SHORT TERM INCOME FUND INC, 497, 2001-01-12

SHORT TERM INCOME FUND INC
497, 2001-01-12

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Registration No. 2-65315
Rule 497(c)
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SHORT TERM 600 FIFTH AVENUE
INCOME FUND, INC. NEW YORK, N.Y. 10020
Class A Shares; Class B Shares (212) 830-5220
================================================================================

PROSPECTUS

December 29, 2000

A money market fund whose investment objective is to seek as high a level of
current income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Fund pursues this objective through two separate
portfolios: the Money Market Portfolio and the U.S. Government Portfolio.

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.

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TABLE OF CONTENTS

<S> <C> <C> <C>
2 Risk/Return Summary: Investments, Risks, 8 Management, Organization and Capital Structure
and Performance 8 Shareholder Information
5 Fee Table 17 Distribution Arrangements
6 Investment Objectives, Principal Investment 19 Financial Highlights
Strategies and Related Risks

</TABLE>
<PAGE>
I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE

Investment Objective
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The objective of the Fund's portfolios is to seek as high a level of current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. There is no assurance that the Fund will achieve its
investment objective.

Principal Investment Strategies
--------------------------------------------------------------------------------

The Fund intends to achieve its investment objective through two separate
portfolios. The Fund is a money market fund which invests in high quality,
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 portfolios at amortized cost and maintain a net asset value of $1.00
per share.

Money Market Portfolio

The Money Market Portfolio of the Fund seeks to achieve the Fund's objective
by investing in: (i) United States Government Securities; (ii) securities issued
by foreign governments and other foreign issuers; (iii) bank obligations; (iv)
commercial paper and certain debt obligations; and (v) repurchase agreements.

The U.S. Government Portfolio

The U.S. Government Portfolio of the Fund seeks to achieve the Fund's
objective by investing in obligations issued or guaranteed by the United States
Government, including repurchase agreements covering these types of obligations.

Principal Risks
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o 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.

o The value of the Fund's shares and the securities held by the Fund can each
decline in value.

o The amount of income the Fund generates will vary with changes in
prevailing interest rates.

o An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.

o The U.S. Government Portfolio's investment policy of investing in
obligations issued or guaranteed by the United States Government, while
minimizing risk of loss, may produce a lower yield than a policy of
investing in other types of instruments. The yield and total return of the
U.S. Government Portfolio is likely to be lower than that of the Money
Market Portfolio.

o The Money Market Portfolio may contain securities issued by foreign
governments and other foreign issuers. As a result, debt obligations of
foreign issuers may be subject to additional investment risks compared to
an investment in debt obligations of domestic issuers. Such additional
risks include future adverse political or economic developments in a
foreign jurisdiction and sudden changes in foreign laws regarding the
regulation of and rights attached with such investments.

Risk/Return Bar Chart And Table
--------------------------------------------------------------------------------

The following bar charts and tables may assist you in deciding whether to
invest in a portfolio of the Fund. The bar charts show the change in the annual
total returns for the Class A shares of each of the Fund's portfolios over the
last ten calendar years. The tables show the average annual total returns for
the last one, five, and ten year periods and since the inception of each Class
of each portfolio. 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. The current 7-day yield of each Class of each of the Fund's portfolios
may be obtained by calling the Fund toll-free at 1-800-221-3079.

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Short Term Income Fund, Inc. Money Market Portfolio - Class A Shares (1),(2),(3)

[GRAPHIC OMITTED]
Calendar Year End % Total Return

1990 7.73%
1991 5.65%
1992 3.45%
1993 2.60%
1994 3.47%
1995 5.09%
1996 4.58%
1997 4.75%
1998 4.70%
1999 4.35%

(1) As of September 30, 2000, the Money Market Portfolio's Class A shares had a
year-to-date return of 4.04%.

(2) The Money Market Portfolio's Class A shares' highest quarterly return was
1.92% for the quarter ended March 31, 1990; the Money Market Portfolio's
Class A shares lowest quarterly return was 0.44% for the quarter ended
December 31, 1993.

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Average Annual Total Returns - Money Market Portfolio
Class A Class B

<S> <C> <C>
For the periods ended December 31, 1999
One Year 4.35% 4.72%
Five Years 4.69% 5.02%
Ten Years 4.62% N/A
Since Inception* 7.01% 4.50%

* The inception date for the Class A shares was November 18, 1980 and
for the Class B shares was November 30, 1992.

</TABLE>
3
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Short Term Income Fund, Inc. U.S. Government Portfolio - Class A Shares
(1),(2),(3)
[GRAPHIC OMITTED]
Calendar Year End % Total Return

1990 7.47%
1991 5.47%
1992 3.29%
1993 2.45%
1994 3.43%
1995 5.18%
1996 4.71%
1997 4.76%
1998 4.64%
1999 4.15%

(1) As of September 30, 2000, the U.S. Government Portfolio's Class A shares
had a year-to-date return of 3.92%.

(2) The U.S. Government Portfolio's Class A shares' highest quarterly return
was 1.88% for the quarter ended March 31, 1990; the U.S. Government
Portfolio's Class A shares' lowest quarterly return was 0.60% for the
quarter ended June 30, 1993.

(3) Participating Organizations may charge a fee to investors for purchasing
and redeeming shares. Therefore, the net return to such investors may be
less than the net return by investing in the Fund directly.
<TABLE>
<CAPTION>
Average Annual Total Returns - U.S. Government Portfolio
Class A Class B
<S> <C> <C>

For the periods ended December 31, 1999
One Year 4.15% 4.49%
Five Years 4.68% 4.98%
Ten Years 4.54% N/A
Since Inception* 5.73% 4.45%

* The inception date of the Class A shares was November 30, 1982 and for the
Class B shares was November 30, 1992.

</TABLE>

4
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FEE TABLE
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This table describes the fees and expenses that you may pay if you buy and hold
shares in any of the Fund's portfolios.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Money Market U.S. Government
Portfolio Portfolio

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Class B Class A Class B
------- ------- ------- -------

Management Fees..................... .29% .29% .26% .26%
Distribution and Service (12b-1) Fees .25% .00% .25% .00%
Other Expenses...................... .46% .32% .43% .32%
Administration Fees............... .21% .21% .21% .21%
---- ---- ----- -----
Total Annual Fund Operating Expenses 1.00% .61% .94% .58%
===== ==== ==== ====

The Manager has voluntarily waived a portion of the management fee of the Money
Market Portfolio. After such waivers, the management fee with respect to both
the Class A shares and Class B shares was 0.28%. The actual Total Annual Fund
Operating Expenses for the Class A shares was 0.99% and for the Class B shares
was 0.60%. The fee waiver arrangement may be terminated at any time at the
option of the Manager.
</TABLE>

<TABLE>
<CAPTION>
Example

This Example is intended to help you compare the cost of investing in each of
the Fund's portfolios with the cost of investing in other money market funds.
The Example assumes that you invest $10,000 in either portfolio of the Fund for
the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:

<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years

Money Market Portfolio Class A: $102 $318 $552 $1,225
Class B: $62 $195 $340 $762

U.S. Government Portfolio Class A: $96 $300 $520 $1,155
Class B: $59 $186 $324 $726
</TABLE>

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<PAGE>
II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS

Investment Objective
--------------------------------------------------------------------------------

The Fund is a money market fund, which, through its two portfolios, seeks as
high a level of current income to the extent consistent with maintaining
liquidity and preserving capital. There can be no assurance that the Fund will
achieve its investment objective.

The investment objective 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
--------------------------------------------------------------------------------

In order to maintain a share price of $1.00, the Fund must comply with
certain industry regulations. The Fund will only invest in securities which are
denominated in United States dollars. Other regulations pertain to the maturity
and credit quality of the securities in which the Fund may invest. The Fund will
only invest in securities which have, or are deemed to have, a remaining
maturity of 397 days or less. Also, the average maturity for all securities
contained in each individual portfolio of the Fund, on a dollar-weighted basis,
will be 90 days or less.

The Fund will only invest in either securities which have been rated (or
whose issuers have been rated) in the highest short-term rating category by
nationally recognized statistical rating organizations, or are unrated
securities but which have been determined by the Fund's Board of Directors to be
of comparable quality.

Subsequent to its purchase by the Fund, the quality of an investment may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. If this occurs, the Board of Directors of the Fund shall
reassess the security's credit risks and shall take such action as the Board of
Directors determines is in the best interest of the Fund and its shareholders.
Reassessment is not required, however, if the security is disposed of or matures
within five business days of the investment adviser becoming aware of the new
rating and provided further that the Board of Directors is subsequently notified
of the investment adviser's actions.

Each portfolio of the Fund shall invest not more than 5% of its total assets
in securities issued by a single issuer.

The Fund's investment adviser considers the following factors when buying
and selling securities for each of the Portfolios: (i) availability of cash,
(ii) redemption requests, (iii) yield management, and (iv) credit management.

Money Market Portfolio

The Money Market Portfolio of the Fund is intended to attain the Fund's
investment objective through investments in the following securities.

(I) United States Government Securities: The Money Market Portfolio may
purchase short-term obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities. These obligations include
issues of the United States Treasury, such as bills, certificates of
indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of Congress.
Some of these securities are supported by the full faith and credit of the
United States Treasury, others are supported by the right of the issuer to
borrow from the Treasury, and still others are supported only by the
credit of the agency or instrumentality.

(II) Bank Obligations: The Money Market Portfolio may purchase certificates of
deposit, time deposits and bankers' acceptances issued by domestic banks,
foreign branches of domestic banks, foreign subsidiaries of domestic
banks, and domestic and foreign branches of foreign banks. Certificates of
deposit are certificates representing the obligation of a bank to repay
funds deposited with it for a specified period of time. Time deposits
are non-negotiable deposits maintained in a bank for a specified period of
time (in no
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event longer than seven days) at a stated interest rate. Time
deposits purchased by the Fund will not benefit from insurance from the
Federal Deposit Insurance Corporation. Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft drawn on it
by a customer. The Money Market Portfolio limits its investments in
obligations of domestic banks, foreign branches of domestic banks and
foreign subsidiaries of domestic banks to banks having total assets in
excess of $1 billion or the equivalent in other currencies. The Money
Market Portfolio limits its investments in obligations of domestic and
foreign branches of foreign banks to dollar denominated obligations of such
banks which at the time of investment have more than $5 billion, or the
equivalent in other currencies, in total assets.

(III) Commercial Paper and Certain Debt Obligations: The Money Market Portfolio
may purchase commercial paper or similar debt obligations. Commercial
paper is generally considered to be short-term, unsecured debt of
corporations.

(IV) Repurchase Agreements: The Money Market Portfolio may enter into
repurchase agreements provided that the instruments serving as collateral
for the agreements are eligible for inclusion in the Money Market
Portfolio. A repurchase agreement arises when a buyer purchases a security
and simultaneously agrees with the vendor to resell the security to the
vendor at an agreed upon time and price.

(V) Private Placement Investments: The Money Market Portfolio may purchase
commercial paper exempt from registration under Section 4(2) of the
Securities Act of 1933 ("4(2) Paper") and securities which are not
registered and are issued as private placements pursuant to Rule 144A of
the Securities Act of 1933 ("Rule 144A Securities"). The Portfolio intends
to purchase both liquid and illiquid 4(2) Paper and Rule 144A Securities.
Any such illiquid securities that the Money Market Portfolio purchases are
subject to a maximum of 10% of the value of its net assets.

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 these 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.

Risks
--------------------------------------------------------------------------------

The Fund complies with industry-standard requirements on the quality,
maturity and diversification of its investments which are designed to help
maintain a $1.00 share price. A significant change in interest rates or a
default on the Fund's investments could cause its share price (and the value of
your investment) to change.

Since the Money Market Portfolio may contain securities issued by foreign
governments and other foreign issuers, the Money Market Portfolio may be subject
to additional investment risks when compared with those incurred by a fund which
invests only in domestic issuers. Foreign securities markets generally are not
as developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of comparable
United States issuers. Similarly, volume in most foreign securities markets is
less than in the United States. The issuers of some of these securities may be
subject to less stringent or different regulation than are United States
issuers. In addition, there may be less publicly available information about a
non-United States issuer, and non-United States issuers generally are not
subject to uniform accounting and financial reporting standards and
requirements. Additional risks associated with foreign investments might include
adverse political and

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<PAGE>
economic developments, seizure or nationalization of foreign deposits and
adoption of governmental restrictions which might adversely affect the payment
of principal and interest on the foreign securities. Furthermore, some of these
foreign securities may be subject to stamp, withholding or other excise taxes
levied by foreign governments, which have the effect of increasing the cost of
such securities and reducing the realized gain or increasing the realized loss
on such securities at the time of sale.

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.

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, 2000, the Manager was the
investment manager, advisor or sub-advisor with respect to assets aggregating in
excess of $14 billion. The Manager has been an investment adviser since 1970 and
currently is manager of thirteen other registered investment companies and also
advises pension trusts, profit-sharing trusts and endowments.

Pursuant to the Investment Management Contract, the Manager manages each
Portfolio's portfolio of securities and makes the decisions with respect to the
purchase and sale of investments, subject to the general control of the Board of
Directors of the Fund. Under the Investment Management Contract: (i) the Money
Market Portfolio will pay an annual management fee of .30% of the Portfolio's
average daily net assets not in excess of $750 million, plus .29% of such assets
in excess of $750 million but not in excess of $1 billion, plus .28% of such
assets in excess of $1 billion but not in excess of $1.5 billion, plus .27% of
such assets in excess of $1.5 billion; and (ii) the U.S. Government Portfolio
will pay an annual management fee of .275% of the Portfolio's average daily net
assets not in excess of $250 million, plus .25% of such assets in excess of $250
million. For the fiscal year ended August 31, 2000, the Manager received a fee
equal to 0.28% and 0.26% per annum of the Money Market Portfolio and the U.S.
Government Portfolio's average daily net assets, respectively.

Pursuant to the Administrative Services Contract, 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. For the fiscal year ended August 31, 2000, the
Manager received a fee equal to 0.21% per annum of each of the Money Market
Portfolio and the U.S. Government Portfolio's average daily net assets.

In addition, Reich & Tang Distributors, Inc., receives a fee equal to .25%
per annum of the average daily net assets of the Class A shares of each
Portfolio under the Shareholder Servicing Agreement. The fees are accrued daily
and paid monthly. Investment management fees and operating expenses, which are
attributable to both Classes of a Portfolio, will be allocated daily to each
Class share based on the percentage of outstanding shares at the end of the day.

IV. SHAREHOLDER INFORMATION

The Fund sells and redeems its shares on a continuing basis at their net
asset value and does not impose a charge for either sales or redemptions. All
transactions in Fund shares are
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effected through the Fund's transfer agent, who accepts orders for purchases and
redemptions from Participating Organizations and from investors directly.

Pricing of Fund Shares
--------------------------------------------------------------------------------

The net asset value of each Class of each portfolio of the Fund's shares is
determined as of 12 noon, New York City time, on each Fund Business Day. Fund
Business Day means weekdays (Monday through Friday) except days on which the New
York Stock Exchange is closed for trading (i.e. national holidays). 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 Investment Company Act of
1940 (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 for each Class made after receipt and acceptance 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. Certificates for Fund shares will not be 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
--------------------------------------------------------------------------------

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.

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Investors purchasing shares through a Participating Organization with which
they have an account ("Participant Investors") become Class A shareholders.
"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. 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 a
personalized monthly statement from the Fund listing (i) the total number of
Fund shares owned as of the statement closing date, (ii) purchases 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. When instructed by
its customer to purchase or redeem Fund shares, the Participating Organization,
on behalf of the customer, transmits to the Fund's transfer agent a purchase or
redemption order, and in the case of a purchase order, payment for the shares
being purchased.

Participating Organizations may confirm to their customers who are
shareholders in the Fund each purchase and redemption of Fund shares for the
customers' accounts. Also, Participating Organizations may send their customers
periodic account statements showing the total number of Fund shares owned by
each customer as of the statement closing date, purchases and redemptions of
Fund shares by each customer during the period covered by the statement and the
income earned by Fund shares of each customer during the statement period
(including dividends paid in cash or reinvested in additional Fund shares).
Participant Investors whose Participating Organizations have not undertaken to
provide such statements will receive them from the Fund directly.

Participating Organizations may charge Participant Investors a fee in
connection with their use of specialized purchase and redemption procedures. In
addition, Participating Organizations offering purchase and redemption
procedures similar to those offered to shareholders who invest in the Fund
directly, may impose charges, limitations, minimums and restrictions in addition
to or different from those applicable to shareholders who invest in the Fund
directly. Accordingly, the net yield to investors who invest through
Participating Organizations may be less than the net yield that could be
achieved 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.

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In the case of qualified Participating Organizations, orders received by
the Fund's transfer agent before 12 noon, New York City time, on a Fund Business
Day, without accompanying Federal Funds will result in the issuance of shares on
that day only if the Federal Funds required in connection with the orders are
received by the Fund's transfer agent before 4:00 p.m., New York City time, on
that day. Orders for which Federal Funds are received after 4:00 p.m., New York
City time, will result in share issuance the following Fund Business Day.
Participating Organizations are responsible for instituting procedures to insure
that purchase orders by their respective clients are processed expeditiously.

Initial Direct Purchases of Class B Shares
--------------------------------------------------------------------------------

Investors who wish to invest in the Fund directly may obtain a current
Prospectus and the subscription order form necessary to open an account by
telephoning the Fund at the following numbers:

Within New York 212-830-5220
Outside New York (TOLL FREE) 800-221-3079

Mail

Investors may send a check made payable to "Short Term Income Fund, Inc."
along with a completed subscription order form to:

Short Term Income Fund, Inc.
Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020

Checks are accepted subject to collection at full value in United States
currency. Payment by a check drawn on any member of the Federal Reserve System
will normally be converted into Federal Funds within two business days after
receipt of the check. Checks drawn on a non-member bank may take substantially
longer to convert into Federal Funds. An investor's purchase order will not be
accepted until the Fund receives Federal Funds.

Bank Wire

To purchase shares of the Fund using the wire system for transmittal of
money among banks, investors should first obtain a new account number by
telephoning the Fund at 212-830-5220 (within New York) or at 800-221-3079
(outside New York) and then instruct a member commercial bank to wire money
immediately to:

For Money Market Portfolio:

State Street Kansas City
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:

State Street Kansas City
ABA # 101003621
Reich & Tang Funds
DDA # 890752-953-8
For Short Term Income Fund, Inc.
U.S. Government Portfolio
Account of (Investor's Name)
Fund Account #
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.

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<PAGE>
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.

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, provided that the information on the subscription
form on file with the Fund is still applicable.

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
paid out 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.

12
<PAGE>
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 these actions
are in the best interests of the Fund and its shareholders.

Shareholders electing the checking option are subject to the procedures,
rules and regulations of the Fund's agent bank governing checking accounts.
Checks drawn on a jointly owned account may, at the shareholder's election,
require only one signature. Checks in amounts exceeding the value of the
shareholder's account at the time the check is presented for payment will not be
honored. Since the dollar value of the account changes daily, the total value of
the account may not be determined in advance and the account may not be entirely
redeemed by check. In addition, the Fund reserves the right to charge the
shareholder's account a fee up to $20 for checks not honored as a result of an
insufficient account value, a check deemed not negotiable because it has been
held longer than six months, an unsigned check and/or a post-dated check. The
Fund reserves the right to terminate or modify the check redemption procedure at
any time or to impose additional fees following notification to the Fund's
shareholders.

Corporations and other entities electing the checking option are required to
furnish a certified resolution or other evidence of authorization in accordance
with the Fund's normal practices. Individuals and joint tenants are not required
to furnish any supporting documentation. Appropriate authorization forms will be
sent by the Fund or its agents to corporations and other shareholders who select
this option. As soon as the 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

13
<PAGE>
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.

Generally

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 shareholder's 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 (i) any period during which the New York Stock Exchange
is closed (other than customary weekend and holiday closings), (ii) any period
during which the SEC determines that trading thereon is restricted, (iii) 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 to fairly determine the value of its net assets, (iv) 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 made to the
appropriate Participating Organization only. The Participating Organization will
be responsible for notifying Participant Investors of the proposed mandatory
redemption. Shareholders may avoid mandatory redemption by purchasing sufficient
additional shares to increase his total net asset value to the minimum amount
during the notice period.

Specified Amount Automatic Withdrawal Plan
--------------------------------------------------------------------------------

Shareholders may elect to withdraw shares and receive payment from the Fund
of a specified amount of $50 or more automatically on a monthly or quarterly
basis. The monthly or quarterly withdrawal payments of the specified amount are
made by the Fund on the 23rd day of the month. Whenever such 23rd day of a month
is not a Fund Business Day, the payment date is the Fund Business Day preceding
the 23rd day of the month. In order to make a payment, a number of shares equal
in aggregate net asset value to the payment amount are redeemed at their net
asset value on the Fund Business Day immediately

14
<PAGE>
preceding the date of payment. To the extent that the redemptions to make plan
payments exceed the number of shares purchased through reinvestment of dividends
and distributions, the redemptions reduce the number of shares purchased on
original investment, and may ultimately liquidate a shareholder's investment.

The election to receive automatic withdrawal payments may be made at the
time of the original subscription by so indicating on the subscription order
form. The election may also be made, changed or terminated at any later time by
sending a signature guaranteed written request to the transfer agent. Because
the withdrawal plan involves the redemption of Fund shares, such withdrawals may
constitute taxable events to the shareholder but the Fund does not expect that
there will be any realized capital gains.

Dividends and Distributions
--------------------------------------------------------------------------------

The Fund declares dividends equal to all its net investment income
(excluding capital gains and losses, if any, and amortization of market
discount) on each Fund Business Day and pays dividends monthly. There is no
fixed dividend rate. In computing these dividends, interest earned and expenses
are accrued daily.

Distributions of long-term capital gains, if any, are paid by both
Portfolios at least once a year and, at the shareholder's option, are reinvested
in additional shares of the Portfolio from which they were paid or are paid in
cash.

All dividends and distributions of capital gains are automatically invested,
at no charge, in additional Fund shares of the same Class of shares immediately
upon payment thereof unless a shareholder has elected by written notice to the
Fund to receive either of such distributions in cash.

Because Class A shares bear the service fee under the Fund's 12b-1 Plan, the
net income of and the dividends payable to the Class A shares will be lower than
the net income of and dividends payable to the Class B shares of the Fund.
Dividends paid to each Class of shares of each portfolio of the Fund will,
however, be declared and paid on the same days at the same times and, except as
noted with respect to the service fees payable under the Plan, will be
determined in the same manner and paid in the same amounts.

Retirement Plans
--------------------------------------------------------------------------------

The Fund has available a form of individual retirement account ("IRA") for
investment in the Fund's shares. In general, an individual can make an annual
contribution to an IRA in an amount equal to the lesser of $2000 or 100% of the
individual's earned income. In addition, in the case of a married couple filing
a joint return, annual IRA contributions of up to $2000 can generally be made
for each spouse, as long as the combined compensation of both spouses is at
least equal to the contributed amounts. IRA contributions can, in general, be
made to either traditional deductible IRAs, traditional non-deductible IRAs or
non-deductible Roth IRAs, a new type of IRA established by the Taxpayer Relief
Act of 1997. Contributions to a Roth IRA are not deductible, but qualified
distributions from a Roth IRA are not includable in income or subject to the
additional ten-percent tax on early withdrawals, if deemed a qualified
distribution. A "qualified distribution" is a distribution that is made after
the end of the five taxable year period beginning with the first taxable year in
which the individual made a contribution to a Roth IRA, and which is made on or
after the date in which the individual attains an age of 59 1/2, made to a
beneficiary on or after the death of the individual, is attributable to the
disability of the individual, or is a distribution for specified first-time home
buyer expenses.

Contributions to traditional deductible IRAs and Roth IRAs may be limited
based on adjusted gross income levels. The ability of a person who is an active
participant in an employer sponsored retirement plan to make deductible
contributions to a regular IRA is phased out based on the individual's adjusted
gross incomes. For 2001, the phase out occurs over a range of adjusted gross
incomes from $53,000 to $63,000 on a joint return and $33,000 to $43,000 on a
single return. The
15
<PAGE>
phase out range for a married individual who is not an active participant but
whose spouse is an active participant is between $150,000 and $160,000.

The maximum annual contribution that can be made to a Roth IRA is also
subject to phase out rules that apply to married individuals filing joint
returns when adjusted gross income is between $150,000 and $160,000 and to
single individuals when adjusted gross income is between $95,000 and $110,000.

For both traditional deductible IRAs and Roth IRAs, the phase out range for
married individuals filing separate returns is from $0 to $10,000. The minimum
investment required to open an IRA is $250. Generally, there are penalties for
premature distributions from a traditional deductible IRA before the attainment
of age 59 1/2, except in the case of the participant's death or disability and
certain other circumstances including first-time home buyer expenses and certain
education expenses.

Fund shares may also be a suitable investment for assets of other types of
qualified pension or profit-sharing plans, including cash or deferred or salary
reduction "Section 401(k) plans" which give participants the right to defer
portions of their compensation for investment on a tax-deferred basis until
distributions are made from the plans.

Persons desiring information concerning investments by IRAs and other
retirement plans should write or telephone the Fund.

Exchange Privilege
--------------------------------------------------------------------------------

Shareholders of the Fund are entitled to exchange some or all of their
shares in the Fund for shares of the same Class of certain other investment
companies that retain Reich & Tang Asset Management L.P. as investment adviser
and that participate in the exchange privilege program with the Fund. If only
one Class of shares is available in a particular exchange fund, the shareholder
of the Fund is entitled to exchange its shares for the shares available in that
exchange fund. Currently the exchange privilege program has been established
between the Fund and California Daily Tax Free Income Fund, Inc., Connecticut
Daily Tax Free Income Fund, Inc., Cortland Trust, Inc., Daily Tax Free Income
Fund, Inc., Delafield Fund, Inc., Florida Daily Municipal Income Fund, Georgia
Daily Municipal Income Fund, Inc., New Jersey Daily Municipal Income Fund, Inc.,
New York Daily Tax Free Income Fund, Inc. and North Carolina Daily Municipal
Income Fund, Inc. In the future, the exchange privilege program may be extended
to other investment companies that retain Reich & Tang Asset Management L.P. as
investment adviser or manager.

There is no charge for the exchange privilege or limitation as to frequency
of exchange. The minimum amount for an exchange is $1,000. However, shareholders
who are establishing a new account with an investment company through the
exchange privilege must ensure that a sufficient number of shares are exchanged
to meet the minimum initial investment required for the investment company into
which the exchange is being made. Each Class of shares is exchanged at its
respective net asset value.

The exchange privilege provides shareholders of the Fund with a convenient
method to shift their investment among different investment companies when they
feel such a shift is desirable. The exchange privilege is available to
shareholders residing in any state in which shares of the investment company
being acquired may legally be sold. Shares of the same Class may be exchanged
only between investment company accounts registered in identical names. Before
making an exchange, the investor should review the current prospectus of the
investment company into which the exchange is to be made. An exchange is a
taxable event.

Instructions for exchanges may be made by sending a signature guaranteed
written request to:

Short Term Income Fund, Inc.
c/o Reich & Tang Funds
600 Fifth Avenue-8th Floor
New York, New York 10020

16
<PAGE>
or, for shareholders who have elected that option, by telephoning the Fund
at 212-830-5220 (within New York) or 800-221-3079 (outside New York). The Fund
reserves the right to reject any exchange request and may modify or terminate
the exchange privilege at any time.

Tax Consequences
--------------------------------------------------------------------------------

Dividends paid by the Fund from its investment company taxable income
including its net 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 investment company taxable
income or capital gains dividends paid shortly following the shareholder's
purchase of shares of the Fund, even though the dividend might be viewed
economically as a return of capital to the shareholder.

It is expected that no portion of dividends to shareholders will qualify for
the dividends- received deduction for corporations.

Distributions from the U.S. Government Portfolio that are derived from
interest on certain obligations of the United States Government and agencies
thereof may be exempt from state and local taxes in certain states.

The redemption of shares in the Fund, or the exchange of shares for shares
in another Fund will be taxable events, on which any gain realized will be
subject to tax.

The Fund is required by Federal law to withhold 31% of reportable payments
paid to certain shareholders who have failed to provide a correct Social
Security or tax identification number or when the Fund or shareholder has been
notified by the IRS that the shareholder is subject to 31% backup withholding.
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 shareholders consult with counsel and other
competent tax advisors.

V. DISTRIBUTION ARRANGEMENTS

Rule 12b-1 Fees
-------------------------------------------------------------------------------

Investors do not pay a sales charge to purchase shares of the Fund. However,
the Fund pays fees in connection with the distribution of shares and for
services provided to the Class A shareholders. The Fund pays these fees from its
assets on an ongoing basis and therefore, over time, the payment of these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.

The Fund's Board of Directors has adopted a Rule 12b-1 distribution and
service plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the Class A
shares of the Fund only).

Under the Distribution Agreement, the Distributor serves as distributor of
the Fund's shares and, for nominal consideration (i.e., $1.00) and as agent for
the Fund, will solicit orders for the purchase of the Fund's shares, provided
that any orders will not be binding on the Fund until accepted by the Fund as
principal.

Under the Shareholder Servicing Agreement, the Distributor receives, with
respect only to the Class A shares, a service fee equal to .25% per annum of
each Portfolio's Class A shares' average daily net assets (the "Shareholder
Servicing Fee") for providing personal shareholder services and for the
maintenance of shareholder accounts. This fee is accrued daily and paid monthly
and any
17
<PAGE>
portion of the fee may be deemed to be used by the Distributor for payments to
Participating Organizations with respect to their provision of such services to
their clients or customers who are shareholders of the Class A shares of each
Portfolio. The Class B shareholders will not receive the benefit of such
services from Participating Organizations and, therefore, will not be assessed a
Shareholder Servicing Fee.

The Plan provides that, in addition to the Shareholder Servicing Fee, the
Fund will pay for (i) telecommunications expenses, including the cost of
dedicated lines and CRT terminals, incurred by the Distributor and Participating
Organizations in carrying out their obligations under the Shareholder Servicing
Agreement with respect to Class A shares, and (ii) preparing, printing and
delivering the Fund's prospectus to existing shareholders of the Fund and
preparing and printing subscription application forms for shareholder accounts.

The Plan provides that the Manager may make payments from time to time from
its own resources, which may include the management fee and past profits for the
following purposes: (i) to defray costs, and to compensate others, including
Participating Organizations with whom the Distributor has entered into written
agreements, for performing shareholder servicing on behalf of the Class A shares
of the Fund; (ii) to compensate certain Participating Organizations for
providing assistance in distributing the Class A shares of the Fund; and (iii)
to pay the costs of printing and distributing the Fund's prospectus to
prospective investors, and to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the Fund's
Class A shares. The Distributor may also make payments from time to time from
its own resources, which may include the Shareholder Servicing Fee (with respect
to Class A shares) and past profits, for the purposes enumerated in (i) above.
The Distributor will determine the amount of such payments made pursuant to the
Plan, provided that such payments will not increase the amount which the Fund is
required to pay to the Manager and Distributor for any fiscal year under either
the Investment Management Contract in effect for that year or under the
Shareholder Servicing Agreement in effect for that year.

18
<PAGE>

VI. FINANCIAL HIGHLIGHTS

These financial highlights tables are intended to help you understand the
financial performance of both Classes of the Money Market Portfolio and the U.S.
Government Portfolio for the past 5 years. Certain information reflects
financial results for a single Portfolio share. The total returns in the table
represent the rate that an investor would have earned on an investment in the
Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP for the fiscal years
ended August 31, 1999 and 2000, and by other auditors for the fiscal years prior
to August 31, 1999. The report of PricewaterhouseCoopers LLP, along with the
Fund's financial statements, is included in the annual report, which is
available upon request.

<TABLE>
<CAPTION>
Money Market Portfolio
CLASS A Year Ended August 31,
------- ------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
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...................... 0.050 0.042 0.047 0.046 0.047
Less distributions:
Dividends from net investment income....... ( 0.050) ( 0.042) ( 0.047) ( 0.046) ( 0.047)
-------- -------- -------- -------- --------
Net asset value, end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.................................. 5.16% 4.30% 4.80% 4.66% 4.71%
Ratios/Supplemental Data
Net assets, end of year (000)................. $ 940,199 $1,193,420 $ 985,377 $ 801,001 $ 756,094
Ratios to average net assets:
Expenses+.................................. 0.99% 0.99% 0.97% 0.99% 0.98%
Net investment income...................... 5.02% 4.19% 4.57% 4.57% 4.63%
Management and administration fees waived.. 0.01% 0.00% 0.02% 0.00% 0.02%
Expenses paid indirectly................... 0.00% 0.00% 0.00% 0.01% 0.01%

<CAPTION>
Money Market Portfolio
CLASS B Year Ended August 31,
------- ------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
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...................... 0.054 0.046 0.050 0.049 0.049
Less distributions:
Dividends from net investment income....... ( 0.054) ( 0.046) ( 0.050) ( 0.049) ( 0.049)
-------- -------- -------- -------- --------
Net asset value, end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.................................. 5.58% 4.67% 5.16% 5.01% 5.00%
Ratios/Supplemental Data
Net assets, end of year (000)................. $ 351,335 $ 297,248 $ 296,177 $ 267,439 $ 219,810
Ratios to average net assets:
Expenses+.................................. 0.60% 0.64% 0.62% 0.66% 0.70%
Net investment income...................... 5.48% 4.55% 5.07% 4.90% 4.91%
Management and administration fees waived.. 0.01% 0.00% 0.02% 0.00% 0.02%
Expenses paid indirectly................... 0.00% 0.00% 0.00% 0.01% 0.01%
</TABLE>

+ Includes expenses paid indirectly.

19
<PAGE>

VI. FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
U.S. Government Portfolio
CLASS A Year Ended August 31,
------- ------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
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...................... 0.048 0.040 0.047 0.046 0.047
Less distributions:
Dividends from net investment income....... ( 0.048) ( 0.040) ( 0.047) ( 0.046) ( 0.047)
------- ------- ------- ------- -------
Net asset value, end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.................................. 4.95% 4.10% 4.82% 4.73% 4.81%
Ratios/Supplemental Data
Net assets, end of year (000)................. $ 491,022 $ 723,952 $ 752,497 $ 735,581 $ 666,620
Ratios to average net assets:
Expenses................................... 0.94% 0.89% 0.87% 0.81% 0.81%
Net investment income...................... 4.77% 4.03% 4.71% 4.61% 4.68%

<CAPTION>
U.S. Government Portfolio
CLASS B Year Ended August 31,
------- ------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
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...................... 0.052 0.043 0.050 0.049 0.050
Less distributions:
Dividends from net investment income....... ( 0.052) ( 0.043) ( 0.050) ( 0.049) ( 0.050)
------- ------- ------- ------- -------
Net asset value, end of year.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.................................. 5.32% 4.44% 5.15% 5.00% 5.07%
Ratios/Supplemental Data
Net assets, end of year (000)................. $ 135,862 $ 117,996 $ 70,168 $ 68,967 $ 126,169
Ratios to average net assets:
Expenses................................... 0.58% 0.56% 0.55% 0.55% 0.56%
Net investment income...................... 5.23% 4.32% 5.03% 4.86% 5.04%
</TABLE>

20
<PAGE>

SHORT
TERM
INCOME
FUND, INC.

PROSPECTUS

December 29, 2000

====================================================
A Statement of Additional Information (SAI) dated December 29, 2000 includes
additional information about the Fund and its investments and is incorporated
by reference into this Prospectus. Further information about Fund investments is
available in the Annual and Semi-Annual shareholder reports. 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 EDGAR database on the Securities and Exchange Commission's
Internet website (http://www.sec.gov) to view the SAI, material incorporated by
reference and other information. Copies of the information may be obtained,
after paying a duplicating fee, by sending an electronic request to
[email protected]. 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 1-202-942-8090. 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. 20549-0102.

811-2950
Reich & Tang Distributors, Inc.
600 Fifth Avenue
New York, NY 10020
(212) 830-5220

STIF2001P

<PAGE>
TRA
PROSPECTUS

Short Term Income Fund, Inc.
600 Fifth Avenue
New York, NY 10020
(212) 830-5220

Total Resource Account Class of Shares ("TRA Shares") of U.S. Government
Portfolio.

December 29, 2000

A money market fund whose investment objective 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 accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.

TABLE OF CONTENTS

2 Risk/Return Summary: Investments, Risks 8 Management, Organization
and Performance and Capital Structure
5 Fee Table 9 Shareholder Information
6 Investment Objectives, Principal 17 Distribution Arrangements
Investment 20 Financial Highlights
Strategies and Related Risks
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I. RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE

INVESTMENT OBJECTIVE

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 Portfolio will achieve
its investment objective.

PRINCIPAL INVESTMENT STRATEGIES

The U.S. Government Portfolio is a money market fund which invests in high
quality, short-term debt instruments. The Portfolio seeks to maintain an
investment portfolio 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 seeks to achieve its objective by investing in
obligations issued or guaranteed by the United States Government, including
repurchase agreements covering these types of obligations. Repurchase agreements
are agreements in which a buyer purchases a security and simultaneously agrees
with the vendor to resell the security to the vendor at an agreed upon time and
price.

PRINCIPAL RISKS

o Although the Portfolio seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the
Portfolio.

o The value of the Portfolio's shares and the securities held by the
Portfolio can each decline in value.

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o The amount of income the Portfolio generates will vary with changes in
prevailing interest rates.

o An investment in the Portfolio is not a bank deposit and is not insured or
guaranteed by the FDIC or any other governmental agency.

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 U.S. Government Portfolio. The bar chart shows the change in
the annual total returns of Class A shares (which are not offered by this
Prospectus) of the Portfolio over the last ten calendar years. The table shows
the average annual total returns of Class A shares for the last one, five, ten
year periods, and since inception. The table also includes the TRA shares'
average annual total return since inception. While analyzing this information,
please note that the Portfolio's past performance is not an indication of how
the Portfolio will perform in the future. The current 7-day yield of the Fund's
Classes may be obtained by calling the Fund toll-free at 1-800-221-3079.

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Short Term Income Fund, Inc. U.S. Government Portfolio - Class A Shares
(1), (2), (3), (4)
[GRAPHIC OMITTED]
Calendar Year End % Total Return

1990 7.47%
1991 5.47%
1992 3.29%
1993 2.45%
1994 3.43%
1995 5.18%
1996 4.71%
1997 4.76%
1998 4.64%
1999 4.15%

(1) The chart shows returns for the Class A shares of the U.S. Government
Portfolio (which are not offered by this Prospectus). As of December 31,
1999 the TRA shares had not been in existence for a full calendar year. All
Classes of the Portfolio will 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. If the expenses of the TRA Shares are higher than the Class
A shares, then your annual return may be lower.

(2) As of September 30, 2000, the U.S. Government Portfolio Class A shares had
a year-to-date return of 3.92%.

(3) The U.S. Government Portfolio's Class A shares' highest quarterly return
was 1.88% for the quarter ended March 31, 1990; the U.S. Government
Portfolio's Class A shares' lowest quarterly return was 0.60% for the
quarter ended June 30, 1993.

(4) Participating Organizations may charge a fee to investors for purchasing
and redeeming shares. Therefore, the net return to such investors may be
less than the net return by investing in the Portfolio directly.

Average Annual Total Returns - U.S. Government Portfolio

Class A TRA shares
For the periods ended December 31, 1999
One Year 4.15% N/A
Five Years 4.68% N/A
Ten Years 4.54% N/A
Since Inception 5.73% 4.49%

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FEE TABLE

This table describes the fees and expenses that you may pay if you buy and hold
the TRA Shares of the Fund's 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................................. .42%
Administration Fees....................... .21%
------
Total Annual Fund Operating Expenses........... .93%
====

Example

This Example is intended to help you compare the cost of investing in the Fund's
U.S. Government Portfolio TRA Class with the cost of investing in other money
market funds.

The Example assumes that you invest $10,000 in the U.S. Government 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:

U.S. Government Portfolio - TRA Shares 1 year 3 years 5 years 10 years
$95 $296 $515 $1,143

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II. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS

INVESTMENT OBJECTIVE

The U.S. Government Portfolio is a money market fund which seeks as high a level
of current income to the extent consistent with maintaining liquidity and
preserving capital.

The Portfolio's investment objective described in this section may only be
changed upon the approval of the holders of a majority of the outstanding shares
of the Portfolio.

PRINCIPAL INVESTMENT STRATEGIES

GENERALLY

In order to maintain a share price of $1.00, the Portfolio must comply with
certain industry regulations. The Portfolio 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
Portfolio 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 Portfolio, on a dollar-weighted basis, will be 90
days or less.

The Portfolio will only invest in either securities which have been rated (or
whose issuers have been rated) in the highest two short-term rating categories
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 Portfolio, the quality of an investment may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Portfolio. 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

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the Portfolio and its shareholders. Reassessment is not required, however, if
the security is disposed of or matures within five business days of the
investment adviser becoming aware of the new rating and provided further that
the Board of Directors is subsequently notified of the investment adviser's
actions.

The Portfolio shall invest not more than 5% of its total assets in securities
issued by a single issuer.

The Portfolio's investment adviser 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 intends to attain its objective through
investments limited to obligations issued or guaranteed by the United States
Government, including repurchase agreements covering these types of obligations.
The Portfolio will enter into repurchase agreements only if the instruments
serving as collateral for the agreements are eligible for inclusion in the
Portfolio.

RISKS

The Portfolio 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 Portfolio's investments could cause its share price (and the
value of your investment) to change.

The investment policies of the U.S. Government Portfolio may produce a lower
yield than a policy of investing in other types of instruments.

III. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE

The Fund's investment adviser is Reich & Tang Asset Management L.P. (the
"Manager"). The Manager's

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principal business office is located at 600 Fifth Avenue, New York, NY 10020. As
of November 30, 2000, the Manager was the investment manager, advisor or
sub-advisor with respect to assets aggregating in excess of $14 billion. The
Manager has been an investment adviser since 1970 and currently is manager of
thirteen other registered investment companies and also advises pension trusts,
profit-sharing trusts and endowments.

Pursuant to the Investment Management Contract, 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. For the fiscal year ended August 31, 2000, the Fund paid
the Manager a management fee equal to .26% per annum of the Fund's average daily
net assets.

Pursuant to the Administrative Services Contract, 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 the 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. For
the fiscal year ended August 31, 2000, the Fund paid the Manager a fee for
administrative services equal to .21% per annum of the Fund's average daily net
assets.

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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 U.S. Government Portfolio 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 days on which the New York Stock Exchange is closed for
trading (i.e. national holidays). The net asset value of the TRA Shares is
computed by dividing the value of the U.S. Government Portfolio'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
Portfolio 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 U.S. Government Portfolio's portfolio securities are valued at their
amortized cost in compliance with the provisions of Rule 2a-7 under the
Investment Company Act of 1940 (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

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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 U.S. Government
Portfolio's net asset value per share made after receipt and acceptance 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 Portfolio reserves the right to
reject any order for its shares. Portfolio shares begin accruing income on the
day the shares are issued. Certificates for the TRA Shares will not be issued to
an investor.

PURCHASE OF TRA SHARES

Only the TRA Shares of the U.S. Government Portfolio are offered through this
Prospectus. These shares are only offered through MSI's Total Resource Account.
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 U.S. Government Portfolio for the TRA
Shares is $2,500. The minimum amount for subsequent investments is $100.

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Each TRA shareholder will receive a personalized monthly statement from MSI
listing (i) the total number of U.S. Government Portfolio shares owned as of the
statement closing date, (ii) purchases and redemptions of U.S. Government
Portfolio 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 shareholder to purchase or redeem shares, MSI, on
behalf of the TRA shareholder, promptly 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 its customers who are shareholders in the U.S. Government
Portfolio each purchase and redemption of Portfolio shares for the customers'
accounts.

Application forms and checks should be sent to Total Resource Account, c/o PFPC,
P.O. Box 8908, Wilmington, DE 19899-8908.

ELECTRONIC FUNDS TRANSFERS (EFT)

You may purchase the TRA Shares of the U.S. Government Portfolio 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 the entity that makes payments to you the forms that the entity requests.
Contact the depositing entity to obtain its forms. 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, may terminate your
participation in the EFT program upon 30 days' notice to you.

SUBSEQUENT PURCHASES OF SHARES

Subsequent purchases can be made by mailing a check to:

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Total Resource Account
c/o PFPC
P.O. Box 8908
Wilmington, DE 19899-8908

There is a $100 minimum for subsequent purchases of shares. All payments should
clearly indicate your Total Resource 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 the 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 paid 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.

WRITTEN REQUESTS

The Total Resource Account 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. MSI will promptly
notify the transfer agent when you place a redemption order.

You may make a redemption in any amount by sending a written request to the Fund
addressed to:

Total Resource Account
c/o PFPC

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P.O. Box 8908
Wilmington, DE 19899-8908

All written requests for redemption must be signed, in each case with signature
guaranteed.

When a signature guarantee is called for, you should have "Signature Guaranteed"
stamped under your signature. A signature guarantee may be obtained from a
domestic bank or trust company, broker, dealer, clearing agency, savings
association or other financial institution which is participating in a medallion
program recognized by the Securities Transfer Association. The three recognized
medallion programs are Securities Transfer Agents Medallion Program (STAMP),
Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc.
Medallion Signature Program (MSP). Signature guarantees from financial
institutions which are not participating in one of these programs will not be
accepted.

Normally the redemption proceeds are paid by check and mailed by MSI's agent
bank, which will disburse payment on behalf of MSI's customer.

CHECKS

You will receive a supply of checks which may be used to effect redemptions in
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.
Investors who purchase U.S. Government Portfolio shares by check may not receive
their redemption proceeds until the check has cleared, which can take up to 15
days following the date of purchase.

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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 your election, require only one signature.
Checks in amounts exceeding the value of your 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 of up to $25
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 TRA shareholders.

Corporations and other entities electing the checking option are required to
furnish a certified resolution in accordance with MSI's normal practices.
Individuals and joint tenants are not required to furnish any supporting
documentation. As soon as the appropriate documentation is 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 shareholders 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 account designated in writing. MSI, on behalf of the Fund, may accept
telephone redemption instructions from any TRA shareholders who elect this
service and thus such TRA shareholders risk possible loss of principal and
interest in the event of a telephone redemption not authorized by them. MSI,

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on behalf of the Fund, will employ reasonable procedures to confirm that
telephone redemption instructions are genuine, and will require that TRA
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 TRA shareholder making a telephone withdrawal should call MSI at
1-800-638-7283 and state: (i) the name of the TRA shareholder appearing on the
TRA records; (ii) the Total Resource Account number with MSI; (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 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 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 by MSI to the TRA shareholder's address of record. If
the TRA shareholder elects to redeem all the shares of his Total Resource
Account, all dividends accrued to the date of such redemption will be paid to
the TRA 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

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(i) any period during which the New York Stock Exchange, Inc. is closed (other
than customary weekend and holiday closings), (ii) any period during which the
SEC determines that trading thereon is restricted, (iii) any period during which
an emergency (as determined by the SEC) exists as a result of which disposal by
the U.S. Government Portfolio of its portfolio securities is not reasonably
practicable or as a result of which it is not reasonably practicable for the
Portfolio fairly to determine the value of its net assets, or (iv) for such
other period as the SEC may by order permit for the protection of the
shareholders of the Portfolio.

MSI, on behalf of the Fund, has reserved the right to redeem the shares of any
TRA shareholder if the net asset value of all the remaining shares in the
account after a withdrawal is less than $250. A TRA shareholder may avoid
mandatory redemption by purchasing sufficient additional shares to increase his
total net asset value to the minimum amount.

DIVIDENDS AND DISTRIBUTIONS

The U.S. Government Portfolio 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

Dividends paid by the U.S. Government Portfolio from its investment company
taxable income including its net short-term capital gains, are taxable to
shareholders as ordinary income. Your purchase price is based on the Portfolio's
net asset value, which may include undistributed income and capital gains. You
will be subject to tax on dividends of investment company taxable income or
capital gains

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dividends paid shortly following your purchase of shares of the Portfolio, 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.

The redemption of shares in the Portfolio will be a taxable event on which any
gain realized will be subject to tax.

The U.S. Government Portfolio is required by Federal law to withhold 31% of
reportable payments paid to certain shareholders who have failed to provide a
correct Social Security or tax identification number or when the Portfolio or
shareholder has been notified by the IRS that the shareholder is subject to 31%
backup withholding.

Reports containing appropriate information with respect to the Federal income
tax status of dividends paid by the Portfolio 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 the TRA Shares of the Fund.
However, the Portfolio pays fees in connection with the distribution of shares
and for services provided to TRA shareholders. The Portfolio pays these fees
from its assets on an ongoing basis and therefore, over time,

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the payment of these fees will increase the cost of your investment and may cost
you more than paying sales charges.

The Fund's Board of Directors has adopted a Rule 12b-1 distribution and service
plan (the "Plan") and, pursuant to the Plan, the Fund and Reich & Tang
Distributors, Inc. (the "Distributor") have entered into a Distribution
Agreement and a Shareholder Servicing Agreement (with respect to the TRA Shares
of the Portfolio).

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 to the TRA Shares, a service fee equal to .25% per annum of the 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 MSI with respect to its
provision of such services to its clients or customers who are shareholders of
the TRA Shares. 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 and the Shareholder Servicing Agreement provide that the Fund will pay
for (i) telecommunications expenses including the cost of dedicated lines and
CRT terminals, incurred by the Distributor and participating organizations such
as MSI 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.

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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;
(ii) to compensate certain participating organizations such as MSI for providing
assistance in distributing the TRA 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 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 the 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 Portfolio 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.

PFPC has contracted with the Distributor to perform certain sub-transfer agent
accounting services for the TRA shareholders. In consideration of the provisions
of these sub-transfer agency accounting services, PFPC will receive sub-transfer
agency fees from the Distributor or its affiliate, the Fund's transfer agent. As
a result of the payment of the sub-transfer agency accounting fees to PFPC, TRA
Shares will have higher transfer agency charges than the other classes of the
Fund.

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VI. Financial Highlights

This financial highlights table is intended to help you understand the financial
performance for the TRA Class of the U.S. Government Portfolio since inception.
Certain information reflects the financial results of a single Portfolio share.
The total returns in the table represent the rate that an investor would have
earned on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP.
The report of PricewaterhouseCoopers LLP, along with the Fund's financial
statements, is included in the annual report, which is available upon request.

U.S. Government Portfolio
--------------------------------------------------------
July 12, 1999
Year Ended (Commencement of Sales) to
TRA CLASS August 31, 2000 August 31, 1999
--------- --------------- ---------------
<S> <C> <C>
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period........... $ 1.00 $ 1.00
------------ -------------
Income from investment operations:
Net investment income....................... 0.049 0.006
Less distributions:
Dividends from net investment income........ ( 0.049 ) ( 0.006 )
----------- -----------
Net asset value, end of period................. $ 1.00 $ 1.00
============ ============
Total Return................................... 5.06% 4.33%**
Ratios/Supplemental Data
Net assets, end of period (000)................ $ 422 $ 1
Ratios to average net assets:
Expenses.................................... 0.93% 0.73%*
Net investment income....................... 5.43% 4.25%*
</TABLE>

* Annualized
** Not annualized

22
<PAGE>

[This Page Intentionally Left Blank]

<PAGE>
A Statement of Additional Information (SAI) dated December 29, 2000 includes
additional information about the Fund and its investments and is incorporated
by reference into this Prospectus. Further information about Fund investments is
available in the Annual and Semi-Annual shareholder reports. 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 EDGAR database on the Securities and Exchange Commission's
Internet website (http://www.sec.gov) to view the SAI, material incorporated by
reference and other information. Copies of the information may be obtained,
after paying a duplicating fee, by sending an electronic request to
[email protected]. 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 1-202-942-8090. 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. 20549-0102.

Short
Term
Income
Fund, Inc.

Total Resource Account Class of Shares of U.S. Government Portfolio

PROSPECTUS

December 29, 2000

TRA Shares
distributed through:
MetLife Securities, Inc.
One Madison Avenue
New York, NY 10010
1-800-638-7283
<PAGE>
--------------------------------------------------------------------------------
SHORT TERM 600 Fifth Avenue, New York, NY 10020
INCOME FUND, INC. (212) 830-5220
================================================================================

STATEMENT OF ADDITIONAL INFORMATION
December 29, 2000
RELATING TO THE SHORT TERM INCOME FUND, INC.
PROSPECTUS DATED DECEMBER 29, 2000
and the
TOTAL RESOURCE ACCOUNT CLASS OF SHARES ("TRA Shares") OF THE
U.S. GOVERNMENT PORTFOLIO PROSPECTUS DATED DECEMBER 29, 2000

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") and the current Prospectus of the
TRA Shares of the U.S. Government Portfolio of the Fund, both dated December 29,
2000 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 audited Financial
Statements of the Fund have been incorporated by reference into the SAI from the
Fund's Annual Report. The Annual Report is available, without charge, upon
request by calling the toll-free number provided.

The material relating to the Purchase, Redemption and Pricing of Shares has been
incorporated by reference to the Prospectus for each Class of shares.

This Statement of Additional Information is incorporated by reference into the
Fund's Prospectus in its entirety.

Table of Contents
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>

Fund History.........................................2 Capital Stock and Other Securities......................11
Description of the Fund and Its Investments and Purchase, Redemption and Pricing of Shares..............12
Risks..............................................2 Taxation of the Fund....................................13
Management of the Fund...............................5 Underwriters............................................13
Control Persons and Principal Holders of Calculation of Performance Data.........................14
Securities.........................................6 Financial Statements....................................14
Investment Advisory and Other Services...............7 Description of Ratings..................................15
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 objective is 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 are 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 security (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 Investment Company Act of 1940 (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>
There is no guarantee that the Fund will be able to maintain a stable price of
$1.00 and thus, it is possible to lose money in this Fund. The income from the
Fund will vary with changes in prevailing interest rates. In addition, the
Fund's investments are subject to "credit risk", which is the risk that an
issuer will be unable to repay its obligations at maturity. The U.S. Government
Portfolio reduces credit risk by investing exclusively in obligations issued or
guaranteed by the U.S. Government.

The Fund intends to continue to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue 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, regulated
investment company securities and other securities. The other securities 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 or regulated investment company 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

3
<PAGE>
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 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 1940 Act.

RULE 144A SECURITIES AND 4(2) PAPER

The Money Market Portfolio may purchase securities that are not registered
("registered securities") under the Securities Act of 1933 (the "Securities
Act"), but can be offered and sold to "qualified institutional buyers" under
Rule 144A of the Securities Act. The Portfolio may also purchase certain
commercial paper issued in reliance on the exemption from regulations in Section
4(2) of the Securities Act ("4(2) Paper"). However, the Portfolio will not
invest more than 10% of its net assets in illiquid investments, which include
securities for which there is no readily available market, securities subject to
contractual restriction on resale, and restricted securities (unless, with
respect to these securities and 4(2) Paper, the Fund's Directors continuously
determine, based on the trading markets for the specific restricted security,
that it is liquid). The Directors have adopted guidelines and delegated to the
Manager the daily function of determining and monitoring liquidity of Rule 144A
securities and 4(2) Paper. The Directors, however, retain sufficient oversight
and are ultimately responsible for these determinations. See "Investment
Restrictions" for further detail on how liquidity is determined.

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 provided,
however, with respect to the Money Market Portfolio restricted securities
shall not include privately placed securities that are exempt from
registration under Section 4(2) or Rule 144A of the Securities Act of 1933;
(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

4
<PAGE>
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.

With respect to the investment restriction set forth in number (c)(5) above, the
Directors have the ultimate responsibility for determining whether specific
securities are liquid or illiquid. The Directors have delegated the function of
making day-to-day determinations of liquidity to the Manager pursuant to
guidelines approved by the Directors.

The Manager takes into account a number of factors in determining whether a Rule
144A security being considered for purchase by the Money Market Portfolio is
liquid, including at least the following: (i) the frequency and size of trades
and quotes for the Rule 144A security; (ii) the number of dealers willing to
purchase or sell the 144A security and the number of other potential purchasers;
(iii) dealer undertakings to make a market in the 144A security; and (iv) the
nature of the 144A security and the nature of the market for the 144A security
(i.e., the time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer).

To make the determination that an issue of 4(2) Paper is liquid, the Manager
must conclude that the following conditions have been met: (i) the 4(2) Paper
must not be in default; (ii) the 4(2) Paper is rated; (a) in one of the two
highest rating categories by at least two nationally recognized statistical
rating organizations ("NRSROs"); or (b) if the security is unrated, the Manager
has determined that the security is of acceptable credit quality; and (iii)
there is a viable trading market for the specific security, taking into account
all relevant factors.

If a percentage restriction is adhered to at the time of an investment a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or in the amount of a Fund's portfolio's assets will not
constitute a violation of such restriction.

III. MANAGEMENT OF THE FUND

The Fund's Board of Directors, which is responsible for the overall management
and supervision of the Fund, has employed the Manager to serve as investment
manager of the Fund. The Manager provides persons satisfactory to the Fund's
Board of Directors to serve as officers of the Fund. Such officers, as well as
certain other employees and directors of the Fund, may be directors or officers
of Reich & Tang Asset Management, Inc., the sole general partner of the Manager
or employees of the Manager or its affiliates. Due to the services performed by
the Manager, the Fund currently has no employees and its officers are not
required to devote their full time to the affairs of the Fund.

The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below. Unless otherwise specified, the address
of each of the following persons is 600 Fifth Avenue, New York, New York 10020.
Mr. Duff may be deemed an "interested person" of the Fund, as defined in the
1940 Act, on the basis of his affiliation with Reich & Tang Asset Management
L.P.

STEVEN W. DUFF, 47 - President and Director of the Fund, has been President of
the Mutual Funds Division of the Manager since September 1994. Mr. Duff is also
President and a Director/Trustee of 11 other funds in the Reich & Tang Fund
Complex, Director of Pax World Money Market Fund, Inc., President of Back Bay
Funds, Inc., and Executive Vice President of Delafield Fund, Inc.

DR. W. GILES MELLON, 69 - Director of the Fund, has been Professor of Business
Administration 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 12 other
funds in the Reich & Tang Fund Complex.

5
<PAGE>
ROBERT STRANIERE, 59 - 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 12 other funds in the Reich & Tang Fund Complex, and a
Director of Life Cycle Mutual Funds, Inc.

DR. YUNG WONG, 62 - Director of the Fund, Dr. Wong is also a Trustee of Eclipse
Financial Asset Trust. His address is 29 Alden Road, Greenwich, Connecticut
06831. Dr. Wong is a Director/Trustee of 12 other funds in the Reich & Tang Fund
Complex.

MOLLY FLEWHARTY, 49 - Vice President of the Fund, has been Vice President of the
Mutual Funds Division of the Manager since September 1993. Ms. Flewharty is also
Vice President of 15 other funds in the Reich & Tang Fund Complex.

LESLEY M. JONES, 52 - Vice President of the Fund, has been Senior Vice President
of the Mutual Funds Division of the Manager since September 1993. Ms. Jones is
also a Vice President of 11 other funds in the Reich & Tang Fund Complex.

DANA E. MESSINA, 44 - Vice President of the Fund, has been Executive Vice
President of the Mutual Funds Division of the Manager since January 1995. Ms.
Messina is also Vice President of 12 other funds in the Reich & Tang Fund
Complex.

BERNADETTE N. FINN, 53 - Vice President and Secretary of the Fund, has been Vice
President of the Mutual Funds Division of the Manager since September 1993. Ms.
Finn is also Vice President and Secretary of 3 other funds, and a Secretary of
12 additional funds in the Reich & Tang Fund Complex.

RICHARD DE SANCTIS, 44 - Treasurer of the Fund, has been Treasurer of the
Manager since September 1993. Mr. De Sanctis is also Treasurer of 14 other funds
in the Reich & Tang Fund Complex, and is Vice President and Treasurer of
Cortland Trust, Inc.

ROSANNE HOLTZER, 36 - 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 15
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, 2000, 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> <C>
Aggregate Pension or Retirement Estimated Annual Total Compensation from
Name of Person, Compensation from the Benefits Accrued as Part Benefits upon Retirement Fund and Fund Complex Paid
Position Fund of Fund Expenses to Directors*

Dr. W. Giles Mellon, 0
Director $14,000 0 $59,000 (16 Funds)

Robert Straniere, 0
Director $14,000 0 $59,000 (16 Funds)

Dr. Yung Wong, 0
Director $14,000 0 $59,000 (16 Funds)
</TABLE>

* The total compensation paid to such persons by the Fund and Fund Complex for
the fiscal year ending August 31, 2000. The parenthetical number represents the
number of investment companies (including the Fund) from which the directors
receive compensation. A Fund is considered to be in the same Fund complex if
among other things, it shares a common investment adviser with the Fund.

IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

On November 30, 2000 there were 719,228,460 Money Market Portfolio - Class A
shares outstanding, 532,360,439 Money Market Portfolio - Class B shares
outstanding, 422,051,556 U.S. Government Portfolio - Class A shares outstanding,
217,014,099 U.S. Government Portfolio - Class B shares outstanding and 458,412
U.S. Government Portfolio -TRA Class

6
<PAGE>
shares outstanding. As of November 30, 2000, 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, 2000:

<TABLE>
<CAPTION>
<S> <C> <C>
NAME AND ADDRESS % OF CLASS NATURE OF OWNERSHIP

MONEY MARKET PORTFOLIO - CLASS A

H.G. Wellington 8.88% Record
14 Wall Street
New York, NY 10005

M.L. Stern & Co. Inc. 5.13% Record
8350 Wilshire Blvd.
Beverly Hills, CA 90211

Money Market Portfolio - Class B

Pershing Division of DJL Securities Corp. 34.67% Record
Harborside Financial Center
Plaza 3 - 6th Floor
Jersey City, NJ 07311

U.S. Government Portfolio - Class A

Neuberger & Berman 17.53% Record
605 3rd Avenue
New York, NY 10036

H.G. Wellington 9.66% Record
14 Wall Street
New York, NY 10005

U.S. Government Portfolio - Class B

Pershing Division of DJL Securities Corp. 18.67% Record
Harborside Financial Center
Plaza 3 - 6th Floor
Jersey City, NJ 07311

U.S. Government Portfolio - TRA Class
MetLife Securities for the 100.00% Record
Exclusive Benefit of Total Resource
Account Shareholders
485 Rte. 1 South, Bldg. E
Island, NY 08830

</TABLE>

V. INVESTMENT ADVISORY AND OTHER SERVICES

The investment manager for the Fund is Reich & Tang Asset Management L.P. (the
"Manager"), a Delaware limited partnership with principal offices at 600 Fifth
Avenue, New York, New York 10020. The Manager was as of November 30, 2000,
investment manager, adviser, or sub-adviser with respect to assets aggregating
in excess of $14 billion. In addition to the Fund, the Manager acts as
investment manager of thirteen other investment companies and also advises
pension trusts, profit-sharing trusts and endowments.

The Manager is a registered investment adviser whose origins date back to 1970.
The Manager is a limited partnership that is a wholly-owned subsidiary of Nvest
Holdings, L.P. ("Nvest Holdings"). Nvest Holdings is a wholly-owned subsidiary
of Nvest Companies, L.P. ("Nvest Companies"). Nvest Companies is the limited
partner and owner, through Nvest Holdings, of a 99.5% interest in the Manager.
Reich & Tang Asset Management, Inc. is the sole general partner and owner of the
remaining 0.5% interest of the Manager, as well as being an indirect
wholly-owned subsidiary of Nvest Companies. Nvest Companies' general partner,
CDCAM North America, LLC ("CDCAM NA LLC"), is a wholly-owned subsidiary of CDC
Asset Management North America Corporation

7
<PAGE>
("CDCAM NA"). CDCAM NA is the sole limited partner of Nvest Companies. CDCAM NA
is a wholly-owned subsidiary of CDC Asset Management S.A., a French company
("CDCAM"). CDCAM is majority-owned by CDC Finance and indirectly owned, through
CDC Finance, Caisse Nationale des Caisses D'Epargne and CNP Assurances, by
Caisse des Depots et Consignations ("CDC"). CDC was created by the French
Government legislation and currently is supervised by the French Parlement.

The eighteen principal subsidiary or affiliated asset management firms of Nvest
Companies, collectively, have more than $130 billion in assets under management
or administration as of September 30, 2000.

On July 25, 2000, 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 Investment Management Contract for an initial term of two
years, extending until August 31, 2002. The contract may be continued in force
after the initial term for successive twelve-month periods beginning each
September 1, provided that such continuance is specifically approved annually by
a 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 Reich &
Tang Asset Management, Inc., 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 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, 2000 the Manager received investment management fees
totaling $4,338,243 from the Money Market Portfolio, of which $200,000 was
waived. For the Fund's fiscal year ended August 31, 2000 the Manager received
investment management fees totaling $2,043,727 from the U.S. Government
Portfolio, none of which was waived. For the Fund's fiscal year ended August 31,
1999 the Manager received investment management fees totaling $4,153,608 and
$2,351,952 from the Money Market Portfolio and the U.S. Government Portfolio,
respectively, none of which was waived. 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.

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 Fund's fiscal year
ended August 31, 2000, the Manager received administration fees in the aggregate
of $3,081,652 and $1,664,230 from the Money Market Portfolio and the U.S.
Government Portfolio, respectively. For the

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Fund's fiscal year ended August 31, 1999, the Manager received administration
fees in the aggregate of $2,983,956 and $1,923,140 from the Money Market
Portfolio and the U.S. Government Portfolio, respectively, none of which was
waived. For the Fund's 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.

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 all
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 and TRA shareholders
pursuant to the Plan shall be compensated by the Distributor from its own
resources which includes the shareholder servicing fee and past profits, and the
Manager from its own resources which includes the management fee and past
profits. 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.

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 Service Fee.

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<PAGE>
The following information applies only to the Class A and TRA Class of shares of
the Portfolios. For the fiscal year ended August 31,2000, the Fund paid a
Service Fee for expenditures pursuant to the Plan in amounts aggregating
$2,914,036 with respect to the Money Market Portfolio and $1,636,189 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 $6,862,081 with respect to the Money Market Portfolio and
$3,386,039 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, $16,967 on printing and mailing of prospectuses to
other than current shareholders, $0 on compensation to underwriters, $0 on
compensation to broker-dealers, $47,455 on compensation to sales personnel, and
$14,057 on other expenses. Of the payments made pursuant to the Plan by the
Fund, with respect to the U.S. Government Portfolio, $0 was spent on
advertising, $6,241 on printing and mailing of prospectuses to other than
current shareholders, $0 on compensation to underwriters, $0 on compensation to
broker-dealers, $37,659 on compensation to sales personnel, and $6,864 on other
expenses.

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 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 and TRA 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
Manager, at its expense also may from time to time provide additional
promotional incentives to Participating Organizations who sell Fund shares. The
Distributor will determine the amount of such payments made pursuant to the
Plan, provided that such payments will not increase the amount which the Fund is
required to pay to the Manager or the Distributor for any fiscal year under the
Investment Management Contract or the Shareholder Servicing Agreement in effect
for that year.

In accordance with the 12b-1 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 August 31, 2001.
Thereafter it may continue in effect for successive annual periods commencing
September 1, provided it is approved by the Fund's 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 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 shareholders.

CUSTODIAN AND TRANSFER AGENT

State Street Kansas City, 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.

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<PAGE>
COUNSEL AND INDEPENDENT ACCOUNTANTS

Legal matters in connection with the issuance of shares of stock of the Fund are
passed upon by Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York,
New York 10022.

PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, independent certified public accountants, have been selected as
Independent Accountants 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.

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.

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 affected 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. The Money Market Portfolio offers
two classes of common stock, Class A and Class B. The U.S. Government Portfolio
offers three classes of common stock, Class A, Class B and the TRA Class of
shares. 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, Class B and TRA Shares will have different class designations; (ii)
only the Class A and the TRA 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' and TRA Class shares' average daily net assets; (iii) only the holders
of the Class A and TRA 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.

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<PAGE>
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

The material relating to the purchase and redemption of shares in each
Prospectus is hereby incorporated by reference.

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.

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<PAGE>
IX. TAXATION OF THE FUND

FEDERAL INCOME TAXES

The Fund has elected and has qualified in the past under the Code, to qualify 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.

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 for the
calendar year and 98% of its capital gain net income for a one year period
ending October 31 of its taxable year (unless it is eligible to elect another
one year period ending either November 30 or December 31) the Fund will be
subject to a nondeductible 4% excise tax on the excess of such amounts over the
amounts actually distributed.

Dividends paid by the Fund from its investment company taxable income including
its net short-term capital gains are taxable to shareholders as ordinary income
whether they are distributed to the shareholders 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 investment company taxable income or
capital gains dividends 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 long-term capital gain over net short-term capital
loss) will be distributed by the Fund annually. The Fund will have no tax
liability with respect to distributed net capital gains and the distributions
will be taxable to shareholders as long-term capital gains regardless of how
long the shareholders have held their shares. However, shareholders who at the
time of such a net capital gain distribution have not held their shares for more
than 6 months, and who subsequently dispose of those shares at a loss, will be
required to treat such loss as a long-term capital loss to the extent of the net
capital gain distribution. Distributions of net capital gain will be designated
as a "capital gain dividend" in a written notice mailed to the Fund's
shareholders after the close of the Fund's taxable year. Capital gains realized
by corporations are generally taxed at the same rate as ordinary income.
However, long-term capital gains (i.e. gains resulting from certain assets held
for 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 dividends distributed by the Fund, without regard
to the length of time shares have been held by the shareholder.

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. On November 16, 1999,
President Clinton signed the Gramm-Leach-Bliley Act, repealing certain
provisions of the Glass-Steagall Act which have restricted affiliation between
banks and securities firms and amending the Bank Holding Company Act thereby

13
<PAGE>
removing restrictions on banks and insurance companies. The new legislation
grants banks new authority to conduct certain authorized activity through
financial subsidiaries. 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 as dealers pursuant to state law.

XI. CALCULATION OF PERFORMANCE DATA

The Fund calculates a seven-day yield quotation using a standard method
prescribed by the rules of the SEC. Under that method, the Fund's portfolios'
yield figures, which are based on a chosen seven-day period, are computed as
follows: the portfolio's return for the seven-day period is obtained by dividing
the net change in the value of a hypothetical account having a balance of one
share at the beginning of the period by the value of such account at the
beginning of the period (expected to always be $1.00). This is multiplied by
(365/7) with the resulting annualized figure carried to the nearest hundredth of
one percent. For purposes of the foregoing computation, the determination of the
net change in account value during the seven-day period reflects (i) dividends
declared on the original share and on any additional shares, including the value
of any additional shares purchased with dividends paid on the original share,
and (ii) fees charged to all shareholder accounts. Realized capital gains or
losses and unrealized appreciation or depreciation of the Fund's portfolio
securities are not included in the computation. Therefore annualized yields may
be different from effective yields quoted for the same period.

The portfolio's "effective yield" for each Class is obtained by adjusting its
"current yield" to give effect to the compounding nature of the Fund's
portfolio, as follows: the unannualized base period return is compounded and
brought out to the nearest one hundredth of one percent by adding one to the
base period return, raising the sum to a power equal to 365 divided by 7, and
subtracting one from the result, i.e., effective yield = [(base period return +
1)365/7] - 1.

Although published yield information is useful to investors in reviewing the
Fund's portfolios' performance, investors should be aware that the Fund's
portfolios' yields fluctuate from day to day. The Fund's portfolios' yields for
any given period are not an indication, or representation by the Fund, of future
yields or rates of return on the Fund's shares, and may not provide a basis for
comparison with bank deposits or other investments that pay a fixed yield for a
stated period of time. Investors who purchase the Fund's shares directly may
realize a higher yield than Participant 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 August 31, 2000 was 5.65% which is equivalent to an effective yield
of 5.81%. The Fund's U.S. Government Portfolio's Class A shares' yield for the
seven day period ended August 31, 2000 was 5.67% which is equivalent to an
effective yield of 5.83%.

The Fund's Money Market Portfolio's Class B shares' yield for the seven day
period ended August 31, 2000 was 6.06% which is equivalent to an effective yield
of 6.25%. The Fund's U.S. Government Portfolio's Class B shares' yield for the
seven day period ended August 31, 2000 was 5.91% which is equivalent to an
effective yield of 6.09%.

The Fund's U.S. Government Portfolio's TRA Class shares' yield for the seven day
period ended August 31, 2000 was 5.56% which is equivalent to an effective yield
of 5.72%.
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XII. FINANCIAL STATEMENTS

The audited financial statements for the fiscal year ended August 31, 2000 and
the report therein of PricewaterhouseCoopers LLP are herein incorporated by
reference to the Fund's Annual Report. The Semi-Annual and Annual Reports are
available upon request and without charge.

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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.

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