Registration No. 33-17604
Rule 497(e)
THE TREASURER'S FUND
19 Old Kings Highway South, Darien, Connecticut 06820-4526
Supplement to Statement of Additional Information Dated March 1, 1995
Due to the high quality of the U.S. Treasury obligations contained in the
portfolio of the U.S. Treasury Money Market Portfolio and the lack of
shareholder interest in maintaining the rating, the Advisor has decided to
withdraw the ratings by Standard & Poor's Corporation and Moody's Investors
Service of the shares of this Portfolio and eliminate this Fund expense.
October 12, 1995
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PART B
THE TREASURER'S FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1995
This Statement of Additional Information is not a
prospectus and should be read in conjunction with the Prospectus
of The Treasurer's Fund, Inc. dated March 1, 1995, as it may be
amended from time to time, a copy of which may be obtained
without charge by writing to GOC Fund Distributors, Inc., 19 Old
Kings Highway South, Darien, Connecticut 06820-4526. This
Statement of Additional Information is incorporated by reference
into the Prospectus in its entirety.
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The Treasurer's Fund, Inc.
THE PORTFOLIOS AND THEIR OBJECTIVES
(See the Fund's Prospectus dated March 1, 1995)
The Treasurer's Fund, Inc. (the "Fund") is a
diversified, no-load, fixed income mutual fund consisting of six
portfolios (the "Portfolios") which are designed to meet the
short and intermediate term investment needs of corporations and
institutional cash managers. There are no sales loads or
exchange or redemption fees associated with the Fund.
A detailed description of the types and quality of the
securities in which the Portfolios may invest is further
described in the Fund's Prospectus and is incorporated herein by
reference. The investment objectives stated below for each
Portfolio are fundamental and may be changed only with the
approval of a majority of outstanding shares of that Portfolio.
General Investment Objectives and Policies
of the U.S. Treasury Money Market Portfolio
The U.S. Treasury Money Market Portfolio's investment
objectives are to maximize current income and to maintain
liquidity and a stable net asset value of $1 per share. The
Portfolio attempts to accomplish these objectives by investing in
U.S. Treasury obligations which have effective maturities of 397
days or less that enable it to employ the amortized cost method
of valuation. The Portfolio may also invest its assets in
repurchase agreements which are collateralized by U.S. Treasury
obligations. At least 65% of the Portfolio's total assets will
consist of U.S. Treasury Obligations and repurchase agreements
which are collateralized by U.S. Treasury obligations. There can
be no assurance that the U.S. Treasury Money Market Portfolio can
achieve these objectives or that it will be able to maintain a
stable net asset value of $1 per share. The shares of this
Portfolio are rated AAAm by Standard & Poor's Corporation and Aaa
by Moody's Investors Service.
Risk Factors
The investment objectives and policies of the U.S.
Treasury Money Market Portfolio are sought through the following
additional strategies employed in the management of the Portfolio
which are described under "Investments and Investment Techniques
Common to Two or More Portfolios":
1. Change in Ratings
2. Amortized Cost Valuation of Portfolio Securities
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3. When-Issued Securities
4. Repurchase Agreements
5. Reverse Repurchase Agreements
6. Loan of Portfolio Securities
General Investment Objectives and Policies
of the Domestic Prime Money Market Portfolio
The Domestic Prime Money Market Portfolio's investment
objectives are to maximize current income and to maintain
liquidity and a stable net asset value of $1 per share. The
Portfolio attempts to accomplish these objectives by investing
exclusively in prime quality, U.S. dollar denominated money
market obligations of domestic issuers which have effective
maturities of 397 days or less. The Portfolio will only purchase
high quality domestic money market instruments that have been
determined by the Fund's Board of Directors to present minimal
credit risks and that are First Tier Eligible Securities at the
time of acquisition, so that the Portfolio is able to employ the
amortized cost method of valuation. The term First Tier Eligible
Securities means (i) securities that have remaining maturities of
397 days or less and are rated in the highest short-term rating
category by any two nationally recognized statistical rating
organizations ("NRSROs") or in such category by the only NRSRO
that has rated the securities (collectively, the "Requisite
NRSROs") (acquisition in the latter situation must also be
ratified by the Board of Directors); (ii) securities that have
remaining maturities of 397 days or less but that at the time of
issuance were long-term securities and whose issuer has received
from the Requisite NRSROs a rating with respect to comparable
short-term debt in the highest short-term category; and
(iii) unrated securities determined by the Fund's Board of
Directors to be of comparable quality. Where the issuer of a
long-term security with a remaining maturity which would
otherwise qualify it as a First Tier Eligible Security does not
have rated short-term debt outstanding, the long-term security is
treated as unrated but may not be purchased if it has a long-term
rating from any NRSRO that is below the two highest long-term
categories. A determination of comparability by the Board of
Directors is made on the basis of its credit evaluation of the
issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support
of the securities or participation certificates. There can be no
assurance that the Domestic Prime Money Market Portfolio can
achieve these objectives or that it will be able to maintain a
stable net asset value of $1 per share.
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Risk Factors
The investment objectives and policies of the Domestic
Prime Money Market Portfolio are sought through the following
additional strategies employed in the management of the Portfolio
which are described under "Investments and Investment Techniques
Common to Two or More Portfolios":
1. Change in Ratings
2. Amortized Cost Valuation of Portfolio Securities
3. Variable Rate Demand Instruments
4. When-Issued Securities
5. Repurchase Agreements
6. Reverse Repurchase Agreements
7. Private Placements
8. Participation Interests
9. Mortgage-Backed Securities
10. Bank Obligations, Certificates of Deposit and
Bankers' Acceptances
11. Loan of Portfolio Securities
General Investment Objectives and Policies
of the Global Money Market Portfolio
The Global Money Market Portfolio's investment
objectives are to maximize current income and to maintain
liquidity and a stable net asset value of $1 per share. The
Portfolio seeks to produce a higher yield than the Domestic Prime
Money Market Portfolio by investing in high quality money market
instruments of issuers located in three countries (including the
United States) with effective maturities of 397 days or less.
The Portfolio will only purchase high quality domestic money
market instruments that have been determined by the Fund's Board
of Directors to present minimal credit risks and that are First
Tier Eligible Securities at the time of acquisition, so that the
Portfolio is able to employ the amortized cost method of
valuation. The term First Tier Eligible Securities means
(i) securities that have remaining maturities of 397 days or less
and are rated in the highest short-term rating category by any
two nationally recognized statistical rating organizations
("NRSROs") or in such category by the only NRSRO that has rated
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the securities (collectively, the "Requisite NRSROs")
(acquisition in the latter situation must also be ratified by the
Board of Directors); (ii) securities that have remaining
maturities of 397 days or less but that at the time of issuance
were long-term securities and whose issuer has received from the
Requisite NRSROs a rating with respect to comparable short-term
debt in the highest short-term category; and (iii) unrated
securities determined by the Fund's Board of Directors to be of
comparable quality. Where the issuer of a long-term security
with a remaining maturity which would otherwise qualify it as a
First Tier Eligible Security does not have rated short-term debt
outstanding, the long-term security is treated as unrated but may
not be purchased if it has a long-term rating from any NRSRO that
is below the two highest long-term categories. A determination
of comparability by the Board of Directors is made on the basis
of its credit evaluation of the issuer, which may include an
evaluation of a letter of credit, guarantee, insurance or other
credit facility issued in support of the securities or
participation certificates. There can be no assurance that the
Global Money Market Portfolio can achieve these objectives or
that it will be able to maintain a stable net asset value of $1
per share.
Risk Factors
The investment objectives and policies of the Global
Money Market Portfolio are sought through the following
additional strategies employed in the management of the Portfolio
which are described under "Investments and Investment Techniques
Common to Two or More Portfolios":
1. Change in Ratings
2. Amortized Cost Valuation of Portfolio Securities
3. Variable Rate Demand Instruments
4. When-Issued Securities
5. Repurchase Agreements
6. Reverse Repurchase Agreements
7. Private Placements
8. Participation Interests
9. Mortgage-Backed Securities
10. Bank Obligations, Certificates of Deposit and
Bankers' Acceptances
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11. Loan of Portfolio Securities
12. Foreign Securities
General Investment Objectives and Policies
of the Tax Exempt Money Market Portfolio
The Tax Exempt Money Market Portfolio's investment
objectives are to maximize current income that is exempt from
federal income tax and to maintain liquidity and a stable net
asset value of $1 per share. The Portfolio attempts to
accomplish these objectives by investing in high quality
municipal securities which, in the opinion of bond counsel at the
date of issuance, earn interest exempt from federal income tax
and which have effective maturities of 397 days or less. The
Portfolio will only purchase high quality tax exempt money market
instruments ("Municipal Obligations") that have been determined
by the Fund's Board of Directors to present minimal credit risks
and that are Eligible Securities at the time of acquisition so
that the Portfolio is able to employ the amortized cost method of
valuation. The term Eligible Securities means (i) Municipal
Obligations with remaining maturities of 397 days or less and
rated in the two highest short-term rating categories by any two
NRSROs or in such categories by the Requisite NRSRO (acquisition
in the latter situation must also be ratified by the Board of
Directors); (ii) Municipal Obligations with remaining maturities
of 397 days or less but that at the time of issuance were long-
term securities and whose issuer has received from the Requisite
NRSROs a rating with respect to comparable short-term debt in the
two highest short-term rating categories; and (iii) unrated
Municipal Obligations determined by the Fund's Board of Directors
to be of comparable quality. Where the issuer of a long-term
Municipal Obligation with a remaining maturity which would
otherwise qualify it as an Eligible Security, does not have rated
short-term debt outstanding, the long-term Municipal Obligation
is treated as unrated but may not be purchased if it has a long-
term rating from any NRSRO that is below the two highest long-
term categories. A determination of comparability by the Board
of Directors is made on the basis of its credit evaluation of the
issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support
of the Municipal Obligations or participation certificates.
Although the Supreme Court has determined that Congress has the
authority to subject the interest on municipal securities, such
as the securities in which the Portfolio will invest, to regular
Federal income taxation, existing law excludes such interest from
regular federal income tax. Interest on these securities may be
subject to state and local taxes. See "Taxes". There can be no
assurance that the Tax Exempt Money Market Portfolio can achieve
these objectives or that it will be able to maintain a stable net
asset value of $1 per share.
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Risk Factors
The investment objectives and policies of the Tax Exempt
Money Market Portfolio are sought through the following
additional strategies employed in the management of the Portfolio
which are described under "Investments and Investment Techniques
Common to Two or More Portfolios":
1. Change in Ratings
2. Municipal Obligations
3. Amortized Cost Valuation of Portfolio Securities
4. Variable Rate Demand Instruments
5. When-Issued Securities
6. Stand-By Commitments
7. Repurchase Agreements
8. Reverse Repurchase Agreements
9. Private Placements
10. Participation Interests
11. Mortgage-Backed Securities
12. Bank Obligations, Certificates of Deposit and
Bankers' Acceptances
13. Loan of Portfolio Securities
General Investment Objectives and Policies
of the Limited Term Portfolio
The Limited Term Portfolio's investment objective is to
maximize current income consistent with moderate risk of capital
by investing in a liquid portfolio with a maximum weighted
average maturity of two years. There can be no assurance that
the Limited Term Portfolio can achieve this objective.
Risk Factors
The investment objectives and policies of the Limited
Term Portfolio are sought through the following additional
strategies employed in the management of the Portfolio which are
described under "Investments and Investment Techniques Common to
Two or More Portfolios":
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1. Change in Ratings
2. Management Strategies
3. Amortized Cost Valuation of Portfolio Securities
4. Variable Rate Demand Instruments
5. When-Issued Securities
6. Repurchase Agreements
7. Reverse Repurchase Agreements
8. Participation Interests
9. Hedging Instruments
10. Private Placements
11. Mortgage-Backed Securities
12. Bank Obligations, Certificates of Deposit and
Bankers' Acceptances
13. Loan of Portfolio Securities
14. Foreign Securities
General Investment Objectives and Policies
of the Tax Exempt Limited Term Portfolio
The Tax Exempt Limited Term Portfolio's investment
objective is to maximize current income exempt from federal
income tax consistent with moderate risk of capital by investing
in a liquid portfolio with a maximum weighted average maturity of
three years. The Portfolio attempts to accomplish this objective
by investing primarily in municipal securities which, in the
opinion of bond counsel at the date of issuance, earn interest
exempt from federal income tax. Although the Supreme Court has
determined that Congress has the authority to subject the
interest on municipal securities, such as the securities in which
the Portfolio will invest, to regular Federal income taxation,
existing law excludes such interest from regular federal income
tax. Interest on these securities may be subject to state and
local income taxes. See "Taxes". There can be no assurance
that the Tax Exempt Limited Term Portfolio can achieve these
objectives.
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Risk Factors
The investment objectives and policies of the Tax
Exempt Limited Term Portfolio are sought through the following
additional strategies employed in the management of the Portfolio
which are described under "Investments and Investment Techniques
Common to Two or More Portfolios":
1. Change in Ratings
2. Management Strategies
3. Municipal Obligations
4. Amortized Cost Valuation of Portfolio Securities
5. Variable Rate Demand Instruments
6. When-Issued Securities
7. Stand-By Commitments
8. Repurchase Agreements
9. Reverse Repurchase Agreements
10. Participations
11. Hedging Instruments
12. Private Placements
13. Mortgage-Backed Securities
14. Bank Obligations Certificates of Deposit and
Bankers' Acceptances
15. Loan of Portfolio Securities
Investments and Investment Techniques
Common to Two or More Portfolios
Change in Ratings. Subsequent to its purchase by a
Portfolio, an issue of securities may cease to be rated or its
rating may be reduced below the minimum required for purchases by
that Portfolio. With regard to the Limited Term Portfolio and
the Tax Exempt Limited Term Portfolio, neither event requires the
elimination of such securities from these Portfolios, but the
Advisor will consider such an event to be relevant in its
determination of whether these Portfolios should continue to hold
such securities. To the extent that the ratings accorded by
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Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P") for securities may change as a result of
changes in these ratings systems, the Advisor will attempt to use
comparable ratings as standards for its investment in debt
securities in accordance with the investment policies contained
therein. However, if these Portfolios hold any variable rate
demand instruments with stated maturities in excess of one year,
such instruments must maintain their high quality rating or must
be sold from these Portfolios. See "Variable Rate Demand
Instruments" herein. With regard to the U.S. Treasury Money
Market Portfolio, the Domestic Prime Money Market Portfolio, the
Global Money Market Portfolio and the Tax Exempt Money Market
Portfolio, the Board of Directors of the Fund shall reassess
promptly whether the security presents minimal credit risks and
shall cause these Portfolios to take such action as the Board of
Directors determines is in the best interest of these Portfolios
and their shareholders. However, reassessment is not required if
the security is disposed of or matures within five business days
of the Advisor becoming aware of the new rating and provided
further that the Board of Directors is subsequently notified of
the Advisor's actions.
In addition, in the event that a security (1) is in
default, (2) ceases to be an Eligible Security under Rule 2a-7 or
(3) is determined to no longer present minimal credit risks,
these Portfolios will dispose of the security absent a
determination by the Fund's Board of Directors that disposal of
the security would not be in the best interests of these
Portfolios. In the event that the security is disposed of, it
shall be disposed of as soon as practicable consistent with
achieving an orderly disposition by sale, exercise of any demand
feature, or otherwise. In the event of a default with respect to
a security which immediately before default accounted for 1/2 of
1% or more of a Portfolio's total assets, that Portfolio shall
promptly notify the Securities and Exchange Commission of such
fact and of the actions that such Portfolio intends to take in
response to the situation.
Management Strategies. In pursuit of their investment
objectives the Limited Term Portfolio and the Tax Exempt Limited
Term Portfolio seek to increase returns by actively managing
securities in the short term and intermediate term ranges.
However, the Portfolios seek to minimize market risk by employing
a "laddered" portfolio approach as opposed to a market timing
approach. In addition, the Portfolios seek investments in
securities which the Advisor believes to be undervalued and,
therefore, have capital appreciation potential. The laddered
approach to portfolio management involves the maintenance of
securities positions of varying amounts staggered at appropriate
points along the fixed income yield curve in an effort to
maximize income and to minimize interest rate risk. Assuming a
positively sloping yield curve, a portfolio designed with a
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series of periodic maturities can produce higher yields at the
horizon of its maturity restriction, balanced by the interest
rate protection provided by shorter, more quickly maturing
securities.
In addition to the above, these Portfolios may engage
in short term trading (selling securities held for brief periods
of time, usually less than three months) if the Advisor believes
that such transactions, net of costs including taxes, if any,
would improve the overall return of the particular Portfolio.
Each of the Limited Term Portfolio and the Tax Exempt Limited
Term Portfolio will limit its voluntary short-term trading to the
extent such limitation is necessary for it to qualify as a
"regulated investment company" under the Internal Revenue Code of
1986. Currently, a regulated investment company must realize
less than 30% of its annual gross income from the sale of stock,
securities and certain options, futures, forward contracts and
foreign currencies held for less than three months.
Municipal Obligations. (1) Municipal Bonds are debt
obligations of states, cities, counties, municipalities and
municipal agencies (all of which are generally referred to as
"municipalities") which generally have a maturity at the time of
issue of one year or more and which are issued to raise funds for
various public purposes such as construction of a wide range of
public facilities, to refund outstanding obligations and to
obtain funds for institutions and facilities.
The two principal classifications of Municipal Bonds
are "general obligation" and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith and
credit and taxing power for the payment of principal and
interest. Issuers of general obligation bonds include states,
counties, cities, towns and other governmental units. The
principal of, and interest on, revenue bonds are payable from the
income of specific projects or authorizations and generally are
not supported by the issuer's general power to levy taxes. In
some cases, revenues derived from specific taxes are pledged to
support payments on a revenue bond.
In addition, certain kinds of "private activity bonds"
are issued by or on behalf of public authorities to provide
funding for various privately operated industrial facilities
(hereinafter referred to as "industrial revenue bonds" or
"IRBs"). Interest on the IRBs is generally exempt, with certain
exceptions, from federal income tax pursuant to Section 103(a) of
the Internal Revenue Code, provided the issuer and corporate
obligor thereof continue to meet certain conditions. (See
"Taxes".) IRBs are, in most cases, revenue bonds and do not
generally constitute the pledge of the credit of the issuer of
such bonds. The payment of the principal and interest on IRBs
usually depends solely on the ability of the user of the
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facilities financed by the bonds or other guarantor to meet its
financial obligations and, in certain instances, the pledge of
real and personal property as security for payment. If there is
not an established secondary market for the IRBs, the IRBs will
be supported by letters of credit, guarantees, insurance or other
credit facilities that meet the high quality criteria of the
Portfolios stated in the Prospectus and provide a demand feature
which may be exercised by the Portfolios to provide liquidity.
In accordance with investment restriction 11 (see page 28), the
Portfolios are permitted to invest up to 10% of the portfolio in
high quality, short-term Municipal Obligations (including IRBs)
that may not be readily marketable or have a liquidity feature.
(2) The principal kinds of Municipal Notes include tax
anticipation notes, bond anticipation notes, revenue anticipation
notes and grant anticipation notes. Notes sold in anticipation
of collection of taxes, a bond sale or receipt of other revenues
are usually general obligations of the issuing municipality or
agency.
(3) Issues of Municipal Commercial Paper typically
represent very short term, unsecured, negotiable promissory
notes. These obligations are often issued to meet seasonal
working capital needs of municipalities or to provide interim
construction financing and are paid from general revenues of
municipalities or are refinanced with long term debt. In most
cases Municipal Commercial Paper is backed by letters of credit,
lending agreements, note repurchase agreements or other credit
facility agreements offered by banks or other institutions which
may be called upon in the event of default by the issuer of the
commercial paper.
(4) Municipal Leases, which may take the form of a
lease or an installment purchase or conditional sale contract,
are issued by state and local governments and authorities to
acquire a wide variety of equipment and facilities such as fire
and sanitation vehicles, telecommunications equipment and other
capital assets. Municipal Leases frequently have special risks
not normally associated with general obligation or revenue bonds.
Leases and installment purchases or conditional sale contracts
(which normally provide for title to the leased asset to pass
eventually to the government issuer) have evolved as a means for
governmental issuers to acquire property and equipment without
meeting the constitutional and statutory requirements for the
issuance of debt. The debt-issuance limitations of many state
constitutions and statutes are deemed to be inapplicable because
of the inclusion in many leases or contracts of "non-
appropriation" clauses that provide that the governmental issuer
has no obligation to make future payments under the lease or
contract unless money is appropriated for such purpose by the
appropriate legislative body on a yearly or other periodic basis.
These types of municipal leases may be considered illiquid and
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subject to the 10% limitation of investment in illiquid
securities set forth under "Investment Restrictions" contained
herein. The Board of Directors may adopt guidelines and delegate
to the Advisor the daily function of determining and monitoring
the liquidity of municipal leases. In making such determination,
the Board and the Advisor may consider such factors as the
frequency of trades for the obligation, the number of dealers
willing to purchase or sell the obligations and the number of
other potential buyers and the nature of the marketplace for the
obligations, including the time needed to dispose of the
obligations and the method of soliciting offers. If the Board
determines that any municipal leases are illiquid, such leases
will be subject to the 10% limitation on investments in illiquid
securities. The Board of Directors is also responsible for
determining the credit quality of municipal leases, on an ongoing
basis, including an assessment of the likelihood that the lease
will not be cancelled.
The Fund expects that, on behalf of the Tax Exempt
Money Market Portfolio and the Tax Exempt Limited Term Portfolio,
it will not invest more than 25% of each Portfolio's total assets
in municipal obligations whose issuers are located in the same
state or more than 25% of each Portfolio's total assets in
municipal obligations the security of which is derived from any
one category. There could be economic, business or political
developments which might affect all municipal obligations of a
similar type. However, the Fund believes that the most important
consideration affecting risk is the quality of particular issues
of municipal obligations rather than factors affecting all, or
broad classes of, municipal obligations.
Amortized Cost Valuation of Portfolio Securities.
Pursuant to Rule 2a-7 under the Investment Company Act of 1940
(the "Rule") each of the U.S. Treasury Money Market Portfolio,
the Domestic Prime Money Market Portfolio, the Global Money
Market Portfolio and the Tax Exempt Money Market Portfolio (the
"Money Market Portfolios") uses the amortized cost method of
valuing its investments, which facilitates the maintenance of the
Money Market Portfolios' per share net asset value at $1.00. The
amortized cost method involves initially valuing a security at
its cost and thereafter amortizing to maturity any discount or
premium, regardless of the impact of fluctuating interest rates
on the market value of the instrument.
Consistent with the provisions of the Rule, the Money
Market Portfolios maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase only instruments having
effective maturities of 397 days or less, and invest only in
securities determined by or under the direction of the Board of
Directors to be of high quality with minimal credit risks.
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The Board of Directors has also established procedures
designed to stabilize, to the extent reasonably possible, the
Money Market Portfolios' price per share as computed for the
purpose of sales and redemptions at $1.00. Such procedures
include review of the Money Market Portfolios' investments by the
Board of Directors at such intervals as they deem appropriate to
determine whether each Portfolio's net asset value calculated by
using available market quotations or market equivalents (i.e.,
determination of value by reference to interest rate levels,
quotations of comparable securities and other factors) deviates
from $1.00 per share based on amortized cost. Market quotations
and market equivalents used in such review may be obtained from
an independent pricing service approved by the Board of
Directors.
The extent of deviation between any Money Market
Portfolio's net asset value based upon available market
quotations or market equivalents and $1.00 per share based on
amortized cost, will be periodically examined by the Board of
Directors. If such deviation exceeds 1/2 of 1%, the Board of
Directors will promptly consider what action, if any, will be
initiated. In the event the Board of Directors determines that a
deviation exists which may result in material dilution or other
unfair results to investors or existing shareholders, they will
take such corrective action as they regard to be necessary and
appropriate, including the sale of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average
portfolio maturity; withholding part or all of dividends or
payment of distributions from capital or capital gains;
redemptions of shares in kind; or establishing a net asset value
per share by using available market quotations or equivalents.
Each Money Market Portfolio may hold cash for the purpose of
stabilizing its net asset value per share. Holdings of cash, on
which no return is earned, would tend to lower the yield on the
Money Market Portfolios' shares.
Variable Rate Demand Instruments. The Domestic Prime
Money Market Portfolio, Global Money Market Portfolio, Tax Exempt
Money Market Portfolio, Limited Term Portfolio and Tax Exempt
Limited Term Portfolio may purchase variable rate demand
instruments.
Variable rate demand instruments that the Portfolios
will purchase are tax exempt Municipal Obligations or taxable
(variable amount master demand notes) debt obligations that
provide for a periodic adjustment in the interest rate paid on
the instrument and permit the holder to demand payment of the
unpaid principal balance plus accrued interest at specified
intervals upon a specified number of days' notice either from the
issuer or by drawing on a bank letter of credit, a guarantee,
insurance or other credit facility issued with respect to such
instrument.
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The variable rate demand instruments in which the
Portfolios may invest are payable on not more than thirty
calendar days' notice either on demand or at specified intervals
not exceeding one year depending upon the terms of the
instrument. Variable rate demand instruments with demand
features in excess of 7 days are considered illiquid. The terms
of the instruments provide that interest rates are adjustable at
intervals ranging from daily to up to one year and their
adjustments are based upon the prime rate of a bank or other
appropriate interest rate adjustment index as provided in the
respective instruments. The Fund will decide which variable rate
demand instruments it will purchase in accordance with procedures
prescribed by its Board of Directors to minimize credit risks. A
Portfolio utilizing the amortized cost method of valuation may
only purchase variable rate demand instruments if (i) the
instrument is subject to an unconditional demand feature,
exercisable by the Portfolio in the event of default in the
payment of principal or interest on the underlying securities,
which itself qualifies as an Eligible Security, or (ii) the
instrument is not subject to an unconditional demand feature but
does qualify as an Eligible Security and has a long-term rating
by the Requisite NRSROs in one of the two highest rating
categories, or, if unrated, is determined to be of comparable
quality by the Fund's Board of Directors. If an instrument is
ever deemed to be of less than high quality, the Portfolio either
will sell it in the market or exercise the demand feature.
The variable rate demand instruments that the
Portfolios may invest in include participation certificates
purchased by the Portfolios from banks, insurance companies or
other financial institutions in fixed or variable rate, tax-
exempt Municipal Obligations (expected to be concentrated in
IRBs) or taxable debt obligations (variable amount master demand
notes) owned by such institutions or affiliated organizations. A
participation certificate gives the Portfolios an undivided
interest in the obligation in the proportion that the Portfolio's
participation interest bears to the total principal amount of the
obligation and provides the demand repurchase feature described
below. Where the institution issuing the participation does not
meet the Portfolio's high quality standards, the participation is
backed by an irrevocable letter of credit or guaranty of a bank
(which may be a bank issuing a confirming letter of credit, or a
bank serving as agent of the issuing bank with respect to the
possible repurchase of the certificate of participation or a bank
serving as agent of the issuer with respect to the possible
repurchase of the issue) or insurance policy of an insurance
company that the Board of Directors of the Fund has determined
meets the prescribed quality standards for the Portfolio. The
Portfolio has the right to sell the participation certificate
back to the institution and, where applicable, draw on the letter
of credit, guarantee or insurance after no more than 30 days'
notice either on demand or at specified intervals not exceeding
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<PAGE>
397 days (depending on the terms of the participation), for all
or any part of the full principal amount of the Portfolio's
participation interest in the security, plus accrued interest.
The Portfolios intend to exercise the demand only (1) upon a
default under the terms of the bond documents, (2) as needed to
provide liquidity to the Portfolio in order to make redemptions
of the Portfolio shares, or (3) to maintain a high quality
investment portfolio. The institutions issuing the participation
certificates will retain a service and letter of credit fee
(where applicable) and a fee for providing the demand repurchase
feature, in an amount equal to the excess of the interest paid on
the instruments over the negotiated yield at which the
participations were purchased by the Portfolio. The total fees
generally range from 5% to 15% of the applicable prime rate* or
other interest rate index. With respect to insurance, the
Portfolios will attempt to have the issuer of the participation
certificate bear the cost of the insurance, although the
Portfolios retain the option to purchase insurance if necessary,
in which case the cost of insurance will be an expense of the
Portfolio subject to the expense limitation on investment company
expenses prescribed by any state in which the Portfolio's shares
are qualified for sale. The Advisor has been instructed by the
Fund's Board of Directors to continually monitor the pricing,
quality and liquidity of the variable rate demand instruments
held by the Portfolio, including the participation certificates,
on the basis of published financial information and reports of
the rating agencies and other bank analytical services to which
the Portfolio may subscribe. Although these instruments may be
sold by the Portfolio, the Portfolio intends to hold them until
maturity, except under the circumstances stated above (see
"Taxes").
While the value of the underlying variable rate demand
instruments may change with changes in interest rates generally,
the variable rate nature of the underlying variable rate demand
instruments should minimize changes in value of the instruments.
Accordingly, as interest rates decrease or increase, the
potential for capital appreciation and the risk of potential
capital depreciation is less than would be the case with a
portfolio of fixed income securities. The Portfolios may contain
variable rate demand instruments on which stated minimum or
maximum rates, or maximum rates set by state law limit the degree
- --------
* The "prime rate" is generally the rate charged by a bank to
its most creditworthy customers for short term loans. The
prime rate of a particular bank may differ from other banks
and will be the rate announced by each bank on a particular
day. Changes in the prime rate may occur with great
frequency and generally become effective on the date
announced.
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<PAGE>
to which interest on such variable rate demand instruments may
fluctuate; to the extent it does, increases or decreases in value
may be somewhat greater than would be the case without such
limits. Additionally, the Portfolios may contain variable rate
demand participation certificates in fixed rate Municipal
Obligations and taxable debt obligations. The fixed rate of
interest on these obligations will be a ceiling on the variable
rate of the participation certificate. In the event that
interest rates increased so that the variable rate exceeded the
fixed rate on the obligations, the obligations could no longer be
valued at par and this may cause the Portfolios to take
corrective action, including the elimination of the instruments.
Because the adjustment of interest rates on the variable rate
demand instruments is made in relation to movements of the
applicable banks' "prime rate", or other interest rate adjustment
index, the variable rate demand instruments are not comparable to
long-term fixed rate securities. Accordingly, interest rates on
the variable rate demand instruments may be higher or lower than
current market rates for fixed rate obligations or obligations of
comparable quality with similar maturities.
For purposes of determining whether a variable rate
demand instrument held by a Portfolio matures within 397 days
from the date of its acquisition, the maturity of the instrument
will be deemed to be the longer of (1) the period required before
the Portfolio is entitled to receive payment of the principal
amount of the instrument or (2) the period remaining until the
instrument's next interest rate adjustment. The maturity of a
variable rate demand instrument will be determined in the same
manner for purposes of computing the Portfolios' dollar-weighted
average portfolio maturity. If a variable rate demand instrument
ceases to meet the investment criteria of the Portfolio, it will
be sold in the market or through exercise of the repurchase
demand.
When-Issued Securities. All Portfolios may purchase
debt obligations offered on a "when-issued" or "delayed delivery"
basis. When so offered, the price, which is generally expressed
in yield terms, is fixed at the time the commitment to purchase
is made, but delivery and payment for the when-issued securities
take place at a later date. Normally, the settlement date occurs
within one month of the purchase of debt obligations; during the
period between purchase and settlement, no payment is made by the
purchaser to the issuer and no interest accrues to the purchaser.
To the extent that assets of a Portfolio are not invested prior
to the settlement of a purchase of securities, that Portfolio
will earn no income; however, it is intended that each Portfolio
will be fully invested to the extent practicable and subject to
the policies stated above. While when-issued securities may be
sold prior to the settlement date, it is intended that each
Portfolio will purchase such securities with the purpose of
actually acquiring them unless a sale appears desirable for
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<PAGE>
investment reasons. At the time the Portfolio makes the
commitment to purchase a debt obligation on a when-issued basis,
it will record the transaction and reflect the value of the
security in determining its net asset value. The Fund does not
believe that the net asset value or income of the Portfolios'
securities portfolios will be adversely affected by their
purchase of debt obligations on a when-issued basis. Each
Portfolio will establish a segregated account in which it will
maintain cash and liquid high grade debt securities equal in
value to commitments for when-issued securities. Such segregated
securities either will mature or, if necessary, be sold on or
before the settlement date.
Stand-by Commitments. When the Portfolios purchase
Municipal Obligations they may also acquire stand-by commitments
from banks and other financial institutions with respect to such
Municipal Obligations. Under a stand-by commitment, a bank or
broker-dealer agrees to purchase at the Portfolio's option a
specified Municipal Obligation at a specified price with same day
settlement. A stand-by commitment is the equivalent of a "put"
option acquired by the Portfolio with respect to a particular
Municipal Obligation held in its portfolio.
The amount payable to the Portfolio upon its exercise
of a stand-by commitment normally would be (1) the acquisition
cost of the Municipal Obligation (excluding any accrued interest
that the Portfolio paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue
discount during the period the Portfolio owned the security plus
(2) all interest accrued on the security since the last interest
payment date during the period the security was owned by the
Portfolio. Absent unusual circumstances relating to a change in
market value, the Portfolio would value the underlying Municipal
Obligation at amortized cost. Accordingly, the amount payable by
a bank or dealer during the time a stand-by commitment is
exercisable would be substantially the same as the market value
of the underlying Municipal Obligation.
The Portfolio's right to exercise a stand-by commitment
would be unconditional and unqualified. A stand-by commitment
would not be transferable by the Portfolio, although it could
sell the underlying Municipal Obligation to a third party at any
time.
The Advisor expects that stand-by commitments generally
will be available without the payment of any direct or indirect
consideration. However, if necessary and advisable, the
Portfolio may pay for stand-by commitments either separately in
cash or by paying a higher price for portfolio securities which
are acquired subject to such a commitment (thus reducing the
yield to maturity otherwise available for the same securities).
The total amount paid in either manner for outstanding stand-by
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<PAGE>
commitments held in the Portfolio would not exceed 1/2 of 1% of
the value of the Portfolio's total assets calculated immediately
after each stand-by commitment was acquired.
The Portfolio would enter into stand-by commitments
only with banks and other financial institutions that, in the
Advisor's opinion, present minimal credit risks and where the
issuer of the Municipal Obligation meets the investment criteria
of the Portfolio. The Portfolio's reliance upon the credit of
these banks and broker-dealers would be supported by the value of
the underlying Municipal Obligations held by the Portfolio that
were subject to the commitment.
The Portfolio intends to acquire stand-by commitments
solely to facilitate Portfolio liquidity and does not intend to
exercise its rights thereunder for trading purposes. The purpose
of this practice is to permit the Portfolio to be fully invested
in securities the interest on which is exempt from federal income
taxes while preserving the necessary liquidity to purchase
securities on a when-issued basis, to meet unusually large
redemptions and to purchase at a later date securities other than
those subject to the stand-by commitment.
The acquisition of a stand-by commitment would not
affect the valuation or assumed maturity of the underlying
Municipal Obligations which will continue to be valued in
accordance with the amortized cost method. Stand-by commitments
acquired by the Portfolios would be valued at zero in determining
net asset value. In those cases in which the Portfolio paid
directly or indirectly for a stand-by commitment, its cost would
be reflected as unrealized depreciation for the period during
which the commitment is held by the Portfolio. Stand-by
commitments would not affect the dollar weighted average maturity
of the Portfolio. The maturity of a security subject to a stand-
by commitment is longer than the stand-by repurchase date.
The stand-by commitments that the Portfolios may enter
into are subject to certain risks, which include the ability of
the issuer of the commitment to pay for the securities at the
time the commitment is exercised, the fact that the commitment is
not marketable by the Portfolios, and that the maturity of the
underlying security will generally be different from that of the
commitment.
In addition, the Portfolio may apply to the Internal
Revenue Service for a ruling, or seek from its counsel an
opinion, that interest on Municipal Obligations subject to stand-
by commitments will be exempt from federal income taxation (see
"Taxes"). In the absence of a favorable tax ruling or opinion of
counsel, the Portfolios will not engage in the purchase of
securities subject to stand-by commitments.
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<PAGE>
Repurchase Agreements. When a Portfolio purchases
securities, it may enter into a repurchase agreement with the
seller wherein the seller agrees, at the time of sale, to
repurchase the security at a mutually agreed upon time and price.
A Portfolio may enter into repurchase agreements with member
banks of the Federal Reserve System and with broker-dealers who
are recognized as primary dealers in United States government
securities by the Federal Reserve Bank of New York. Although the
securities subject to the repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase
would never be more than 397 days after the Portfolio's
acquisition of the securities and normally would be within a
shorter period of time. The resale price will be in excess of
the purchase price, reflecting an agreed upon market rate
effective for the period of time the Portfolio's money will be
invested in the security, and will not be related to the coupon
rate of the purchased security. At the time a Portfolio enters
into a repurchase agreement the value of the underlying security,
including accrued interest, will be equal to or exceed the value
of the repurchase agreement, and, in the case of a repurchase
agreement exceeding one day, the seller will agree that the value
of the underlying security, including accrued interest, will at
all times be equal to or exceed the value of the repurchase
agreement. Each Portfolio may engage in a repurchase agreement
with respect to any security in which that Portfolio is
authorized to invest, even though the underlying security may
mature in more than one year. The collateral securing the
seller's obligation must be of a credit quality at least equal to
the Portfolio's investment criteria for Portfolio securities and
will be held by the Portfolio's Custodian or in the Federal
Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a
repurchase agreement is deemed to be a loan from a Portfolio to
the seller subject to the repurchase agreement and is therefore
subject to that Portfolio's investment restriction applicable to
loans. It is not clear whether a court would consider the
securities purchased by a Portfolio subject to a repurchase
agreement as being owned by that Portfolio or as being collateral
for a loan by that Portfolio to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect
to the seller of the securities before repurchase of the security
under a repurchase agreement, a Portfolio may encounter delay and
incur costs before being able to sell the security. Delays may
involve loss of interest or decline in price of the security. If
the court characterized the transaction as a loan and a Portfolio
has not perfected a security interest in the security, that
Portfolio may be required to return the security to the seller's
estate and be treated as an unsecured creditor of the seller. As
an unsecured creditor, a Portfolio would be at the risk of losing
some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for
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<PAGE>
a Portfolio, the Advisor seeks to minimize the risk of loss
through repurchase agreements by analyzing the creditworthiness
of the obligor, in this case the seller. Apart from the risk of
bankruptcy or insolvency proceedings, there is also the risk that
the seller may fail to repurchase the security, in which case a
Portfolio may incur a loss if the proceeds to that Portfolio of
the sale to a third party are less than the repurchase price.
However, if the market value of the securities subject to the
repurchase agreement becomes less than the repurchase price
(including interest), the Portfolio involved will direct the
seller of the security to deliver additional securities so that
the market value of all securities subject to the repurchase
agreement will equal or exceed the repurchase price. It is
possible that a Portfolio will be unsuccessful in seeking to
impose on the seller a contractual obligation to deliver
additional securities.
Reverse Repurchase Agreements. Reverse repurchase
agreements involve the sale of securities held by a Portfolio
pursuant to an agreement to repurchase the securities at an
agreed upon price and date. Each Portfolio is permitted to enter
into reverse repurchase agreements for liquidity purposes or when
it is able to purchase other securities which will produce more
income than the cost of the agreement. Each Portfolio may enter
into reverse repurchase agreements only with those member banks
of the Federal Reserve System and broker-dealers who are
recognized as primary dealers in U.S. government securities by
the Federal Reserve Bank of New York whose creditworthiness has
been reviewed and found satisfactory by the Fund's Board of
Directors. When engaging in reverse repurchase transactions, the
Portfolios will maintain, in a segregated account with its
Custodian, securities equal in value to those subject to the
agreement. These agreements are considered to be borrowings and
therefore are included in the asset restriction contained under
"Investment Restrictions" relating to borrowings.
The Portfolio could experience delays in recovering
securities in the event of the bankruptcy of the other party to a
reverse repurchase agreement and could experience a loss to the
extent that the value of the securities may have decreased in the
meantime.
Participation Interests. The Domestic Prime Money
Market Portfolio, Global Money Market Portfolio, Tax Exempt Money
Market Portfolio, Limited Term Portfolio and the Tax Exempt
Limited Term Portfolio may purchase from banks participation
interests in all or part of specific holdings of Municipal or
other debt obligations (including corporate loans). Where the
institution issuing the participation does not meet the
Portfolio's quality standards, the participation may be backed by
an irrevocable letter of credit or guarantee that the Board of
Directors has determined meets the prescribed quality standards
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<PAGE>
of each Portfolio. Thus, even if the credit of the selling bank
does not meet the quality standards of a Portfolio, the credit of
the entity issuing the credit enhancement will. Each Portfolio
will have the right to sell the participation interest back to
the bank for the full principal amount of the Portfolio's
interest in the Municipal or debt obligation plus accrued
interest, but only (1) as required to provide liquidity to that
Portfolio, (2) to maintain the quality standards of each
Portfolio's investment portfolio or (3) upon a default under the
terms of the debt obligation. The selling bank may receive a fee
from a Portfolio in connection with the arrangement. When
purchasing bank participation interests, the Portfolio will treat
both the bank and the underlying borrower as the issuer of the
instrument for the purpose of complying with the diversification
requirement of investment restriction number 3 discussed below.
Bank Obligations, Certificates of Deposit and Bankers'
Acceptances. All the Portfolios, except the U.S. Treasury Money
Market Portfolio, may purchase certificates of deposit, bankers'
acceptances and other obligations issued or guaranteed by the 50
largest banks in the United States. For this purpose banks are
ranked by total deposits as shown by their most recent annual
financial statements. The "other obligations" in which the
Portfolio may invest include instruments (such as bankers'
acceptances, commercial paper and certificates of deposit) issued
by U.S. subsidiaries of the 50 largest banks in the U.S. where
the instruments are guaranteed as to principal and interest by
such banks. In addition, the Global Money Market Portfolio and
the Limited Term Portfolio may also purchase certificates of
deposit, bankers' acceptances and other obligations (or
instruments secured by such obligations) of (i) domestic banks
subject to regulation by the U.S. Government or its agencies
(such as the Federal Reserve Board, the Comptroller of the
Currency, or the FDIC) and having total assets of over $1 billion
unless their obligations are guaranteed by their parent bank,
which has assets of over $5 billion; (ii) foreign branches of
these banks ("Euros"); (iii) United States branches of foreign
banks of equivalent size ("Yankees"); and (iv) foreign banks.
The Portfolio limits investments in foreign bank obligations to
U.S. dollar denominated obligations of foreign banks which have
more than $10 billion of assets, are among the 75 largest in the
world, and have branches or agencies in the U.S. See "Foreign
Securities" herein for further discussion of the risks inherent
in such investments. At the time the Portfolio invests in any
certificate of deposit, bankers' acceptance or other bank
obligation, the issuer or its parent must have its debt rated
within the quality standards of the Portfolio or if unrated be of
comparable quality as determined by the Fund's Board of
Directors.
Mortgage-Backed Securities. Certain of the Portfolios
may purchase securities issued or guaranteed by federal agencies
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<PAGE>
or U.S. Government sponsored corporations. Such securities
include those issued and guaranteed by the Government National
Mortgage Association (GNMA, or "Ginnie Mae"), the Federal
National Mortgage Association and the Federal Home Loan Mortgage
Corporation.
GNMA Mortgage-Backed Securities ("GNMAs") are mortgage-
backed securities representing part ownership of a pool of
mortgage loans. These loans issued by lenders such as mortgage
bankers, commercial banks, and savings and loan associations are
either insured by the Federal Housing Administration (FHA) or
guaranteed by the Veterans Administration (VA). A "pool" or
group of such mortgages is assembled and, after being approved by
GNMA, is offered to investors through securities dealers. Once
approved by GNMA (a U.S. Government corporation within the U.S.
Department of Housing and Urban Development) the timely payment
of interest and principal is guaranteed by the full faith and
credit of the U.S. Government.
As mortgage-backed securities, GNMAs differ from bonds
in that principal is paid back by the borrower over the length of
the loan rather than returned in a lump sum at maturity. GNMAs
are called "pass-through" securities because both interest and
principal payments, including prepayments, are passed through to
the holder of the security (in this case, the Portfolio).
The payment of principal of the underlying mortgages
may exceed the minimum required by the schedule of payments for
the mortgages. Such prepayments are made at the option of the
mortgagors for a wide variety of reasons reflecting their
individual circumstances and may involve capital losses if the
mortgages were purchased at a premium. For example, mortgagors
may speed up the rate at which they prepay their mortgages when
interest rates decline sufficiently to encourage refinancing. A
Portfolio, when such prepayments are passed through to it, may be
able to reinvest them only at a lower rate of interest. The
Advisor, in determining the attractiveness of GNMAs relative to
alternative fixed income securities, and in choosing specific
GNMA issues, will have made assumptions as to the likely speed of
prepayment. Actual experience may vary from these assumptions,
resulting in a higher or lower investment return than
anticipated.
The Federal National Mortgage Association ("FNMA" or
"Fannie Mae") is a U.S. Government sponsored corporation owned
entirely by private stockholders. It is subject to general
regulation by the Secretary of Housing and Urban Development.
FNMA purchases residential mortgages from a list of approved
seller/services, which include state and federally-chartered
savings and loan associations, mutual savings banks, commercial
banks, credit unions, and mortgage banks. Pass-through
securities issued by FNMA are guaranteed as to timely payment of
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<PAGE>
principal and interest by FNMA but are not backed by the full
faith and credit of the U.S. Government.
The Federal Home Loan Mortgage Corporation ("FHLMC" or
"Freddie Mac") is a corporate instrumentality of the U.S.
Government, created by Congress in 1970 for the purpose of
increasing the availability of mortgage credit for residential
housing. Its common stock is owned by the twelve Federal Home
Loan Banks. FHLMC also has preferred stock outstanding that is
traded on the New York Stock Exchange and is owned entirely by
savings and loan institutions. FHLMC issues Federal Home Loan
Mortgage Corporation Participation Certificates ("Pcs") which
represent interests in mortgages from FHLMC's mortgage portfolio.
FHLMC guarantees the timely payment of interest and ultimate
collection of principal, but Pcs are not backed by the full faith
and credit of the U.S. Government.
FHLMC Pcs differ from FNMA pass-throughs in that the
mortgages underlying Pcs are mostly conventional mortgages rather
than FHA insured or VA guaranteed mortgages, although FHLMC has
occasionally purchased FHA or VA loans. However, in several other
respects (such as the monthly pass-through of interest and
principal and the unpredictability of future prepayment
experience) Pcs are similar to FNMAs.
The Portfolios, except the U.S. Treasury Money Market
Portfolio, may also invest in Collateralized Mortgage Obligations
("CMOs"), a type of mortgage-backed security. CMOs are debt
securities collateralized by mortgage-backed certificates issued
by federal agencies or U.S. Government sponsored corporations
such as GNMA, FNMA and FHLMC. The payment of CMOs depends upon
the cash flow from the pool of mortgages represented by the
mortgage-backed certificates.
CMOs are divided into multiple classes. Generally, the
interest on the classes is distributed currently to the holders
of each class. However, principal is not paid in this manner.
Instead, holders of the first class receive all payments of
principal until their bond is fully paid. Thereafter, principal
is paid on each succeeding class with the earliest maturing
securities retired first.
One or more classes, usually the last, may be zero-
coupon bonds ("Z bonds"). The cash flow that would otherwise be
used to pay interest on this class is used instead to pay
principal on the earlier maturing classes. After all prior
classes are retired, the Z bond pays interest and principal until
final maturity. Interest accrued but not paid on the Z bond is
added to the principal of the Z bond and thereafter accrues
interest.
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<PAGE>
Any guarantee or insurance on a mortgage-backed
certificate does not extend to a Portfolio's investments in CMOs.
There is a possibility of limited liquidity as there is no
assurance that a secondary market will develop for CMOs or, if
such market does develop, that it will provide a Portfolio with
liquidity or remain for the term of the investment. If an event
of default occurs with respect to the CMOs purchased by a
Portfolio, there can be no assurance that the collateral pledged
as security therefor will be sufficient to pay the principal and
interest due on such bonds. The payment of principal of the
underlying mortgages may exceed the minimum required by the
schedule of payments for the mortgages. Such prepayments are
made at the option of the mortgagors for a wide variety of
reasons reflecting their individual circumstances and may involve
capital losses if the mortgages were purchased at a premium. For
example, mortgagors may speed up the rate at which they prepay
their mortgages when interest rates decline sufficiently to
encourage refinancing. The Advisor, in determining the
attractiveness of CMO's relative to alternative fixed income
securities, and in choosing specific CMO issues, will have made
assumptions as to the likely speed of prepayment. Actual
experience may vary from these assumptions, resulting in a higher
or lower investment return than anticipated.
Foreign Securities. The Global Money Market Portfolio
and the Limited Term Portfolio may invest in certain foreign
securities. Investment in obligations of foreign issuers and in
foreign branches of domestic banks involves somewhat different
investment risks from those affecting obligations of United
States domestic issuers. There may be limited publicly available
information with respect to foreign issuers and foreign issuers
are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those
applicable to domestic companies. There may also be less
government supervision and regulation of foreign securities
exchanges, brokers and listed companies than in the United
States. Foreign securities markets have substantially less
volume than national securities exchanges and securities of some
foreign companies are less liquid and more volatile than
securities of comparable domestic companies. Brokerage
commissions and other transaction costs on foreign securities
exchanges are generally higher than in the United States.
Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes, which may decrease the net
return on foreign investments as compared to dividends and
interest paid to the Portfolio by domestic companies. Additional
risks include future political and economic developments, the
possibility that a foreign jurisdiction might impose or change
withholding taxes on income payable with respect to foreign
securities, the possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits and the
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<PAGE>
possible adoption of foreign governmental restrictions such as
exchange controls.
Privately Placed Securities. All the Portfolios,
except the U.S. Treasury Money Market Portfolio, may invest in
securities issued as part of privately negotiated transactions
between an issuer and one or more purchasers. Except with
respect to securities subject to Rule 144A of the Securities Act
of 1933 which are discussed below, these securities are typically
not readily marketable, and therefore are considered illiquid
securities. The price these Portfolios pay for illiquid
securities, and any price received upon resale, may be lower than
the price paid or received for similar securities with a more
liquid market. Accordingly, the valuation of privately placed
securities by these Portfolios will reflect any limitations on
their liquidity. As a matter of policy, none of the Portfolios
will invest more than 10% of the market value of the total assets
of the Portfolio in repurchase agreements maturing in over seven
days and other illiquid investments. The Portfolios may purchase
securities that are not registered ("restricted securities")
under the Securities Act of 1933 (the "Securities Act"), but can
be offered and sold to "qualified institutional buyers" under
Rule 144A under the Securities Act. These Portfolios may also
purchase certain commercial paper issued in reliance on the
exemption from regulations in Section 4(2) of the Securities Act
("4(2) Paper"). However, each Portfolio will not invest more
than 10% of its net assets in illiquid investments, which include
securities for which there is no ready market, securities subject
to contractual restriction on resale, certain investments in
asset-backed and receivable-backed securities and restricted
securities (unless, with respect to these securities and 4(2)
Paper, the Fund's Directors continuously determine, based on the
trading markets for the specific restricted security, that it is
liquid). The Directors may adopt guidelines and delegate to the
Investment Advisor the daily function of determining and
monitoring liquidity of restricted securities and 4(2) Paper.
The Directors, however, will retain sufficient oversight and be
ultimately responsible for the determinations.
Since it is not possible to predict with assurance
exactly how this market for restricted securities sold and
offered under Rule 144A will develop, the Directors will
carefully monitor the Portfolios investments in these securities,
focusing on such factors, among others, as valuation, liquidity
and availability of information. This investment practice could
have the effect of increasing the level of illiquidity in the
Portfolios to the extent that qualified institutional buyers
become for a time uninterested in purchasing these restricted
securities.
Hedging Instruments. Hedging is a means of
transferring risk which an investor does not desire to assume
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<PAGE>
during an uncertain market environment. The Limited Term
Portfolio and the Tax Exempt Limited Term Portfolio are permitted
to enter into transactions solely (a) to hedge against changes in
the market value of portfolio securities or (b) to close out or
offset existing positions. The transactions must be appropriate
for the reduction of risk; they cannot be for speculation. The
Limited Term Portfolio and the Tax Exempt Limited Term Portfolio
may (a) sell futures contracts on non-municipal and municipal
debt securities and indexes of non-municipal and municipal debt
securities, respectively, and (b) purchase or write (sell)
options on these futures, on non-municipal and municipal debt
securities and on indexes of non-municipal and municipal debt
securities traded on registered securities exchanges and contract
markets, respectively.
Financial futures contracts obligate the seller to
deliver a specific type of security, at a specified time for a
specified price. The contracts may be satisfied by actual
delivery of the securities or by an offsetting transaction.
There are risks associated with the use of futures contracts for
hedging purposes. In certain market conditions, as with rising
interest rates, futures contracts may not completely offset a
decline in value of portfolio securities. It may not always be
possible to execute a buy or sell order at the desired price or
to close out an open position due to market conditions, limits on
open positions, and/or daily price fluctuation limits. Changes
in market interest rates may differ substantially from those
anticipated when hedge positions were established. If a
Portfolio has hedged against rising interest rates and they
decline, the value of the Portfolio will increase, but at least
part of the benefit of the increase will be lost because of
losses in the Portfolio's futures positions. The Portfolio may
have to sell securities to meet daily maintenance margin
requirements. The risk of loss to the Portfolio is theoretically
unlimited when the Portfolio sells a futures contract because the
Portfolio is obligated to make delivery unless the contract is
closed out, regardless of fluctuations in the price of the
underlying security.
The Portfolios may also purchase put options or write
(sell) call options on non-municipal debt securities. In the
event that options on municipal debt securities became available,
the Tax Exempt Limited Term Portfolio would consider purchasing
or selling these options. The Portfolios may purchase call
options and write (sell) put options on debt securities to close
out open positions, purchase put options to protect its holding
from a decline in market value, and write call options. The
Portfolios may also purchase put options and write call options
on futures contracts which are traded on a United States exchange
or board of trade and enter into closing transactions with
respect to these options. The Portfolios may use options on
futures contracts under the same conditions it uses put and call
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<PAGE>
options on debt securities. The effect of a futures contract may
also be created by simultaneous purchase of a put and sale of a
call option on the same security. When the Portfolio purchases a
put option or call option, the maximum risk of loss to the
Portfolio is the price of the option purchased. The use of
options as a hedge rather than financial futures contracts may
result in partial hedges because of the limits inherent in the
exercise prices. The Portfolio will not invest more than 5% of
its net assets in premiums on put options.
The Tax Exempt Limited Term Portfolio may also utilize
futures contracts on municipal bond indexes or related put and
call options on these index contracts. The Portfolio's
strategies in employing these contracts would be similar to the
strategies applicable to futures and options contracts generally.
The Portfolio may also buy put options and sell call options on
municipal bond index futures or on municipal bond indexes.
The hedging activities of the Portfolios are subject to
several additional restrictions. A Portfolio may not enter into
futures contracts or related options if immediately thereafter
the sum of the amount of initial and variation margin deposits on
outstanding futures contracts and premiums paid for related
options would exceed 20% of the market value of its total assets.
In addition, it may not enter into futures contracts or purchase
or sell related options (other than offsetting existing
positions) if immediately thereafter the sum of the amount of
initial margin deposits on outstanding futures contracts and
premiums paid for related options would exceed 5% of the market
value of its total assets. A Portfolio's ability to engage in
hedging activities is also restricted by the requirements to
"cover" any sale of a futures contract with securities held in
the Portfolio and to establish and maintain segregated accounts
(which may be invested only in liquid assets such as cash, U.S.
government securities and other high grade debt obligations)
equal to the amount of any futures contract purchased by the
Portfolio. A segregated account freezes those assets of the
Portfolio and renders them unavailable for sale or other
disposition. These requirements may thus reduce the Portfolio's
flexibility in making investment decisions with respect to such
assets. The Portfolios' ability to engage in hedging activities
may be further limited by certain income tax considerations. See
"Taxes".
To the extent the Portfolios use hedging instruments
which do not involve specific portfolio securities, offsetting
price changes between the hedging instruments and the securities
being hedged will not always be possible, and market value
fluctuations of the Portfolio may not be completely eliminated.
When using hedging instruments that do not specifically correlate
with securities in the Portfolio, the Advisor will attempt to
create a very closely correlated hedge. Hedging activities based
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<PAGE>
on non-municipal debt securities or indexes may not correlate as
closely to the Portfolios as hedging activities based on
municipal debt securities or indexes. Less closely correlated
hedges are likely to occur if a Portfolio hedges municipal
securities with a futures contract on United States government
obligations, other non-municipal securities or an index that does
not include municipal securities. This type of hedging activity
may be useful to a Portfolio, especially where closely correlated
hedging activities based on municipal securities or indexes are
not available.
Brokerage commissions on financial futures and options
transactions and premium costs for purchasing options may tend to
reduce a Portfolio's yield.
Loan of Portfolio Securities. Each Portfolio may from
time to time lend securities on a short term basis to banks,
brokers and dealers and receive as collateral cash, securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or irrevocable bank letters of credit (or any
combination thereof), which collateral will be marked to market
daily and will be required to be maintained at all times in an
amount equal to at least 100% of the current value of the loaned
securities plus accrued interest. Such loans are not made with
respect to any Portfolio if as a result the aggregate of all
outstanding loans exceeds one-third of the value of the
Portfolio's total assets. Securities lending will afford a
Portfolio the opportunity to earn additional income because the
Portfolio will continue to be entitled to the interest payable on
the loaned securities and also will either receive as income all
or a portion of the interest on the investment of any cash loan
collateral or, in the case of collateral other than cash, a fee
negotiated with the borrower. Such loans will be terminable at
any time. Loans of securities involve risks of delay in
receiving additional collateral or in recovering the securities
lent or even loss of rights in the collateral in the event of the
insolvency of the borrower of the securities. A Portfolio will
have the right to retain record ownership of loaned securities in
order to exercise beneficial rights. A Portfolio may pay
reasonable fees in connection with arranging such loans. The
Portfolio will not lend its securities to any officer, partner,
Director, employee, or affiliate of the Fund, or the Advisor.
Puts for the Tax Exempt Portfolios. The Tax Exempt
Money Market Portfolio and the Tax Exempt Limited Term Portfolio
may purchase municipal bonds or notes with the right to resell
them at an agreed price or yield within a specified period prior
to maturity to facilitate portfolio liquidity. This right to
resell is known as a put. The aggregate price paid for
securities with puts may be higher than the price which otherwise
would be paid. Consistent with the investment objectives of
these Portfolios and subject to the supervision of the Directors,
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<PAGE>
the purpose of this practice is to permit the Portfolios to be
fully invested in tax exempt securities while maintaining the
necessary liquidity to purchase securities on a when-issued
basis, to meet unusually large redemptions, to purchase at a
later date securities other than those subject to the put and in
the case of the Tax Exempt Limited Term Portfolio, to facilitate
the Advisor's ability to manage the portfolio actively. The
principal risk of puts is that the put writer may default on its
obligation to repurchase. The Advisor will monitor each writer's
ability to meet its obligations under puts. See "Investment
Restrictions" and "Taxes" herein.
The amortized cost method is used by the Domestic Prime
Money Market Portfolio, the Global Money Market Portfolio and the
Tax Exempt Money Market Portfolio to value any municipal
securities; no value is assigned to any puts on such municipal
securities. This method is also used by the Tax Exempt Limited
Term Portfolio to value certain high quality municipal securities
which meet the requirements specified for use of the amortized
cost method; when these securities are subject to puts separate
from the underlying securities, no value is assigned to the puts.
The cost of any such put is carried as an unrealized loss from
the time of purchase until it is exercised or expires.
INVESTMENT RESTRICTIONS
Unless specified to the contrary, the following
restrictions may not be changed as to a Portfolio without the
approval of a majority of the outstanding voting securities of
that Portfolio which, under the Investment Company Act of 1940
and the rules thereunder and as used in this Statement of
Additional Information, means the lesser of (1) 67% of the shares
of a Portfolio present at a meeting if the holders of more than
50% of the outstanding shares of that Portfolio are present in
person or by proxy, or (2) more than 50% of the outstanding
shares of a Portfolio.*
The Fund may not, on behalf of a Portfolio:
(1) with regard to the Domestic Prime Money Market
Portfolio and the Global Money Market Portfolio, invest more than
5% of their total assets in securities of any one issuer;
- --------
* Any investment restrictions herein which involve a maximum
percentage of securities or assets shall not be considered
to be violated unless an excess over the percentage occurs
immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by,
the Portfolio.
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<PAGE>
however, the Portfolios may invest more than 5% of their total
assets in the First Tier Securities of a single issuer for a
period of up to three business days;
(2) purchase securities (including warrants) other
than those described in the Prospectus as fundamental;
(3) with respect to 75% of the Portfolio's total
assets, invest more than 5% of the value of the total assets in
the securities of any one issuer, except obligations issued or
guaranteed by the U.S. Government or its agencies and
instrumentalities;
(4) purchase the securities of any issuer if such
purchase would cause more than 10% of the voting securities of
such issuer to be held by the Portfolio or if such securities
were purchased for the purpose of exercising control;
(5) borrow money, except (a) from banks for
extraordinary or emergency purposes (not for leveraging or
investment) or (b) by engaging in reverse repurchase agreements,
provided that (a) and (b) in the aggregate do not exceed an
amount equal to one-third of the value of the total assets of
that Portfolio less its liabilities (not including the amount
borrowed) at the time of borrowing, and further provided that
300% asset coverage is maintained at all times;
(6) purchase securities while borrowings (excluding
reverse repurchase agreements entered into for other than
extraordinary or emergency purposes) exceed 5% of the Portfolio's
total assets;
(7) mortgage, pledge, or hypothecate any assets except
that a Portfolio may pledge not more than one-third of its total
assets to secure borrowings made in accordance with Investment
Restriction (5) above. However, although not a fundamental
policy of the Fund, as a matter of operating policy in order to
comply with certain state statutes, no Portfolio will pledge its
assets in excess of an amount equal to 10% of net assets;
(8) act as underwriter of securities issued by others,
except to the extent that the purchase of securities in
accordance with the Portfolio's investment objectives and
policies directly from the issuer thereof and the later
disposition thereof may be deemed to be underwriting;
(9) make loans to other persons, except loans of
portfolio securities and except to the extent that the purchase
of debt obligations in accordance with the Portfolio's investment
objectives and policies and the entry into repurchase agreements
may be deemed to be loans;
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<PAGE>
(10) issue senior securities, except as appropriate to
evidence indebtedness which a Portfolio is permitted to incur
pursuant to Investment Restriction (5) and except for shares of
the various series which may be established by the Board of
Directors;
(11) purchase and sell real estate or invest in real
estate limited partnerships or in limited partnership interests
in real estate investment trusts which are not readily marketable
(although a Portfolio may invest in securities of companies which
deal in real estate and in other permitted investments secured by
real estate), commodities, commodities contracts or oil and gas
interests;
(12) invest more than 10% of the market value of the
Portfolio's net assets in illiquid investments including
repurchase agreements maturing in more than seven days and
foreign securities, privately placed securities (including short
term debt obligations issued pursuant to Section 4(2) of the
Securities Act of 1933) and bank participation interests for
which a readily available market does not exist;
(13) sell securities short or purchase securities on
margin, or engage in the purchase and sale of a put, call,
straddle or spread option or in writing such option except to the
extent that securities subject to a demand obligation and stand-
by commitments may be purchased as set forth herein and except
that the Limited Term Portfolio and the Tax Exempt Limited Term
Portfolio may purchase hedging instruments as described herein;
(14) acquire securities of other investment companies;
(15) lend portfolio securities in an amount exceeding
in the aggregate one-third of the market value of the Portfolio's
total assets, less liabilities other than obligations created by
these transactions;
(16) invest more than 5% of the value of a Portfolio's
total assets in the securities of issuers where the entity
providing the revenues from which the issue is to be paid has a
record, including predecessors, of fewer than three years of
continuous operation, except obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
The Fund may not, on behalf of the Portfolio or
Portfolios specified:
(17) with respect to the Tax Exempt Money Market
Portfolio and the Tax Exempt Limited Term Portfolio, under normal
market conditions, purchase securities if such purchase would
cause less than 80% of the Portfolio's net assets to be invested
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<PAGE>
in securities the income from which is exempt from regular
federal income tax;
(18) with respect to the U.S. Treasury Money Market
Portfolio, the Domestic Prime Money Market Portfolio, Global
Money Market Portfolio and Limited Term Portfolio, invest more
than 25% of the value of the Portfolio's total assets in
securities of companies in the same industry (excluding U.S.
Government securities and, as to Domestic Prime Money Market
Portfolio and Global Money Market Portfolio only, certificates of
deposit and bankers' acceptances of domestic banks); and
(19) with respect to the Tax Exempt Money Market
Portfolio and Tax Exempt Limited Term Portfolio, purchase (i)
pollution control and industrial revenue bonds or (ii) securities
which are not Municipal Obligations, if in either case the
purchase would cause more than 25% of the value of the
Portfolio's total assets to be invested in companies in the same
industry (for the purposes of this restriction wholly-owned
finance companies are considered to be in the industry of their
parents if their activities are primarily related to financing
the activities of the parents).
MANAGEMENT OF THE FUND
Directors and Officers
The Directors and Officers of the Fund and their
principal occupations during the last five years are set forth
below.
Name,Age, Position(s) Principal Occupations During
with Fund and Address Past Five Years
*Thomas E. O'Connor, 51............... President of Thomas E.
Chairman of the Board O'Connor & Co., Inc., the
19 Old Kings Highway South general partner of Thomas E.
Darien, Connecticut 06820-4526 O'Connor & Co. L.P. which is
a general partner of the
Advisor. Prior to forming
the Advisor and its
affiliated management
company, Gabelli-O'Connor
Fixed Income Management
- --------
* "Interested person" of the Fund, as defined in the
Investment Company Act.
-32-
C/M: 10112.0000 170559.3
<PAGE>
Co., he was a Managing
Director of Bear, Stearns &
Co. Inc. He began his
affiliation with Bear,
Stearns & Co. Inc. in 1972
and became a General Partner
of Bear, Stearns & Co. (the
predecessor partnership) in
1977, and became manager of
the Public Finance Department
in 1978.
+Felix J. Christiana, 70.............. Retired Senior Vice
Director President, Dollar Dry Dock
45 Pondfield Parkway Savings Bank. Director of
Mount Vernon, New York 10552 The Gabelli Asset Fund, The
Gabelli Value Fund, Inc., and
The Gabelli Convertible
Securities Fund. Trustee of
the Gabelli Equity Trust and
The Gabelli Growth Fund.
+Robert C. Kolodny, M.D., 51.......... Physician, author and
Director lecturer (self-employed)
885 Oenoke Ridge Road (1983-present). General
New Canaan, Connecticut 06840 Partner of KBS Partnership,
KBS II Investment
Partnership, KBS III
Investment Partnership and
KBS IV Limited Partnership,
private investment
partnerships (1981-present);
Medical Director and Chairman
of the Board of the
Behavioral Medicine Institute
(1983-present) and Associate
Director, Masters & Johnson
Institute, St. Louis, MO
(1972-1983), medical research
institutes.
- --------
+ Director, trustee or officer of investment companies advised
by Gabelli Funds, Inc.
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<PAGE>
+Anthony R. Pustorino, 69............. Retired President, Pustorino,
Director Pugliesi & Co., P.C.,
515 Madison Avenue certified public accountants
New York, New York 10022 (1961-1990); Professor, Pace
University (1965-present).
Director of The Gabelli Asset
Fund, The Gabelli Growth
Fund, The Gabelli Value Fund,
Inc. and The Gabelli
Convertible Securities Fund.
Trustee of The Gabelli Equity
Trust.
Gary L. Roubos, 58................... Chairman of the Board of
Director Dover Corp., a diversified
280 Park Avenue industrial manufacturing
New York, New York 10017 company since 1981.
William A. Merritt Jr., 58.............. Financial Consultant/Mergers
Director and Acquisitions (1992-
83 Brookside Road present). President and
Darien, Connecticut 06820 Chief Operating Officer of
WilTel Communications
Systems, Inc. (1990-1992).
Executive Vice-President,
Chief Operating Officer and
Director of TIE/Communica-
tions (1981-1990).
Mary E. Hauck, 50..................... Retired Senior Portfolio
Director manager of the Advisor.
Bishop Park Road Prior to joining the Advisor
RR4, Box 200 in 1987, she was a senior
Pound Ridge, New York 10576 vice president and portfolio
manager of municipal mutual
funds at the Dreyfus
Corporation, where she began
in 1977.
- --------
+ Director, trustee or officer of investment companies advised
by Gabelli Funds, Inc.
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<PAGE>
Ronald S. Eaker, 34................... Senior Portfolio manager of
President and Chief Investment the Advisor. Prior to
Officer joining the Advisor in 1987,
19 Old Kings Highway South he was Supervisor of
Darien, Connecticut 06820-4526 Administrative Operations at
Frank Henjes & Co., where he
began in 1983.
Henley L. Smith, 38................... Senior Portfolio manager of
Vice President and the Advisor. Prior to
Investment Officer joining the Advisor in 1987,
19 Old Kings Highway South he was portfolio manager at
Darien, Connecticut 06820-4526 Manufacturers Hanover
Investment Corp. where he
began in 1984. From 1982-
1984 he was a portfolio
manager for Manufacturers
Hanover Trust Company.
Carroll L. Coward, 38.................... Portfolio manager of the
Vice President and Investment Advisor. Prior to joining
Officer the Advisor in 1992, she was
19 Old Kings Highway South Vice President of Lord Abbett
Darien, Connecticut 06820-4526 & Co., where she began in
1986.
Judith Fabrizi, 27....................... Employee of the Advisor.
Secretary, Treasurer and Prior to joining the Advisor
Investment Officer in 1989, she was a cosmetic
19 Old Kings Highway South consultant for Lord & Taylor,
Darien, Connecticut 06820-4526 where she began in 1987.
Joan V. Fiore, 38..................... Managing Director and Counsel
Assistant Secretary of the Administrator since
237 Park Avenue 1991. Staff Attorney at the
New York, New York 10017 Securities Exchange
Commission from 1986 to 1991.
Sheryl Hirschfeld, 34.................... Director of the Administrator
Assistant Secretary since 1994. Prior to joining
237 Park Avenue the Administrator, she was an
New York, New York 10017 employee of the Dreyfus
Corporation from 1982 to
1994.
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<PAGE>
John J. Pileggi, 35................... Senior Managing Director of
Assistant Treasurer the Administrator since 1984.
237 Park Avenue
New York, New York 10017
Compensation Table
Aggregate Compensation
Name of Person, Position from Fund
Felix J. Christiana, Director $6,000
Robert C. Kolodny, M.D., $5,500
Director
Anthony R. Pustorino, Director $6,000
Gary L. Roubos, Director $6,000
William A. Merritt Jr., $6,000
Director
Mary E. Hauck, Director $6,000
There are no pension, retirement or other benefits
payable by the Fund to any director or officer of the Fund.
- -------------------
* The total compensation paid to such persons by the Fund
during the fiscal year ending October 31, 1994.
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<PAGE>
Investment Advisor
The investment advisor for the Fund is Gabelli-O'Connor
Fixed Income Mutual Funds Management Co., with offices at 19 Old
Kings Highway South, Darien, Connecticut 06820-4526, a Delaware
partnership organized in 1987. As of the date of this Statement
of Additional Information, the Advisor is an investment manager,
administrator or advisor only for the assets of the Fund.
Gabelli-O'Connor Fixed Income Mutual Funds Management Co. is a
registered investment advisor under the Investment Advisers Act
of 1940. Mr. O'Connor is President and sole shareholder of
Thomas E. O'Connor & Co., Inc., the general partner of Thomas E.
O'Connor & Co. L.P., which is a general partner of the Advisor.
Mario J. Gabelli is the Chairman of the Board of Directors of
Gabelli Funds, Inc., which is the other general partner of the
Advisor. As a result of these relationships, Messrs. Thomas E.
O'Connor and Mario J. Gabelli may each be deemed to be a
"controlling person" of the Advisor. As of December 31, 1994 the
Advisor served as investment advisor for assets aggregating in
excess of $623 million. The Advisor is an affiliate of Gabelli-
O'Connor Fixed Income Management Co., a registered investment
advisor that is an investment manager or advisor to corporations,
institutions, pension trusts, profit sharing trusts and high net
worth individuals and which, as of December 31, 1994, served as
an investment advisor for assets aggregating in excess of $576
million. The Advisor is an affiliate of Quantum/Gabelli-O'Connor
L.P. which, as of December 31, 1994, served as investment advisor
for assets aggregating in excess of $25 million. The Advisor is
also an affiliate of Gabelli Funds, Inc. which, through its
affiliates, acts as an investment manager, administrator or
advisor for assets aggregating in excess of $7.8 billion as of
December 31, 1994.
Pursuant to the Advisory Agreements for each of the
Portfolios, the Advisor manages the Fund's portfolio of
securities and makes decisions with respect to the purchase and
sale of investments, subject to the general control of the Board
of Directors of the Fund.
The Advisor provides persons satisfactory to the Board
of Directors of the Fund to serve as officers of the Fund. Such
officers, as well as certain other employees and directors of the
Fund, may be directors, officers or employees of the Advisor or
its affiliates.
The Advisor also provides the Fund with supervisory
personnel who will be responsible for supervising the performance
of administrative services, accounting and related services, net
asset value and yield calculation, reports to and filings with
regulatory authorities, and services relating to such functions.
However, the Administrator will provide personnel who will be
responsible for performing the operational components of such
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<PAGE>
services. The personnel rendering such supervisory services may
be employees of the Advisor, of its affiliates or of other
organizations. The Advisory Agreements for each Portfolio were
most recently approved, as amended, on October 12, 1994 by the
Board of Directors, including a majority of the directors who are
not interested persons (as defined in the Investment Company Act
of 1940) of the Fund or the Advisor. The Advisory Agreements for
the Domestic Prime Money Market Portfolio and the Tax Exempt
Money Market Portfolio were approved by a majority of the
shareholders of each such Portfolio at a meeting of the
shareholders on March 6, 1989. The Advisory Agreement for the
U.S. Treasury Money Market Portfolio was approved by the
shareholders of that Portfolio on March 14, 1991.
The Advisory Agreements have a term which extends to
October 31, 1995, and may be continued in force thereafter for
successive twelve-month periods beginning each November 1,
provided that such continuance is specifically approved annually
by majority vote of the respective Portfolio's outstanding voting
securities or by the Fund's Board of Directors, and in either
case by a majority of the directors who are not parties to the
Advisory Agreement or interested persons of any such party, by
votes cast in person at a meeting called for the purpose of
voting on such matter.
The Advisory Agreements are terminable without penalty
by the Portfolio on sixty days' written notice when authorized
either by majority vote of the outstanding voting shares of the
Portfolio or by a vote of a majority of the Fund's Board of
Directors, or by the Advisor on sixty days' written notice, and
will automatically terminate in the event of an assignment. The
Advisory Agreements provide that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the
Advisor, or of reckless disregard of its obligations thereunder,
the Advisor shall not be liable for any action or failure to act
in accordance with its duties thereunder.
Fees. Set forth below as a percentage of average daily
net assets are the advisory fees paid to the Advisor for each
Portfolio pursuant to the Advisory Agreements: the U.S. Treasury
Money Market Portfolio, .30%; the Domestic Prime Money Market
Portfolio, .30%; the Global Money Market Portfolio, .30%; the Tax
Exempt Money Market Portfolio, .30%; the Limited Term Portfolio,
.45%; and the Tax Exempt Limited Term Portfolio, .45%. Any
portion of the total fees received by the Advisor may be used by
the Advisor to provide shareholder and administrative services
and for distribution of Fund shares. See "Financial Statements"
herein.
The fees payable under the applicable Advisory
Agreements for the fiscal years ended October 31, 1992,
October 31, 1993 and October 31, 1994, were $288,434, $311,273
-38-
C/M: 10112.0000 170559.3
<PAGE>
and $440,162, respectively, for the Tax Exempt Money Market
Portfolio and $537,912, $454,859 and $457,770, respectively, for
the Domestic Prime Money Market Portfolio. Of these amounts,
$15,083, $0 and $0 were voluntarily and irrevocably waived by the
Advisor for the Tax Exempt Money Market Portfolio and $18,487, $0
and $0 for the Domestic Prime Money Market Portfolio,
respectively. The U.S. Treasury Money Market Portfolio was
activated on July 20, 1990. Fees payable under the Advisory
Agreement for the U.S. Treasury Money Market Portfolio for the
fiscal years ended October 31, 1992, October 31, 1993 and
October 31, 1994 were $975,875, $673,891 and $542,100,
respectively. Of these amounts, for fiscal years ended
October 31, 1992, October 31, 1993 and October 31, 1994, $24,462,
$0 and $0, respectively, were voluntarily and irrevocably waived
by the Advisor. As of the date hereof, the other three
Portfolios have not been activated by the Advisor. The Advisor
may continue to irrevocably waive its rights to any portion of
the advisory fees and may use any portion of the advisory fees
for purposes of shareholder and administrative services and
distribution of the Fund's shares pursuant to the Fund's
Distribution and Service Plans.
Expense Limitation
The Advisor has agreed to reimburse a Portfolio for its
expenses (exclusive of interest, taxes, brokerage, and
extraordinary expenses) which in any year exceed the limits on
investment company expenses prescribed by any state in which the
Portfolio's shares are qualified for sale. For the purpose of
this obligation to reimburse expenses, the Portfolio's annual
expenses are estimated and accrued daily, and any appropriate
estimated payments are made to it on a monthly basis. From time
to time, the Advisor may voluntarily assume certain expenses of
any Portfolio of the Fund. This would have the effect of
lowering the overall expense ratio of that Portfolio and of
increasing yield to investors in that Portfolio. Subject to the
obligations of the Advisor to reimburse a Portfolio for its
excess expenses as described above, the Portfolios have, under
the respective Advisory Agreements, confirmed their obligation
for payment of all their other expenses, including without
limitation: fees payable to the Advisor, Administrator,
Custodian, Transfer Agent and Dividend Agent; brokerage and
commission expenses; federal, state or local taxes, including
issuance and transfer taxes incurred by or levied on them;
commitment fees, certain insurance premiums and membership fees
and dues in investment company organizations; interest charges on
borrowings; telecommunications expenses; recurring and non-
recurring legal and accounting expenses; costs of organizing and
maintaining the Fund's existence as a corporation; compensation,
including directors' fees, of any directors, officers or
employees who are not also officers of the Advisor or its
affiliates and costs of other personnel providing administrative
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<PAGE>
and clerical services; costs of stockholders' services and costs
of stockholders' reports, proxy solicitations, and corporate
meetings; fees and expenses of registering their shares under the
appropriate Federal securities laws and of qualifying their
shares under applicable state securities laws, including expenses
attendant upon the initial registration and qualification of
these shares and attendant upon renewals of, or amendments to,
those registrations and qualifications; and expenses of
preparing, printing and delivering the Prospectus to existing
shareholders and of printing shareholder application forms for
shareholder accounts.
The Fund may from time to time hire its own employees
or contract to have management services performed by third
parties, and the management of the Fund intends to do so whenever
it appears advantageous to the Fund. The Fund's expenses for
employees and for such services are among the expenses subject to
the expense limitation described above.
Administrator
The Administrator for the Fund is Furman Selz
Incorporated (the "Administrator"), which has its principal
office at 237 Park Avenue, New York, New York 10017, and is
primarily an institutional brokerage firm with membership on the
New York, American, Boston, Midwest, Pacific and Philadelphia
Stock Exchanges.
The Administrator and its affiliate, Furman Selz
Capital Management, Inc., act as investment advisor to numerous
individual and institutional accounts. The Administrator serves
as administrator and distributor of other mutual funds. The Fund
will not invest in these funds or in any other fund which may in
the future be affiliated with the Administrator or any of its
affiliates.
Pursuant to the Administrative Services Agreements from
each of the Portfolios, the Administrator provides all management
and administrative services reasonably necessary for the Fund,
other than those provided by the Advisor, subject to the
supervision of the Fund's Board of Directors. Because of the
services rendered the Fund by the Administrator and the Fund's
Advisor, the Fund itself may not require any employees other than
its officers, none of whom receive compensation from the Fund.
For the services rendered to the Fund by the
Administrator, each Portfolio pays the Administrator a fee,
computed daily and payable monthly, in accordance with the
following schedule: (i) .10% of the first $500 million of
aggregate average daily net assets of the Fund, (ii) .065% of the
next $250 million of aggregate average daily net assets of the
Fund, (iii) .055% of the next $250 million of aggregate average
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daily net assets of the Fund, and (iv) .050% of all aggregate
average daily net assets of the Fund over $1 billion.
Under the Administrative Services Agreement with each
Portfolio, the Administrator provides all administrative
services, including, without limitation: (i) provides services
of persons competent to perform such administrative and clerical
functions as are necessary to provide effective administration of
the Fund, including maintaining certain books and records
described in Rule 31a-1 under the 1940 Act, and reconciling
account information and balances among the Fund's Custodian and
Advisor; (ii) oversees the performance of administrative and
professional services to the Fund by others, including the Fund's
Custodian; (iii) prepares, but does not pay for, the periodic
updating of the Fund's Registration Statement, Prospectus and
Statement of Additional Information in conjunction with Fund
counsel, including the printing of such documents for the purpose
of filings with the Securities and Exchange Commission and state
securities administrators, prepares the Fund's tax returns, and
prepares reports to the Fund's shareholders and the Securities
and Exchange Commission; (iv) prepares in conjunction with Fund
counsel, but does not pay for, all filings under the securities
or "Blue Sky" laws of such states or countries as are designated
by the Distributor, which may be required to register or qualify,
or continue the registration or qualification, of the Fund and/or
its shares under such laws; (v) prepares notices and agendas for
meetings of the Fund's Board of Directors and minutes of such
meetings in all matters required by the 1940 Act to be acted upon
by the Board; (vi) monitors daily and periodic compliance with
respect to all requirements and restrictions of the Investment
Company Act, the Internal Revenue Code and the Prospectus; and
(vii) monitors and evaluates daily income and expense accruals,
and sales and redemptions of shares of the Portfolios.
The Administrator also provides the Fund with all
accounting services, including (i) daily computation of net asset
value for each Portfolio; (ii) maintenance of security ledgers
and books and records as required by the Investment Company Act;
(iii) production of the Portfolio and general ledger reports;
(iv) reconciliation of accounting records; and (v) calculation of
yield and average maturity for each Portfolio.
For these accounting services provided, the
Administrator shall be paid a fee of $2,500 per Portfolio per
month.
The actual fees paid to the Administrator for all
services rendered for the year ended October 31, 1994 were
$176,933 for the Domestic Prime Money Market Portfolio, $171,454
for the Tax Exempt Money Market Portfolio and $202,796 for the
U.S. Treasury Money Market Portfolio.
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The Administrative Services Agreements are terminable
at any time, without the payment of any penalty, by a vote of the
majority of the relevant Portfolio's shareholders, by the Fund on
behalf of the Portfolio or the Administrator on sixty days'
written notice and automatically in the event of an "assignment"
as defined by the 1940 Act. The Administrative Services
Agreements shall remain in effect for the same periods as the
Advisory Agreements subject to annual approval by the Fund's
Board of Directors. The Administrative Services Agreements
provide that in the absence of willful misfeasance, bad faith or
gross negligence on the part of the Administrator, or reckless
disregard of its obligations thereunder, the Administrator shall
not be liable for any action or failure to act in accordance with
its duties thereunder.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
Custodial Trust Company, 101 Carnegie Center,
Princeton, New Jersey 08540 is the Fund's Custodian. Pursuant
to a Custodian Agreement with the Fund, it is responsible for
maintaining the books and records of the Fund's portfolio
securities and cash. Subject to the supervision of the Advisor
and Administrator, the Custodian maintains the Fund's portfolio
transaction records. The Administrator acts as the Fund's
transfer agent and dividend agent.
TAXES
The Fund has elected to qualify under the Internal
Revenue Code of 1986, as amended ("Code"), as a regulated
investment company. As a regulated investment company, the Fund
will not be subject to federal income taxes on its investment
company taxable income and its long-term capital gains that it
distributes to its shareholders, provided that at least 90% of
its investment company taxable income and at least 90% of its tax
exempt net interest income for the taxable year is distributed
and numerous other requirements concerning regulated investment
companies are satisfied. The Fund's policy is to distribute as
dividends each year 100% (and in no event less than 90%) of its
investment company taxable income and tax exempt net interest
income. Each Portfolio will be treated as a separate corporation
and generally will have to comply with the qualifications and
other requirements applicable to regulated investment companies
without regard to other Portfolios. If for any taxable year a
Portfolio does not qualify as a regulated investment company, all
of its taxable income would be taxable at corporate rates and no
distributions would qualify as tax exempt.
The Fund has adopted a policy of declaring dividends
daily in an amount based on its net investment income. The
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amount of each daily dividend may differ from actual net
investment income calculated in accordance with federal income
tax principles. Dividend distributions will be made on the last
business day of each month. Dividends paid from taxable income,
if any, and distributions of any realized short term capital
gains (whether from tax exempt or taxable obligations) are
taxable to shareholders as ordinary income, whether received in
cash or reinvested in additional shares of the Fund. Dividends
paid by the Fund from taxable income on December 31 will be
treated as received by shareholders on such date (and subject to
tax in the shareholder's tax year in which such date occurs) for
federal income tax purposes, notwithstanding actual receipt of
the dividend in the following calendar year. Distributions of
net realized capital gains after utilization of capital loss
carryforwards, if any, are made in October and, if necessary, to
meet applicable distribution requirements, shortly after
October 31, the Portfolios' fiscal year-end, except that the U.S.
Treasury Money Market Portfolio, the Domestic Prime Money Market
Portfolio, the Global Money Market Portfolio and the Tax Exempt
Money Market Portfolio include net short-term capital gain in
their daily declarations of income. Distributions paid by the
Portfolios (including distributions of tax exempt interest) may
result in a liability (or increased liability) under the
alternative minimum tax.
Distributions of tax exempt income are not subject to
regular federal income taxes, but may be subject to the
alternative minimum tax. Distributions derived from interest on
certain private activity bonds that are exempt from regular
federal income tax are specifically treated as tax preference
items and may subject individual or corporate shareholders to
liability (or increased liability) under the alternative minimum
tax. At least 80 percent of the net assets of the Tax Exempt
Money Market Portfolio and Tax Exempt Limited Term Portfolio will
be invested in municipal obligations, the interest income on
which is not treated as a tax preference item under the
alternative minimum tax. However, because 75% of the difference
between adjusted current earnings (including, generally, tax
exempt income) and alternative minimum taxable income (determined
without regard to this item) is an addition to the corporate
alternative minimum tax base, all distributions derived from
interest that is exempt from regular federal income tax are
included in adjusted current earnings and may subject corporate
shareholders to, or increase their liability under, the
alternative minimum tax. Certain tax exempt interest is also
included in the tax base for the additional corporate minimum tax
imposed by the Superfund Amendments and Reauthorization Act of
1986, and, in certain cases, Subchapter S corporations with
accumulated earnings and profits from Subchapter C years will be
subject to a tax on "passive investment income," including tax
exempt interest. For social security recipients, interest on tax
exempt bonds, including tax exempt interest dividends paid by the
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<PAGE>
Fund, is to be added to adjusted gross income, for purposes of
computing the amount of social security benefits includible in
gross income.
With respect to the variable rate demand instruments
and participation certificates, the Fund is relying on the
opinion of Battle Fowler LLP, counsel to the Fund, that it will
be treated for Federal income tax purposes as the owner thereof
and that the interest on the underlying tax exempt obligations
will be tax exempt to the Fund. Counsel has pointed out that the
IRS has announced that it will not ordinarily issue advance
rulings on the question of ownership of securities or
participation interests therein subject to a put and, as a
result, the IRS could reach a conclusion different from that
reached by counsel.
The Fund may be subject to state or local tax in
jurisdictions in which the Fund is organized or may be deemed to
be doing business. However, Connecticut and Maryland tax
regulated investment companies in a manner that is generally
similar to the federal income tax rules described herein.
Distributions may be subject to state and local income
taxes. In addition, the treatment of the Fund and its
shareholders in those states that have income tax laws might
differ from their treatment under the federal income tax laws.
Some states exempt from state personal income tax distributions
received from the Fund only to the extent such distributions are
derived from interest on obligations issued by such state or its
municipalities or political subdivisions. Shareholders should
consult with their own tax advisors with respect to any state or
local taxes. In addition, shareholders should review with their
tax advisors the state and local income tax consequences of the
Fund's investing in certain investments issued by agencies and
instrumentalities of the U.S. Government and in repurchase and
reverse repurchase agreements and of the Fund's engaging in
securities loans.
With respect to the U.S. Treasury Money Market
Portfolio, states generally provide for a pass-through of the
state and local income tax exemption afforded under federal law
to direct owners of U.S. Government obligations, subject to such
Portfolio's compliance with certain state notice and investment
threshold requirements. It is expected that dividends from the
U.S. Treasury Money Market Portfolio that are derived from
interest earned on U.S. Government obligations generally will be
treated for state and local income tax purposes as if the
investor directly owned a proportionate share of the U.S.
Government obligations held by that Portfolio. Therefore, since
the income on U.S. Government obligations in which the U.S.
Treasury Money Market Portfolio invests is exempt from state and
local income taxes under federal law, dividends paid by that
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<PAGE>
Portfolio that are derived from such interest will also be free
from state and local income taxes. To the extent required by
applicable state laws and within any applicable time period
following the end of the Fund's taxable year, the Fund intends to
send each shareholder a tax information notice describing the
federal and state tax status of dividends paid to investors for
the prior tax year.
The exemption from state and local income taxation, if
available, does not preclude states from assessing other taxes,
such as personal property taxes and estate and inheritance taxes,
on the value of an investor's shares in the U.S. Treasury Money
Market Portfolio. In addition, states may impose taxes on
capital gains distributed by such Portfolio and may include the
value of Portfolio shares and the income attributable thereto in
the measure of state or municipal franchise taxes imposed on a
corporate investor's privilege of doing business in the state or
municipality. Shareholders are urged to contact their tax
advisors regarding the state and local tax treatment of ownership
of shares in the U.S. Treasury Money Market Portfolio and of
dividends received from the Portfolio.
If the Fund acquires debt instruments that were
originally issued at a discount, e.g., zero coupon bonds, it will
be required to include annually in gross income or, in the case
of tax-exempt instruments issued at a discount, in tax-exempt
income, a portion of the "original issue discount" that accrues
over the term of the obligation regardless of whether the income
is received by the Fund, and to make distributions accordingly.
To insure that the Fund has sufficient cash to meet this
distribution requirement, the Fund may borrow funds on a short-
term basis or sell certain investments. Since a substantial
percentage of the Fund's dividends are expected to be reinvested
and dividends that are declared and automatically reinvested
satisfy the distribution requirement, the Fund expects to satisfy
the distribution requirement even if it owns obligations with
original issue discount. Shareholders will realize taxable
income on the automatic reinvestment of dividends that are
attributable to original issue discount on taxable obligations.
The Code imposes a nondeductible 4% excise tax on a
Portfolio unless it meets certain requirements with respect to
distributions of ordinary income and capital gain net income.
The formula requires payment to shareholders during a calendar
year of distributions representing at least 98% of each
Portfolio's ordinary income for the calendar year, plus at least
98% of the excess of its capital gains over its capital losses
realized during the one-year period ending October 31 during such
year, which shall be reduced (but not below net capital gain) by
the amount of the Portfolio's net ordinary loss for the year. It
is anticipated that this provision will not have any material
impact on any Portfolio.
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Dividends and interest paid by foreign issuers may be
subject to withholding and other foreign taxes, which may
decrease the net return on foreign investments as compared to
dividends and interest paid by domestic issuers. The Fund does
not expect that any Portfolio will qualify to elect to pass
through to its shareholders the right to take a foreign tax
credit for foreign taxes withheld from dividends and interest
payments.
For federal income tax purposes, distributions of net
capital gains (the excess of net long-term capital gains over net
short-term capital loss), if any, are taxable as net capital
gains regardless of the length of time shareholders have owned
their shares. Although the Tax Reform Act of 1986 eliminated the
preferential treatment previously available for net capital
gains, the preferential treatment for net capital gains was
restored, to some extent, by the Revenue Reconciliation Act of
1990, which, in limited circumstances, places a 28% ceiling on
the marginal rate applicable to net capital gains realized by
individuals. Distributions attributable to short-term capital
gains (whether from tax exempt or taxable obligations) are
taxable as ordinary income for federal income tax purposes.
Generally, on the sale or exchange of obligations held for more
than one year, gain realized by a Portfolio that is not
attributable to original issue discount or certain market
discount will be long-term capital gain. Such capital gain, if
any, will be distributed as capital gain dividends. Gain on the
disposition of a tax-exempt bond purchased at a market discount
generally will be treated as ordinary income, rather than capital
gain, to the extent of accrued market discount. Capital gain
dividends, designated as such in a written notice to investors
mailed not later than 60 days after a Portfolio taxable year
closes, will be taxed as long-term capital gain. However, if an
investor receives a capital gain dividend and sells shares after
holding them for six months or less (not including periods during
which the shareholder holds an offsetting position), then any
loss realized on the sale will be treated as long-term capital
loss to the extent of such capital gain dividend. If any net
capital gains are retained by a Portfolio for reinvestment,
requiring federal income taxes to be paid thereon by such
Portfolio, the Portfolio will elect to treat such capital gains
as having been distributed to shareholders. As a result,
shareholders will report such capital gains as net capital gains,
will be able to claim their share of federal income taxes paid by
the Portfolio on such gains as a credit against their own federal
income tax liability, and will be entitled to increase the
adjusted tax basis of their Portfolio shares by 65% of their
share of the undistributed gain. Distributions of net capital
gains are not eligible for the dividends received deduction.
All taxable dividends from investment company taxable
income are taxable as ordinary income. It is not expected that
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<PAGE>
any income distributions from the Portfolios will qualify for the
dividends received deduction for corporations.
The Code permits the character of tax exempt interest
distributed by a regulated investment company to flow through as
tax exempt interest to its shareholders, provided that at least
50% of the value of its assets at the end of each quarter of its
taxable year is invested in state, municipal and other
obligations the interest on which is exempt under Section 103(a)
of the Code. The Tax Exempt Money Market Portfolio and Tax
Exempt Limited Term Portfolio intend to satisfy this 50%
requirement in order to permit their distributions attributable
to tax exempt interest to be treated as such for federal income
tax purposes in the hands of their shareholders. Distributions to
shareholders of tax exempt interest earned by these Portfolios
for the taxable year are therefore not subject to regular federal
income tax, although, as described above, they may be subject to
the individual and corporate alternative minimum taxes.
Any short-term capital loss realized upon the
redemption of shares of the Tax Exempt Money Market Portfolio or
the Tax Exempt Limited Term Portfolio within six months from the
date of their purchase will be disallowed to the extent of any
tax exempt dividends received during such six-month period,
although the period may be reduced under Treasury Regulations to
be prescribed.
Distributions of investment company taxable income and
net realized capital gains will be taxable as described above,
whether received in shares or in cash. Shareholders electing to
receive distributions in the form of additional shares will have
a cost basis for federal income tax purposes in each share so
received equal to the value of a share on the reinvestment date.
Shareholders are required to report tax exempt interest
on their federal income tax returns. Redemptions of shares,
including exchanges for shares of another Portfolio, may result
in tax consequences (gain or loss) to shareholders and are also
subject to reporting requirements.
The Tax Reform Act of 1986 contained a provision
limiting miscellaneous itemized deductions for individuals and
certain other shareholders, such as estates and trusts, to the
extent such miscellaneous itemized deductions do not exceed 2% of
adjusted gross income for a taxable year. However, the Revenue
Reconciliation Act of 1989 provided an exemption from the
limitation for publicly-offered regulated investment companies.
The U.S Treasury Money Market Portfolio, Domestic Prime Money
Market Portfolio and the Tax Exempt Money Market Portfolio
currently qualify and expect to continue to qualify as publicly-
offered regulated investment companies; it is expected that the
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<PAGE>
remaining Portfolios will qualify as publicly-offered regulated
investment companies when activated.
Interest on indebtedness incurred by shareholders to
purchase or carry shares of the Tax Exempt Money Market Portfolio
and the Tax Exempt Limited Term Portfolio will not be deductible
for federal income tax purposes. In addition, interest incurred
or continued to purchase shares of the other Portfolios is
generally treated as investment interest, and in the case of non-
corporate taxpayers is deductible only to the extent of net
investment income. Under rules used by the Internal Revenue
Service to determine when borrowed funds are used for the purpose
of purchasing or carrying particular assets, the purchase of
shares may be considered to have been made with borrowed funds
even though the borrowed funds are not directly traceable to the
purchase of shares.
Section 147(a) of the Code prohibits exemption from
taxation of interest on certain governmental obligations to
persons who are "substantial users" (or persons related thereto)
of facilities financed by such obligations. The Tax Exempt Money
Market Portfolio and the Tax Exempt Limited Term Portfolio have
not undertaken any investigation as to the users of the
facilities financed by tax exempt bonds in their portfolios.
In South Carolina v. Baker, the U.S. Supreme Court held
that the federal government may constitutionally require states
to register bonds they issue and may subject the interest on such
bonds to federal tax if not registered, and the Court further
held that there is no constitutional prohibition against the
federal government's taxing the interest earned on municipal
bonds. The Supreme Court decision affirms the authority of the
federal government to regulate and control municipal bonds and to
tax such bonds in the future. The decision does not, however,
affect the current exemption from taxation of the interest earned
on municipal bonds in accordance with Section 103 of the Code.
Under the federal income tax law, the Portfolios will
be required to report to the Internal Revenue Service all
distributions of taxable income and capital gains as well as
gross proceeds from the redemption or exchange of Portfolio
shares, except in the case of exempt shareholders, which include
most corporations. Under the backup withholding provisions of
Section 3406 of the Code, distributions of taxable income and
capital gains and proceeds from the redemption or exchange of the
shares of a regulated investment company may be subject to
withholding of federal income tax at the rate of 31% in the case
of non-exempt shareholders who fail to furnish the investment
company with their taxpayer identification numbers and their
required certifications regarding their status under the federal
income tax law. A special exception is available for proceeds
from the redemption or exchange of Portfolio shares if a
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<PAGE>
Portfolio maintains a constant net asset value per share. If the
withholding provisions are applicable, any such distributions and
proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld.
Corporate shareholders should provide the Portfolios with their
taxpayer identification numbers and certify their exempt status
in order to avoid possible erroneous application of backup
withholding.
In January of each year (or earlier, if necessary to
satisfy state and local income tax notice requirements), the
Portfolios will issue to each shareholder a statement of the
federal income tax status of all distributions, including: in the
case of the Tax Exempt Money Market Portfolio and the Tax Exempt
Limited Term Portfolio, a statement of the percentage of the
prior calendar year's distributions which the respective
Portfolio has designated as tax exempt, the percentage of such
tax exempt distributions treated as a tax preference item for
purposes of the alternative minimum tax, and the source on a
state-by-state basis of all distributions; and, in the case of
the U.S. Treasury Money Market Portfolio, all applicable state
and local income tax information.
The foregoing discussion of U.S. federal income tax law
relates solely to the application of that law to U.S. persons,
i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences
of ownership of shares of a Portfolio, including the possibility
that such a shareholder may be subject to a U.S. withholding tax
at a rate of 30% (or at a lower rate under an applicable income
tax treaty) on amounts constituting ordinary income received by
such person, where such amounts are treated as income from U.S.
sources under the Code.
The federal, state and local income tax rules that
apply to the Fund and its shareholders have changed extensively
in recent years, and investors should recognize that additional
changes may be made in the future, some of which could have an
adverse affect on the Fund and its investors for federal and/or
state and local tax purposes. Shareholders should consult their
tax advisors about the application of the provisions of tax law
described in this statement of additional information in light of
their particular federal and state tax situations.
PURCHASE, REDEMPTION AND EXCHANGE
GOC Fund Distributors, Inc. (the "Distributor") serves
as the exclusive Distributor of the shares of each Portfolio
pursuant to its Distribution Agreement with the Fund. Investors
may open accounts in the Portfolios in the Fund only through the
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<PAGE>
exclusive Distributor for the Fund. Under the Distribution
Agreement, the Distributor, for nominal consideration and as
agent for the Fund, will solicit orders for the purchase of Fund
shares, provided that any subscriptions and orders will not be
binding on the Fund until accepted by the Fund as principal. The
material relating to the purchase, redemption and exchange of
Portfolio shares in the Prospectus is incorporated herein by
reference and investors should refer to the Prospectus for
information relating to these areas.
DIVIDENDS AND DISTRIBUTIONS
Net investment income is declared as dividends daily
and paid monthly; if an investor's shares are redeemed during a
month, accrued but unpaid dividends are paid with the redemption
proceeds. Substantially all the realized net capital gains for
the Portfolios, if any, are declared and paid on an annual basis
(except for net short-term capital gains for the Money Market
Portfolios). Dividends are payable to shareholders of record at
the time of declaration.
Dividends of each Portfolio are automatically
reinvested in additional Portfolio shares unless the shareholder
has elected to have them paid in cash.
The net investment income of the Fund for each business
day is determined immediately prior to the determination of net
asset value. Net investment income for other days is determined
at the time net asset value is determined on the prior business
day. Shares of the Limited Term Portfolio and the Tax Exempt
Limited Term Portfolio earn dividends on the business day their
redemption is effective but not on the business day their
purchase is effective. See "Purchase of Shares" and "Redemption
of Shares" in the Prospectus.
NET ASSET VALUE
Net asset value per share for each of the Portfolios is
determined by subtracting from the value of the Portfolio's total
assets the amount of its liabilities and dividing the remainder
by the number of its outstanding shares. The U.S. Treasury Money
Market Portfolio, the Domestic Prime Money Market Portfolio, the
Global Money Market Portfolio and the Tax Exempt Money Market
Portfolio value all portfolio securities by the amortized cost
method in accordance with Rule 2a-7 under the Investment Company
Act of 1940. This method attempts to maintain a constant net
asset value per share of $1.00. No assurances can be given that
this goal can be attained.
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In the case of the Limited Term Portfolio and the Tax
Exempt Limited Term Portfolio, the value of each security for
which readily available market quotations exist is based on a
decision as to the broadest and most representative market for
the security; the value is based either on the last sale price on
a national securities exchange, or, in the absence of recorded
sales, at the readily available closing bid price on such
exchanges, or at the quoted bid price in the over-the-counter
market. Assets for which market quotations are not readily
available are valued in accordance with procedures established by
the Fund's Board of Directors, including use of an independent
pricing service or services which use prices based on yields or
prices of comparable municipal securities, indications as to
values from dealers and general market conditions. High quality
securities with effective maturities of 397 calendar days or less
generally will be valued by the amortized cost method.
Each of the Portfolios computes its net asset value
once daily on Monday through Friday, except that the net asset
value is not computed for a Portfolio on a day in which no orders
to purchase, sell or redeem Portfolio shares have been received
or on the holidays listed herein. The Fund does not determine
net asset value per share on the following holidays: New Year's
Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
The Portfolios compute net asset value as follows: the
U.S. Treasury Money Market Portfolio, the Domestic Prime Money
Market Portfolio, the Global Money Market Portfolio and the Tax
Exempt Money Market Portfolio (the "Money Market Portfolios"),
12:00 Noon New York Time; the Limited Term Portfolio and the Tax
Exempt Limited Term Portfolio, 4:00 p.m. New York Time. The days
on which a Fund's net asset value is determined are its business
days.
The Money Market Portfolios utilize the amortized cost
method of valuation. Amortized cost valuation involves valuing
an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, except that
if fluctuating interest rates cause the market value of the
Portfolios to deviate more than l/2 of l% from the value
determined on the basis of amortized cost, the Board of Directors
will consider whether any action should be initiated, as
described in the following paragraph. Although the amortized
cost method provides certainty in valuation, it may result in
periods during which the value of an instrument is higher or
lower than the price an investment company would receive if the
instrument were sold.
The Fund's Board of Directors has established
procedures to stabilize, to the extent reasonably possible, these
Portfolios' net asset value at $l.00 per share. These procedures
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include a review of the extent of any deviation of net asset
amortized cost per share. Should that deviation exceed 1/2 of
1%, the Board will consider whether any action should be
initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include
redemption of shares in kind, selling portfolio securities prior
to maturity, reducing or withholding dividends and utilizing a
net asset value per share as determined by using available market
quotations. The Money Market Portfolios will maintain a dollar-
weighted average portfolio maturity of 90 days or less, will not
purchase any instrument with an effective maturity greater than
397 days, will limit portfolio investments, including repurchase
agreements, to those United States dollar-denominated instruments
that the Fund's Board of Directors determines present minimal
credit risks, and will comply with certain reporting and
recordkeeping procedures. The Fund has also established
procedures to ensure compliance with the requirement that
portfolio securities meet the high quality criteria. See
"Investments and Investment Techniques Common to Two or More
Portfolios", herein.
COMPUTATION OF YIELD
The current and effective yields of the Money Market
Portfolios may be quoted in reports, sales literature, and
advertisements published by the Fund. Current yield is computed
by determining the net change, exclusive of capital changes, in
the value of a hypothetical pre-existing account having a balance
of one share at the beginning of a seven-day calendar period,
dividing the net change in account value of the account at the
beginning of the period, and multiplying the return over the
seven-day period by 365/7. For purposes of the calculation, net
change in account value reflects the value of additional shares
purchased with dividends from the original share and dividends
declared on both the original share and any such additional
shares, but does not reflect realized gains or losses or
unrealized appreciation or depreciation. Effective yield is
computed by annualizing the seven-day return with all dividends
reinvested in additional Portfolio shares.
The yields of the Domestic Prime Money Market
Portfolio, the Tax Exempt Money Market Portfolio and the U.S.
Treasury Money Market Portfolio for the seven-day period ended
October 31, 1994 were 4.47%, 2.77% and 4.18%, respectively.
The Limited Term Portfolio and Tax Exempt Limited Term
Portfolio are not money market funds and must compute their yield
in a different fashion. These Portfolios compute yield based on
a 30-day (or one month) period ended on the date of the most
recent balance sheet included in the registration statement,
computed by dividing the net investment income per share earned
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during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
6
YIELD = 2[( a-b + 1) - 1]
---
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to dividends.
d = the maximum offering price per share on the last
day of the period.
Actual future yields will depend on the type, quality,
and maturities of the investments held by the Portfolios, changes
in interest rates on investments, and the Portfolios' expenses
during the period.
Tax Equivalent Yield
The Tax Exempt Money Market Portfolio and Tax Exempt
Limited Term Portfolio may from time to time advertise their tax
equivalent yield.
Tax equivalent yield is computed based upon a 30-day
(or one month) period ended on the date of the most recent
balance sheet included in the Statement of Additional
Information, computed by dividing that portion of the yield of
the Portfolio (as computed pursuant to the formulae previously
discussed) which is tax exempt by one minus a stated income tax
rate and adding the product to that portion, if any, of the yield
of the Portfolio that is not tax exempt. The tax equivalent
yields for these Portfolios also may fluctuate daily and do not
provide a basis for determining future yields.
The U.S. Treasury Money Market Portfolio may also
advertise a tax equivalent yield for one or more of the states
and municipalities wherein all or substantially all of that
Portfolio's dividends represent a pass-through of income received
on direct obligations of the U.S. Government and, as a result,
are not subject to such state's income tax. The U.S. Treasury
Money Market Portfolio's advertisement of a tax equivalent yield
reflects the taxable yield that an investor subject to that
state's or municipality's highest marginal tax rate would have
had to receive in order to realize the same level of after-tax
yield as an investment in the U.S. Treasury Money Market
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<PAGE>
Portfolio would have produced. Tax equivalent yield is
calculated by dividing the portion of the U.S. Treasury Money
Market Portfolio's yield that is not subject to state or
municipal taxes (calculated as described above) by the result of
subtracting the state's or municipality's highest marginal tax
rate from 1, and adding the resulting figure to that portion, if
any, of the U.S. Treasury Money Market Portfolio's yield that is
subject to state or municipal income tax. All dividends paid by
the U.S. Treasury Money Market Portfolio are subject to federal
income taxation at applicable rates.
Computation of Total Return
The total return of the Limited Term and the Tax Exempt
Limited Term Portfolios must be displayed in any advertisement
containing the yield of any of these Portfolios. Total return is
the average annual total return for the 1-, 5- and 10-year period
ended on the date of the most recent balance sheet included in
the Statement of Additional Information, computed by finding the
average annual compounded rates of return over 1-, 5- and 10-year
periods that would equate the initial amount invested to the
ending redeemable value according to the following formula:
n
P(1+T) = ERV
Where:
P = a hypothetical initial investment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000
payment made at the beginning of the 1-, 5- or 10-
year periods at the end of the 1-, 5- or 10-year
periods (or fractions thereof).
Because the Limited Term and the Tax Exempt Limited Term
Portfolios have not had a registration in effect for 1, 5 or 10
years the period during which the registration has been effective
shall be substituted.
Yield information may be useful for reviewing the
performance of the Portfolio and for providing a basis for
comparison with other investment alternatives. However, unlike
bank deposits or other investments which pay a fixed yield for a
stated period of time, the Portfolios' yield does fluctuate, and
this should be considered when reviewing performance or making
comparisons.
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From time to time evaluations of performance of the
Portfolios made by independent sources may be used in
advertisements concerning the Portfolios. These sources may
include Lipper Analytical Services, Wiesenberger Investment
Company Service, Donoghue's Money Fund Report, Barron's, Business
Week, Changing Times, Financial World, Forbes, Fortune, Money,
Personal Investor, Bank Rate Monitor, and The Wall Street
Journal.
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on August 17,
1987. The Fund was formerly named the Gabelli-O'Connor
Treasurer's Fund, Inc. At a meeting of the shareholders held on
March 6, 1989, the shareholders of the Fund voted to amend the
Amended Articles of Incorporation to change the name of the Fund
to The Treasurer's Fund, Inc. The authorized capital stock of
the Fund consists of twenty billion shares of common stock having
a par value of one tenth of one cent ($.001) per share ("Common
Stock"). The Fund's net assets at the close of business on
January 31, 1995 were valued at $123,667,677 for the Tax Exempt
Money Market Portfolio, $142,097,467 for the Domestic Prime Money
Market Portfolio and $133,419,578 for the U.S. Treasury Money
Market Portfolio. The Fund's Board of Directors is authorized to
divide the unissued shares into separate series of stock, each
series representing a separate, additional investment portfolio.
The Board currently has authorized the division of the unissued
shares into six series of Common Stock, one for each of the
Portfolios. Shares of all series will have identical voting
rights, except where, by law, certain matters must be approved by
a majority of the shares of the affected series. Each share of
any series of shares when issued has equal dividend,
distribution, liquidation and voting rights within the series for
which it was issued, and each fractional share has those rights
in proportion to the percentage that the fractional share
represents of a whole share. Shares will be voted in the
aggregate. There are no conversion or preemptive rights in
connection with any shares of the Fund. All shares, when issued
in accordance with the terms of the offering, will be fully paid
and nonassessable. Shares are redeemable at net asset value, at
the option of the shareholder.
As of January 31, 1995, the officers and directors of
the Fund, collectively, beneficially owned, directly or
indirectly (including the power to vote or to dispose of any
shares), less than 1% of the total outstanding shares of each of
the Fund's Portfolios.
As of January 31, 1995, the following persons or
entities owned as much as 5% of the indicated Portfolio's
outstanding shares:
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<TABLE>
<CAPTION>
Name and Address Portfolio in Percentage of
of record or Number of which shares Ownership of
beneficial owner shares owned are owned Portfolio
- ---------------- ------------ ------------- -------------
<S> <C> <C> <C>
Bear, Stearns & Co. Inc. 40,027,586.00 Domestic Prime 19.9%
1 Metrotech Center North
Brooklyn, NY 11201-3872
Bankamerica National 19,776,857.18 U.S. Treasury 18.0%
Trust Company
Bear Stearns Mortgage Cap.
AC# 077002601
Attn: Mutual Funds
P.O. Box 94627
Pasadena, CA 91109-4627
Bear, Stearns & Co. Inc. 8,684,478.00 U.S. Treasury 7.9%
Bear Stearns Security Corp.
1 Metrotech Center North
Brooklyn, NY 11201-3872
Bear, Stearns & Co. Inc. 6,191,540.00 U.S. Treasury 5.6%
1 Metrotech Center North
Brooklyn, NY 11201-3872
Bear, Stearns & Co. Inc. 5,808,266.00 U.S. Treasury 5.1%
Bear Stearns Security Corp.
1 Metrotech Center North
Brooklyn, NY 11201-3872
</TABLE>
The shares held by Bear, Stearns & Co. Inc. are held on
behalf of individual client accounts.
The shares of the Fund have non-cumulative voting
rights, which means that the holders of more than 50% of the
shares outstanding voting for the election of directors can elect
100% of the directors if the holders choose to do so, and, in
that event, the holders of the remaining shares will not be able
to elect any person or persons to the Board of Directors. Unless
specifically requested by an investor who is a shareholder of
record, the Fund does not issue certificates evidencing Fund
shares.
As a general matter, the Fund will not hold annual or
other meetings of the Funds' shareholders. This is because the
By-laws of the Fund provide for annual meetings only (a) for the
election of directors, (b) for approval of the Fund's revised
investment advisory agreement with respect to a particular class
or series of stock, (c) for approval of revisions to the Fund's
distribution agreement with respect to a particular class or
series of stock, and (d) upon the written request of holders of
shares entitled to cast not less than twenty-five percent of all
the votes entitled to be cast at such meeting. Annual and other
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<PAGE>
meetings may be required with respect to such additional matters
relating to the Fund as may be required by the Investment Company
Act of 1940 (the "Act") including the removal of Fund directors
and communication among shareholders, any registration of the
Fund with the Securities and Exchange Commission or any state, or
as the Directors may consider necessary or desirable. Each
Director serves until the next meeting of shareholders called for
the purpose of considering the election or reelection of such
Director or of a successor to such Director, and until the
election and qualification of his or her successor, elected at
such meeting, or until such Director sooner dies, resigns,
retires or is removed by the vote of the shareholders.
Rule 18f-2 under the Act provides that any matter
required to be submitted by the provisions of the Act or
applicable state law, or otherwise, to the holders of the
outstanding voting securities of an investment company such as
the Fund shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding
shares of each class or series affected by such matter, i.e., by
a majority of the outstanding shares of each Portfolio.
Rule 18f-2 further provides that a class or series shall be
deemed to be affected by a matter unless it is clear that the
interests of each class or series in the matter are substantially
identical or that the matter does not affect any interest of such
class or series. However, the Rule exempts the selection of
independent public accountants, the approval of principal
distribution contracts and the election of directors from the
separate voting requirements of the Rule.
DISTRIBUTION PLANS
The Fund has adopted a shareholder servicing and
administration plan (the "Plan"), pursuant to Rule 12b-1 under
the Act (the "Rule") for each Portfolio of the Fund. The Rule
provides that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in
accordance with a plan permitted by the Rule. Although there are
no fees or expenses chargeable to the Fund under the Plans, the
Fund's Board of Directors has adopted the Plans in case certain
expenses of the Fund might be considered to constitute indirect
payments by the Fund of distribution expenses. If a payment by
the Fund to the Advisor of advisory fees should be deemed to be
indirect financing by the Fund of the distribution of its shares,
such payments would be authorized under the Plans.
The Plans provide that the Advisor may make payments
from time to time from its own resources, which may include the
advisory fee and past profits for the following purposes: to pay
promotional and administrative expenses in connection with the
offer and sale of the shares of the Portfolios, including
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<PAGE>
payments to participating organizations for performing
shareholder servicing and related administrative functions and
for providing assistance in distributing the Fund's shares. The
Advisor, in its sole discretion, will determine the amount of
such payments made pursuant to the Plans, provided that such
payments will not increase the amount which the Fund is required
to pay to the Advisor for any fiscal year under the Advisory
Agreement in effect for that year.
The Glass-Steagell Act limits the ability of a
depository institution to become an underwriter or distributor of
securities. However, it is the Fund management's position that
banks are not prohibited from acting in other capacities for
investment companies, such as providing administrative and
shareholder account maintenance services and receiving
compensation from the Advisor for providing such services.
However, this is an unsettled area of the law and if a
determination contrary to the Fund management's position is made
by a bank regulatory agency or court concerning shareholder
servicing and administration payments to banks from the Advisor,
any such payments will be terminated and any shares registered in
the banks' names, for their underlying customers, will be
reregistered in the name of the customers at no cost to the Fund
or its shareholders. In addition, state securities laws on this
issue may differ from the interpretation of federal law expressed
herein and banks and financial institutions may be required to
register as dealers pursuant to state law.
The Plans provide that they may continue in effect for
successive annual periods provided they are approved by the
shareholders or by the Board of Directors, including a majority
of directors who are not interested persons of the Fund and who
have no direct or indirect interest in the operation of the
Plans, or in the agreements related to the Plans. On October 12,
1994, the Board of Directors approved the continuance of all of
the Plans until October 31, 1995. The Plans for the Domestic
Prime Money Market Portfolio and the Tax Exempt Money Market
Portfolio were approved by a majority of the affected Portfolio's
shareholders at the annual meeting on March 6, 1989. The Plan
for the U.S. Treasury Money Market Portfolio was approved by a
majority of that Portfolio's shareholders on March 14, 1991. The
Plans further provide that they may not be amended to increase
materially the costs which may be spent by the Fund for
distribution pursuant to the Plans without shareholder approval,
and the other material amendments must be approved by the
directors in the manner described in the preceding sentence. The
Plans may be terminated at any time by a vote of a majority of
the disinterested directors of the Fund or the Fund's
shareholders. Although there are no fees or expenses chargeable
to the Fund under the Plans, for the fiscal year ended
October 31, 1994, the Advisor made payments under each Plan to or
on behalf of participating organizations in amounts of $180,784,
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<PAGE>
$146,734 and $153,613 with regard to the U.S. Treasury Money
Market Portfolio, the Tax Exempt Money Market Portfolio and the
Domestic Prime Money Market Portfolio, respectively (representing
.10%, .10% and .10% of the average daily net assets of each of
those Portfolios). Although these payments were not made by the
Fund, each may be deemed an indirect payment by the Fund.
BROKERAGE AND PORTFOLIO TURNOVER
Brokerage
The Fund's purchases and sales of portfolio securities
usually are principal transactions. Portfolio securities are
normally purchased directly from the issuer, from banks and
financial institutions or from an underwriter or market maker for
the securities. There usually are not brokerage commissions paid
for such purchases. Any transactions for which the Fund pays a
brokerage commission will be effected at the best price and
execution available. Purchases from underwriters of portfolio
securities include a commission or concession paid by the issuer
to the underwriter, and purchases from dealers serving as market
makers include the spread between the bid and asked price. The
Fund may purchase participation certificates in variable rate
Municipal Obligations with a demand feature from banks or other
financial institutions at a negotiated yield to the Fund based on
the applicable interest rate adjustment index for the security.
The interest received by the Fund is net of a fee charged by the
issuing institution for servicing the underlying obligation and
issuing the participation certificate, letter of credit,
guarantee or insurance and providing the demand repurchase
feature.
Allocation of transactions, including their frequency,
to various dealers is determined by the Advisor in its best
judgment and in a manner deemed in the best interest of
shareholders of the Fund rather than by a formula. The primary
consideration is prompt execution of orders in an effective
manner at the most favorable price. No preference in purchasing
portfolio securities will be given to banks or dealers that are
Participating Organizations.
Investment decisions for the Fund will be made
independently from those for any other investment companies or
accounts that may be or become managed by the Advisor or its
affiliates. If, however, the Fund and other investment companies
or accounts managed by the Advisor are simultaneously engaged in
the purchase or sale of the same security, the transactions may
be averaged as to price and allocated equitably to each account.
In some cases, this policy might adversely affect the price paid
or received by the Fund or the size of the position obtainable
for the Fund. In addition, when purchases or sales of the same
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<PAGE>
security for the Fund and for other investment companies managed
by the Advisor occur contemporaneously, the purchase or sale
orders may be aggregated in order to obtain any price advantage
available to large denomination purchasers or sellers.
No portfolio transactions are executed with the Advisor
or its affiliates acting as principal. In addition, the Fund
will not buy bankers' acceptances, certificates of deposit or
commercial paper from the Advisor or its affiliates.
Portfolio Turnover
Each Portfolio's average annual portfolio turnover
rate, i.e., the ratio of the lesser of sales or purchases to the
monthly average value of the portfolio (excluding from both the
numerator and the denominator all securities with maturities at
the time of acquisition of one year or less) is expected to be
high. Purchases and sales are made for each Portfolio whenever
necessary in the Advisor's opinion, to meet the Portfolio's
objective. In order to qualify as a regulated investment
company, less than 30% of each Portfolio's gross income
(including tax exempt income) must be derived from the sale or
other disposition of stock, securities or certain investments
held for less than three months. Although increased Portfolio
turnover may increase the likelihood of additional capital gains
for the Portfolios, the Portfolios expect to satisfy the 30%
income test.
COUNSEL AND INDEPENDENT AUDITORS
Legal Matters for the Fund are passed upon by Battle
Fowler LLP, 75 East 55th Street, New York, New York 10022.
Ernst & Young LLP, 787 Seventh Avenue, New York, New
York 10019 have been selected as independent auditors for the
Fund.
RATINGS OF MUNICIPAL AND CORPORATE OBLIGATIONS
Description of Moody's Investors Service, Inc.'s
municipal and corporate bond ratings:
Aaa - Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge". Interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
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Aa - Bonds which are rated Aa are judged to be of high
quality by all standards. Together with Aaa group they comprise
what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuations of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A - Bonds which are rated A posses favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as
medium grade obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements
may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba - Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments
may be very moderate and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which rated B generally lack characteristics
of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing.
Such issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations
which are speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class
of bonds, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Moody's ratings for municipal notes and other short-
term loans are designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-
term and long-term credit risk. Loans bearing the designation
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<PAGE>
MIG 1 are of the best quality, enjoying strong protection by
establishing cash flow of funds for their servicing or by
established and broad-based access to the market for refinancing,
or both. Loans bearing the designation MIG 2 are of high
quality, with margins of protection ample although not so large
as in the preceding group. A short-term issue having a demand
feature (i.e., payment relying on external liquidity and usually
payable on demand rather than fixed maturity dates) is
differentiated by Moody's with the use of the Symbol VMIG,
instead of MIG.
Moody's also provides credit ratings for tax exempt
commercial paper. These are promissory obligations (1) not
having an original maturity in excess of nine months, and (2)
backed by commercial banks. Notes bearing the designation P-1
have a superior capacity for repayment. Notes bearing the
designation P-2 have a strong capacity for repayment.
Description of Standard & Poor's Corporation's
municipal and corporate bond ratings:
AAA - Bonds rated AAA have the highest rating assigned
by S&P to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the highest rated
issues only in small degree.
A - Bonds rated A have a strong capacity to pay
interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances
and economic conditions than bonds in the highest rated
categories.
BBB - Bonds rated BBB are regarded as having an
adequate capacity to pay interest and repay principal. Whereas
they normally exhibit adequate protection parameters, adverse
economic condition or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for bonds in this category than for bonds in higher rated
categories.
BB, B, CC, CCC - Bonds rated BB, B, CC, CCC are
regarded, on balance, as predominantly speculative with respect
to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the
lower degree of speculation and CCC the highest degree of
speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
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C - Bonds rated C are income bonds on which no interest
is being paid.
D - Bonds rated D are in default, and payment of
interest and/or repayment of principal is in arrears.
S&P's top ratings for municipal notes issued after
July 29, 1984 are SP-1 and SP-2. The designation SP-1 indicates
a very strong capacity to pay principal and interest. A "+" is
added for those issues determined to possess overwhelming safety
characteristics. An "SP-2" designation indicates a satisfactory
capacity to pay principal and interest.
Unrated Bonds. Bonds which are unrated expose the
investor to risks with respect to the issuer's capacity to pay
interest and principal which are similar to the risks of lower-
rated obligations. The safety of an investment in an unrated
obligation, therefore, is more reliant as a general proposition
on an investment advisor's judgment, analysis and experience than
an investment in a higher rated obligation.
Commercial Paper Ratings
Description of Standard & Poor's Corporation's two highest
commercial paper ratings:
A - Issues assigned this highest rating are regarded as
having the greatest capacity for timely payment. Issues in this
category are delineated with the numbers 1, 2 and 3 to indicate
the relative degree of safety.
A-1 - This designation indicates that the degree of
safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety is
not as high as for issues designated A-1.
Description of Moody's Investors Service, Inc.'s two highest
commercial paper ratings:
Moody's employs the following designations, both judged
to be investment grade, to indicate the relative repayment
capacity of rated issues: Prime-1, highest quality; Prime-2,
higher quality.
Money Market Fund Ratings
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Description of Standard & Poor's Corporation's two highest money
market fund ratings:
AAAm - Safety is excellent. Superior capacity to
maintain principal value and limit exposure to loss.
AAm - Safety is very good. Strong capacity to maintain
principal value and limit exposure to loss.
Description of Moody's Investors Service, Inc.'s two highest
money market fund ratings:
Aaa - Money Market Funds rated Aaa have superior
quality assets and management.
Aa - Money Market Funds rated Aa have strong quality
assets and management.
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TABLE OF CONTENTS
Page
THE PORTFOLIOS AND THEIR OBJECTIVES........................................ 1
General Investment Objectives and Policies
of the U.S. Treasury Money Market Portfolio................................ 1
Domestic Prime Money Market Portfolio............................. 2
Global Money Market Portfolio..................................... 3
Tax Exempt Money Market Portfolio................................. 5
Limited Term Portfolio............................................ 6
Tax Exempt Limited Term Portfolio................................. 7
Investments and Investment Techniques
Common to Two or More Portfolios........................................... 8
Change in Ratings................................................. 8
Management Strategies............................................. 9
Municipal Obligations............................................. 10
Amortized Cost Valuation of Portfolio Securities.................. 12
Variable Rate Demand Instruments.................................. 13
When-Issued Securities............................................ 16
Stand-by Commitments.............................................. 17
Repurchase Agreements............................................. 19
Reverse Repurchase Agreements..................................... 20
Participation Interests........................................... 20
Bank Obligations, Certificates of Deposit and Bankers'
Acceptances.................................................... 21
Mortgage-Backed Securities........................................ 21
Foreign Securities................................................ 24
Privately Placed Securities....................................... 25
Hedging Instruments............................................... 25
Loan of Portfolio Securities...................................... 28
Puts for the Tax Exempt Portfolios................................ 28
INVESTMENT RESTRICTIONS.................................................... 29
MANAGEMENT OF THE FUND..................................................... 32
Directors and Officers............................................... 32
Investment Advisor................................................... 37
Fees.............................................................. 38
Expense Limitation................................................... 39
Administrator........................................................ 40
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT............................... 42
TAXES ..................................................................... 42
PURCHASE, REDEMPTION AND EXCHANGE.......................................... 49
DIVIDENDS AND DISTRIBUTIONS................................................ 50
NET ASSET VALUE............................................................ 50
COMPUTATION OF YIELD....................................................... 52
Tax Equivalent Yield................................................. 53
Computation of Total Return.......................................... 54
DESCRIPTION OF COMMON STOCK................................................ 55
DISTRIBUTION PLANS......................................................... 57
BROKERAGE AND PORTFOLIO TURNOVER........................................... 59
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Page
Brokerage............................................................ 59
Portfolio Turnover................................................... 60
COUNSEL AND INDEPENDENT AUDITORS........................................... 60
RATINGS OF MUNICIPAL AND CORPORATE OBLIGATIONS............................. 60
Unrated Bonds........................................................ 63
Commercial Paper Ratings............................................. 63
Description of Standard & Poor's Corporation's two highest
commercial paper ratings....................................... 63
Description of Moody's Investors Service, Inc.'s two highest
commercial paper ratings....................................... 63
Money Market Fund Ratings............................................ 63
Description of Standard & Poor's Corporation's two highest
money market fund ratings...................................... 64
Description of Moody's Investors Service, Inc.'s two highest
money market fund ratings...................................... 64
Financial Statements................................................Appendix A
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Directors
The Treasurer's Fund, Inc.
We have audited the accompanying statements of assets and
liabilities, including the portfolios of investments, of The Treasurer's Fund,
Inc. (comprising, respectively, the Domestic Prime Money Market, Tax Exempt
Money Market, and U.S. Treasury Money Market Portfolios) as of October 31,
1994, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1994 by correspondence with the custodian and others.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our operation.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting The Treasurer's
Fund, Inc. at October 31, 1994, the results of their operations for the year
then ended, the changes in their net assets for each of the two years in the
period then ended, and the financial highlights for each of the indicated
periods, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
December 28, 1994
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Domestic Prime Money Market Portfolio
Portfolio of Investments
October 31, 1994
<TABLE>
<CAPTION>
Yield to
Maturity
Credit at Time of Maturity Principal
Ratings* Purchase Date Amount
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Commercial Paper - 43.0%
American Trading & Production Corp., 4.90%................... A1/P1 4.989% 11/17/94 $ 7,000,000
Arbor National Mortgage Inc. (LOC Westdeutche
Landesbank), 5.10%........................................ A1+/P1 5.229 12/22/94 6,500,000
Concord Leasing Inc. (LOC Midland Bank PLC), 4.91%(b)........ A1/P1/F1 4.997 11/21/94 7,000,000
Deerfield Capital Corp. (LOC Sumitomo Bank, Ltd.), 5.05%..... A1/P1 5.142 11/04/94 6,500,000
Guardian Industries Corp., 4.80%............................. A1/P1 4.926 11/10/94 7,000,000
Louis Dreyfus Corp. (LOC Credit Agricole), 5.10%............. A1+/P1 5.192 11/09/94 7,000,000
Madison Funding Corp. (LOC Sumitomo Bank, Ltd.), 5.20%....... A1/P1 5.320 12/12/94 2,500,000
Madison Funding Corp. (LOC Sumitomo Bank, Ltd.), 5.08%....... A1/P1 5.189 12/12/94 4,500,000
Pitney Bowes Credit Corp., 4.78%............................. A1+/P1 4.909 11/29/94 7,500,000
TransAmerica Finance Corp., 5.17%(a)......................... A1/P1/D1 5.287 12/05/94 6,475,000
Total Commercial Paper......................................................................................................
Adjustable Rate Securities - 31.2%***
Federal Home Loan Bank 05/05/97(3)........................... NR/Aaa 4.338 11/05/94 10,000,000
Federal Home Loan Bank 09/29/98(4)........................... NR/Aaa 4.906 11/29/94 1,000,000
Federal Home Loan Bank 06/11/96(5)........................... NR/Aaa 4.700 12/11/94 5,000,000
Health Insurance Plan of Greater New York ACES,
Series 1990B-1, (07/01/16)**.............................. A1/P1 5.000 11/02/94 1,200,000
Small Business Administration 5.75%, due 05/25/18
Pool #502159(6)........................................... NR/NR 5.844 11/01/94 9,664,259
Small Business Administration 5.50%, due 09/25/13
Pool #502521(7)........................................... NR/NR 5.576 11/01/94 1,956,832
Small Business Administration 5.75%, due 02/25/18
Pool #502161(8)........................................... NR/NR 5.844 11/01/94 1,926,405
Small Business Administration 5.75%, due 04/25/18
Pool #502220(8)........................................... NR/NR 5.841 11/01/94 1,842,651
Small Business Administration 5.375%, due 01/25/19
Pool #502519(9)........................................... NR/NR 5.456 11/01/94 2,461,184
Small Business Administration 5.75%, due 06/25/19
Pool #502635(8)........................................... NR/NR 5.837 11/01/94 4,975,932
Student Loan Marketing Association Note (12/30/94)(10)....... NR/Aaa 5.000 11/02/94 5,000,000
Total Adjustable Rate Securities............................................................................................
U.S. Government Issues - 10.3%
U.S. Treasury Bills.......................................................... 3.853 02/09/95 5,000,000
U.S. Treasury Bills.......................................................... 4.353 03/09/95 5,000,000
U.S. Treasury Bills.......................................................... 5.057 03/09/95 5,000,000
Total U.S. Government Issues................................................................................................
Loan Participations - 4.9%
Welch Foods, Inc. 4.83% (Citibank)........................... NR/NR 4.830 11/07/94 7,000,000
Total Loan Participations...................................................................................................
</TABLE>
<TABLE>
<CAPTION>
Value
(note 1A)
---------------
<S> <C>
Commercial Paper - 43.0%
American Trading & Production Corp., 4.90%................... $6,984,755
Arbor National Mortgage Inc. (LOC Westdeutche
Landesbank), 5.10%........................................ 6,453,037
Concord Leasing Inc. (LOC Midland Bank PLC), 4.91%(b)........ 6,980,906
Deerfield Capital Corp. (LOC Sumitomo Bank, Ltd.), 5.05%..... 6,497,265
Guardian Industries Corp., 4.80%............................. 6,991,600
Louis Dreyfus Corp. (LOC Credit Agricole), 5.10%............. 6,992,067
Madison Funding Corp. (LOC Sumitomo Bank, Ltd.), 5.20%....... 2,485,194
Madison Funding Corp. (LOC Sumitomo Bank, Ltd.), 5.08%....... 4,473,965
Pitney Bowes Credit Corp., 4.78%............................. 7,472,117
TransAmerica Finance Corp., 5.17%(a)......................... 6,443,384
Total Commercial Paper......................................... 61,774,290
Adjustable Rate Securities - 31.2%***
Federal Home Loan Bank 05/05/97(3)........................... 10,000,000
Federal Home Loan Bank 09/29/98(4)........................... 1,000,000
Federal Home Loan Bank 06/11/96(5)........................... 5,000,000
Health Insurance Plan of Greater New York ACES,
Series 1990B-1, (07/01/16)**.............................. 1,200,000
Small Business Administration 5.75%, due 05/25/18
Pool #502159(6)........................................... 9,641,681
Small Business Administration 5.50%, due 09/25/13
Pool #502521(7)........................................... 1,956,832
Small Business Administration 5.75%, due 02/25/18
Pool #502161(8)........................................... 1,921,681
Small Business Administration 5.75%, due 04/25/18
Pool #502220(8)........................................... 1,839,405
Small Business Administration 5.375%, due 01/25/19
Pool #502519(9)........................................... 2,416,786
Small Business Administration 5.75%, due 06/25/19
Pool #502635(8)........................................... 4,969,811
Student Loan Marketing Association Note (12/30/94)(10)....... 5,002,201
Total Adjustable Rate Securities............................... 44,948,397
U.S. Government Issues - 10.3%
U.S. Treasury Bills............................................ 4,949,167
U.S. Treasury Bills............................................ 4,926,844
U.S. Treasury Bills............................................ 4,913,511
Total U.S. Government Issues................................... 14,789,522
Loan Participations - 4.9%
Welch Foods, Inc. 4.83% (Citibank)........................... 7,000,000
Total Loan Participations...................................... 7,000,000
</TABLE>
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Tax Exempt Money Market Portfolio
Portfolio of Investments
October 31, 1994
<TABLE>
<CAPTION>
Yield to
Maturity
Credit at Time of Maturity Principal
Ratings* Purchase Date Amount
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Repurchase Agreements - 10.6%
Bear Stearns & Co. dated 10/31/94............................................ 4.800% 11/01/94 $15,213,078
(Proceeds at maturity, $15,215,106)
collateralized by:
$28,905,000 U.S. Treasury STRIPS
11/15/02 vs. $15,518,516
Total Repurchase Agreements.................................................................................................
Total Investments - 100.0% (cost $143,725,287)+.............................................................................
</TABLE>
<TABLE>
<CAPTION>
Value
(note 1A)
---------------
<S> <C>
Repurchase Agreements - 10.6%
Bear Stearns & Co. dated 10/31/94.............................. $ 15,213,078
(Proceeds at maturity, $15,215,106)
collateralized by:
$28,905,000 U.S. Treasury STRIPS
11/15/02 vs. $15,518,516
Total Repurchase Agreements.................................... 15,213,078
Total Investments - 100.0% (cost $143,725,287)+................ $143,725,287
</TABLE>
*, **, ***, + See Footnotes to Portfolios
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Tax Exempt Money Market Portfolio
Portfolio of Investments
October 31, 1994
<TABLE>
<CAPTION>
Credit Current Maturity Principal
Ratings* Coupon Date Amount
---------------- --------- ---------- --------------
<S> <C> <C> <C> <C>
Short-Term Municipal Securities - 97.2%
Alabama - 2.2%
Huntsville Health Care Authority (MBIA) (LIQ AmSouth
Bank) (06/01/22)**................................... VMIG1/A1 3.350% 11/07/94 $ 900,000
Huntsville IDR TENR #66 (Avco Corporation Project)
Series 1982 (LOC Bankers Trust Co.) (11/01/99)**..... NR/Aaa 3.900 11/07/94 2,000,000
Total Alabama
Arizona - 5.7%
Arizona HFAR, (Pooled Loan Program), Series 1985
(FGIC) (10/01/15)**.................................. VMIG1/A1 3.450 11/07/94 500,000
Maricopa County Pollution Control Corp. PCR,
Adj.-Southern CA Edison-Paloverd-C (12/01/09)
(Industrial Revenue)****............................. A1/P1 3.250 11/15/94 1,100,000
Maricopa County Pollution Control Corp. PCR,
Adj.-Southern CA Edison-Paloverd-C (12/01/09)
(Industrial Revenue)****............................. A1/P1 3.000 11/28/94 2,700,000
Maricopa County Pollution Control Corp. PCR,
Adj.-Southern CA Edison-Paloverd-C (12/01/09)
(Industrial Revenue)****............................. A1/P1 3.400 01/23/95 1,400,000
Pima County IDA, Series 1982 A, (General Project)
(Tucson Electric Power Co.) (LOC Bank of America)
(07/01/22)**......................................... VMIG1/A1 3.500 11/07/94 2,000,000
Total Arizona
California - 6.5%
California State Revenue Anticipation Notes(b).......... MIG1/SP1/F1+ 3.750 12/21/94 3,100,000
Irvine Ranch Water District, Capital Improvement Project
General Obligation Unlimited (06/01/15)**............ VMIG1/A1+ 3.200 11/01/94 800,000
Napa Tax & Anticipation Notes........................... NR/SP1+ 3.000 11/09/94 2,000,000
Union City Multi-Family Revenue, (Sierra Green Project)
(LOC Sumitomo Trust) (10/01/07)**.................... NR/A1 3.250 11/07/94 2,800,000
Total California
</TABLE>
<TABLE>
<CAPTION>
Value
(note 1A)
---------------
<S> <C>
Short-Term Municipal Securities - 97.2%
Alabama - 2.2%
Huntsville Health Care Authority (MBIA) (LIQ AmSouth
Bank) (06/01/22)**................................... $ 900,000
Huntsville IDR TENR #66 (Avco Corporation Project)
Series 1982 (LOC Bankers Trust Co.) (11/01/99)**..... 2,000,000
Total Alabama 2,900,000
Arizona - 5.7%
Arizona HFAR, (Pooled Loan Program), Series 1985
(FGIC) (10/01/15)**.................................. 500,000
Maricopa County Pollution Control Corp. PCR,
Adj.-Southern CA Edison-Paloverd-C (12/01/09)
(Industrial Revenue)****............................. 1,100,000
Maricopa County Pollution Control Corp. PCR,
Adj.-Southern CA Edison-Paloverd-C (12/01/09)
(Industrial Revenue)****............................. 2,700,000
Maricopa County Pollution Control Corp. PCR,
Adj.-Southern CA Edison-Paloverd-C (12/01/09)
(Industrial Revenue)****............................. 1,400,000
Pima County IDA, Series 1982 A, (General Project)
(Tucson Electric Power Co.) (LOC Bank of America)
(07/01/22)**......................................... 2,000,000
Total Arizona 7,700,000
California - 6.5%
California State Revenue Anticipation Notes(b).......... 3,103,557
Irvine Ranch Water District, Capital Improvement Project
General Obligation Unlimited (06/01/15)**............ 800,000
Napa Tax & Anticipation Notes........................... 2,000,114
Union City Multi-Family Revenue, (Sierra Green Project)
(LOC Sumitomo Trust) (10/01/07)**.................... 2,800,000
Total California 8,703,671
</TABLE>
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Tax Exempt Money Market Portfolio
Portfolio of Investments
October 31, 1994
<TABLE>
<CAPTION>
Credit Current Maturity Principal
Ratings* Coupon Date Amount
---------------- --------- ---------- --------------
<S> <C> <C> <C> <C>
Short-Term Municipal Securities (continued)
Colorado - 6.4%
Adams County MFHR (Hungers Cove), Series A
(LOC Sumitomo Trust, confirmed by
Sumitomo Bank, Ltd.) (01/15/14)**.................... NR/A1 3.300% 11/07/94 $3,000,000
Colorado Student Obligation Board Authority
(LOC Fuji Bank of Japan, Ltd.) (09/01/99)**.......... VMIG1/NR 3.400 11/07/94 600,000
Platte River Power Authority Electric Revenue
Subordinated Lien Series S-1
(LOC Morgan Guaranty Trust) (06/01/18)****(b)........ VMIG1/A1/F1+ 2.900 11/03/94 2,000,000
Platte River Power Authority Electric Revenue
Subordinated Lien Series S-1
(LOC Morgan Guaranty Trust) (06/01/18)****(b)........ VMIG1/A1/F1+ 3.350 12/08/94 1,200,000
Platte River Power Authority Electric Revenue
Subordinated Lien Series S-1
(LOC Morgan Guaranty Trust) (06/01/18)****(b)........ VMIG1/A1/F1+ 3.400 01/05/95 1,800,000
Total Colorado
Connecticut - 1.5%
Connecticut Special Assessment Unemployment
Compensation Revenue (FGIC) (11/15/01)***............ VMIG1/A1+ 3.850 07/01/95 2,000,000
Florida - 8.9%
Broward County Housing Finance Authority MFHR
(12/01/10)**......................................... NR/A1 3.400 11/07/94 2,675,000
Dade County IDR Solid Waste -- Montenay Project
(LOC Banque Paribas) (12/01/10)**.................... NR/A1 3.500 11/07/94 1,000,000
Florida HFA Multi-Family Series 1986 B (Heritage Place II)
(GTY Lincoln National Bank) (12/01/08)**............. NR/A1 3.700 11/07/94 4,800,000
First Florida Government Finance Commission Revenue,
Series 1985A (BIG Insured & Sakura Bank, Ltd.)
(12/01/00)**......................................... NR/A1 3.300 11/07/94 3,427,000
Total Florida
Georgia - 8.6%
Athens, Clark County IDR (LOC Credit Lyonnais)
(03/01/08)****....................................... VMIG1/NR 3.350 11/03/94 3,700,000
Burke County Development Authority PCR (FGIC)
(SPA Industrial Bank of Japan, Ltd.) (01/01/16)**(b). VMIG1/A1+/F1 3.300 11/07/94 5,100,000
DeKalb County Development Authority (Joyce
International Project) (LOC Chemical Bank) (01/01/00)** NR/A1 3.250 11/07/94 1,000,000
DeKalb County Private Hospital Authority
(LOC Trust Company Bank) (03/01/24)**................ VMIG1/A1+ 3.250 11/07/94 1,700,000
Total Georgia
Illinois - 0.9%
Joliet Regional Port. District Industrial
Building Revenue (07/15/03)**........................ P1/NR 3.650 11/01/94 1,200,000
</TABLE>
<TABLE>
<CAPTION>
Value
(note 1A)
---------------
<S> <C>
Short-Term Municipal Securities (continued)
Colorado - 6.4%
Adams County MFHR (Hungers Cove), Series A
(LOC Sumitomo Trust, confirmed by
Sumitomo Bank, Ltd.) (01/15/14)**.................... $ 3,000,000
Colorado Student Obligation Board Authority
(LOC Fuji Bank of Japan, Ltd.) (09/01/99)**.......... 600,000
Platte River Power Authority Electric Revenue
Subordinated Lien Series S-1
(LOC Morgan Guaranty Trust) (06/01/18)****(b)........ 2,000,000
Platte River Power Authority Electric Revenue
Subordinated Lien Series S-1
(LOC Morgan Guaranty Trust) (06/01/18)****(b)........ 1,200,000
Platte River Power Authority Electric Revenue
Subordinated Lien Series S-1
(LOC Morgan Guaranty Trust) (06/01/18)****(b)........ 1,800,000
Total Colorado 8,600,000
Connecticut - 1.5%
Connecticut Special Assessment Unemployment
Compensation Revenue (FGIC) (11/15/01)***............ 2,000,000
Florida - 8.9%
Broward County Housing Finance Authority MFHR
(12/01/10)**......................................... 2,675,000
Dade County IDR Solid Waste -- Montenay Project
(LOC Banque Paribas) (12/01/10)**.................... 1,000,000
Florida HFA Multi-Family Series 1986 B (Heritage Place II)
(GTY Lincoln National Bank) (12/01/08)**............. 4,800,000
First Florida Government Finance Commission Revenue,
Series 1985A (BIG Insured & Sakura Bank, Ltd.)
(12/01/00)**......................................... 3,427,000
Total Florida 11,902,000
Georgia - 8.6%
Athens, Clark County IDR (LOC Credit Lyonnais)
(03/01/08)****....................................... 3,700,000
Burke County Development Authority PCR (FGIC)
(SPA Industrial Bank of Japan, Ltd.) (01/01/16)**(b). 5,100,000
DeKalb County Development Authority (Joyce
International Project) (LOC Chemical Bank) (01/01/00)** 1,000,000
DeKalb County Private Hospital Authority
(LOC Trust Company Bank) (03/01/24)**................ 1,700,000
Total Georgia 11,500,000
Illinois - 0.9%
Joliet Regional Port. District Industrial
Building Revenue (07/15/03)**........................ 1,200,000
</TABLE>
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Tax Exempt Money Market Portfolio
Portfolio of Investments (continued)
October 31, 1994
<TABLE>
<CAPTION>
Credit Current Maturity Principal
Ratings* Coupon Date Amount
---------------- --------- ---------- --------------
<S> <C> <C> <C> <C>
Short-Term Municipal Securities (continued)
Kentucky - 4.7%
Jefferson County PCR Series 1992-A (Louisvilla Gas &
Electric Company Project) (09/01/17)****............. VMIG1/A1+ 2.500% 11/02/94 $1,400,000
Kentucky Higher Education Student Loan Corp., Insured
Student Loan Revenue, Series E (LOC Sumitomo Bank,
Ltd. & Trust) (12/01/11)**........................... VMIG1/A1 3.600 11/07/94 2,000,000
Ohio County PCR (Big Rivers Electric Corporation)
(LOC Chemical Bank) (10/01/15)**..................... NR/NR 3.800 11/07/94 2,900,000
Total Kentucky
Maine - 3.8%
State of Maine General Obligation
Tax & Anticipation Notes............................. NR/SP1+ 4.500 06/30/95 5,000,000
Maryland - 1.0%
Montgomery County, Community Housing Revenue
(Fieldstone at Brandermill)
(IRR Surety Industrial Indemnity)
(LOC Perpetual America Bank) (09/01/07)**(b)......... NR/A1+/F1 3.300 11/07/94 1,350,000
Michigan - 1.5%
Michigan Higher Education Student Loan Authority
Series XII-B (AMBAC) (10/01/13)**.................... VMIG1/A1+ 3.400 11/07/94 2,000,000
Minnesota - 1.5%
Rochester Health Care Facilities Revenue, Series B,
Mayo Foundation/Mayo Medical Center (11/15/19)****... NR/A1+ 3.000 11/10/94 1,000,000
Rochester Health Care Facilities Revenue, Series B,
Mayo Foundation/Mayo Medical Center (11/15/19)****... NR/A1+ 3.300 01/11/95 1,000,000
Total Minnesota
Mississippi - 1.2%
Jackson County Water System General Obligation
Refunding Bonds, Series 1994 (11/01/24)***........... VMIG1/NR 3.600 02/01/95 1,640,000
Missouri - 0.7%
Kansas City IDA Series B3 (Owens-Illinois Project)
(LOC Industrial Bank of Japan, Ltd.) (12/31/08)**.... Aa3/NR 3.525 11/07/94 1,000,000
Nevada - 5.3%
Clark County Airport Refunding Series 1993-A
(MBIA) (07/01/12)**.................................. VMIG1/A1+ 3.300 11/07/94 6,100,000
Nevada Department of Commerce IDRB,
(Marshmallow Lane Partners)
(LOC Credit Commercial de France)
(04/01/09)**......................................... VMIG1/NR 3.800 11/07/94 1,000,000
Total Nevada
</TABLE>
<TABLE>
<CAPTION>
Value
(note 1A)
---------------
<S> <C>
Short-Term Municipal Securities (continued)
Kentucky - 4.7%
Jefferson County PCR Series 1992-A (Louisvilla Gas &
Electric Company Project) (09/01/17)****............. $1,400,000
Kentucky Higher Education Student Loan Corp., Insured
Student Loan Revenue, Series E (LOC Sumitomo Bank,
Ltd. & Trust) (12/01/11)**........................... 2,000,000
Ohio County PCR (Big Rivers Electric Corporation)
(LOC Chemical Bank) (10/01/15)**..................... 2,900,000
Total Kentucky 6,300,000
Maine - 3.8%
State of Maine General Obligation
Tax & Anticipation Notes............................. 5,025,457
Maryland - 1.0%
Montgomery County, Community Housing Revenue
(Fieldstone at Brandermill)
(IRR Surety Industrial Indemnity)
(LOC Perpetual America Bank) (09/01/07)**(b)......... 1,350,000
Michigan - 1.5%
Michigan Higher Education Student Loan Authority
Series XII-B (AMBAC) (10/01/13)**.................... 2,000,000
Minnesota - 1.5%
Rochester Health Care Facilities Revenue, Series B,
Mayo Foundation/Mayo Medical Center (11/15/19)****... 1,000,000
Rochester Health Care Facilities Revenue, Series B,
Mayo Foundation/Mayo Medical Center (11/15/19)****... 1,000,000
Total Minnesota 2,000,000
Mississippi - 1.2%
Jackson County Water System General Obligation
Refunding Bonds, Series 1994 (11/01/24)***........... 1,640,000
Missouri - 0.7%
Kansas City IDA Series B3 (Owens-Illinois Project)
(LOC Industrial Bank of Japan, Ltd.) (12/31/08)**.... 1,000,000
Nevada - 5.3%
Clark County Airport Refunding Series 1993-A
(MBIA) (07/01/12)**.................................. 6,100,000
Nevada Department of Commerce IDRB,
(Marshmallow Lane Partners)
(LOC Credit Commercial de France)
(04/01/09)**......................................... 1,000,000
Total Nevada 7,100,000
</TABLE>
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Tax Exempt Money Market Portfolio
Portfolio of Investments (continued)
October 31, 1994
<TABLE>
<CAPTION>
Credit Current Maturity Principal
Ratings* Coupon Date Amount
---------------- --------- ---------- --------------
<S> <C> <C> <C> <C>
Short-Term Municipal Securities (continued)
New York - 2.4%
New York City Tax & Anticipation Notes.................. MIGI/SP1+ 4.250% 02/15/95 $3,095,000
New York City Municipal Water Finance Authority, Water
& Sewage System Revenue, Series C (06/15/22)**....... VMIG1/Aaa 3.550 11/01/94 100,000
Total New York
North Carolina - 4.0%
Charlotte Airport Refunding Revenue Bonds
Series 1993 A (07/01/16)**........................... VMIG1/A1+ 3.300 11/07/94 1,400,000
Lenoir County PCR TENR #60, Series 1983
(Texasgulf, Inc. Project)
(LOC Bankers Trust Co.) (12/01/03)**................. Aa1/NR 3.650 11/07/94 1,000,000
North Carolina Eastern Municipal Power Agency,
Series 1988B (LOC Morgan Guaranty Trust &
Union Bank of Switzerland) (01/01/10)****............ NR/A1 2.900 11/09/94 3,000,000
Total North Carolina
Ohio - 0.7%
Ohio State Student Loan Funding Corp., Series A-2
(LOC National Westminster Bank PLC) (01/01/07)**..... VMIG1/NR 3.450 11/07/94 900,000
Oregon - 1.3%
Oregon Economic Development Revenue, (Tokyo Tanso
Project) (LOC Bank of Tokyo, Ltd.) (02/01/12)**...... NR/A1+ 3.375 11/07/94 1,800,000
Pennsylvania - 5.8%
Berks County, IDR (Sixth & Penn Street Project)
(LOC Meridian Bank) (06/01/03)**..................... VMIG1/NR 3.350 11/07/94 1,585,000
Delaware Valley Regional Financing (LOC Marine Midland
Bank, Hong Kong & Shanghai Bank) (08/01/16)**........ VMIG1/A1 3.400 11/07/94 2,700,000
Pennsylvania Energy Development Authority, Series 1986
Development Energy Revenue Bonds (Ebensburg
Project) (LOC Swiss Bank Corp.) (12/01/11)**......... VMIG1/NR 3.450 11/07/94 1,500,000
Philadelphia, General Obligation Bonds Series 1990
(LOC Fuji Bank, Ltd.) (08/01/20)****................. VMIG1/A1 3.250 12/12/94 2,000,000
Total Pennsylvania
Tennessee - 4.3%
Clarksville Public Authority, Series 1990 Pooled Financing
(MBIA) (SBPA Credit Suisse) (07/01/13)**............. VMIG1/A1+ 3.250 11/07/94 1,000,000
Knox County Industrial Development Board Industrial
Revenue, (Old Kingston Properties Project) (FGIC)
(LOC Mitsui Bank, Ltd.) (12/01/14)**................. VMIG1/A1+ 3.300 11/07/94 1,300,000
Knox County Industrial Development Board Industrial
Revenue, (Watkins Partners, Ltd. Project) (FGIC)
(LOC Mitsui Bank, Ltd.) (12/01/14)**................. VMIG1/A1+ 3.300 11/07/94 2,200,000
</TABLE>
<TABLE>
<CAPTION>
Value
(note 1A)
---------------
<S> <C>
Short-Term Municipal Securities (continued)
New York - 2.4%
New York City Tax & Anticipation Notes.................. $3,100,652
New York City Municipal Water Finance Authority, Water
& Sewage System Revenue, Series C (06/15/22)**....... 100,000
Total New York 3,200,652
North Carolina - 4.0%
Charlotte Airport Refunding Revenue Bonds
Series 1993 A (07/01/16)**........................... 1,400,000
Lenoir County PCR TENR #60, Series 1983
(Texasgulf, Inc. Project)
(LOC Bankers Trust Co.) (12/01/03)**................. 1,000,000
North Carolina Eastern Municipal Power Agency,
Series 1988B (LOC Morgan Guaranty Trust &
Union Bank of Switzerland) (01/01/10)****............ 3,000,000
Total North Carolina 5,400,000
Ohio - 0.7%
Ohio State Student Loan Funding Corp., Series A-2
(LOC National Westminster Bank PLC) (01/01/07)**..... 900,000
Oregon - 1.3%
Oregon Economic Development Revenue, (Tokyo Tanso
Project) (LOC Bank of Tokyo, Ltd.) (02/01/12)**...... 1,800,000
Pennsylvania - 5.8%
Berks County, IDR (Sixth & Penn Street Project)
(LOC Meridian Bank) (06/01/03)**..................... 1,585,000
Delaware Valley Regional Financing (LOC Marine Midland
Bank, Hong Kong & Shanghai Bank) (08/01/16)**........ 2,700,000
Pennsylvania Energy Development Authority, Series 1986
Development Energy Revenue Bonds (Ebensburg
Project) (LOC Swiss Bank Corp.) (12/01/11)**......... 1,500,000
Philadelphia, General Obligation Bonds Series 1990
(LOC Fuji Bank, Ltd.) (08/01/20)****................. 2,000,000
Total Pennsylvania 7,785,000
Tennessee - 4.3%
Clarksville Public Authority, Series 1990 Pooled Financing
(MBIA) (SBPA Credit Suisse) (07/01/13)**............. 1,000,000
Knox County Industrial Development Board Industrial
Revenue, (Old Kingston Properties Project) (FGIC)
(LOC Mitsui Bank, Ltd.) (12/01/14)**................. 1,300,000
Knox County Industrial Development Board Industrial
Revenue, (Watkins Partners, Ltd. Project) (FGIC)
(LOC Mitsui Bank, Ltd.) (12/01/14)**................. 2,200,000
</TABLE>
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Tax Exempt Money Market Portfolio
Portfolio of Investments (continued)
October 31, 1994
<TABLE>
<CAPTION>
Credit Current Maturity Principal
Ratings* Coupon Date Amount
---------------- --------- ---------- --------------
<S> <C> <C> <C> <C>
Knox County Industrial Development Board Industrial
Revenue, (Middlebrook Properties Project) (FGIC)
(LOC Mitsui Bank, Ltd.) (12/01/14)**................. VMIG1/A1+ 3.300 11/07/94 1,300,000
Total Tennessee
Short-Term Municipal Securities (continued)
Texas - 12.0%
Bexar County HFC, Series 1984 A (Altamonte Project)
(Surety: Industrial Indemnity) (11/01/06)**.......... NR/A1 3.700% 11/07/94 $3,100,000
Brazos Higher Education Authority Inc., Student Loan
Revenue, Series B-1 (LOC Student Loan Marketing
Association) (06/01/23)***........................... VMIG1/NR 3.800 06/01/95 1,500,000
Brazos River Harbor Navigation District, Series 1987B
(Dow Chemical Co. Project) (09/01/00)****............ P1/NR 3.250 11/22/94 2,100,000
Brazos River Harbor Navigation District, Series 1987B
(Dow Chemical Co. Project) (09/01/00)****............ P1/NR 3.250 12/06/94 1,100,000
Greater East Texas Higher Education Authority, Inc.
Student Loan Revenue Bonds (05/01/28)***............. VMIG1/A1+ 2.750 02/01/95 2,000,000
Harris County HFC MFHR (Idlewood Park)
(GTD New England Mutual Life) (06/01/05)**........... NR/A1+ 3.700 11/07/94 2,750,000
Panhandle Plains Higher Education Student Loan Revenue
Series A (LOC Student Loan Marketing Assoc.)
(06/01/23)**......................................... VMIG1/NR 3.350 11/07/94 1,000,000
San Antonio Housing Finance Corp. (LOC Swiss Bank)
(05/01/20)**......................................... NR/A1+ 3.450 11/07/94 2,500,000
Total Texas
Utah - 3.0%
Tooele County Hazardous Waste Treatment Revenue
Updates Union Pac/USPCI - A IDR (11/01/26)****....... VMIG1/A1 3.650 01/17/95 4,000,000
Virginia - 1.5%
Virginia Education Loan Authority, Student Loan Revenue
Series 1994E (09/01/08)***........................... VMIG1/Aaa 4.100 08/24/95 2,000,000
Wyoming - 1.8%
Lincoln County PCR Series 1991, (Pacific Corp. Project),
(LOC Union Bank of Switzerland) (01/01/16)****....... VMIG1/A1+ 3.350 01/19/95 2,400,000
Total Investments - 97.2% (cost $130,256,780)+...............................................................................
</TABLE>
<TABLE>
<CAPTION>
Value
(note 1A)
---------------
<S> <C>
Knox County Industrial Development Board Industrial
Revenue, (Middlebrook Properties Project) (FGIC)
(LOC Mitsui Bank, Ltd.) (12/01/14)**................. 1,300,000
Total Tennessee 5,800,000
Short-Term Municipal Securities (continued)
Texas - 12.0%
Bexar County HFC, Series 1984 A (Altamonte Project)
(Surety: Industrial Indemnity) (11/01/06)**.......... $3,100,000
Brazos Higher Education Authority Inc., Student Loan
Revenue, Series B-1 (LOC Student Loan Marketing
Association) (06/01/23)***........................... 1,500,000
Brazos River Harbor Navigation District, Series 1987B
(Dow Chemical Co. Project) (09/01/00)****............ 2,100,000
Brazos River Harbor Navigation District, Series 1987B
(Dow Chemical Co. Project) (09/01/00)****............ 1,100,000
Greater East Texas Higher Education Authority, Inc.
Student Loan Revenue Bonds (05/01/28)***............. 2,000,000
Harris County HFC MFHR (Idlewood Park)
(GTD New England Mutual Life) (06/01/05)**........... 2,750,000
Panhandle Plains Higher Education Student Loan Revenue
Series A (LOC Student Loan Marketing Assoc.)
(06/01/23)**......................................... 1,000,000
San Antonio Housing Finance Corp. (LOC Swiss Bank)
(05/01/20)**......................................... 2,500,000
Total Texas 16,050,000
Utah - 3.0%
Tooele County Hazardous Waste Treatment Revenue
Updates Union Pac/USPCI - A IDR (11/01/26)****....... 4,000,000
Virginia - 1.5%
Virginia Education Loan Authority, Student Loan Revenue
Series 1994E (09/01/08)***........................... 2,000,000
Wyoming - 1.8%
Lincoln County PCR Series 1991, (Pacific Corp. Project),
(LOC Union Bank of Switzerland) (01/01/16)****....... 2,400,000
Total Investments - 97.2% (cost $130,256,780)+................. $130,256,780
</TABLE>
*, **, ***, + See Footnotes to Portfolios
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
U.S. Treasury Money Market Portfolio
Portfolio of Investments
October 31, 1994
<TABLE>
<CAPTION>
Yield to
Maturity
at Time of Maturity Principal
Purchase Date Amount
-------------- ----------- -------------
<S> <C> <C> <C>
U.S. Government Issues - 72.1%
U.S. Treasury Bills.................................................... 4.632% 11/17/94 $25,000,000
U.S. Treasury Bills.................................................... 4.683 12/08/94 25,000,000
U.S. Treasury Bills++.................................................. 4.651 12/15/94 20,000,000
U.S. Treasury Bills.................................................... 4.928 03/02/95 5,000,000
U.S. Treasury Notes, 6.000%............................................ 4.865 11/15/94 25,000,000
Total U.S. Government Issues................................................................................................
Repurchase Agreements - 27.6%
Nomura Securities International Inc. dated 10/31/94.................... 4.720 11/01/94 23,114,277
(Proceeds at maturity $23,114,277)
collateralized by:
$23,085,000 U.S. Treasury Notes 7.87%, 04/15/98 vs. $23,480,905
Union Bank of Switzerland dated 10/31/94............................... 4.770 11/01/94 15,000,000
(Proceeds at maturity $15,001,988)
collateralized by:
$15,530,000 U.S. Treasury Notes 7.00%, 04/15/99 vs. $15,334,998
Total Repurchase Agreements.................................................................................................
Total Investments - 99.7% (cost $137,761,663)+..............................................................................
</TABLE>
<TABLE>
<CAPTION>
Value
(note 1A)
--------------
<S> <C>
U.S. Government Issues - 72.1%
U.S. Treasury Bills.................................................... $ 24,949,444
U.S. Treasury Bills.................................................... 24,881,806
U.S. Treasury Bills++.................................................. 19,888,533
U.S. Treasury Bills.................................................... 4,918,997
U.S. Treasury Notes, 6.000%............................................ 25,011,636
Total U.S. Government Issues............................................ 99,650,416
Repurchase Agreements - 27.6%
Nomura Securities International Inc. dated 10/31/94.................... 23,111,247
(Proceeds at maturity $23,114,277)
collateralized by:
$23,085,000 U.S. Treasury Notes 7.87%, 04/15/98 vs. $23,480,905
Union Bank of Switzerland dated 10/31/94............................... 15,000,000
(Proceeds at maturity $15,001,988)
collateralized by:
$15,530,000 U.S. Treasury Notes 7.00%, 04/15/99 vs. $15,334,998
Total Repurchase Agreements............................................. 38,111,247
Total Investments - 99.7% (cost $137,761,663)+.......................... $137,761,663
</TABLE>
+ See Footnotes to Portfolios
++ Securities on loan to Bear Stearns & Co.; collateralized by U.S.
Government securities at a market value of $23,006,358 as of
October 31, 1994
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Footnotes to Portfolios
*Credit Ratings given by Standard and Poor's Corporation & Moody's Investors
Service Inc. (unaudited)
<TABLE>
<CAPTION>
Standard & Poor's Moody's
----------------- ------------
<S> <C> <C>
A1 P1 Instrument of the highest quality.
AAA Aaa Instrument judged to be of the best quality and carrying the smallest amount
of investment risk.
AA Aa Instrument judged to be of high quality by all standards.
SP1 MIG1/VMIG1 Instrument judged to be of the best quality with strong protection.
SP2 MIG2/VMIG2 Instrument judged to be of high quality with ample protection.
NR NR Not Rated. In the opinion of the Investment Advisor, instrument judged
to be of comparable investment quality to rated securities which may be
purchased by the Portfolios.
</TABLE>
(a) Rated D1 by Duff & Phelps, Inc. (highest quality). (unaudited)
(b) Rated F1 by Fitch Investors Service, Inc. (highest quality). (unaudited)
Items which possess the strongest investment attributes of their category
are given that letter rating followed by a number. Duff & Phelps, Inc., Fitch
Investors Service, Inc. and Standard & Poor's ratings may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
U.S. Government Issues have an assumed rating of AAA/Aaa.
<TABLE>
<CAPTION>
Abbreviations used in this statement:
<S> <C>
ACES........................................... Adjustable Convertible Extendable Securities
AMBAC.......................................... Insured as to principal and interest by the American Municipal Bond Assurance
Corp.
BIG............................................ Bond Investors Guarantee
ETM............................................ Escrow to maturity, collateralized by U.S. Government Securities
FGIC........................................... Insured as to principal and interest by the Financial Guaranty Insurance Corp.
GTD............................................ Guaranteed (1)
GTY............................................ Guaranty (1)
HFA............................................ Housing Finance Agency
HFAR........................................... Health Facilities Authority Revenue
HFC............................................ Housing Finance Corporation
IDA............................................ Industrial Development Authority
IDR............................................ Industrial Development Revenue
IDRB........................................... Industrial Development Revenue Bond
IRR............................................ Irrevocable (1)
LIQ............................................ Liquidity (1)
LOC............................................ Letter of Credit (1)
MBIA........................................... Insured as to principal and interest by the Municipal Bond Insurance
Association
MFHR........................................... Multi-Family Housing Revenue
PCR............................................ Pollution Control Revenue
SBPA........................................... Stand-by Purchase Agreement
STRIPS......................................... Prestripped zero coupon bond that is a direct obligation of the U.S. Treasury
SPA............................................ Securities Purchase Agreement
TENR........................................... Tax Exempt Note Rate (2)
</TABLE>
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Footnotes to Portfolios (continued)
(1) Institutions shown in parenthesis have entered into credit support
agreements with the issuer.
(2) Institutions shown in parenthesis are the issuers of the participation
interests of those specific holdings.
(3) Coupon resets monthly. The interest rate is based upon the Prime rate
plus 1.65% minus 1 month LIBOR.
(4) Coupon resets monthly. The interest rate is based upon the Prime rate
plus 2.03% minus 1 month LIBOR.
(5) Coupon resets quarterly. The interest rate is based upon the Prime rate
minus (.61 multiplied by 3 month LIBOR).
(6) Coupon resets quarterly. The interest rate is based upon the Prime rate
minus 2%.
(7) Coupon resets monthly. The interest rate is based upon the Prime rate
minus 2.25%.
(8) Coupon resets monthly. The interest rate is based upon the Prime rate
minus 2%.
(9) Coupon resets quarterly. The interest rate is based upon the Prime rate
minus 2.375%.
(10) Coupon resets weekly at the bond equivalent yield of the 3-month Treasury
Bill plus 30 basis points.
** Variable/Floating Rate Demand Note. "Maturity Date" shown is next
exercise date of demand feature and "Yield to Maturity at Time of
Purchase"/"Current Coupon" is the rate in effect on October 31, 1994.
*** "Maturity Date" shown is next coupon reset date and "Yield to Maturity at
Time of Purchase"/"Current Coupon" is the rate in effect on October 31,
1994.
**** Tax-Free Commercial Paper. Date in parenthesis is the final maturity of
an issue which has been remarketed in short-term interest periods ending
on date shown in maturity date column.
+ Cost basis for book and tax purposes is substantially the same.
Investment percentages shown are calculated as a percentage of net
assets.
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Statement of Assets and Liabilities
October 31, 1994
<TABLE>
<CAPTION>
Domestic Prime Tax Exempt
Money Market Money Market
Portfolio Portfolio
--------------- ---------------
<S> <C> <C>
ASSETS:
Investments, in securities at value (identified cost -- $143,725,287*,
$130,256,780, and $137,761,663*, respectively)........................ $143,725,287 $130,256,780
Cash 50,618 92,506
Interest receivable........................................................ 316,497 790,618
Receivable for securities sold............................................. -- 4,710,816
Receivable for fund shares sold............................................ -- --
Paydowns receivable........................................................ 48,974 --
Other assets............................................................... 1,575 1,575
Total assets........................................................... 144,142,951 135,852,295
LIABILITIES:
Dividend payable........................................................... 197,534 111,171
Payable for securities purchased........................................... -- 1,640,000
Payable for fund shares redeemed........................................... 61,712 16,175
Advisory fee payable (note 2).............................................. 37,529 35,366
Administrative services fee payable (note 2)............................... 12,509 11,789
Fund accounting and shareholder servicing fees payable (note 2)............ 13,689 14,320
Accrued expenses payable and other liabilities............................. 76,061 72,466
Total liabilities...................................................... 399,034 1,901,287
Net assets................................................................. $143,743,917 $133,951,008
NET ASSETS CONSIST OF:
Shares of beneficial interest outstanding (par value of $0.001 per share);
2,000,000,000 shares authorized per Portfolio (note 3)................ $ 143,744 $ 134,011
Additional paid-in capital................................................. 143,600,173 133,876,655
Undistributed net investment income........................................ -- 3,430
Accumulated net realized loss on securities................................ -- (63,088)
Net assets applicable to outstanding shares................................ $143,743,917 $133,951,008
Shares of beneficial interest outstanding.................................. 143,743,917 134,010,666
Net asset value per share outstanding...................................... $ 1.00 $ 1.00
</TABLE>
<TABLE>
<CAPTION>
U.S. Treasury
Money Market
Portfolio
-----------------
<S> <C>
ASSETS:
Investments, in securities at value (identified cost -- $143,725,287*,
$130,256,780, and $137,761,663*, respectively)........................ $137,761,663
Cash --
Interest receivable........................................................ 705,535
Receivable for securities sold............................................. --
Receivable for fund shares sold............................................ 1,960
Paydowns receivable........................................................ --
Other assets............................................................... 8,182
Total assets........................................................... 138,477,340
LIABILITIES:
Dividend payable........................................................... 182,176
Payable for securities purchased........................................... --
Payable for fund shares redeemed........................................... 5,049
Advisory fee payable (note 2).............................................. 36,517
Administrative services fee payable (note 2)............................... 12,183
Fund accounting and shareholder servicing fees payable (note 2)............ 9,881
Accrued expenses payable and other liabilities............................. 26,772
Total liabilities...................................................... 272,578
Net assets................................................................. $138,204,762
NET ASSETS CONSIST OF:
Shares of beneficial interest outstanding (par value of $0.001 per share);
2,000,000,000 shares authorized per Portfolio (note 3)................ $ 138,205
Additional paid-in capital................................................. 138,066,557
Undistributed net investment income........................................ --
Accumulated net realized loss on securities................................ --
Net assets applicable to outstanding shares................................ $138,204,762
Shares of beneficial interest outstanding.................................. 138,204,762
Net asset value per share outstanding...................................... $ 1.00
</TABLE>
* Includes Repurchase Agreements of $15,213,078 and $38,111,247 for the
Domestic Prime Money Market Portfolio and U.S. Treasury Money Market
Portfolio, respectively.
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Statement of Operations
For the Year Ended October 31, 1994
<TABLE>
<CAPTION>
Domestic Prime Tax Exempt U.S. Treasury
Money Market Money Market Money Market
Portfolio Portfolio Portfolio
------------------ ------------------ ------------------
<S> <C> <C> <C>
Interest Income.................................................. $6,357,993 $3,978,890 $6,423,947
------------------ ------------------ ------------------
Expenses:
Advisory (note 2)............................................. 457,770 440,162 542,100
Administrative services (note 2).............................. 146,933 141,454 172,796
Interest (note 8)............................................. 201,906 -- --
Custody....................................................... 43,973 30,944 17,629
Shareholder services (note 2)................................. 32,277 30,164 11,800
Fund accounting (note 2)...................................... 31,558 34,897 32,114
Auditing...................................................... 25,000 25,000 25,000
Registration.................................................. 19,605 23,095 22,280
Reports to shareholders....................................... 14,645 11,501 5,172
Legal......................................................... 14,830 15,140 16,359
Directors' fees and expenses.................................. 10,492 10,492 10,492
Amortization of organization expense (note 1D)................ -- -- 8,665
Miscellaneous................................................. 36,962 26,997 18,808
------------------ ------------------ ------------------
1,035,951 789,846 883,215
Less-- Fund expenses waived by Administrator (Note 2)............ (8,014) (7,417) (2,313)
------------------ ------------------ ------------------
Total expenses................................................... 1,027,937 782,429 880,902
------------------ ------------------ ------------------
Net investment income............................................ 5,330,056 3,196,461 5,543,045
Net realized gain (loss) on securities........................... 9,118 (1,391) 32,925
------------------ ------------------ ------------------
Net increase in net assets resulting from operations............. $5,339,174 $3,195,070 $5,575,970
------------------ ------------------ ------------------
------------------ ------------------ ------------------
</TABLE>
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Domestic Prime Tax Exempt
Money Market Portfolio Money Market Portfolio
------------------------------ -------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1994 1993 1994 1993
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income.................... $ 5,330,056 $ 4,283,168 $ 3,196,461 $ 2,227,482
Net realized gain (loss) on securities... 9,118 38,532 (1,391) (2,039)
-------------- -------------- --------------- --------------
Net increase in net assets resulting
from operations........................ 5,339,174 4,321,700 3,195,070 2,225,443
-------------- -------------- --------------- --------------
Distributions to shareholders from:
Net investment income (note 1C).......... (5,330,056) (4,283,168) (3,195,070) (2,225,443)
Net realized gain on securities.......... (9,118) (38,532) -- --
-------------- -------------- --------------- --------------
Total distributions paid to
shareholders............................. (5,339,174) (4,321,700) (3,195,070) (2,225,443)
-------------- -------------- --------------- --------------
Net increase (decrease) in net assets
from capital share transactions (note 3).. (1,276,595) (24,336,661) 16,199,684 22,000,460
-------------- -------------- --------------- --------------
Total increase (decrease) in net assets..... (1,276,595) (24,336,661) 16,199,684 22,000,460
Net Assets
Beginning of period...................... 145,020,512 169,357,173 117,751,324 95,750,864
-------------- -------------- --------------- --------------
End of period*........................... $143,743,917 $145,020,512 $133,951,008 $117,751,324
-------------- -------------- --------------- --------------
-------------- -------------- --------------- --------------
</TABLE>
<TABLE>
<CAPTION>
U.S. Treasury
Money Market Portfolio
-----------------------------
Year Ended Year Ended
October 31, October 31,
1994 1993
-------------- --------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income.................... $ 5,543,045 $ 5,734,763
Net realized gain (loss) on securities... 32,925 60,251
-------------- --------------
Net increase in net assets resulting
from operations........................ 5,575,970 5,795,014
-------------- --------------
Distributions to shareholders from:
Net investment income (note 1C).......... (5,543,045) (5,734,763)
Net realized gain on securities.......... (32,925) (60,251)
-------------- --------------
Total distributions paid to
shareholders............................. (5,575,970) (5,795,014)
-------------- --------------
Net increase (decrease) in net assets
from capital share transactions (note 3).. (85,866,292) (30,828,170)
-------------- --------------
Total increase (decrease) in net assets..... (85,866,292) (30,828,170)
Net Assets
Beginning of period...................... 224,071,054 254,899,224
-------------- --------------
End of period*........................... $138,204,762 $224,071,054
-------------- --------------
-------------- --------------
</TABLE>
* Accumulated net investment income for the Tax Exempt Money Market
Portfolio is $3,430 and $2,039 for 1994 and 1993, respectively.
See accompanying notes to financial statements
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Notes to Financial Statements
October 31, 1994
1. The Treasurer's Fund, Inc. (the "Fund") is an open-end, diversified
management investment company registered under the Investment Company Act
of 1940, as amended (the "Act"). The Fund currently consists of six
separately managed portfolios: U.S. Treasury Money Market Portfolio,
Domestic Prime Money Market Portfolio, Global Money Market Portfolio, Tax
Exempt Money Market Portfolio, Limited Term Portfolio and Tax Exempt
Limited Term Portfolio (collectively, the "Portfolios"). Of these, the
U.S. Treasury Money Market Portfolio, the Domestic Prime Money Market
Portfolio and the Tax Exempt Money Market Portfolio have commenced
operations. The Fund was incorporated in Maryland on August 17, 1987 and
until December 18, 1987, the commencement of operations of the Tax Exempt
Money Market Portfolio, had no operations other than the sale of 20,000
shares of capital stock in each of the Portfolios, at an aggregate cost
of $120,000, to an officer of the Fund, representing the initial capital
of the Fund. The Domestic Prime Money Market Portfolio began operations
on January 8, 1988; the U.S. Treasury Money Market Portfolio began
operations on July 25, 1990. The following is a summary of significant
accounting policies consistently followed by the Fund in preparation of
its financial statements:
(A) The Domestic Prime Money Market Portfolio, the Tax Exempt Money
Market Portfolio and the U.S. Treasury Money Market Portfolio value
all portfolio securities by the amortized cost method which
approximates market value in accordance with Rule 2a-7 under the
Investment Company Act of 1940, as amended.
(B) It is the Fund's policy to comply with the requirements of the
Internal Revenue Code (the "Code") applicable to regulated investment
companies and to distribute all of its "investment company taxable
income," as defined in the Code, and net capital gains, if any, to
its shareholders. Therefore, no Federal income tax provision is
required. The Fund intends to treat each Portfolio as a separate
entity taxable as a corporation for Federal income tax purposes and
to have each Portfolio qualify and elect to be taxed as a "regulated
investment company" under Subchapter M of the Internal Revenue Code.
(C) Net investment income, including short-term capital gains, is
declared as dividends daily and paid monthly; however, if an
investor's shares are redeemed during a month, accrued but unpaid
dividends are paid with the redemption proceeds.
Dividends are payable to shareholders of record at the time of
declaration.
(D) Costs incurred in connection with the organization of the Fund have
been deferred and are being amortized on a straight-line basis over
five years from the date of commencement of operations of each
Portfolio.
(E) Investment transactions are recorded on the trade date. Identified
cost of investments sold is used for both financial statement and
Federal income tax purposes. Interest income, including the
amortization of discount or premium, is recorded as earned.
When-issued securities are recorded on the date on which the priced
transaction confirmation is issued.
(F) Certain administrative expenses are common to, and allocated among,
the Portfolios. Such allocations are made on the basis of each
Portfolio's average net assets or other criteria directly affecting
the expenses.
2. The Fund retains Gabelli-O'Connor Fixed Income Mutual Funds Management
Co. ("Gabelli-O'Connor") to act as Investment Advisor and Furman Selz
Incorporated ("Furman Selz") to act as Administrator for the Fund.
Gabelli-O'Connor supervises all aspects of the Fund's operations and
provides investment advice and portfolio management services to the Fund.
Subject to the supervision of the Fund's Board of Directors, the Advisor
makes the Fund's day-to-day investment decisions, arranges for the
execution of portfolio transactions and generally manages the Fund's
investments. The Advisor also provides supervisory personnel who are
responsible for supervising the performance of administrative services,
accounting and related services, net asset value and yield calculations,
reports to and filings with regulatory authorities and services relating
to such functions. However, the Administrator provides personnel to
perform the operational components of such services.
Pursuant to the Administrative Services Agreement with each of the
Portfolios, Furman Selz provides all management and administrative
services necessary for the Fund, other than those provided by the
Advisor, subject to the supervision of the Fund's Board of Directors.
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Notes to Financial Statements (continued)
October 31, 1994
As compensation for their respective services, Gabelli-O'Connor and
Furman Selz are entitled to monthly fees with respect to each Portfolio.
Gabelli-O'Connor earns fees at the following annualized rates:
- ---------------------------------------------------------------------------
Average daily value of Gabelli-
net assets of each Portfolio O'Connor
- ---------------------------------------------------------------------------
U.S. Treasury Money Market Portfolio 0.30%
Domestic Prime Money Market Portfolio 0.30%
Money Market Plus Portfolio 0.30%
Tax Exempt Money Market Portfolio 0.30%
Limited Term Portfolio 0.45%
Tax Exempt Limited Term Portfolio 0.45%
- ---------------------------------------------------------------------------
For the services rendered to the Fund by the Administrator, the Fund pays
the Administrator a fee, computed daily and payable monthly, in
accordance with the following schedule: (i) 0.10% of the first $500
million of aggregate average daily net assets of the Fund, (ii) 0.065% of
the next $250 million of aggregate average daily net assets of the Fund,
(iii) 0.055% of the next $250 million of aggregate average daily net
assets of the Fund, and (iv) 0.050% of all aggregate average daily net
assets of the Fund over $1 billion.
Furman Selz was retained as Administrator for the GOC Fund, a no-load,
diversified management investment company for which Gabelli-O'Connor
acted as Investment Advisor. The GOC Fund was terminated on October 19,
1994.
The Administrator also provide the Fund with all accounting related
services. For the fund accounting services provided, the Administrator is
paid a fee of $2,500 plus out of pocket expenses, per Portfolio per
month.
For the year ended October 31, 1994, Gabelli-O'Connor was entitled to
fees of $457,770, $440,162 and $542,100, respectively, from the Domestic
Prime Money Market Portfolio, the Tax Exempt Money Market Portfolio and
the U.S. Treasury Money Market Portfolio. For fund accounting and
administrative servicing fees during this period, Furman Selz received
$31,558 and $146,933, respectively, from the Domestic Prime Money Market
Portfolio, $34,897 and $141,454, respectively, from the Tax Exempt Money
Market Portfolio and $32,114 and $172,796, respectively, from the U.S.
Treasury Money Market Portfolio.
Furman Selz acts as the Fund's transfer and dividend disbursing agent.
The Fund compensates Furman Selz for providing personnel and facilities
to perform transfer agency related services for the Fund at a rate
intended not to exceed the cost of providing such services. During the
year ended October 31, 1994, Furman Selz was entitled to and voluntarily
waived fees of $8,014 for the Domestic Prime Money Market Portfolio,
$7,417 for the Tax Exempt Money Market Portfolio and $2,313 for the U.S.
Treasury Money Market Portfolio.
The Fund has adopted a distribution and service plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940 for each
Portfolio of the Fund. There are no fees or expenses chargeable to the
Fund under the Plan and the Fund's Board of Directors has adopted the
Plan in case certain expenses of the Fund might be considered to
constitute indirect payment by the Fund of distribution expenses. GOC
Fund Distributors, Inc. (the "Distributor") serves as the exclusive
Distributor of the shares of each Portfolio pursuant to its Distribution
Agreement with the Fund.
The Advisor has agreed to reimburse each Portfolio for its expenses
(exclusive of interest, taxes, brokerage, and extraordinary expenses)
which in any year exceed the lesser of (i) 1.50% of the Portfolio's
average annual net assets or (ii) the limits on investment company
expenses prescribed by any state in which the Portfolio's shares are
qualified for sale. From time to time, the Advisor may voluntarily assume
certain expenses of any Portfolio of the Fund as noted above. No such
reimbursement was required during the fiscal year ended October 31, 1994,
for any of the Portfolios.
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Notes to Financial Statements (continued)
October 31, 1994
3. At October 31, 1994, there were twenty billion shares of capital stock,
having a par value of one tenth of one cent ($0.001) per share,
authorized. Each Portfolio has been allocated two billion shares of the
authorized capital stock. The balance of eight billion shares of capital
stock may be issued in an existing or newly created class by resolution
of the Board of Directors. Transactions in capital stock shares at $1.00
per share were as follows:
<TABLE>
<CAPTION>
Domestic Prime Tax Exempt
Money Market Portfolio Money Market Portfolio
-------------------------------- ---------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1994 1993 1994 1993
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Sold.......................... 650,211,087 584,941,132 447,120,392 354,056,280
Issued in reinvestment of
dividends................... 5,064,961 3,920,596 3,068,356 2,054,795
--------------- --------------- --------------- ----------------
655,276,048 588,861,728 450,188,748 356,111,075
Redeemed...................... (656,552,643) (613,198,389) (433,989,064) (334,110,615)
--------------- --------------- --------------- ----------------
Increase (decrease) in shares. (1,276,595) (24,336,661) 16,199,684 22,000,460
--------------- --------------- --------------- ----------------
--------------- --------------- --------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
U.S. Treasury
Money Market Portfolio
--------------------------------
Year Ended Year Ended
October 31, October 31,
1994 1993
--------------- ---------------
<S> <C> <C>
Sold.......................... 1,400,716,056 2,028,076,009
Issued in reinvestment of
dividends................... 5,457,529 5,384,595
--------------- ---------------
1,406,173,585 2,033,460,604
Redeemed...................... (1,492,039,877) (2,064,288,774)
--------------- ---------------
Increase (decrease) in shares. (85,866,292) (30,828,170)
--------------- ---------------
--------------- ---------------
</TABLE>
4. Each Portfolio may engage in repurchase agreements, with respect to any
security in which that Portfolio is authorized to invest, with member
banks of the Federal Reserve System and with broker-dealers who are
recognized as primary dealers in U.S. government securities by the
Federal Reserve Bank of New York whose creditworthiness has been reviewed
and found satisfactory by the Fund's Board of Directors. The Portfolios
will always receive securities as collateral whose market value,
including accrued interest, will be at least equal to 100% of the dollar
amount invested by the Portfolio in each agreement, and the Portfolio
will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer to the account of the custodian. If the
value of the underlying securities falls below the value of the
repurchase price plus accrued interest, the Fund will require the seller
to deposit additional collateral by the next business day. If the request
for additional collateral is not met, or the seller defaults on its
repurchase obligation, the Portfolios maintain the right to sell the
underlying securities at market value and may claim any resulting loss
against the seller.
5. In the pursuit of the Fund's minimum credit risk investment policy, each
Portfolio maintains a diversified portfolio of money market instruments,
each of which matures or resets to par in less than 397 days from the
date of purchase and is determined to represent minimal credit risk in
accordance with the policies and procedures approved by the Fund's
Directors. The ability of the issuer of the instruments to meet their
obligations may be affected by economic developments in a specific
industry, region or state.
6. At October 31, 1994, the Tax Exempt Money Market Portfolio had net
capital loss carryforwards for Federal income tax purposes of $64,597
with $1,391, $2,039, $7,802, $39,134, and $14,231, expiring in 2002,
2001, 1998, 1997 and 1996, respectively.
7. The Fund may lend its securities to broker-dealers and other
institutional investors. The Fund's policy is to receive collateral on
each loan equal at all times to the market value of the securities loan
plus accrued interest. The Fund may bear the risk of delay in receiving
additional collateral or in recovering the securities loaned or even a
loss of rights in the collateral should the borrower of the securities
fail financially. The Fund receives compensation for lending its
securities in the form of fees or through the reinvestment of collateral
of any cash received as collateral. The Fund also continues to receive
interest on the securities loaned, and any gain or loss in the market
price of the securities loaned that may occur during the term of the loan
will be for the account of the Fund.
8. The Portfolios are permitted to enter into reverse repurchase agreement
for liquidity purposes or when it is able to purchase other securities
which will produce more income than the cost of the agreement. The
Portfolios may enter into reverse repurchase agreements only with those
member banks of the Federal Reserve System and broker-dealers who are
recognized as primary dealers in U.S. government securities by the
Federal Reserve Bank of New York whose
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Notes to Financial Statements (continued)
October 31, 1994
creditworthiness has been reviewed and found satisfactory by the Fund's
Board of Directors. When engaging in reverse repurchase transactions, the
Portfolios will maintain, in a segregated account with its Custodian,
securities equal in value to those subject to the agreement. During the
year ended October 31, 1994, the Domestic Prime Money Market Portfolio
entered into reverse repurchase agreements and incurred interest expenses
of $201,906.
9. Subsequent to October 31, 1999, the Domestic Prime Money Market Portfolio
realized losses on the sale of securities in the amount of $262,913. Such
losses were reimbursed to the Fund by Gabelli-O'Connor. In addition,
Gabelli-O'Connor currently has undertaken, under certain circumstances,
to reimburse future realized losses, if any, on the sale of securities in
an amount which would maintain the Domestic Prime Money Market
Portfolio's net asset value at $1 per share.
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Financial Highlights:
Contained below is per share-operating performance data for a share of
beneficial interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from information provided in the Fund's financial
statements.
<TABLE>
<CAPTION>
Domestic Prime
Money Market Portfolio
------------------------------------------------------------------------------
Year Ended
------------------------------------------------------------------------------
October 31, October 31, October 31, October 31, October 31,
1994 1993 1992 1991 1990
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- ------- -------- --------
Investment Operations:
Investment income-- net.......................... 0.035 0.028 0.038 0.061 0.080
Net realized gain (loss) on investments.......... 0.000 0.000 0.000 0.001 0.000
-------- -------- -------- -------- --------
Total from Investment Operations.............. 0.035 0.028 0.038 0.062 0.080
-------- -------- -------- -------- --------
Distributions:
Dividends from investment income-- net........... (0.035) (0.028) (0.038) (0.061) (0.080)
Dividends from net realized gain on investments.. (0.000) (0.000) (0.000) (0.001) (0.000)
-------- -------- -------- -------- --------
Total Distributions........................... (0.035) (0.028) (0.038) (0.062) (0.080)
-------- -------- -------- -------- --------
Net asset value, end of year..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Investment Return............................. 3.56% 2.90% 3.82% 6.42% 8.26%
Ratios/Supplemental Data:
Ratio of operating expenses to average net
assets........................................ 0.54% 0.62% 0.54% 0.88% 1.04%
Ratio of interest expense to average net assets.. 0.13% -- -- 0.39% 0.59%
Ratio of net investment income to average net
assets........................................ 3.49% 2.82% 3.82% 6.12% 7.99%
Decrease reflected in above expense ratios due
to undertakings by the Advisor/Administrator.. 0.01% 0.00% 0.01% 0.06% 0.09%
Net Assets, end of year (in thousands)........... $143,744 $145,021 $169,357 $205,282 $155,732
</TABLE>
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Financial Highlights:
Contained below is per share-operating performance data for a share of
beneficial interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from information provided in the Fund's financial
statements.
<TABLE>
<CAPTION>
Tax Exempt
Money Market Portfolio
----------------------------------------------------------------------------
Year Ended
----------------------------------------------------------------------------
October 31, October 31, October 31, October 31, October 31,
1994 1993 1992 1991 1990
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- ------- -------- --------
Investment Operations:
Investment income-- net.......................... 0.022 0.021 0.031 0.047 0.058
Net realized gain (loss) on investments.......... 0.000 0.000 0.000 0.000 0.000
-------- -------- -------- -------- --------
Total from Investment Operations.............. 0.022 0.021 0.031 0.047 0.058
-------- -------- -------- -------- --------
Distributions:
Dividends from investment income-- net........... (0.022) (0.021 (0.031) (0.047) (0.058)
Dividends from net realized gain on investments.. (0.000) (0.000 (0.000) (0.000) (0.000)
-------- -------- -------- -------- --------
Total Distributions........................... (0.022) (0.021 (0.031) (0.047) (0.058)
-------- -------- -------- -------- --------
Net asset value, end of year..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total Investment Return............................. 2.21% 2.16% 3.19% 4.83% 5.94%
Ratios/Supplemental Data:
Ratio of expenses to average net assets.......... 0.53% 0.57% 0.58% 0.49% 0.45%
Ratio of net investment income to average net
assets........................................ 2.18% 2.15% 3.10% 4.71% 5.77%
Decrease reflected in above expense ratios due
to undertakings by the Advisor/Administrator.. 0.01% 0.00% 0.02% 0.09% 0.16%
Net Assets, end of year (in thousands)........... $133,951 $117,751 $95,751 $86,486 $89,620
</TABLE>
10112.0000 330470.1
<PAGE>
The Treasurer's Fund
Financial Highlights:
Contained below is per share-operating performance data for a share of
beneficial interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each year indicated. This
information has been derived from information provided in the Fund's financial
statements.
<TABLE>
<CAPTION>
U.S. Treasury
Money Market Portfolio
--------------------------------------------------------------------------------------
For the Period
July 25, 1990
(Commencement of
Operations) through
Year Ended October 31, 1990
-------------------------------------------------------------- ---------------------
October 31, October 31, October 31, October 31,
1994 1993 1992 1991
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year....... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- ------- -------- --------
Investment Operations:
Investment income-- net.................. 0.033 0.026 0.034 0.055 0.019
Net realized gain (loss) on investments.. 0.000 0.000 0.002 0.002 0.000
-------- -------- -------- -------- --------
Total from Investment Operations...... 0.033 0.026 0.036 0.057 0.019
-------- -------- -------- -------- --------
Distributions:
Dividends from investment income --
net................................... (0.033) (0.026) (0.034) (0.055) (0.019)
Dividends from net realized gain on
investments........................... (0.000) (0.000) (0.002) (0.002) (0.000)
-------- -------- -------- -------- --------
Total Distributions................... (0.033) (0.026) (0.036) (0.057) (0.019)
-------- -------- -------- -------- --------
Net asset value, end of year............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== =========
Total Investment Return..................... 3.31% 2.60% 3.68% 6.06% 1.82%**
Ratios/Supplemental Data:
Ratio of expenses to average net
assets................................ 0.49% 0.47% 0.45% 0.49% 0.45%*
Ratio of net investment income to
average net assets.................... 3.07% 2.55% 3.38% 5.50% 7.17%*
Decrease reflected in above expense
ratios due to undertakings by the
Advisor/Administrator................. 0.00% 0.00% 0.01% 0.03% 0.19%*
Net Assets, end of year (in thousands)... $138,205 $224,071 $254,899 $281,259 $130,337
</TABLE>
- ----------------
* Annualized
** Not Annualized
Federal Tax Status of Dividends (unaudited)
This information is provided to you to meet regulatory requirements and no
current action on your part is needed.
For the fiscal year ended October 31, 1994, dividends paid to you in cash or
reinvested in the amount of $0.035 per share for Domestic Prime Money Market
Portfolio are taxable as ordinary dividend income. None of this amount
qualifies for the dividend received deduction available to corporations. 12%
of the income was derived from obligations of the U.S. Treasury.
For the fiscal year October 31, 1994, dividends in the amount of $0.022 per
share for the Tax Exempt Money Market Portfolio are exempt from Federal
taxation. They may not be exempt from state or local taxation. You should
contact your tax adviser as to the state and local status of the dividend you
have received.
For the fiscal year ended October 31, 1994, dividends paid to you in cash or
reinvested in the amount of $0.033 per share for a U.S. Treasury Money Market
Portfolio are taxable as ordinary dividend income. None of this amount
qualifies for the dividend received deduction available to corporations. 100%
of the income was derived from obligations of the U.S. Treasury.
10112.0000 330470.1
