<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM 600 FIFTH AVENUE, NEW YORK, N.Y. 10020
INCOME FUND, INC. (212) 830-5200
================================================================================
Dear Shareholder:
We are pleased to present the semi-annual report of Short Term Income Fund, Inc.
for the period September 1, 1998 through February 28, 1999.
The Fund's Money Market Portfolio had 71,899 shareholders and net assets of
$1,432,355,876 as of February 28, 1999. The Government Portfolio had 14,559
shareholders and net assets of $934,123,896 as of February 28, 1999.
We thank you for your support and look forward to continuing to serve your cash
management needs.
Sincerely,
\s\Steven W. Duff
Steven W. Duff
President
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS
FEBRUARY 28, 1999
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Commercial Paper (10.63%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,000,000 Bank of America 07/09/99 4.93% $ 14,739,459
20,000,000 Bear Stearns Companies Inc. 03/08/99 4.92 19,981,022
20,000,000 Dresdner US Finance Inc. 03/02/99 4.87 19,997,300
43,000,000 Island Finance Puerto Rico, Inc. 04/27/99 4.87 42,671,838
10,000,000 J.P. Morgan Securities, Inc. 03/25/99 5.10 9,966,533
15,000,000 J.P. Morgan Securities, Inc. 04/27/99 4.86 14,885,763
30,000,000 Lehman Brothers Holdings Inc. 03/08/99 4.99 29,971,008
-------------- -------------
153,000,000 Total Commercial Paper 152,212,923
-------------- -------------
<CAPTION>
Domestic Certificates of Deposit (3.70%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,000,000 Chase Manhattan Bank (USA) 07/13/99 4.87% $ 20,000,000
18,000,000 First Union National Bank 09/17/99 5.25 18,000,000
15,000,000 Northern Trust (k) 09/08/99 4.89 14,995,290
-------------- -------------
53,000,000 Total Domestic Certificates of Deposit 52,995,290
-------------- -------------
<CAPTION>
Letter of Credit Commercial Paper (28.18%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,000,000 Banca Serfin S.A.
LOC Barclays Bank PLC 11/18/99 5.10% $ 14,470,542
5,000,000 Banco Mercantil Del Norte, S.A.
LOC Bayerische HypoVereinsbank, A.G. 04/01/99 5.32 4,977,740
25,000,000 Bancomer, S.A.
LOC Bank of Montreal 06/18/99 5.00 24,634,396
15,000,000 China International Marine Containers
LOC Societe Generale 03/16/99 4.90 14,969,563
20,000,000 Citic Pacific Finance
LOC Bank of America 03/26/99 4.92 19,931,944
20,000,000 Cofco Capital Corporation
LOC Bank of America 04/06/99 4.88 19,903,400
15,000,000 Contifinancial Corporation
LOC Dresdner Bank, A.G. 05/03/99 4.90 14,872,687
23,000,000 Corporacion Andina de Fomento
LOC Barclays Bank PLC 04/27/99 4.91 22,823,379
11,000,000 Dean Health System, Inc.
LOC Rabobank Nederland 03/11/99 4.89 10,985,181
40,000,000 Dean Health System, Inc.
LOC Rabobank Nederland 04/13/99 4.89 39,768,278
20,000,000 Demir Funding Corporation
LOC Bayerische HypoVereinsbank, A.G. 04/12/99 4.96 19,885,667
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Letter of Credit Commercial Paper (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10,000,000 Garanti Funding Corporation
LOC Bayerische HypoVereinsbank, A.G. 07/29/99 4.90% $ 9,800,833
11,000,000 Garanti Funding Corporation
LOC Bayerische HypoVereinsbank, A.G. 07/30/99 4.92 10,778,533
20,000,000 Louis Dreyfus Corporation
LOC ABN AMRO Bank N.A. 03/05/99 4.86 19,989,244
20,000,000 Louis Dreyfus Corporation
LOC ABN AMRO Bank N.A. 03/12/99 4.85 19,970,483
20,000,000 Louis Dreyfus Corporation
LOC ABN AMRO Bank N.A. 03/18/99 4.87 19,954,194
15,000,000 Pactual Overseas
LOC Barclays Bank PLC 05/14/99 4.90 14,852,925
15,000,000 Pemex Capital Inc.
LOC Societe Generale 04/19/99 4.89 14,901,388
10,000,000 TEB Funding Corporation
LOC Societe Generale 05/28/99 5.18 9,876,556
15,000,000 Transportadora de Gas del Sur S.A.
LOC Dresdner Bank, A.G. 03/22/99 5.24 14,954,763
17,000,000 Transportadora de Gas del Sur S.A.
LOC Dresdner Bank, A.G. 03/23/99 5.24 16,946,289
35,000,000 Unibanco-Uniao De Bancos Brasilieros
LOC Westdeutsche Landesbank 06/28/99 4.95 34,441,196
10,000,000 Vermont Yankee Nuclear Power Company
LOC Societe Generale 03/22/99 5.02 9,970,833
-------------- -------------
407,000,000 Total Letter of Credit Commercial Paper 403,660,014
-------------- -------------
<CAPTION>
Loan Participations (8.73%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,000,000 Boeing Capital Corporation with Chase Manhattan Bank (g) 08/24/99 5.72% $ 20,000,000
40,000,000 GMAC Mortgage Corporation with Bank One (d) 03/01/99 5.02 40,000,000
35,000,000 Marsh & McLennan Companies with Chase Manhattan Bank 03/25/99 4.94 35,000,000
30,000,000 Marsh & McLennan Companies with Chase Manhattan Bank 05/24/99 5.18 30,000,000
-------------- -------------
125,000,000 Total Loan Participations 125,000,000
-------------- -------------
<CAPTION>
Master Notes (4.54%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,000,000 The Goldman Sachs Group L.P. (a) 10/19/99 4.99% $ 20,000,000
45,000,000 Williamette Industries Incorporated (b) 07/09/99 4.96 45,000,000
-------------- -------------
65,000,000 Total Master Notes 65,000,000
-------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
FEBRUARY 28, 1999
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Medium Term Note (1.40%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,000,000 The Bear Stearns Companies Inc. (e) 06/07/99 4.90% $ 20,000,000
-------------- -------------
20,000,000 Total Medium Term Note 20,000,000
-------------- -------------
<CAPTION>
Other Notes (26.41%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 5,000,000 Allegheny Co, PA (Union Electric Steel Corp.) (c)
LOC PNC Bank, N.A. 11/01/27 5.00% $ 5,000,000
4,120,000 American West Michigan Property Taxable Municipal IDRB (c)
LOC Comerica Bank 12/01/25 4.97 4,120,000
1,710,000 B & V Land Company, L.L.C. (c)
LOC First Michigan Bank 09/01/27 4.97 1,710,000
3,860,000 Bollman Capital, L.L.C. - Series 1996A (c)
LOC First of America/Michigan National Bank 12/15/26 4.97 3,860,000
3,000,000 California PCFA Environmental Improvement Bonds
(Shell Oil Company Project) (c) 06/01/38 4.91 3,000,000
6,716,000 Capital One Funding Corporation
Floating Rate Option Notes - Series 1997D (c)
LOC Bank One Ohio 07/02/18 4.97 6,716,000
2,290,000 Carriage Inn Retirement Community of Cadiz, Inc. - Series 1996 (c)
LOC Key Bank, N.A. 10/01/17 4.95 2,290,000
2,655,000 Carriage Inn Retirement Community of Dayton, Inc. - Series 1996 (c)
LOC Key Bank, N.A. 10/01/16 4.95 2,655,000
15,000,000 Caterpillar Financial Services Corporation (h) 07/07/99 4.99 15,000,000
2,050,000 County of Lorain, OH (c)
LOC FirstMerit Bank 04/01/19 5.01 2,050,000
6,840,000 Dickenson Press, Inc. - Series 1997 (c)
LOC First Michigan Bank 01/01/27 4.97 6,840,000
2,000,000 Dormont Manufacturing Company, Inc. (c)
LOC PNC Bank, N.A. 03/01/08 5.05 2,000,000
4,700,000 DP Fox Capital, L.L.C. (c)
LOC Michigan National Bank 05/01/28 4.97 4,700,000
4,830,000 First Metropolitan Title Company (c)
LOC Michigan National Bank 05/01/22 4.95 4,830,000
20,000,000 First Union National Bank of North Carolina (i) 07/16/99 4.85 20,000,000
3,015,000 Greensboro, NC Public Improvement - Series C (c) 04/01/14 4.95 3,015,000
4,605,000 Growth Properties I, Ltd L.P. 1997 (c)
LOC Columbus Bank & Trust Company 08/01/12 5.00 4,605,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Other Notes (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 6,900,000 Illinois Health Facilities (Loyola University) (c)
MBIA Insured 07/01/24 4.95% $ 6,900,000
10,800,000 Illinois Student Assistance Commission (c)
MBIA Insured 09/01/32 4.88 10,800,000
18,600,000 Jacksonville Health Charity Group (Baptist/St. Vincent) (c)
MBIA Insured 08/15/19 4.95 18,600,000
6,620,000 Jake Sweeney Automotive, Inc. (c)
LOC Star Bank, N.A. 04/01/05 4.97 6,620,000
15,000,000 John Hancock Mutual Life Insurance Company (j) 08/19/00 5.77 15,000,000
1,685,000 KBL Capital Fund, Inc. (c)
LOC Old Kent Bank & Trust Co. 07/01/15 4.97 1,685,000
3,845,000 LKWP Investments, L.L.C. (c)
LOC First Michigan Bank 03/01/27 4.97 3,845,000
3,795,000 Labelle Capital Funding - Series A (c)
LOC First of America/Michigan National Bank 09/01/26 4.97 3,795,000
4,850,000 Lam Funding, L.L.C. (c)
LOC First of America 12/15/27 4.88 4,850,000
1,650,000 Machining Center (c)
LOC Comerica Bank 10/01/27 5.30 1,650,000
4,265,000 Massachusetts IFA (E. Nazarene College) (c)
LOC State Street Bank & Trust Co. 10/01/13 5.25 4,265,000
1,910,000 Miami Valley Realty Associates (c)
LOC Key Bank, N.A. 06/01/12 4.95 1,910,000
965,000 Mt. Carmel East Professional Office Building - Series 1994 (c)
LOC National City Bank, Northwest 01/01/14 4.91 965,000
1,455,000 Mt. Carmel Partnership Project (c)
LOC National City Bank, Northwest 08/01/14 4.91 1,455,000
2,575,000 Mubea, Inc. Project (c)
LOC Fifth Third Bank 12/01/04 4.91 2,575,000
15,860,000 Nebraska Public Power - Series B (c)
LOC Bank of America/Toronto Dominion/
Bank of Nova Scotia/Commerz Bank 03/09/99 4.90 15,860,000
4,780,000 New Federal Cold Storage (c)
LOC National City Bank, PA 11/01/12 4.91 4,780,000
25,000,000 New York City, N.Y. GO Bonds
FGIC Insured 05/21/99 4.98 25,000,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
FEBRUARY 28, 1999
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Other Notes (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 12,725,000 New York City, N.Y. GO Bonds - Series D 08/01/99 5.54% $ 12,745,126
13,000,000 New York State HFA
(250 West 50th Street Project) - Series 1997B (c)
LOC Fleet National Bank 05/01/13 4.95 13,000,000
1,125,000 Oak Crest Homes, Inc. (c)
LOC First of America 11/01/26 4.97 1,125,000
1,025,000 Ohio Metallurgical Services Inc. (c)
LOC FirstMerit Bank 10/01/04 5.01 1,025,000
3,600,000 Opportunity Aviation, Ltd. Project (c)
LOC National City Bank, Northwest 12/02/02 4.91 3,600,000
9,750,000 PRD Financial L.L.C. (c)
LOC First of America 04/01/27 5.01 9,750,000
900,000 Pennsylvania EDFA (CEO Deux, Inc.) (c)
LOC PNC Bank, N.A. 08/01/08 5.00 900,000
1,200,000 Pennsylvania EDFA (Southstar Canal Road Ltd) (c)
LOC PNC Bank, N.A. 12/01/10 5.00 1,200,000
8,600,000 Polar Plastics, Inc. (c)
LOC PNC Bank, N.A. 08/01/17 4.92 8,600,000
8,930,000 Riverside County, CA (Bankruptcy Courthouse) (c)
LOC Commerzbank, A.G. 11/01/27 4.95 8,930,000
2,360,000 SDR Capital, L.L.C. (c)
LOC First Michigan Bank 10/15/01 4.97 2,360,000
2,200,000 SSM Health Care Systems - Series 1995D (c)
MBIA Insured 06/01/24 4.96 2,200,000
4,500,000 Seven Z Enterprises (f)
LOC PNC Bank, N.A. 06/03/13 5.05 4,500,000
1,900,000 Soaring Eagle Partners L.P. (c)
LOC PNC Bank, N.A. 10/01/12 4.92 1,900,000
2,910,000 Sojourn Project (c)
LOC FirstMerit Bank 07/01/12 5.01 2,910,000
1,920,000 UAI Technologies, Inc. - Series 1998 (c)
LOC First Union National Bank 05/01/18 4.95 1,920,000
1,695,000 Valley City Linen Co. (c)
LOC First Michigan Bank 02/15/02 4.97 1,695,000
2,700,000 Van Wert County, OH (c)
LOC Bank One Ohio 11/01/17 4.97 2,700,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Other Notes (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 30,000,000 Virginia Housing Development Authority Mortgage Bonds - Stem IV
GIC Monumental Life 03/16/99 5.22% $ 29,999,357
11,620,000 Washington State HFC (Country Manor One Project) (c)
LOC U.S. Bank of Washington 01/01/12 5.05 11,620,000
2,000,000 Willingboro Township, NJ BAN 10/01/99 4.93 2,003,189
4,500,000 Windsor Medical Center, Inc. (c)
LOC FirstMerit Bank 12/03/18 5.01 4,500,000
6,000,000 Winston Salem, NC COPS 03/10/99 4.88 6,000,000
14,000,000 Winston Salem, NC COPS 03/11/99 4.86 14,000,000
1,400,000 Wulfeck Family Partnership Project (c)
LOC Star Bank, N.A. 09/01/17 4.97 1,400,000
4,840,000 Zylstra Funding, Inc. (c)
LOC First Michigan Bank 06/01/27 4.97 4,840,000
------------- --------------
378,346,000 Total Other Notes 378,368,672
------------- --------------
<CAPTION>
Repurchase Agreement, Overnight (10.54%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 151,000,000 The Goldman Sachs Group L.P.
(Collateralized by $201,002,546, GNMA, 4.5000% to 7.5000%,
due 12/15/08 to 02/20/29) 03/01/99 4.80% $ 151,000,000
------------- --------------
151,000,000 Total Repurchase Agreement, Overnight 151,000,000
------------- --------------
<CAPTION>
Short Term Bank Notes (2.44%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,000,000 NationsBank 12/30/99 5.00% $ 15,000,000
20,000,000 NationsBank 01/18/00 5.02 19,996,590
------------- --------------
35,000,000 Total Short Term Bank Notes 34,996,590
------------- --------------
<CAPTION>
Yankee Certificates of Deposit (3.14%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 15,000,000 Commerzbank A.G. 01/10/00 5.02% $ 14,998,751
15,000,000 Toronto Dominion Bank 12/29/99 5.09 14,998,800
15,000,000 Union Bank of Switzerland 01/13/00 5.10 14,997,480
------------- --------------
45,000,000 Total Yankee Certificates of Deposit 44,995,031
------------- --------------
Total Investments (99.71%) (Cost $1,428,228,520+) 1,428,228,520
Cash and Other Assets, Net of Liabilities (0.29%) 4,127,356
--------------
Net Assets (100.00%) $1,432,355,876
==============
Net Assets Value, offering and redemption price per share:
Class A Shares, 1,136,291,505 shares outstanding (Note 3) $ 1.00
==============
Class B Shares, 297,650,903 shares outstanding (Note 3) $ 1.00
==============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
FEBRUARY 28, 1999
(UNAUDITED)
================================================================================
FOOTNOTES:
(a) The interest rate is adjusted daily based on opening Federal Funds rate +
0.10% (daily put).
(b) The interest rate is adjusted monthly based on 1 month LIBOR + 0.03% (7 day
put).
(c) Securities payable on demand at par including accrued interest (with 7 days
notice). Interest is adjusted weekly.
(d) The interest rate is adjusted daily based on Federal Funds rate + 0.15%.
(e) The interest rate is adjusted monthly based on 1 month LIBOR - 0.03%.
(f) This security can be put on the first business day of the month atpar.
Interest is adjusted weekly.
(g) The interest rate is adjusted quarterly based on 3 month LIBOR + 3 basis
points.
(h) The interest rate is adjusted quarterly based on 3 month LIBOR -0.07%.
(i) The interest rate is adjusted daily based on prime -2.90%.
(j) The interest rate is adjusted yearly based on 1 year LIBOR + 0.06% (one
year put)/Evergreen maturity.
(k) The interest rate is adjusted monthly based on 1 month LIBOR - 0.05%.
<TABLE>
<CAPTION>
KEY:
<S> <C> <C> <C> <C> <C>
BAN = Bond Anticipation Note HFA = Hospital Finance Authority
COPS = Certificates of Participation HFC = Housing Finance Corporation
EDFA = Economic Development Finance Authority IDRB = Industrial Development Revenue Bond
FGIC = Financial Guaranty Insurance Company LOC = Letter of Credit
GMAC = General Motors Acceptance Corporation MBIA = Municipal Bond Insurance Association
GO = General Obligation PCFA = Pollution Control Finance Authority
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
U.S. GOVERNMENT PORTFOLIO
STATEMENT OF NET ASSETS
FEBRUARY 28, 1999
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Face Maturity Value
Amount Date Yield (Note 1)
------ ---- ----- ------
Repurchase Agreements, Overnight (69.69%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 16,000,000 Fuji Bank, Ltd. (Collateralized by $15,757,000,
U.S. Treasury Bill, 6.250%, due 03/31/99 03/01/99 4.75% $ 16,000,000
210,000,000 The Goldman Sachs Group L.P. (Collateralized by $410,611,900,
GNMA, 2.402% to 8.350%, due 12/15/12 to 01/20/29) 03/01/99 4.80 210,000,000
215,000,000 JP Morgan Securities, Inc. (Collateralized by $259,563,094,
GNMA, 5.50% to 10.000%, due 12/20/01 to 02/15/29) 03/01/99 4.80 215,000,000
210,000,000 Morgan Stanley & Company, Inc. (Collateralized by $758,238,020,
GNMA, 7.000% to 9.000%, due 04/15/16 to 07/15/28) 03/01/99 4.83 210,000,000
------------- -------------
651,000,000 Total Repurchase Agreements, Overnight 651,000,000
------------- -------------
<CAPTION>
U.S. Government Obligations (30.13%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,000,000 U.S. Treasury Notes, 6.25% 03/31/99 5.33% $ 20,011,082
30,000,000 U.S. Treasury Notes, 6.37% 04/30/99 5.38 30,037,585
25,000,000 U.S. Treasury Notes, 6.25% 05/31/99 4.98 25,065,272
30,000,000 U.S. Treasury Notes, 6.00% 06/30/99 4.20 30,166,023
10,000,000 U.S. Treasury Notes, 6.37% 07/15/99 4.54 10,062,823
60,000,000 U.S. Treasury Notes, 5.87% 07/31/99 4.16 60,399,240
30,000,000 U.S. Treasury Notes, 6.00% 08/15/99 4.27 30,221,752
20,000,000 U.S. Treasury Notes, 5.87% 08/31/99 4.52 20,114,971
10,000,000 U.S. Treasury Notes, 5.75% 09/30/99 4.67 10,057,084
45,000,000 U.S. Treasury Notes, 5.50% 02/29/00 4.58 45,298,051
------------- -------------
280,000,000 Total U.S. Government Obligations 281,433,883
------------- -------------
Total Investments (99.82%) (Cost $932,433,883+) 932,433,883
Cash and Other Assets, Net of Liabilities (0.18%) 1,690,013
-------------
Net Assets (100.00%) $ 934,123,896
=============
Net asset value, offering and redemption price per share:
Class A Shares, 769,527,949 shares outstanding (Note 3) $ 1.00
=============
Class B Shares, 164,595,947 shares outstanding (Note 3) $ 1.00
=============
+ Aggregate cost for federal income tax purposes is identical.
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1999
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Money Market U.S. Government
Portfolio Portfolio
--------------- ---------------
INVESTMENT INCOME
<S> <C> <C>
Income:
Interest.............................................................. $ 36,516,549 $ 23,778,446
------------------- ------------------
Expenses: (Note 2)
Investment management fee............................................. 2,009,800 1,225,079
Administration fee.................................................... 1,442,264 1,003,032
Distribution fee (Class A)............................................ 1,324,000 1,014,021
Custodian expenses.................................................... 54,743 47,798
Shareholder servicing and related shareholder expenses................ 1,218,443 587,327
Legal, compliance and filing fees..................................... 105,950 74,453
Audit and accounting.................................................. 54,373 37,765
Directors' fees ...................................................... 13,553 7,553
Miscellaneous......................................................... 28,992 16,406
------------------- ------------------
Total expenses.................................................... 6,252,118 4,013,434
Less:
Expenses paid indirectly....................................... ( 3,267) ( 289)
------------------- ------------------
Net expenses.............................................. 6,248,851 4,013,145
------------------- ------------------
Net investment income.................................................... 30,267,698 19,765,301
<CAPTION>
REALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C> <C>
Net realized gain (loss) on investments.................................. 436,625 ---
------------------- ------------------
Increase in net assets from operations................................... $ 30,704,323 $ 19,765,301
=================== ==================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Money Market Portfolio U.S. Government Portfolio
------------------------------- -------------------------------
Six Months Six Months
Ended Year Ended Year
February 28, 1999 Ended February 28, 1999 Ended
(Unaudited) August 31, 1998 (Unaudited) August 31, 1998
--------- -------------- --------- ---------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C> <C> <C>
Operations:
Net investment income.................. $ 30,267,698 $ 56,795,811 $ 19,765,301 $ 37,915,374
Net realized gain (loss) on investments 436,625 69,854 -0- -0-
-------------- -------------- -------------- --------------
Increase in net assets from operations. 30,704,323 56,865,665 19,765,301 37,915,374
Dividends to shareholders:
Net investment income
Class A.............................. ( 23,114,623) ( 43,410,231) ( 16,624,559) ( 33,787,099)
Class B.............................. ( 7,429,203) ( 13,154,934) ( 3,140,742) ( 4,128,275)
Capital share transactions (Note 3):
Class A.............................. 149,571,764 184,183,496 17,031,092 16,916,289
Class B.............................. 1,069,921 28,629,584 94,428,268 1,200,649
-------------- -------------- -------------- --------------
Total increase (decrease)............ 150,802,182 213,113,580 111,459,360 18,116,938
Net assets:
Beginning of period.................. 1,281,553,694 1,068,440,114 822,664,536 804,547,598
-------------- -------------- -------------- --------------
End of period (including undistributed
net investment income of $138,140
and $414,267 for the Money Market
Portfolio)......................... $1,432,355,876 $1,281,553,694 $ 934,123,896 $ 822,664,536
============== ============== ============== ==============
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
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SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
1. Summary of Accounting Policies.
Short Term Income Fund, Inc. is a no-load, diversified, open-end management
investment company registered under the Investment Company Act of 1940. The Fund
is presently comprised of two Portfolios, Money Market Portfolio and U.S.
Government Portfolio, with each Portfolio having two classes of stock
authorized, Class A and Class B. The Class A shares of each Portfolio are
subject to a service fee pursuant to each Portfolio's Distribution and Service
Plan. The Class B shares are not subject to a service fee. Additionally, the
Portfolio may allocate among its classes certain expenses, to the extent
allowable to specific classes, including transfer agent fees, government
registration fees, certain printing and postage costs, and administrative and
legal expenses. Class specific expenses of the Fund were limited to shareholder
servicing fees and transfer agent expenses. In all other respects, the Class A
and Class B shares represent the same interest in the income and assets of each
respective Portfolio. The Fund's financial statements are prepared in accordance
with generally accepted accounting principles for investment companies as
follows.
a) Valuation of Securities -
Investments are valued at amortized cost. Under this valuation method, a
portfolio instrument is valued at cost and any discount or premium is
amortized on a constant basis to the maturity of the instrument.
b) Federal Income Taxes -
It is the policy of each Portfolio to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
provision for federal income tax is required.
c) Dividends and Distributions -
Dividends from investment income (including realized capital gains and
losses), determined on a class level, are declared daily and paid monthly.
With respect to the Money Market Portfolio, realized capital gains and
losses are excluded.
d) Use of Estimates -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
e) General -
Securities transactions are recorded on a trade date basis. Interest income
is accrued as earned. Realized gains and losses from securities
transactions are recorded on the identified cost basis. It is the Fund's
policy to take possession of securities as collateral under repurchase
agreements and to determine on a daily basis that the value of such
securities are sufficient to cover the value of the repurchase agreements.
2. Investment Management Fees and Other Transactions with Affiliates.
Under the Management Contract, the Money Market Portfolio pays a management fee
to Reich & Tang Asset Management, L.P. (the Manager) at the annual rate of .30%
of the Portfolio's average daily net assets not in excess of $750 million, plus
.29% of such assets in excess of $750 million but not in excess of $1 billion,
plus .28% of such assets in excess of $1 billion but not in excess of $1.5
billion, plus .27% of such assets in excess of $1.5 billion. The U.S. Government
Portfolio pays a management fee to the Manager equal to .275% of the Portfolio's
average daily net assets not in excess of $250 million, plus .25% of such assets
in excess of $250 million. The Manager has agreed to reimburse the Fund for its
net operating expenses (exclusive of taxes, brokerage, interest and
extraordinary expenses) to the extent that such expenses, including the
management fee, for any fiscal year exceed 1% of the average daily net assets of
each Portfolio for such fiscal year. No such reimbursement was required for the
period ended February 28, 1999.
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<PAGE>
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================================================================================
2. Investment Management Fees and Other Transactions with Affiliates
(Continued).
Pursuant to an Administrative Services Agreement, each Portfolio pays to the
Manager an annual fee of .21% of each Portfolio's average daily net assets not
in excess of $1.25 billion, plus .20% of such assets in excess of $1.25 billion
but not in excess of $1.5 billion, plus .19% of such assets in excess of $1.5
billion.
Pursuant to a Distribution and Service Plan adopted under Securities and
Exchange Commission Rule 12b-1, the Fund and Reich & Tang Distributors, Inc.
(the Distributor) entered into a Distribution Agreement and a Shareholder
Servicing Agreement, only with respect to the Class A shares of each Portfolio.
For its services under the Shareholder Servicing Agreement, the Distributor
receives from each Portfolio with respect only to the Class A shares, a service
fee equal to .25% per annum of each Portfolio's average daily net assets.
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$9,000 per annum plus $1,250 per meeting attended.
Included in the Statements of Operations under the caption "Shareholder
servicing and related shareholder expenses" are fees of $613,552 and $240,685
for the Money Market Portfolio and the U.S. Government Portfolio, respectively,
paid to Reich & Tang Services L.P., an affiliate of the Manager as servicing
agent for the Fund.
Included under the caption "Shareholder servicing and related shareholder
expenses" are expense offsets of $3,267 and $289 for the Money Market Portfolio
and the U.S. Government Portfolio, respectively.
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<PAGE>
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SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
================================================================================
3. Capital Stock.
At February 28, 1999, 10,000,000,000 shares of $.001 par value stock were
authorized and capital paid in for the Money Market Portfolio and the U.S.
Government Portfolio amounted to $1,433,942,408 and $934,123,896, respectively.
Transactions in capital stock, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Money Market Portfolio U.S. Government Portfolio
-------------------------------------- ------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
2/28/99 8/31/98 2/28/99 8/31/98
--------------- --------------- ---------------- ---------------
Class A
<S> <C> <C> <C> <C>
Sold................................ 504,969,570 957,881,430 343,329,502 867,760,740
Issued on reinvestment of dividends. 21,793,243 39,324,620 16,621,325 32,991,750
Redeemed............................ ( 377,191,049) ( 813,022,554) ( 342,919,735) ( 883,836,201)
------------- ------------- ------------- -------------
Net increase (decrease)............. 149,571,764 184,183,496 17,031,092 16,916,289
============= ============= ============= =============
<CAPTION>
Class B
<S> <C> <C> <C> <C>
Sold................................ 490,677,756 897,301,951 327,577,811 494,551,691
Issued on reinvestment of dividends. 7,365,111 12,863,930 2,790,436 3,422,930
Redeemed............................ ( 496,972,946) ( 881,536,297) ( 235,939,979) ( 496,773,972)
------------- ------------- ------------- -------------
Net increase (decrease)............. 1,069,921 28,629,584 94,428,268 1,200,649
============= ============= ============= =============
</TABLE>
4. Sales of Securities.
Accumulated undistributed realized losses of the Money Market Portfolio at
February 28, 1999 amounted to $1,724,671. Such amount represents tax basis
capital losses which may be carried forward to offset future capital gains
through August 31, 2004.
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<PAGE>
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================================================================================
<TABLE>
<CAPTION>
5. Financial Highlights.
Money Market Portfolio
CLASS A Year Ended August 31,
- ------- Six Months Ended -----------------------------------------------------------------
February 28, 1999 1998 1997 1996 1995 1994
----------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income..................... 0.022 0.047 0.046 0.047 0.047 0.029
Less distributions:
Dividends from net investment income...... ( 0.022) ( 0.047) ( 0.046) ( 0.047) ( 0.047) ( 0.029)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total Return.................................. 4.46%* 4.80% 4.66% 4.71% 4.82%(a) 2.93%
Ratios/Supplemental Data
Net assets, end of period (000)............... $1,135,034 $ 985,377 $ 801,001 $ 756,094 $ 661,795 $ 676,756
Ratios to average net assets:
Expenses.................................. 0.99%* 0.97% 0.99% 0.98% 0.88% 0.91%
Net investment income..................... 4.32%* 4.57% 4.57% 4.63% 4.75% 2.89%
Management, administration and
shareholder servicing fees waived....... -- 0.02% -- 0.02% 0.13% --
Expenses paid indirectly.................. -- -- 0.01% 0.01% -- --
<CAPTION>
Money Market Portfolio
CLASS B Year Ended August 31,
- ------- Six Months Ended -----------------------------------------------------------------
February 28, 1999 1998 1997 1996 1995 1994
----------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income..................... 0.023 0.050 0.049 0.049 0.050 0.031
Less distributions:
Dividends from net investment income...... ( 0.023) ( 0.050) ( 0.049) ( 0.049) ( 0.050) ( 0.031)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total Return.................................. 4.82%* 5.16% 5.01% 5.00% 5.08%(a) 3.19%
Ratios/Supplemental Data
Net assets, end of period (000)............... $ 297,322 $ 296,177 $ 267,439 $ 219,810 $ 217,877 $ 422,005
Ratios to average net assets:
Expenses.................................. 0.64%* 0.62% 0.66% 0.70% 0.62% 0.67%
Net investment income..................... 4.69%* 5.07% 4.90% 4.91% 4.90% 3.13%
Management, administration and
shareholder servicing fees waived....... -- 0.02% -- 0.02% 0.13% --
Expenses paid indirectly.................. -- -- 0.01% 0.01% -- --
* Annualized
(a) Includes the effect of a capital contribution from the Manager.
Without the capital contribution, the total return would have been
3.42% for Class A and 3.69% for Class B.
</TABLE>
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SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
5. Financial Highlights. (Continued)
U.S. Government Portfolio
Year Ended August 31,
CLASS A Six Months Ended ---------------------------------------------------------
------- February 28, 1999 1998 1997 1996 1995 1994
----------------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income..................... 0.020 0.047 0.046 0.047 0.048 0.028
Less distributions:
Dividends from net investment income...... ( 0.020) ( 0.047) ( 0.046) ( 0.047) ( 0.048) ( 0.028)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total Return.................................. 4.18%* 4.82% 4.73% 4.81% 4.93% 2.79%
Ratios/Supplemental Data
Net assets, end of period (000)............... $ 769,528 $ 752,497 $ 735,581 $ 666,620 $ 469,592 $ 398,699
Ratios to average net assets:
Expenses.................................. 0.89%* 0.87% 0.81% 0.81% 0.80% 0.85%
Net investment income..................... 4.10%* 4.71% 4.61% 4.68% 4.83% 2.75%
<CAPTION>
U.S. Government Portfolio
Year Ended August 31,
CLASS B Six Months Ended ---------------------------------------------------------
------- February 28, 1999 1998 1997 1996 1995 1994
----------------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income..................... 0.022 0.050 0.049 0.050 0.051 0.030
Less distributions:
Dividends from net investment income...... ( 0.022) ( 0.050) ( 0.049) ( 0.050) ( 0.051) ( 0.030 )
--------- --------- --------- --------- --------- ---------
Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total Return.................................. 4.53%* 5.15% 5.00% 5.07% 5.19% 3.04%
Ratios/Supplemental Data
Net assets, end of period (000)............... $ 164,596 $ 70,168 $ 68,967 $ 126,169 $ 306,799 $ 80,196
Ratios to average net assets:
Expenses.................................. 0.56%* 0.55% 0.55% 0.56% 0.55% 0.60%
Net investment income..................... 4.36%* 5.03% 4.86% 5.04% 5.20% 2.98%
</TABLE>
* Annualized
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<PAGE>
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SHORT TERM
INCOME
FUND, INC.
Semi-Annual Report
February 28, 1999
(Unaudited)
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<PAGE>
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- ------------------------------------------------------
This report is submitted for the general information
of the shareholders of the Fund. It is not
authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an
effective prospectus, which includes information
regarding the Fund's objectives and policies,
experience of its management, marketability of
shares, and other information.
- ------------------------------------------------------
Short Term Income Fund, Inc.
600 Fifth Avenue
New York, New York 10020
Manager
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
Custodian
Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, Missouri 64105
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services, Inc.
600 Fifth Avenue
New York, New York 10020
STIF299S
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<PAGE>
