<PAGE>
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SHORT TERM
INCOME
FUND, INC.
Annual Report
August 31, 1996
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<PAGE>
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SHORT TERM
INCOME FUND, INC. 600 FIFTH AVENUE, NEW YORK, N.Y. 10020
212/830-5200
===============================================================================
Dear Shareholder:
We are pleased to present the annual report of Short Term Income Fund, Inc. for
the period September 1, 1995 through August 31, 1996.
The Fund's Money Market Portfolio had 74,510 shareholders and net assets of
$975,904,375 as of August 31, 1996. The Government Portfolio had 12,453
shareholders and net assets of $792,789,311 as of August 31, 1996.
We thank you for your support and look forward to continuing to serve your cash
management needs.
Sincerely,
\s\Steven W. Duff
Steven W. Duff
President
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<PAGE>
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SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS
AUGUST 31, 1996
===============================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- --------
Bankers' Acceptances (3.06%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 30,000,000 Trust Company Bank of Georgia 09/30/96 5.49% $ 29,878,275
----------- ------------
30,000,000 Total Bankers' Acceptances 29,878,275
----------- ------------
<CAPTION>
Commercial Paper (27.00%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,000,000 ANZ Finance, Delaware 11/12/96 5.37% $ 14,845,417
20,000,000 Bank of America 12/20/96 5.40 19,682,000
15,000,000 Banque Internationale A Luxembourg (BIL) North America 10/10/96 5.56 14,915,517
10,000,000 Banque Internationale A Luxembourg (BIL) North America 11/21/96 5.37 9,883,694
20,000,000 Banque Internationale A Luxembourg (BIL) North America 10/17/96 5.56 19,866,044
40,000,000 Bear Stearns Companies, Inc. 09/11/96 5.47 39,951,822
13,000,000 Compaigne Bancaire 10/23/96 5.51 12,901,958
8,000,000 Compaigne Bancaire 11/05/96 5.53 7,923,700
15,000,000 Ford Motor Credit 09/16/96 5.43 14,970,804
14,000,000 Island Finance of Puerto Rico 11/04/96 5.42 13,871,247
15,000,000 J.P. Morgan & Company, Incorporated 12/10/96 5.65 14,775,825
20,000,000 Morgan Stanley Group, Incorporated 09/19/96 5.43 19,952,178
15,000,000 Raytheon Corporation 09/30/96 5.30 14,940,600
45,000,000 UBS Finance, Delaware 09/03/96 5.30 45,000,000
----------- -----------
265,000,000 Total Commercial Paper 263,480,806
----------- -----------
<CAPTION>
LOC Commercial Paper (24.61%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,000,000 Banamex
LOC Barclays Bank 09/18/96 5.50% $ 14,966,125
10,000,000 Banco Bradesco
LOC Barclays Bank 12/23/96 5.65 9,830,417
5,000,000 Banco Bradesco
LOC Barclays Bank 02/24/97 5.62 4,867,808
5,000,000 Banco National de Comercial
LOC Societe Generale 12/06/96 5.47 4,929,892
10,000,000 Banco National de Comerico Exterior, S.N.C.
LOC Societe Generale 12/06/96 5.44 9,860,306
15,000,000 Banco Real Grand Cayman
LOC Barclays Bank 10/02/96 5.43 14,935,958
25,000,000 Banco Rio de La Plata
LOC Bayerische Vereinsbank, A.G. 01/23/97 5.55 24,464,542
25,000,000 Bancomer S.A.
LOC Bank of Montreal 10/04/96 5.34 24,885,903
20,000,000 Bancomer S.A.
LOC Bank of Montreal 10/10/96 5.56 19,887,356
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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===============================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- -------
LOC Commercial Paper (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10,000,000 Cemex S.A.
LOC Credit Suisse 09/10/96 5.26% $ 9,989,791
33,000,000 Dean Health System, Incorporated
LOC Rabobank Nederland 11/27/96 5.51 32,576,757
10,000,000 Garanti Funding Corporation
LOC Bayerische Vereinsbank, A.G. 02/06/97 5.55 9,766,000
10,000,000 Garanti Funding Corporation
LOC Bayerische Vereinsbank, A.G. 02/07/97 5.55 9,764,500
5,000,000 Guangdong Enterprise
LOC Credit Suisse 12/18/96 5.67 4,918,733
15,000,000 Louis Dreyfus Corporation
LOC Credit Agricole 09/16/96 5.33 14,971,292
15,000,000 Minmetals Capital & Securities, Incorporated
(Owned by China National Metals & Minerals Import & Export)
LOC Credit Suisse 02/25/97 5.66 14,598,958
15,000,000 National Bank of Pakistan
LOC Credit Suisse 09/20/96 5.39 14,962,458
----------- -----------
243,000,000 Total LOC Commercial Paper 240,176,796
----------- -----------
<CAPTION>
U.S. Government Agencies (3.70%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 21,150,000 Federal Home Loan Bank 02/07/97 5.18% $ 21,148,582
5,000,000 Federal Home Loan Bank (a) 11/18/97 5.75 5,000,000
10,000,000 Federal National Mortgage Association (b) 04/04/97 5.31 9,996,048
----------- ------------
36,150,000 Total U.S. Government Agencies 36,144,630
----------- ------------
<CAPTION>
Master Notes (11.89%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 36,000,000 Goldman Sachs (c) 11/04/96 5.41% $ 36,000,000
35,000,000 Morgan (J.P.) Securities Incorporated (d) 10/11/96 5.47 35,000,000
45,000,000 Williamette Industries Incorporated (e) 07/18/97 5.46 45,000,000
- ------------ ------------
116,000,000 Total Master Notes 116,000,000
- ------------ ------------
<CAPTION>
Other Notes (8.71%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,000,000 City of New York
LOC Societe Generale 01/29/97 5.75% $ 15,000,000
3,325,000 Greensboro, NC Public Improvement - Series C (f) 04/01/14 5.45 3,325,000
6,600,000 Methodist Hospital Taxable Healthcare Notes - Series 1994A 02/24/97(h) 5.70 6,600,000
6,900,000 New Orleans Aviation Board Taxable Refunding Bonds - Series 1993A (f)
MBIA Insured 08/01/00 5.55 6,900,000
25,000,000 State of Oregon Taxable EDRB (Georgia Pacific Corporation 1995 B) - Series 169
LOC Commerzbank A.G. 10/10/96(h) 5.70 25,000,000
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
===============================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- -------
Other Notes (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,200,000 The City of New York Taxable Municipal Fiscal 1996 - Series A2
LOC Societe Generale 02/10/97(h) 5.70% $ 15,200,000
6,000,000 Winston Salem, NC Certificate of Participation 09/11/96(h) 5.35 6,000,000
7,000,000 Winston Salem, NC Certificate of Participation 09/24/96(h) 5.35 7,000,000
- ------------ ------------
85,025,000 Total Other Notes 85,025,000
- ------------ ------------
<CAPTION>
Repurchase Agreement, Overnight (9.94%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 97,000,000 Donaldson, Lufkin & Jenrette Securities Corporation
(Collateralized by $92,210,000 U.S. Treasury Notes, 5.375% to 8.500%,
due 11/30/97 to 11/15/05 and U.S. Treasury Bonds, 6.000% to 13.875%,
due 05/15/10 to 02/15/26) 09/03/96 5.25% $ 97,000,000
- ------------ ------------
97,000,000 Total Repurchase Agreement, Overnight 97,000,000
- ------------ ------------
<CAPTION>
Eurodollar Certificates of Deposit (4.10%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,000,000 ABN-AMRO 11/15/96 5.45% $ 15,000,000
25,000,000 National Westminster 09/10/96 5.51 24,999,421
- ------------ ------------
40,000,000 Total Eurodollar Certificates of Deposit 39,999,570
- ------------ ------------
<CAPTION>
Yankee Certificates of Deposit (6.66%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,000,000 Banque Nationale de Paris 09/19/96 5.66% $ 20,000,168
25,000,000 Canadian Imperial Bank 09/05/96 5.50 25,000,000
20,000,000 Royal Bank of Canada (g) 09/25/96 5.36 19,999,764
- ------------ ------------
65,000,000 Total Yankee Certificates of Deposit 64,999,932
- ------------ ------------
Total Investments (99.67%) (Cost $972,705,009+) 972,705,009
Cash and Other Assets Net of Liabilities (0.33%) 3,199,366
------------
Net Assets (100.00%) $975,904,375
============
Net asset value, offering and redemption price per share:
Class A shares, 757,623,067 shares outstanding (Note 3) $ 1.00
============
Class B shares, 220,380,901 shares outstanding (Note 3) $ 1.00
============
+ Aggregate cost for federal income tax purposes is identical.
FOOTNOTES:
(a) The interest rate is adjusted daily based on federal funds effective rate.
(b) The interest rate is adjusted daily based on prime -2.50%.
(c) The interest rate is adjusted daily based on opening federal funds +.10% (daily put).
(d) The interest rate is adjusted monthly based on one month LIBOR (daily put).
(e) The interest rate is adjusted monthly based on one month LIBOR + .03% (seven day put).
(f) Securities payable on demand at par including accrued interest (with 7 days notice). Interest rate is adjusted weekly.
(g) The interest rate is adjusted daily based on federal funds +.10%.
(h) The maturity date indicated is next put date.
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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SHORT TERM INCOME FUND, INC.
U.S. GOVERNMENT PORTFOLIO
STATEMENT OF NET ASSETS
AUGUST 31, 1996
===============================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- -------
Repurchase Agreements, Overnight (70.38%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 30,000,000 CIBC (Collateralized by $31,125,000 U.S Treasury Bills, due 02/27/97,
U.S. Treasury Note, 6.250% due 08/31/00) 09/03/96 5.20% $ 30,000,000
183,000,000 Fuji Securities, Inc. (Collateralized by $180,854,000 U.S. Treasury Bills,
and U.S. Treasury Notes, 6.250% to 8.875%, due 10/19/96 to 8/31/00) 09/03/96 5.22 183,000,000
75,000,000 CS First Boston (Collateralized by $59,352,000 U.S. Treasury Bonds,
10.375% to 12.000%, due 08/15/03 to 11/15/12) 09/03/96 5.25 75,000,000
70,000,000 CIBC (Collateralized by $72,140,000 U.S. Treasury Bills and U.S. Treasury Bonds
7.250% to 11.250%, due 11/14/96 to 05/15/96) 09/03/96 5.25 70,000,000
130,000,000 Goldman Sachs (Collateralized by $194,260,040 GNMA's, 5.500% to
10.000%, due 09/15/01 to 08/15/26) 09/03/96 5.30 130,000,000
50,000,000 CIBC (Collateralized by $50,085,000 U.S. Treasury Bills, due 07/24/97,
U.S. Treasury Note, 6.125%, due 05/31/97) 09/12/96 5.25 50,000,000
20,000,000 Goldman Sachs (Collateralized by $29,724,000 GNMA'S, 6.500% to 10.500%,
due 12/15/07 to 08/15/26) 09/23/96 5.25 20,000,000
----------- ------------
558,000,000 Total Repurchase Agreements, Overnight 558,000,000
----------- ------------
<CAPTION>
U.S. Government Agencies (1.16%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 9,216,023 Small Business Administration Variable Loan 05/25/14(a) 6.64% $ 9,208,381
- ------------ ------------
9,216,023 Total U.S. Government Agencies 9,208,381
- ------------ ------------
<CAPTION>
U.S. Government Obligations (30.68%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10,000,000 U.S. Treasury Bills 09/19/96 5.17% $ 9,977,600
10,000,000 U.S. Treasury Bills 09/19/96 5.18 9,977,556
10,000,000 U.S. Treasury Bills 10/10/96 5.23 9,947,583
10,000,000 U.S. Treasury Bills 10/17/96 5.35 9,937,422
10,000,000 U.S. Treasury Bills 10/17/96 5.29 9,937,056
15,000,000 U.S. Treasury Bills 11/14/96 5.24 14,847,300
10,000,000 U.S. Treasury Bills 11/21/96 5.25 9,887,644
10,000,000 U.S. Treasury Bills 11/29/96 5.30 9,875,300
15,000,000 U.S. Treasury Bills 12/12/96 5.46 14,778,750
10,000,000 U.S. Treasury Bills 01/02/97 5.50 9,820,181
10,000,000 U.S. Treasury Bills 01/09/97 5.51 9,809,422
10,000,000 U.S. Treasury Bills 02/06/97 5.50 9,768,600
20,000,000 U.S. Treasury Bills 03/06/97 5.43 19,466,133
10,000,000 U.S. Treasury Notes, 7.00% 09/30/96 5.06 10,012,132
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
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SHORT TERM INCOME FUND, INC.
U.S. GOVERNMENT PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
===============================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- -------
U.S. Government Obligations (Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10,000,000 U.S. Treasury Notes, 8.00% 10/15/96 5.25% $ 10,029,594
5,000,000 U.S. Treasury Notes, 6.87% 10/31/96 5.08 5,011,600
15,000,000 U.S. Treasury Notes, 6.87% 10/31/96 5.07 15,034,888
10,000,000 U.S. Treasury Notes, 4.37% 11/15/96 5.18 9,980,334
10,000,000 U.S. Treasury Notes, 4.37% 11/15/96 5.25 9,980,783
10,000,000 U.S. Treasury Notes, 7.25% 11/15/96 5.28 10,035,723
10,000,000 U.S. Treasury Notes, 7.25% 11/30/96 5.20 10,041,754
15,000,000 U.S. Treasury Notes, 7.25% 11/30/96 5.49 15,057,928
- ------------ ------------
245,000,000 Total U.S. Government Obligations 243,215,283
- ------------ ------------
Total Investments (102.22%) (Cost $810,423,664+) 810,423,664
Liabilities in Excess of Cash and Other Assets (-2.22%) (17,634,353)
------------
Net Assets (100.00%) $792,789,311
============
Net asset value, offering and redemption price per share:
Class A shares, 666,620,150 shares outstanding (Note 3) $ 1.00
============
Class B shares, 126,169,161 shares outstanding (Note 3) $ 1.00
============
+ Aggregate cost for federal income tax purposes is identical.
FOOTNOTES:
(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.
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED AUGUST 31, 1996
===============================================================================
<TABLE>
<CAPTION>
Money Market U.S. Government
Portfolio Portfolio
------------------- ------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest............................................................ $ 53,088,941 $ 41,866,422
------------------ ------------------
Expenses: (Note 2)
Investment management fee........................................... 2,827,181 1,960,693
Administration fee.................................................. 1,970,196 1,573,195
Distribution fee (Class A).......................................... 1,808,166 1,448,043
Custodian expenses.................................................. 107,238 95,458
Shareholder servicing and related shareholder expenses.............. 1,938,400 469,689
Legal, compliance and filing fees................................... 60,583 53,109
Audit and accounting................................................ 91,705 88,048
Directors' fees .................................................... 29,318 16,842
Miscellaneous....................................................... 21,156 17,926
------------------ ------------------
Total expenses.................................................. 8,853,943 5,723,003
Less:
Fees waived (Note 2)...................................... ( 220,000) --
Expenses paid indirectly.................................. ( 85,145) ( 14,045)
------------------ ------------------
Net expenses.......................................... 8,548,798 5,708,958
------------------ ------------------
Net investment income................................................... 44,540,143 36,157,464
------------------ ------------------
<CAPTION>
<S> <C> <C>
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments................................. 130,223 160,896
------------------ ------------------
Increase in net assets from operations.................................. $ 44,670,366 $ 36,318,360
================== ==================
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
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SHORT TERM INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED AUGUST 31, 1996 AND 1995
===============================================================================
<TABLE>
<CAPTION>
Money Market Portfolio U.S. Government Portfolio
---------------------------------- ----------------------------------
1996 1995 1996 1995
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income................... $ 44,540,143 $ 40,399,994 $ 36,157,464 $ 32,852,430
Net realized gain (loss) on investments. 130,223 ( 11,438,610) 160,896 19,188
---------------- --------------- --------------- ----------------
Increase in net assets from operations.. 44,670,366 28,961,384 36,318,360 32,871,618
Dividends to shareholders:
Net investment income
Class A............................... ( 33,451,731) ( 28,998,644) ( 27,085,557) ( 20,587,273)
Class B............................... ( 11,087,370) ( 11,207,955) ( 9,071,907) ( 12,265,157)
Net realized gain on investments
Class A............................... -- -- ( 133,784)* ( 11,606)
Class B............................... -- -- ( 27,112)* ( 7,582)
Capital share transactions (Note 3):
Class A............................... 94,199,071 ( 13,625,381) 197,028,406 70,892,796
Class B............................... 1,902,497 ( 203,707,058) ( 180,629,804) 226,602,774
Contribution of capital from
investment manager (Note 2)...... -- 9,488,117 -- --
---------------- --------------- --------------- ----------------
Total increase (decrease)............. 96,232,833 ( 219,089,537) 16,398,602 297,495,570
Net assets:
Beginning of year..................... 879,671,542 1,098,761,079 776,390,709 478,895,139
---------------- --------------- --------------- ----------------
End of year........................... $ 975,904,375 $ 879,671,542 $ 792,789,311 $ 776,390,709
================ =============== =============== ================
* Represents a Long Term Capital Gain distribution of $0.000202949 per share
declared to shareholders of record as of August 30, 1996 and paid on September
15, 1996.
</TABLE>
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See Notes to Financial Statements.
<PAGE>
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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) Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
e) General -
Securities transactions are recorded on a trade date basis. Interest income
is accrued as earned. Realized gains and losses from securities
transactions are recorded on theidentified 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 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,
1996.
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
2. Investment Management Fees and Other Transactions with Affiliates.
(Continued)
Pursuant to an Administrative Services Agreement, each Portfolio pays to the
Manager 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. Prior to December 1, 1995 the administration fee was .20%, .19% and
18%.
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, 1996 the Manager voluntarily waived investment
management fees and shareholder servicing fees of $200,000 and $20,000,
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 "Shareholder
servicing and related shareholder expenses" are fees of $786,362 and $228,495
for the Money Market Portfolio and the U.S. Government Portfolio, respectively,
paid to Reich & Tang Services L.P., an affiliate of the Manager as servicing
agent for the Fund. Included under the captions "Custodian expenses" and
"Shareholder servicing and related shareholder expenses" are expense offsets of
$85,145 and $14,045 for the Money Market Portfolio and the U.S. Government
Portfolio, respectively.
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, 1996, 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 $978,003,968 and $792,789,311, respectively.
Transactions in capital stock, all at $1.00 per share, were as follows:
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
3. Capital Stock. (Continued)
Money Market Portfolio U.S. Government Portfolio
---------------------------------- ------------------------------------
Year Ended Year Ended Year Ended Year Ended
8/31/96 8/31/95 8/31/96 8/31/95
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Class A
Sold................................... 750,205,484 697,072,360 784,780,227 564,854,707
Issued on reinvestment of dividends.... 29,962,057 25,911,372 26,088,090 19,605,821
Redeemed............................... ( 685,968,470) ( 736,609,113) ( 613,839,911) ( 513,567,732)
-------------- -------------- -------------- --------------
Net increase (decrease)................ 94,199,071 ( 13,625,381) 197,028,406 70,892,796
============== ============== ============== ==============
<CAPTION>
<S> <C> <C> <C> <C>
Class B
Sold................................... 635,780,156 515,705,468 752,064,206 1,119,846,439
Issued on reinvestment of dividends.... 10,765,783 11,057,107 8,117,333 10,643,618
Redeemed............................... ( 644,643,442) ( 730,469,633) ( 940,811,343) ( 903,887,283)
-------------- -------------- -------------- --------------
Net increase (decrease)................ 1,902,497 ( 203,707,058) ( 180,629,804) 226,602,774
============== ============== ============== ==============
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses of the Money Market Portfolio at
August 31, 1996 amounted to $2,294,030. At August 31, 1996 the Fund had tax
basis capital losses of $2,283,215 which may be carried forward to offset future
capital gains through August 31, 2002.
5. Subsequent Event.
On October 22, 1996 the U.S. Government Portfolio declared a Long Term Capital
Gain distribution of $.000262202 per share to shareholders of record as of
October 22, 1996. The dividend will be paid on November 15, 1996.
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<PAGE>
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SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
<TABLE>
<CAPTION>
6. Selected Financial Information.
Money Market Portfolio
CLASS A Year Ended August 31,
- ------- --------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------- ----------
Income from investment operations:
Net investment income........ 0.047 0.047 0.029 0.027 0.041
Less distributions:
Dividends from net investment income 0.047 0.047 0.029 0.027 0.041
------------ ------------ ------------ ------------- ----------
Net asset value, end of period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============= ==========
Total Return.................... 4.71% 4.82%(d) 2.93% 2.69% 4.13%
Ratios/Supplemental Data
Net assets, end of period (000). $ 756,094 $ 661,795 $ 676,756 $ 706,074 $ 694,635
Ratios to average net assets:
Expenses..................... 0.98%(b)(c) 0.88%(b) 0.91% 0.91%(b) 0.83%
Net investment income........ 4.63%(b) 4.75%(b) 2.89% 2.59%(b) 4.03%
<CAPTION>
Money Market Portfolio
CLASS B (a) Year Ended August 31,
- ------- ----------------------------------------------------------------
1996 1995 1994 1993
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ----------- ----------- ----------
Income from investment operations:
Net investment income........ 0.049 0.050 0.031 0.021
Less distributions:
Dividends from net investment income 0.049 0.050 0.031 0.021
------------ ----------- ----------- ----------
Net asset value, end of period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ =========== =========== ==========
Total Return.................... 5.00% 5.08%(d) 3.19% 2.84%*
Ratios/Supplemental Data
Net assets, end of period (000). $ 219,810 $ 217,877 $ 422,005 $ 453,093
Ratios to average net assets:
Expenses..................... 0.70%(b)(c) 0.62%(b) 0.67% 0.71%*
Net investmentncome.......... 4.91%(b) 4.90%(b) 3.13% 2.75%*
* Annualized
(a) Distribution of Class B shares commenced November 30, 1992.
(b) Net of management and administration fees waived equivalent to 0.02%, 0.13%
and 0.01%. In addition, in 1993 shareholder servicing fees equivalent to
0.03% were waived only with repect to Class A.
(c) Includes expenses paid indirectly equivalent to .01% of average net assets.
(d) 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>
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<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
<TABLE>
<CAPTION>
6. Selected Financial Information. (Continued)
U.S. Government Portfolio
CLASS A Year Ended August 31,
- ------- -----------------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ------------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ------------- ------------ ----------- --------
Income from investment operations:
Net investment income.......... 0.047 0.048 0.028 0.025 0.039
Less distributions:
Dividends from net investment income 0.047 0.048 0.028 0.025 0.039
----------- ------------ ----------- ----------- --------
Net asset value, end of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ============= ============ =========== =========
Total Return...................... 4.81% 4.93% 2.79% 2.56% 3.98%
Ratios/Supplemental Data
Net assets, end of period (000)... $ 666,620 $ 469,592 $ 398,699 $ 429,164 $ 579,526
Ratios to average net assets:
Expenses....................... 0.81% 0.80% 0.85% 0.85% 0.77%
Net investment income.......... 4.68% 4.83% 2.75% 2.52% 3.92%
<CAPTION>
U.S. Government Portfolio
CLASS B (a) Year Ended August 31,
- ------- ---------------------------------------------------------------
1996 1995 1994 1993
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------
Income from investment operations:
Net investment income.......... 0.050 0.051 0.030 0.021
Less distributions:
Dividends from net investment income 0.050 0.051 0.030 0.021
----------- ---------- ----------- ----------
Net asset value, end of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ============= =========== ==========
Total Return...................... 5.07% 5.19% 3.04% 2.75%*
Ratios/Supplemental Data
Net assets, end of period (000)... $ 126,169 $ 306,799 $ 80,196 $ 101,391
Ratios to average net assets:
Expenses....................... 0.56% 0.55% 0.60% 0.63%*
Net investmentncome............ 5.04% 5.20% 2.98% 2.68%*
* Annualized
(a) Distribution of Class B shares commenced November 30, 1992.
</TABLE>
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<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, 1996, 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, 1996, by correspondence with the custodian and brokers.
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, 1996, 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
October 2, 1996, except for Note 5 as
to which the date is October 23, 1996
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by an effective prospectus, which includes
information regarding the Fund's objectives and policies, experience of its
management, marketability of shares, and other information.
- -------------------------------------------------------------------------------
Short Term Income Fund, Inc.
600 Fifth Avenue
New York, New York 10020
Manager
Reich & Tang Asset Management, L.P.
600 Fifth Avenue
New York, New York 10020
Custodian
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services L.P.
600 Fifth Avenue
New York, New York 10020
- -------------------------------------------------------------------------------
<PAGE>
