As filed with the Securities and Exchange Commission on October 30, 1998.
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 [X]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 32 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 194O [X]
Amendment No. 32 [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)
[ ] on (date) pursuant to paragraph (b)
[X] 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
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment
<PAGE>
SHORT TERM INCOME FUND, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
(as required by Rule 4O4 (c))
PART A
ITEM NO. PROSPECTUS HEADING
1. Front and Back Cover Pages Cover Page; Back Page
2. Risk/Return Summary: Investments, Risk/Return Summary: Investments,
Risks and Performance Risks and Performance
3. Risk/Return Summary: Fee Table Fee Table
4. Investment Objectives, Principal Investment Objectives, Principal
Investment Strategies and Related Risks Investment Strategies and Related
Risks
5. Management's Discussion of Not Applicable
Fund Performance
6. Management Organization, and Capital Management Organization,
Structure and Capital Structure
7. Shareholder Information Shareholder Information
8. Distribution Arrangements Distribution Arrangements
9. Financial Highlights Information Financial Highlights
<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 and Table of Contents Cover Page and Table of Contents
11. Fund History Fund History
12. Description of the Fund and Its Description of the Fund and Its
Investments and Risks Investments and Risks
13. Management of the Fund Management of the Fund
14. Control Persons and Principal Control Persons and Principal
Holders of Securities Holders of Securities
15. Investment Advisory and Other Services Investment Advisory and Other
Services
16. Brokerage Allocation and Other Practices Brokerage Allocation and Other
Practices
17. Capital Stock and Other Securities Capital Stock and Other
Securities
18. Purchase, Redemption and Pricing Purchase, Redemption and Pricing
of Shares of Shares
19. Taxation of the Fund Taxation of the Fund
20. Underwriters Underwriters
21. Calculations of Performance Calculations of Performance
Data Data
23. Financial Statements Financial Statements
<PAGE>
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SHORT TERM PROSPECTUS
INCOME FUND, INC. JANUARY 2, 1999
CLASS A SHARES; CLASS B SHARES
================================================================================
The objective of 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 and the U.S. Government Portfolio.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE
<TABLE>
<CAPTION>
<S> <C>
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CONTENTS
Risk/Return Summary.............................2 Shareholder Information........................10
Fee Table.......................................6 Tax Consequences...............................17
Investment Objectives, Principal Distribution Arrangements......................18
Investment Strategies Financial Highlights...........................20
and Related Risks.............................7
Management, Organization and
Capital Structure.............................9
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
INVESTMENT OBJECTIVES
The objective of 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. There is no assurance that the Fund will achieve its investment
objective.
PRINCIPAL INVESTMENT STRATEGIES
The Fund intends to achieve its investment objectives through two separate
portfolios. The Fund is a money market fund which invests in high quality and
short-term debt instruments. The Fund seeks to maintain investment portfolios
with a dollar-weighted average maturity of 90 days or less, to value its
investment portfolio at amortized cost and maintain a net asset value of $1.00
per share.
MONEY MARKET PORTFOLIO
The Money Market Portfolio of the Fund seeks to achieve the Fund's objectives by
investing principally in (i) United States Government Securities; (ii) bank
obligations; (iii) commercial paper and certain debt obligations; and (iv)
repurchase agreements.
THE U.S. GOVERNMENT PORTFOLIO
The U.S. Government Portfolio of the Fund seeks to achieve the Fund's objectives
principally by investing in obligations issued or guaranteed by the United
States Government including repurchase agreements covering those types of
obligations.
PRINCIPAL RISKS
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund. The value of the
Fund's shares and the securities held by the Fund can each decline in value.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other governmental agency.
The U.S. Government Portfolio's investment policy of only investing in
obligations issued or guaranteed by the United States Government, while
minimizing risk of loss, may produce a lower yield than a policy of investing in
other types of instruments. The yield and total return of the U.S. Government
Portfolio is likely to be lower than that of the Money Market Portfolio.
Because the Money Market Portfolio may contain securities issued by foreign
governments and other foreign issuers, debt obligations of foreign issuers may
be subject to additional investment risks compared to an investment in debt
obligations of domestic issuers. Such additional risks include future adverse
political or economic developments in a foreign jurisdiction and sudden changes
in foreign laws regarding the regulation of and rights attached with such
investments.
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RISK/RETURN BAR CHART
The following bar charts may assist in your decision to invest in a portfolio of
the Fund. The bar charts show the change in the average annual returns of each
of the Fund's portfolios over the last ten calendar years. While analyzing this
information, please note that the Funds' past performance is not an indication
of how the Fund will perform in the future. The current 7-day yield of each of
the Fund's portfolios may be obtained by calling the Fund toll-free at
1-800-_______________.
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[BAR CHART OMITTED]
(1) As of September 30, 1998, the Fund's Money Market Portfolio had a
year-to-date return of ___________%.
(2) The Fund's Money Market Portfolio's highest quarterly return was _______%
for the quarter ended _______ ___, 19__; the lowest quarterly return was
____% for the quarter ended _______ __, 19__.
(3) Investors purchasing or redeeming shares through a Participating
Organization may be charged a fee in connection with such service and,
therefore, the net return to such investors may be less than the net return
by investing in the Fund directly.
(4) Returns do not include fees and expenses and, if those amounts were
included, returns would be less than those shown.
(NOTE TO SEC: THE NUMBERS REFLECTED IN THIS CHART DO NOT REFLECT THE YIELDS OF
THE FUND BUT RATHER ARE IN TO SHOW HOW THE CHART WILL LOOK. ACTUAL YIELDS WILL
BE INSERTED IN A SUBSEQUENT FILING.)
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[BAR CHART OMITTED]
(1) As of September 30, 1998, the Fund's U.S. Government Portfolio had a
year-to-date return of ___________%.
(2) The Fund's U.S. Government Portfolio's highest quarterly return was
_______% for the quarter ended _______ ___, 19__; the lowest quarterly
return was ____% for the quarter ended _______ __, 19__.
(3) Investors purchasing or redeeming shares through a Participating
Organization may be charged a fee in connection with such service and,
therefore, the net return to such investors may be less than the net return
by investing in the Fund directly.
(4) Returns do not include fees and expenses and, if those amounts were
included, returns would be less than those shown.
(NOTE TO SEC: THE NUMBERS REFLECTED IN THIS CHART DO NOT REFLECT THE YIELDS OF
THE FUND BUT RATHER ARE IN TO SHOW HOW THE CHART WILL LOOK. ACTUAL YIELDS WILL
BE INSERTED IN A SUBSEQUENT FILING.)
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FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares in any of the Fund's portfolios.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
MONEY MARKET U.S. GOVERNMENT
PORTFOLIO PORTFOLIO
--------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
CLASS A CLASS B CLASS A CLASS B
Management Fees .30% .30% .26% .26%
Distribution and Service (12b-1) Fees .25% .00% .25% .00%
Other Expenses .44% .36% .30% .29%
Administration Fees .21% _____ .21% _____ .21% _____ .21% _____
Total Fund Operating Expenses .99% .66% .81% .55%
</TABLE>
The Manager voluntarily waived a portion of the Administrative Fees with respect
to both Class A and B shares. After such waivers, relating to the Money Market
Portfolio, the Administrative Fees for Class A were ___% and for Class B were
___%, and the actual Total Fund Operating Expenses for Class A were ___% and for
Class B were ___%. After such waivers, relating to the U.S. Government
Portfolio, the Administrative Fees for Class A were ___% and for Class B were
___%, and the actual Total Fund Operating Expenses for Class A were ___% and for
Class B were ___%. This fee waiver arrangement may be terminated at any time at
the option of the Fund.
EXAMPLE
This Example is intended to help you compare the cost of investing in any of the
Fund's portfolios with the cost of investing in other money market funds.
The Example assumes that you invest $10,000 in either portfolio of the Fund for
the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
MONEY MARKET PORTFOLIO Class A: $______ $_______ $_______ $_______
Class B: $______ $_______ $_______ $_______
U.S. GOVERNMENT PORTFOLIO Class A: $______ $_______ $_______ $_______
Class B: $______ $_______ $_______ $_______
</TABLE>
6
<PAGE>
II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
INVESTMENT OBJECTIVES
The Fund is a money market fund, which through its two portfolios, seeks to
provide a high level of current income while maintaining liquidity and
preserving capital. There can be no assurance that the Fund will achieve its
investment objectives.
The investment objectives of the Fund described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Fund that would be affected by such a change.
PRINCIPAL INVESTMENT STRATEGIES
GENERALLY
In order to maintain a share price of $1.00, the Fund must comply with certain
industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other regulations pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities which have, or are deemed to have, a remaining
maturity of 397 days or less. Also, the average maturity for all securities
contained in each individual portfolio of the Fund, on a dollar-weighted basis,
will be 90 days or less.
The Fund will only invest in either securities which have been rated (or whose
issuers have been rated) in the highest short-term rating category by nationally
recognized statistical rating organizations, or are unrated securities but which
have been determined by the Fund's Board of Directors to be of comparable
quality.
Subsequent to its purchase by the Fund, the quality of an investment may cease
to be rated or its rating may be reduced below the minimum required for purchase
by the Fund. If this occurs, the Board of Directors of the Fund shall reassess
the security's credit risks and shall take such action as the Board of Directors
determines is in the best interest of the Fund and its shareholders.
Reassessment is not required, however, 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.
Each portfolio of the Fund shall invest not more than 5% of its total assets in
securities issued by a single issuer.
The Fund's investment manager considers the following factors when buying and
selling securities for each of the Portfolios: (i) availability of cash, (ii)
redemption requests, (iii) yield management, and (iv) credit management.
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.
(i) United States Government Securities: The Money Market Portfolio may
purchase short-term obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities. These obligations 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 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.
(ii) Bank Obligations: The Money Market Portfolio may purchase certificates of
deposit, time deposits and bankers' acceptances issued by domestic banks,
foreign branches of domestic banks, foreign
7
<PAGE>
subsidiaries of domestic banks, and domestic and foreign branches of
foreign banks. 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 purchased 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. 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.
(iii)Commercial Paper and Certain Debt Obligations: The Money Market Portfolio
may purchase commercial paper or similar debt obligations. Commercial paper
is generally considered to be short term unsecured debt of corporations.
(iv) Repurchase Agreements: The Money Market Portfolio may enter into repurchase
agreements 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.
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. 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.
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.
RISKS
The Fund complies with industry-standard requirements on the quality, maturity
and diversification of its investments which are designed to help maintain a
$1.00 share price. A significant change in interest rates or a default on the
Fund's investments could cause its share price (and the value of your
investment) to change.
Since the Money Market Portfolio may contain securities issued by foreign
governments and other foreign issuers, the Money Market Portfolio may be subject
to additional investment risks when compared with those incurred by a fund which
invests only in domestic issuers. 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 in most foreign securities markets are
less than in the United States. The issuers of some of these securities may be
subject to less stringent or
8
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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 and requirements. Additional risks associated with
foreign investments might include adverse political and economic developments,
seizure or nationalization of foreign deposits and adoption of governmental
restrictions which might adversely affect the payment of principal and interest
on the foreign securities. Furthermore, some of these foreign securities may be
subject to stamp, withholding 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.
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Manager is in the process of working with the Fund's service
providers to prepare for the year 2000. Based on information currently
available, the Manager does not expect that the Fund will incur material costs
to be year 2000 compliant. Although the Manager does not anticipate that the
year 2000 issue will have a material impact on the Fund's ability to provide
service at current levels, there can be no assurance that steps taken in
preparation for the year 2000 will be sufficient to avoid an adverse impact on
the Fund.
III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's principal business office is located at 600 Fifth
Avenue, New York, NY 10020. As of July 31, 1998, the Manager was the investment
manager, advisor or supervisor with respect to assets aggregating in excess of
$11.29 billion. The Manager has been an investment adviser since 1970 and
currently is manager of seventeen other registered investment companies and also
advises pension trusts, profit-sharing trusts and endowments.
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. The Manager provides the Fund with personnel to perform all of the
clerical and accounting type functions not performed by the Manager. 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. In addition, Reich & Tang Distributors, Inc.,
receives a
9
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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.
IV. SHAREHOLDER INFORMATION
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from Participating Organizations
and from investors directly.
PRICING OF FUND SHARES
The net asset value of each Class of each portfolio of the Fund's shares is
determined as of 12 noon, New York City time, on each Fund Business Day. Fund
Business Day means weekdays (Monday through Friday) except days on which the New
York Stock Exchange is closed for trading. The net asset value of a Class is
computed by dividing the value of the Fund's net assets for such Class (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
total number of shares outstanding for such Class. The Fund intends to maintain
a stable net asset value at $1.00 per share although there can be no assurance
that this will be achieved.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. If fluctuating interest
rates cause the market value of the securities in a 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.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the value of an instrument is higher or lower
than the price an investment company would receive if the instrument were sold.
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.
SUBSCRIBING TO THE FUND--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. 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
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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.
PURCHASE OF FUND SHARES
Investors purchasing shares through a Participating Organization with which they
have an account become Class A shareholders. All other investors, and investors
who have accounts with Participating Organizations but do not wish to invest in
the Fund through them, may invest in the Fund directly as Class B shareholders
of the Fund. Class B shareholders do 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, because they may not be legally permitted to receive such as
fiduciaries, do not receive compensation from the Distributor or the Manager.
The minimum initial investment in the Fund for both classes of shares in 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 all other investors. The
minimum amount for subsequent investments is $100 for all shareholders.
Each shareholder, except certain Participant Investors, will receive from the
Fund a personalized monthly statement (i) listing the total number of Fund
shares owned as of the statement closing date, (ii) purchase and redemptions of
Fund shares and (iii) the dividends paid on Fund shares (including dividends
paid in cash or reinvested in additional Fund shares).
INVESTMENTS THROUGH PARTICIPATING
ORGANIZATIONS--PURCHASE OF CLASS A SHARES
Participant Investors may, if they wish, invest in the Fund through the
Participating Organizations with which they have accounts. "Participating
Organizations" are securities brokers, banks and financial institutions or other
industry professionals or organizations which have entered into shareholder
servicing agreements with the Distributor with respect to investment of their
customer accounts in the Fund. 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 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 statements will receive them from the Fund directly.
Participating Organizations may charge Participant Investors a fee in connection
with their use of specialized purchase and redemption procedures. 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
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shareholders who invest in the Fund directly. Accordingly, the net yield to
investors who invest through Participating Organizations may be less than by
investing 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, without accompanying Federal Funds will result in the issuance of shares on
that day only if 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. Orders for which Federal Funds are received after 4:00 p.m., New York
City time, will result in share issuance the following Fund Business Day.
Participating Organizations are responsible for instituting procedures to insure
that purchase orders by their respective clients are processed expeditiously.
INITIAL DIRECT PURCHASES OF CLASS B SHARES
Investors who wish to invest in the Fund directly may obtain a current
prospectus and the subscription order form necessary to open an account by
telephoning the Fund at the following numbers:
Within New York 212-830-5220
Outside New York (TOLL FREE) 800-221-3079
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.
Reich & Tang 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 of the Federal Reserve System
will 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. An investor's purchase order 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, investors should first obtain a new account number by telephoning
the Fund at 212-830-5220 (within New York) or at 800-221-3079 (outside New York)
and then instruct a member commercial bank to wire money immediately to:
For Money Market Portfolio:
Investors Fiduciary Trust Company
ABA # 101003621
Reich & Tang Funds
DDA # 890752-953-8
For Short Term Income Fund, Inc.
Money Market Portfolio
Account of (Investor's Name)
Fund Account #
SS#/Tax ID#
For U.S. Government Portfolio:
Investors Fiduciary Trust Company
ABA # 101003621
Reich & Tang Funds
DDA # 890752-953-8
For Short Term Income Fund
U.S. Government Portfolio
Account of (Investor's Name)
SS#/Tax ID#
The investor should then promptly complete and mail the subscription order form.
12
<PAGE>
Investors planning to wire funds should instruct their bank early in the day so
the wire transfer can be accomplished 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 - 8th 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
Subsequent purchases can be made by bank wire, as indicated above, or by mailing
a check to:
Short Term Income Fund, Inc.
Mutual Funds Group
P.O. Box 13232
Newark, New Jersey 07101-3232
There is a $100 minimum for subsequent purchases of shares. All payments should
clearly indicate the shareholder's account number.
Provided that the information on the subscription 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.
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 same Fund Business Day
after the redemption is effected, provided the redemption request is received
prior to 12 noon, New York City time. However, redemption payments 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. Shares redeemed are not entitled to participate
in dividends declared on the day a redemption becomes effective.
A shareholder's original subscription order form permits
13
<PAGE>
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. It should be signed 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 to
the Fund addressed to:
Short Term Income Fund, Inc.
c/o Reich & Tang 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 and mailed to the shareholder
of record.
Checks
By making the appropriate election on their subscription order form,
shareholders may request a supply of checks which may be used to effect
redemptions from the Class of shares of the Portfolios in which they invest. The
checks, which will be issued in the shareholder's name, are drawn on a special
account maintained by the Fund with the Fund's agent bank. Checks may be drawn
in any amount of $250 or more. When a check is presented to the Fund's agent
bank, it instructs the Fund's 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 use of a check to make a withdrawal enables a shareholder in the
Fund to receive dividends on the shares to be redeemed up to the Fund Business
Day on which the check clears. Checks provided by the Fund may not be certified.
Fund shares purchased by check may not be redeemed by check until the check has
cleared, which can 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
insufficient account value, a check deemed not negotiable because it has been
held longer than six months, an unsigned check and/or 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.
Corporations and other entities electing the checking option are required to
furnish a certified resolution or other evidence of authorization in accordance
with the Fund's normal practices. Individuals and joint tenants are not required
to furnish any supporting documentation. Appropriate authorization forms will be
sent by the Fund or its agents to corporations and other shareholders who select
this option. As soon as the
14
<PAGE>
authorization forms are filed in good order with the Fund's agent bank, it will
provide the shareholder with a supply of checks.
Telephone
The Fund accepts telephone requests for redemption from shareholders who elect
this option on their subscription order form. The proceeds of a telephone
redemption may be sent to the shareholders at their addresses or, if in excess
of $1,000, to their bank accounts, both as set forth in the subscription order
form or in a subsequent written authorization. The Fund may accept telephone
redemption instructions from any person with respect to accounts of shareholders
who elect this service and thus such shareholders risk possible loss of
principal and interest in the event of a telephone redemption not authorized by
them. 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 the
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 at 800-221-3079, and state: (i) the name of the
shareholder appearing on the Fund's records; (ii) the shareholder's account
number with the Fund; (iii) the amount to be withdrawn; (iv) whether such amount
is to be forwarded to the shareholder's designated bank account or address; and
(v) the name of the person requesting the redemption. Usually the proceeds are
sent to the designated bank account or address on the same Fund Business Day the
redemption is effected, provided the redemption request is received before 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 in whole or in
part at any time and will notify shareholders accordingly.
There is no redemption charge, no minimum period of investment, no minimum
amount for a redemption, and no restriction on frequency of withdrawals.
Proceeds of redemptions are paid by check. Unless other instructions are given
in proper form to the Fund's transfer agent, a check for the proceeds of a
redemption will be sent to the shareholders' address of record. If a shareholder
elects to redeem all the shares of the Fund he owns, all dividends accrued to
the date of such redemption will be paid to the shareholder along with the
proceeds of the redemption.
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven days after the shares are tendered for
redemption, 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 SEC determines that trading thereon is restricted. Any period during which
an emergency (as determined by the SEC) exists as a result of which disposal by
the Fund of its portfolio securities is not reasonably practicable or as a
result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or for such other period as the SEC may
by order permit for the protection of the shareholders of the Fund.
The Fund has reserved the right to redeem the shares of any shareholder if the
net asset value of all the remaining shares in the shareholder's or his
Participating Organization's account after a withdrawal is less than $500.
Written notice of a proposed 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. For Participant
Investor accounts, notice of a proposed mandatory redemption will be given only
to the appropriate Participating Organization. The Participating Organization
will be responsible for notifying the Participant Investor of the proposed
mandatory redemption. During the notice period a shareholder or Participating
Organization who receives such a notice may avoid mandatory redemption by
purchasing sufficient additional shares to increase his total net asset value to
the minimum amount.
15
<PAGE>
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. Because the
withdrawal plan involves the redemption of Fund shares, such withdrawals may
constitute taxable events to the shareholder but the Fund does not expect that
there will be any realized capital gains.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends equal to all its net investment income (excluding
capital gains and losses, if any, and amortization of market discount) on each
Fund Business Day and pays dividends monthly. There is no fixed dividend rate.
In computing these dividends, interest earned and expenses are accrued daily.
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.
All dividends and distributions of capital gains are automatically invested, at
no charge, in additional Fund shares of the same Class of shares immediately
upon payment thereof unless a shareholder has elected by written notice to the
Fund to receive either of such distributions in cash.
Because Class A shares bear the service fee under the Fund's 12b-1 Plan, 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 of the Fund. Dividends
paid to each Class of shares of each portfolio of the Fund 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 Plan, will be determined in the
same manner and paid in the same amounts.
EXCHANGE PRIVILEGE
Shareholders of the Fund are entitled to exchange some or all of their Class of
shares in the Fund for shares of each portfolio the same Class of certain other
investment companies which retain Reich & Tang Asset Management L.P. as
investment adviser and which participate in the exchange privilege program with
the Fund. If only one Class of shares is available in a particular exchange
fund, the shareholder of the Fund is entitled to exchange their shares for the
shares available in that exchange 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 and Reich & Tang Equity Fund, Inc. In
the future, the exchange privilege program may be extended to other investment
companies which retain Reich & Tang Asset Management L.P. as investment adviser
or manager.
16
<PAGE>
There is no charge for the exchange privilege or limitation as to frequency of
exchange. The minimum amount for an exchange is $1,000. However, shareholders
who are establishing a new account with an investment company through the
exchange privilege must ensure 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 of the same Class 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.
Instructions for exchanges may be made by sending a signature guaranteed written
request to:
Short Term Income Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020
or, for shareholders who have elected that option, by telephoning the Fund at
212-830-5220 (within New York) or 800-221-3079 (outside New York). The Fund
reserves the right to reject any exchange request and may modify or terminate
the exchange privilege at any time.
TAX CONSEQUENCES
The purchase of shares will be the purchase of an asset. Dividends paid by the
Fund from its net investment income including its short-term capital gains are
taxable to shareholders as ordinary income whether they are distributed to the
shareholder or reinvested in additional Fund shares. Dividends designated by the
Fund as from long-term capital gains which are taxable to shareholders at
capital gain rates are also taxable to shareholders whether they are distributed
to them or reinvested. 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.
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.
Since the Fund expects to maintain the net asset value of each Class of shares
of the Fund at $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. However the redemption of shares in the Fund, or the exchange of shares
for shares in another Fund will be taxable events, on which any gain realized
will be subject to tax.
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.
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.
17
<PAGE>
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.
V. DISTRIBUTION ARRANGEMENTS
RULE 12B-1 FEES
Investors do not pay a sales charge to purchase shares of the Fund. However, the
Fund pays fees in connection with the distribution of shares and for services
provided to the Class A shareholders. The Fund pays these fees from its assets
on an ongoing basis and therefore, over time, the payment of these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
Pursuant to Rule 12b-1 under the 1940 Act, the SEC requires 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 Rule 12b-1. The Fund's
Board of Directors has adopted a distribution and service plan (the "Plan") and,
pursuant to the Plan, the Fund and Reich & Tang Distributors, Inc. (the
"Distributor") have entered into a Distribution Agreement and a Shareholder
Servicing Agreement (with respect to the Class A shares of the Fund only).
Under the Distribution Agreement, the Distributor serves as distributor of the
Fund's shares and, for nominal consideration (i.e., $1.00) and as agent for the
Fund, will solicit orders for the purchase of the Fund's shares, provided that
any orders will not be binding on the Fund until accepted by the Fund as
principal.
Under the Shareholder Servicing Agreement, the Distributor receives, with
respect only 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 "Shareholder
Servicing 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 and, therefore, will not be
assessed a Shareholder Servicing Fee.
The Plan provides that, in addition to the Shareholder Servicing Fee, the Fund
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 with respect to 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 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 costs, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing on behalf of the Class A shares
of the Fund; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Class A shares of the Fund; 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
Class A shares. The Distributor may also make payments from time to time from
its own resources, which may include the Shareholder Servicing Fee (with respect
to Class A shares) and past profits, for the purposes 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 the Fund 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 under the
Shareholder Servicing Agreement in effect for that year.
18
<PAGE>
For the fiscal year ended August 31, 1998, the total amount spent pursuant to
the Distribution Plan for the Class A shares for the Money Market Portfolio and
the U.S. Government Portfolio were ___% and ___%, respectively, of the average
daily net assets of the Class A shares of the particular Portfolio. Of these
amounts, ___% and ___% were paid by the Money Market Portfolio and the U.S.
Government Portfolio, respectively, to the Distributor, pursuant to the
Shareholder Servicing Agreement.
19
<PAGE>
VI. FINANCIAL HIGHLIGHTS
This financial highlights table is intended to help you understand the financial
performance of both classes of the Money Market Portfolio and the U.S.
Government Portfolio for the past 5 years. Certain information reflects
financial results for a single Portfolio share. The total returns in the table
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McGladrey and Pullen, LLP, whose report, along
with the Fund's financial statements, is included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
YEAR ENDED AUGUST 31,
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
CLASS A
PER SHARE OPERATING PERFORMANCE:
(for a share outstanding throughout
the year)
Net asset value, beginning of year $ $ 1.00 $ 1.00 $1.00 $1.00
------- ------- ------- ------ -------
Income from investment operations:
Net Investment income......... 0.046 0.047 0.047 0.029
Less distributions:
Dividends from net investment income ( ) (0.046) (0.047) (0.047) (0.029)
------ ----- ----- ----- -----
Net asset value, end of year..... $ $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========
TOTAL RETURN..................... 4.66% 4.71% 4.82%(a) 2.93%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000).... $801,001 $756,094 $661,795 $676,756
Ratios to average net assets:
Expenses...................... 0.99% 0.98% 0.88% 0.91%
Net Investment income......... 4.57% 4.63% 4.75% 2.89%
Management, administration and
shareholder servicing fees waived -- 0.02% 0.13% --
Expenses paid indirectly......... 0.01% 0.01% -- --
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B 1998 1997 1996 1995 1994
- -------
PER SHARE OPERATING PERFORMANCE:
(for a share outstanding throughout
the year)
Net asset value, beginning of year $ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------- --------- -------- ---------
Income from investment operations:
Net Investment income.......... 0.049 0.049 0.050 0.031
Less distributions:
Dividends from net investment income ( ) (0.049) (0.049) (0.050) (0.031)
-------- ------- ------- ------- -------
Net asset value, end of year...... $ $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ========= ======== ==========
TOTAL RETURN...................... 5.01% 5.00% 5.08%(a) 3.19%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year(000)...... $267,439 $219,810 $217,877 $422,005
Ratios to average net assets:
Expenses....................... 0.66% 0.70% 0.62% 0.67%
Net Investment income.......... 4.90% 4.91% 4.90% 3.13%
Management, administration and
shareholder servicing fees waived -- 0.02% 0.13% --
Expenses paid indirectly.......... 0.01% 0.01% -- --
</TABLE>
(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.
20
<PAGE>
This financial highlights table is intended to help you understand the financial
performance of both classes of the Money Market Portfolio and the U.S.
Government Portfolio for the past 5 years. Certain information reflects
financial results for a single Portfolio share. The total returns in the table
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McGladrey and Pullen, LLP, whose report, along
with the Fund's financial statements, is included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
U.S. GOVERNMENT PORTFOLIO
YEAR ENDED AUGUST 31,
<S> <C> <C> <C> <C> <C>
CLASS A 1998 1997 1996 1995 1994
PER SHARE OPERATING PERFORMANCE:
(for a share outstanding throughout
the year)
Net asset value, beginning of year $ $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- --------- ------- -------- --------
Income from investment operations:
Net Investment income......... 0.046 0.047 0.048 0.028
Less distributions:
Dividends from net investment income ( ) (0.046) (0.047) (0.048) (0.028)
------- ----- ----- ----- -----
Net asset value, end of year..... $ $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========== ======== ======== =======
TOTAL RETURN..................... 4.73% 4.81% 4.93% 2.79%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000).... $735,581 $666,620 $469,592 $398,699
Ratios to average net assets:
Expenses...................... 0.81% 0.81% 0.80% 0.85%
Net Investment income......... 4.61% 4.68% 4.83% 2.75%
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT PORTFOLIO
YEAR ENDED AUGUST 31,
<S> <C> <C> <C> <C> <C>
CLASS B 1998 1997 1996 1995 1994
- -------
PER SHARE OPERATING PERFORMANCE:
(for a share outstanding throughout
the year)
Net asset value, beginning of year $ $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- ----------- --------- -------
Income from investment operations:
Net Investment income............. 0.049 0.050 0.051 0.030
Less distributions:
Dividends from net investment income ( ) (0.049) (0.050) (0.051) (0.030)
------- ------- ------- ------- -------
Net asset value, end of year...... $ $ 1.00 $ 1.00 $ 1.00 $1.00
======== ========= ========= ======== ======
TOTAL RETURN...................... 5.00% 5.07% 5.19% 3.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period year (000) $68,967 $126,169 $306,799 $ 80,196
Ratios to average net assets:
Expenses....................... 0.55% 0.56% 0.55% 0.60%
Net Investment income.......... 4.86% 5.04% 5.20% 2.98%
</TABLE>
21
<PAGE>
A Statement of Additional Information (SAI) dated January 2, 1999, and the
Fund's Annual and Semi-Annual Reports include additional information about the
Fund and its investments and are incorporated by reference into this prospectus.
You may obtain the SAI, the Annual and Semi-Annual Reports and material
incorporated by reference without charge by calling the Fund at 1-800-221-3079.
To request other information, please call your financial intermediary or the
Fund.
[Internet Address: www.__________]
A current SAI has been filed with the Securities and Exchange Commission. You
may visit the Securities and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material incorporated by reference and other
information. These materials can also be reviewed and copied at the Commission's
Public Reference Room in Washington D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. In addition, copies of these materials may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009.
SHORT TERM INCOME FUND, INC.
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, NY 10020
(212) 830-5220
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM
INCOME FUND, INC. 600 FIFTH AVENUE, NEW YORK, NY 10020
(212) 830-5220
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STATEMENT OF ADDITIONAL INFORMATION
JANUARY 2, 1999
RELATING TO THE SHORT TERM INCOME FUND, INC.
PROSPECTUS DATED JANUARY 2, 1999
This Statement of Additional Information (SAI) is not a Prospectus. The SAI
expands upon and supplements the information contained in the current Prospectus
of Short Term Income Fund, Inc. (the "Fund"), dated January 2, 1999 and should
be read in conjunction with the Fund's Prospectus.
A Prospectus may be obtained from any Participating Organization or by writing
or calling the Fund toll-free at 1-(800) 221-3079. The Financial Statements of
the Fund have been incorporated by reference to the Fund's Annual Report. The
Annual Report is available, without charge, upon request by calling the
toll-free number provided.
This Statement of Additional Information is incorporated by reference into the
Fund's Prospectus in its entirety.
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Table of Contents
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Fund History.........................................2 Capital Stock and Other Securities......................12
Description of the Fund and its Investments and Purchase, Redemption and Pricing Shares.................13
Risks..............................................2 Taxation of the Fund....................................13
Management of the Fund...............................5 Underwriters............................................15
Control Persons and Principal Holders of Calculation of Performance Data.........................15
Securities.........................................7 Financial Statements....................................16
Investment Advisory and Other Services...............8 Description of Ratings..................................17
Brokerage Allocation and Other Practices............11
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I. FUND HISTORY
The Fund was incorporated on August 22, 1979 in the state of Maryland.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
The Fund is an open-end, diversified management investment company. The Fund's
investment objectives are to seek as high a level of current income to the
extent consistent with preserving capital and maintaining liquidity. No
assurance can be given that these objectives will be achieved.
The following discussion expands upon the description of the Fund's investment
objectives and policies in the Prospectus.
The Fund may only purchase United States dollar-denominated securities that have
been determined by the Fund's Board of Directors to present minimal credit risks
and that are Eligible Securities at the time of acquisition. The term Eligible
Securities means: (i) securities which have or are deemed to have remaining
maturities of 397 days or less and rated in the two highest short-term rating
categories by any two nationally recognized statistical rating organizations
("NRSROs") or in such categories by the only NRSRO that has rated the Municipal
Obligations (collectively, the "Requisite NRSROs"); or (ii) unrated securities
determined by the Fund's Board of Directors to be of comparable quality. In
addition, securities which have or are deemed to have remaining maturities of
397 days or less but that at the time of issuance were long-term securities
(i.e. with maturities greater than 366 days) are deemed unrated and may be
purchased if such had received a long-term rating from the Requisite NRSROs in
one of the three highest rating categories. Provided however, that such may not
be purchased if it (i) does not satisfy the rating requirements set forth in the
preceding sentence and (ii) has received a long-term rating from any NRSRO that
is not within the three highest long-term rating 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. While there are several organizations that currently qualify as
NRSROs, two examples of NRSROs are Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies, ("S&P") and Moody's Investors Service, Inc.
("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in the
case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in the
case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's in
the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "VMIG-1" by Moody's or "SP-1/AA" by S&P.
Such instruments may produce a lower yield than would be available from less
highly rated instruments.
All investments by the Fund will mature or will be deemed to mature within 397
days or less from the date of acquisition and the average maturity of the Fund
portfolio (on a dollar-weighted basis) will be 90 days or less. The maturities
of variable rate demand instruments held in the Fund's portfolio will be deemed
to be the longer of the period required before the Fund is entitled to receive
payment of the principal amount of the instrument through demand, or the period
remaining until the next interest rate adjustment, although the stated
maturities may be in excess of 397 days.
Subsequent to its purchase by the Fund, a rated security may cease to be rated
or its rating may be reduced below the minimum required for purchase by the
Fund. If this occurs, the Board of Directors of the Fund shall promptly reassess
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 (i) is in default, (ii) ceases to be
an Eligible Security under Rule 2a-7 of the 1940 Act or (iii) is determined to
no longer present minimal credit risks, or an event of insolvency occurs with
respect to the issues of a portfolio security or the provider of any Demand
Feature or Guarantee, 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 interests of the Fund. Disposal of the security shall
occur 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 SEC of
such fact and of the actions that the Fund intends to take in response to the
situation.
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The Fund shall not 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.
The Fund intends to continue qualify as a "regulated investment company" under
Subchapter M of the Code (the "Code"). For the Fund to qualify, at the close of
each quarter of the taxable year, at least 50% of the value of its total assets
must consist of cash, government securities, investment company securities and
other securities. They must be limited in respect of any one issuer to not more
than 5% in value of the total assets of the Fund and to not more than 10% of the
outstanding voting securities of such issuer. In addition, at the close of each
quarter of its taxable year, not more than 25% in value of the Fund's total
assets may be invested in securities of one issuer (however, this restriction
does not apply to the Fund's investing in Government securities). The
limitations described in this paragraph regarding qualification as a "regulated
investment company" are not fundamental policies and may be revised if
applicable Federal income tax requirements are revised. (See "Federal Income
Taxes" herein.)
DESCRIPTION OF INVESTMENTS
The following discussion expands upon the description in the Prospectus of the
types of securities in which the portfolios of the Fund invest.
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. 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 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
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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").
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions which
apply to all portfolios. They may not be changed unless approved by a majority
of the outstanding shares "of each series of the Fund's shares that would be
affected by such a change." The term "majority of the outstanding shares" of the
Fund means the vote of the lesser of (i) 67% or more of the shares of the Fund
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund. 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 own beneficially more than 1/2 of 1% of
the issuer's securities or in the aggregate own more than 5% of the
issuer's securities; and
(c) (1) 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; (8) issue
senior securities, except insofar as the Fund may be deemed to have issued
a senior security in connection with any permitted borrowings; (9) 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; (10) 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
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.
Provided, 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; and with respect to
75% of any portfolio's total assets, the Fund shall not invest more than
10% of such total assets in securities backed by a demand feature or
guarantee from the same institution; (11) make loans, except that the Fund
may purchase for a Portfolio the debt securities described above under
"Description of Investments " and may enter into repurchase agreements as
therein described; (12) 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 (13) pledge, mortgage, assign
or encumber any of a Portfolio's assets except to the extent necessary to
secure a borrowing permitted by clause (12) made with respect to the
Portfolio.
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If a percentage restriction is adhered to at the time of an investment a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of a Fund's portfolio's assets will not
constitute a violation of such restriction.
III. MANAGEMENT OF THE FUND
The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, has employed 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 their full-time to the affairs of the Fund.
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.
Mr. Duff may be deemed an "interested person" of the Fund, as defined in the
1940 Act, on the basis of his affiliation with Reich & Tang Asset Management
L.P.
STEVEN W. DUFF, 44 - President and Director of the Fund, has been President of
the Mutual Funds Division of the Manager since September 1994. Mr. Duff was
formerly Director of Mutual Fund Administration at NationsBank which he was
associated with from June 1981 to August 1994. Mr. Duff is also President and a
Director /Trustee of 13 other funds in the Reich & Tang Fund Complex, Director
of Pax World Money Market Fund, Inc., Executive Vice President of Reich & Tang
Equity Fund, Inc., President of Back Bay Fund, Inc. and President and Chief
Executive Officer of Tax Exempt Proceeds Fund, Inc.
DR. W. GILES MELLON, 67 - Director of the Fund, is Professor of Business
Administration and Area Chairman of Economics in the Graduate School of
Management, Rutgers University which he has been associated with since 1966. His
address is Rutgers University Graduate School of Management, 92 New Street,
Newark, New Jersey 07102. Dr. Mellon is also a Director/Trustee of 15 other
funds in the Reich & Tang Fund Complex.
ROBERT STRANIERE, 56 - Director of the Fund, has been a member of the New York
State Assembly and a partner with the Straniere & Straniere Law Firm since 1981.
His address is 182 Rose Avenue, Staten Island, New York 10306. Mr. Straniere is
also a Director/Trustee of 15 other funds in the Reich & Tang Fund Complex and
Director of Life Cycle Mutual Funds, Inc.
DR. YUNG WONG, 59 - 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. His address is 29 Alden Road, Greenwich,
Connecticut 06831. Dr. Wong has been a Director of Republic Telecom Systems
Corporation (a provider of telecommunications equipment) since January 1989 and
of TelWatch, Inc. (a provider of network management software) since August 1989.
Dr. Wong is also a Director/Trustee of 15 other funds in the Reich & Tang Fund
Complex. Dr. Wong is also a Trustee of Eclipse Financial Asset Trust.
MOLLY FLEWHARTY, 47 - Vice President of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Flewharty was
formerly Vice President of Reich & Tang, Inc. which she was associated with from
December 1977 to September 1993. Ms. Flewharty is also Vice President of 16
other funds in the Reich & Tang Fund Complex.
LESLEY M. JONES, 50 - Vice President of the Fund, has been 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. which she was associated
with from April 1973 to September 1993. Ms. Jones is also a Vice President of 14
other funds in the Reich & Tang Fund Complex.
DANA E. MESSINA, 41 - Vice President of the Fund, has been Executive Vice
President of the Mutual Funds Division of the Manager since January 1995 and was
Vice President from September 1993 to January 1995. Ms. Messina was formerly
Vice President of Reich & Tang, Inc. with which she was associated with from
December 1980 to September 1993. Ms. Messina is also Vice President of 15 other
funds in the Reich & Tang Fund Complex.
BERNADETTE N. FINN, 51 - Vice President and Secretary of the Fund, has been Vice
President of the Mutual Funds Division of the Manager since September 1993. Ms.
Finn was formerly Vice President and Assistant Secretary of Reich & Tang, Inc.
which she was associated with from September 1970 to September 1993. Ms. Finn is
also
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Secretary of 14 other funds in the Reich & Tang Fund Complex, and a Vice
President and Secretary of 4 funds in the Reich & Tang Fund Complex.
RICHARD DE SANCTIS, 41 - Treasurer of the Fund, has been 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. Mr. De Sanctis is also Treasurer of 17 other
funds in the Reich & Tang Fund Complex and is Vice President and Treasurer of
Cortland Trust, Inc.
ROSANNE HOLTZER, 33 - Assistant Treasurer of the Fund, has been Vice President
of the Mutual Funds division of the Manager since December 1997. Ms. Holtzer was
formerly Manager of Fund Accounting for the Manager with which she has been
associated with from June 1986. Ms. Holtzer is also Assistant Treasurer of 18
other funds in the Reich & Tang Fund Complex.
The Fund paid an aggregate remuneration of $42,000 to its directors with respect
to the period ended August 31, 1998, all of which consisted of directors' fees
paid to the three disinterested directors, pursuant to the terms of the
Investment Management Contract (see "Manager" herein.).
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COMPENSATION TABLE
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AGGREGATE COMPENSATION
FROM THE FUND PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION FROM
NAME OF PERSON, BENEFITS ACCRUED AS PART BENEFITS UPON RETIREMENT FUND AND FUND COMPLEX PAID
POSITION OF FUND EXPENSES TO DIRECTORS*
Dr. W. Giles
Mellon, $14,000 0 0 $53,000 (16 Funds)
Director
Robert Straniere, $14,000 0 0 $53,000 (16 Funds)
Director
Dr. Yung Wong, $14,000 0 0 $53,000 (16 Funds)
Director
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* The total compensation paid to such persons by the Fund and Fund Complex
for the fiscal year ending August 31, 1998 (and, with respect to certain of the
funds in the Fund Complex, estimated to be paid during the fiscal year ending
August 31, 1998). 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.
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IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On September 30, 1998 there were ___________ shares of the Fund outstanding. As
of September 30, 1998, 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 September 30, 1998:
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Name and Address % of Class Nature of Ownership
MONEY MARKET PORTFOLIO - CLASS A
Reich & Tang Services, Inc. [93.44%] Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, N.Y. 10020
MONEY MARKET PORTFOLIO - CLASS B
Reich & Tang Services, Inc. [42.66%] Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, N.Y. 10020
U.S. GOVERNMENT PORTFOLIO - CLASS A
Reich & Tang Services, Inc. [96.67%] Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, N.Y. 10020
U.S. GOVERNMENT PORTFOLIO - CLASS B
Reich & Tang Services, Inc. [28.80%] Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, N.Y. 10020
Mount Sinai School of [6.91%] Record
Medicine
FDR Station PO Box 40
New York, N.Y. 10150-0040
Mount Sinai Services Elmhurst [6.69%] Record
Operating Account
7901 Broadway
Elmhurst Hospital Office Center
New York, N.Y. 11373
Mount Sinai Services Queens [5.28%] Record
Operating Account
7901 Broadway
Elmhurst Hospital Office Center
New York, N.Y. 11373
</TABLE>
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V. INVESTMENT ADVISORY AND OTHER SERVICES
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 was as of July 31, 1998, investment manager,
adviser, or supervisor with respect to assets aggregating in excess of $11.29
billion. In addition to the Fund, the Manager acts as investment manager and
administrator of seventeen other investment companies and also advises pension
trusts, profit-sharing trusts and endowments.
Effective January 1, 1998, NEIC Operating Partnership, L.P. ("NEICOP") was the
limited partner and owner of a 99.5% interest in the Manager replacing New
England Investment Companies, L.P. ("NEICLP") as the limited partner and owner
of such interest in the Manager due to a restructuring by New England Investment
Companies, Inc. ("NEIC"). Subsequently, effective March 31, 1998, Nvest
Companies, L.P. ("Nvest Companies") due to a change in name of NEICOP, replaces
NEICOP as the limited partner and owner of a 99.5% interest in the Manager.
Reich & Tang Asset Management, Inc. (an indirect wholly-owned subsidiary of
Nvest Companies) is the sole general partner and owner of the remaining 0.5%
interest of the Manager. Nvest Corporation, a Massachusetts Corporation
(formerly known as New England Investment Companies, Inc.), serves as the
managing general partner of Nvest Companies.
Reich & Tang Asset Management, Inc. is an indirect subsidiary of Metropolitan
Life Insurance Company ("MetLife"). Also, MetLife directly and indirectly owns
approximately 47% of the outstanding partnership interests of Nvest Companies
and may be deemed a "controlling person" of the Manager. Reich & Tang, Inc.
owns, directly and indirectly, approximately 13% of the outstanding partnership
interests of Nvest Companies.
MetLife is a mutual life insurance company and is the second largest life
insurance company in the United States in terms of total assets. MetLife
provides a wide range of insurance and investment products and services to
individuals and groups and is the leader among United States life insurance
companies in terms of total life insurance in force. MetLife and its affiliates
provide insurance or other financial services to approximately 36 million people
worldwide.
Nvest Companies is a holding company offering a broad array of investment styles
across a wide range of asset categories through thirteen subsidiaries, divisions
and affiliates offering a wide array of investment styles and products to
institutional clients. Its business units, in addition to the manager, include
AEW Capital Management, L.P., Back Bay Advisors, L.P., Capital Growth Management
Limited Partnerships; Greystone Partners; L.P. Harris Associates; L.P. Jurika &
Voyles, L.P., Loomis, Sayles & Company, L.P., New England Funds, L.P., Nvest
Associates, Inc., Snyder Capital Management, L.P., Vaughan, Nelson, Scarborough
& McCullough, L.P., and Westpeak Investment Advisors, L.P. These affiliates in
the aggregate are investment advisors or managers to 80 other registered
investment companies.
The recent name change did not result in a change of control of the Manager and
has no impact upon the Manager's performance of its responsibilities and
obligations.
On January 30, 1998, the Board of Directors, including a majority of the
directors who are not interested persons (as defined in the 1940 Act) of the
Fund or the Manager, approved the continuance of the Investment Management
Contract effective May 1, 1998, which has a term which extends to April 30,
1999. The contract is continued in force thereafter for successive twelve-month
periods beginning each May 1, provided that such majority vote of the Fund's
outstanding voting securities or 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.
Pursuant to the Investment Management Contract, the Manager manages the Fund'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 NEIC, the
sole general partner of the Manager, or employees of the Manager or its
affiliates.
The Investment Management Contract is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting shares or by a vote of a majority of its Board of Directors,
or 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
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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 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. 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. For the Fund's fiscal
year ended August 31, 1998 the Manager received investment management fees
totaling $________ and $________ from the Money Market Portfolio and the U.S.
Government Portfolio, respectively. For the Fund's fiscal year ended August 31,
1997 the Manager received investment management fees totaling $3,041,228 and
$1,968,002 from the Money Market Portfolio and the U.S. Government Portfolio,
respectively. For the Fund's fiscal year ended August 31, 1996 the Manager
received investment management fees totaling $2,827,181 and $1,960,693 from the
Money Market Portfolio and the U.S. Government Portfolio, respectively.
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. For the Funds fiscal year
ended August 31, 1998, the Manager received administration fees in the aggregate
of $________ and $________ from the Money Market Portfolio and the U.S.
Government Portfolio, respectively. For the Fund's fiscal year ended August 31,
1997, the Manager received administration fees in the aggregate of $2,150,030
and $1,600,765 from the Money Market Portfolio and the U.S. Government
Portfolio, respectively. For the Fund's fiscal year ended August 31, 1996 the
Manager received administration fees in the aggregate of $1,970,196 and
$1,573,195 from the Money Market Portfolio and the U.S.
Government Portfolio, respectively.
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 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 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, the Manager from its management fee. Expenses
incurred in the distribution of Class B shares and the servicing 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. This includes 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
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corporate meetings, SEC 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. 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.
DISTRIBUTION AND SERVICE PLAN
The Fund's distributor is Reich & Tang Distributors, Inc., a Delaware
corporation with principal officers at 600 Fifth Avenue, New York, New York
10020. Pursuant to Rule 12b-1 under the 1940 Act, the SEC 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 has entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to Class A shares
only) with Reich & Tang Distributors, Inc., (the "Distributor"), as distributor
of the Fund's shares.
Under the Plan, the Portfolios and the Distributor will enter into a Shareholder
Servicing Agreement with respect to the Class A shares. Under the Shareholder
Servicing Agreement, 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"). The service fee is in exchange for providing
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. The Class B shareholders will not receive the benefit
of such services from Participating Organizations and, therefore, will not be
assessed a Shareholder Servicing Fee.
The following information applies only to the Class A shares of the Portfolios.
For the fiscal year ended August 31,1998, the Fund paid a Service Fee for
expenditures pursuant to the Plan in amounts aggregating $_________ with respect
to the Money Market Portfolio and $_________ with respect to the U.S. Government
Portfolio. During such period, the Manager and Distributor made payments
pursuant to the Plan to or on behalf of Participating Organizations of
$4,133,535 with respect to the Money Market Portfolio and $3,011,266 with
respect to the U.S. Government Portfolio. Of the payments made pursuant to the
Plan by the Fund, $_____ was spent on advertising, $_____ on printing and
mailing of prospectuses to other than current shareholders, $_______ on
compensation to underwriters, $______ on compensation to broker-dealers, $______
on compensation to sales personnel, and $_____ on interest, carrying or other
financial charges. The excess of such payments over the total payments the
Distributor received from the Fund represents distribution and servicing
expenses funded by the Distributor from its own resources, or the Manager from
its own resources (which may be deemed to be an indirect payment by the Fund).
Under the Distribution Agreement, the Distributor, for nominal consideration
(i.e., $1.00) 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 Agreement provide that, in addition to
the Shareholder Servicing Fee, the Fund 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 Agreement 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 that the Manager may make payments from time to time from
their 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 Class A shares 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
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<PAGE>
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 Shareholder Servicing 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 the Fund is required to pay to
the Manager or the Distributor for any fiscal year under the Investment
Management Contract or the Shareholder Servicing Agreement 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 Plan provides that it will remain in effect until April 30, 1999. Thereafter
it may continue in effect for successive annual periods commencing May 1,
provided it is approved by the Class A shareholders or by the Board of
Directors. This includes 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 the agreements related to the Plan. The 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 Class A shareholder approval,
and the other material amendments must be approved by the directors in the
manner described in the preceding sentence. The Plan may be terminated at any
time by a vote of a majority of the disinterested directors of the Fund or the
Fund's Class A shareholders.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri
64105, is custodian for the Fund's cash and securities. Reich & Tang Services,
Inc., an affiliate of the Fund's Manager, located at 600 Fifth Avenue, New York,
NY 10020, is transfer agent and dividend agent for the shares of the Fund. The
custodian and transfer agent do not assist in, and are not responsible for,
investment decisions involving assets of the Fund.
COUNSEL AND AUDITORS
Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Battle Fowler LLP, 75 East 55th Street, New York, New York 10022.
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017, independent
certified public accountants, have been selected as auditors for the Fund.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer, from banks and financial institutions or from an underwriter or market
maker for the securities. There usually are no brokerage commissions paid for
such purchases. The Fund has paid no brokerage commissions since its formation.
Any transaction for which the Fund pays a brokerage commission will be effected
at the best price and execution available. 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. The Fund purchases participation
certificates in variable rate Municipal Obligations with a demand feature from
banks or other financial institutions at a negotiated yield to the Fund based on
the applicable interest rate adjustment index for the security. The interest
received by the Fund is net of a fee charged by the issuing institution for
servicing the underlying obligation and issuing the participation certificate,
letter of credit, guarantee or insurance and providing the demand repurchase
feature.
Allocation of transactions, including their frequency, 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 rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price. No preference in purchasing portfolio securities will
be given to banks or dealers that are Participating Organizations.
Investment decisions for the Fund will be made independently from those for any
other investment companies or accounts that may be or become managed by the
Manager or its affiliates. If, however, the Fund and other investment companies
or accounts managed by the Manager are simultaneously 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
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<PAGE>
companies managed by the Manager occur contemporaneously, the purchase or sale
orders may be aggregated in order to obtain any price advantage available to
large denomination purchasers or sellers.
No portfolio transactions are executed with the Manager or its affiliates acting
as principal. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Manager or its affiliates.
VII. CAPITAL STOCK AND OTHER SECURITIES
The authorized capital stock of the Fund consists of ten billion shares of stock
having a par value of one tenth of one cent ($.001) per share. The Fund's Board
of Directors is authorized to divide the shares into separate series of stock,
one for each of the portfolios that may be created. Except as noted below, each
share of any series of shares when issued will have equal dividend, distribution
and liquidation rights within the series for which it was issued and each
fractional share has those rights in proportion to the percentage that the
fractional share represents of a whole share. Shares of all series have
identical voting rights, except where, by law, certain matters must be approved
by a majority of the shares of the unaffected series. Shares will be voted in
the aggregate. 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 are redeemable at net
asset value, at the option of the shareholder. Each series of the Fund is
subdivided into two classes of common stock, Class A and Class B. Each share,
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) only the Class A shares will
be assessed a service fee pursuant to the Rule 12b-1 Distribution and Service
Plan of the Fund of .25% of the Class A shares' average daily net assets; (iii)
only the holders of the Class A shares will 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 stockholders to
exchange their shares only for shares of the same class of an investment company
that participates on an exchange privilege program with the Fund. Payments that
are made under the Plan will be calculated and charged daily to the appropriate
class prior to determining daily net asset value per share and
dividends/distributions.
Under its amended Articles of Incorporation, the Fund has the right to redeem
for cash shares of stock owned by any shareholder to the extent and at such
times as the Fund's Board of Directors determines to be necessary or appropriate
to prevent an undue concentration of stock ownership which would cause the Fund
to become a "personal holding company" for Federal income tax purposes. In this
regard, the Fund may also exercise its right to reject purchase orders.
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. In
that event, the holders of the remaining shares will not be able to elect any
person or persons to the Board of Directors. Unless specifically requested by an
investor, the Fund will not issue certificates evidencing Fund shares.
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 (i) for the election of directors, (ii) for approval of the
revised investment advisory contracts with respect to a particular class or
series of stock, (iii) for approval of the Fund's distribution agreement with
respect to a particular class or series of stock, and (iv) upon the written
request of shareholders 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 SEC 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 re-election 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.
VIII. PURCHASE, REDEMPTION AND PRICING SHARES
The material relating to the purchase and redemption of shares of each Class of
the portfolios in the Prospectus is herein incorporated by reference.
NET ASSET VALUE
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The Fund does not determine net asset value per share of each Class on any day
in which the New York Stock Exchange is closed for trading. Those days include:
New Year's Day, Martin Luther King Jr.'s Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The net asset value of each portfolio of the Fund's shares is determined as of
12 noon, New York City time, on each Fund Business Day. The net asset value of a
Class is computed by dividing the value of the Fund's net assets for such Class
(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 total number of shares outstanding for such Class.
The Fund's portfolio securities are valued at their amortized cost in compliance
with the provisions of Rule 2a-7 under the 1940 Act. Amortized cost valuation
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium. 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, as described in
the following paragraph. Although the amortized cost method provides certainty
in valuation, it may result in periods during which the value of an instrument
is higher or lower than the price an investment company would receive if the
instrument were sold.
The Fund's Board of Directors has established procedures to stabilize the Fund's
net asset value at $1.00 per share of each Class. These procedures include a
review of the extent of any deviation of net asset value per share, based on
available market rates, from the Fund's $1.00 amortized cost per share of each
Class. 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-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument with a
remaining maturity greater than 397 days, 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 compliance with the requirement
that portfolio securities are Eligible Securities.
IX. TAXATION OF THE FUND
FEDERAL INCOME TAXES
The Fund has elected to qualify under the Code as a "regulated investment
company" that distributes "exempt-interest dividends". The Fund intends to
continue to qualify for regulated investment company status so long as such
qualification is in the best interests of its shareholders. Such qualification
relieves the Fund of liability for Federal income taxes to the extent its
earnings are distributed in accordance with the applicable provisions of the
Code.
Dividends paid by the Fund from its net investment income including its
short-term capital gains are taxable to shareholders as ordinary income whether
they are distributed to the shareholder or reinvested in additional Fund shares.
Dividends designated by the Fund as from long-term capital gains which are
taxable to shareholders at capital gain rates are also taxable to shareholders
whether they are distributed to them or reinvested. 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.
Although it is not intended, it is possible that the Fund may realize short-term
or long-term capital gains or losses from its portfolio transactions. The Fund
may also realize short-term or long-term capital gains or accrued market
discount upon the maturity or disposition of securities acquired at discounts
resulting from market fluctuations. Short-term capital gains and accrued market
discount will be taxable to shareholders as ordinary income. Any net capital
gains (the excess of net realized long-term capital gain over net realized
short-term capital loss) will be distributed by the Fund annually. The Fund will
have no tax liability with respect to distributed net capital gains and the
distributions will be taxable to shareholders as long-term capital gains
regardless of how long the shareholders have held their shares. However,
shareholders who at the time of such a net capital gain distribution have not
held their shares for more than 6 months, and who subsequently dispose of those
shares at a loss, will be required to treat such loss as a long-term capital
loss to the extent of the net capital gain distribution. Distributions of net
capital gain will be designated as a "capital gain dividend" in a written notice
mailed to the Fund's shareholders after the close of the Fund's taxable year.
Capital gains realized by corporations are generally taxed at the same rate as
ordinary income. However, long-term capital gains (i.e. gains resulting from
assets with a holding of more than one year) realized as non-corporate
shareholder are taxable at a maximum rate of 20%. Corresponding maximum rate and
holding period
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<PAGE>
rules apply with respect to capital gains distributed by the Fund, without
regard to the length of time shares have been held by the holder.
The Fund intends to distribute at least 90% of its investment company taxable
income (taxable income subject to certain adjustments exclusive of the excess of
its net long-term capital gain over its net short-term capital loss) for each
taxable year. These distributions will be taxable to shareholders as ordinary
income. The Fund will be subject to Federal income tax on any undistributed
investment company taxable income and undistributed net long-term capital gains.
If the Fund does not distribute at least 98% of its ordinary income and 98% of
its capital gain net income for a taxable year, the Fund will be subject to a
nondeductible 4% excise tax on the excess of such amounts over the amounts
actually distributed.
If a shareholder fails to provide the Fund with a current taxpayer
identification number, the Fund generally is required to withhold 31% of taxable
dividend payments, and proceeds from the redemption of shares.
Dividends and distributions to shareholders will be taxable whether received in
cash or reinvested in additional shares of the Fund.
X. UNDERWRITERS
The Fund sells and redeems its shares on a continuing basis at their net asset
value and does not impose a sales charge. The Distributor does not receive an
underwriting commission. In effecting sales of Fund shares under the
Distribution Agreement, the Distributor, for nominal consideration (i.e., $1.00)
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 Glass-Steagall Act and other applicable laws and regulations prohibit banks
and other depository institutions from engaging in the business of underwriting,
selling or distributing most types of securities. In the opinion of the Manager,
however, based on the advice of counsel, these laws and regulations do not
prohibit such 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 to 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 banks
and financial institutions may be required to register ad dealers pursuant to
state law.
XI. CALCULATION OF PERFORMANCE DATA
The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the SEC. Under that method, the Fund's portfolios'
yield figures, which are based on a chosen seven-day period, are computed as
follows: the portfolio's return for the seven-day period 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). This is multiplied by
(365/7) with the resulting annualized 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. Therefore annualized yields may
be different from effective yields quoted for the same period.
The portfolio's "effective yield" for each Class is obtained by adjusting its
"current yield" to give effect to the compounding nature of the Fund's
portfolio, as follows: the unannualized base period return is compounded and
brought out to the nearest one hundredth of one percent by adding one to the
base period return, raising the sum to a power equal to 365 divided by 7, and
subtracting one from the result, i.e., effective yield = [(base period return +
1)365/7] - 1.
Although published yield information is useful to investors in reviewing the
Fund's portfolios' performance, investors should be aware that the Fund's
portfolios' yields fluctuate from day to day. The Fund's portfolios' yields for
any given period are not an indication, or representation by the Fund, of future
yields or rates of return on the Fund's shares, and may not provide a basis for
comparison with bank deposits or other investments that pay a fixed yield for a
stated period of time. Investors who purchase the Fund's shares directly may
realize a higher yield than Participant
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Investors because they will not be subject to any fees or charges that may be
imposed by Participating Organizations.
The Fund may from time to time advertise its portfolios' tax equivalent current
yield. The tax equivalent yield for each Class is computed based upon a 30-day
(or one month) period ended on the date of the most recent balance sheet
included in this Statement of Additional Information. It is computed by dividing
that portion of the yield of the Fund (as computed pursuant to the formulae
previously discussed) which is tax exempt by one minus a stated income tax rate
and adding the quotient to that portion, if any, of the yield of the Fund that
is not tax exempt. The tax equivalent yield for the Fund may also fluctuate
daily and does not provide a basis for determining future yields.
The Fund may from time to time advertise a tax equivalent effective yield table
which shows the yield that an investor would need to receive from a taxable
investment in order to equal a tax-free yield from the Fund. This is calculated
by dividing that portion of the Fund's effective yield that is tax-exempt by 1
minus a stated income tax rate and adding the quotient to that portion, if any,
of the Fund's effective yield that is not tax-exempt.
The Fund's Money Market Portfolio's Class A shares' yield for the seven day
period ended November 30, 1998 was ____% which is equivalent to an effective
yield of ____%. The Fund's U.S. Government Portfolio's Class A shares' yield for
the seven day period ended November 30, 1998 was ____% which is equivalent to an
effective yield of ____%.
The Fund's Money Market Portfolio's Class B shares' yield for the seven day
period ended November 30, 1998 was ____% which is equivalent to an effective
yield of ____%. The Fund's U.S. Government Portfolio's Class B shares' yield for
the seven day period ended November 30, 1998 was ____% which is equivalent to an
effective yield of ____%.
XII. FINANCIAL STATEMENTS
The audited financial statements for the Fund for the fiscal year ended August
31, 1998 and the report therein of McGladrey & Pullen, LLP, are herein
incorporated by reference to the Fund's Annual Report. The Annual Report is
available upon request and without charge.
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<PAGE>
DESCRIPTION OF RATINGS*
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S TWO HIGHEST MUNICIPAL BOND
RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in 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.
CON. ( ... ) Bonds for which the security depends upon the completion of some
act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (i) earnings of projects under construction, (ii) earnings of
projects unseasoned in operating experience, (iii) rentals which begin when
facilities are completed, or (iv) payments to which some other limiting
condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S TWO HIGHEST RATINGS OF STATE
AND MUNICIPAL NOTES AND OTHER SHORT-TERM LOANS:
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Symbols used will be as follows:
MIG-1: Loans bearing this designation are of the best quality, enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2: Loans bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
DESCRIPTION OF STANDARD & POOR'S RATING SERVICES TWO HIGHEST DEBT RATINGS:
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only to a small degree.
PLUS ( + ) OR MINUS ( - ): The AA rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.
PROVISIONAL RATINGS: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Standard & Poor's does not provide ratings for state and municipal notes.
DESCRIPTION OF STANDARD & POOR'S RATING SERVICES TWO HIGHEST COMMERCIAL PAPER
RATINGS:
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
* As described by the rating agencies.
16
<PAGE>
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S TWO HIGHEST COMMERCIAL PAPER
RATINGS:
Moody's employs the following designations, both judged to be investment grade,
to indicate the relative repayment capacity of rated issues: Prime-1, highest
quality; Prime-2, higher quality.
17
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Articles of Incorporation of Registrant (filed as Exhibit 1 to
Registration Statement and incorporated herein by reference).
(b) By-Laws of Registrant (filed as Exhibit 2 to Registration Statement
and incorporated herein by reference).
(c) Form of Certificate for shares of the Money Market Portfolio and U.S.
Government Portfolio Common Stock of Registrant (filed as Exhibit 4 to
Registration Statement and incorporated herein by reference).
(d) Investment Management Contract between the Registrant and Reich & Tang
Asset Management L.P. (filed as Exhibit 5 to Post Effective Amendment
No. 30 to the Registration Statement and incorporated herein by
reference).
(e) Distribution Agreement between the Registrant and Reich & Tang
Distributors L.P. (filed as Exhibit 6 to Post Effective Amendment No.
30 to the Registration Statement and incorporated herein by
reference).
(f) Not applicable.
(g) Custody Agreement between Registrant and Investors Fiduciary Trust
Company (filed as Exhibit 8 to Post-Effective Amendment No. 26 to
Registration Statement and incorporated herein by reference).
(h) 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 and incorporated herein by
reference).
(h.1)Administrative Services Contract between Registrant and Reich & Tang
L.P. (filed as Exhibit 9(d) to Post-Effective Amendment No. 23 to
Registration Statement and incorporated herein by reference).
(h.2)Transfer Agency Agreement (filed as Exhibit 9(e) to Post-Effective
Amendment No. 26 to Registration Statement and incorporated herein by
reference).
(i) Opinion and Consent of Messrs. Seward & Kissel (filed as Exhibit 10(a)
to Pre-Effective Amendment No. 1 to Registration Statement and
incorporated herein by reference).
(i.1)Opinion of Messrs. Venable, Baetjer and Howard (filed as Exhibit
10(b) to Pre-Effective Amendment No. 1 to Registration Statement and
incorporated herein by reference).
(j) Consent of Independent Auditor.
(k) Audited Financial Statements for the fiscal year ended August 31, 1997
(filed with the annual report) and the unaudited semi-annual report
for the six months ended February 28, 1998 and incorporated herein by
reference.
(l) 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 and
incorporated by reference).
(m) Distribution and Service Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (filed as Exhibit 15.1 to Post
Effective Amendment No. 30 to the Registration Statement and
incorporated herein by reference).
C-1
<PAGE>
(m.1) Distribution Agreement between Registrant and Reich & Tang
Distributors L.P. (filed as Exhibit 6 to Post Effective Amendment No.
30 to the Registration Statement and incorporated herein by
reference).
(m.2) Shareholder Servicing Agreement between Registrant and Reich & Tang
Distributors L.P. (filed as Exhibit 15.3 to Post Effective
Registration Statement No. 30 and incorporated herein by reference).
(n) Financial Data Schedule (for Edgar Filing only).
(o) Rule 18f-3 Plan for Multi Class (filed on November 5, 1997 with
Post-Effective Amendment No. 2 to the Virginia Daily Municipal Income
Fund, Inc. (file no. 33-90538) Registration Statement and incorporated
herein by reference).
(p) Powers of Attorney (filed as exhibit 16 with Post-Effective Amendment
No. 6 to Registration Statement and incorporated herein by reference).
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.
None.
ITEM 25. INDEMNIFICATION.
Registrant incorporates herein by reference the response to Item 4 of
Part II of Registrant's Registration Statement on Form N-1A filed with the
Commission on August 23, 1979.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The description of Reich & Tang Asset Management L.P. ("RTAMLP") 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.
The 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, Georgia Daily
Municipal Income Fund, Inc., 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., Pax World Money Market Fund, Inc.,
Pennsylvania Daily Municipal Income Fund, Short Term Income Fund, Inc., Tax
Exempt Proceeds Fund, Inc., and Virginia Daily Municipal Income 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. are registered investment
companies whose address is 600 Fifth Avenue, New York, New York 10020, which
invests principally in equity securities. In addition, RTAMLP is the sole
general partner of Alpha Associates L.P., August Associates L.P., Reich & Tang
Minutus I, L.P., Reich & Tang Minutus II, L.P., Reich & Tang Equity Partners
L.P., Reich & Tang Micro Cap L.P., Reich & Tang Concentrated Portfolio L.P. and
Tucek Partners L.P., private investment partnerships organized as limited
partnerships.
Peter S. Voss, President, Chief Executive Officer and a Director of Nvest
Corporation (Formerly New England Investment Companies, Inc.) since October
1992, Chairman of the Board of Nvest Corporation 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 Nvest Corporation's
subsidiaries other than Loomis, Sayles & Company, L.P. ("Loomis") and Back Bay
Advisors, L.P. ("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. Neal Ryland, Executive Vice President, Treasurer and Chief
Financial Officer 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 Nvest Corporation 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 Nvest
Corporation. Lorraine C. Hysler has been Secretary of RTAM since July 1994,
Assistant Secretary since September 1993, Vice President of the Mutual Funds
Group of NEICLP from September 1993
C-2
<PAGE>
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 RTAM since July 1994, President and Chief Operating Officer of the Capital
Management Group of NEICLP 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 RTAM 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 Back Bay Funds, Inc., 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., Pax World Money Market Fund, Inc., Short Term
Income Fund, Inc. and Virginia Daily Municipal Income Fund, Inc. President and
Trustee of Institutional Daily Municipal Income Fund, Pennsylvania Daily
Municipal Income Fund, President and Chief Executive Officer of Tax Exempt
Proceeds Fund, Inc., and Executive Vice President of Reich & Tang Equity Fund,
Inc. Bernadette N. Finn has been Vice President/Compliance of RTAM since July
1994, Vice President of Mutual Funds Division of NEICLP 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 Back
Bay Funds, Inc., 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., Institutional Daily Municipal Income Fund, 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., Pax World Money Market Fund, Inc., Pennsylvania Daily Municipal
Income Fund, Tax Exempt Proceeds Fund, Inc., and Virginia Daily Municipal Income
Fund, Inc. a Vice President and Secretary of Reich & Tang Equity Fund, Inc., and
Short Term Income Fund, Inc. Richard DeSanctis has been Treasurer of RTAM since
July 1994, Assistant Treasurer since September 1993 and Treasurer of the Mutual
Funds Group of NEICLP from September 1993 until July 1994, Treasurer of the
Reich & Tang Mutual Funds since July 1994. Mr. DeSanctis joined Reich & Tang,
Inc. in December 1990 and served as Controller of Reich & Tang, Inc., from
January 1991 to September 1993. Mr. DeSanctis was Vice President and Treasurer
of Cortland Financial Group, Inc. and Vice President of Cortland Distributors,
Inc. from 1989 to December 1990. Mr. DeSanctis is also Treasurer of Back Bay
Funds, Inc., California Daily Tax Free Income Fund, Inc., Connecticut Daily Tax
Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund, Inc.,
Institutional 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., Pax World
Money Market Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang
Equity Fund, Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc.
and Virginia Daily Municipal Income Fund, Inc., and is Vice President and
Treasurer of Cortland Trust, Inc. Richard I. Weiner has been Vice President of
RTAM since July 1994, has been Vice President of Nvest Corporation since
September 1993, Vice President of the Capital Management Group of NEIC from
September 1993 until July 1994, Vice President of Reich & Tang Asset Management
L.P. Capital Management Group since July 1994. Mr. Weiner joined Reich & Tang,
Inc. in August 1970 and has served as a Vice President since September 1982.
Rosanne D. Holtzer has been Vice President of the Mutual Funds division of the
Manager since December 1997. Ms. Holtzer was formerly Manager of Fund Accounting
for the Manager with which she was associated with from June 1986. She is also
Assistant Treasurer of Back Bay Funds, 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. Pax World Money Market Fund, Inc., Pennsylvania Daily Municipal Income
Fund, Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Virginia
Daily Municipal Income Fund, Inc. and is Vice President and Assistant Treasurer
of Cortland Trust, Inc.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Reich & Tang Distributors, Inc. is also distributor for Back Bay
Funds, Inc., 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, Georgia Daily
Municipal 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., Pax World Money Market
Fund, Inc., Pennsylvania Daily Municipal Income Fund, Reich & Tang Equity Fund,
Inc., Short Term Income Fund, Inc., Tax Exempt Proceeds Fund, Inc. and Virginia
Daily Municipal Income Fund, Inc.
C-3
<PAGE>
(b) The following are the directors and officers of Reich & Tang
Distributors, Inc.. The principal business address of Messrs. Voss, Ryland and
Wadsworth is 399 Boylston Street, Boston, Massachusetts 02116. For all other
persons, the principal business address is 600 Fifth Avenue, New York, New York
10020.
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name With the Distributor With Registrant
<S> <C> <C>
Peter S. Voss President and Director None
G. Neal Ryland Director None
Edward N. Wadsworth Executive Officer 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 Treasurer Treasurer
Richard I. Weiner Vice President None
</TABLE>
(c) Not applicable.
ITEM 28. 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, 801 Pennsylvania Street, Kansas City,
Missouri 64105, the Registrant's custodian.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, 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(a) 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 30th day of
October, 1998.
SHORT TERM INCOME FUND, INC.
By: /s/ Steven Duff
Steven Duff
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective 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 10/30/98
(2) Principal Financial and
Accounting Officer
/s/ Richard DeSanctis
Richard De Sanctis Treasurer 10/30/98
(3) Majority of Directors
/s/ Steven Duff
Steven Duff Director 10/30/98
W. Giles Mellon (Director) *
Robert Straniere (Director) *
Yung Wong (Director) *
By:
/s/ Bernadette N. Finn
Bernadette N. Finn
*Attorney-in-Fact 10/30/98
* Powers of attorney filed with Post-Effective Amendment No. 26 to
Registration Statement and incorporated herein by reference.
EXHIBIT J
McGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the use of our report dated September 30, 1997, on the
financial statements referred to therein, in Post-Effective Amendment No. 32 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 "Financial Highlights" and in the Statement of Additional Information
under the caption "Counsel and Auditors" and "Financial Statements".
/s/McGLADREY & PULLEN, LLP
McGladrey & Pullen, LLP
New York, New York
October 28, 1998
[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] Money Market Portfolio
[NUMBER] 1
[NAME] Class A
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] AUG-31-1997
[PERIOD-START] SEP-01-1996
[PERIOD-END] AUG-31-1997
[INVESTMENTS-AT-COST] 1082499930
[INVESTMENTS-AT-VALUE] 1082499930
[RECEIVABLES] 234314
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 1634468
[TOTAL-ASSETS] 1086477545
[PAYABLE-FOR-SECURITIES] 15000000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3037431
[TOTAL-LIABILITIES] 18037431
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1070487643
[SHARES-COMMON-STOCK] 1070487643
[SHARES-COMMON-PRIOR] 978003968
[ACCUMULATED-NII-CURRENT] (183622)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2231151)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1068440114
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 56885759
[OTHER-INCOME] 0
[EXPENSES-NET] 9253948
[NET-INVESTMENT-INCOME] 47631811
[REALIZED-GAINS-CURRENT] 52064
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 47683875
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 47631811
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1556751298
[NUMBER-OF-SHARES-REDEEMED] 1508097433
[SHARES-REINVESTED] 43829810
[NET-CHANGE-IN-ASSETS] 92535739
[ACCUMULATED-NII-PRIOR] (194437)
[ACCUMULATED-GAINS-PRIOR] (2294030)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3041228
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 9304968
[AVERAGE-NET-ASSETS] 1026636766
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.99
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[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] Money Market Portfolio
[NUMBER] 2
[NAME] Class B
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] AUG-31-1997
[PERIOD-START] SEP-01-1996
[PERIOD-END] AUG-31-1997
[INVESTMENTS-AT-COST] 1082499930
[INVESTMENTS-AT-VALUE] 1082499930
[RECEIVABLES] 234314
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 1634468
[TOTAL-ASSETS] 1086477545
[PAYABLE-FOR-SECURITIES] 15000000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3037431
[TOTAL-LIABILITIES] 18037431
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1070487643
[SHARES-COMMON-STOCK] 1070487643
[SHARES-COMMON-PRIOR] 978003968
[ACCUMULATED-NII-CURRENT] (183622)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2231151)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1068440114
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 56885759
[OTHER-INCOME] 0
[EXPENSES-NET] 9253948
[NET-INVESTMENT-INCOME] 47631811
[REALIZED-GAINS-CURRENT] 52064
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 47683875
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 47631811
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1556751298
[NUMBER-OF-SHARES-REDEEMED] 1508097433
[SHARES-REINVESTED] 43829810
[NET-CHANGE-IN-ASSETS] 92535739
[ACCUMULATED-NII-PRIOR] (194437)
[ACCUMULATED-GAINS-PRIOR] (2294030)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3041228
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 9304968
[AVERAGE-NET-ASSETS] 1026636766
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.66
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[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] U.S. Government Portfolio
[NUMBER] 3
[NAME] Class A
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] AUG-31-1997
[PERIOD-START] SEP-01-1996
[PERIOD-END] AUG-31-1997
[INVESTMENTS-AT-COST] 771647908
[INVESTMENTS-AT-VALUE] 771647908
[RECEIVABLES] 34225584
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 866413
[TOTAL-ASSETS] 806739905
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2192307
[TOTAL-LIABILITIES] 2192307
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 804547598
[SHARES-COMMON-STOCK] 804547598
[SHARES-COMMON-PRIOR] 792789311
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 804547598
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 41299929
[OTHER-INCOME] 0
[EXPENSES-NET] 5885968
[NET-INVESTMENT-INCOME] 35413961
[REALIZED-GAINS-CURRENT] 187048
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 35601009
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 35413961
[DISTRIBUTIONS-OF-GAINS] 187048
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1095638059
[NUMBER-OF-SHARES-REDEEMED] 1118222350
[SHARES-REINVESTED] 34342578
[NET-CHANGE-IN-ASSETS] 11758287
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1968002
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5901562
[AVERAGE-NET-ASSETS] 764363409
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.81
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[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] U.S. Government Portfolio
[NUMBER] 4
[NAME] Class B
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] AUG-31-1997
[PERIOD-START] SEP-01-1996
[PERIOD-END] AUG-31-1997
[INVESTMENTS-AT-COST] 771647908
[INVESTMENTS-AT-VALUE] 771647908
[RECEIVABLES] 34225584
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 866413
[TOTAL-ASSETS] 806739905
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2192307
[TOTAL-LIABILITIES] 2192307
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 804547598
[SHARES-COMMON-STOCK] 804547598
[SHARES-COMMON-PRIOR] 792789311
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 804547598
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 41299929
[OTHER-INCOME] 0
[EXPENSES-NET] 5885968
[NET-INVESTMENT-INCOME] 35413961
[REALIZED-GAINS-CURRENT] 187048
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 35601009
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 35413961
[DISTRIBUTIONS-OF-GAINS] 187048
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1095638059
[NUMBER-OF-SHARES-REDEEMED] 1118222350
[SHARES-REINVESTED] 34342578
[NET-CHANGE-IN-ASSETS] 11758287
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1968002
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5901562
[AVERAGE-NET-ASSETS] 764363409
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.05
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.05
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.55
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
