors
or managers to 42 other registered investment companies.
Pursuant to the Investment Management Contract for each Portfolio, the Manager
manages each Portfolio's portfolio of securities and makes the decisions with
respect to the purchase and sale of investments, subject to the general control
of the Board of Directors of the Fund. Under the Investment Management Contract,
(i) the Money Market Portfolio will pay an annual management fee of .30% of the
Portfolio's average daily net assets not in excess of $750 million, plus .29% of
such assets in excess of $750 million but not in excess of $1 billion, plus .28%
of such assets in excess of $1 billion but not in excess of $1.5 billion, plus
.27% of such assets in excess of $1.5 billion and (ii) the U.S. Government
Portfolio will pay an annual management fee of .275% of the Portfolio's average
daily net assets not in excess of $250 million, plus .25% of such assets in
excess of $250 million.
Pursuant to the Administrative Services Contract for each Portfolio, the Manager
performs clerical, accounting supervision and office service functions for the
Fund and provides the Fund with personnel to (i) supervise the performance of
bookkeeping and related services by Investors Fiduciary Trust Company, the
Fund's bookkeeping agent; (ii) prepare reports to and filings with regulatory
authorities; and (iii) perform such other administrative services as the Fund
may from time to time request of the Manager. The personnel rendering such
services may be employees of the Manager or its affiliates. The Manager, at its
discretion, may voluntarily waive all or a portion of the administrative
services fee. For its services under the Administrative Services Contract, the
Manager receives an annual fee of .21% of each Portfolio'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. Any portion of the total fees received by the Manager
and its past profits may be used to provide shareholder services and for
distribution of Fund shares. (See "Distribution and Service Plan" herein.) In
addition, Reich & Tang Distributors L.P., the Distributor, receives a fee equal
to .25% per annum of the average daily net assets of the Class A shares of each
Portfolio under the Shareholder Servicing Agreement. The fees are accrued daily
and paid monthly.
Investment management fees and operating expenses, which are attributable to
both Classes of a Portfolio, will be allocated daily to each Class share based
on the percentage of outstanding shares at the end of the day.
DISTRIBUTION AND SERVICE PLAN
Rule 12b-1 under the 1940 Act (the "Rule") regulates the circumstances under
which an investment company may, directly or indirectly, bear the expenses of
distributing its shares. The Rule defines distribution expenses to include the
cost of "any activity which is primarily intended to result in the sale of fund
shares." The Rule provides, among other things, that an investment company may
bear distribution expenses only pursuant to a plan adopted in accordance with
the Rule. Because certain proposed expenditures, described below, by the Fund,
the Manager and the Distributor, could be deemed to involve payment of
distribution expenses by the Fund, the Fund's Board of Directors has adopted a
distribution and service plan (the "Plan") and, pursuant to the Plan, the Fund
with Reich & Tang Distributors L.P. (the "Distributor") has entered into a
distribution agreement and a Shareholder Servicing Agreement (with respect to
the Class A shares of each Portfolio only).
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Reich & Tang Asset Management, Inc. serves as the sole general partner for both
Reich & Tang Asset Management L.P. and Reich & Tang Distributors L.P., and Reich
& Tang Asset Management L.P. serves as the sole limited partner of the
Distributor.
Under the Distribution Agreement, the Distributor, for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal. Under the Shareholder Servicing
Agreement approved by the shareholders on December 4, 1995 the Distributor
receives from each Portfolio with respect to the Class A shares, a service fee
equal to .25% per annum of each Portfolio's Class A shares average daily net
assets (the "Service Fee") for providing personal shareholder services and for
the maintenance of shareholder accounts. This fee is accrued daily and paid
monthly and any portion of the fee may be deemed to be used by the Distributor
for payments to Participating Organizations with respect to their provision of
such services to their clients or customers who are shareholders of the Class A
shares of each Portfolio. The Class B shareholders will not receive the benefit
of such services from Participating Organizations that are compensated by the
Distributor or the Manager and, therefore, will not be assessed a Service Fee.
The Plan and the Shareholder Servicing Agreement with respect to Class A shares
provide that, in addition to the Service Fee, each Portfolio will pay for (i)
telecommunications expenses including the cost of dedicated lines and CRT
terminals, incurred by the Distributor and Participating Organizations in
carrying out their obligations under the Shareholder Servicing Agreement and
(ii) preparing, printing and delivering the Fund's prospectus to existing
shareholders of each Portfolio and preparing and printing subscription
application forms for shareholder accounts.
The Plan provides that, with respect to Class A shares, the Manager may make
payments from time to time from its own resources, which may include the
management fee, and past profits for the following purposes: (i) to defray the
costs of, and to compensate others, including Participating Organizations with
whom the Distributor has entered into written agreements, for performing
shareholder servicing and related administrative functions on behalf of the
Fund; (ii) to compensate certain Participating Organizations for providing
assistance in distributing the Fund's shares; and (iii) to pay the costs of
printing and distributing the Fund's prospectus to prospective investors, and to
defray the cost of the preparation and printing of brochures and other
promotional materials, mailings to prospective shareholders, advertising, and
other promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Service Fee (with respect to Class A shares) and past
profits, for the purposes enumerated in (i) above. The Manager and the
Distributor may make payments to Participating Organizations for providing
certain of such services generally up to a maximum of (on an annualized basis)
.40% of the average daily net asset value of the Fund serviced through the
Participating Organizations. The Distributor will determine the amount of such
payments made pursuant to the Plan, provided that such payments will not
increase the amount which each Portfolio is required to pay to the Manager and
Distributor for any fiscal year under either the Investment Management Contract
in effect for that year or the Shareholder Servicing Agreement in effect for
that year.
The Glass-Steagall Act and other applicable laws and regulations prohibit banks
and other
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depository institutions from engaging in the business of underwriting, selling
or distributing most types of securities. However, in the opinion of the Manager
based on the advice of counsel, these laws and regulations do not prohibit
depository institutions from providing other services for investment companies
such as the shareholder servicing and related administrative functions referred
to above. The Fund's Board of Directors will consider appropriate modifications
in the Fund's operations, including discontinuance of any payments then being
made under the Plan to banks and other depository institutions, in the event of
any future change in such laws or regulations which may affect the ability of
such institutions to provide the above-mentioned services. It is not anticipated
that the discontinuance of payments to such an institution would result in loss
to shareholders or change in the Fund's net asset value. In addition, state
securities laws on this issue may differ from the interpretations of Federal law
expressed herein and bank and financial institutions may be required to register
as dealers pursuant to state law.
For the fiscal year ended August 31, 1995, the total amounts spent pursuant to
the Distribution Plan for the Class A shares for the Money Market Portfolio and
the U.S. Government Portfolio were .52% and .62%, respectively, of the average
daily net assets of the Class A shares of the particular Portfolio. Of these
amounts, .25% and .25% were paid by the Money Market Portfolio and the U.S
Government Portfolio, respectively, to the Distributor, pursuant to the
Shareholder Servicing Agreement and .27% and .37% were paid by the Manager's
predecessor for the Money Market Portfolio and the U.S. Government Portfolio,
respectively (which may be deemed indirect payments by the Fund).
DIVIDENDS AND FEDERAL
INCOME TAX MATTERS
Except as described herein, each Portfolio's net investment income (including
net realized short-term capital gains, if any) will be declared as a dividend on
each Fund Business Day. The Fund declares dividends for Saturdays, Sundays and
holidays on the previous Fund Business Day. The Fund generally pays dividends
monthly. Unless the Fund's transfer agent is otherwise instructed by the
shareholder, dividends will automatically be reinvested in additional full and
fractional shares of the same Class of shares of the Portfolio on the Fund
Business Day on which the dividends are paid. If a shareholder elects to redeem
all the shares of the Class of shares of the Portfolio he owns, all dividends
accrued to the date of the redemption will be paid to the shareholder on the
next Fund Business Day or no later than the next regular dividend payment date,
depending on the internal procedures of the Participating Organization, if any,
in question. Distributions of long-term capital gains, if any, are paid by both
Portfolios at least once a year and, at the shareholder's option, are reinvested
in additional shares of the Portfolio from which they were paid or are paid in
cash.
The Fund did for the fiscal year ended August 31, 1995 and intends for each year
thereafter to qualify for Federal income tax treatment as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Such qualification relieves the Fund of liability for Federal income
tax on that part of its net investment income (including net realized short-term
capital gains, if any) and long-term capital gains, if any, paid out to its
shareholders in accordance with the applicable provisions of the Code.
Dividends declared by the Fund of its net investment income are taxable to a
shareholder of the Fund as ordinary income whether they are distributed to the
shareholder or reinvested in additional Fund shares. Dividends of long-term
capital gains which are designated by the Fund as
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such are taxable to shareholders at capital gain rates. A shareholder will be
subject to tax on dividends of net investment income or capital gains paid
shortly following the shareholder's purchase of shares of the Fund even though
the dividend might be viewed economically as a return of capital to the
shareholder.
It is expected that no portion of dividends to shareholders will qualify for the
dividends-received deduction for corporations. Since the Fund expects to
maintain the net asset value of each Class of shares of the Fund at a constant
$1.00, a shareholder will generally not realize any gain for Federal income tax
purposes upon a redemption of their Class of shares in the Fund.
In view of the continuous changes in the tax law and the regulations thereunder,
it is recommended that shareholders consult with counsel and other competent tax
advisors. Reports containing appropriate information with respect to the Federal
income tax status of dividends paid by the Fund during the year are mailed to
shareholders annually.
The Fund is required by Federal law to withhold 31% of reportable payments paid
to certain shareholders who have not complied with IRS regulations. In
connection with this withholding requirement, a shareholder will be asked to
certify on his application that the social security or tax identification number
provided is correct and that the shareholder is not subject to 31% backup
withholding for previous underreporting to the IRS.
Distributions from the U.S. Government Portfolio that are derived from interest
on certain obligations of the United States Government and agencies thereof may
be exempt from state and local taxes in certain states. Investors should consult
their own tax advisors regarding specific questions as to Federal, state or
local taxes.
The Class A shares of each Portfolio will bear the Service Fees under the Plans.
As a result, the net income of and the dividends payable to the Class A shares
will be lower than the net income of and dividends payable to the Class B shares
within the same Portfolio. Dividends paid to each Class of shares of each
Portfolio will, however, be declared and paid on the same days at the same times
and, except as noted with respect to the Service Fees payable under the Plans,
will be determined in the same manner and paid in the same amounts.
NET ASSET VALUE
The Fund determines the net asset value of the shares of each Class of each
Portfolio of the Fund as of 12 noon, New York City time, by dividing the value
of each Class of the Portfolio's net assets (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued but
excluding capital stock and surplus) by the number of shares outstanding of that
Class of Portfolio at the time the determination is made. The Fund determines
its net asset value on each Fund Business Day. Fund Business Day for this
purpose means weekdays (Monday through Friday) except customary national
business holidays and Good Friday. Purchases and redemptions will be effected at
the time of determination of net asset value next following the receipt of any
purchase or redemption order. (See "How to Purchase and Redeem Shares" and
"Other Purchase and Redemption Procedures" herein.)
In order to maintain a stable net asset value per share of $1.00, the Fund's
portfolio securities are valued at their amortized cost. Amortized cost
valuation involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, except that if
fluctuating interest rates cause the market value of the Fund's portfolio to
deviate more than 1/2 of 1% from the value determined on the basis of amortized
cost, the Board of Directors will consider whether any action should be
initiated to
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prevent any material dilutive effect on investors. Although the amortized cost
method provides certainty in valuation, it may result in periods during which
the stated value of an instrument is higher or lower than the price an
investment company would receive if the instrument were sold. There is no
assurance that the Fund will maintain a stable net asset value per share of
$1.00.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Fund, which was incorporated on August 22,
1979 in Maryland, consists of ten billion shares of stock having a par value of
one tenth of one cent ($.001) per share, currently divided into two separate
series, one for each of the Fund's two Portfolios. Except as noted below, each
share of either series has equal dividend, distribution, liquidation and voting
rights within the Portfolio for which it was issued, and a fractional share has
those rights in proportion to the percentage that the fractional share
represents of a whole share. Generally, shares will be voted in the aggregate
without reference to Portfolio or except if voting by Portfolio Class is
required by law or the matter involved affects only one Portfolio Class, in
which case shares will be voted separately by Portfolio Class. There are no
conversion or preemptive rights in connection with any shares of the Fund. All
shares when issued in accordance with the terms of the offering will be fully
paid and nonassessable. Shares of the Fund are redeemable at net asset value, at
the option of the shareholder. As of November 30, 1995, the amount of shares
owned by all officers and directors of the Fund, as a group, was less than 1% of
the outstanding shares of the Fund.
Each series of the Fund is subdivided into two classes of stock, Class A and
Class B. Each share in a series Portfolio, regardless of class, will represent
an interest in the same portfolio of investments and will have identical voting,
dividend, liquidation and other rights, preferences, powers, restrictions,
limitations, qualifications, designations and terms and conditions, except that:
(i) the Class A and Class B shares will have different class designations; (ii)
Class A shares will bear the Service Fees charged pursuant to the terms of the
Plan applicable to that class; (iii) the holders of the Class A shares would be
entitled to vote on matters pertaining to the Plan and any related agreements in
accordance with provisions of Rule 12b-1; and (iv) the exchange privilege will
permit shareholders to exchange their shares only for shares of the same class
of a fund that participates in an Exchange Privilege Program with the Fund.
Payments that are made under the Plans will be calculated and charged daily to
the appropriate class prior to determining daily net asset value per share and
dividends/distributions.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105 is custodian for the Fund's cash and securities, transfer agent and
dividend agent for the shares of the Fund. The Fund's transfer agent and
custodian does not assist in, and is not responsible for, investment decisions
involving assets of the Fund.
GENERAL INFORMATION
All shareholder inquiries should be directed to Short Term Income Fund, Inc.,
600 Fifth Avenue, New York, New York 10020 (telephone: 212-830-5220).
The Fund prepares semi-annual unaudited and annual audited reports which include
a list of investment securities held by the Fund and which are sent to
shareholders.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of revised
investment advisory contracts with respect to a particular
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class or series of stock, (c) for approval of the Fund's distribution agreement
with respect to a particular class or series of stock, and (d) upon the written
request of holders of shares entitled to cast not less than 25% of all the votes
entitled to be cast at such meeting. Annual and other meetings may be required
with respect to such additional matters relating to the Fund as may be required
by the Act including the removal of Fund director(s) and communication among
shareholders, any registration of the Fund with the Securities and Exchange
Commission or any state, or as the Directors may consider necessary or
desirable. Each Director serves until the next meeting of the shareholders
called for the purpose of considering the election or reelection of such
Director or of a successor to such Director, and until the election and
qualification of his or her successor, elected at such a meeting, or until such
Director sooner dies, resigns, retires or is removed by the vote of the
shareholders.
For further information with respect to the Fund and the shares offered hereby,
reference is made to the Fund's Registration Statement filed with the Securities
and Exchange Commission, including the exhibits thereto. The Registration
Statement and the exhibits thereto may be examined at the Commission and copies
thereof may be obtained upon payment of certain duplicating fees.
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Table of Contents
Table of Fees and Expenses..........................2 SHORT
Selected Financial Information TERM
Money Market Portfolio............................3 INCOME
U.S. Government Portfolio ........................3 FUND, INC.
Investment Objectives,
Policies and Risks..................................4
Money Market Portfolio............................4
U.S. Government Portfolio.........................6
Investment Risks..................................6
Investment Restrictions.............................7
How to Purchase and Redeem Shares...................8
Money Market Portfolio and
U.S. Government Portfolio.........................10 PROSPECTUS
Investment Through
Participating Organizations.....................10 January 2, 1996
Other Purchase and
Redemption Procedures.............................11
Initial Purchase of Shares........................11
Subsequent Purchases of Shares....................12
Redemption of Shares..............................12
Specified Amount Automatic
Withdrawal Plan.................................14
Exchange Privilege................................14
Individual Retirement Accounts......................15
Management and Investment
Management Contract..............................16
Distribution and Service Plan.......................18
Dividends and Federal Income Tax Matters............19
Net Asset Value.....................................21
Description of Common Stock.........................21
Custodian and Transfer Agent........................22
General Information.................................22
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM 600 Fifth Avenue, New York, NY 10020
INCOME FUND, INC. (212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 2, 1996
Short Term Income Fund, Inc. (the "Fund") is a no-load, open-end, diversified
management investment company. The Fund's investment objective is to provide as
high a level of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. The Fund is presently comprised of two
separate Portfolios and each Portfolio offers two classes of shares to the
general public.
This Statement of Additional Information is not a prospectus and is only
authorized for distribution when preceded or accompanied by the Fund's
prospectus dated January 2, 1996 (the "Prospectus"). This Statement of
Additional Information contains additional and more detailed information than
that set forth in the Prospectus and should be read in conjunction with the
Prospectus, additional copies of which may be obtained without charge by writing
& calling the Fund's distributor, Reich & Tang Distributors L.P., at the address
or telephone number set forth above.
<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C>
Investment Objectives,
Policies and Risk........................................2 Distribution and Service Plan........................10
Investment Restrictions....................................2 Counsel and Auditors.................................11
Portfolio Transactions.....................................3 Description of Ratings...............................12
Yield Quotations...........................................4 Independent Auditor's Report.........................13
Management and Management Contract.........................5 Financial Statements.................................14
Redemption of Shares.......................................9
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISK
Money Market Portfolio
Bank Obligations
Domestic banks organized under Federal law are supervised and examined by the
Comptroller of the Currency and are required to be members of the Federal
Reserve System and to be insured by the Federal Deposit Insurance Corporation
("FDIC"). Domestic banks organized under state law are supervised and examined
by state banking authorities; in addition, state banks whose certificates of
deposit may be purchased by the Fund are insured by the FDIC and are subject to
Federal examination and to a substantial body of Federal law and regulation.
Obligations of foreign branches of domestic banks, foreign subsidiaries of
domestic banks and domestic and foreign branches of foreign banks, such as
certificates of deposit ("CDs") and time deposits ("TDs") may be general
obligations of the parent banks in addition to the issuing branch, or may be
limited by the terms of a specific obligation and governmental regulation. Such
obligations are subject to different risks than are those of domestic banks.
These risks include foreign economic and political developments, foreign
governmental restrictions that may adversely affect payment of principal and
interest on the obligations, foreign exchange controls and foreign withholding
and other taxes on interest income. Foreign branches and subsidiaries are not
necessarily subject to the same or similar regulatory requirements that apply to
domestic banks, such as mandatory reserve requirements, loan limitations, and
accounting, auditing and financial recordkeeping requirements. In addition, less
information may be publicly available about a foreign branch of a domestic bank
or about a foreign subsidiary of a domestic bank or about a domestic or foreign
branch of a foreign bank than about a domestic bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by Federal and State
regulation as well as governmental action in the country in which the foreign
bank has its head office. In addition, branches licensed by the Comptroller of
the Currency and branches licensed by certain states ("State Branches") may or
may not be required to: (1) pledge to the regulator, by depositing assets with a
designated bank within the state, an amount of its assets equal to 5% of its
total liabilities; and (2) maintain assets within the state of an amount equal
to a specified percentage of the aggregate amount of liabilities of the foreign
bank payable at or through all of its agencies or branches within the state. The
deposits of State Branches may not necessarily be insured by the FDIC.
In view of the foregoing factors associated with the purchase of CDs and the TDs
issued by foreign branches of domestic banks, by foreign subsidiaries of
domestic banks, by foreign branches of foreign banks or by domestic branches of
foreign banks, the Manager carefully evaluates such investments on a case by
case basis.
Repurchase Agreements
Investments by the Fund in repurchase agreements are made in accordance with
procedures established by the Fund providing that the securities serving as
collateral for each repurchase agreement are delivered to the Fund's custodian
either physically or in book entry form and that the collateral is marked to the
market with sufficient frequency to ensure that each repurchase agreement is
fully collateralized at all times. A buyer of a repurchase agreement runs the
risk of loss with respect to his investment in the event of a default by the
issuer if, at the time of default, the value of the collateral securing the
agreement is less than the price paid for the repurchase agreement. Were a
default to occur, the Fund would look to the collateral securing the repurchase
agreement to recover its entire investment. In the event that a vendor defaults
on its repurchase obligation, the Fund might suffer a loss to the extent that
the proceeds from the sale of the collateral are less than the repurchase price.
If the vendor becomes bankrupt, the Fund might be delayed, or may incur costs or
possible losses in selling the collateral. The Fund enters into repurchase
agreements only with member banks of the Federal Reserve System and "primary
dealers" (as designated by the Federal Reserve Bank of New York) in United
States government securities. In the view of the management of the Fund, the
restrictions and procedures described above which govern the Fund's investments
in repurchase agreements substantially minimize the Fund's risk of losses in
making those investments. Repurchase agreements may be considered to be loans
under the Investment Company Act of 1940, as amended (the "1940 Act").
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INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions which are in addition
to those described in the Prospectus. Under the following restrictions, which
may not be changed without the approval by a majority vote of the Fund's
outstanding shares and which apply to each of the Money Market Portfolio and the
U.S. Government Portfolio, the Fund may not:
(a) invest in securities of companies that have conducted operations for less
than three years, including the operations of predecessors;
(b) invest in or hold securities of any issuer if officers and directors of the
Fund or Reich & Tang Asset Management, Inc., the general partner of its
investment manager, individually owning beneficially more than 1/2 of 1% of
the securities of the issuer, in the aggregate own more than 5% of the
issuer's securities; and
(c) make investments for the purpose of exercising control over any issuer or
other person; (2) purchase securities having voting rights at the time of
purchase; (3) purchase securities of other investment companies, except in
connection with a merger, acquisition, consolidation or reorganization
involving the Fund; (4) invest in real estate (other than debt obligations
secured by real estate or interests therein or debt obligations issued by
companies which invest in real estate or interests therein), commodities,
commodity contracts, commodity options, interests in oil or gas or
interests in other mineral exploration or development programs; (5)
purchase restricted securities or purchase securities on margin; (6) make
short sales of securities or intentionally maintain a short position in any
security or write, purchase or sell puts, calls, straddles, spreads or any
combination thereof; (7) act as an underwriter of securities or (8) issue
senior securities, except insofar as the Fund may be deemed to have issued
a senior security in connection with any permitted borrowings.
PORTFOLIO TRANSACTIONS
The Fund's purchases and sales of securities usually are principal transactions.
Portfolio securities are generally purchased directly from the issuer or from an
underwriter or market maker for the securities. There usually are no brokerage
commissions paid for such purchases and the Fund at present does not anticipate
paying brokerage commissions. Should the Fund pay a brokerage commission on a
particular transaction, the Fund would seek to effect the transaction at the
most favorable available combination of best execution and lowest commission.
Purchases from underwriters of portfolio securities include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
serving as market makers include the spread between the bid and asked price.
No portfolio transactions are executed with the Manager, or with an affiliate of
the Manager, acting either as principal or as paid broker.
The frequency of transactions and their allocation to various dealers is
determined by the Manager in its best judgment and in a manner deemed in the
best interest of shareholders of the Fund. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price.
Investment decisions for the Fund will be made independently from those for any
other accounts or investment companies that may be or become advised or managed
by the Manager or its affiliates. If, however, the Fund and other investment
companies or accounts advised or managed by the Manager are contemporaneously
engaged in the purchase or sale of the same security, the transactions may be
averaged as to price and allocated equitably to each account. In some cases,
this policy might adversely affect the price paid or received by the Fund or the
size of the position obtainable for the Fund. In addition, when purchases or
sales of the same security for the Fund and for other investment companies
managed by the Manager occur contemporaneously, the purchase or sale orders may
be aggregated in order to obtain any price advantages available to large
denomination purchasers or sellers.
The Fund does not determine net asset value per share on the following holidays:
New Year's Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas.
Pursuant to rules of the Securities and Exchange Commission, the Fund's Board of
Directors has established procedures to stabilize the Fund's net asset value at
$1.00 per share. These procedures include a review of the extent of any
deviation of net asset value per share, of each Class based on available market
rates, from $1.00. Should that deviation exceed 1/2 of 1%, the Board will
consider whether any action should be initiated to eliminate or reduce material
dilution or other unfair results to shareholders. Such action may include
redemption of shares in kind, selling portfolio securities prior to maturity,
reducing or withholding dividends and utilizing a net asset value per share as
determined by using available market quotations. The Fund will maintain a
dollar-
3
<PAGE>
weighted average portfolio maturity of 90 days or less, will not purchase any
instrument with a remaining maturity greater than 397 days or subject to a
repurchase agreement having a duration of greater than one year, will limit
portfolio investments, including repurchase agreements, to those United States
dollar-denominated instruments that the Fund's Board of Directors determines
present minimal credit risks, and will comply with certain reporting and
record-keeping procedures. The Fund has also established procedures to ensure
that portfolio securities meet the quality criteria as provided in Rule 2a-7 of
the 1940 Act. (See "Investment Objectives, Policies and Risks" in the
Prospectus.)
On November 30, 1995, there were 1,507,884,653 Class A or Class B shares of the
Fund outstanding. As of November 30, 1995, the amount of shares owned by all
officers and directors of the Fund, as a group, was less than 1% of the
outstanding shares. Set forth below is certain information as to persons who
owned 5% or more of the Fund's outstanding shares as of November 30, 1995:
MONEY MARKET PORTFOLIO - CLASS A
Nature of
Name and address % of Class Ownership
Fundtech Services L.P. 90.34% Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, N.Y. 10020
MONEY MARKET PORTFOLIO - CLASS B
Fundtech Services L.P. 37.20% Record
as Agent for Various
Benefical Owners
600 Fifth Avenue
New York, N.Y. 10020
U.S. GOVERNMENT PORTFOLIO - CLASS A
Fundtech Services L.P. 96.27% Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, N.Y. 10020
U.S. GOVERNMENT PORTFOLIO - CLASS B
Fundtech Services L.P. 54.92% Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, N.Y. 10020
Mount Sinai Services 06.69% Record
Queens Operating Acct
c/o Joe Badamo
7901 Broadway
Elmhurst, N.Y. 11373
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares outstanding voting for the election of
directors can elect 100% of the directors if the holders choose to do so, and,
in that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. The Fund will not issue
certificates evidencing Fund shares. The Fund's By-laws provide that the holders
of one-third of the outstanding shares of the Fund present at the meeting in
person or proxy will constitute a quorum for the transaction of business at a
meeting.
As a general matter, the Fund will not hold annual or other meetings of the
Fund's shareholders. This is because the By-laws of the Fund provide for annual
meetings only (a) for the election of directors, (b) for approval of revised
investment advisory contracts with respect to a particular class or series of
stock, (c) for approval of the Fund's distribution agreement with respect to a
particular class or series of stock, and (d) upon the written request
4
<PAGE>
of holders of shares entitled to cast not less than 25% of all the votes
entitled to be cast at such meeting. Annual and other meetings may be required
with respect to such additional matters relating to the Fund as may be required
by the 1940 Act including the removal of Fund director(s) and communication
among shareholders, any registration of the Fund with the Securities and
Exchange Commission or any state, or as the Directors may consider necessary or
desirable. Each Director serves until the next meeting of shareholders called
for the purpose of considering the election or reelection of such Director or of
a successor to such Director, and until the election and qualification of his or
her successor, elected at such meeting, or until such Director sooner dies,
resigns, retires or is removed by the vote of the shareholders.
YIELD QUOTATIONS
The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the Securities and Exchange Commission. Under that
method, the Fund's yield figure, which is based on a chosen seven-day period, is
computed as follows: the Fund's return for the seven-day period (which is
obtained by dividing the net change in the value of a hypothetical account
having a balance of one share at the beginning of the period by the value of
such account at the beginning of the period (expected to always be $1.00)) is
multiplied by (365/7) with the resulting annualized yield figure carried to the
nearest hundredth of one percent. For purposes of the foregoing computation, the
determination of the net change in account value during the seven-day period
reflects (i) dividends declared on the original share and on any additional
shares, including the value of any additional shares purchased with dividends
paid on the original share, and (ii) fees charged to all shareholder accounts.
Realized capital gains or losses and unrealized appreciation or depreciation of
the Fund's portfolio securities are not included in the computation.
The Fund also compiles a compound effective yield quotation for a seven-day
period by using a formula prescribed by the Securities and Exchange Commission.
Under that formula, the Fund's unannualized return for the seven-day period
(described in the preceding paragraph) is compounded by adding one to the base
period return, raising the sum to a power equal to 365/7 and subtracting one
from the result (i.e., effective yield = (base return +1)365/7-1).
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield for each
Portfolio fluctuates from day to day and that the Fund's yield for any given
period for a Portfolio is not an indication, or representation by the Fund, of
future yields or rates of return on the Fund's shares. The Fund's yields are not
fixed or guaranteed, and an investment in the Fund is not insured. Accordingly,
the Fund's yield information may not necessarily be used to compare Fund shares
with investment alternatives which, like money market instruments or bank
accounts, may provide a fixed rate of interest. In addition, investments in the
Fund may not necessarily be used to compare with investment alternatives which
are insured or guaranteed.
The Money Market Portfolio's Class A shares yield for the seven-day period ended
August 31, 1995 was 4.95%, which is equivalent to an effective yield of 5.07%.
The Money Market Portfolio's Class B shares yield for the seven-day period ended
August 31, 1995 was 5.19%, which is equivalent to an effective yield of 5.33%.
The U.S. Government Portfolio's Class A shares yield for the seven-day period
ended August 31, 1995 was 4.99% which is equivalent to an effective yield of
5.11%. The U.S. Government Portfolio's Class B shares yield for the seven-day
period ended August 31, 1995 was 5.24% which is equivalent to an effective yield
of 5.37%.
MANAGEMENT AND MANAGEMENT CONTRACT
Directors and Officers
The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below. Unless otherwise specified, the address
of each of the following persons is 600 Fifth Avenue, New York, New York 10020.
Directors deemed to be "interested persons" of the Fund for purposes of the 1940
Act are indicated by an asterisk.
Steven W. Duff, 41:* President and Director of the Fund, is President of the
Mutual Funds Division of the Manager since September 1994. Mr. Duff was formerly
Director of Mutual Fund Administration of NationsBank with which he was
associated from 1981 to August 1994. Mr. Duff is also President and a Director
of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free
Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
5
<PAGE>
Institutional Daily Income Fund, Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund,
Inc. and North Carolina Daily Municipal Income Fund, Inc.; President and Trustee
of Florida Daily Municipal Income Fund and Pennsylvania Daily Municipal Income
Fund; President of Reich & Tang Government Securities Trust; President and Chief
Executive Officer of Tax Exempt Proceeds Fund, Inc. and Executive Vice President
of Reich & Tang Equity Fund, Inc.
W. Giles Mellon, 64: Director of the Fund, is Professor of Business
Administration and Area Chairman of Economics and Finance in the Graduate School
of Management, Rutgers University with which he has been associated since 1966.
His address is Rutgers University Graduate School of Management, 92 New Street,
Newark, New Jersey 07102. Dr. Mellon is also a Director of California Daily Tax
Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax
Free Income Fund, Inc., Delafield Fund, Inc., Michigan Daily Tax Free Income
Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., North Carolina Daily
Municipal Income Fund, Inc. and Reich & Tang Equity Fund, Inc., a Trustee of
Florida Daily Municipal Income Fund, Institutional Daily Income Fund,
Pennsylvania Daily Municipal Income Fund and Reich & Tang Government Securities
Trust.
Robert Straniere, 54: Director of the Fund, is a member of the New York State
Assembly and a partner in the Straniere Law Firm since 1981. His address is 182
Rose Avenue, Staten Island, New York 10306. Mr. Straniere is also a Director of
California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income
Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
North Carolina Daily Municipal Income Fund, Inc. and Reich & Tang Equity Fund,
Inc., a Trustee of Florida Daily Municipal Income Fund, Institutional Daily
Income Fund, Pennsylvania Daily Municipal Income Fund and Reich & Tang
Government Securities Trust, and a Director of Life Cycle Funds, Inc.
Dr. Yung Wong, 56: Director of the Fund, was Director of Shaw Investment
Management (UK) Limited from 1994 to October 1995 and formerly General Partner
of Abacus Partners Limited Partnership (a general partner of a venture capital
investment firm) from 1984 to 1994. Dr. Wong is a Director of Republic Telecom
Systems Corporation (provider of telecommunications equipment) since January
1989, and of TelWatch, Inc. (provider of network management software) since
August 1989. His address is 29 Alden Road, Greenwich, Connecticut 06831. Dr.
Wong is also a Director of California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc.,
Delafield Fund, Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey
Daily Municipal Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc. and Reich & Tang Equity Fund, Inc., a Trustee of Florida Daily Municipal
Income Fund, Institutional Daily Income Fund, Pennsylvania Daily Municipal
Income Fund and Reich & Tang Government Securities Trust.
Bernadette N. Finn, 48: Vice President and Secretary of the Fund, is Vice
President of the Mutual Fund Division of the Manager since September 1993. Ms.
Finn was formerly Vice President and Assistant Secretary of Reich & Tang, Inc.
with which she was associated from September 1970 to September 1993. Ms. Finn is
also a Vice President and Secretary of Reich & Tang Equity Fund, Inc. and Reich
& Tang Government Securities Trust, Secretary of California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust,
Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily
Municipal Income Fund, Institutional Daily Income Fund, Michigan Daily Tax Free
Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily
Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund and Tax Exempt Proceeds Fund, Inc.
Molly Flewharty, 44: Vice President of the Fund, is Vice President of the Mutual
Funds Division of the Manager since September 1993. Ms. Flewharty was formerly
Vice President of Reich & Tang, Inc. with which she was associated from December
1977 to September 1993. Ms. Flewharty is also Vice President of California Daily
Tax Free Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc.,
Cortland Trust, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Fund, Institutional Daily Income Fund, Michigan Daily
Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New
York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund,
Inc. and Reich & Tang Government Securities Trust.
Lesley M. Jones, 47: Vice President of the Fund, is Senior Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Jones was
formerly Senior Vice President of Reich & Tang, Inc. with which she
6
<PAGE>
was associated from April 1973 to September 1993. Ms. Jones is also a Vice
President of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, Institutional Daily Income Fund, Michigan
Daily Tax Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
New York Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund,
Inc. and Reich & Tang Government Securities Trust.
Dana E. Messina, 39: Vice President of the Fund, is Executive Vice President of
the Mutual Funds Division of the Manager since January 1995 and Vice President
from September 1993 to January 1995. Ms. Messina was formerly Vice President of
Reich & Tang, Inc. with which she was associated from December 1980 to September
1993. Ms. Messina is also Vice President of California Daily Tax Free Income
Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc.,
Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal
Income Fund, Institutional Daily Income Fund, Michigan Daily Tax Free Income
Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax
Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Reich & Tang Government Securities
Trust, Reich & Tang Equity Fund, Inc.; and Tax Exempt Proceeds Fund, Inc.
Richard De Sanctis, 39: Treasurer of the Fund, is Assistant Treasurer of NEIC
since September 1993. Mr. De Sanctis was formerly Controller of Reich & Tang,
Inc. from January 1991 to September 1993 and Vice President and Treasurer of
Cortland Financial Group, Inc. and Vice President of Cortland Distributors, Inc.
from 1989 to December 1990. He is also Treasurer of California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Daily Tax Free
Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund,
Institutional Daily Income Fund, Michigan Daily Tax Free Income Fund, Inc., New
Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income Fund,
Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily
Municipal Income Fund, Reich & Tang Equity Fund, Inc., Reich & Tang Government
Securities Trust and Tax Exempt Proceeds Fund, Inc. and is Vice President and
Treasurer of Cortland Trust, Inc.
The Fund paid an aggregate remuneration of $256,649 to its officers and
directors and to certain employees of the Manager with respect to its fiscal
year ended August 31, 1995, consisting of $42,000 in aggregate directors' fees
to the three disinterested directors, and salaries and benefits aggregating
$214,649 paid to certain employees of the Manager pursuant to the terms of the
Investment Management Contract. (See "Management and Investment Management
Contract" below.) See Compensation Table below.
<TABLE>
<CAPTION>
COMPENSATION TABLE
<S> <C> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
Aggregate Pension or Estimated Annual Total Compensation
Compensation from Retirement Benefits upon from Fund and Fund
Name of Person, Registrant for Benefits Accrued Retirement Complex Paid to
Position Fiscal Year as Part of Fund Directors*
Expenses
W. Giles Mellon, $14,000 0 0 $51,500 (14 Funds)
Director
Robert Straniere, $14,000 0 0 $51,500 (14 Funds)
Director
Dr. Yung Wong, $14,000 0 0 $51,500 (14 Funds)
Director
* The total compensation paid to such persons by the Fund and Fund Complex
for the fiscal year ending August 31, 1995 (and, with respect to certain of
the funds in the Fund Complex, estimated to be paid during the fiscal year
ending August 31, 1995). The parenthetical number represents the number of
investment companies (including the Fund) from which such person receives
compensation that are considered part of the same Fund complex as the Fund,
because, among other things, they have a common investment advisor.
</TABLE>
7
<PAGE>
Manager and Investment Management Contract
The Investment Manager for the Fund is Reich & Tang Asset Management L.P. a
Delaware limited partnership with principal offices at 600 Fifth Avenue, New
York, New York 10020 (the "Manager"). The Manager was at November 30, 1995
manager, adviser or supervisor with respect to assets aggregating approximately
$8.4 billion. The Manager acts as manager or administrator of eighteen other
investment companies and also advises pension trust, profit sharing trusts and
endowments. New England Investment Companies, L.P. ("NEICLP"), is the limited
partner and owner of a 99.5% interest in the newly created limited partnership,
Reich & Tang Asset Management L.P., the Manager. Reich & Tang Asset Management,
Inc. (a wholly-owned subsidiary of NEICLP) is the general partner and owner of
the remaining .5% interest of the Manager. In addition to the Fund, the
Manager's advisory clients include, among others, California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust,
Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc., Florida Daily
Municipal Income Fund, Institutional Daily Income Fund, Lebenthal Funds, Inc.
(Lebenthal New York Tax Free Money Fund), Michigan Daily Tax Free Income Fund,
Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc., Reich
& Tang Government Securities Trust and Tax Exempt Proceeds Fund, Inc. The
Manager also advises pension trusts, profit-sharing trusts and endowments.
New England Investment Companies, Inc. ("NEIC"), an affiliate of New England
Mutual Life Insurance Company ("The New England"), serves as the sole general
partner of NEICLP. NEIC is a wholly-owned subsidiary of The New England which
may be deemed a "controlling person" of the Manager. NEIC is a holding company
offering a broad array of investment styles across a wide range of asset
categories through ten investment advisory/management affiliates and two
distribution subsidiaries which include, in addition to the Manager, Loomis,
Sayles & Company, L.P., Copley Real Estate Advisors, Inc., Back Bay Advisors,
L.P., Marlborough Capital Advisors, L.P., Westpeak Investment Advisors, L.P.,
Draycott Partners, Ltd., TNE Investment Services, L.P., New England Investment
Associates, Inc., Harris Associates, and an affiliate, Capital Growth Management
Limited Partnership. These affiliates in the aggregate are investment advisors
or managers to 42 other registered investment companies.
Pursuant to the Investment Management Contract for each Portfolio, the Manager
manages each Portfolio's portfolio of securities and makes decisions with
respect to the purchase and sale of investments, subject to the general control
of the Board of Directors of the Fund.
The Manager provides persons satisfactory to the Board of Directors of the Fund
to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors or officers of Reich &
Tang Asset Management, Inc., the sole general partner of the Manager, or
employees of the Manager or its affiliates.
The Investment Management Contract was approved by the shareholders of each
Portfolio, effective September 15, 1993. The Investment Management Contract was
approved by the Board of Directors, including a majority of the directors who
are not interested persons of the Fund or Manager, effective October 1, 1994 and
the Investment Management Contract for each Portfolio has a term which extends
to April 30, 1996 and may be continued in force thereafter for successive
twelve-month periods beginning each May 1, provided that such continuance is
specifically approved annually by majority vote of the Fund's outstanding voting
securities or by its Board of Directors, and in either case by a majority of the
Directors who are not parties to the Investment Management Contract or
interested persons of any such party, by votes cast in person at a meeting
called for the purpose of voting on such matter.
The Investment Management Contract is terminable without penalty by each
Portfolio on sixty days' written notice when authorized either (1) by majority
vote of its outstanding voting shares or (2) by a vote of a majority of its
Board of Directors or (3) by the Manager on sixty days' written notice, and will
automatically terminate in the event of its assignment. The Investment
Management Contract provides that in the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager, or of reckless disregard
of its obligations thereunder, the Manager shall not be liable for any action or
failure to act in accordance with its duties thereunder.
Under the Investment Management Contract, (i) the Money Market Portfolio will
pay an annual management fee of .30% of the Portfolio's average daily net assets
not in excess of $750 million, plus .29% of such assets in excess
8
<PAGE>
of $750 million but not in excess of $1 billion, plus .28% of such assets in
excess of $1 billion but not in excess $1.5 billion, plus .27% of such assets in
excess of $1.5 billion and (ii) the U.S. Government Portfolio will pay an annual
management fee of .275% of the Portfolio's average daily net assets not in
excess of $250 million, plus .25% of such assets in excess of $250 million. The
Manager, at its discretion, may voluntarily waive all or a portion of the
management fee. The fees are accrued daily and paid monthly. Any portion of the
total fees received by the Manager may be used by the Manager to provide
shareholder services and for distribution of Fund shares. (See "Distribution and
Service Plan" herein.)
Pursuant to an Administrative Services Contract with the Fund, the Manager also
performs clerical, accounting supervision, office service and related functions
for the Fund and provides the Fund with personnel to (i) supervise the
performance of bookkeeping related services by Investors Fiduciary Trust
Company, the Fund's bookkeeping agent, (ii) prepare reports to and filings with
regulatory authorities, and (iii) perform such other services as the Fund may
from time to time request of the Manager. The personnel rendering such services
may be employees of the Manager, of its affiliates or of other organizations.
The Manager, at its discretion, may voluntarily waive all or a portion of the
administrative services fee. For its services under the Administrative Services
Contract, the Manager receives from the Fund an annual fee equal to .21% of each
Portfolio'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.
The Manager at its discretion may waive its rights to any portion of the
management fee or the administrative services fee and may use any portion of the
management fee and the administrative services fee for purposes of shareholder
and administrative services and distribution of the Fund's shares. There can be
no assurance that such fees will be waived in the future.
Investment management fees and operating expenses which are attributable to both
Classes of a Portfolio will be allocated daily to each Class share based on the
percentage of outstanding shares at the end of the day. Additional shareholder
services provided by Participating Organizations to Class A shareholders
pursuant to the Plan shall be compensated by the Distributor from its
shareholder servicing fee, and the Manager from its management fee. Expenses
incurred in the distribution of Class B shares shall be paid by the Manager.
Expense Limitation
The Manager has agreed, pursuant to the Investment Management Contract, to
reimburse the Fund for its expenses (exclusive of interest, taxes, brokerage and
extraordinary expenses) which in any year exceed the limits on investment
company expenses prescribed by any state in which the Fund's shares are
qualified for sale. For the purpose of this obligation to reimburse expenses,
the Fund's annual expenses are estimated and accrued daily, and any appropriate
estimated payments are made to it on a monthly basis. Subject to the obligations
of the Manager to reimburse the Fund for its excess expenses as described above,
the Fund has, under the Investment Management Contract, confirmed its obligation
for payment of all its other expenses, including all operating expenses, taxes,
brokerage fees and commissions, commitment fees, certain insurance premiums,
interest charges and expenses of the custodian, transfer agent and dividend
disbursing agent's fees, telecommunications expenses, auditing and legal
expenses, bookkeeping agent fees, costs of forming the corporation and
maintaining corporate existence, compensation of Directors, officers and
employees of the Fund and costs of other personnel performing services for the
Fund who are not officers of the Manager or its affiliates, costs of investor
services, shareholders' reports and corporate meetings, Securities and Exchange
Commission registration fees and expenses, state securities laws registration
fees and expenses, expenses of preparing and printing the Fund's prospectus for
delivery to existing shareholders and of printing application forms for
shareholder accounts, and the fees and reimbursements payable to the Manager
under the Investment Management Contract and the Distributor under the
Shareholder Servicing Agreement.
The Fund may from time to time hire its own employees or contract to have
management services performed by third parties (including Participating
Organizations) as discussed herein, and the management of the Fund intends to do
so whenever it appears advantageous to the Fund. The Fund's expenses for
employees and for such services are among the expenses subject to the expense
limitation described above.
The following fees were paid to the predecessor investment managers under the
previous Investment Management Contracts. For the Fund's fiscal year ended
August 31, 1993, Reich & Tang L.P. received
9
<PAGE>
investment management fees of $2,796,430 and $1,728,354 from the Money Market
Portfolio and the U.S. Government Portfolio, respectively. For the Fund's fiscal
year ended August 31, 1994, Reich & Tang L.P. and its successor, NEICLP,
received investment management fees totaling $3,479,792 and $1,383,715 from the
Money Market Portfolio and the U.S. Government Portfolio, respectively. For the
Fund's fiscal year ended August 31, 1995 the Manager received investment
management fees totaling $1,459,899 and $1,717,027 from the Money Market
Portfolio and the U.S. Government Portfolio, respectively. For the Fund's fiscal
year ended August 31, 1994, Reich & Tang L.P. and its successor, NEICLP,
received administration fees in the aggregate of $2,360,565 and $1,056,972 from
the Money Market Portfolio and the U.S. Government Portfolio, respectively. For
the Fund's fiscal year ended August 31, 1995, the Manager received
administration fees in the aggregate of $1,602,115 and $1,323,622 from the Money
Market Portfolio and the U.S. Government Portfolio, respectively. No
reimbursements were payable to the Fund by the predecessor managers pursuant to
the expense limitation described above with respect to the fiscal years ended
August 31, 1993, August 31, 1994 and August 31, 1995.
The Manager now acts as investment manager or adviser for other persons and
entities and may under the Investment Management Contract act as investment
manager or adviser to other registered investment companies. At present, the
Manager is investment manager or administrator to eighteen other registered
investment companies.
REDEMPTION OF SHARES
The material relating to the redemption of shares in the prospectus is herein
incorporated by reference. Payment of the redemption price for shares redeemed
may be made either in cash or in portfolio securities (selected at the
discretion of the Board of Directors of the Fund and taken at their value used
in determining the Fund's net asset value per share of each Class as described
under "Net Asset Value" herein), or partly in cash and partly in portfolio
securities. However, payments will be made wholly in cash unless the Board of
Directors believes that economic conditions exist which would make such a
practice detrimental to the best interests of the Fund. If payment for shares
redeemed is made wholly or partly in portfolio securities, brokerage costs may
be incurred by the investor in converting the securities to cash. The Fund will
not distribute in kind portfolio securities that are not readily marketable. The
Fund has filed a formal election with the Securities and Exchange Commission
pursuant to which the Fund will only effect a redemption in portfolio securities
where $250,000 or 1% of the Fund's total net assets, whichever is less, during a
90 day period. In the opinion of the Fund's management, however, the amount of
redemption request would have to be significantly greater than $250,000 or 1% of
total net assets before a redemption wholly or partly in portfolio securities
was made.
DISTRIBUTION AND SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Securities and Exchange
Commission has required that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Fund's Board of Directors has adopted a
distribution and service plan (the "Plan") and, pursuant to the Plan, the Fund
and the Manager have entered into a Distribution Agreement and a Shareholder
Servicing Agreement with Reich & Tang Distributors L.P. (the "Distributor") as
distributor of the Fund's shares.
Reich & Tang Asset Management, Inc. serves as the sole general partner for both
Reich & Tang Asset Management L.P. and Reich & Tang Distributors L.P., and Reich
& Tang Asset Management L.P. serves as the sole limited partner of the
Distributor.
Under each Plan, the Portfolios and the Distributor will enter a Shareholder
Servicing Agreement with respect to the Class A shares. Under the Shareholder
Servicing Agreements, the Distributor receives from each Portfolio a service fee
equal to .25% per annum of each Portfolio's Class A shares average daily net
assets, (the "Service Fee") for providing, with respect to the Class A shares,
personal shareholder services and for the maintenance of shareholder accounts.
The Service Fee is accrued daily and paid monthly and any portion of the Service
Fee may be deemed to be used by the Distributor for payments to Participating
Organizations with respect to servicing their clients or customers who are
shareholders of the Fund.
10
<PAGE>
Under the Distribution Agreement, the Distributor, for nominal consideration and
as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as principal.
The Plan and the Shareholder Servicing Agreements provide, with respect to the
Class A shares, that, in addition to the Service Fee, each Portfolio will pay
for (i) telecommunications expenses including the cost of dedicated lines and
CRT terminals, incurred by the Participating Organizations and Distributor in
carrying out their obligations under the Shareholder Servicing Agreements with
respect to the Class A shares and (ii) preparing, printing and delivering the
Fund's prospectus to existing shareholders of the Fund and preparing and
printing subscription application forms for shareholder accounts.
The Plan provides, with respect to Class A shares, that the Manager may make
payments from time to time from its own resources, which may include the
management fee and past profits for the following purposes: (i) to defray the
costs of, and to compensate others, including Participating Organizations with
whom the Distributor has entered into written agreements for performing
shareholder servicing and related administrative functions on behalf of the
Fund; (ii) to compensate certain Participating Organizations for providing
assistance in distributing the Fund's shares; and (iii) to pay the costs of
printing and distributing the Fund's prospectus to prospective investors, and to
defray the cost of the preparation and printing of brochures and other
promotional materials, mailings to prospective stockholders, advertising, and
other promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Fund's shares. The
Distributor may also make payments from time to time from its own resources,
which may include the Service Fee with respect to Class A shares and past
profits for the purpose enumerated in (i) above. The Distributor will determine
the amount of such payments made pursuant to the Plan, provided that such
payments will not increase the amount which each Portfolio is required to pay to
the Manager and the Distributor for any fiscal year under either the Investment
Management Contract in effect for that year, the Administrative Services
Contract in effect for that year or under the Shareholder Servicing Agreements
in effect for that year.
In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into between either the Fund or the Distributor and
Participating Organizations or other organizations must be in a form
satisfactory to the Fund's Board of Directors. In addition, the Plan requires
the Fund and the Distributor to prepare, at least quarterly, written reports
setting forth all amounts expended for distribution purposes by the Fund and the
Distributor pursuant to the Plan and identifying the distribution activities for
which those expenditures were made.
The following information applies only to the Class A shares of the Portfolios.
For the fiscal year ended August 31, 1995, the Fund paid a Service Fee for
expenditures pursuant to the Plan in amounts aggregating $$1,533,545 with
respect to the Money Market Portfolio and $1,065,325 with respect to the U.S.
Government Portfolio. During such period, the Manager's predecessor and
Distributor made payments pursuant to the Plan to or on behalf of Participating
Organizations of $3,100,084 with respect to the Money Market Portfolio and
$2,501,431 with respect to the U.S. Government Portfolio. For the fiscal year
ended August 31, 1994, the Fund paid a Service Fee for expenditures pursuant to
the Plan in amounts aggregating $1,752,570 with respect to the Money Market
Portfolio and $1,068,325 with respect to the U.S. Government Portfolio. During
such period, the Manager's predecessor and Distributor made payments pursuant to
the Plan to or on behalf of Participating Organizations of $3,604,492 with
respect to the Money Market Portfolio and $2,010,531 with respect to the U.S.
Government Portfolio. The excess of such payments over the total payments the
predecessor managers and Distributor received from the Fund represents
distribution and servicing expenses funded by the Manager's predecessors and
Distributor from their own resources including the management fee.
The Plan was approved by the shareholders of the Fund at a special meeting held
on September 15, 1992. The continuance of the amended Plan was most recently
approved at a meeting of the Board of Directors held on January 21, 1994. Each
Plan for each Class of shares of each Portfolio provides that it will remain in
effect until April 30, 1996, and thereafter may continue in effect for
successive annual periods beginning May 1st, provided it is approved by each
Class of each Portfolio's shareholders or by the Board of Directors, including a
majority of directors who are not interested persons of the Fund and who have no
direct or indirect interest in the operation of the Plan or in any agreement
related to the Plan. Each Plan further provides that it may not be amended to
increase materially the costs which may be spent by the Fund for distribution
pursuant to the Plan without shareholder approval, and that other material
amendments of the Plan must be approved by the directors in the manner described
in the
11
<PAGE>
preceding sentence. The Plan may be terminated at any time by a vote of the
Board of Directors or of the Fund's stockholders.
COUNSEL AND AUDITORS
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Messrs. Battle Fowler LLP 75 East 55th Street, New York, New York
10020.
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, have been selected as auditors for the Fund.
12
<PAGE>
DESCRIPTION OF RATINGS
COMMERCIAL PAPER AND CORPORATE BOND RATINGS
Description of Prime-1 and A1 Commercial Paper Ratings
The rating Prime-1 is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations.
Commercial paper rated A by Standard & Poor's Corporation ("S&P's") has the
following characteristics. Liquidity ratios are adequate to meet cash
requirements. Long-term senior debt rating should be A or better. In some cases
BBB credits may be allowed if other factors outweigh the BBB rating. The issuer
should have access to at least two additional channels of borrowing. Basic
earnings and cash flow should have an upward trend with allowances made for
unusual circumstances. Typically the issuer's industry should be well
established and the issuer should have a strong position within its industry and
the reliability and quality of management should be unquestioned. Issuers rated
A are further referred by use of numbers 1, 2 and 3 to denote relative strength
within this highest classification.
Description of Aa and AA Corporate Bond Ratings
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa (Moody's highest rating) they comprise
what are generally known as high-grade bonds. Aa bonds are rated lower than the
best bonds because margins of protection may not be as large as Aaa securities
or fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat larger
than in Aaa securities.
Bonds rated AA by S&P's are judged to be high-quality debt obligations. Their
capacity to pay principal and interest is considered very strong, and in the
majority of instances they differ from AAA issues only in small degree. Bonds
rated AAA are considered by S&P's to be highest grade obligations and indicate
an extremely strong capacity to pay principal and interest.
13
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
INDEPENDENT AUDITOR'S REPORT
===============================================================================
The Board of Directors and Shareholders
Short Term Income Fund, Inc.
We have audited the accompanying statements of net assets of Money Market
Portfolio and the U.S. Government Portfolio of Short Term Income Fund, Inc. as
of August 31, 1995, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the selected financial information for each of the five
years in the period then ended. These financial statements and selected
financial information are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
selected financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of August 31, 1995, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of the Money Market Portfolio and the U.S. Government Portfolio of
Short Term Income Fund, Inc. as of August 31, 1995, the results of its
operations, the changes in its net assets and the selected financial information
for the periods indicated, in conformity with generally accepted accounting
principles.
/s/ McGladrey & Pullen, LLP
New York, New York
September 27, 1995
14
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS
AUGUST 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Domestic Securities (55.92%)
Bankers' Acceptances (3.40%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 30,000,000 Trust Company Bank of Atlanta 09/29/95 5.97% $ 29,862,800
-------------- ------------
30,000,000 Total Bankers' Acceptances 29,862,800
-------------- ------------
<CAPTION>
Certificates of Deposit (2.27%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 20,000,000 American Express Centurian Bank 09/15/95 5.82% $ 20,000,000
-------------- ------------
20,000,000 Total Certificates of Deposit 20,000,000
-------------- ------------
<CAPTION>
Commercial Paper (30.58 %)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 5,000,000 Banco Real S.A. Grand Cayman
LOC Barclays Bank 10/24/95 5.73% $ 4,958,483
40,000,000 Bear Stearns Companies Incorporated 11/07/95 5.76 39,577,156
25,000,000 Cemex S.A.
LOC Credit Suisse 09/11/95 5.79 24,959,931
10,000,000 Island Finance Puerto Rico Incorporated 09/08/95 5.75 9,988,926
15,000,000 Island Finance Pureto Rico Incorporated 09/25/95 5.79 14,942,500
10,000,000 Island Finance Puerto Rico Incorporated 10/20/95 5.80 9,922,008
40,000,000 Merrill Lynch & Company Incorporated 09/18/95 5.90 39,890,067
20,000,000 Michelin Tire Company
LOC Societe Generale 09/27/95 5.77 19,917,089
25,000,000 Petroleo Brasilerio S.A.
LOC Barclays Bank 11/20/95 5.85 24,680,000
10,000,000 Petroleo Brasilerio S.A.
LOC Barclays Bank 12/20/95 5.86 9,824,611
25,133,000 Phillip Morris Company 09/29/95 5.75 25,021,186
20,000,000 Raytheon Company 09/07/95 5.77 19,980,867
10,506,000 Seventy-Five State Street Capital Corporation
LOC Banque Paribas 10/06/95 5.79 10,447,269
15,000,000 Unibanco - Uniao de Bancos
LOC Westdeutsche Landesbank Girozentrale 10/05/95 5.89 14,917,833
-------------- ------------
270,639,000 Total Commercial Paper 269,027,926
-------------- ------------
<CAPTION>
U.S. Government Agencies (2.54%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,000,000 Federal Home Loan Bank 11/18/97 (c) 6.25% $ 20,000,000
2,337,760 Small Business Administration Variable Loan 08/25/17 (a) 6.75 2,337,760
-------------- ------------
22,337,760 Total U.S. Government Agencies 22,337,760
-------------- ------------
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
15
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
<CAPTION>
Medium Term Notes (2.84%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 25,000,000 Bank One (Columbus) 03/20/96 5.98 % $ 25,000,000
-------------- ------------
25,000,000 Total Medium Term Notes 25,000,000
-------------- ------------
<CAPTION>
Short Term Bank Notes (6.82%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,000,000 Bank of America 10/25/95 5.79 % $ 20,000,000
40,000,000 The Boatmen's National Bank of St. Louis, NA 02/28/96 5.80 40,000,000
-------------- ------------
60,000,000 Total Short Term Bank Notes 60,000,000
-------------- ------------
<CAPTION>
Other Notes (0.43%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 3,795,000 Fresno County, CA 06/28/96 6.06 % $ 3,793,074
-------------- -----------
3,795,000 Total Other Notes 3,793,074
-------------- -----------
<CAPTION>
Repurchase Agreement, Overnight (7.04%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 61,900,000 Donaldson, Lufkin & Jenrette Securities Corp.
(Collateralized by $49,247,000
U.S. Treasury Bonds, 9.125% to 9.250%,
due 02/15/16 to 05/15/18) 09/01/95 5.80% $ 61,900,000
-------------- -------------
61,900,000 Total Repurchase Agreement, Overnight 61,900,000
-------------- -------------
Total Domestic Securities 491,921,560
-------------
FOREIGN SECURITIES (44.20%)
Foreign Commercial Paper (28.85%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 150,000 All Nippon Airways Co., Ltd. 09/25/95 (b) 6.25 % $ 150,000
15,000,000 Bank of Montreal 09/01/95 5.83 15,000,000
25,000,000 Banque Indosuez 10/17/95 5.81 24,816,319
25,000,000 Banque Paribas 09/15/95 5.93 24,943,222
40,000,000 Canadian Imperial Bank of Commerce 09/28/95 5.90 39,825,700
40,000,000 Cheltenham & Gloucester 10/23/95 5.76 39,672,400
25,000,000 Compagnie Bancaire 09/19/95 5.92 24,927,125
25,000,000 Swedish Export Credit Corporation 11/17/95 5.75 24,698,149
20,000,000 Toronto Dominion Bank 11/21/95 5.76 19,744,400
40,000,000 Union Bank of Switzerland 09/01/95 5.82 40,000,000
-------------- ------------
255,150,000 Total Foreign Commercial Paper 253,777,315
-------------- ------------
<CAPTION>
Japanese Yankee Certificates of Deposit (4.55%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 40,000,000 Sumitomo Bank, Limited 09/11/95 5.85% $ 40,000,111
-------------- ------------
40,000,000 Total Japanese Yankee Certificates of Deposit 40,000,111
-------------- ------------
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
16
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Yankee Certificates of Deposit (10.80%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 40,000,000 Bank of Nova Scotia 10/20/95 5.75% $ 40,000,000
35,000,000 Bayerische Landesbank Girozentrale 10/11/95 5.74 34,999,023
20,000,000 Societe Generale 09/22/95 5.80 20,000,000
------------- -------------
95,000,000 Total Yankee Certificates of Deposit 94,999,023
------------- -------------
Total Foreign Securities 388,776,449
-------------
Total Investments (100.12%) (Cost $880,698,009+) 880,698,009
Liabilities in excess of Cash and Other Assets (-0.12%) ( 1,026,467)
-------------
Net Assets (100.00%) $ 879,671,542
=============
Net asset value, offering and redemption price per share:
Class A shares, 663,423,996 shares outstanding (Note 3) $ 1.00
=============
Class B shares, 218,478,404 shares outstanding (Note 3) $ 1.00
=============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
FOOTNOTES:
(a) This is a small business administration variable pool certificate. The
interest rate is adjusted periodically based upon the prime rate.
(b) This is a floating rate Foreign Commercial Paper. The interest rate is
adjusted weekly based upon the 3-month Treasury Bill Auction.
(c) This is a floating rate federal home loan bank note. The interest rate is
adjusted daily based upon the prime rate.
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
17
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
U.S. GOVERNMENT PORTFOLIO
STATEMENT OF NET ASSETS
AUGUST 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Repurchase Agreements, Overnight (67.97%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 100,000,000 CS First Boston (Collateralized $76,100,000 U.S. Treasury Bonds,
10.375% to 13.125%, due 5/15/01 to 11/15/12) 09/01/95 5.76% $ 100,000,000
127,676,000 Fuji Securities, Inc. (Collateralized by $124,720,000
U.S. Treasury Notes, 4.750% to 7.125%, due 9/30/96 to 10/15/98) 09/01/95 5.80 127,676,000
100,000,000 Goldman Sachs (Collateralized by $56,412,000
U.S. Treasury Notes, 5.625% to 7.875%, due 2/15/96 to 8/15/03
and 47,685,000 U.S. Treasury Bill, due 3/07/96) 09/01/95 5.75 100,000,000
200,000,000 Morgan (J.P.) Securities, Inc. (Collateralized by $198,000,000
U.S. Treasury Notes, 7.250%, due 11/30/96) 09/01/95 5.80 200,000,000
- ---------------- -------------
527,676,000 Total Repurchase Agreements, Overnight 527,676,000
- ---------------- -------------
<CAPTION>
U.S. Government Agencies (3.73%)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 1,055,998 Small Business Administration Variable Loan 09/25/09 (a) 6.96 % $ 1,054,945
10,667,255 Small Business Administration Variable Loan 05/25/14 (a) 7.16 10,657,971
2,109,492 Small Business Administration Variable Loan 09/25/14 (a) 6.97 2,107,964
1,333,870 Small Business Administration Variable Loan 10/25/14 (a) 7.21 1,332,820
5,129,122 Small Business Administration Variable Loan 11/25/14 (a) 6.99 5,105,738
6,316,773 Small Business Administration Variable Loan 12/25/14 (a) 6.97 6,303,603
2,379,675 Small Business Administration Variable Loan 04/25/17 (a) 7.25 2,379,675
- --------------- ---------------
28,992,185 Total U.S. Government Agencies 28,942,716
- --------------- ---------------
<CAPTION>
U.S. Government Obligations (28.52%)
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$ 25,000,000 U.S. Treasury Bill 09/07/95 6.19 24,975,000
25,000,000 U.S. Treasury Bill 10/05/95 6.12 24,859,750
25,000,000 U.S. Treasury Bill 12/07/95 5.54 24,636,924
25,000,000 U.S. Treasury Bill 12/14/95 5.59 24,606,389
25,000,000 U.S. Treasury Bill 12/21/95 5.56 24,582,594
25,000,000 U.S. Treasury Bill 01/11/96 5.50 24,509,583
25,000,000 U.S. Treasury Bill 01/18/96 5.55 24,478,750
50,000,000 U.S. Treasury Bill 02/08/96 5.63 48,785,555
- --------------- ---------------
225,000,000 Total U.S. Government Obligations 221,434,545
- --------------- ---------------
Total Investments(100.22%)(Cost $778,053,261+) 778,053,261
Liabilities in Excess of Cash and Other Assets(-0.22%) ( 1,662,552)
---------------
Net Assets(100.00%) $ 776,390,709
===============
Net asset value, offering and redemption price per share:
Class A shares, 469,591,744 shares outstanding(Note 3) $ 1.00
===============
Class B shares, 306,798,965 shares outstanding(Note 3) $ 1.00
===============
+ Aggregate cost for federal income tax purposes is identical.
(a) This is a small business administration variable pool certificate. The
interest rate is adjusted periodically based upon the prime rate.
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
18
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED AUGUST 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Money Market U.S. Government
Portfolio Portfolio
------------------- -------------------
INVESTMENT INCOME
<S> <C> <C>
Income:
Interest.............................................................. $ 47,228,729 $ 37,536,309
------------------- -------------------
Expenses: (Note 2)
Investment management fee............................................. 2,520,468 1,717,027
Administration fee.................................................... 1,686,530 1,323,622
Distribution fee (Class A)............................................ 1,533,545 1,065,325
Custodian, shareholder servicing and related
shareholder expenses............................................. 1,994,421 430,048
Legal, compliance and filing fees..................................... 85,925 53,698
Audit and accounting.................................................. 92,951 60,748
Directors' fees ...................................................... 29,308 16,773
Miscellaneous......................................................... 30,571 16,638
------------------- -------------------
Total expenses.................................................... 7,973,719 4,683,879
Less fees waived (Note 2)......................................... ( 1,144,984) --
------------------- -------------------
Net expenses.................................................. 6,828,735 4,683,879
------------------- -------------------
Net investment income..................................................... 40,399,994 32,852,430
------------------- -------------------
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C> <C>
Net realized gain (loss) on investments................................... ( 11,438,610) 19,188
------------------- --------------------
Increase in net assets from operations.................................... $ 28,961,384 $ 32,871,618
=================== ====================
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
19
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED AUGUST 31, 1995 AND 1994
===============================================================================
<TABLE>
<CAPTION>
Money Market Portfolio U.S. Government Portfolio
------------------------------------- -----------------------------------
1995 1994 1995 1994
---------------- ------------------ --------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
<S> <C> <C> <C> <C>
Net investment income.................. $ 40,399,994 $ 35,247,405 $ 32,852,430 $ 14,748,649
Net realized gain (loss) on investments ( 11,438,610) ( 462,944) 19,188 6,185
---------------- ---------------- --------------- ----------------
Increase in net assets from operations. 28,961,384 34,784,461 32,871,618 14,754,834
Dividends to shareholders:
Net investment income
Class A.............................. ( 28,998,644) ( 20,224,664) ( 20,587,273) ( 11,731,317)
Class B.............................. ( 11,207,955) ( 15,022,741) ( 12,265,157) ( 3,017,332)
Net realized gain on investments
Class A.............................. -- ( 6,463) ( 11,606)* ( 5,034)
Class B.............................. -- ( 4,353) ( 7,582)* ( 1,151)
Capital share transactions (Note 3):
Class A.............................. ( 13,625,381) ( 29,024,564) 70,892,796 ( 30,464,588)
Class B.............................. ( 203,707,058) ( 30,907,624) 226,602,774 ( 21,194,952)
Contribution of capital from
investment manager (Note 2)..... 9,488,117 -- -- --
---------------- ----------------- --------------- ---------------
Total increase (decrease)............ ( 219,089,537) ( 60,405,948) 297,495,570 ( 51,659,540)
Net assets:
Beginning of year.................... 1,098,761,079 1,159,167,027 478,895,139 530,554,679
---------------- ----------------- -------------- ---------------
End of year.......................... $ 879,671,542 $ 1,098,761,079 $ 776,390,709 $ 478,895,139
================ ================= ============== ===============
* Represents a Long Term Capital Gain distribution of $0.000024715 per share
declared to shareholders of record as of August 31, 1995 and paid on September
15, 1995.
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
20
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. Summary of Accounting Policies.
Short Term Income Fund, Inc. is a no-load, diversified, open-end management
investment company registered under the Investment Company Act of 1940. The Fund
is presently comprised of two Portfolios, Money Market Portfolio and U.S.
Government Portfolio, with each Portfolio having two classes of stock
authorized, Class A and Class B. The Class A shares of each Portfolio are
subject to a service fee pursuant to each Portfolio's Distribution and Service
Plan. The Class B shares are not subject to a service fee. In all other
respects, the Class A and Class B shares represent the same interest in the
income and assets of each respective Portfolio. 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.
b) Federal Income Taxes -
It is the policy of each Portfolio to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
provision for federal income tax is required.
c) Dividends and Distributions -
Dividends from investment income (including realized capital gains and
losses), determined on a class level, are declared daily and paid monthly.
With respect to the Money Market Portfolio, realized capital gains and
losses are excluded.
d) 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. It is the Fund's
policy to take possession of securities as collateral under repurchase
agreements and to determine on a daily basis that the value of such
securities are sufficient to cover the value of the repurchase agreements.
2. Investment Management Fees and Other Transactions with Affiliates.
Under the Management Contract, the Money Market Portfolio pays a management fee
to Reich & Tang Asset Management, L.P. (the Manager) at the annual rate of .30%
of the Portfolio's average daily net assets not in excess of $750 million, plus
.29% of such assets in excess of $750 million but not in excess of $1 billion,
plus .28% of such assets in excess of $1 billion but not in excess of $1.5
billion, plus .27% of such assets in excess of $1.5 billion. The U.S. Government
Portfolio pays a management fee to the Manager equal to .275% of the Portfolio's
average daily net assets not in excess of $250 million, plus .25% of such assets
in excess of $250 million. The Manager has agreed to reimburse the Fund for its
net operating expenses (exclusive of taxes, brokerage, interest and
extraordinary expenses) to the extent that such expenses, including the
management fee, for any fiscal year exceed 1% of the average daily net assets of
each Portfolio for such fiscal year. No such reimbursement was required for the
year ended August 31, 1995.
Pursuant to an Administrative Services Agreement, each Portfolio pays to the
Manager an annual fee of .20% of each Portfolio's average daily net assets not
in excess of $1.25 billion, plus .19% of such assets in excess of $1.25 billion
but not in excess of $1.5 billion, plus .18% of such assets in excess of $1.5
billion.
21
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
2. Investment Management Fees and Other Transactions with Affiliates
(Continued).
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) entered into a Distribution Agreement and a Shareholder Servicing
Agreement, only with respect to the Class A shares of each Portfolio. For its
services under the Shareholder Servicing Agreement, the Distributor receives
from each Portfolio with respect only to the Class A shares, a service fee equal
to .25% of 1% per annum of each Portfolio's average daily net assets.
For the year ended August 31, 1995 the Manager voluntarily waived investment
management fees and administration fees of $1,060,569 and $84,415, respectively,
of the Money Market Portfolio.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$9,000 per annum plus $1,250 per meeting attended.
Included in the Statements of Operations under the caption "Custodian,
shareholder servicing and related shareholder expenses" are fees of $619,400 and
$135,121 for the Money Market Portfolio and the U.S. Government Portfolio,
respectively, paid to Fundtech Services L.P., an affiliate of the Manager as
servicing agent for the Fund.
On November 4, 1994, in order to maintain the net asset value of the Money
Market Portfolio at $1.00, the Manager purchased U.S. Government Agency
Securities, from the Money Market Portfolio for $130,750,000 which was equal to
the Money Market Portfolio's amortized cost or carrying value on that date. The
securities had a fair value of $121,261,883 on this date. The excess over fair
value ($9,488,117) that was paid by the Manager has been classified by the Money
Market Portfolio as a realized loss in the Statement of Operations and a capital
contribution in the Statement of Changes in Net Assets.
3. Capital Stock.
At August 31, 1995, 10,000,000,000 shares of $.001 par value stock were
authorized and capital paid in for the Money Market Portfolio and the U.S.
Government Portfolio amounted to $881,902,400 and $776,390,709, respectively.
Transactions in capital stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Money Market Portfolio U.S. Government Portfolio
---------------------------------- -----------------------------------
Year Year Year Year
Ended Ended Ended Ended
8/31/95 8/31/94 8/31/95 8/31/94
------------ ------------- ------------- --------------
Class A
<S> <C> <C> <C> <C>
Sold................................ 697,072,360 1,700,098,534 564,854,707 536,615,973
Issued on reinvestment of dividends. 25,911,372 18,107,312 19,605,821 11,148,576
Redeemed............................ ( 736,609,113) (1,747,230,410) ( 513,567,732) ( 578,229,137)
------------- -------------- ------------- -------------
Net increase (decrease)............. ( 13,625,381) ( 29,024,564) 70,892,796 ( 30,464,588)
============= ============== ============= =============
Class B
Sold................................ 515,705,468 1,029,117,086 1,119,846,439 708,239,603
Issued on reinvestment of dividends. 11,057,107 14,662,636 10,643,618 2,404,230
Redeemed............................ ( 730,469,633) (1,074,687,346) ( 903,887,283) ( 731,838,785)
------------- -------------- ------------- -------------
Net increase (decrease)............. ( 203,707,058) ( 30,907,624) 226,602,774 ( 21,194,952)
============= ============== ============= =============
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses of the Money Market Portfolio at
August 31, 1995 amounted to $2,424,253. At August 31, 1995 the Fund had tax
basis capital losses of $2,413,437 which may be carried forward to offset future
capital gains through August 31, 2002.
5. Selected Financial Information.
Reference is made to pages 3 and 4 of the Prospectus for Selected Financial
Information.
- -------------------------------------------------------------------------------
22
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements.
Included in Prospectus Part A:
(1) Table of Fees and Expenses.
(2) Financial Highlights.
Included in Statement of Additional Information Part B :
(1) Independent Auditor's Report dated September 27, 1995;
(2) Statement of Net Assets at August 31, 1995 (audited);
(3) Statement of Operations for the year ended August 31, 1995 (audited);
(4) Statements of Changes in Net Assets for the two years ended August 31,
1995 and 1994; and
(5) Notes to Financial Statements.
(b) Exhibits:
(1) Articles of Incorporation of Registrant (filed as Exhibit 1 to
Registration Statement on Form N-1 [File No. 2-65135] and incorporated
herein by reference).
(2) By-Laws of Registrant (filed as Exhibit 2 to Registration Statement on
Form N-1 [File No. 2-65135] and incorporated herein by reference).
(3) None.
(4) Form of Certificate for shares of the Money Market Portfolio and U.S.
Government Portfolio Common Stock of Registrant.
(5) Investment Management Contract between the Registrant and New England
Investment Companies, L.P. (filed as Exhibit 5 to Post-Effective
Amendment No. 23 to Registration Statement on Form N-1 [File No.
2-65135] and incorporated herein by reference).
(6) Distribution Agreement (filed as Exhibit 15(b) to Post-Effective
Amendment No.23 to Registration Statement on Form N-1 [File No.
2-65135] and incorporated herein by reference).
(7) None.
(8) Copy of Custody Agreement between Registrant and Investors Fiduciary
Trust Company (filed as Exhibit 8 to Post-Effective Amendment No. 26
to Registration Statement on Form N-1A [File Nos. 2-65135 and
811-2950] and incorporated herein by reference).
(9) (a), (b) and (c) Participating Broker agreements with Discount
Brokerage Corporation, Neuberger & Berman and L.F. Rothschild,
Uterberg Towbin, respectively, (filed as Exhibits 9(a), (b) and (c),
respectively, to Post-Effective Amendment No. 2 to Registration
Statement on Form N-1 [File No. 2-65135] and incorporated herein by
reference).
C-1
<PAGE>
(9) (d) Administrative Services Contract between Registrant and Reich &
Tang L.P. (filed as Exhibit 9(d) to Post-Effective Amendment No. 23 to
Registration Statement on Form N-1A [File No. 2-65135 ] and
incorporated herein by reference).
(9) (e) Transfer Agency Agreement (filed as Exhibit 9(e) to Post-Effective
Amendment No. 26 to Registration Statement on Form N-1A [File Nos.
2-65135 and 811-2950] and incorporated herein by reference).
(10) (a) Opinion and Consent of Messrs. Seward & Kissel (filed as Exhibit
10(a) to Pre-Effective Amendment No. 1 to Registration Statement on
Form N-1 [File No. 2-65135] and incorporated herein by reference).
(10) (b) Opinion of Messrs. Venable, Baetjer and Howard (filed as Exhibit
10(b) to Pre-Effective Amendment No. 1 to Registration Statement on
Form N-1 [File No. 2-65135] and incorporated herein by reference).
(11) Consent of Independent Auditors filed as Exhibit 11 herein.
(12) None.
(13) Written assurance of Reich & Tang, Inc. that the purchase of shares of
the registrant was for investment purposes without any present
intention of redeeming on reselling (filed as Exhibit 13 to
Pre-Effective Amendment No. 1 to Registration Statement on Form N-1
[File No. 2-65135] and incorporated by reference).
(14) None.
(15) (a) Distribution and Service Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 filed as Exhibit 15(a) herein.
(15) (b) Shareholder Servicing Agreement between Registrant and Reich &
Tang Distributors L.P. filed as Exhibit 15(b) herein.
ITEM 25. Persons Controlled by or under Common Control with Registrant.
No such persons.
ITEM 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders,
Title of Class - Class A November 30, 1995
------------------------ -------------------------
Money Market Portfolio
Common Stock, par value
$.001 per share 43,935
U.S. Government Portfolio
Common Stock, par value
$.001 per share 10,332
Title of Class - Class B
------------------------
Money Market Portfolio
Common Stock, par value
$.001 per share 5,625
U.S. Government Portfolio
Common Stock, par value
$.001 per share 995
C-2
<PAGE>
Item 27. Indemnification.
Registrant incorporates herein by reference the response to Item 4 of Part
II of Registrant's Registration Statement on Form N-1 filed with the Commission
on August 23, 1979.
ITEM 28. Business and Other Connections of Investment Adviser.
The description of Reich & Tang Asset Management L.P. under the caption
"Management and Investment Management Contract" in the Prospectus and
"Management and Management Contract" in the Statement of Additional Information
constituting parts A and B, respectively, of the Registration Statement are
incorporated herein by reference.
New England Mutual Life Insurance Company, ("The New England") of which New
England Investment Companies, Inc. ("NEIC") is an indirect wholly-owned
subsidiary, owns approximately 68.1% of the outstanding partnership units of New
England Investment Companies L.P. and Reich & Tang, Inc., owns approximately
22.8% of the outstanding partnership units of New England Investment Company
L.P. Reich & Tang Asset Management Inc. serves as the sole general partner for
both Reich & Tang Asset Management L.P. and Reich & Tang Distributors L.P., the
Reich & Tang Asset Management L.P. serves as the sole limited partner of the
Distributor.
Registrant's investment adviser, Reich & Tang Asset Management L.P., is a
registered investment adviser. Reich & Tang Asset Management L.P.'s investment
advisory clients include California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax
Free Income Fund, Inc., Florida Daily Municipal Income Fund, Institutional Daily
Income Fund, Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily
Municipal Income Fund, Inc., New York Daily Tax Free Income Fund, Inc., North
Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Short Term Income Fund, Inc., and Tax Exempt Proceeds Fund, Inc.,
registered investment companies whose addresses are 600 Fifth Avenue, New York,
New York 10020, which invest principally in money market instruments, Delafield
Fund, Inc. and Reich & Tang Equity Fund, Inc., a registered investment companies
whose addresses are 600 Fifth Avenue, New York, New York 10020,which invests
principally in equity securities and Reich & Tang Government Securities Trust, a
registered investment company whose address is 600 Fifth Avenue, New York, New
York 10020, which invests solely in securities issued or guaranteed by the
United States Government. In addition, Reich & Tang Asset Management L.P. is the
sole general partner of Alpha Associates, August Associates, Reich & Tang
Minutus Cap L.P., Reich & Tang Equity Partnerships L.P. and Tucek Partners,
private investment partnerships organized as limited partnerships.
Peter S. Voss, President, Chief Executive Officer and a Director of NEIC
since October 1992, Chairman of the Board of NEIC since December 1992, Group
Executive Vice President, Bank of America, responsible for the global asset
management private banking businesses, from April 1992 to October 1992,
Executive Vice President of Security Pacific Bank, and Chief Executive Officer
of Security Pacific Hoare Govett Companies a wholly-owned subsidiary of Security
Pacific Corporation, from April 1988 to April 1992, Director of The New England
since March 1993, Chairman of the Board of Directors of NEIC's subsidiaries
other than Loomis, Sayles & Company, Incorporated ("Loomis") and Back Bay
Advisors, Inc. ("Back Bay"), where he serves as a Director, and Chairman of the
Board of Trustees of all of the mutual funds in the TNE Fund Group and the
Zenith Funds. G. Neil Ryland, Executive Vice President, Treasurer and Chief
Financial Officer NEIC since July 1993, Executive Vice President and Chief
Financial Officer of The Boston Company, a diversified financial services
company, from March 1989 until July 1993, from September 1985 to December 1988,
Mr. Ryland was employed by Kenner Parker Toys, Inc. as Senior Vice President and
Chief Financial Officer. Edward N. Wadsworth, Executive Vice President, General
Counsel, Clerk and Secretary of NEIC since December 1989, Senior Vice President
and Associate General Counsel of The New England from 1984 until December 1992,
and Secretary of Westpeak and Draycott and the Treasurer of NEIM. Lorraine C.
Hysler has been Secretary of Reich & Tang Asset
C-3
<PAGE>
Management Inc. since July 1994, Assistant Secretary of NEIC since
September 1993, Vice President of the Mutual Funds Group of New England
Investment Companies, L.P. from September 1993 until July 1994, and Vice
President of Reich & Tang Mutual Funds since July 1994. Ms. Hysler joined Reich
& Tang, Inc. in May 1977 and served as Secretary from April 1987 until September
1993. Richard E. Smith, III has been a Director of Reich & Tang Asset Management
Inc. since July 1994, President and Chief Operating Officer of the Capital
Management Group of New England Investment Companies, L.P. from May 1994 until
July 1994, President and Chief Operating Officer of the Reich & Tang Capital
Management Group since July 1994, Executive Vice President and Director of Rhode
Island Hospital Trust from March 1993 to May 1994, President, Chief Executive
Officer and Director of USF&G Review Management Corp. from January 1988 until
September 1992. Steven W. Duff has been a Director of Reich & Tang Asset
Management Inc. since October 1994, President and Chief Executive Officer of
Reich & Tang Mutual Funds since August 1994, Senior Vice President of
NationsBank from June 1981 until August 1994, Mr. Duff is President and a
Director of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Michigan Daily Tax
Free Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc., New York
Daily Tax Free Income Fund, Inc., North Carolina Daily Municipal Income Fund,
Inc. and Short Term Income Fund, Inc., President and Chairman of Reich & Tang
Government Securities Trust, President and Trustee of Florida Daily Municipal
Income Fund, Pennsylvania Daily Municipal Income Fund, President and Chief
Executive Officer of Tax Exempt Proceeds Fund, Inc., Executive Vice President of
Reich & Tang Equity Fund, Inc., and Senior Vice President of Lebenthal Funds,
Inc. Bernadette N. Finn has been Vice President - Compliance of Reich & Tang
Asset Management Inc. since July 1994, Vice President of Mutual Funds Division
of New England Investment Companies, L.P. from September 1993 until July 1994,
Vice President of Reich & Tang Mutual Funds since July 1994. Ms. Finn joined
Reich & Tang, Inc. in September 1970 and served as Vice President from September
1982 until May 1987 and as Vice President and Assistant Secretary from May 1987
until September 1993. Ms. Finn is also Secretary of California Daily Tax Free
Income Fund, Inc., Connecticut Daily Tax Free Income Fund, Inc., Cortland Trust,
Inc., Delafield Fund, Inc., Daily Tax Free Income Fund, Inc., Florida Daily
Municipal Income Fund, Lebenthal Funds, Inc., Michigan Daily Tax Free Income
Funds, Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax
Free Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fund and Tax Exempt Proceeds Fund, Inc., a
Vice President and Secretary of Reich & Tang Equity Fund, Inc., Reich & Tang
Government Securities Trust and Short Term Income Fund, Inc. Richard De Sanctis
has been Treasurer of Reich & Tang Asset Management Inc. since July 1994,
Assistant Treasurer of NEIC since September 1993 and Treasurer of the Mutual
Funds Group of New England Investment Companies, L.P. from September 1993 until
July 1994, Treasurer of the Reich & Tang Mutual Funds since July 1994. Mr De
Sanctis joined Reich & Tang, Inc. in December 1990 and served as Controller of
Reich & Tang, Inc., from January 1991 to September 1993. Mr De Sanctis was Vice
President and Treasurer of Cortland Financial Group, Inc. and Vice President of
Cortland Distributors, Inc. from 1989 to December 1990. Mr. De Sanctis is also
Treasurer of California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Florida Daily Municipal Income Fund, Michigan Daily Tax Free Income Fund, Inc.,
New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free Income
Fund, Inc., North Carolina Daily Municipal Income Fund, Inc., Pennsylvania Daily
Municipal Income Fund, Reich & Tang Equity Fund, Inc., Reich & Tang Government
Securities Trust, Tax Exempt Proceeds Fund, Inc. and Short Term Income Fund,
Inc. and is Vice President and Treasurer of Cortland Trust, Inc.
Item 29. Principal Underwriters.
(a) Reich & Tang Distributors L.P., the Registrant's Distributor, is also
distributor for California Daily Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free
Income Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal Income
Fund, Institutional Daily Income Fund, Michigan Daily Tax Free Income Fund,
Inc., New Jersey Daily Municipal Income Fund, Inc., New York Daily Tax Free
Income Fund, Inc., North Carolina Municipal Income Fund, Inc., Pennsylvania
Daily Municipal Income Fund, Reich & Tang Equity Fund, Inc. Reich & Tang
Government Securities Trust and Tax Exempt Proceeds Fund, Inc.
C-4
<PAGE>
(b) The following are the directors and officers of Reich & Tang Asset
Management, Inc., the general partner of Reich & Tang Distributors L.P.
Reich & Tang Distributors L.P. does not have any officers. The principal
business address of Messrs. Voss, Ryland, and Wadsworth is 399 Boylston
Street, Boston, Massachusetts 02116. All other persons' principal business
address is 600 Fifth Avenue, New York, New York 10020.
Positions and Offices
With the General Partner Positions and Offices
Name of the Distributor With Registrant
Peter S. Voss President, CEO, and None
Director
G. Neal Ryland Executive Vice President, None
Treasurer and CFO
Edward N. Wadsworth Clerk None
Richard E. Smith III Director None
Steven W. Duff Director President and Director
Bernadette N. Finn Vice President Vice President and
Secretary
Lorraine C. Hysler Secretary None
Richard De Sanctis Vice President and Treasurer
Treasurer
(c) Not applicable.
ITEM 30. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder
are maintained in the physical possession of the Registrant or Investors
Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri 64105, the
Registrant's custodian.
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings.
Not applicable.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, and State of New York, on the 18th day of December, 1995.
SHORT TERM INCOME FUND, INC.
By: /s/Steven Duff
Steven Duff
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
(1) Principal Executive Officer
/s/Steven Duff
Steven Duff President and Director 12/18/95
(2) Principal Financial and
Accounting Officer
/s/ Richard De Sanctis
Richard De Sanctis Treasurer 12/18/95
(3) Majority of Directors
/s/ Steven Duff
Steven Duff Director 12/18/95
W. Giles Mellon (Director)*
Robert Straniere (Director)*
Yung Wong (Director)*
By: /s/ Bernadette N. Finn
Bernadette N. Finn
*Attorney-in-Fact 12/18/95
* Powers of attorney filed as "Other Exhibit" to Post-Effective Amendment
No.26 to Registration Statement on Form N-1A [File Nos. 2-65135 and
811-2950] and incorporated herein by reference.
EXHIBIT 11
McGLADREY & PULLEN L.L.P.
Certified Public Accountants & Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated September 27, 1995, on the
financial statements referred to therein in Post-Effective Amendment No. 28 to
the Registration Statement on Form N-1A, File No. 2-65315 of Short Term Income
Fund, Inc., as filed with the Securities and Exchange Commission.
We also consent to the reference to our Firm in the Prospectus under the
caption "Selected Financial Information" and in the Statement of Additional
Information under the caption "Counsel and Auditors."
/s/McGLADREY & PULLEN, LLP
McGladrey & Pullen, LLP
New York, New York
December 15, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000312669
<NAME> Short Term Income Fund, Inc.
<SERIES>
<NUMBER> 1
<NAME> Money Market Portfolio
<S> <C>
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 880698009
<INVESTMENTS-AT-VALUE> 880698009
<RECEIVABLES> 1474593
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 11819
<TOTAL-ASSETS> 882184421
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2512879
<TOTAL-LIABILITIES> 2512879
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 881902400
<SHARES-COMMON-STOCK> 881902400
<SHARES-COMMON-PRIOR> 1099234839
<ACCUMULATED-NII-CURRENT> 193395
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2424253)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 879671542
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 47228729
<OTHER-INCOME> 0
<EXPENSES-NET> 6828735
<NET-INVESTMENT-INCOME> 40399994
<REALIZED-GAINS-CURRENT> (1950493)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 38499501
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 40206599
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1212777828
<NUMBER-OF-SHARES-REDEEMED> 1467078746
<SHARES-REINVESTED> 36968479
<NET-CHANGE-IN-ASSETS> (219089537)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (473760)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2520468
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7973719
<AVERAGE-NET-ASSETS> 843264994
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .10
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000312669
<NAME> Short Term Income Fund, Inc.
<SERIES>
<NUMBER> 2
<NAME> U.S. Government Portfolio
<S> <C>
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 778053261
<INVESTMENTS-AT-VALUE> 778053261
<RECEIVABLES> 737375
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2430
<TOTAL-ASSETS> 778793066
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2402357
<TOTAL-LIABILITIES> 2402357
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 776390709
<SHARES-COMMON-STOCK> 776390709
<SHARES-COMMON-PRIOR> 478895139
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 776390709
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 37536309
<OTHER-INCOME> 0
<EXPENSES-NET> 4683879
<NET-INVESTMENT-INCOME> 32852430
<REALIZED-GAINS-CURRENT> 19188
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 32871618
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 32852430
<DISTRIBUTIONS-OF-GAINS> 19188
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1684701146
<NUMBER-OF-SHARES-REDEEMED> 1417455015
<SHARES-REINVESTED> 30249439
<NET-CHANGE-IN-ASSETS> 297495570
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1717027
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4683879
<AVERAGE-NET-ASSETS> 661810839
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .10
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
