<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM 600 FIFTH AVENUE, NEW YORK, N.Y. 10020
INCOME FUND, INC. (212) 830-5200
================================================================================
Dear Shareholder:
We are pleased to present the semi-annual report of Short Term Income Fund, Inc.
for the period September 1, 1997 through February 28, 1998.
The Fund's Money Market Portfolio had 72,427 shareholders and net assets of
$1,198,579,457 as of February 28, 1998. The Government Portfolio had 13,053
shareholders and net assets of $789,250,144 as of February 28, 1998.
We thank you for your support and look forward to continuing to serve your cash
management needs.
Sincerely,
\s\Steven W. Duff
Steven W. Duff
President
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS
FEBRUARY 28, 1998
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Certificates of Deposit (5.42%)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,000,000 Chase Manhattan Bank (USA) 04/06/98 5.65% $ 20,000,000
25,000,000 Chase Manhattan Bank (USA) 07/07/98 5.62 25,000,000
20,000,000 PNC Bank, N.A. 05/27/98 5.67 19,998,115
-------------- -------------
65,000,000 Total Certificates of Deposit 64,998,115
-------------- -------------
<CAPTION>
Commercial Paper (13.42%)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 30,000,000 Bank of America Corp. 04/14/98 5.43% $ 29,807,934
20,000,000 Bank of America Corp. 07/13/98 5.43 19,609,128
15,000,000 Bear Stearns Cos. Inc. 05/12/98 5.54 14,838,475
15,000,000 Bear Stearns Cos. Inc. 06/05/98 5.52 14,785,854
15,000,000 Deutsche Bank Funding, Inc. 04/13/98 5.48 14,905,325
12,700,000 Island Finance Puerto Rico, Inc. 03/13/98 5.58 12,678,579
5,300,000 Island Finance Puerto Rico, Inc. 04/15/98 5.52 5,264,696
12,700,000 Island Finance Puerto Rico, Inc. 04/17/98 5.47 12,612,532
15,000,000 Island Finance Puerto Rico, Inc. 05/05/98 5.52 14,854,667
9,000,000 Island Finance Puerto Rico, Inc. 05/15/98 5.53 8,899,175
12,700,000 Pitney Bowes Credit 05/15/98 5.44 12,560,596
-------------- -------------
162,400,000 Total Commercial Paper 160,816,961
-------------- -------------
<CAPTION>
LOC Commercial Paper (26.27%)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10,000,000 Alfa-Russia Finance Co.
LOC Societe Generale 07/31/98 5.90% $ 9,761,755
15,000,000 Alfa-Russia Finance Co.
LOC Societe Generale 08/03/98 5.52 14,655,425
9,850,000 Banco Bandeirantes
LOC Barclays Bank PLC 06/08/98 5.84 9,700,915
10,000,000 Banco Bandeirantes
LOC Barclays Bank PLC 06/18/98 5.81 9,834,400
10,000,000 Banco De Credito Nacional, S.A.
LOC Barclays Bank PLC 11/20/98 5.55 9,610,614
5,000,000 Banco Mercantil Del Norte, S.A.
LOC Bayerische Vereinsbank, A.G. 11/06/98 5.56 4,815,325
12,000,000 Banco Nacional de Mexico, S.A.
LOC Barclays Bank PLC 04/09/98 5.51 11,930,967
16,000,000 Banco Rio de La Plata, S.A.
LOC Bayerische Vereinsbank, A.G. 03/13/98 5.51 15,973,258
10,000,000 Cemex S.A. de C.V.
LOC Credit Suisse/First Boston 05/11/98 5.53 9,893,639
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
LOC Commercial Paper (Continued)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,000,000 China Ocean Shipping Company
LOC Credit Suisse/First Boston 04/06/98 5.57% $ 14,919,646
5,000,000 ContiFinancial Corporation
LOC Dresdner Bank A.G. 05/07/98 5.70 4,949,308
16,000,000 Dean Health System Inc.
LOC Rabobank Nederland 03/23/98 5.53 15,948,853
35,000,000 Dean Health System Inc.
LOC Rabobank Nederland 04/22/98 5.54 34,727,787
20,000,000 Dixie Overseas Ltd.
LOC Credit Agricole 08/17/98 5.58 19,493,200
10,000,000 Garanti Funding Corporation
LOC Bayerische Vereinsbank, A.G. 07/30/98 5.51 9,776,250
20,000,000 Generale Trust & Banking
LOC Credit Suisse/First Boston 05/04/98 5.58 19,807,500
15,000,000 Guandong Enterprises (Holdings) Ltd.
LOC Credit Suisse/First Boston 08/12/98 5.55 14,633,250
18,000,000 Pemex Capital, Inc.
LOC Societe Generale 06/18/98 5.53 17,706,240
12,250,000 TEB Funding Corporation II
LOC Societe Generale 05/01/98 5.83 12,133,625
20,000,000 Transportadora de Gas del Sur S.A.
LOC Dresdner Bank A.G. 04/20/98 5.51 19,851,911
10,000,000 Transportadora de Gas del Sur S.A.
LOC Dresdner Bank A.G. 04/24/98 5.52 9,919,764
25,000,000 Unifunding Inc.
LOC Unibank 05/05/98 5.51 24,758,667
-------------- -------------
319,100,000 Total Letter of Credit Commercial Paper 314,802,299
-------------- -------------
<CAPTION>
US Government Agencies (0.83%)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10,000,000 Federal Farm Credit Bank (f) 03/03/98 5.44% $ 10,000,000
-------------- -------------
10,000,000 Total US Government Agencies 10,000,000
-------------- -------------
<CAPTION>
Loan Participations (7.93%)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 40,000,000 GMAC Mortgage Corporation with Bank One Ohio (g) 03/02/98 5.79% $ 40,000,000
25,000,000 Marsh & McLennan Companies with Chase Manhattan Bank (i) 08/24/98 5.88 25,000,000
20,000,000 Marsh & McLennan Companies with Chase Manhattan Bank 11/24/98 5.60 20,000,000
10,000,000 Marsh & McLennan Companies with Chase Manhattan Bank 11/24/98 5.65 10,000,000
-------------- -------------
95,000,000 Total Loan Participations 95,000,000
-------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
FEBRUARY 28, 1998
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Master Notes (11.26%)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 5,000,000 Donaldson, Lufkin & Jenrette (a) 02/05/99 5.67% $ 5,000,000
45,000,000 J.P. Morgan Securities Inc. (c) 04/02/98 5.63 45,000,000
40,000,000 The Goldman Sachs Group L.P. (b) 04/28/98 5.71 40,000,000
45,000,000 Williamette Industries Incorporated (d) 07/09/98 5.65 45,000,000
-------------- -------------
135,000,000 Total Master Notes 135,000,000
-------------- -------------
<CAPTION>
Other Notes (20.34%)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 4,100,000 Allegheny Co, PA (Union Electric Steel Corp.)
LOC PNC Bank, N.A. 11/01/27 5.65% $ 4,100,000
1,755,000 B & V Land Company, L.L.C.
LOC First Michigan Bank 09/01/27 5.60 1,755,000
3,955,000 Bollman Capital, LLC - Series 1996A (e)
LOC First of America/Michigan National Bank 12/15/26 5.60 3,955,000
9,348,000 Capital One Funding Corporation
Floating Rate Ohio Notes - Series 1997D
LOC Bank One 07/02/18 5.57 9,348,000
2,360,000 Carriage Inn Retirement Community of Cadiz, Inc.- Series 1996 (e)
LOC Key Bank, N.A. 10/01/17 5.61 2,360,000
2,740,000 Carriage Inn Retirement Community of Dayton, Inc.- Series 1996 (e)
LOC Key Bank, N.A. 10/01/16 5.61 2,740,000
10,000,000 Cleveland, OH
LOC Credit Suisse/First Boston/Union Bank of Switzerland 03/09/98 5.60 10,000,000
11,000,000 Development Authority of Douglas City, GA
LOC Nations Bank 11/01/18 5.70 11,000,000
7,285,000 Dickson Press, Inc. - Series 1997 (e)
LOC First Michigan Bank 01/01/27 5.60 7,285,000
5,000,000 First Metroplitan Title Company (e)
LOC Michigan National Bank 05/01/22 5.58 5,000,000
3,130,000 Greensboro, NC Public Improvement - Series C (e) 04/01/14 5.65 3,130,000
4,755,000 Growth Properties I, Ltd. L.P 1997 (e)
LOC Columbus Bank & Trust Company 08/01/12 5.75 4,755,000
7,000,000 Illinois Health Facilities (Loyola University) (e)
MBIA Insured 07/01/24 5.65 7,000,000
9,000,000 Illinois Student Assistance Commission (e)
MBIA Insured 09/01/32 5.56 9,000,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Other Notes (Continued)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,725,000 KBL Capital Fund, Inc. (e)
LOC Old Kent Bank & Trust Co. 07/01/15 5.60% $ 1,725,000
4,000,000 LKWP Investments, L.L.C. (e)
LOC First Michigan Bank 03/01/27 5.60 4,000,000
2,275,000 Labelle Capital Funding - Series A (e)
LOC First of America/Michigan National Bank 09/01/26 5.60 2,275,000
1,750,000 Labelle Capital Fundunf - Series 13 (e)
LOC First of America/Michigan National Bank 09/01/26 5.60 1,750,000
5,000,000 Lam Funding, L.L.C.
LOC First of America 12/15/27 5.62 5,000,000
1,000,000 Machining Center
LOC Comerica Bank 10/01/27 5.60 1,000,000
4,265,000 Massachusetts IFA (E. Nazarene College)
LOC State Street Bank & Trust Co. 10/01/13 5.50 4,265,000
2,000,000 Miami Valley Realty Associates (e)
LOC Key Bank, N.A. 06/01/12 5.59 2,000,000
1,000,000 Mt. Carmel East Professional Office Building - Series 1994 (e)
LOC National City Bank 01/01/14 5.65 1,000,000
3,000,000 Mubea, Inc. Project
LOC Fifth Third Bank 12/01/04 5.65 3,000,000
5,000,000 New Federal Cold Storage
LOC National City Bank, PA 11/01/12 5.65 5,000,000
500,000 New Orleans Aviation Board
Taxable Refunding Bonds - Series 1993A (e)
MBIA Insured 08/01/11 5.55 500,000
25,000,000 New York City GO Bonds
FGIC Insured 05/21/98 5.66 25,000,000
13,000,000 New York State HFA (Housing RB) - Series 1997B (e)
LOC Fleet Bank 05/01/13 5.60 13,000,000
8,365,000 New York, State Taxable - Series G 08/01/98 5.73 8,360,789
3,720,000 Opportunity Aviation, Ltd. Project
LOC National City Bank, Northwest 12/02/02 5.65 3,720,000
6,000,000 Oregon State (Georgia Pacific) - Series 1995B
LOC Commerzbank A.G. 03/10/98 5.95 6,000,000
1,100,000 Pennsylvania EDFA (CEO Deux, Inc.) (e)
LOC PNC Bank, N.A. 08/01/08 5.65 1,100,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
FEBRUARY 28, 1998
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Other Notes (Continued)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,300,000 Pennsylvania EDFA (Cambria Rowe Business Col.)
LOC PNC Bank, N.A. 12/01/14 5.65% $ 1,300,000
1,300,000 Pennsylvania EDFA (Southstar Canal Rd Ltd.)
LOC PNC Bank, N.A. 12/01/10 5.65 1,300,000
10,000,000 PRD Financial L.L.C.
LOC First of America 04/01/27 5.62 10,000,000
4,500,000 Polar Plastics, Inc. (e)
LOC PNC Bank, N.A. 08/01/17 5.61 4,500,000
2,610,000 SDR Capital, L.L.C. (e)
LOC First Michigan Bank 10/15/01 5.60 2,610,000
2,555,000 SEI, Inc.
LOC First Michigan Bank 09/01/27 5.60 2,555,000
1,000,000 Soaring Eagle Partners L.P.
LOC PNC Bank, N.A. 10/01/12 5.61 1,000,000
3,000,000 Sojourn Project (e)
LOC First National Bank of Ohio 07/01/12 5.75 3,000,000
1,775,000 Valley City Linen Co. (e)
LOC First Michigan Bank 02/15/02 5.60 1,775,000
3,000,000 Van Wert County, OH
LOC Bank One, Ohio 10/01/17 5.62 3,000,000
11,620,000 Washington State Housing Finance Commission
(Country Manor One Proj.) (e)
LOC U.S. Bank of Washington 01/01/12 5.80 11,620,000
4,500,000 Windsor Medical Center, Inc. (e)
LOC First National Bank of Ohio 12/03/18 5.75 4,500,000
14,000,000 Winston - Salem, NC COP (e) 04/15/98 5.54 14,000,000
6,000,000 Winston - Salem, NC COP (e) 04/23/98 5.53 6,000,000
1,500,000 Wulfeck Family Partnership Project
LOC Star Bank, N.A. 09/01/17 5.61 1,500,000
5,000,000 Zylstra Funding, Inc. (e)
LOC First Michigan Bank 06/01/27 5.60 5,000,000
------------- ------------
243,788,000 Total Other Notes 243,783,789
------------- ------------
<CAPTION>
Repurchase Agreements, Overnight (3.50%)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 42,000,000 The Goldman Sachs Group L.P. (Collateralized by $70,838,254,
GNMA's, 6.00% to 9.50%, due 12/15/17 to 10/20/27) 03/02/98 5.68% $ 42,000,000
------------- ------------
42,000,000 Total Repurchase Agreements, Overnight 42,000,000
------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Short Term Bank Notes (1.67%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,000,000 NationsBank 12/22/98 5.53% $ 20,042,706
------------- --------------
20,000,000 Total Short Term Bank Notes 20,042,706
------------- --------------
<CAPTION>
Yankee Certificates of Deposit (9.18%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10,000,000 Barclays Bank Floating Rate (h) 04/18/98 5.65% $ 10,000,000
20,000,000 Bayerische Vereinsbank 02/26/99 5.66 19,990,516
20,000,000 Canadian Imperial Bank of Commerce 04/14/98 5.43 20,002,356
40,000,000 Deutsche Bank A.G. 04/20/98 5.50 40,000,492
20,000,000 Swiss Bank Corporation 07/02/98 5.42 20,017,221
------------- --------------
110,000,000 Total Yankee Certificates of Deposit 110,010,585
------------- --------------
Total Investments (99.82%) (Cost $1,196,454,455+) 1,196,454,455
Cash and Other Assets, Net of Liabilities (0.18%) 2,125,002
--------------
Net Assets (100.00%) $1,198,579,457
==============
Net asset value, offering and redemption price per share:
Class A shares, 939,571,655 shares outstanding (Note 3) $ 1.00
==============
Class B shares, 260,739,915 shares outstanding (Note 3) $ 1.00
==============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
FOOTNOTES:
(a) The interest rate is adjusted monthly based on 1 month LIBOR +.05% (30 day
put).
(b) The interest rate is adjusted daily based on opening Federal Funds rate
+.10% (daily put).
(c) The interest rate is adjusted monthly based on 1 month LIBOR (daily put).
(d) The interest rate is adjusted monthly based on 1 month LIBOR +.03% (7 day
put).
(e) Securities payable on demand at par including accrued interest (with 7 days
notice). Interest is adjusted weekly.
(f) The interest rate is adjusted monthly based on a 3 month T-Bill +.23%.
(g) The interest rate is adjusted monthly based on 1 month LIBOR +.08%.
(h) The interest rate changes daily based on prime minus 2.87%.
(i) The interest rate is adjusted quarterly based on 3 month LIBOR flat.
(j) The interest rate is adjusted monthly based on 1 month LIBOR +.07%.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
U.S. GOVERNMENT PORTFOLIO
STATEMENT OF NET ASSETS
FEBRUARY 28, 1998
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Repurchase Agreements, Overnight (78.18%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 120,000,000 Canadian Imperial Bank of Commerce (Collateralized by $121,958,000,
U.S. Treasury Bill, due 05/28/98,
U.S. Treasury Notes, 5.000% to 6.750%, due 05/15/98 to 05/31/99) 03/02/98 5.63% $ 120,000,000
67,000,000 Fuji Bank, Ltd. (Collateralized by $60,923,000,
U.S. Treasury Bond, 8.000%, due 11/15/21
U.S. Treasury Bill, due 07/02/98) 03/02/98 5.62 67,000,000
170,000,000 Morgan Stanley & Company, Inc. (Collateralized by $195,928,301,
GNMA 5.000% to 8.000%, due 01/15/23 to 11/20/27) 03/02/98 5.69 170,000,000
220,000,000 The Goldman Sachs Group L.P. (Collateralized by $315,198,676,
GNMA 6.500% to 8.000%, due 08/20/21 to 02/20/28) 03/02/98 5.68 220,000,000
40,000,000 The Goldman Sachs Group L.P. (Collateralized by $60,772,290,
GNMA 7.000% to 8.500%, due 01/20/22 to 06/20/27) 03/09/98 5.47 40,000,000
------------- -------------
617,000,000 Total Repurchase Agreements, Overnight 617,000,000
------------- -------------
<CAPTION>
U.S. Government Obligations ( 21.56%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10,000,000 U.S. Treasury Bill 03/05/98 5.67% $ 9,995,531
10,000,000 U.S. Treasury Bill 03/05/98 5.74 9,995,467
10,000,000 U.S. Treasury Note, 6.12% 03/31/98 5.52 10,003,457
10,000,000 U.S. Treasury Note, 5.87% 04/30/98 5.48 10,004,626
10,000,000 U.S. Treasury Note, 5.87% 04/30/98 5.48 10,004,577
10,000,000 U.S. Treasury Note, 6.12% 05/15/98 5.46 10,010,993
10,000,000 U.S. Treasury Note, 6.12% 05/15/98 5.53 10,009,601
10,000,000 U.S. Treasury Note, 6.00% 05/31/98 5.55 10,007,720
15,000,000 U.S. Treasury Note, 6.00% 05/31/98 5.58 15,010,439
10,000,000 U.S. Treasury Note, 6.25% 06/30/98 5.53 10,019,703
10,000,000 U.S. Treasury Note, 6.25% 06/30/98 5.55 10,018,847
15,000,000 U.S. Treasury Note, 6.00% 09/30/98 5.48 15,037,684
10,000,000 U.S. Treasury Note, 6.00% 09/30/98 5.56 10,020,528
5,000,000 U.S. Treasury Note, 6.00% 09/30/98 5.56 5,010,264
5,000,000 U.S. Treasury Note, 6.00% 09/30/98 5.57 5,009,909
10,000,000 U.S. Treasury Note, 5.87% 10/31/98 5.41 10,018,593
10,000,000 U.S. Treasury Note, 5.87% 10/31/98 5.55 10,008,946
------------- -------------
170,000,000 Total U.S. Government Obligations 170,186,885
------------- -------------
Total Investments (99.74%) (Cost $787,186,885+) 787,186,885
Cash and Other Assets, Net of Liabilities (0.26%) 2,063,259
-------------
Net Assets (100.00%) $ 789,250,144
=============
Net asset value, offering and redemption price per share:
Class A Shares, 702,629,510 shares outstanding (Note 3) $ 1.00
=============
Class B Shares, 86,620,634 shares outstanding (Note 3) $ 1.00
=============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1998
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Money Market U.S. Government
Portfolio Portfolio
--------------- ---------------
INVESTMENT INCOME
<S> <C> <C>
Income:
Interest.............................................................. $ 32,514,324 $ 21,772,539
--------------- ---------------
Expenses: (Note 2)
Investment management fee............................................. 1,676,539 1,004,792
Administration fee.................................................... 1,192,318 817,991
Distribution fee (Class A)............................................ 1,110,555 876,063
Custodian expenses.................................................... 50,776 25,268
Shareholder servicing and related shareholder expenses................ 996,839 447,423
Legal, compliance and filing fees..................................... 77,751 36,872
Audit and accounting.................................................. 47,144 29,220
Directors' fees ...................................................... 13,571 7,571
Miscellaneous......................................................... 26,929 14,105
--------------- ---------------
Total expenses.................................................... 5,192,422 3,259,305
Less:
Fees waived.................................................... ( 286,000) --
Expenses paid indirectly....................................... ( -- ) ( 1,129)
--------------- ---------------
Net expenses.............................................. 4,906,422 3,258,176
--------------- ---------------
Net investment income.................................................... 27,607,902 18,514,363
--------------- ---------------
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments................................... 47,274 -0-
--------------- ---------------
Increase in net assets from operations.................................... $ 27,655,176 $ 18,514,363
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Money Market Portfolio U.S. Government Portfolio
------------------------------- -------------------------------
Six Months Six Months
Ended Year Ended Year
February 28, 1998 Ended February 28, 1998 Ended
(Unaudited) August 31, 1997 (Unaudited) August 31, 1997
--------- -------------- --------- ---------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C> <C> <C>
Operations:
Net investment income.................. $ 27,607,902 $ 47,631,811 $ 18,514,363 $ 35,413,961
Net realized gain (loss) on investments 47,274 52,064 -0- 187,048
-------------- -------------- -------------- --------------
Increase in net assets from operations 27,655,176 47,683,875 18,514,363 35,601,009
Dividends to shareholders:
Net investment income
Class A.............................. ( 21,056,446) ( 35,478,855) ( 16,543,868) ( 29,587,255)
Class B.............................. ( 6,283,314) ( 12,152,956) ( 1,970,495) ( 5,826,706)
Net realized gain on investments
Class A.............................. -- -- -- ( 154,608)*
Class B.............................. -- -- -- ( 32,440)*
Capital share transactions (Note 3):
Class A.............................. 137,035,410 44,913,178 ( 32,951,058) 68,960,418
Class B.............................. ( 7,211,483) 47,570,497 17,653,604 ( 57,202,131)
-------------- -------------- -------------- --------------
Total increase (decrease)............ 130,139,343 92,535,739 ( 15,297,454) 11,758,287
Net assets:
Beginning of period.................. 1,068,440,114 975,904,375 804,547,598 792,789,311
-------------- -------------- -------------- --------------
End of period (including undistributed
net investment income of $451,764
and $183,622 for the Money Market
Portfolio)........................ $1,198,579,457 $1,068,440,114 $ 789,250,144 $ 804,547,598
============== ============== ============== ==============
</TABLE>
* Represents a Long Term Capital Gain distribution of .000262202 per
share declared to shareholders of record as of October 22, 1996 and
paid on November 15,1996.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
1. Summary of Accounting Policies.
Short Term Income Fund, Inc. is a no-load, diversified, open-end management
investment company registered under the Investment Company Act of 1940. The Fund
is presently comprised of two Portfolios, Money Market Portfolio and U.S.
Government Portfolio, with each Portfolio having two classes of stock
authorized, Class A and Class B. The Class A shares of each Portfolio are
subject to a service fee pursuant to each Portfolio's Distribution and Service
Plan. The Class B shares are not subject to a service fee. Additionally, the
Portfolio may allocate among its classes certain expenses, to the extent
allowable to specific classes, including transfer agent fees, government
registration fees, certain printing and postage costs, and administrative and
legal expenses. Class specific expenses of the Fund were limited to distribution
fees and transfer agent expenses. In all other respects, the Class A and Class B
shares represent the same interest in the income and assets of each respective
Portfolio. The Fund's financial statements are prepared in accordance with
generally accepted accounting principles for investment companies as follows.
a) Valuation of Securities -
Investments are valued at amortized cost. Under this valuation method, a
portfolio instrument is valued at cost and any discount or premium is
amortized on a constant basis to the maturity of the instrument.
b) Federal Income Taxes -
It is the policy of each Portfolio to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
provision for federal income tax is required.
c) Dividends and Distributions -
Dividends from investment income (including realized capital gains and
losses), determined on a class level, are declared daily and paid monthly.
With respect to the Money Market Portfolio, realized capital gains and
losses are excluded.
d) Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
e) General -
Securities transactions are recorded on a trade date basis. Interest income
is accrued as earned. Realized gains and losses from securities
transactions are recorded on the identified cost basis. It is the Fund's
policy to take possession of securities as collateral under repurchase
agreements and to determine on a daily basis that the value of such
securities are sufficient to cover the value of the repurchase agreements.
2. Investment Management Fees and Other Transactions with Affiliates.
Under the Management Contract, the Money Market Portfolio pays a management fee
to Reich & Tang Asset Management, L.P. (the Manager) at the annual rate of .30%
of the Portfolio's average daily net assets not in excess of $750 million, plus
.29% of such assets in excess of $750 million but not in excess of $1 billion,
plus .28% of such assets in excess of $1 billion but not in excess of $1.5
billion, plus .27% of such assets in excess of $1.5 billion. The U.S. Government
Portfolio pays a management fee to the Manager equal to .275% of the Portfolio's
average daily net assets not in excess of $250 million, plus .25% of such assets
in excess of $250 million. The Manager has agreed to reimburse the Fund for its
net operating expenses (exclusive of taxes, brokerage, interest and
extraordinary expenses) to the extent that such expenses, including the
management fee, for any fiscal year exceed 1% of the average daily net assets of
each Portfolio for such fiscal year. No such reimbursement was required for the
period ended February 28, 1998.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
================================================================================
2. Investment Management Fees and Other Transactions with Affiliates
(Continued).
Pursuant to an Administrative Services Agreement, each Portfolio pays to the
Manager an annual fee of .21% of each Portfolio's average daily net assets not
in excess of $1.25 billion, plus .20% of such assets in excess of $1.25 billion
but not in excess of $1.5 billion, plus .19% of such assets in excess of $1.5
billion.
Pursuant to a Distribution and Service Plan adopted under Securities and
Exchange Commission Rule 12b-1, the Fund and Reich & Tang Distributors, Inc.
(the Distributor) entered into a Distribution Agreement and a Shareholder
Servicing Agreement, only with respect to the Class A shares of each Portfolio.
For its services under the Shareholder Servicing Agreement, the Distributor
receives from each Portfolio with respect only to the Class A shares, a service
fee equal to .25% per annum of each Portfolio's average daily net assets.
During the period ended February 28, 1998, the Manager voluntarily waived
investment management fees and administration fees of $276,258 and $9,742,
respectively on the Money Market Portfolio.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$9,000 per annum plus $1,250 per meeting attended.
Included in the Statements of Operations under the caption "Shareholder
servicing and related shareholder expenses" are fees of $510,069 and $196,467
for the Money Market Portfolio and the U.S. Government Portfolio, respectively,
paid to Reich & Tang Services L.P., an affiliate of the Manager as servicing
agent for the Fund.
Included under the caption "Custodian expenses" are expense offsets of $1,129
for the U.S. Government Portfolio.
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<PAGE>
- --------------------------------------------------------------------------------
================================================================================
3. Capital Stock.
At February 28, 1998, 10,000,000,000 shares of $.001 par value stock were
authorized and capital paid in for the Money Market Portfolio and the U.S.
Government Portfolio amounted to $1,200,311,570 and $789,250,144, respectively.
Transactions in capital stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Money Market Portfolio U.S. Government Portfolio
--------------------------------------- -------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
2/28/98 8/31/97 2/28/98 8/31/97
------------ ------------- ------------- -------------
Class A
<S> <C> <C> <C> <C>
Sold................................ 539,783,366 762,333,045 406,812,911 673,017,142
Issued on reinvestment of dividends. 19,360,536 32,106,578 16,344,296 29,037,928
Redeemed............................ ( 422,108,492) ( 749,526,445) ( 456,108,265) ( 633,094,652)
-------------- -------------- -------------- --------------
Net increase (decrease)............. 137,035,410 44,913,178 ( 32,951,058) 68,960,418
============== ============== ============== ==============
Class B
Sold................................ 398,979,482 794,418,253 214,908,336 422,620,917
Issued on reinvestment of dividends. 6,174,913 11,723,232 1,586,706 5,304,650
Redeemed............................ ( 412,365,878) ( 758,570,988) ( 198,841,438) ( 485,127,698)
-------------- -------------- -------------- --------------
Net increase (decrease)............. ( 7,211,483) 47,570,497 17,653,604 ( 57,202,131)
============== ============== ============== ==============
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses of the Money Market Portfolio at
February 28, 1998 amounted to $2,183,877. Such amount represents tax basis
capital losses which may be carried forward to offset future capital gains
through August 31, 2004.
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<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
================================================================================
5. Financial Highlights.
<TABLE>
<CAPTION>
Money Market Portfolio
CLASS A Year Ended August 31,
- ------- -----------------------------------------------------------------
Six Months Ended
February 28, 1998 1997 1996 1995 1994 1993
----------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income...................... 0.023 0.046 0.047 0.047 0.029 0.027
Less distributions:
Dividends from net investment income ( 0.023) ( 0.046) ( 0.047) ( 0.047) ( 0.029) ( 0.027)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total Return.................................. 4.84%* 4.66% 4.71% 4.82%(b) 2.93% 2.69%
Ratios/Supplemental Data
Net assets, end of period (000)............... $ 938,216 $ 801,001 $ 756,094 $ 661,795 $ 676,756 $ 706,074
Ratios to average net assets:
Expenses................................... 0.94%* 0.99% 0.98% 0.88% 0.91% 0.91%
Net investment income...................... 4.79%* 4.57% 4.63% 4.75% 2.89% 2.59%
Management, administration and
shareholder servicing fees waived........ 0.05%* -- 0.02% 0.13% -- 0.04%
Expenses paid indirectly................... -- * 0.01% 0.01% -- -- --
<CAPTION>
Money Market Portfolio
CLASS B (a) Year Ended August 31,
- ------- -----------------------------------------------------------------
Six Months Ended
February 28, 1998 1997 1996 1995 1994 1993
----------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income...................... 0.025 0.049 0.049 0.050 0.031 0.021
Less distributions:
Dividends from net investment income ( 0.025) ( 0.049) ( 0.049) ( 0.050) ( 0.031) ( 0.021)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total Return.................................. 5.20%* 5.01% 5.00% 5.08%(b) 3.19% 2.84%*
Ratios/Supplemental Data
Net assets, end of period (000) $ 260,363 $ 267,439 $ 219,810 $ 217,877 $ 422,005 $ 453,093
Ratios to average net assets:
Expenses................................... 0.59%* 0.66% 0.70% 0.62% 0.67% 0.71%*
Net investment income...................... 5.13%* 4.90% 4.91% 4.90% 3.13% 2.75%*
Management, administration and
shareholder servicing fees waived 0.05%* -- 0.02% 0.13% -- 0.01%*
Expenses paid indirectly................... -- * 0.01% 0.01% -- -- --
</TABLE>
* Annualized
(a) Distribution of Class B shares commenced November 30, 1992.
(b) 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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
5. Financial Highlights. (Continued)
<TABLE>
<CAPTION>
U.S Government Portfolio
CLASS A Year Ended August 31,
- ------- -----------------------------------------------------------------
Six Months Ended
February 28, 1998 1997 1996 1995 1994 1993
----------------- -------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income...................... 0.023 0.046 0.047 0.048 0.028 0.025
Less distributions:
Dividends from net investment income ( 0.023) ( 0.046) ( 0.047) ( 0.048) ( 0.028) 0.025
--------- --------- --------- --------- --------- ---------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total Return.................................. 4.82%* 4.73% 4.81% 4.93% 2.79% 2.56%
Ratios/Supplemental Data
Net assets, end of period (000)............... $ 702,629 $ 735,581 $ 666,620 $ 469,592 $ 398,699 $ 429,164
Ratios to average net assets:
Expenses................................... 0.87%* 0.81% 0.81% 0.80% 0.85% 0.85%
Net investment income...................... 4.72%* 4.61% 4.68% 4.83% 2.75% 2.52%
<CAPTION>
U.S Government Portfolio
CLASS B (a) Year Ended August 31,
- ------- -----------------------------------------------------------------
Six Months Ended
February 28, 1998 1997 1996 1995 1994 1993
----------------- -------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income...................... 0.025 0.049 0.050 0.051 0.030 0.021
Less distributions:
Dividends from net investment income ( 0.025) ( 0.049) ( 0.050) ( 0.051) ( 0.030) ( 0.021)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total Return.................................. 5.16%* 5.00% 5.07% 5.19% 3.04% 2.75%*
Ratios/Supplemental Data
Net assets, end of period (000)............... $ 86,621 $ 68,967 $ 126,169 $ 306,799 $ 80,196 $ 101,391
Ratios to average net assets:
Expenses................................... 0.55%* 0.55% 0.56% 0.55% 0.60% 0.63%*
Net investment income...................... 5.04%* 4.86% 5.04% 5.20% 2.98% 2.68%*
* Annualized
(a) Distribution of Class B shares commenced November 30, 1992.
</TABLE>
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<PAGE>
- -------------------------------------------------------------------------------
- -----------------------------------------------------
This report is submitted for the general
information of the shareholders of the Fund. It is
not authorized for distribution to prospective
investors in the Fund unless preceded or
accompanied by an effective prospectus, which
includes information regarding the Fund's
objectives and policies, experience of its
management, marketability of shares, and other
information.
- -----------------------------------------------------
Short Term Income Fund, Inc.
600 Fifth Avenue
New York, New York 10020
Manager
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
Custodian
Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services, L.P.
600 Fifth Avenue
New York, New York 10020
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
SHORT TERM
INCOME
FUND, INC.
Semi-Annual Report
February 28, 1998
(Unaudited)
- -------------------------------------------------------------------------------
<PAGE>
