As filed with the Securities and Exchange Commission on November 2, 2006
Investment Company Act File number 811-2950
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
SHORT TERM INCOME FUND, INC.
(Exact name of registrant as specified in charter)
600 FIFTH AVENUE
NEW YORK, NY 10020
(Address of principal executive offices) (Zip code)
ROSANNE HOLTZER
C/O REICH & TANG ASSET MANAGEMENT, LLC
600 FIFTH AVENUE
NEW YORK, NEW YORK 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-830-5200
Date of fiscal year end: August 31
Date of reporting period: August 31, 2006
ITEM 1: REPORT TO STOCKHOLDERS
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SHORT TERM 600 FIFTH AVENUE, NEW YORK, NY 10020
INCOME FUND, INC. (212) 830-5200
================================================================================
Dear Shareholder:
We are pleased to present the annual report of Short Term Income Fund, Inc. (the
"Fund") for the year ended August 31, 2006.
The Fund's Money Market Portfolio had 14,478 shareholders and net assets of
$847,372,202 as of August 31, 2006. The Government Portfolio had 3,601
shareholders and net assets of $426,083,554 as of August 31, 2006.
We thank you for your support and look forward to continuing to serve your cash
management needs.
Sincerely,
\s\ Steven W. Duff
Steven W. Duff
President
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SHORT TERM INCOME FUND, INC.
EXPENSE CHART
FOR THE SIX MONTHS ENDED AUGUST 31, 2006
(UNAUDITED)
================================================================================
As a shareholder of the Fund, you incur the following ongoing costs: management
fees and other Fund expenses. You may also incur distribution and/or service
(12b-1) fees. This example is intended to help you understand your ongoing costs
(in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period March 1, 2006 through August 31, 2006.
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use information in this line, together with
the amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading entitled "Expenses Paid During the Period" to estimate
the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees that you may incur in other
mutual funds. Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
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Money Market Portfolio
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Class A Beginning Account Value Ending Account Value Expenses Paid During the
3/1/06 8/31/06 Period*
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Actual $1,000.00 $1,020.90 $4.84
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Hypothetical (5% return before $1,000.00 $1,020.42 $4.84
expenses)
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Class B Beginning Account Value Ending Account Value Expenses Paid During the
3/1/06 8/31/06 Period*
- ----------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,022.20 $3.47
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Hypothetical (5% return before $1,000.00 $1,021.78 $3.47
expenses)
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================================================================================
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Money Market Portfolio
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First Southwest Shares Beginning Account Value Ending Account Value Expenses Paid During the
3/1/06 8/31/06 Period*
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Actual $1,000.00 $1,020.30 $5.40
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Hypothetical (5% return before $1,000.00 $1,019.86 $5.40
expenses)
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U.S. Government Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Class A Beginning Account Value Ending Account Value Expenses Paid During the
3/1/06 8/31/06 Period*
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Actual $1,000.00 $1,020.50 $4.53
- ----------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before $1,000.00 $1,020.72 $4.53
expenses)
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- ----------------------------------------------------------------------------------------------------------------------
Class B Beginning Account Value Ending Account Value Expenses Paid During the
3/1/06 8/31/06 Period*
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Actual $1,000.00 $1,021.90 $3.16
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Hypothetical (5% return before $1,000.00 $1,022.08 $3.16
expenses)
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<FN>
* Expenses are equal to the Fund's annualized expense ratios of 0.95%, 0.68%,
and 1.06%, for the Money Market Portfolio Class A, Class B, and First
Southwest shares, respectively and 0.89%, and 0.62% for the U.S. Government
Portfolio Class A and Class B shares, respectively, multiplied by the
average account value over the period (March 1, 2006 through August 31,
2006), multiplied by 184/365 (to reflect the most recent fiscal half-year).
</FN>
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SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
AUGUST 31, 2006
================================================================================
Face Maturity Current Value
Amount Date Coupon (a) (Note 1)
------ ---- --------- ------
Asset Backed Commercial Paper (13.54%)
- ------------------------------------------------------------------------------------------------------------------------
$ 20,000,000 Apreco LLC 09/07/06 5.40% $ 19,982,167
10,000,000 ASAP Funding Inc. 10/20/06 5.41 9,927,180
30,000,000 Chesham Finance, Limited 09/01/06 5.29 30,000,000
10,000,000 Govco Incorporated 10/18/06 5.47 9,929,631
30,000,000 Lexington Parker Capital Company, LLC 09/07/06 5.40 29,973,250
15,000,000 Lockhart Funding, LLC 10/04/06 5.33 14,927,262
- -------------- --------------
115,000,000 Total Asset Backed Commercial Paper 114,739,490
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Commercial Paper (1.18%)
- ------------------------------------------------------------------------------------------------------------------------
$ 10,000,000 Bank of Ireland 09/14/06 5.41% $ 9,980,644
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10,000,000 Total Commercial Paper 9,980,644
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Domestic Certificate of Deposit (2.36%)
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$ 20,000,000 Wilmington Trust Company 01/22/07 5.41% $ 20,000,000
------------- --------------
20,000,000 Total Domestic Certificate of Deposit 20,000,000
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Eurodollar Certificate of Deposit (3.54%)
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$ 30,000,000 Societe Generale 02/02/07 4.90% $ 30,001,223
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30,000,000 Total Eurodollar Certificate of Deposit 30,001,223
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Floating Rate Securities (11.80%)
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$ 30,000,000 Bank of America Federal Funds Floater (b) 12/15/06 5.31% $ 30,000,000
15,000,000 Bear Stearns Federal Funds Floater (c) 01/19/07 5.39 15,000,000
15,000,000 General Electric Capital Corporation
Extendible Monthly Securities (d) 10/17/07 5.43 15,000,000
15,000,000 KBC Bank, N.V. (e) 05/22/07 5.35 15,000,000
15,000,000 Merrill Lynch & Co, Inc. (f) 05/14/07 5.29 15,000,000
10,000,000 Merrill Lynch & Co, Inc. Extendible Monthly Securities (g) 06/15/07 5.31 10,000,000
- -------------- --------------
100,000,000 Total Floating Rate Securities 100,000,000
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Foreign Commercial Paper (1.17%)
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$ 10,000,000 Alliance & Leicester PLC 11/07/06 5.44% $ 9,900,151
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10,000,000 Total Foreign Commercial Paper 9,900,151
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The accompanying notes are an integral part of these financial statements.
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================================================================================
Face Maturity Current Value
Amount Date Coupon (a) (Note 1)
------ ---- --------- ------
Letter of Credit Commercial Paper (5.85%)
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$ 30,000,000 Dean Health System, Inc.
LOC M & I Marshall & Ilsley Bank 10/05/06 5.33% $ 29,850,117
20,000,000 ICICI Bank Ltd.
LOC Fortis Bank S.A./N.V. 12/01/06 5.35 19,736,605
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50,000,000 Total Letter of Credit Commercial Paper 49,586,722
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Loan Participations (h) (4.72%)
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$ 25,000,000 AXA Equitable Life Insurance Company with
J.P. Morgan Chase 03/21/07 5.34% $ 25,000,000
15,000,000 Mt. Vernon Phenol (General Electric Co.)
with JPMorgan Chase 05/21/07 5.34 15,000,000
- -------------- --------------
40,000,000 Total Loan Participations 40,000,000
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Medium Term Note (2.36%)
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$ 20,000,000 Royal Bank of Canada 08/10/07 5.60% $ 20,000,000
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20,000,000 Total Medium Term Note 20,000,000
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Other Note (2.95%)
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$ 25,000,000 Winston-Salem, NC COPs - Series 1992 09/05/06 5.41% $ 25,000,000
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25,000,000 Total Other Note 25,000,000
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Repurchase Agreement (2.83%)
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$ 24,000,000 Bank of America, purchased on 08/31/06, repurchase proceeds at
maturity $24,003,487 (Collateralized by $48,069,296, GNMA,
4.500% to 6.500%, due 06/16/21 to 07/16/36, value $24,480,000) 09/01/06 5.23% $ 24,000,000
- -------------- --------------
24,000,000 Total Repurchase Agreement 24,000,000
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Time Deposit (1.77%)
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$ 15,000,000 Rabobank Nederland 09/01/06 5.28% $ 15,000,000
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15,000,000 Total Time Deposit 15,000,000
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U.S. Government Agency Medium Term Notes (5.31%)
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$ 10,000,000 Federal Home Loan Bank 08/14/07 5.58% $ 10,000,000
30,000,000 Federal Home Loan Mortgage Corporation 02/09/07 4.76 30,000,000
5,000,000 Federal Home Loan Mortgage Corporation 04/27/07 5.25 5,000,000
- -------------- -------------
45,000,000 Total U.S. Government Agency Medium Term Notes 45,000,000
- -------------- -------------
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The accompanying notes are an integral part of these financial statements.
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SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006
================================================================================
Face Maturity Current Value
Amount Date Coupon (a) (Note 1)
------ ---- --------- ------
Variable Rate Demand Instruments (i) (21.30%)
- ------------------------------------------------------------------------------------------------------------------------
$ 1,970,000 Ali Industries, Inc. Project
LOC National City Bank 07/01/10 5.43% $ 1,970,000
5,500,000 Allegheny County, PA IDA (Union Electric Steel Corporation)
LOC PNC Bank, N.A. 11/01/27 5.34 5,500,000
2,250,000 Alta Mira LLC, - Series 2004
LOC M & I Marshall & Ilsley Bank 11/01/34 5.43 2,250,000
1,680,000 ARS Development Ltd. Project - Series 2001
LOC National City Bank 09/01/21 5.43 1,680,000
1,030,000 B & V Land Company, LLC
LOC Huntington National Bank 09/01/27 5.43 1,030,000
5,705,000 Baldwin County Sewer Service, LLC - Series 2005
LOC Amsouth Bank, N.A. 05/01/25 5.41 5,705,000
1,405,000 Bank of Kentucky Building, LLC - Series 1999
LOC US Bank, N.A. 12/01/19 5.38 1,405,000
2,940,000 Bollman Capital, LLC - Series 1996A
LOC First of America Bank 12/15/26 5.38 2,940,000
1,000,000 Bookstore Notes - Series 2004A
LOC M & I Marshall & Ilsley Bank 10/01/44 5.33 1,000,000
475,000 Burgess & Niple Limited, - Series 1999
LOC National City Bank 09/01/14 5.38 475,000
635,000 Burton I. Saltzman (Dave's Supermarket, Inc. Project)
LOC US Bank, N.A. 09/01/08 5.47 635,000
520,000 Capital One Funding Corporation
Floating Rate Option Notes - Series 1997D
LOC JPMorgan Chase Bank, N.A. 07/02/18 5.33 520,000
5,000,000 City of Marion, IN EDRB
(Dolgencorp, Inc. Project) - Series 2005A
LOC KeyBank, N.A. 02/01/35 5.35 5,000,000
1,070,000 Community Limited Care Dialysis Center - Series 1997
LOC Fifth Third Bank 12/01/12 5.40 1,070,000
670,000 Crownover Lumber Company - Series 1997A
LOC Fifth Third Bank 09/01/08 5.48 670,000
380,000 Crownover Lumber Company - Series 1997B
LOC Fifth Third Bank 09/01/08 5.48 380,000
300,000 Derby Fabricating LLC
LOC Fifth Third Bank 06/01/24 5.33 300,000
2,670,000 Dickinson Press, Inc. - Series 1997
LOC Huntington National Bank 01/01/27 5.43 2,670,000
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The accompanying notes are an integral part of these financial statements.
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================================================================================
Face Maturity Current Value
Amount Date Coupon (a) (Note 1)
------ ---- --------- ------
Variable Rate Demand Instruments (i) (Continued)
- ------------------------------------------------------------------------------------------------------------------------
$ 4,959,934 Federal Home Loan Mortgage Corporation
Class A Certificates - Series M006 10/15/45 5.33% $ 4,959,934
1,300,000 Gesmundo & Associates, Inc. Loan Program Notes
LOC National City Bank 08/15/27 5.33 1,300,000
930,000 Graves Lumber Co. Project - Series 2000
LOC Federal Home Loan Bank of Cincinnati 11/01/10 5.48 930,000
1,173,000 HCS & DJS Leasing - Series 2004
LOC Fifth Third Bank 06/01/34 5.33 1,173,000
2,500,000 Holland - Sheltair Aviation Funding, LLC - Series 2005 - B4
LOC Mellon Bank, N.A. 05/01/35 5.33 2,500,000
3,585,000 Hunter's Square, Inc. Project - Series 1998
LOC National City Bank 10/01/16 5.38 3,585,000
8,200,000 Lexington Financial Services, LLC Health Care RB - Series 2001
LOC LaSalle Bank, N.A. 02/01/26 5.37 8,200,000
890,000 Lincoln Parkway LLC
LOC Fifth Third Bank 06/01/44 5.33 890,000
1,445,000 LKWP Investments, LLC - Series 1997
LOC Huntington National Bank 03/01/27 5.43 1,445,000
545,000 Machining Center Inc. - Series 1997
LOC Comerica Bank 10/01/27 5.43 545,000
620,000 Madison, WI Community Development Authority
(Block 90 Parking Ramp Project)
LOC US Bank, N.A. 10/01/08 5.43 620,000
3,460,000 Maryland Health & Higher Educational Facilities Authority
(Glen Meadows Retirement Community) - Series 1999B
LOC Wachovia Bank, N.A. 07/01/29 5.38 3,460,000
400,000 Maximum Principal Amount Limited Partnership
(Riverview Medical Office Building) - Series 1997
LOC National City Bank 11/01/17 5.38 400,000
1,000,000 Miami Valley Realty Associates - Series 1997
LOC Key Bank, N.A. 06/01/12 5.40 1,000,000
3,500,000 Mississippi Business Finance Corporation
(Attala Steel Industries, LLC Project) - Series 2005
LOC Federal Home Loan Bank of Dallas 07/01/20 5.33 3,500,000
3,020,000 Mobile Airport Authority RB - Series 1999
LOC Regions Bank 10/01/24 5.33 3,020,000
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The accompanying notes are an integral part of these financial statements.
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SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006
================================================================================
Face Maturity Current Value
Amount Date Coupon (a) (Note 1)
------ ---- --------- ------
Variable Rate Demand Instruments (i) (Continued)
- ------------------------------------------------------------------------------------------------------------------------
$ 13,385,000 Mobile, AL Springhill Medical Clinic Board RB
(Springhill Medical Complex)
LOC Amsouth Bank, N.A. 06/01/20 5.33% $ 13,385,000
920,000 Mount Carmel East Professional Building - Series 1994A
LOC National City Bank 01/01/14 5.38 920,000
1,135,000 MCMC POB II (Mount Carmel Partnership Project) - Series 1994
LOC National City Bank 08/01/14 5.38 1,135,000
3,145,000 Mount Ontario Holdings LLC - Series 2001
LOC US Bank, N.A. 04/01/21 5.34 3,145,000
5,000,000 New Jersey EDA Thermal Energy Facilities RB
(Marina Energy LLC Project) - Series 2001B
LOC Wachovia Bank, N.A. 09/01/21 5.32 5,000,000
6,400,000 Newport, KY Industrial Building RB
(Aquarium Holdings of Northern Kentucky, LLC Project)
LOC Fifth Third Bank 12/01/08 5.33 6,400,000
2,365,000 Ohio State Water Development Authority RB
(Independence Excavating, Inc. Project)
LOC National City Bank 12/01/09 5.38 2,365,000
2,820,000 Ordeal Properties LLC - Series 1997
LOC Key Bank, N.A. 10/01/12 5.35 2,820,000
1,500,000 Pennsylvania EDFA
(West 914 Incorporation Project) - Series 1991 A1
LOC PNC Bank, N.A. 05/01/21 5.34 1,500,000
10,090,000 PRD Financial LLC - Series 1997
LOC National City Bank 04/01/27 5.33 10,090,000
4,000,000 Prevea Clinic, Inc. - Series 2004-A
LOC Wells Fargo Bank, N.A. 12/01/34 5.28 4,000,000
4,800,000 Rochester Institute of Technology, NY RB - Series 2004A 11/01/21 5.43 4,800,000
1,525,000 Sacramento County Housing Authority, CA
(Hidden Oaks Apartments) - Series 1999E
Collateralized by Federal National Mortgage Association 05/15/29 5.38 1,525,000
10,000,000 Sea Island Company & Sea Island Coastal
Properties LLC - Series 2003B
LOC Columbus Bank & Trust Company 04/01/23 5.38 10,000,000
2,680,000 Shelburne Realty & Troy Realty LLC - Series 1996
LOC National City Bank 04/01/17 5.38 2,680,000
12,505,000 Southwestern Group Limited - Series 2001
LOC US Bank, N.A. 07/01/21 5.33 12,505,000
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The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
================================================================================
Face Maturity Current Value
Amount Date Coupon (a) (Note 1)
------ ---- --------- ------
Variable Rate Demand Instruments (i) (Continued)
- ------------------------------------------------------------------------------------------------------------------------
$ 5,600,000 St. Johns County IDA First Mortgage RB
(Presbyterian Retirement Communities Project) - Series 2004B
LOC Allied Irish Banks, PLC 08/01/34 5.42% $ 5,600,000
2,905,000 St. Ann's Medical Office Building II
Limited Partnership - Series 1998
LOC National City Bank 11/01/19 5.38 2,905,000
6,064,000 Stonegate Partners I, LLC
(Stonegate Partners Project) - Series 2002
LOC US Bank, N.A. 06/01/34 5.38 6,064,000
4,330,000 Tom Richards, Inc. (Process Technology Project) - Series 2001
LOC Federal Home Loan Bank of Cincinnati 12/01/16 5.38 4,330,000
3,000,000 Tri-Park Villas Notes - Series 2004-A
LOC M & I Marshall & Ilsley Bank 10/01/44 5.33 3,000,000
1,340,000 UAI Technologies, Inc. - Series 1998
LOC Wachovia Bank, N.A. 05/01/18 5.43 1,340,000
865,000 Valley City Linen Co. - Series 1997
LOC Huntington National Bank 02/01/27 5.43 865,000
1,375,000 Washington State HFC MHRB
(The Vintage at Richland Senior Living Project) - Series 2004B
Guaranteed by Federal National Mortgage Association 01/15/38 5.34 1,375,000
- -------------- -------------
180,476,934 Total Variable Rate Demand Instruments 180,476,934
- -------------- -------------
Yankee Certificates of Deposit (18.88%)
- ------------------------------------------------------------------------------------------------------------------------
$ 10,000,000 Banque Nationale de Paris 02/08/07 5.42% $ 10,000,000
25,000,000 Canadian Imperial Bank of Commerce 11/24/06 5.07 25,000,000
15,000,000 Canadian Imperial Bank of Commerce 02/12/07 5.34 15,000,000
35,000,000 Credit Suisse First Boston 11/08/06 5.38 35,000,326
25,000,000 Deutsche Zentral - Genossenschafts Bank 11/17/06 5.38 25,000,000
25,000,000 HSH Nordbank A.G. 11/06/06 5.44 25,000,226
25,000,000 Toronto Dominion 02/21/07 5.62 25,000,000
- -------------- -------------
160,000,000 Total Yankee Certificates of Deposit 160,000,552
- -------------- -------------
Total Investments (99.56%) (cost $843,685,716+) 843,685,716
Cash and other assets, net of liabilities (0.44%) 3,686,486
-------------
Net Assets (100.00%) $ 847,372,202
=============
<FN>
+ Aggregate cost for federal income tax purposes is identical.
</FN>
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The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
AUGUST 31, 2006
================================================================================
FOOTNOTES:
(a) The interest rate shown reflects the security's current coupon, unless
yield is available.
(b) The interest rate changes daily based upon Federal Funds Target plus 0.06%.
(c) The interest rate changes daily based upon Federal Funds Open plus 0.08%.
(d) The interest rate changes monthly based upon one month LIBOR plus 0.10%.
(e) The interest rate changes daily based upon Federal Funds Target plus 0.10%.
(f) The interest rate changes monthly based upon one month LIBOR minus 0.035%.
(g) The interest rate changes monthly based upon one month LIBOR minus 0.02%.
(h) The interest rate changes monthly based upon one month LIBOR plus 0.02%.
(i) Unless otherwise noted securities payable on demand at par including
accrued interest (with one or seven days notice). Interest is adjusted
weekly.
KEY:
COPs = Certificates of Participation HFC = Housing Finance Commission
EDA = Economic Development Authority IDA = Industrial Development Authority
EDFA = Economic Development Finance Authority LOC = Letter of Credit
EDRB = Economic Development Revenue Bond MHRB = Multi-Family Housing Revenue Bond
GNMA = Government National Mortgage Association RB = Revenue Bond
BREAKDOWN OF PORTFOLIO HOLDINGS BY MATURITY:
- ------------------------------------------------------------------------------
Securities Maturing in Value % of Portfolio
- ------------------------------------------------------------------------------
Less than 31 Days $489,412,995 58.01%
31 through 60 Days 64,634,190 7.66
61 through 90 Days 119,900,703 14.21
91 through 120 Days 19,736,605 2.34
121 through 180 Days 115,001,223 13.63
Over 180 Days 35,000,000 4.15
- ------------------------------------------------------------------------------
Total $843,685,716 100.00%
- ------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
U.S. GOVERNMENT PORTFOLIO
SCHEDULE OF INVESTMENTS
AUGUST 31, 2006
================================================================================
Face Maturity Current Value
Amount Date Coupon (a) (Note 1)
------ ---- --------- ------
Repurchase Agreements (56.56%)
- ------------------------------------------------------------------------------------------------------------------------
$ 105,000,000 Annaly Mortgage Management, Inc., purchased on 08/31/06,
repurchase proceeds at maturity $105,015,313 (Collateralized by
$310,901,328 GNMA, 4.000% to 5.375%,
due 05/17/31 to 10/20/34, value $107,100,000) 09/01/06 5.25% $ 105,000,000
16,000,000 Bank of America, purchased on 08/31/06,
repurchase proceeds at maturity $16,002,324 (Collateralized by
$25,580,015, GNMA, 4.500% to 6.500%,
due 04/20/28 to 06/20/36, value $16,320,000) 09/01/06 5.23 16,000,000
20,000,000 Bear Stearns & Co., purchased on 08/31/06,
repurchase proceeds at maturity $20,002,911 (Collateralized by
$69,477,668, GNMA, 5.000% to 7.500%,
due 02/20/19 to 06/20/36, value $20,403,884) 09/01/06 5.24 20,000,000
100,000,000 UBS Securities, LLC, purchased on 08/31/06,
repurchase proceeds at maturity $100,014,556 (Collateralized by
$383,288,344, GNMA, 4.000% to 12.500%,
due 12/15/06 to 08/15/36, value $102,000,675) 09/01/06 5.24 100,000,000
- -------------- -------------
241,000,000 Total Repurchase Agreements 241,000,000
- -------------- -------------
U.S. Government Obligations (43.28%)
- ------------------------------------------------------------------------------------------------------------------------
$ 150,000,000 U.S. Treasury Bill 09/07/06 5.09% $ 149,873,000
20,000,000 U.S. Treasury Note, 3.125% 05/15/07 5.02 19,744,125
15,000,000 U.S. Treasury Note, 3.125% 05/15/07 5.06 14,803,659
- -------------- -------------
185,000,000 Total U.S. Government Obligations 184,420,784
- -------------- -------------
Total Investments (99.84%) (cost $425,420,784+) 425,420,784
Cash and other assets, net of liabilities (0.16%) 662,770
-------------
Net Assets (100.00%) $ 426,083,554
=============
<FN>
+ Aggregate cost for federal income tax purposes is identical.
</FN>
FOOTNOTES:
(a) The interest rate shown reflects the security's current yield; coupon rate
for Treasury Securities is shown within the description.
KEY:
GNMA = Government National Mortgage Association
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
U.S. GOVERNMENT PORTFOLIO
BREAKDOWN OF PORTFOLIO HOLDINGS BY MATURITY
AUGUST 31, 2006
================================================================================
- ------------------------------------------------------------------------------
Securities Maturing in Value % of Portfolio
- ------------------------------------------------------------------------------
Less than 31 Days $ 390,873,000 91.88%
31 through 60 Days -- 0.00
61 through 90 Days -- 0.00
91 through 120 Days -- 0.00
121 through 180 Days -- 0.00
Over 180 Days 34,547,784 8.12
- ------------------------------------------------------------------------------
Total $ 425,420,784 100.00%
- ------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2006
================================================================================
Money Market U.S. Government
Portfolio Portfolio
-------------------- -------------------
ASSETS
Investments in securities, at amortized cost (Note 1)........ $ 819,685,716 $ 184,420,784
Repurchase agreements (Note 1)............................... 24,000,000 241,000,000
Cash ........................................................ 1,539,362 1,189,475
Accrued interest receivable.................................. 3,801,466 359,067
Prepaid expenses............................................. 20,432 11,047
-------------------- -------------------
Total assets........................................... 849,046,976 426,980,373
-------------------- -------------------
LIABILITIES
Payable to affiliates*....................................... 408,611 194,223
Accrued expenses............................................. 171,638 91,239
Dividends payable............................................ 1,094,525 611,357
-------------------- -------------------
Total liabilities...................................... 1,674,774 896,819
-------------------- -------------------
Net assets................................................... $ 847,372,202 $ 426,083,554
==================== ===================
SOURCE OF NET ASSETS
Net capital paid in on shares of capital stock (Note 3)...... $ 847,373,317 $ 426,083,554
Accumulated net realized loss................................ (1,115) -0-
-------------------- -------------------
Net assets................................................... $ 847,372,202 $ 426,083,554
==================== ===================
Net asset value, per share (Note 3):
Money Market Portfolio:
Class A shares, ($399,104,616 applicable to 399,105,141 shares outstanding) $ 1.00
===========
Class B shares, ($314,460,763 applicable to 314,461,177 shares outstanding) $ 1.00
===========
First Southwest shares, ($133,806,823 applicable to 133,806,999 shares outstanding) $ 1.00
===========
U.S. Government Portfolio:
Class A shares, ($204,332,183 applicable to 204,332,183 shares outstanding) $ 1.00
===========
Class B shares, ($221,751,371 applicable to 221,751,371 shares outstanding) $ 1.00
===========
<FN>
* Includes fees payable to Reich & Tang Asset Management, LLC, Reich & Tang
Distributors, Inc. and Reich & Tang Services, Inc.
</FN>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 2006
================================================================================
Money Market U.S. Government
Portfolio Portfolio
-------------------- -------------------
INVESTMENT INCOME
Income:
Interest..................................................... $ 39,652,598 $ 19,978,827
-------------------- -------------------
Expenses: (Note 2)
Investment management fee.................................... 2,578,062 1,185,027
Administration fee........................................... 1,812,562 942,923
Distribution fee (First Southwest shares).................... 331,199 -0-
Shareholder servicing fee (Class A).......................... 974,926 564,913
Shareholder servicing fee (First Southwest shares)........... 331,199 -0-
Custodian expenses........................................... 51,241 26,737
Shareholder servicing and related shareholder expenses+...... 630,211 319,882
Legal, compliance and filing fees............................ 452,484 127,273
Audit and accounting......................................... 174,885 127,117
Directors' fees.............................................. 54,620 30,369
Miscellaneous................................................ 51,805 26,230
-------------------- -------------------
Total expenses........................................... 7,443,194 3,350,471
Less: Fees waived (First Southwest shares).............. (79,488) -0-
Expenses paid indirectly.......................... -0- (13,899)
-------------------- -------------------
Net expenses............................................. 7,363,706 3,336,572
-------------------- -------------------
Net investment income........................................... 32,288,892 16,642,255
REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments......................... -0- 2,751
-------------------- -------------------
Increase in net assets from operations.......................... $ 32,288,892 $ 16,645,006
==================== ===================
<FN>
+ Includes class specific transfer agency expenses of $311,962 and $200,200
for the Money Market Portfolio Class A and Class B shares, respectively and
$173,477 and $114,896 for the U.S. Government Portfolio Class A and Class B
shares, respectively.
</FN>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
Money Market Portfolio U.S. Government Portfolio
----------------------- -------------------------
2006 2005 2006 2005
---- ---- ---- ----
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income................... $ 32,288,892 $ 17,371,571 $ 16,642,255 $ 9,049,419
Net realized gain (loss) on investments -0- (1,115) 2,751 75
---------------- ---------------- ---------------- ----------------
Increase in net assets from operations.. 32,288,892 17,370,456 16,645,006 9,049,494
Dividends to shareholders from
net investment income:
Class A................................. (14,316,769) (6,178,819) (8,027,122) (4,301,759)
Class B................................. (13,256,967) (9,138,174) (8,615,133) (4,747,660)
First Southwest shares.................. (4,715,156) (2,054,578) -0- -0-
---------------- ---------------- ---------------- ----------------
Total dividend to shareholders...... (32,288,892) (17,371,571) (16,642,255) (9,049,419)
---------------- ---------------- ---------------- ----------------
Distributions to shareholders from
realized gain on investments:
Class A................................. -0- -0- (1,410) (36)
Class B................................. -0- -0- (1,341) (39)
First Southwest shares.................. -0- -0- -0- -0-
---------------- ---------------- ---------------- ----------------
Total distributions to shareholders. -0- -0- (2,751) (75)
---------------- ---------------- ---------------- ----------------
Capital share transactions (Note 3):
Class A................................. 51,525,598 (23,070,586) (34,032,228) (12,269,538)
Class B................................. (84,626,791) (215,703,492) (11,638,016) (57,122,700)
First Southwest shares.................. 16,895,909 (25,472,772) -0- -0-
---------------- ---------------- ---------------- ----------------
Total capital share transactions.... (16,205,284) (264,246,850) (45,670,244) (69,392,238)
---------------- ---------------- ---------------- ----------------
Total increase (decrease)........... (16,205,284) (264,247,965) (45,670,244) (69,392,238)
Net assets:
Beginning of year....................... 863,577,486 1,127,825,451 471,753,798 541,146,036
---------------- ---------------- ---------------- ----------------
End of year............................. $ 847,372,202 $ 863,577,486 $ 426,083,554 $ 471,753,798
================ ================ ================ ================
Undistributed net investment income........ $ -0- $ -0- $ -0- $ -0-
================ ================ ================ ================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Summary of Accounting Policies
Short Term Income Fund, Inc. (the "Fund") is a diversified, open-end management
investment company registered under the Investment Company Act of 1940. The Fund
is presently comprised of two portfolios, Money Market Portfolio and U.S.
Government Portfolio. The Money Market Portfolio has three classes of stock
authorized, Class A, Class B and First Southwest Prime Income Fund (the "First
Southwest shares"). The U.S. Government Portfolio has two classes of stock
authorized, Class A and Class B. The Class A shares of each Portfolio, and the
First Southwest shares of the Money Market Portfolio are subject to a service
fee pursuant to each Portfolio's Distribution and Service Plan. The First
Southwest shares are subject to an additional fee pursuant to a Distribution
Agreement. The Class B shares are not subject to a service fee. Additionally,
the Portfolio may allocate among its classes certain expenses, to the extent
allowable to specific classes, including transfer agent fees, government
registration fees, certain printing and postage costs, and administrative and
legal expenses. Class specific expenses of the Fund were limited to shareholder
servicing fees and transfer agent expenses. Income, expenses (other than
expenses attributable to a specific class), and realized and unrealized gains
and losses on investments are allocated to each class of shares based on its
relative net assets. In all other respects, the share classes of each Portfolio
represent the same interest in the income and assets of their respective
Portfolios. Distribution of First Southwest shares commenced on August 5, 2002.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America for investment
companies as follows:
a) Valuation of Securities -
Investments are valued at amortized cost, which approximates market value.
Under this valuation method, a portfolio instrument is valued at cost and
any discount or premium is amortized on a constant basis to the maturity of
the instrument. 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. The maturity of variable rate
demand instruments is deemed to be the longer of the period required before
the Fund is entitled to receive payment of the principal amount or the
period remaining until the next interest rate adjustment.
b) Repurchase Agreements -
In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian take possession of the underlying collateral
securities, the fair value of which exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the
seller defaults, and the fair market value of the collateral declines,
realization of the collateral by the Fund may be delayed or limited.
c) Federal Income Taxes -
It is the policy of each Portfolio to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its tax exempt and taxable income to its shareholders.
Therefore, no provision for federal income tax is required.
d) Dividends and Distributions -
Dividends from investment income (including realized capital gains and
losses), determined on a class level, are declared daily and paid monthly.
Net realized long-term capital gains, if any, are distributed at least
annually and in no event later than 60 days after the end of the Fund's
fiscal year.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
1. Summary of Accounting Policies (Continued)
e) Use of Estimates -
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.
f) General -
Securities transactions are recorded on a trade date basis. Interest income
including accretion of discount and amortization of premium is accrued as
earned. Realized gains and losses from securities transactions are recorded
on the identified cost basis.
2. Investment Management Fees and Other Transactions with Affiliates
Under the Management Contract, the Money Market Portfolio pays a management fee
to Reich & Tang Asset Management, LLC (the "Manager") at the annual rate of .30%
of the Portfolio's average daily net assets not in excess of $750 million, plus
..29% of such assets in excess of $750 million but not in excess of $1 billion,
plus .28% of such assets in excess of $1 billion but not in excess of $1.5
billion, plus .27% of such assets in excess of $1.5 billion. The U.S. Government
Portfolio pays a management fee to the Manager equal to .275% of the Portfolio's
average daily net assets not in excess of $250 million, plus .25% of such assets
in excess of $250 million.
Pursuant to an Administrative Services Agreement, each Portfolio pays to the
Manager an annual fee of .21% of each Portfolio's average daily net assets not
in excess of $1.25 billion, plus .20% of such assets in excess of $1.25 billion
but not in excess of $1.5 billion, plus .19% of such assets in excess of $1.5
billion.
Pursuant to a Distribution and Service Plan adopted under Securities and
Exchange Commission Rule 12b-1, the Fund and Reich & Tang Distributors, Inc.
(the "Distributor"), an affiliate of the Manager, have entered into a
Distribution Agreement and a Shareholder Servicing Agreement, only with respect
to the Class A shares of each Portfolio and the First Southwest shares of the
Money Market Portfolio. For its services under the Shareholder Servicing
Agreement, the Distributor receives from each Portfolio a service fee equal to
..25% per annum of each Portfolio's average daily net assets with respect only to
the Class A shares and the First Southwest shares of the Money Market Portfolio.
In addition, the Distributor receives .25% per annum in Distribution fees of the
First Southwest shares' average daily net assets.
For the year ended August 31, 2006, the following fees were voluntarily waived
by the Distributor:
Money Market Portfolio
----------------------
Distribution fees - First Southwest shares $ 79,488
The Distributor has no right to recoup prior fee waivers.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
2. Investment Management Fees and Other Transactions with Affiliates (Continued)
Fees are paid to Directors who are unaffiliated with the Manager on the basis of
$8,000 per annum plus $1,450 per meeting attended (there are five scheduled
Board Meetings each year). In addition, the Audit Committee Chairman receives an
aggregate payment of $1,000 per quarter allocated among the funds of the Reich &
Tang complex on whose audit committee he serves and each member of the Audit
Committee will receive an aggregate payment of $750 per Audit Committee meeting
attended allocated among the funds of the Reich & Tang Complex. Effective
January 1, 2006, the Lead Independent Director will receive an additional annual
fee of $8,000 and the Deputy Lead Director will receive an additional annual fee
of $4,000, both fees paid quarterly and allocated among the funds of the Reich &
Tang Complex.
Included in the Statement of Operations under the caption "Shareholder servicing
and related shareholder expenses" are fees of $372,156 and $224,563 for the
Money Market Portfolio and the U.S. Government Portfolio, respectively paid to
Reich & Tang Services, Inc., (the "Transfer Agent"), an affiliate of the Manager
as servicing agent for each portfolio. Pursuant to the Transfer Agency
Agreement, the Transfer Agent receives a fee of $17.40 per account per year or a
minimum of 0.05% of the monthly average net assets of the Class A and B shares
of each portfolio. For the year ended August 31, 2006, these fees amounted to an
annual rate of 0.05% of the monthly average net assets of the Class A and B
shares of each portfolio.
For the year ended August 31, 2006, the breakdown of expenses paid indirectly by
the Fund were as follows:
U.S. Government Portfolio
-------------------------
Custodian expenses $13,899
-------
Total $13,899
=======
3. Capital Stock
At August 31, 2006, 10,000,000,000 shares of $.001 par value stock were
authorized. Transactions in capital stock, all at $1.00 per share, were as
follows:
Money Market Portfolio U.S. Government Portfolio
---------------------- -------------------------
Year Year Year Year
Ended Ended Ended Ended
August 31, 2006 August 31, 2005 August 31, 2006 August 31, 2005
---------------- --------------- --------------- ---------------
Class A shares
- --------------
Sold.................................. 2,026,096,416 1,917,167,808 1,143,651,308 1,119,590,779
Issued on reinvestment of dividends... 12,881,685 5,492,425 7,219,159 3,547,909
Redeemed.............................. (1,987,452,503) (1,945,730,819) (1,184,902,695) (1,135,408,226)
---------------- --------------- --------------- ---------------
Net increase (decrease)............... 51,525,598 (23,070,586) (34,032,228) (12,269,538)
================ =============== =============== ===============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
3. Capital Stock (Continued)
Money Market Portfolio U.S. Government Portfolio
---------------------- -------------------------
Year Year Year Year
Ended Ended Ended Ended
August 31, 2006 August 31, 2005 August 31, 2006 August 31, 2005
---------------- --------------- --------------- ---------------
Class B shares
- --------------
Sold.................................. 1,161,030,721 1,355,103,467 886,491,976 1,028,993,585
Issued on reinvestment of dividends... 13,139,388 8,895,965 8,078,598 4,448,814
Redeemed.............................. (1,258,796,900) (1,579,702,924) (906,208,590) (1,090,565,099)
---------------- --------------- --------------- ---------------
Net increase (decrease)............... (84,626,791) (215,703,492) (11,638,016) (57,122,700)
================ =============== =============== ===============
First Southwest shares
- ----------------------
Sold.................................. 215,384,221 142,993,781
Issued on reinvestment of dividends... 4,715,497 2,062,226
Redeemed.............................. (203,203,809) (170,528,779)
---------------- ---------------
Net increase (decrease)............... 16,895,909 (25,472,772)
================ ===============
4. Tax Information
The tax character of all dividends and distributions paid during the years ended
August 31, 2006 and 2005 were as follows:
Money Market Portfolio U.S. Government Portfolio
-------------------------- --------------------------
2006 2005 2006 2005
-------- -------- -------- --------
Ordinary income....................... $32,288,892 $17,371,571 $16,645,006 $ 9,049,494
Long-term capital gains............... -0- -0- -0- -0-
At August 31, 2006, the Money Market Portfolio had unused capital loss carry
forwards of $1,115, available for Federal income tax purposes to be applied
against future gains, if any. If not applied against future gains, $916 will
expire in 2013 and $199 will expire in 2014.
At August 31, 2006, the Money Market Portfolio and the U.S. Government Portfolio
had no distributable earnings.
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48 - Accounting for Uncertainty in Income Taxes that requires
the tax effects of certain tax positions to be recognized. These tax positions
must meet a "more likely than not" standard that based on their technical
merits, they have a more than 50 percent likelihood of being sustained upon
examination. FASB interpretation No. 48 is effective for fiscal periods
beginning after December 15, 2006. At adoption, the financial statements must be
adjusted to reflect only those tax positions that are more likely than not of
being sustained. Management of the Fund is currently evaluating the impact FASB
Interpretation No. 48 will have on the Fund's financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
5. Financial Highlights
Money Market Portfolio
Class A shares Years Ended August 31,
- -------------- -------------------------------------------------------------
2006 2005 2004 2003 2002
--------- --------- --------- --------- ---------
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................. 0.037 0.017 0.003 0.006 0.014
Net realized and unrealized gain (loss)
on investments........................ -- 0.000 0.000 -- 0.000
--------- --------- --------- --------- ---------
Total from investment operations........ 0.037 0.017 0.003 0.006 0.014
Less distributions from:
Dividends from net investment income.. (0.037) (0.017) (0.003) (0.006) (0.014)
Net realized gains on investments..... ( -- ) ( -- ) (0.000) ( -- ) (0.000)
--------- --------- --------- --------- ---------
Total distributions..................... (0.037) (0.017) (0.003) (0.006) (0.014)
--------- --------- --------- --------- ---------
Net asset value, end of year.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.............................. 3.72% 1.66% 0.33% 0.63% 1.44%
Ratios/Supplemental Data
Net assets, end of year (000's)........... $ 399,104 $ 347,579 $ 370,650 $ 389,718 $ 322,381
Ratios to average net assets:
Expenses (a).......................... 0.94% 0.94% 0.87% 0.87% 0.97%
Net investment income................. 3.67% 1.64% 0.32% 0.61% 1.56%
Expenses paid indirectly.............. -- 0.00% 0.00% 0.00% 0.00%
<FN>
(a) Includes expenses paid indirectly if applicable
</FN>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
5. Financial Highlights (Continued)
Money Market Portfolio
Class B shares Years Ended August 31,
- -------------- -------------------------------------------------------------
2006 2005 2004 2003 2002
--------- --------- --------- --------- ---------
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................. 0.039 0.019 0.006 0.009 0.018
Net realized and unrealized gain (loss)
on investments........................ -- 0.000 0.000 -- 0.000
--------- --------- --------- --------- ---------
Total from investment operations........ 0.039 0.019 0.006 0.009 0.018
Less distributions from:
Dividends from net investment income (0.039) (0.019) (0.006) (0.009) (0.018)
Net realized gains on investments..... ( -- ) ( -- ) (0.000) ( -- ) (0.000)
--------- --------- --------- --------- ---------
Total distributions..................... (0.039) (0.019) (0.006) (0.009) (0.018)
--------- --------- --------- --------- ---------
Net asset value, end of year.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.............................. 4.00% 1.95% 0.58% 0.92% 1.80%
Ratios/Supplemental Data
Net assets, end of year (000's)........... $ 314,461 $ 399,087 $ 614,791 $ 858,944 $ 838,064
Ratios to average net assets:
Expenses (a).......................... 0.67% 0.66% 0.62% 0.58% 0.61%
Net investment income................. 3.89% 1.86% 0.57% 0.92% 1.78%
Expenses paid indirectly.............. -- 0.00% 0.00% 0.00% 0.00%
<FN>
(a) Includes expenses paid indirectly if applicable
</FN>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
5. Financial Highlights (Continued)
Money Market Portfolio
-------------------------------------------------------------------
August 5, 2002
First Southwest shares Years Ended August 31, (Commencement of
- ---------------------- ------------------------------------------------ Offering) to
2006 2005 2004 2003 August 31, 2002
--------- --------- --------- --------- ---------------
Per Share Operating Performance:
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................. 0.035 0.015 0.002 0.005 0.001
Net realized and unrealized gain (loss)
on investments........................ -- 0.000 0.000 -- 0.000
--------- --------- --------- --------- ---------
Total from investment operations........ 0.035 0.015 0.002 0.005 0.001
Less distributions from:
Dividends from net investment income (0.035) (0.015) (0.002) (0.005) (0.001)
Net realized gains on investments..... ( -- ) ( -- ) (0.000) ( -- ) (0.000)
--------- --------- --------- --------- ---------
Total distributions..................... (0.035) (0.015) (0.002) (0.005) (0.001)
--------- --------- --------- --------- ---------
Net asset value, end of period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.............................. 3.61% 1.56% 0.19% 0.50% 0.07%(a)
Ratios/Supplemental Data
Net assets, end of period (000's)......... $ 133,807 $ 116,911 $ 142,384 $ 130,429 $ 127,082
Ratios to average net assets:
Expenses (net of fees waived)(b)...... 1.05% 1.05% 1.01% 0.99% 0.99%(c)
Net investment income................. 3.56% 1.52% 0.19% 0.51% 0.93%(c)
Distribution fees waived.............. 0.06% 0.06% 0.06% 0.06% 0.06%(c)
Expenses paid indirectly.............. -- 0.00% 0.00% 0.00% 0.00%(c)
<FN>
(a) Not annualized
(b) Includes expenses paid indirectly if applicable (c) Annualized
</FN>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
5. Financial Highlights (Continued)
U.S. Government Portfolio
Class A shares Years Ended August 31,
- -------------- -------------------------------------------------------------
2006 2005 2004 2003 2002
--------- --------- --------- --------- ---------
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................. 0.036 0.016 0.003 0.006 0.014
Net realized and unrealized gain (loss)
on investments........................ 0.000 0.000 0.000 0.000 --
--------- --------- --------- --------- ---------
Total from investment operations........ 0.036 0.016 0.003 0.006 0.014
Less distributions from:
Dividends from net investment income.. (0.036) (0.016) (0.003) (0.006) (0.014)
Net realized gains on investments..... (0.000) (0.000) (0.000) (0.000) ( -- )
--------- --------- --------- --------- ---------
Total distributions..................... (0.036) (0.016) (0.003) (0.006) (0.014)
--------- --------- --------- --------- ---------
Net asset value, end of year.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.............................. 3.65% 1.64% 0.28% 0.64% 1.39%
Ratios/Supplemental Data
Net assets, end of year (000's)........... $ 204,332 $ 238,365 $ 250,634 $ 236,931 $ 241,906
Ratios to average net assets:
Expenses (a).......................... 0.88% 0.87% 0.84% 0.79% 0.89%
Net investment income................. 3.55% 1.62% 0.28% 0.64% 1.46%
Expenses paid indirectly.............. 0.00% 0.00% 0.00% 0.00% 0.00%
<FN>
(a) Includes expenses paid indirectly
</FN>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
5. Financial Highlights (Continued)
U.S. Government Portfolio
Class B shares Years Ended August 31,
- -------------- -------------------------------------------------------------
2006 2005 2004 2003 2002
--------- --------- --------- --------- ---------
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................. 0.039 0.019 0.005 0.008 0.017
Net realized and unrealized gain (loss)
on investments........................ 0.000 0.000 0.000 0.000 --
--------- --------- --------- --------- ---------
Total from investment operations........ 0.039 0.019 0.005 0.008 0.017
Less distributions from:
Dividends from net investment income (0.039) (0.019) (0.005) (0.008) (0.017)
Net realized gains on investments..... (0.000) (0.000) (0.000) (0.000) ( -- )
--------- --------- --------- --------- ---------
Total distributions..................... (0.039) (0.019) (0.005) (0.008) (0.017)
--------- --------- --------- --------- ---------
Net asset value, end of year.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return.............................. 3.94% 1.91% 0.53% 0.84% 1.69%
Ratios/Supplemental Data
Net assets, end of year (000's)........... $ 221,752 $ 233,389 $ 290,512 $ 331,130 $ 400,833
Ratios to average net assets:
Expenses (a).......................... 0.61% 0.60% 0.60% 0.59% 0.58%
Net investment income................. 3.86% 1.85% 0.52% 0.84% 1.61%
Expenses paid indirectly.............. 0.00% 0.00% 0.00% 0.00% 0.00%
<FN>
(a) Includes expenses paid indirectly
</FN>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
================================================================================
To the Board of Directors and Shareholders of
Short Term Income Fund, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Money Market Portfolio and U.S.
Government Portfolio (constituting Short Term Income Fund, Inc., hereafter
referred to as the "Fund") at August 31, 2006, the results of each of their
operations for the year then ended, the changes in each of their net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods presented, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 2006 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
October 19, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
ADDITIONAL INFORMATION
(UNAUDITED)
================================================================================
ADDITIONAL INFORMATION ABOUT PORTFOLIO HOLDINGS
The Fund is required to file its complete schedule of portfolio holdings with
the Securities and Exchange Commission ("SEC") on Form N-Q for its first and
third fiscal quarters. The Fund's Form N-Q is available without charge on the
SEC's website (http://www.sec.gov) or by calling the Fund toll free at (800)
433-1918. You can also obtain copies of the Fund's Form N-Q by visiting the
SEC's Public Reference Room in Washington, DC (please call the SEC at (800)
732-0330 for information on the operation of the Public Reference Room).
INFORMATION ABOUT PROXY VOTING
Information regarding the Fund's proxy voting record for the 12 month period
ending June 30 of each year is filed with the SEC on Form N-PX no later than
August 31 of each year. The Fund's Form N-PX is available without charge, upon
request, by calling the Fund at (800) 433-1918 and on the SEC's website
(http//www.sec.gov). The Fund does not presently invest in voting securities and
has therefore not adopted proxy voting policies and procedures.
QUALIFIED INTEREST INCOME
For the fiscal year ended August 31, 2006, the Funds' designate the following
percentages of ordinary distributions paid during the fiscal year that are from
qualified interest income to foreign shareholders:
Qualified Interest
Income
------
Short Term Income Fund - Money Market Portfolio 77%
Short Term Income Fund - U.S. Government Portfolio 100%
INFORMATION ABOUT THE INVESTMENT MANAGEMENT CONTRACT
On July 20, 2006, the Board of Directors approved the continuance of the
Investment Management Contract. In determining whether to approve the
continuance of the Investment Management Contract, the Directors considered the
following information:
1) The nature, extent and quality of services provided by the Manager.
The Directors reviewed in detail the nature and extent of the services provided
by the Manager under the terms of the Fund's Investment Management Contract and
the quality of those services over the past year. The Directors noted that the
services include managing the investment and reinvestment of the Fund's assets;
the provision of reports to the Board regarding changes in portfolio holdings,
important developments affecting the entities whose securities are included in
the Fund's portfolio, and the money market industry and the economy in general;
and the payment of compensation of all officers, directors and employees of the
Fund who are officers of the Manager or its affiliates. The Board also observed
that the Manager provides various administrative services to the Fund pursuant
to the terms of a separate Administrative Services Contract and considered the
nature, extent and quality of services provided under that agreement as well.
The Directors evaluated these factors based on their direct experience with the
Manager and in consultation with counsel to the independent Directors and Fund
counsel. The Directors concluded that the nature and extent of the services
provided under the Investment Management
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
INFORMATION ABOUT THE INVESTMENT MANAGEMENT CONTRACT, (continued)
1) The nature, extent and quality of services provided by the Manager.
(continued)
Contract were reasonable and appropriate in relation to the management fee, that
the level of services provided by the Manager had not diminished over the past
year and that the quality of services continues to be high. The Directors
reviewed the personnel responsible for providing advisory services to the Fund
and concluded, based on their experience and interaction with the Manager, that
(i) the Manager was able to retain quality portfolio managers and other
personnel; (ii) the Manager exhibited a high level of diligence and attention to
detail in carrying out its advisory responsibilities under the Investment
Management Contract; (iii) the Manager was responsive to requests of the
Directors; and (iv) the Manager had kept the Directors apprised of developments
relating to the Fund and the industry in general. The Directors also focused on
the Manager's reputation and long-standing relationship with the Fund and, in
particular, the experience of the Manager in advising money market funds. The
Directors also noted the high quality of services provided by the Manager under
the Administrative Services Contract.
2) The performance of the Fund and the Manager.
The Directors reviewed the investment performance of the Fund, both on an
absolute basis and on a gross basis, as compared to various Lipper peer group
categories ("Performance Peer Groups") for the one-month, one-, three-, five-
and ten-year periods ended May 31, 2006. The Performance Peer Groups were
comprised of: (i) the Fund and twelve other retail no-load money market funds,
as classified by Lipper, (ii) the Fund and five other retail money market funds
that are considered by the Manager to be competitors of the Fund with similar
distribution channels, (iii) a sub-advised competitor group of the Fund and any
other similar money market products managed or sub-advised by the Manager, and
(iv) the Fund and all other retail money market funds in the Lipper universe
regardless of asset size or primary channel of distribution. The Manager advised
the Board that, other the sub-advised competitor group, it does not advise or
subadvise other funds with a similar investment policy to the Fund's; or (ii)
other types of accounts, such as institutional and pension accounts, with a
similar investment policy to the Fund's. The Directors used the Fund's
performance against the Performance Peer Groups to provide objective comparative
benchmarks against which they could assess the Fund's performance. The Directors
considered those comparisons as helpful in their assessment as to whether the
Manager was obtaining for the Fund's shareholders the performance that was
available in the marketplace given the Fund's investment objectives, strategies,
limitations and restrictions. In reviewing the Fund's performance, the Board
noted that Fund performance was generally acceptable, noting that on occasion it
has underperformed and on other occasion it has outperformed certain of these
peer groups. At the same time, the Board considered that the difference between
the best and worst performing funds in the Performance Peer Groups for all time
periods was small. Board also considered the Manager's explanation that its
investment strategy and process was generally more conservative than many of its
competitors. The Board determined to continue to monitor the Fund's performance
carefully.
In connection with its assessment of the overall performance of the Manager, the
Directors considered the Manager's financial condition and whether it has the
resources necessary to continue to carry out its obligations under the
Investment Management Contract. The Directors took into account, in this regard,
the payments made by the Manager from its own resources to securities brokers,
banks and financial institutions or other industry professionals or
organizations whose customers are shareholders of the Fund ("Participating
Organizations") in connection with distribution assistance and shareholder
servicing provided by the Participating Organizations. The Directors concluded
that the Manager had the financial resources necessary to continue to perform
its obligations under the Investment Management Contract and to continue to
provide the high quality services that it had provided to the Fund to date.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
ADDITIONAL INFORMATION (CONTINUED)
(UNAUDITED)
================================================================================
INFORMATION ABOUT THE INVESTMENT MANAGEMENT CONTRACT, (continued)
3) The cost of the advisory services and the profits to the Manager and
its affiliates from the relationship with the Fund.
In connection with the Directors' consideration of the level of the management
fee, the Directors considered a number of factors. The Directors compared the
level of the management fee for the Fund and the level of the combined
management-administrative fees against comparative Lipper expense peer groups
("Expense Peer Groups"). The Expense Peer Groups consist of: (i) the Fund and
twelve other retail no-load money market funds, as classified by Lipper, (ii)
the Fund and five other retail money market funds that are considered by the
Manager to be competitors of the Fund with similar distribution channels, (iii)
a sub-advised competitor group of the Fund and any other similar money market
products managed or sub-advised by the Manager, and (iv) the Fund and all other
retail no-load money market funds in the Lipper universe (excluding outliers).
The Directors also considered comparative total fund expenses of the Fund and
the Expense Peer Groups. The Directors used this combined fee information and
total expense data as a guide to help assess the reasonableness of the Fund's
management fee, although they acknowledged that it was difficult to make precise
comparisons with other funds since the exact nature of services provided under
the Expense Peer Group fund agreements is often not apparent. The Directors also
viewed the Expense Peer Group fee information as a whole as useful in assessing
whether the Manager was providing services at a cost that was competitive with
other, similar funds. The Board noted that the contract rates of the Fund's
management fee and combined fees (management and administrative) were generally
reasonable when compared to the range, of that of the Expense Peer Groups. In
assessing this information, the Directors considered both the comparative
contract rates as well as the level of the management fees after waivers and/or
reimbursements. The Directors also noted that, other than as reflected in the
Sub-advised peer group, the Manager did not advise or sub-advise any other
registered investment companies or other types of accounts, such as
institutional or pension accounts, with similar investment policies to the Fund.
With respect to the sub-advised peer group, the Directors considered the
significant differences in the nature of the responsibilities of the Manager
with respect to sub-advised accounts as well as the lower level of services
provided by the Manager to sub-advised accounts. The Directors concluded that
the level of the management fee was reasonable in light of these factors.
The Directors also considered the profitability to the Manager and its
affiliates arising out of their relationships with the Fund. In this regard the
Directors reviewed profitability data relating to the Manager and its affiliates
for the year ended December 31, 2005. The Directors considered revenues received
by the Manager under the Investment Management Contract and Administrative
Services Contract as well as revenues received by the Manager's affiliates under
the 12b-1 Plans and related agreements, Transfer Agency Agreement and revenues
derived from Reich & Tang's cash management business (e.g. checking and debit
card services that are offered by Reich & Tang to Fund shareholders through
certain Participating Organizations). The Directors concluded that the
profitability of the Fund to the Manager and its affiliates was not excessive.
4) The extent to which economies of scale will be realized as the Fund
grows and whether fee levels reflect those economies of scale.
With respect to the Directors' consideration of economies of scale, the
Directors discussed with the Manager whether economies of scale would be
realized by it in its management of the Fund at higher asset levels. The
Directors also discussed with the Manager whether certain of the Manager's costs
would increase if asset levels rise and observed that as assets rise, the
Manager and its affiliates may be required to pay increased fees to
Participating Organizations. The Directors also reviewed the Expense Peer Group
data to assess whether the Expense Peer Group funds had advisory or
administrative fee breakpoints and, if so, at what asset levels. The Directors
concluded that they were unable to assess at this time whether economies of
scale would be realized if the Fund were to experience significant asset growth.
In the event there were significant asset growth in the future, the Directors
determined to reassess whether the management fee appropriately took into
account any economies of scale that had been realized as a result of that
growth.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
INFORMATION ABOUT THE INVESTMENT MANAGEMENT CONTRACT, (continued)
5) Other Factors.
In addition to the above factors, the Directors acknowledged the importance of
the ability of the Manager's affiliate, the distributor, to market the Fund
through its distribution networks, including its customer service and
administration system with banks and bank customers.
Based on a consideration of all these factors in their totality, the Directors,
including all of the disinterested Directors, determined that the Fund's
management fee was fair and reasonable with respect to the quality of services
that the Manager provides and in light of the other factors described above that
the Directors deemed relevant. The Directors based their decision on evaluations
of all these factors as a whole and did not consider any one factor as
all-important or controlling. The disinterested Directors were also assisted by
the advice of independent counsel in making this determination.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
ADDITIONAL INFORMATION (CONTINUED)
(UNAUDITED)
================================================================================
Directors and Officers Information
August 31, 2006(1)
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
Name, Address(2), Position(s) Term of Principal Occupation(s) Number of Portfolios in Other
and Age Held with Office During Past Fund Complex Directorships
Fund and Length of 5 Years Overseen by Director held by
Time Director
Served(3)
- ---------------------------------------------------------------------------------------------------------------------------
Disinterested Directors:
- ---------------------------------------------------------------------------------------------------------------------------
Edward A. Kuczmarski, Director Since 2006 Certified Public Accountant and Director/Trustee Trustee of
Age 56 Partner of Hays and Company LLP of twelve portfolios the Empire
since 1980. Builder Tax
Free Bond
Fund
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
Dr. W. Giles Mellon, Director Since 1980 Professor Emeritus of Business Director/Trustee N/A
Age 75 Administration in the Graduate of eleven portfolios
School of Management, Rutgers
University with which he has
been associated with since 1966.
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
Robert Straniere, Esq. Director Since 1983 Owner, Straniere Law Firm since Director/Trustee WPG Funds
Age 65 1980, NYS Assemblyman from 1981 of eleven portfolios Group
to 2004 and counsel at Fisher,
Fisher & Berger since 1995.
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
Dr. Yung Wong, Director Since 1980 Managing Director of Abacus Director/Trustee N/A
Age 67 Associates, an investment firm, of eleven portfolios
since 1996.
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Directors and Officers Information (continued)
August 31, 2006(1)
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
Name, Address(2), Position(s) Term of Principal Occupation(s) Number of Portfolios in Other
and Age Held with Office During Past Fund Complex Directorships
Fund and Length of 5 Years Overseen by Director held by
Time Director
Served(3)
- ---------------------------------------------------------------------------------------------------------------------------
Interested Directors/Officers:
- ---------------------------------------------------------------------------------------------------------------------------
Steven W. Duff, President Since 1994 Manager and President of Reich & Director/Trustee None
Age 52 and Tang Asset Management, LLC and/or Officer of
Director(4) ("RTAM, LLC"), a registered sixteen portfolios
Investment Advisor and President
of the Mutual Funds Division of
RTAM, LLC. Associated with
RTAM, LLC since 1994. Mr. Duff
is also President and Director/
Trustee of eight other funds in
the Reich & Tang Fund Complex,
Director of Pax World Money
Market Fund, Inc., Principal
Executive Officer of Delafield
Fund, Inc. and President and
Chief Executive Officer of Tax
Exempt Proceeds Fund, Inc. Mr.
Duff also serves as a Director
of Reich & Tang Services, Inc.
and Reich & Tang Distributors,
Inc.
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
Richard De Sanctis, Vice Since 2005 Executive Vice President and N/A N/A
Age 49 President Chief Financial Officer of RTAM,
LLC. Associated with RTAM, LLC
Treasurer 1994 to 2004 since 1990. Mr. De Sanctis is
and Vice President of ten other
Assistant funds in the Reich & Tang Fund
Secretary Complex, Vice President and
Assistant Secretary of Cortland
Trust, Inc. and serves as
Executive Vice President and
Chief Financial Officer of Reich
& Tang Services, Inc. and Reich
& Tang Distributors, Inc. Prior
to December 2004, Mr. De Sanctis
was Treasurer and Assistant
Secretary of eleven funds in the
Reich & Tang Fund Complex and
Vice President, Treasurer and
Assistant Secretary of Cortland
Trust, Inc.
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INCOME FUND, INC.
ADDITIONAL INFORMATION (CONTINUED)
(UNAUDITED)
================================================================================
Directors and Officers Information (continued)
August 31, 2006(1)
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
Name, Address(2), Position(s) Term of Principal Occupation(s) Number of Portfolios in Other
and Age Held with Office During Past Fund Complex Directorships
Fund and Length of 5 Years Overseen by Director held by
Time Director
Served(3)
- ---------------------------------------------------------------------------------------------------------------------------
Interested Directors/Officers (Continued):
- ---------------------------------------------------------------------------------------------------------------------------
Molly Flewharty, Vice Since 1995 Senior Vice President of RTAM, N/A N/A
Age 55 President LLC. Associated with RTAM, LLC
since 1977. Ms. Flewharty is
also Vice President of eleven
other funds in the Reich & Tang
Fund Complex. Ms. Flewharty also
serves as Senior Vice President
of Reich & Tang Distributors,
Inc.
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
Rosanne Holtzer, Chief Since 2004 Senior Vice President, N/A N/A
Age 42 Compliance Compliance, Officer and
Officer Assistant Secretary of RTAM,
LLC. Associated with RTAM, LLC
Secretary Since 2001 since 1986. Ms. Holtzer is also
Chief Compliance Officer,
Assistant Since 1995 Secretary and Assistant
Treasurer Treasurer of eleven other funds
in the Reich & Tang Fund Complex.
Ms. Holtzer also serves as
Senior Vice President, Assistant
Secretary & Compliance Officer
of Reich & Tang Distributors,
Inc. and Senior Vice President,
Assistant Secretary & Chief
Compliance Officer of Reich &
Tang Services, Inc.
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
Michael Lydon, Vice Since 2005 Executive Vice President and N/A N/A
Age 43 President Chief Operations Officer of
RTAM, LLC. Associated with
RTAM, LLC since January 2005.
Mr. Lydon was Vice President at
Automatic Data Processing from
July 2000 to December 2004.
Prior to July 2000, Mr. Lydon
was Executive Vice President and
Chief Information Officer of
RTAM, LLC. Mr. Lydon is also
Vice President of eleven other
funds in the Reich & Tang Fund
Complex. Mr. Lydon also serves
as Executive Vice President and
Chief Operations Officer for
Reich & Tang Distributors, Inc.
and Reich & Tang Services, Inc.
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Directors and Officers Information (continued)
August 31, 2006(1)
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
Name, Address(2), Position(s) Term of Principal Occupation(s) Number of Portfolios in Other
and Age Held with Office During Past Fund Complex Directorships
Fund and Length of 5 Years Overseen by Director held by
Time Director
Served(3)
- ---------------------------------------------------------------------------------------------------------------------------
Interested Directors/Officers (Continued):
- ---------------------------------------------------------------------------------------------------------------------------
Dana E. Messina, Vice Since 1995 Executive Vice President of N/A N/A
Age 49 President RTAM, LLC. Associated with
RTAM, LLC since 1980. Ms.
Messina is also Vice President
of eight other funds in the
Reich & Tang Fund Complex. Ms.
Messina also serves as Executive
Vice President of Reich & Tang
Distributors, Inc.
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
Anthony Pace, Treasurer Since 2004 Vice President of RTAM, LLC N/A N/A
Age 41 and since September 2004. Mr. Pace
Assistant was a Director of a Client
Secretary Service Group at GlobeOp
Financial Services, Inc. from
May 2002 to August 2004 and
Controller/Director of Mutual
Fund Administration for Smith
Barney Funds Management LLC
and Salomon Brothers Asset
Management Inc. from 1998 to May
2002. Mr. Pace is also Treasurer
and Assistant Secretary of
eleven other funds in the Reich
& Tang Fund Complex.
- ---------------------- ------------- -------------- --------------------------------- ----------------------- -------------
<FN>
(1) The Statement of Additional Information includes additional information
about Short Term Income Fund, Inc. (the "Fund") directors/officers and is
available, without charge, upon request by calling the Fund's transfer agent at
(800) 433-1918.
(2) The address for each of the above directors/officers of the Fund is Reich &
Tang Asset Management, LLC, 600 Fifth Avenue, New York, NY 10020.
(3) Each Director will hold office for an indefinite term until the earliest of
(i) the next meeting of shareholders, if any, called for the purpose of
considering the election or re-election of such Director and until the election
and qualification of his or her successor, if any, elected at such meeting, or
(ii) the date a Director resigns or retires, or a Director is removed by the
Board of Directors or shareholders, in accordance with the Fund's Articles of
Incorporation, as amended, and Amended and Restated By-Laws. Each officer will
hold office for an indefinite term until the date he or she resigns or retires
or until his\her successor is elected and qualifies.
(4) Steven W. Duff is deemed an interested person of the Fund due to his
affiliation with Reich & Tang Asset Management, LLC, the Fund's investment
advisor.
</FN>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by an effective prospectus, which includes
information regarding the Fund's objectives and policies, experience of its
management, marketability of shares, and other information.
- --------------------------------------------------------------------------------
Short Term Income Fund, Inc.
600 Fifth Avenue
New York, New York 10020
Manager
Reich & Tang Asset Management, LLC
600 Fifth Avenue
New York, New York 10020
Custodian
The Bank of New York
2 Hanson Place, 7th Floor,
Brooklyn, New York 11217
Transfer Agent &
Dividend Disbursing Agent
Reich & Tang Services, Inc.
600 Fifth Avenue
New York, New York 10020
STIF8/06A
SHORT TERM
INCOME
FUND, INC.
Annual Report
August 31, 2006
ITEM 2: CODE OF ETHICS
The registrant has adopted a Code of Ethics applicable to its Principal
Executive and Senior Financial Officers.
ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT
The registrant's Board of Directors has determined that there is an audit
committee financial expert serving on its audit committee, Edward A. Kuczmarski,
who is "independent," as defined in the instructions to this Item.
FYE 8/31/2006 FYE 8/31/2005
4(a) Audit Fees $ 64,600 $ 53,800
4(b) Audit Related Fees $ 0 $ 0
4(c) Tax Fees $ 7,500 $ 6,930
4(d) All Other Fees $ 0 $ 0
4(e)(1) The audit committee has adopted pre-approval policies and procedures
whereby the audit committee has pre-approved the provision of certain enumerated
tax services to the registrant by the registrant's principal accountant to the
extent the fee is less than $5,000 per occurrence.
4(e)(2) None
4(f) Not applicable.
4(g) $64,600 and $49,500, respectively, were the amount of non-audit fees that
were billed by the registrant's accountant for services rendered to (i) the
registrant, and (ii) the registrant's investment adviser and any control person
of the adviser that provides ongoing services to the registrant for the fiscal
year ended August 31, 2006. $6,930 and $45,000, respectively, were the amount of
non-audit fees that were billed by the registrant's accountant for services
rendered to (i) the registrant, and (ii) the registrant's investment adviser and
any control person of the adviser that provides ongoing services to the
registrant for the fiscal year ended August 31, 2005.
4(h) The registrant's audit committee has considered whether its principal
accountant's provision of non-audit services that were rendered to the
registrant's investment adviser, and any control persons of the investment
adviser that provides ongoing services to the registrant, that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is
compatible with maintaining the principal accountant's independence.
ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6: SCHEDULE OF INVESTMENTS
Schedule of Investments in securities of unaffiliated issuers is included under
Item 1.
ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8: PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 9: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors that were implemented
after the registrant last provided disclosure in response to the requirements of
Item 7(d)(2)(ii)(G) of Schedule 14A, or this Item 9.
ITEM 10: CONTROLS AND PROCEDURES
(a) The registrant's Principal Executive Officer and Principal Financial
Officer have evaluated the design and operation of the registrant's
disclosure controls and procedures within 90 days of this filing and
have concluded that the registrant's disclosure controls and procedures
were effective in ensuring that information required to be disclosed by
the registrant in this Form N-CSR was recorded, processed, summarized
and reported on a timely basis.
(b) There were no changes in the registrant's internal controls over
financial reporting that occurred during the second fiscal quarter of
the period covered by this report that have materially affected, or are
reasonably likely to affect, the registrant's internal controls over
financial reporting.
ITEM 11: EXHIBITS
(a)(1) Code of Ethics.
(a)(2) Certifications of Principal Executive Officer and Principal Financial
Officer, under Rule 30a-2 of the Investment Company Act of 1940.
(a)(3) Not applicable.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer, under Section 906 of the Sarbanes-Oxley Act of 2002 and 18
U.S.C. ss.1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant)Short Term Income Fund, Inc.
By (Signature and Title)* /s/Rosanne Holtzer
Rosanne Holtzer, Secretary
Date: November 2, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/Steven W. Duff
Steven W. Duff, President
Date: November 2, 2006
By (Signature and Title)* /s/Anthony Pace
Anthony Pace, Treasurer
Date: November 2, 2006
* Print the name and title of each signing officer under his or her signature.