As filed with the Securities and Exchange Commission on April 22, 1999.
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. 34 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 194O [X]
Amendment No. 34 [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>
Total Resource Account 600 FIFTH AVENUE
Shares ("TRA Shares") of NEW YORK, N.Y. 10020
Short Term Income Fund, Inc. (212) 830-5220
TRA Shares of U.S. Government Portfolio
================================================================================
PROSPECTUS
June 20, 1999
The objective of the U.S. Government Portfolio 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 Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2 Risk/Return Summary: Investments, Risks, 6 Management, Organization and Capital Structure
and Performance 6 Shareholder Information
4 Fee Table 10 Tax Consequences
5 Investment Objectives, Principal Investment 10 Distribution Arrangements
Strategies and Related Risks 12 Financial Highlights
</TABLE>
<PAGE>
I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS, AND PERFORMANCE
Investment Objectives
- ----------------------
The objective of the U.S. Government Portfolio 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 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.
The U.S. Government Portfolio
The U.S. Government Portfolio of the Fund seeks to achieve its 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.
Risk/Return Bar Chart And Table
- --------------------------------
The following bar chart and table may assist in your decision to invest in
the TRA Shares of the Fund. The bar chart shows the change in the annual returns
of the Class A shares of the Fund over the last ten calendar years. The table
shows the average annual returns for the last one, five, ten year periods, and
since the inception of the Class A shares of the Fund. While analyzing this
information, please note that the Fund's past performance is not an indication
of how the Fund will perform in the future. Also, the returns presented are for
a class that is not offered in the prospectus that would have substantially
similar annual returns because the shares are invested in the same portfolio of
securities and the annual returns differ only to the extent that the classes do
not have the same expenses. The current 7-day yield of the Fund may be obtained
by calling the Fund toll-free at 1-800-221-3079.
2
<PAGE>
Short Term Income Fund, Inc. Money Market Portfolio - Class A Shares (1)(2)(3)
[GRAPHIC OMITTED]
Calendar Year End % Total Return
1988 7.03%
1989 8.82%
1990 7.73%
1991 5.65%
1992 3.45%
1993 2.60%
1994 3.47%
1995 5.09%
1996 4.58%
1997 4.75%
(1) As of September 30, 1998, the Fund's U.S. Government Portfolio had a
year-to-date return of 3.57%.
(2) The Fund's U.S. Government Portfolio's highest quarterly return was 2.10%
for the quarter ended June 30, 1989; the lowest quarterly return was 0.60%
for the quarter ended December 31,1993.
(3) Investors purchasing or redeeming shares through a financial intermediary
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.
Average Annual Total Returns - U.S. Government Portfolio
Class A
For the periods ended December 31, 1997
One Year 4.76%
Five Years 4.10%
Ten Years 5.13%
Average Annual Total Returns
since Inception 5.91%
3
<PAGE>
FEE TABLE
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
TRA Shares in the U.S. Government Portfolio.
Annual Fund Operating Expenses
- -------------------------------
(expenses that are deducted from Fund assets)
TRA Shares
Management Fees..................... .26%
Distribution and Service (12b-1) Fees .25%
Other Expenses...................... .36%
Administration Fees............... .21%
----
Total Fund Operating Expenses....... .87%
"Other Expenses" are based on estimated amounts for the current fiscal year.
[Description of anticipated fee waiver's and reimbursements to follow]. This fee
waiver and reimbursement arrangement may be terminated at any time at the option
of the [Distributor].
Example
- -------
This Example is intended to help you compare the cost of investing in the Fund's
portfolio with the cost of investing in other money market funds. The Example
assumes that you invest $10,000 in the 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:
1 Year 3 Years
------ -------
U.S. Government Portfolio TRA Shares: $89 $278
4
<PAGE>
II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objectives
- ---------------------
The U.S. Government Portfolio is a money market fund which 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 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.
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 the Portfolio: (i) availability of cash, (ii)
redemption requests, (iii) yield management, and (iv) credit management.
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.
5
<PAGE>
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. The year 2000 problem may also adversely affect issuers of the
securities contained in the Portfolio, to varying degrees based upon various
factors, and thus may have a corresponding adverse affect on the Portfolio's
performance. The Manager is unable to predict what affect, if any, the year 2000
problem will have on such issuers.
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 November 30, 1998, the Manager was the
investment manager, advisor or supervisor with respect to assets aggregating in
excess of $12.3 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 the U.S. Government
Portfolio, the Manager manages the 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 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 the U.S. Government
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 fee equal to .25% per annum of the average
daily net assets of the TRA Shares of the U.S. Government Portfolio under the
Shareholder Servicing Agreement. The fees are accrued daily and paid monthly.
Investment management fees and operating expenses, which are attributable to
all Classes of the U.S. Government 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 TRA Shares are effected through the Fund's transfer agent, who
accepts orders for purchases and redemptions from MetLife Securities, Inc.
("MSI").
Pricing of Fund Shares
- ----------------------
The net asset value of the TRA 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
6
<PAGE>
days on which the New York Stock Exchange is closed for trading. The net asset
value of the TRA Shares 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 MSI's purchase order at the net asset value
per share next determined after receipt of the purchase order. 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. The Fund reserves the right to reject any order of its shares. Fund shares
begin accruing income on the day the shares are issued. Certificates for TRA
Shares will not be issued to an investor.
Purchase of TRA Shares
- ----------------------
Only TRA Shares of the U.S. Government Portfolio are offered through this
Prospectus. These shares are only offered through MSI's Total Resources Account
("TRA") and through MSI. All shares are held in an omnibus account at the Fund
through MSI, which will maintain individual investor accounts.
The minimum initial investment in the Fund for TRA Shares is $2,500. The
minimum amount for subsequent investments is $100.
Each TRA account holder will receive from MSI 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).
When instructed by a TRA account holder to purchase or redeem Fund shares,
MSI ,on behalf of the TRA account holder, 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.
MSI confirms to their customers who are shareholders in the Fund each
purchase and redemption of Fund shares for the customers' accounts.
Application forms and checks should be sent to MetLife Securities, Inc. c/o
PFPC, Inc. [ ].
Electronic Funds Transfers (EFT)
- ---------------------------------
You may purchase TRA Shares of the Fund by having salary, dividend payments,
interest payments or any other payments designated by you, automatically
deposited into your Fund account. To enroll, you must file with MSI a completed
EFT Application, Pre-authorized Credit Application. The appropriate form may be
obtained from MSI. You may elect at any time to terminate your participation by
notifying in writing the appropriate depositing entity. Death or legal
incapacity will automatically terminate your participation. Further, [MSI, on
behalf of the Fund]
7
<PAGE>
may terminate your participation upon 30 days' notice to you.
Subsequent Purchases of Shares
- -------------------------------
Subsequent purchases can be made by mailing a check to:
MetLife Securities, Inc.
c/o PFPC, Inc.
[
]
There is a $100 minimum for subsequent purchases of shares. All payments
should clearly indicate your TRA account number.
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 TRA
Shares following receipt by the Fund's transfer agent of the redemption order
(and any supporting documentation which it may require) from MSI. 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 6
days after investment. Shares redeemed are not entitled to participate in
dividends declared on the day a redemption becomes effective.
The TRA application form permits you to redeem by written request and to
elect one or more of the additional redemption procedures described below. You
may only change the instructions indicated on your original application form by
transmitting a written direction to MSI.
When a signature guarantee is called for, you should have "Signature
Guaranteed" stamped under your 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.
Written Requests
You may make a redemption in any amount by sending a written request to the
Fund addressed to:
MetLife Securities, Inc.
[
]
All written requests for redemption must be signed, in each case with
signature guaranteed.
Normally the redemption proceeds are paid by check and mailed to MSI, which
will disburse payment on behalf of its customer.
Checks
You will receive a supply of checks which may be used to effect
redemptions of the TRA Shares. The checks, which will be issued in your name,
are drawn on a special account maintained by MSI, on behalf of the Fund, with
MSI's agent bank. When a check is presented to MSI's agent bank, it instructs
the Fund's transfer agent to redeem a sufficient number of full and fractional
shares in the MSI omnibus account to cover the amount of the check. The use of a
check to make a withdrawal enables you to receive dividends on the shares to be
redeemed up to the Fund Business Day on which the check clears. [Checks 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 6 days following the date of
purchase.
There is no charge to you for checks provided by MSI. MSI, on behalf of the
Fund, reserves the right to impose a charge or impose a different minimum check
amount in the future.
Shareholders electing the checking option are subject to the procedures,
rules and regulations of MSI's agent bank governing checking accounts. Checks
drawn on a jointly owned account may, at the your election, require only one
signature. Checks in amounts exceeding the value of your
8
<PAGE>
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, [MSI, on behalf of the Fund] reserves the right
to charge your account a fee up to $15 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. [MSI,
on behalf of 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 TRA account holders.
Corporations and other entities electing the checking option are required to
furnish a certified resolution or other evidence of authorization in accordance
with MSI's normal practices. Individuals and joint tenants are not required to
furnish any supporting documentation. Appropriate authorization forms will be
sent by MSI, on behalf of the Fund, to corporations and other investors who
select this option. As soon as the authorization forms are filed in good order
with MSI's agent bank, it will provide the shareholder with a supply of checks.
Telephone
The Fund accepts telephone requests for redemption from TRA account holders
who elect this option on their application form. The proceeds of a telephone
redemption may be sent to you at your address or, if in excess of $1,000, to
your bank accounts designated in writing. [MSI, on behalf of the Fund] may
accept telephone redemption instructions from any person with respect to TRA
accounts who elect this service and thus such TRA account holders risk possible
loss of principal and interest in the event of a telephone redemption not
authorized by them. [MSI, on behalf of the Fund] will employ reasonable
procedures to confirm that telephone redemption instructions are genuine, and
will require that TRA account holders 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 TRA account holder making a telephone withdrawal should call MSI at [ ],
and state: (i) the name of the TRA account holder appearing on the TRA records;
(ii) the TRA account number with MSI; (iii) the amount to be withdrawn; (iv)
whether such amount is to be forwarded to the account holder's designated bank
account or address; and (v) the name of the person requesting the redemption.
Usually the proceeds are sent to MSI's designated bank account 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. [MSI, on
behalf of the Fund] reserves the right to terminate or modify the telephone
redemption service in whole or in part at any time and will notify account
holders 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 by MSI to the TRA account holder's address of record. If
the TRA account holder elects to redeem all the shares of the his TRA account,
all dividends accrued to the date of such redemption will be paid to the TRA
account holder 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
9
<PAGE>
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.
[MSI, on behalf of the Fund] has reserved the right to redeem the shares of
any TRA account holder if the net asset value of all the remaining shares in the
account after a withdrawal is less than $250. Written notice of a proposed
mandatory redemption will be given at least 60 days in advance to any customer
whose account is to be redeemed. During the notice period a customer 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.
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.
All dividends and distributions of capital gains are automatically invested,
at no charge, in additional TRA Shares immediately upon payment thereof.
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. You will be subject to tax on
dividends of net investment income or capital gains paid shortly following your
purchase of shares of the Fund, even though the dividend might be viewed
economically as a return of capital.
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 TRA Shares of the
Fund at $1.00, you will generally not realize any gain for Federal income tax
purposes upon a redemption of your shares in the Fund. However the redemption of
shares in the Fund will be a taxable event 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, you will be asked to certify on
your application form that the Social Security or tax identification number
provided is correct and that you are 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.
In view of the continuous changes in the tax law and the regulations
thereunder, it is recommended that you 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 TRA Shares' 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.
The Fund's Board of Directors has adopted a Rule 12b-1 distribution and
service plan (the
10
<PAGE>
"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 TRA Shares of the Fund).
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 TRA Shares, a service fee equal to .25% per annum of the
Portfolio's TRA 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 including MSI with respect to their provision of
such services to their clients or customers who are shareholders of the TRA
Shares of the Portfolio. Shareholders of other classes offered by the Fund who
do not receive the benefit of such services from participating organizations
such as MSI 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 TRA 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.
These payments are limited to a maximum of .05% per annum of the Portfolio's TRA
Shares' average daily net assets.
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 TRA Shares of
the Fund; (ii) to compensate certain participating organizations for providing
assistance in distributing the TRA 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
TRA 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
TRA 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.
11
<PAGE>
VI. FINANCIAL HIGHLIGHTS
This financial highlights table is intended to help you understand the financial
performance of the U.S. Government Portfolio for the past 5 years. 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 $ 1.00
========= ========= ========= ========= =========
Income from investment operations:
Net Investment income................ 0.047 0.046 0.047 0.048 0.028
Less distributions:
Dividends from net investment income. ( 0.047) (0.046) (0.047) (0.048) (0.028)
-------- ----------- --------- ----------- -------------
Net asset value, end of year............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return............................ 4.82% 4.73% 4.81% 4.93% 2.79%
Ratios/Supplemental Data
Net assets, end of year (000)........... $ 752,497 $ 735,581 $ 666,620 $ 469,592 $ 398,699
Ratios to average net assets:
Expenses............................. 0.87% 0.81% 0.81% 0.80% 0.85%
Net Investment income................ 4.71% 4.61% 4.68% 4.83% 2.75%
</TABLE>
12
<PAGE>
A Statement of Additional Information (SAI) dated January 4, 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.
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.
Total Resource
Account Shares
("TRA Shares") of
SHORT TERM INCOME FUND, INC.
TRA Shares of U.S. Government Portfolio
PROSPECTUS
June 20, 1999
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, NY 10020
(212) 830-5220
811-2950
<PAGE>
SHORT TERM 600 Fifth Avenue, New York, NY 10020
INCOME FUND, INC. (212) 830-5220
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
January 4, 1999
RELATING TO THE SHORT TERM INCOME FUND, INC.
PROSPECTUS DATED JANUARY 4, 1999
and the
TOTAL RESOURCE ACCOUNT SHARES ("TRA Shares") OF THE U.S. GOVERNMENT
PORTFOLIO PROSPECTUS DATED JUNE 20, 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 4, 1999 and the
Total Resource Account Shares of the U.S. Government Portfolio Prospectus dated
June 20, 1999 and should be read in conjunction with each 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.
<TABLE>
<CAPTION>
Table of Contents
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fund History.........................................2 Capital Stock and Other Securities......................12
Description of the Fund and its Investments and Purchase, Redemption and Pricing Shares.................12
Risks..............................................2 Taxation of the Fund....................................13
Management of the Fund...............................5 Underwriters............................................18
Control Persons and Principal Holders of Calculation of Performance Data.........................19
Securities.........................................6 Financial Statements....................................20
Investment Advisory and Other Services...............7 Description of Ratings..................................21
Brokerage Allocation and Other Practices............11
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
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.
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.
2
<PAGE>
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 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
3
<PAGE>
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.
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
4
<PAGE>
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, 45 - 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 Funds, Inc., and President and Chief
Executive Officer of Tax Exempt Proceeds Fund, Inc.
Dr. W. Giles Mellon, 67 - Director of the Fund, has been Professor of Business
Administration and Area Chairman of Economics in the Graduate School of
Management, Rutgers University since 1966. His address is Rutgers University
Graduate School of Management, 92 New Street, Newark, New Jersey 07102. Dr.
Mellon is a Director/Trustee of 15 other funds in the Reich & Tang Fund Complex.
Robert Straniere, 57 - Director of the Fund, has been a member of the New York
State Assembly and a partner with The 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 a
Director of Life Cycle Mutual Funds, Inc.
Dr. Yung Wong, 60 - 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 18
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, 42 - 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 Vice President and Secretary of 4 other funds, and a Secretary of 14
additional funds in the Reich & Tang Fund Complex.
Richard De Sanctis, 42 - 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.
5
<PAGE>
Rosanne Holtzer, 34 - 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).
<TABLE>
<CAPTION>
COMPENSATION TABLE
<S> <C> <C> <C> <C>
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 $53,750 (14 Funds)
Director
Robert Straniere, $14,000 0 0 $53,750 (14 Funds)
Director
Dr. Yung Wong, $14,000 0 0 $53,750 (14 Funds)
Director
</TABLE>
* 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.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On November 30, 1998 there were 1,065,789,800 Money Market Portfolio - Class A
shares outstanding, 373,145,405 Money Market Portfolio - Class B shares
outstanding, 854,691,326 U.S. Government Portfolio -Class A shares outstanding
and 168,042,880 U.S. Government Portfolio - Class B shares outstanding. As of
November 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 November 30, 1998:
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address % of Class Nature of Ownership
MONEY MARKET PORTFOLIO - CLASS A
Reich & Tang Services, Inc. 93.66% Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, N.Y. 10020
National Reality Trust 5.08% Record
C/O/ LEWCO Securities Corp.
34 Exchange Place 4th Fl.
Jersey City, NJ 07311
6
<PAGE>
Name and Address % of Class Nature of Ownership
MONEY MARKET PORTFOLIO - CLASS B
Reich & Tang Services, Inc. 64.51% Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, N.Y. 10020
Venrock Associates II LP 6.38% Record
30 Rockefeller Plaza
55th Floor
New York, NY 10020
Venrock Associates II LP 6.28% Record
30 Rockefeller Plaza
55th Floor
New York, NY 10020
U.S. GOVERNMENT PORTFOLIO - CLASS A
Reich & Tang Services, Inc. 93.31% 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. 63.53% Record
as Agent for Various
Beneficial Owners
600 Fifth Avenue
New York, N.Y. 10020
Centennial Energy Partners, L.P. 15.93% Record
Attn: Joseph Reich
900 3rd Ave.
New York, NY 10022
Xanadu Partners 7.31% Record
900 3rd Ave.
New York, NY 10022
Sepracor Securities Inc. 6.02% Record
Collateral Account
111 Locke Drive
Marlborough, MA 01752-7214
</TABLE>
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 November 30, 1998, investment
manager, adviser, or supervisor with respect to assets aggregating in excess of
$12.3 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
7
<PAGE>
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 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
8
<PAGE>
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 $3,491,263 of which
$276,258 was waived and $2,060,639 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 $2,487,557 of which $9,742 was waived and $1,678,581 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 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.
9
<PAGE>
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
and TRA 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 and TRA 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 and TRA
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 $2,309,663 with respect
to the Money Market Portfolio and $1,793,205 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
$4,483,163 with respect to the Money Market Portfolio and $3,451,933 with
respect to the U.S. Government Portfolio. Of the payments made pursuant to the
Plan by the Fund, with respect to the Money Market Portfolio, $0 was spent on
advertising, $10,777 on printing and mailing of prospectuses to other than
current shareholders, $0 on compensation to underwriters, $4,427,428 on
compensation to broker-dealers, $29,263 on compensation to sales personnel, and
$0 on interest, carrying or other financial charges. Of the payments made
pursuant to the Plan by the Fund, with respect to the U.S. Government Portfolio,
$0 was spent on advertising, $3,398 on printing and mailing of prospectuses to
other than current shareholders, $0 on compensation to underwriters, $3,413,152
on compensation to broker-dealers, $25,188 on compensation to sales personnel,
and $0 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 TRA 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 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 TRA 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
10
<PAGE>
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 and TRA 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 and TRA 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 and TRA 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. Thus, the Fund will select a broker
for such a transaction based upon which broker can effect the trade 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 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.
11
<PAGE>
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
or special meetings only (i) for the election (or re-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 his successor is elected or qualified, or
until such Director sooner dies, resigns, retires or is removed by the vote of
the shareholders.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
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,
12
<PAGE>
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 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.
13
<PAGE>
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 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:
14
<PAGE>
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.
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.
15
<PAGE>
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 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.
16
<PAGE>
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 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.
[Purchase and Redemption of TRA shares of the Fund]
17
<PAGE>
To be inserted
Net Asset Value
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 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
18
<PAGE>
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 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.
19
<PAGE>
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 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 4.32% which is equivalent to an effective
yield of 4.41%. The Fund's U.S. Government Portfolio's Class A shares' yield for
the seven day period ended November 30, 1998 was 3.97% which is equivalent to an
effective yield of 4.05%.
The Fund's Money Market Portfolio's Class B shares' yield for the seven day
period ended November 30, 1998 was 4.67% which is equivalent to an effective
yield of 4.78%. The Fund's U.S. Government Portfolio's Class B shares' yield for
the seven day period ended November 30, 1998 was 4.30% which is equivalent to an
effective yield of 4.39%.
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.
20
<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. (c) 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.
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.
- -----------------------
* As described by the rating agencies.
21
<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).
(e.1) Form of Distribution Agreement (for TRA Shares) between Registrant and
Reich & Tang Distributors, Inc.
(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, 1998
(filed with the annual report) 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).
C-1
<PAGE>
(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).
(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).
(m.3) Form of Distribution and Service Plan (relating to TRA Shares)
pursuant to Rule 12b-1 under the Investment Company Act of 1940.
(m.4) Form of Distribution Agreement (relating to TRA Shares) between
Registrant and Reich & Tang Distributors, Inc.
(m.5) Form of Shareholder Servicing Agreement (relating to TRA Shares)
between Registrant and Reich & Tang Distributors, Inc.
(n) Financial Data Schedule (for Edgar Filing only).
(o) Amendment No. 3 to Rule 18f-3 Plan for Multi Class.
(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.
In accordance with Section 2-418 of the General Corporation Law of the
State of Maryland, Article EIGHTH of the Registrants Articles of Incorporation
provides as follows:
EIGHTH: (1) The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees),
judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgement, order, settlement
conviction, or upon a plea of nolo contendere or its equivalent, shall not, in
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
C-2
<PAGE>
(2) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgement in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Corporation, unless and only to the extent that the court in which
such action or suit was brought, or a court of equity in the country in which
the Corporation has its principal office, shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper.
(3) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (1) and (2) of this Article
EIGHTH or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(4) Any indemnification under paragraphs (1) and (2) of this Article
EIGHTH (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in such paragraphs. Such
determination shall be made (i) by the Board of Directors by a majority vote of
quorum consisting of directors who were not parties to such actions, suit or
proceeding, or (ii) if such a quorum is not obtainable or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion or (iii) by the stockholders provided, however, that if there is
neither a court determination on the merits that such director, officer,
employee or agent is not liable in such action, suit or proceeding nor a court
determination that director, officer, employee or agent was not guilty of
willful misfeasance , bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, then such determination shall be
made by an independent legal counsel (other than a counsel who performs legal
serves for the Corporation; its investment adviser or principle underwriter, or
persons affiliated with these persons).
(5) Expenses (including attorneys' fees) incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding if
authorized by the Board of Directors in the specific case, upon receipt of an
undertaking, secured by a surety bond or other insurance, by or on behalf of the
director, officer, employee or agent reasonably assuring that such amount will
be repaid unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article EIGHTH.
(6) The indemnification provided by this Article EIGHTH shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
(7) The Corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out or his status as such,
whether or not the Corporation would have the power to indemnify him against the
liability under the provisions of these Articles of Incorporation or the general
laws of the State of Maryland.
(8) Nothing contained in this Article EIGHTH shall protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or to its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
C-3
<PAGE>
(9) For the purposes of this Article EIGHTH, references to "the
Corporation" include any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents as well as the resulting or surviving
corporation; so that any person who is or was a director, officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article EIGHTH with
respect to the resulting or surviving corporation as he would have with respect
to such a constituent corporation if its separate existence had continued.
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 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
C-4
<PAGE>
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.
(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>
<S> <C> <C>
Positions and Offices Positions and Offices
Name With the Distributor With Registrant
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.
C-5
<PAGE>
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, Kansas City, Missouri
64105, the Registrant's custodian.
ITEM 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
Not applicable.
C-6
<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 22nd day of
April, 1999.
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 4/22/99
(2) Principal Financial and
Accounting Officer
/s/ Richard De Sanctis
Richard De Sanctis Treasurer 4/22/99
(3) Majority of Directors
/s/ Steven Duff
Steven Duff Director 4/22/99
W. Giles Mellon (Director) *
Robert Straniere (Director) *
Yung Wong (Director) *
By: /s/ Bernadette N. Finn
Bernadette N. Finn
*Attorney-in-Fact 4/22/99
* 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 25, 1998, on the
financial statements referred to therein, in Post-Effective Amendment No. 34 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
April 21, 1999
SHORT TERM INCOME FUND, INC.
U.S. Government Portfolio
Total Resource Account ("TRA")
Class of Common Stock
(the "Portfolio")
Distribution and Service Plan Pursuant to Rule
12b-1 Under the Investment Company Act of 1940
The Distribution and Service Plan (the "Plan") is adopted by
Short Term Income Fund, Inc. (the "Fund"), on behalf of the Portfolio, in
accordance with the provisions of Rule 12b-1 under the Investment Company Act of
1940 (the "Act").
The Plan
1. The Fund, on behalf of the Portfolio, and Reich & Tang
Distributors, Inc. (the "Distributor"), have entered into a Distribution
Agreement, in a form satisfactory to the Fund's Board of Directors, under which
the Distributor will act as distributor of the Fund's shares. Pursuant to the
Distribution Agreement, the Distributor, as agent of the Fund, will solicit
orders for the purchase of the Fund's shares, provided that any subscriptions
and orders for the purchase of the Fund's shares will not be binding on the Fund
until accepted by the Fund as principal.
2. The Fund, on behalf of the Portfolio, and the Distributor
have entered into a Shareholder Servicing Agreement with respect to the TRA
Class of Shares of the Portfolio, in a form satisfactory to the Fund's Board of
Directors, which provides that the Distributor will be paid a service fee for
<PAGE>
providing or for arranging for others to provide all personal shareholder
servicing and related maintenance of shareholder account functions not performed
by us or our transfer agent.
3. The Manager may make payments from time to time from its
own resources, which may include the management fees and administrative services
fees received by the Manager from the Fund and from other companies, and past
profits for the following purposes:
(i) to pay the costs of, and to compensate others, including
organizations whose customers or clients are TRA Class Fund
Shareholders ("Participating Organizations"), for performing personal
shareholder servicing and related maintenance of shareholder account
functions on behalf of the Fund;
(ii) to compensate Participating Organizations for providing
assistance in distributing the Portfolio's TRA Class of Shares; and
(iii) to pay the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective
shareholders, advertising, and other promotional activities, including
salaries and/or commissions of sales personnel of the Distributor and
other persons, in connection with the distribution of the Fund's
shares.
The Distributor may also make payments from time to time from its own resources,
which may include the service fee and past profits
2
<PAGE>
for the purpose enumerated in (i) above. Further, the Distributor may determine
the amount of such payments made pursuant to the Plan, provided that such
payments will not increase the amount which the Fund, on behalf of the
Portfolio, is required to pay to (1) the Manager for any fiscal year under the
Investment Management Contract or the Administrative Services Contract in effect
for that year or otherwise or (2) to the Distributor under the Shareholder
Servicing Agreement in effect for that year or otherwise. The Investment
Management Contract will also require the Manager to reimburse the Fund, on
behalf of the Portfolio, for any amounts by which the Fund's annual operating
expenses, including distribution expenses, exceed in the aggregate in any fiscal
year the limits prescribed by any state in which the Portfolio's shares are
qualified for sale.
4. The Fund, on behalf of the Portfolio, will pay for (i)
telecommunications expenses, including the cost of dedicated lines and CRT
terminals, incurred by the Distributor in carrying out its obligations under the
Shareholder Servicing Agreement with respect to the TRA Class of Shares of the
Fund 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.
5. Payments by the Distributor or Manager to Participating
Organizations as set forth herein are subject to compliance by them with the
terms of written agreements in a form
3
<PAGE>
satisfactory to the Fund's Board of Directors to be entered into between the
Distributor and the Participating Organizations.
6. The Fund and the Distributor will prepare and furnish to
the Fund's Board of Directors, at least quarterly, written reports setting forth
all amounts expended for servicing and distribution purposes by the Fund, the
Distributor and the Manager, pursuant to the Plan and identifying the servicing
and distribution activities for which such expenditures were made.
7. The Plan became effective upon approval by (i) a majority
of the outstanding voting securities of the Portfolio (as defined in the Act),
and (ii) a majority of the Board of Directors of the Fund, including a majority
of the Directors who are not interested persons (as defined in the Act) of the
Fund and who have no direct or indirect financial interest in the operation of
the Plan or in any agreement entered into in connection with the Plan, pursuant
to a vote cast in person at a meeting called for the purpose of voting on the
approval of the Plan.
8. The Plan will remain in effect until ______________ unless
earlier terminated in accordance with its terms, and thereafter may continue in
effect for successive annual periods if approved each year in the manner
described in clause (ii) of paragraph 7 hereof.
9. The Plan may be amended at any time with the approval of
the Board of Directors of the Fund, provided that (i) any material amendments of
the terms of the Plan will be effective only upon approval as provided in clause
(ii) of paragraph 7 hereof, and (ii) any amendment which increases materially
the amount which may be spent by the Fund pursuant to the Plan will be
4
<PAGE>
effective only upon the additional approval as provided in clause (i) of
paragraph 7 hereof.
10. The Plan, with respect to the Portfolio, may be terminated
without penalty at any time (i) by a vote of the majority of the entire Board of
Directors of the Fund and by a vote of a majority of the Directors of the Fund
who are not interested persons (as defined in the Act) of the Fund and who have
no direct or indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, or (ii) by a vote of a majority of the
outstanding voting securities of the Portfolio (as defined in the Act).
5
DISTRIBUTION AGREEMENT
SHORT TERM INCOME FUND, INC.
the "Fund"
U.S. Government Portfolio
Total Resource Account ("TRA")
Class of Common Stock
(the "Portfolio")
600 Fifth Avenue
New York, New York 10020
________________, 1999
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, New York 10020
Ladies and Gentlemen:
We hereby confirm our agreement with you as follows:
1. In consideration of the agreements on your part herein
contained and of the payment by us to you of a fee of $1 per year and on the
terms and conditions set forth herein, on behalf of our Portfolio, we have
agreed that you shall be, for the period of this agreement, a distributor, as
our agent, for the unsold portion of such number of shares of our common stock
Portfolio $.001 par value per share, as may be effectively registered from time
to time under the Securities Act of 1933, as amended (the "1933 Act"). This
agreement is being entered into pursuant to the Distribution and Service Plan
(the "Plan") adopted by us in accordance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").
2. We hereby agree that you will act as our agent, and hereby
appoint you our agent, to offer, and to solicit offers to subscribe to, the
unsold balance of shares of our common stock as shall then be effectively
registered under the Act. All subscriptions for shares of the Portfolio's common
stock obtained by you shall be directed to us for acceptance and shall not be
binding on us until accepted by us. You shall have no authority to make binding
subscriptions on our behalf. We reserve the right to sell shares of our common
stock through other distributors or directly to investors through subscriptions
received by us at our principal office in New York, New York. The right given to
you under this agreement shall not apply to shares of our common stock issued in
connection with (a) the
<PAGE>
merger or consolidation of any other investment company with us, (b) our
acquisition by purchase or otherwise of all or substantially all of the assets
or stock of any other investment company, or (c) the reinvestment in shares of
our common stock by our stockholders of dividends or other distributions or any
other offering by us of securities to our stockholders.
3. You will use your best efforts to obtain subscriptions to
shares of our common stock upon the terms and conditions contained herein and in
our Prospectus, as in effect from time to time. You will send to us promptly all
subscriptions placed with you. We shall furnish you from time to time, for use
in connection with the offering of shares of our common stock, such other
information with respect to us and shares of our common stock as you may
reasonably request. We shall supply you with such copies of our Registration
Statement and Prospectus, as in effect from time to time, as you may request.
Except as we may authorize in writing, you are not authorized to give any
information or to make any representation that is not contained in the
Registration Statement or Prospectus, as then in effect. You may use employees,
agents and other persons, at your cost and expense, to assist you in carrying
out your obligations hereunder, but no such employee, agent or other person
shall be deemed to be our agent or have any rights under this agreement. You may
sell our shares to or through qualified brokers, dealers and financial
institutions under selling and servicing agreements provided that no dealer,
financial institution or other person shall be appointed or authorized to act as
our agent without our written consent.
With respect to the TRA Class Shares of our Portfolio, you
will arrange for organizations whose customers or clients are shareholders of
our corporation ("Participating Organizations") to enter into agreements with
you for the performance of shareholder servicing and related administrative
functions not performed by you or the Transfer Agent. Pursuant to our
Shareholder Servicing Agreement with you with respect to our TRA Class Shares,
you may make payments to Participating Organizations for performing shareholder
servicing and related administrative functions with respect to our TRA Class
Shares. Such payments will be made only pursuant to written agreements approved
in form and substance by our Board of Directors to be entered into by you and
the Participating Organizations. It is recognized that we shall have no
obligation or liability to you or any Participating Organization for any such
payments under the agreements with Participating Organizations. Our obligation
is solely to make payments to you under the Shareholder Servicing Agreement
(with respect to the TRA Class Shares) and to the Manager under the Investment
Management Contract and the Administrative Services Contract. All sales of our
shares effected through you will be made in compliance with all applicable
federal securities laws and regulations and the
2
<PAGE>
Constitution, rules and regulations of the National Association of Securities
Dealers, Inc. ("NASD").
4. We reserve the right to suspend the offering of shares of
our common stock at any time, in the absolute discretion of our Board of
Directors, and upon notice of such suspension you shall cease to offer shares of
our common stock hereunder.
5. Both of us will cooperate with each other in taking such
action as may be necessary to qualify shares of our common stock for sale under
the securities laws of such states as we may designate, provided, that you shall
not be required to register as a broker-dealer or file a consent to service of
process in any such state where you are not now so registered. Pursuant to the
Investment Management Contract in effect between us and the Manager, we will pay
all fees and expenses of registering shares of our common stock under the Act
and of qualification of shares of our common stock, and to the extent necessary,
our qualification under applicable state securities laws. You will pay all
expenses relating to your broker-dealer qualification.
6. We represent to you that our Registration Statement and
Prospectus have been carefully prepared to date in conformity with the
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Securities and Exchange Commission (the "SEC") thereunder. We represent and
warrant to you, as of the date hereof, that our Registration Statement and
Prospectus contain all statements required to be stated therein in accordance
with the 1933 Act and the 1940 Act and the SEC's rules and regulations
thereunder; that all statements of fact contained therein are or will be true
and correct at the time indicated or the effective date as the case may be; and
that neither our Registration Statement nor our Prospectus, when they shall
become effective or be authorized for use, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of shares
of our common stock. We will from time to time file such amendment or amendments
to our Registration Statement and Prospectus as, in the light of future
development, shall, in the opinion of our counsel, be necessary in order to have
our Registration Statement and Prospectus at all times contain all material
facts required to be stated therein or necessary to make any statements therein
not misleading to a purchaser of shares of our common stock. If we shall not
file such amendment or amendments within fifteen days after our receipt of a
written request from you to do so, you may, at your option, terminate this
agreement immediately. We will not file any amendment to our Registration
Statement or Prospectus without giving you reasonable notice thereof in advance;
provided, however, that nothing in this agreement shall
3
<PAGE>
in any way limit our right to file such amendments to our Registration Statement
or Prospectus, of whatever character, as we may deem advisable, such right being
in all respects absolute and unconditional. We represent and warrant to you that
any amendment to our Registration Statement or Prospectus hereafter filed by us
will be carefully prepared in conformity within the requirements of the 1933 Act
and the 1940 Act and the SEC's rules and regulations thereunder and will, when
it becomes effective, contain all statements required to be stated therein in
accordance with the 1933 Act and the 1940 Act and the SEC's rules and
regulations thereunder; that all statements of fact contained therein will, when
the same shall become effective, be true and correct; and that no such
amendment, when it becomes effective, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of our
shares.
7. We agree to indemnify, defend and hold you, and any person
who controls you within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which you or
any such controlling person may incur, under the 1933 Act or the 1940 Act, or
under common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in our Registration Statement or
Prospectus in effect from time to time or arising out of or based upon any
alleged omission to state a material fact required to be stated in either of
them or necessary to make the statements in either of them not misleading;
provided, however, that in no event shall anything herein contained be so
construed as to protect you against any liability to us or our security holders
to which you would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of your duties, or by reason of
your reckless disregard of your obligations and duties under this agreement. Our
agreement to indemnify you and any such controlling person is expressly
conditioned upon our being notified of any action brought against you or any
such controlling person, such notification to be given by letter or by telegram
addressed to us at our principal office in New York, New York, and sent to us by
the person against whom such action is brought within ten days after the summons
or other first legal process shall have been served. The failure so to notify us
of any such action shall not relieve us from any liability which we may have to
the person against whom such action is brought other than on account of our
indemnity agreement contained in this paragraph 7. We will be entitled to assume
the defense of any suit brought to enforce any such claim, and to retain
4
<PAGE>
counsel of good standing chosen by us and approved by you. In the event we do
elect to assume the defense of any such suit and retain counsel of good standing
approved by you, the defendant or defendants in such suit shall bear the fees
and expenses of any additional counsel retained by any of them; but in case we
do not elect to assume the defense of any such suit, or in case you, in good
faith, do not approve of counsel chosen by us, we will reimburse you or the
controlling person or persons named as defendant or defendants in such suit, for
the fees and expenses of any counsel retained by you or them. Our
indemnification agreement contained in this paragraph 7 and our representations
and warranties in this agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of you or any controlling
person and shall survive the sale of any shares of our common stock made
pursuant to subscriptions obtained by you. This agreement of indemnity will
inure exclusively to your benefit, to the benefit of your successors and
assigns, and to the benefit of any of your controlling persons and their
successors and assigns. We agree promptly to notify you of the commencement of
any litigation or proceeding against us in connection with the issue and sale of
any shares of our common stock.
8. You agree to indemnify, defend and hold us, our several
officers and directors, and any person who controls us within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any reasonable counsel fees
incurred in connection therewith) which we, our officers or directors, or any
such controlling person may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement or Prospectus as in effect from time to time, or shall arise out of or
be based upon any alleged omission to state a material fact in connection with
such information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. Your agreement
to indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process shall
have been served. You shall have a right to control the defense of such action,
with counsel of your own choosing, satisfactory to us, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event you and we, our officers or directors or such
5
<PAGE>
controlling person shall each have the right to participate in the defense or
preparation of the defense of any such action. The failure so to notify you of
any such action shall not relieve you from any liability which you may have to
us, to our officers or directors, or to such controlling person other than on
account of your indemnity agreement contained in this paragraph 8.
9. We agree to advise you immediately:
a. of any request by the SEC for amendments to our
Registration Statement or Prospectus or for additional
information,
b. of the issuance by the SEC of any stop order suspending
the effectiveness of our Registration Statement or Prospectus or
the initiation of any proceedings for that purpose,
c. of the happening of any material event which makes untrue
any statement made in our Registration Statement or Prospectus or
which requires the making of a change in either of them in order
to make the statements therein not misleading, and
d. of all action of the SEC with respect to any amendments
to our Registration Statement or Prospectus.
10. This Agreement will become effective on the date hereof
and will remain in effect thereafter for successive twelve-month periods
(computed from each ____________), provided that such continuation is
specifically approved at least annually by vote of our Board of Directors and of
a majority of those of our directors who are not interested persons (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Plan or in any agreements related to the Plan, cast in person
at a meeting called for the purpose of voting on this agreement. This agreement
may be terminated at any time, without the payment of any penalty, (a) on sixty
days' written notice to you (i) by vote of a majority of our entire Board of
Directors, and by a vote of a majority of our Directors who are not interested
persons (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Plan or in any agreement related to
the Plan, or (ii) by vote of a majority of our outstanding voting securities, as
defined in the Act, or (b) by you on sixty days' written notice to us.
11. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the SEC thereunder.
6
<PAGE>
12. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees, officers or directors, who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the 1940 Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
SHORT TERM INCOME FUND, INC.
U.S. Government Portfolio
TRA Class Common Stock
By
Accepted: __________________, 1999
REICH & TANG DISTRIBUTORS, INC.
By: ___________________________________
7
SHAREHOLDER SERVICING
AGREEMENT
SHORT TERM INCOME FUND, INC.
U.S. Government Portfolio
Total Resource Account ("TRA")
Class of Common Stock
(the "Portfolio")
600 Fifth Avenue
New York, New York 10020
, 1999
Reich & Tang Distributors, Inc. ("Distributor")
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We hereby employ you, pursuant to the Distribution and
Service Plan, as amended, adopted by us in accordance with Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended (the "Act"), to
provide the services listed below on behalf of the TRA Class Shares of the
Portfolio. You will perform, or arrange for others including organizations whose
customers or clients are shareholders of our corporation (the "Participating
Organizations") to perform, all personal shareholder servicing and related
maintenance of shareholder account functions ("Shareholder Services") not
performed by us or our transfer agent.
2. You will be responsible for the payment of all expenses
incurred by you in rendering the foregoing services, except that the Portfolio
will pay for (i) telecommunications expenses, including the cost of dedicated
lines and CRT terminals, incurred by the Distributor and Participating
Organizations in rendering such services to the TRA Class Shareholders, and (ii)
preparing, printing and delivering our prospectus to existing shareholders and
preparing and printing subscription application forms for shareholder accounts.
3. You may make payments from time to time from your own
resources, including the fees payable hereunder and past profits to compensate
Participating Organizations for providing
<PAGE>
Shareholder Services to the TRA Class Shareholders of the Fund. Payments to
Participating Organizations to compensate them for providing Shareholder
Services are subject to compliance by them with the terms of written agreements
satisfactory to our Board of Directors to be entered into between the
Distributor and the Participating Organizations. The Distributor will in its
sole discretion determine the amount of any payments made by the Distributor
pursuant to this Agreement, provided, however, that no such payment will
increase the amount which each Portfolio is required to pay either to the
Distributor under this Agreement or to the Manager under the Investment
Management Contract, the Administrative Services Agreement, or otherwise.
4. We will expect of you, and you will give us the benefit
of, your best judgment and efforts in rendering these services to us, and we
agree as an inducement to your undertaking these services that you will not be
liable hereunder for any mistake of judgment or for any other cause, provided
that nothing herein shall protect you against any liability to us or to our
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
5. In consideration of your performance, each Portfolio will
pay you a service fee, as defined by Article III, Section 26(b)(9) of the Rules
of Fair Practice, as amended, of the National Association of Securities Dealers,
Inc. at the annual rate of one quarter of one percent (0.25%) of the Portfolio's
TRA Class Shares' average daily net assets. Your fee will be accrued by us
daily, and will be payable on the last day of each calendar month for services
performed hereunder during that month or on such other schedule as you shall
request of us in writing. You may waive your right to any fee to which you are
entitled hereunder, provided such waiver is delivered to us in writing.
6. This Agreement will become effective on the date hereof and
will remain in effect thereafter for successive twelve-month periods (computed
from each ___________), provided that such continuation is specifically approved
at least annually by vote of our Board of Directors and of a majority of those
of our directors who are not interested persons (as defined in the Act) and have
no direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan, cast in person at a meeting called for the
purpose of voting on this Agreement. This Agreement may be terminated at any
time, without the payment of any penalty, (a) on sixty days' written notice to
you (i) by vote of a majority of our entire Board of Directors, and by a vote of
a majority of our Directors who are not interested persons (as defined in the
Act) and who have no direct or indirect financial interest in the operation of
the
2
<PAGE>
Plan or in any agreement related to the Plan, or (ii) by vote of a majority of
the outstanding voting securities of the Portfolio's TRA Class Shares, as
defined in the Act, or (b) by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission
thereunder.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees, officers or directors, who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your understanding,
will you kindly so indicate by signing and returning to us the enclosed copy
hereof.
Very truly yours,
SHORT TERM INCOME FUND, INC.
U.S. Government Portfolio
TRA Class Common Stock
By:
ACCEPTED: , 1999
REICH & TANG DISTRIBUTORS, INC.
By:
3
REICH & TANG ASSET MANAGEMENT, L.P.
AMENDMENT NO. 3
TO
RULE 18f-3 MULTI-CLASS PLAN
April __ , 1999
I. Introduction.
Pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), the following sets forth the method for
allocating fees and expenses among each class of shares of the underlying
investment funds sponsored by Reich & Tang Asset Management, L.P. as set forth
in Exhibit A (each Fund referred to herein as the "Company") that issues
multiple classes of shares (the "Multi-Class Funds"). In addition, this Rule
18f-3 Multi-Class Plan (the "Plan") sets forth the shareholder servicing
arrangements, distribution arrangements, conversion features, exchange
privileges and other shareholder services of each class of shares in the
Multi-Class Funds.
The Company is an open-end series investment company
registered under the 1940 Act and the shares of which are registered on Form
N-1A under the Securities Act of 1933 (see Exhibit A for each Company's
registration number). Upon the effective date of this Plan, the Company hereby
elects to offer multiple classes of shares in the Multi-Class Funds pursuant to
the provisions of Rule 18f-3 and this Plan. This Plan does not make any material
changes to the class arrangements and expense allocations previously approved by
the Board of Directors of the Company pursuant to the exemptive order issued by
the Securities and Exchange Commission to California Daily Tax Free Income Fund,
et al. under Section 6(c) of the 1940 Act on November 18, 1992 (1940 Act Release
No. 812-7852).
The Company currently consists of the following sixteen
separate Funds:
California Daily Tax Free Income Fund, Inc., Connecticut Daily
Tax Free Income Fund, Inc., Daily Tax Free Income Fund, Inc., Delafield Fund,
Inc., Florida Daily Municipal Income Fund, Georgia Daily Municipal Income Fund,
Inc., Institutional Daily Income Fund, Kentucky Daily Municipal Income Fund,
Inc., Michigan Daily Tax Free Income Fund, Inc., New Jersey Daily Tax Free
Income Fund, Inc., North Carolina Daily Municipal Income Fund, Inc.,
Pennsylvania Daily Municipal Income Fun, Short Term Income Fund, Inc., Tennessee
Daily Municipal Income Fund, Inc., Texas Daily Municipal Income Fund, Inc. and
Virginia Daily Municipal Income Fund, Inc.
<PAGE>
This Amendment No.3 serves to create a Total Resource
Account ("TRA") Class of Shares of the Multi-Class Funds for the purpose of
accomodating clients and customers of MetLife Securities, Inc. Amendment No. 2
served to include the following Funds in the definition of Multi-Class Funds:
Georgia Daily Municipal Income Fund, Inc., Kentucky Daily Municipal Income Fund,
Inc., Tennessee Daily Municipal Income Fund, Inc. and Texas Daily Municipal
Income Fund, Inc. Amendment No. 1 served to create a Class C of shares of the
Multi-Class Funds for the purpose of accommodating clients and customers of
Schroeder & Co. ("Schroeder"). All investors in Class C shares will be clients
of Schroeder maintained in omnibus account on the books of each Multi-Class Fund
with all sub-accounting performed by Schroeder.
II. Allocation of Expenses.
Pursuant to Rule 18f-3 under the 1940 Act, the Company shall
allocate to each class of shares in a Multi-Class Fund (i) any fees and expenses
incurred by the Company in connection with the distribution of such class of
shares under a distribution and service plan adopted for such class of shares
pursuant to Rule 12b-1, and (ii) any fees and expenses incurred by the Company
under a shareholder servicing plan in connection with the provision of
shareholder services to the holders of such class of shares. In addition,
pursuant to Rule 18f-3, the Company may allocate the following fees and expenses
to a particular class of shares in a single Multi-Class Fund:
(i) transfer agent fees and related expenses identified by the
transfer agent as being attributable to such class of
shares;
(ii) printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses, reports, and proxies to current shareholder of
such class of shares or to regulatory agencies with respect
to such class of shares;
(iii) blue sky registration or qualification fees incurred by such
class of shares;
(iv) Securities and Exchange Commission registration fees
incurred by such class of shares;
(v) the expense of administrative personnel and services
(including, but not limited to, those of a fund accountant,
[custodian]1 or divided paying agent charged with
calculating net asset values or
- --------
1. Rule 18f-3 requires that services related to the management of the
portfolio's assets, such as custodial fees, be borne by the fund and
not by class.
<PAGE>
determining or paying dividends) as required to support the
shareholders of such class of shares;
(vi) litigation or other legal expenses relating solely to such
class of shares;
(vii) fees of the Company's Directors incurred as a result of
issues relating to such class of shares; and
(viii) independent accountants' fees relating solely to such class
of shares.
The initial determination of the class expenses that will be
allocated by the Company to a particular class of shares and any subsequent
changes thereto will be reviewed by the Board of Directors and approved by a
vote of the Directors of the Company, including a majority of the Directors who
are not interested persons of the Company.
Income, realized and unrealized capital gains and losses, and
any expenses of the Multi-Class Funds not allocated to a particular class of any
such Fund pursuant to this Plan shall be allocated to each class of the Fund on
the basis of the net asset value of that class in relation to the net asset of
the Fund.
III. Class Arrangements.
The following summarizes the Rule 12b-1 distribution fees,
shareholder servicing fees, exchange privileges and other shareholder services
applicable to each class of shares of the Multi-Class Funds. Additional details
regarding such fees and services are set forth in each Fund's current Prospectus
and Statement of Additional Information.
A. Class A Shares -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: Up to .25%
per annum of average daily net assets.
6. Conversion Features: None.
<PAGE>
7. Exchange Privileges: Subject to restrictions and
conditions set forth in the Prospectus, Class A
Shares may be exchanged for Class A shares of any
other Fund.
8. Other Incidental Shareholder Services: As provided
in the Prospectus.
B. Class B Shares -
1. Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: None.
6. Conversion Features: None.
7. Exchange Privileges: Subject to restrictions and
conditions set forth in the Prospectus, Class B
shares may be exchanged for Class B shares of
other Multi-Class Funds.
8. Other Incidental Shareholder Services: As provided
in the Prospectus.
C. Class C Shares (created for all funds which are purchased by
Schroeder & Co. clients)
1. Maximum Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: .25% per
annum of the average daily net assets.
6. Sub-Accounting/Transfer Agent Fee: .20% per annum
of the average daily net assets.
<PAGE>
7. Conversion Features: None.
8. Exchange Privileges: Subject to restrictions and
conditions set forth in the Prospectus, Class C
Shares may be exchanged for Class C shares of any
other Fund.
9. Other Incidental Shareholder Services: As provided
in the Prospectus.
D. TRA Class of Shares (created for all funds which are
purchased by MetLife Securities, Inc. clients)
1. Maximum Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Redemption Fees: None.
4. Rule 12b-1 Distribution Fees: None.
5. Rule 12b-1 Shareholder Servicing Fees: .25% per
annum of the average daily net assets.
6. Sub-Accounting/Transfer Agent Fee: [.20%] per
annum of the average daily net assets.
7. Conversion Features: None.
8. Exchange Privileges: Subject to restrictions and
conditions set forth in the Prospectus, TRA Class
Shares may be exchanged for TRA Class shares of
any other Fund.
9. Other Incidental Shareholder Services: As provided
in the Prospectus.
IV. Board Review.
The Board of Directors of the Company shall review this Plan
as frequently as it deems necessary. Prior to any material amendments to this
Plan, the Company's Board of Directors, including a majority of the Directors
that are not interested persons of the Company, shall find that the Plan, as
proposed to be amended (including any proposed amendments to the method of
allocating class and/or fund expenses, is in the best interest of each class of
shares of a Multi-Class Fund individually and the Fund as a whole. In
considering whether to approve any proposed amendments(s) to the Plan, the
Directors of the
<PAGE>
Company shall request and evaluate such information as they consider reasonably
necessary to evaluate the proposed amendments(s) to the Plan.
In making its initial determination to approve this Plan, the
Board focused on, among other things, the relationship between or among the
classes and examined potential conflicts of interest between classes regarding
the allocation of fees, services, waivers and reimbursement of expenses, and
voting rights. The Board evaluated the level of services provided to each class
and the cost of those services to ensure that the services are appropriate and
the allocation of expenses is reasonable. In approving any subsequent amendments
to this Plan, the Board shall focus on and evaluate such factors as well as any
others deemed necessary by the Board.
<PAGE>
EXHIBIT A
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
Georgia Daily Municipal Income Fund, Inc.
Institutional Daily Income Fund
Kentucky Daily Municipal Income Fund, Inc.
Michigan Daily Tax Free Income Fund, Inc.
New Jersey Daily Tax Free Income Fund, Inc.
North Carolina Daily Municipal Income Fund, Inc.
Pennsylvania Daily Municipal Income Fund
Short Term Income Fund, Inc.
Tennessee Daily Municipal Income Fund, Inc.
Texas Daily Municipal Income Fund, Inc.
Virginia Daily Municipal Income Fund, Inc.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> The schedule contains summary financial information
extracted from the financial statements and supporting
schedules as of the end of the most current period and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000312669
<NAME> Short Term Income Fund, Inc.
<SERIES>
<NUMBER> 3
<NAME> U.S. GOVERNMENT PORTFOLIO - Class A
<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>
