TREASURERS FUND INC /MD/, 497, 1996-02-05

TREASURERS FUND INC /MD/
497, 1996-02-05

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Registration No. 33-17604
Rule 497(e)

THE TREASURER'S FUND

19 Old Kings Highway South, Darien, Connecticut 06820-4526

Supplement to Prospectus 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

<PAGE>

PROSPECTUS March 1, 1995

The Treasurer's Fund

19 Old Kings Highway South, Darien, Connecticut 06820-4526

For information call

1-800-TSR-FUND/1-800-877-3863

- -------------------------------------------------------------------------------

The Treasurer's Fund is composed of six portfolios designed to meet the
short and intermediate term investment needs of corporate and institutional cash
managers. There are no sales loads or exchange or redemption fees associated
with the Fund.

U.S. Treasury Money Market Portfolio--seeks to maximize current income
and maintain liquidity and a stable net asset value of $1 per share by investing
in short term U.S. Treasury obligations. This Portfolio may also invest in
repurchase agreements and reverse repurchase agreements which are collateralized
by U.S. Treasury obligations. The shares of this Portfolio are rated "AAAm" by
Standard & Poor's Corporation and "Aaa" by Moody's Investors Service.

Domestic Prime Money Market Portfolio--seeks to maximize current income
and maintain liquidity and a stable net asset value of $1 per share by investing
in prime quality, domestic money market instruments.

Global Money Market Portfolio--seeks to maximize current income and
maintain liquidity and a stable net asset value of $1 per share by investing in
prime quality money market instruments of both domestic and foreign issuers.

Tax Exempt Money Market Portfolio--seeks to maximize current tax exempt
income and maintain liquidity and a stable net asset value of $1 per share by
investing in high quality money market instruments which are exempt from federal
income tax.

Limited Term Portfolio--seeks 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. Designed for investors who seek yields
greater than available from a portfolio of exclusively money market obligations.
The net asset value per share will fluctuate.

Tax Exempt Limited Term Portfolio--seeks 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. Designed for investors who seek tax exempt yields greater than
available from a portfolio of exclusively tax exempt money market obligations.
The net asset value per share will fluctuate.

329543.1

<PAGE>

This Prospectus sets forth concisely the information about each
Portfolio that a prospective investor ought to know before investing and it
should be retained for future reference. Additional information about each
Portfolio, including additional information concerning risk factors relating to
an investment in each Portfolio, has been filed with the Securities and Exchange
Commission in a Statement of Additional Information for the Fund, dated or
supplemented the date of this Prospectus and as supplemented from time to time.
This information is incorporated by reference and is available without charge
upon request from GOC Fund Distributors, Inc., 19 Old Kings Highway South,
Darien, Connecticut 06820-4526, Attention: The Treasurer's Fund
1-800-TSR-FUND/1-800-877-3863.

An investment in the Money Market Portfolios is neither insured nor
guaranteed by the U.S. Government. There can be no assurance that the
Portfolios' objectives will be achieved or that the Money Market Portfolios'
stable net asset value of $1 per share can be maintained.

- ------------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

- ------------------------------------------------------------------------------

329543.1

<PAGE>

TABLE OF CONTENTS

SUMMARY.................................................. 1

Table of Fees and Expenses............................... 5

Financial Highlights..................................... 5

U.S. TREASURY MONEY MARKET PORTFOLIO..................... 7

DOMESTIC PRIME MONEY MARKET PORTFOLIO.................... 9

GLOBAL MONEY MARKET PORTFOLIO............................ 12

TAX EXEMPT MONEY MARKET PORTFOLIO........................ 15

LIMITED TERM PORTFOLIO................................... 19

TAX EXEMPT LIMITED TERM PORTFOLIO........................ 21

ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS....... 24

INVESTMENT RESTRICTIONS.................................. 34

MANAGEMENT OF THE FUND................................... 36

PURCHASE OF SHARES....................................... 40

REDEMPTION OF SHARES..................................... 42

EXCHANGE OF SHARES....................................... 44

DIVIDENDS AND DISTRIBUTIONS.............................. 45

NET ASSET VALUE.......................................... 46

YIELD AND TOTAL RETURN INFORMATION....................... 47

DESCRIPTION OF COMMON STOCK.............................. 48

DISTRIBUTION PLAN........................................ 49

TAXES.................................................... 50

CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT............. 55

329543.1

<PAGE>

<TABLE>

The Treasurer's Fund Portfolios

SUMMARY
<CAPTION>

Maturity Representative* Quality Ratings**
Objectives Restrictions Investments Moody's S&P
--------------------------------------------------------------------------------------------------------------------------

U.S. Treasury Money Market Portfolio
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Composed of U.S. Treasury Maximum weighted U.S. Treasury obligations -- --
obligations only. Seeks to average maturity: 90 days
maintain a stable $1 net Maximum maturity of
asset value per share. individual securities: 397 days

Domestic Prime Money Market Portfolio
--------------------------------------------------------------------------------------------------------------------------
Composed of prime quality Maximum weighted U.S. Government obligations -- --
U.S. dollar denominated average maturity: 90 days Commercial paper P-1 A-1
money market obligations of Maximum maturity of Negotiable CDs -- --
domestic issuers only. individual securities: 397 days Bankers acceptances -- --
Seeks to maintain a stable Short term corporate obligationsAa or Aaa Aa or Aaa
$1 net asset value per share.

Global Money Market Portfolio
--------------------------------------------------------------------------------------------------------------------------
Composed of prime quality Maximum weighted U.S. Government obligations -- --
U.S. dollar denominated average maturity: 90 days Commercial paper P-1 A-1
money market obligations of Maximum maturity of Negotiable CDs -- --
domestic and foreign individual securities: 397 days Bankers acceptances -- --
issuers. Seeks to maintain a Eurodollar and Yankee CDs -- --
stable $1 net asset value per Short term corporate and Aa or Aaa Aa or Aaa
share. government obligations

Tax Exempt Money Market Portfolio
--------------------------------------------------------------------------------------------------------------------------
Composed of high quality Maximum weighted Municipal notes MIG-1 or SP-1 or
municipal securities exempt average maturity: 90 days MIG-2 SP-2
from federal income tax. Maximum maturity of Short term municipal bonds Aa or Aaa Aa or Aaa
Seeks to maintain a stable individual securities: 397 days Tax exempt commercial paper P-1 or P-2 A-1 or A-2
$1 net asset value per share. Variable and floating rate VMIG-1 or SP-1 or
demand notes VMIG-2 SP-2

Limited Term Portfolio
--------------------------------------------------------------------------------------------------------------------------
Composed of prime quality Maximum weighted U.S. Government obligations -- --
U.S. dollar denominated average maturity: 2 years Commercial paper P-1 A-1
securities. Seeks to obtain aMaximum maturity of Corporate notes, bonds and Aa or Aaa Aa or Aaa
current yield greater than individual securities: 3 years other obligations
that obtainable from the Asset-backed debt Aa or Aaa Aa or Aaa
Money Market Portfolios by Negotiable CDs -- --
actively managing securities Eurodollar and Yankee CDs -- --
in the short and intermediate Hedging instruments -- --
maturity ranges. Net asset Private placements -- --
value per share will
fluctuate.

Tax Exempt Limited Term Portfolio
--------------------------------------------------------------------------------------------------------------------------
Composed of municipal Maximum weighted Municipal notes MIG-1 or SP-1 or
securities exempt from average maturity: 3 years MIG-2 SP-2
federal income tax. Seeks to Maximum maturity of Intermediate term municipal A, Aa or A, Aa or
obtain a current yield individual securities: 5 years bonds Aaa Aaa
greater than that obtainable Tax exempt commercial paper P-1 or P-2 A-1 or A-2
from the Tax Exempt Variable and floating rate VMIG-1 or SP-1 or
Money Market Portfolio by demand notes VMIG-2 SP-2
actively managing securities Hedging instruments -- --
in the short and intermediate Private placements -- --
maturity ranges. Net asset
value per share will
fluctuate.
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

* In addition, each Portfolio may invest in repurchase
agreements and reverse repurchase agreements with member
banks of the Federal Reserve System and primary dealers in
U.S. Government Securities.

** Unrated securities may be purchased if they are determined
by the Fund's Board of Directors to be of comparable quality
to the permitted investments of the Portfolio. There is no
assurance that the Portfolios will achieve their objectives
or that the stable net asset value of $1 per share for the
Money Market Portfolios can be maintained.

329543.1
-1-

<PAGE>

The Treasurer's Fund

The Treasurer's Fund, Inc. (the "Fund") is a no-load, diversified,
open-end, management investment company, organized under Maryland law, that is
composed of six portfolios designed to meet the distinctive cash management
objectives of treasurers and financial officers of corporations and other
institutions.

The Fund offers a choice of four Money Market Portfolios -- three
taxable and the other tax exempt -- which seek to maintain stable net asset
values of $1 per share. There can be no assurance that the Money Market
Portfolios will be able to maintain stable net asset values of $1 per share. The
Fund also offers two Limited Term Portfolios -- one taxable and the other tax
exempt. The net asset value per share of the Limited Term Portfolios will
fluctuate.

An investment in the Portfolios of the Fund entails certain risks,
including, for certain Portfolios, risks associated with the purchase of
when-issued securities, repurchase agreements, reverse repurchase agreements,
puts and foreign securities, and with the lending of Portfolio securities, which
are further described under "Additional Investment Information and Risk Factors"
herein and "Risk Factors" in the Statement of Additional Information.

Investment Requirements

Minimum Initial Investment $100,000 per Portfolio

Subsequent Investments No minimum amount

Minimum Balance $50,000 per Portfolio

Investors may allocate their investment among the Portfolios at their
discretion and may change their allocation at any time, subject only to the
minimum initial investment required for each Portfolio. There are no fees for
exchanges among Portfolios.

Advisory Fee Expenses

The Fund will pay Gabelli-O'Connor Fixed Income Mutual Funds Management
Co., the Fund's investment advisor (the "Advisor"), a monthly advisory fee at
the annual rate of .30% of the average daily net assets of the Money Market
Portfolios and .45% of the average daily net assets of the Limited Term
Portfolios. Each Portfolio will also be responsible for payment of its expenses,
including administrator fees, custodian fees, transfer and dividend paying agent
fees, legal fees, auditing fees, directors' fees, the expense of issuing reports
to shareholders and other expenses of administering the Portfolio.

329543.1
-2-

<PAGE>

The Fund expects to achieve a significantly lower total expense ratio
than funds designed for individual investors because it:

o is designed specifically for corporate and institutional investors who
normally maintain high average account balances;

o requires a $100,000 minimum investment per Portfolio;

o imposes a $10,000 minimum on check writing privileges (available for
the Money Market Portfolios only).

Furthermore, there are no sales loads, exchange fees or redemption
fees. All distribution and promotional expenses payable pursuant to the
Portfolios' Rule 12b-1 Plans will be paid by the Advisor from its own resources
which include the advisory fee. Each Portfolio has adopted a "defensive" Rule
12b-1 Plan in case any Fund payments or expenses are deemed to be indirect
financing of distribution expenses. From time to time, Gabelli-O'Connor Fixed
Income Mutual Funds Management Co. 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.

Operational Benefits

The Fund's six Portfolios are specifically designed to meet the
distinctive cash management needs and objectives of treasurers and financial
officers of corporations and other institutions:

o diversification, without the cost and inconvenience of direct
investment in individual securities

o a comprehensive package of convenient services:

-- dedicated line (1-800-TSR-FUND/1-800-877-3863) direct to the
Advisor's shareholder service representatives for
shareholder inquiries and for placing purchase, redemption
or exchange instructions

-- free exchange among the Portfolios

-- checkwriting option, without cost (Money Market Portfolios
only)

-- custodial services, security safekeeping, record keeping

-- dividends, accrued daily and paid monthly, may be
automatically reinvested or wired to a designated bank
account

-- confirmation statement for each transaction

329543.1
-3-

<PAGE>

-- consolidated monthly statement for all six Portfolios

o liquidity:

-- telephone purchase orders for the four Money Market
Portfolios received before 12:00 noon New York time will
become effective and begin earning income that day provided
Federal Funds are received by the Fund's Custodian prior to
the close of business; redemptions made before 12:00 noon
New York time will be wired that day (but no dividend will
be earned that day);

-- telephone purchase orders for the two Limited Term
Portfolios received by 4:00 pm New York time will be
invested at that day's NAV and will begin earning income on
the next business day; redemptions made before 4:00 pm New
York time will be made at that day's NAV and wired the next
business day.

329543.1
-4-

<PAGE>

<TABLE>

Table of Fees and Expenses

Annual Fund Operating Expenses
(as a percentage of average net assets)
<CAPTION>
Domestic Prime Tax Exempt U.S. Treasury
Money Market Money Market Money Market
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Management Fees............................................ .30% .30% .30%
Other Operating Expenses................................... .24% .23% .19%
Interest Expense........................................... .13% .00% .00%
---- ---- ----
Total Fund Operating Expenses.............................. .67% .53% .49%
</TABLE>

Example:
You would pay the following expenses on a $1000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Domestic Prime Tax Exempt U.S. Treasury
Money Market Money Market Money Market
Portfolio Portfolio Portfolio
<C> <C> <C> <C>
1 Year..................................................... $ 7.00 $ 5.00 $ 5.00
3 Years.................................................... 21.00 17.00 16.00
5 Years.................................................... 37.00 30.00 27.00
10 Years................................................... 83.00 66.00 62.00
</TABLE>

The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in each Portfolio will bear
directly and indirectly. (For more complete descriptions of the various costs
and expenses, see "Management of the Fund."). The Example shown in the table
above should not be considered a representation of past or future expenses and
actual expenses may be greater or less than those shown. At this time, only the
U.S. Treasury Money Market, Domestic Prime Money Market and Tax Exempt Money
Market Portfolios of the Fund have been activated by the Advisor.

Financial Highlights

The following financial highlights of The Treasurer's Fund and the related
financial statements for 1994, 1993, 1992, 1991 and 1990 have been audited by
Ernst & Young LLP, Independent Auditors. Prior to 1990, the Financial Highlights
were audited by other auditors. This information should be read in conjunction
with the financial statements which appear in the Statement of Additional
Information.
<TABLE>
<CAPTION>

Domestic Prime
Money Market Portfolio
------------------------------------------------------------------------------------------------
January 8, 1988
(commencement
of
operations)
through
October 31,
Year Ended 1988
------------------------------------------------------------------------------------
October October October October October October
31, 31, 31, 31, 31, 31,
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of Period.......... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net Investment Income.... 0.035 0.028 0.038 0.061 0.080 0.090 0.057
Net Realized Gain on
Investments........... 0.000 0.000 0.000 0.001 0.000 0.000 0.000
------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations............ 0.035 0.028 0.038 0.062 0.080 0.090 0.057
------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from Net
Investment Income........ (0.035) (0.028) (0.038) (0.061) (0.080) (0.090) (0.057)
Dividends from Net Realized
Gain on Investments...... (0.000) (0.000) (0.000) (0.001) (0.000) (0.000) (0.000)
------ ------ ------ ------ ------ ------ ------
Total Distributions.......... (0.035) (0.028) (0.038) (0.062) (0.080) (0.090) (0.057)
------ ------ ------ ------ ------ ------ ------
Net Asset Value:
End of Period................ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
======
Total Return..................... 3.56% 2.90% 3.82% 6.42% 8.26% 9.29% 7.33%*
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands)........... $143,744 $145,021 $169,357 $205,282 $155,732 $185,068 $95,073
Ratio of Operating Expenses
to Average Net Assets**.. 0.54% 0.55% 0.54% 0.49% 0.45% 0.45% 0.45%
Ratio of Interest Expenses
to Average Net Assets.... 0.13% 0.07% - 0.39% 0.59% 0.08% --
Ratio of Net Investment Income
to Average Net Assets.... 3.49% 2.82% 3.82% 6.12% 7.99% 8.98% 7.33%*
Decrease reflected in above
expense ratios due to
undertakings by the
Advisor/Administrator.... 0.01% 0.00% 0.01% 0.06% 0.09% 0.16% 0.40%*
</TABLE>

- ---------------
* Annualized.
** Expenses exclusive of interest, net of reimbursement/waivers.

329543.1
-5-

<PAGE>

Tax Exempt
Money Market Portfolio
-------------------------------------------------------------------------------------------
December 18, 1987
(commencement
of
operations)
through
October 31,
Year Ended 1988
-----------------------------------------------------------------------------------
October October October October October October
31, 31, 31, 31, 31, 31,
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of Period................ $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net Investment Income.......... 0.022 0.021 0.031 0.047 0.058 0.061 0.045
Net Realized Gain on
Investments................. 0.000 0.000 0.000 0.000 0.000 0.000 --
------ ------ ------ ------ ------ ------ ---
Total From Investment
Operations.................. 0.022 0.021 0.031 0.047 0.058 0.061 0.045
------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from Net
Investment Income.............. (0.022) (0.021) (0.031) (0.047) (0.058) (0.061) (0.045)
Dividends from Net Realized
Gain on Investments............ (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) --
------ ------ ------ ------ ------ ------ ------
Total Distributions................ (0.022) (0.021) (0.031) (0.047) (0.058) (0.061) (0.045)
------ ------ ------ ------ ------ ------ ------
Net Asset Value:
End of Period...................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
======
Total Return........................... 2.21% 2.16% 3.19% 4.83% 5.94% 6.31% 5.19%*
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands)................. $133,951 $117,751 $95,751 $86,486 $89,620 $68,193 $57,561
Ratio of Operating Expenses
to Average Net Assets.......... 0.53% 0.57% 0.58% 0.49% 0.45% 0.45% 0.45%*
Ratio of Net Investment Income
to Average Net Assets.......... 2.18% 2.15% 3.10% 4.71% 5.77% 6.12% 5.20%*
Decrease reflected in above expense
ratios due to undertakings by the
Advisor/Administrator.......... 0.01% 0.00% 0.02% 0.09% 0.16% 0.27% 0.57%*
</TABLE>

- ---------------
* Annualized.

U.S. Treasury
Money Market Portfolio
---------------------------------------------------------------------------
July 25, 1990
(commencement
of
operations)
through
October 31,
Year Ended 1990
--------------------------------------------------------
October October October October
31, 31, 31, 31,
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value:
Beginning of Period................................ $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
Income from InvestmentOperations:
Net Investment Income.............................. 0.033 0.026 0.034 0.055 0.019
Net Realized Gain 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
------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Investment Income............... (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 Period...................................... $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ======= ======= ======
Total Return........................................... 3.31% 2.60% 3.68% 6.06% 1.82%**
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands)........... $138,205 $224,071 $254,899 $281,259 $130,337
Ratio of Operating 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 under-
takings by the Advisor/Administrator........... 0.00% 0.00% 0.01% 0.03% 0.19%*
</TABLE>

- ---------------
* Annualized.
** Not annualized.

329543.1
-6-

<PAGE>

U.S. TREASURY MONEY MARKET PORTFOLIO

Investment Objectives and Policies

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 and repurchase agreements that are collateralized by U.S. Treasury
obligations to enable it to employ the amortized cost method of valuation. The
Portfolio may also engage in reverse repurchase agreements that enable it to
employ the amortized cost method of valuation. The investment objectives stated
above are fundamental and may be changed only with the approval of a majority of
the outstanding shares of the Portfolio. 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 the
Portfolio are rated AAAm by Standard & Poor's Corporation ("S&P") and Aaa by
Moody's Investors Services Inc. ("Moody's").

PERMITTED INVESTMENTS:

United States Treasury Obligations -- obligations issued by the United
States Treasury. These obligations are backed by the full faith and credit of
the United States.

U.S. Treasury obligations include bills, notes and bonds, which principally
differ only in their interest rates, maturities and times of issuance. Interest
on U.S. Treasury obligations is specifically exempted from state and local
income taxes under federal law. While shareholders in the U.S. Treasury Money
Market Portfolio do not directly receive interest on U.S. Treasury obligations,
the dividends from the Portfolio are derived primarily from such interest.

States generally allow the character of the Portfolio's income to
pass-through to its shareholders, so that distributions from the Portfolio
derived from interest that would be exempt from state and local income taxes if
received directly by an individual taxpayer also will be exempt from such taxes
when earned by an individual shareholder through a distribution from the
Portfolio. The Portfolio may also invest 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. Interest income derived
from such repurchase agreements is not considered to be income derived from U.S
Treasury obligations and is not exempt from state and local income taxes. In
addition, some states require that, in order for the tax exempt character of the
Portfolio's interest from U.S. Treasury obligations to pass-through to its
shareholders, the Portfolio must maintain specified minimum levels of the
Portfolio's total assets in U.S. Treasury obligations. If the level of non-U.S.
Treasury obligations (including repurchase agreements) exceeds a state's limit
for this pass-through, then none of the Portfolio's interest income would be
exempt from state or local income tax in that state.

329543.1
-7-

<PAGE>

While the Portfolio does not specifically limit the amount of repurchase
agreements which the Portfolio can enter into (other than the requirement that
65% of the Portfolio's total assets be invested in U.S. Treasury obligations and
repurchase agreements collateralized by U.S. Treasury obligations), the
Portfolio will endeavor to maintain the levels necessary to preserve the
pass-through of the Portfolio's tax exempt interest income from U.S. Treasury
obligations.

Investors should recognize that the state and local income tax rules that
apply to the U.S. Treasury Money Market Portfolio and its shareholders may be
subject to change in the future and that such changes could have an adverse
impact on the Portfolio and its shareholders. Shareholders are urged to contact
their tax advisors regarding the state and local tax treatment of distributions
received from the U.S. Treasury Money Market Portfolio.

Interest income on U.S. Treasury obligations is not, however, exempt from
federal income tax. In addition, capital gains, if any, realized by the
Portfolio upon the sale of U.S. Treasury obligations is not exempt from federal
taxes or, generally, from state and local taxes.

The U.S. Treasury Money Market Portfolio may purchase securities on a
when-issued or delayed delivery basis and may enter into repurchase and reverse
repurchase agreements 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. In addition, the Portfolio
is permitted to lend its securities. For a discussion of these transactions, see
"Additional Investment Information and Risk Factors."

329543.1
-8-

<PAGE>

DOMESTIC PRIME MONEY MARKET PORTFOLIO

Investment Objectives and Policies

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 obligations of
domestic issuers which have effective maturities of 397 days or less. The
investment objectives stated above are fundamental and may be changed only with
the approval of a majority of the outstanding shares of the Portfolio. 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.

Permitted Investments:

United States Government Obligations -- obligations issued or guaranteed by
the United States Government or by its agencies or instrumentalities. These
obligations are backed by the full faith and credit of the United States, by the
credit of the issuing or guaranteeing agency or by the agency's right to borrow
from the U.S. Treasury. For further description of the government obligations in
which the Portfolio will invest, see "Additional Investment Information and Risk
Factors."

Bank Obligations -- 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. which are guaranteed as to principal and interest
by such banks.

Commercial Paper and Other Short Term Corporate Obligations -- commercial
paper and other short term domestic corporate obligations, including corporate
bonds, variable amount master demand notes and participations in corporate
loans, with maturities of 397 days or less. For further description of these
obligations, including the liquidity of participations in corporate loans, see
"Additional Investment Information and Risk Factors" herein and "Investments and
Investment Techniques Common to Two or More Portfolios" in the Statement of
Additional Information.

Quality Information. 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

329543.1
-9-

<PAGE>

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. While there
are several organizations that currently qualify as NRSROs, two examples of
NRSROs are S&P and Moody's. The two highest ratings by Moody's for long-term
debt securities are Aaa and Aa and by S&P are AAA and AA. The highest rating for
commercial paper is Prime-1 by Moody's and A-1 by S&P. For a more detailed
discussion of the quality requirements applicable to certificates of deposit,
bankers' acceptances and other bank obligations, see "Investments and Investment
Techniques Common to Two or More Portfolios" in the Statement of Additional
Information. These standards must be satisfied at the time an investment is
made. Subsequent to its purchase by the Portfolio, the quality of an investment
may cease to be rated or its rating may be reduced so that it ceases to qualify
as a First Tier Eligible Security. If this occurs, the Board of Directors of the
Fund shall reassess promptly whether the security presents minimal credit risks
and shall cause the Portfolio to take such action as the Board of Directors
determines is in the best interest of the Portfolio and its 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 investment under Rule 2a-7 or (3) is determined to no longer
present minimal credit risks, the Portfolio will dispose of the security absent
a determination by the Fund's Board of Directors that disposal of the security
would not be in the best interests of the Portfolio. 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 the
Portfolio's total assets, the Portfolio shall promptly notify the Securities and
Exchange Commission of such fact and of the actions that the Portfolio intends
to take in response to the situation.

The Domestic Prime Money Market Portfolio may purchase securities on a
when-issued or delayed delivery basis and may enter into repurchase and reverse
repurchase agreements 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. In

329543.1
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<PAGE>

addition, the Portfolio is permitted to lend its securities. For a discussion of
these transactions, see "Additional Investment Information and Risk Factors."

329543.1
-11-

<PAGE>

GLOBAL MONEY MARKET PORTFOLIO

Investment Objectives and Policies

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 the securities of issuers located in at
least three countries (including the United States). The securities invested in
by the Global Money Market Portfolio, described below, have effective maturities
of 397 days or less. The investment objectives stated above are fundamental and
may be changed only with the approval of a majority of the outstanding shares of
the Portfolio. 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.

PERMITTED INVESTMENTS:

United States Government Obligations -- obligations issued or guaranteed by
the United States Government or by its agencies or instrumentalities. These
obligations are backed by the full faith and credit of the United States, by the
credit of the issuing or guaranteeing agency or by the agency's right to borrow
from the U.S. Treasury. For further description of the government obligations in
which the Portfolio may invest, see "Additional Investment Information and Risk
Factors."

Bank Obligations -- 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 "Additional Investment
Information and Risk Factors" for further information on foreign investments.

Commercial Paper and Other Short Term Corporate Obligations -- commercial
paper and other short term domestic corporate obligations, including corporate
bonds, variable amount master demand notes and participations in corporate
loans, with maturities of 397 days or less; commercial paper and other short
term obligations issued by foreign corporations if the issuer is a direct parent
or subsidiary of a United States corporation, the obligation is United States
dollar denominated and is not subject to foreign withholding tax ("Euro
Commercial paper"); and commercial paper and other short term obligations issued
by foreign governments. For further description of all the obligations in the
Portfolio, including foreign

329543.1
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<PAGE>

investments and the liquidity of participations in corporate loans, see
"Additional Investment Information and Risk Factors" herein and "Investment
Objectives and Policies" in the Statement of Additional Information.

Quality Information. The Portfolio will only purchase high quality 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 categories by any two nationally recognized
statistical rating organizations ("NRSRO") or in such categories 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 rating categories and (iii) un-rated
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
issues, 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. While there are several organizations that currently
qualify as NRSROs, two examples of NRSROs are S&P and Moody's. The two highest
ratings by Moody's for long-term debt securities are Aaa and Aa and by S&P are
AAA and AA; the highest ratings for domestic and foreign commercial paper are
Prime-1 by Moody's and A-1 by S&P. For a more detailed discussion of quality
requirements applicable to certificates of deposit, bankers' acceptances and
other bank obligations, see "Investments and Investment Techniques Common to Two
or More Portfolios" in the Statement of Additional Information. Subsequent to
its purchase by the Portfolio, the quality of an investment may cease to be
rated or its rating may be reduced so that it ceases to qualify as a First Tier
Security. If this occurs, the Board of Directors of the Fund shall reassess
promptly whether the security presents minimal credit risks and shall cause the
Portfolio to take such action as the Board of Directors determines is in the
best interest of the Portfolio and its 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 action.

329543.1
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<PAGE>

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 the
Portfolio's total assets, the Portfolio shall promptly notify the Securities and
Exchange Commission of such fact and of the actions that the Portfolio intends
to take in response to the situation.

The Global Money Market Portfolio may also purchase securities on a
when-issued or delayed delivery basis and may enter into repurchase and reverse
repurchase agreements 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. In addition, the Portfolio
is permitted to lend its securities. For a discussion of these transactions, see
"Additional Investment Information and Risk Factors."

329543.1
-14-

<PAGE>

TAX EXEMPT MONEY MARKET PORTFOLIO

Investment Objectives and Policies

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. Interest on these securities may be subject to state and local taxes.
See "Taxes." The Portfolio intends to invest all of its assets in tax exempt
obligations and in no event shall invest less than 80% of its assets in such
obligations; however, it reserves the right to invest up to 20% of its assets in
taxable obligations. The investment objectives stated above are fundamental and
may be changed only with the approval of a majority of the outstanding shares of
the Portfolio. 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.

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.

Permitted Investments:

Municipal Bonds - bonds issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies, authorities and instrumentalities. These
obligations may be general obligation bonds secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest, or they may be revenue bonds payable from specific revenue sources,
but not generally backed by the issuer's taxing power. These include industrial
revenue bonds or "private activity bonds" where payment is the responsibility of
the private industrial user of the facility financed by the bonds; such bonds
are issued by or on behalf of public authorities to provide funding for various
privately operated industrial facilities. Interest on such bonds is generally
exempt, with certain exemptions, from regular federal income tax provided the
issuer and corporate obligor thereof continue to meet certain conditions. See
"Taxes." The Portfolio may invest more than 25% of its assets in industrial
revenue bonds, but may not invest more than 25% of its assets in industrial
revenue bonds of projects of similar type or in the same state.

Municipal Notes - municipal notes of various types, including notes issued
in anticipation of receipt of taxes, the proceeds of the sale of bonds, other
revenues or grant proceeds, as well as municipal commercial paper and variable
rate demand notes. The interest rate on variable rate demand notes is adjustable
at periodic intervals of 397 days or less as specified

329543.1
-15-

<PAGE>

in the notes. There is no specific percentage limitation on these investments.
For more information about municipal notes, see "Investments and Investment
Techniques Common to Two or More Portfolios" in the Statement of Additional
Information.

Municipal Leases - 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 sales 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 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 obligations, 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
leases will not be cancelled.

Quality Information. 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 that have remaining maturities of 397
days or less and are rated in the two highest short-term rating categories by
any two nationally recognized statistical rating organizations ("NRSROs") or in
such categories by the only NRSRO that has rated the Municipal Obligations
(collectively, the "Requisite NRSROs") (acquisition in the latter situation must
also be ratified by the Board of Directors); (ii) Municipal Obligations 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 two highest
short-term rating categories and (iii) un-rated Municipal Obligations determined
by the Fund's Board of Directors to be of comparable quality. Where the issuer
of a long-term Municipal Obligation

329543.1
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<PAGE>

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.
While there are several organizations that currently qualify as NRSROs, two
examples of NRSROs are S&P and Moody's. The two highest long-term ratings by S&P
and Moody's are Aaa and Aa by Moody's and AAA and AA by S&P, for debt
securities; MIG-1, VMIG-1, Prime-1 and MIG-2, VMIG-2, Prime-2 by Moody's and
A-1, SP-1 and A-2, SP-2 by S&P, for short-term municipal securities. These
standards must be satisfied at the time an investment is made. Subsequent to its
purchase ___ the Portfolio, the quality of an investment may cease to be rated
or its rating may be reduced below the minimum required for purchase by the
Portfolio. If this occurs, the Board of Directors of the Fund shall reassess
promptly whether the Municipal Obligation presents minimal credit risks and
shall cause the Portfolio to take such action as the Board of Directors
determines is in the best interest of the Portfolio and its shareholders.
However, reassessment is not required if the Municipal Obligation 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 municipal obligation (1) is in default, (2)
ceases to be an Eligible Security or (3) is determined to no longer present
minimal credit risks, the Portfolio will dispose of the Municipal Obligation
absent a determination by the Fund's Board of Directors that disposal of the
Municipal Obligation would not be in the best interests of the Portfolio. In the
event that the Municipal Obligation 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 Municipal Obligation which immediately before default accounted for
1/2 of 1% or more of the Portfolio's total assets, the Fund shall promptly
notify the Securities and Exchange Commission of such fact and of the actions
that the Fund intends to take in response to the situation.

The Tax Exempt Money Market Portfolio may purchase municipal obligations on
a when-issued or delayed delivery basis and may also purchase municipal
obligations with puts and stand-by commitments. The Advisor currently does not
anticipate entering into any transactions which would result in income subject
to federal income tax. However, the Portfolio may invest up to 20% of the value
of its net assets in taxable securities in certain circumstances, including
repurchase and reverse repurchase agreements 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. The
Portfolio may also lend its portfolio securities. Income from taxable
securities, repurchase and reverse repurchase agreements and portfolio lending
will be subject to income taxation. For a discussion of these transactions, see
"Additional Investment Information and Risk Factors."

329543.1
-17-

<PAGE>

LIMITED TERM PORTFOLIO

Investment Objectives and Policies

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. The investment
objective stated above is fundamental and may be changed only with the approval
of a majority of the outstanding shares of the Portfolio. There can be no
assurance that the Limited Term Portfolio will be able to achieve this
objective.

The Limited Term Portfolio seeks to maintain a current yield that is greater
than that obtainable from a portfolio of high quality money market obligations.
The Portfolio seeks to increase returns by actively managing securities in the
short term and intermediate term ranges. The Portfolio will consist only of
securities with a maximum dollar weighted average maturity of two years and a
maximum maturity of three years (three years and sixty days for new issues) at
the time of investment. However, it seeks to minimize market risk by employing a
"laddered" portfolio approach as opposed to a market timing approach. 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
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, the Portfolio seeks investment in securities which the Advisor
believes to be undervalued and, therefore, have capital appreciation potential.
Any realized capital gains, as well as interest income, will be subject to
federal income taxes. See "Management Strategies" in the Statement of Additional
Information.

Purchases and sales are made for the Portfolio whenever necessary, in the
Advisor's opinion, to meet the Portfolio's objective. This is expected to result
in a maximum average annual portfolio turnover rate of not greater than 200%. In
order to qualify as a regulated investment company, less than 30% of the
Portfolio's gross income must be derived from the sale or other disposition of
stock, securities or certain other investments held for less than three months.
Although increased portfolio turnover may increase the likelihood of additional
capital gains for the Portfolio, the Portfolio expects to satisfy the 30% income
test.

The Portfolio may purchase or sell certain financial instruments in order to
attempt to reduce the volatility of its portfolio, moderate market risk and
minimize fluctuations in its net asset value per share. For a discussion of
these transactions, see "Additional Investment Information."

329543.1
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<PAGE>

Permitted Investments:

The Portfolio will invest in the same types of securities that are permitted
investments for the Global Money Market Portfolio, with varying and longer
maturities. However, when purchasing securities with effective maturities in
excess of one year the Portfolio will purchase only domestic issues.

From time to time, the assets of the Portfolio may be substantially invested
in short term obligations in order to attempt to reduce the volatility of the
Portfolio, moderate market risk, and minimize fluctuation in its net asset
value. Short term obligations may also be purchased pending investment of
proceeds of sales of Portfolio shares or Portfolio securities, or to maintain
liquidity to meet anticipated redemptions.

Quality Information. The Limited Term Portfolio's rated debt securities must
be rated Aa or higher by Moody's or AA or higher by S&P, or the equivalent.
Rated domestic and foreign commercial paper must be rated Prime-1 by Moody's or
A-1 by S&P, or the equivalent. The Portfolio may also invest in unrated
securities if, in the opinion of the Fund's Board of Directors, such securities
are of comparable quality to the rated securities in which the Portfolio may
invest. These standards must be satisfied at the time an investment is made. If
the quality of the investment later declines, the Portfolio may continue to hold
the investment. However, if the Portfolio holds 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 the Portfolio.

The Limited Term Portfolio may also invest in hedging instruments in certain
circumstances. In addition, the Portfolio may purchase obligations on a
when-issued or delayed delivery basis, enter into repurchase and reverse
repurchase agreements 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. The Portfolio is also
permitted to lend its securities and purchase certain privately placed
securities. For a discussion of these transactions, see "Additional Investment
Information and Risk Factors."

The Portfolio may also purchase zero coupon bonds. Zero coupon bonds do not
provide for the payment of any current interest and provide for payment at
maturity at par value unless sooner sold or redeemed. The market value of zero
coupon bonds is subject to greater fluctuations than coupon bonds in response to
changes in interest rates. For a discussion of the tax consequences of an
investment in zero coupon bonds, see "Taxes" herein.

329543.1
-19-

<PAGE>

TAX EXEMPT LIMITED TERM PORTFOLIO

Investment Objectives and Policies

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.
Any realized capital gains will be subject to federal income taxes. Interest on
these securities may be subject to state and local income taxes. See "Taxes."
The Portfolio intends to invest all of its assets in tax exempt obligations;
however, it reserves the right to invest up to 20% of its assets in taxable
obligations. The investment objectives stated above are fundamental and may be
changed only with the approval of a majority of the outstanding shares of the
Portfolio. There can be no assurance that the Tax Exempt Limited Term Portfolio
will be able to achieve these objectives.

The Tax Exempt Limited Term Portfolio seeks to maintain a current yield that
is greater than the obtainable from a portfolio of short term, high quality tax
exempt money market obligations. The Portfolio seeks to increase returns by
actively managing securities in the short term and intermediate term ranges. The
Portfolio will consist only of securities with a maximum dollar weighted average
maturity of three years and a maximum maturity of five years (five years and
sixty days for new issues) at the time of investment. However, it seeks to
minimize market risk by employing a "laddered" portfolio approach as opposed to
a market timing approach. 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 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, the Portfolio seeks investments in securities which the Advisor
believes to be undervalued and, therefore, have capital appreciation potential.
The value of municipal securities in the Portfolio can also be affected by
market reaction to legislative consideration of various tax reform proposals.
See "Management Strategies" in the Statement of Additional Information.

Purchases and sales are made for the Portfolio whenever necessary, in the
Advisor's opinion, to meet the Portfolio's objective. This is expected to result
in a maximum average

329543.1
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<PAGE>

annual portfolio turnover rate of not greater than 200%. In order to qualify as
a regulated investment company, less than 30% of the Portfolio's gross income
(including tax exempt income) must be derived from the sale or other disposition
of stock, securities or certain other investments held for less than three
months. Although increased portfolio turnover may increase the likelihood of
additional capital gains for the Portfolio, the Portfolio expects to satisfy the
30% income test.

Permitted Investments:

The Portfolio will invest in the same types of securities that are permitted
investments for the Tax Exempt Money Market Portfolio, with varying and longer
maturities, such as Municipal Bonds and Municipal Notes, whose interest is
exempt form federal income tax.

From time to time, the assets of the Portfolio may be substantially invested
in short term municipal obligations in order to attempt to reduce the volatility
of the Portfolio, moderate market risk, and minimize fluctuation in its net
asset value. Short term obligations may also be purchased pending investment of
proceeds of sales of Portfolio shares or Portfolio securities, or to maintain
liquidity to meet anticipated redemptions.

Quality Information. The Tax Exempt Limited Term Portfolio's rated debt
securities must be rated A or higher by Moody's or A or higher by S&P, or the
equivalent. Rated short term municipal securities must be rated MIG-2, VMIG-2,
P-2 or higher by Moody's or SP-2, A-2 or higher by S&P, or the equivalent. The
Portfolio may also invest in unrated securities if, in the opinion of the Fund's
Board of Directors, such securities are of comparable quality to the rated
securities in which the Portfolio may invest. These standards must be satisfied
at the time an investment is made. If the quality of the investment later
declines, the Fund may continue to hold the investment. However, if the
Portfolio holds 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 the Portfolio.

The Tax Exempt Limited Term Portfolio may purchase municipal obligations on
a when-issued or delayed delivery basis and may purchase municipal obligations
with puts and stand-by commitments. The Advisor currently does not anticipate
entering into any transaction which would result in income subject to federal
income tax. However, the Portfolio may invest up to 20% of the value of its
total assets in taxable securities in certain circumstances, including hedging
instruments and repurchase and reverse repurchase agreements 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. The Portfolio may also lend its securities. Income from taxable
securities, repurchase and

329543.1
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<PAGE>

reverse repurchase agreements and portfolio lending will be subject to income
taxation. The Portfolio may purchase certain privately placed securities. For a
discussion of these transactions, see "Additional Investment Information and
Risk Factors."

329543.1
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<PAGE>

ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS

When-Issued and Delayed Delivery Securities. Each of the Portfolios may
purchase securities on a when-issued or delayed delivery basis. Delivery of and
payment for these securities may occur a month or more after the date of the
purchase commitment. The securities are subject to market fluctuation during
this period and no interest accrues to the Portfolio until settlement. Each
Portfolio maintains with the Custodian a separate account with a segregated
portfolio of liquid high grade debt securities in an amount at least equal to
these commitments.

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. Each 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 whose creditworthiness has been reviewed and found to meet the
investment criteria of the Portfolio. Although the securities subject to the
repurchase agreement might bear maturities exceeding 397 days, settlement for
the repurchase would never be more than one year 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. If the seller defaults and the
collateral value declines, the Portfolio might incur a loss. If bankruptcy
proceedings are commenced with respect to the seller, the Fund's realization
upon the collateral may be delayed or limited. See "Investment Restrictions."
Each Portfolio may invest no more than 10% of its assets in illiquid securities
including repurchase agreements maturing in more than seven days. See
"Investment Restrictions."

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 permitted to enter into reverse repurchase
agreements may do so only with those member banks of the Federal

329543.1
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<PAGE>

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 to meet the investment criteria of
the Portfolio. When engaging in reverse repurchase transactions, the Fund 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 which allows a Portfolio to
borrow money from banks for extraordinary or emergency purposes and to engage in
reverse repurchase agreements provided that such in the aggregate do not exceed
one-third of the value of the total assets of that Portfolio less its
liabilities. Any Portfolio that utilizes reverse repurchase agreements to this
extent may be considered to be leveraging its portfolio; however, since the
Portfolios are required to maintain segregated accounts to cover their positions
on these reverse repurchase agreements, the risks inherent in this leveraging
technique are minimized.

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.

Portfolio Lending. 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.

Foreign Investment Information for the Global Money Market Portfolio and the
Limited Term Portfolio. The Global Money Market Portfolio and the Limited Term
Portfolio may invest in certain U.S. dollar denominated 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

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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 issuers. 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 possible adoption of foreign
governmental restrictions such as exchange controls.

Taxable Investments for the Tax Exempt Portfolios. The Advisor currently
does not anticipate entering into any transactions which would result in income
subject to federal income tax. However, the Tax Exempt Money Market Portfolio
and the Tax Exempt Limited Term Portfolio are permitted to invest up to 20% of
the value of their respective total assets in securities the interest income on
which is subject to federal income tax. These Portfolios may make taxable
investments pending investment of proceeds from sales of their shares or
portfolio securities, pending settlement of purchases of portfolio securities,
to maintain liquidity to meet anticipated redemptions or when it is advisable in
the Advisor's opinion because of adverse market conditions. The taxable
investments permitted for these Portfolios include Obligations of the United
States government and its agencies and instrumentalities, bank obligations,
commercial paper and repurchase agreements and, in the case of the Tax Exempt
Limited Term Portfolio, other debt securities which meet the Portfolio's quality
requirements. See "Taxes." Any securities, the interest income on which may be
subject to the federal alternative minimum tax for individuals (including
participation certificates in such securities) are included with taxable
investments in determining the 20% limitation.

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, 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" in the Statement of Additional
Information.

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<PAGE>

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. See the
Statement of Additional Information for the valuation procedure if the Tax
Exempt Limited Term Portfolio were to invest in municipal securities that could
not be valued by the amortized cost method and that are subject to separate
puts.

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 are therefore 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 purchased by a
Portfolio will reflect any limitations on their liquidity. As a matter of
policy, a Portfolio will not invest more than 10% of the market value of the net
assets of the Portfolio in repurchase agreements maturing in over seven days and
other illiquid investments.

These 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 of 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, a Portfolio will not invest
more than 10% of its net assets in illiquid investments, which include
securities for which there is no readily available market, securities subject to
contractual restriction on resale, 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 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 these 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

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<PAGE>

effect of increasing the level of illiquidity in a Portfolio to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these restricted securities.

Hedging for the Limited Term Portfolio and the Tax Exempt Limited Term
Portfolio. Hedging is a means of transferring risk which an investor does not
desire to assume during an uncertain market environment. The Limited Term
Portfolio and the Tax Exempt Limited Term Portfolio are permitted to enter into
the transactions more fully described in the Statement of Additional Information
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 to 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.

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 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 in 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.
For more detailed information about these transactions, see the Statement of
Additional Information.

United States Government Obligations for the Domestic Prime Money Market
Portfolio, the Global Money Market Portfolio and the Limited Term Portfolio.
These Portfolios may purchase any obligations issued or guaranteed by the United
States Government or by its agencies or instrumentalities.

Securities issued or guaranteed as to principal and interest by the United
States Government or by agencies or instrumentalities thereof include
obligations of several different kinds. Such securities in general include a
variety of United States Treasury obligations, consisting of bills, notes and
bonds, which principally differ only in their interest rates, maturities and
times of issuance, and obligations issued or guaranteed by United States
Government agencies and instrumentalities which are supported by (a) the full
faith and credit of the United States Treasury (such as Government National
Mortgage Association participation certificates), (b) the limited authority of
the issuer to borrow from the United States Treasury (such as securities of the
Student Loan Marketing Association), (c) the

329543.1
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<PAGE>

authority of the United States Government to purchase certain obligations of the
issuer (such as securities of the Federal National Mortgage Association), or (d)
only the credit of the issuer. No assurance can be given that the United States
Government will provide financial support to United States Government agencies
or instrumentalities as described in clauses (b), (c) or (d) above in the
future, other than as set forth above, since it is not obligated to do so by
law. Certain instruments issued or guaranteed by the United States Government or
agencies thereof which have a variable rate of interest readjusted no less
frequently than annually are deemed to have a maturity equal to the period
remaining until the next readjustment of the interest rate.

Custodial Receipts for the Domestic Prime Money Market Portfolio, the Global
Money Market Portfolio and the Limited Term Portfolio. Securities issued or
guaranteed as to principal and interest by the United States Government may be
acquired by the Portfolios in the form of custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
United States Treasury notes or bonds. Such notes and bonds are held in custody
by a bank on behalf of the owners. These custodial receipts are known by various
names, including "Treasury Receipts," "Treasury Investment Growth Receipts"
("TIGR"s) and "Certificates of Accrual on Treasury Securities" ("CATS"). The
Portfolios may also invest in separately traded principal and interest
components of securities issued or guaranteed by the United States Treasury. The
principal and interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS"). Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently. The Portfolios may also invest in stripped
mortgage-backed securities that represent beneficial ownership interests in
either principal or interest distributions on certain mortgage pass-through
certificates which are guaranteed by the Federal National Mortgage Association.
Such certificates are held by a trust which sells such securities through the
Federal Reserve.

Securities guaranteed as to principal and interest by the United States
Government, its agencies or instrumentalities are deemed to include securities
for which the payment of principal and interest is backed by an irrevocable
letter of credit issued by the United States Government, its agencies or
instrumentalities.

Mortgage-Backed Securities. All of the Portfolios, except the U.S. Treasury
Money Market Portfolio, may purchase securities issued or guaranteed by federal
agencies 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

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<PAGE>

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/servicers,
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
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.

329543.1
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<PAGE>

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.

These types of securities generally are less effective than other debt
securities in providing a means of "locking" in attractive long term interest
rates because the underlying mortgages can be prepaid. However, this risk is far
less significant for the Portfolios because of their shorter weighted average
maturities than for a long term portfolio. During periods of declining interest
rates, mortgage-backed securities may have less potential for capital
appreciation because of the possibility of increased prepayments. During periods
of increasing interest rates, mortgage-backed securities may have a greater risk
of capital depreciation because of the possibility of decreased prepayments.

All of 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
being 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.

Any guarantee or insurance on a mortgage-backed certificate does not extend
to a Portfolio's investment 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

329543.1
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<PAGE>

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 CMOs 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.

Variable Rate Demand Instruments. All of the Portfolios, except the U.S.
Treasury Money Market Portfolio, may purchase variable rate demand instruments.
These instruments may be tax exempt or taxable (variable amount master demand
notes) and 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 upon not more than 30 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 interest. These instruments are
payable either on demand or at specified intervals not exceeding one year. The
Money Market Portfolios 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. The
remaining Portfolios can only purchase such instruments if the Board of
Directors determines that they meet the particular Portfolio's quality
requirements. While transfer of these instruments is usually restricted by their
issuers and there are no trading markets for them, the liquidity of such
investments is assured through their demand features. Notwithstanding such,
variable rate demand instruments with demand features in excess of 7 days are
considered illiquid. See "Investments and Investment Techniques Common to Two or
More Portfolios" in the Statement of Additional Information for further
description of these instruments.

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 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, these 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

329543.1
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<PAGE>

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.

Participation Interests. All of the Portfolios, except the U.S. Treasury
Money Market 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
a Portfolio's quality standard the participation interest will be backed by an
irrevocable letter of credit or guarantee that the Board of Directors has
determined meets the prescribed quality standards 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. The terms of certain of the participations in
corporate loans in which a Portfolio may invest may not enable the Portfolios to
sell such instruments to the bank, and the secondary markets, if any, for such
instruments are extremely limited. Therefore, investments in these types of
participation interests having remaining maturities in excess of 7 days are
considered illiquid and are subject to the 10% limitation for all illiquid
investments.

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INVESTMENT RESTRICTIONS

As a diversified investment company, 75% of the assets of each of the
Portfolios is subject to the following limitations: (a) each Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except obligations of the United States government and its agencies and
instrumentalities, and (b) each Portfolio may not own more than 10% of the
outstanding voting securities of any one issuer. The classification of the Fund
as a diversified investment company is a fundamental policy of the Fund and may
be changed only with the approval of the holders of a majority of the Fund's
outstanding shares. As used in this Prospectus, the term "majority of the
outstanding shares" of a Portfolio means, respectively, the vote of the lesser
of (i) 67% or more of the shares of the Portfolio present at the meeting, if
more than 50% of the outstanding shares of the Portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding shares of the
Portfolio.

The Fund also operates under certain investment restrictions which are
deemed fundamental policies of the Fund and also may be changed only with the
approval of the holders of a majority of a Portfolio's outstanding shares. In
addition to other restrictions listed in the Statement of Additional
Information, none of the Portfolios may (except where specified):

(i) 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; 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;

(ii) invest more than 10% of the market value of the Fund's net
assets in illiquid investments including 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 and repurchase agreements maturing in
more than seven days;

(iii) purchase securities on margin or 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 the borrowing, and further provided that
300% asset coverage is maintained at all times;

(iv) purchase securities while borrowings (excluding reverse
repurchase agreements entered into for other than extraordinary or emergency
purposes) exceed 5% of its total assets;

(v) 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

329543.1
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<PAGE>

with paragraph (iii) 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; or

(vi) lend portfolio securities of value 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.

For a more detailed discussion of these investment restrictions, see
"Investment Restrictions" in the Statement of Additional Information.

329543.1
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<PAGE>

MANAGEMENT OF THE FUND

Board of Directors and Officers. The Board of Directors of the Fund
decides upon matters of general policy and reviews the actions of the Fund's
Distributor and its Advisor. The following serve as the Fund's Board of
Directors and Officers:

Thomas E. O'Connor -- Chairman of the Board

Ronald S. Eaker -- President and Chief Investment Officer

Henley L. Smith -- Vice President and Investment Officer

Carroll L. Coward -- Vice President and Investment Officer

Judith Fabrizi -- Secretary, Treasurer and Investment Officer

John J. Pileggi -- Assistant Treasurer

Joan V. Fiore -- Assistant Secretary

Sheryl Hirschfeld -- Assistant Secretary

Felix J. Christiana -- Director; Retired Senior Vice President, Dollar
Dry Dock Savings Bank

Mary E. Hauck -- Director; Retired Senior Portfolio Manager,
Gabelli-O'Connor Fixed Income Mutual Funds Management Co.

Robert C. Kolodny, M.D. -- Director; Physician, author and lecturer;
General Partner of KBS Partnership, KBS II Investment Partnership, KBS III
Investment Partnership and KBS IV Limited Partnership, private investment
partnerships; Medical Director and Chairman of the Board of the Behavioral
Medicine Institute; Associate Director of Masters and Johnson Institute
(1973-1983)

Anthony R. Pustorino -- Director; Retired President, Pustorino, Puglisi
& Co., P.C., certified public accountants; Professor, Pace University

Gary L. Roubos -- Director; Chairman of the Board of Dover Corp., a
diversified industrial manufacturing company

William A. Merritt Jr. -- Director; Financial Consultant/Mergers and
Acquisitions. President and Chief Operating Officer of WilTel Communications
Systems, Inc. (1990-1992); Executive Vice-President and Chief Operating Officer
of TIE/Communications (1981-1990)

329543.1
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<PAGE>

Mr. O'Connor may be deemed an "interested person" of the Fund, as
defined in the Investment Company Act of 1940, on the basis of his affiliation
with the Advisor.

Advisor. Gabelli-O'Connor Fixed Income Mutual Funds Management Co. has
been employed by the Board of Directors as the Investment Advisor for each
Portfolio of the Fund pursuant to the Advisory Agreements entered into by the
Fund on behalf of each Portfolio. The Advisor 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.

Gabelli-O'Connor Fixed Income Mutual Funds Management Co., with offices
at 19 Old Kings Highway South, Darien, Connecticut 06820-4526, is a Delaware
partnership organized in 1987. As of the date of this Prospectus, the Advisor is
an investment manager, administrator or advisor 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. Mr. Mario J. Gabelli is the Chairman of the Board 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
adviser 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.

The Advisor provides persons satisfactory to the Fund's Board of
Directors to serve as officers of the Fund. Such officers, as well as certain
other employees and directors of the Fund, may be directors, officers or
employees of the Advisor or its affiliates. Due to the services performed by the
Advisor and the Administrator, the Fund currently has no employees and its
officers are not required to devote their full time to the affairs of the Fund.

329543.1
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<PAGE>

The Statement of Additional Information contains general background information
regarding each Director and principal officer of the Fund.

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
respective 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" in the Statement of Additional Information. 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 the Portfolio and of
increasing yield to investors in that Portfolio. See "Expense Limitation" in the
Statement of Additional Information.

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 with each of the
Portfolios, the Administrator 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. 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, the Fund
pays the Administrator a fee, computed daily and payable monthly, in the
according 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 daily net assets of the Fund, and (iv)
.050% of all aggregate average daily net assets of the Fund over $1 billion.

The Administrator also provides the Fund with all accounting related
services. For the accounting services provided, the Administrator shall be paid
a fee of $2,500 per Portfolio per month.

329543.1
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<PAGE>

The Administrative Services Agreements are terminable by the Portfolio
or the Administrator on sixty days' written notice; terminate automatically in
the event of an "assignment" as defined by the 1940 Act; and shall remain in
effect for the same periods as the Advisory Agreements subject to annual
approval of the Fund's Board of Directors. The Administrative Services
Agreements provide that in the presence 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.

Expenses. Each Portfolio is responsible for payment of its expenses,
including the following expenses, 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
nonrecurring legal and auditing 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 the officers of the Advisor
or its affiliates; costs of other personnel providing administrative 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 Advisor pays the promotional and advertising
expenses related to the distribution of the Fund's shares and for the printing
of all Fund prospectuses used in connection with the distribution and sale of
Fund shares. See "Management of Fund" in the Statement of Additional
Information. The Advisor has agreed to a reduction in the amounts payable to it
and to reimburse each Portfolio, as necessary, if in any fiscal year the sum of
the Portfolio's expenses exceeds the limits set by applicable regulations of
state securities commissions.

329543.1
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<PAGE>

PURCHASE OF SHARES

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 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.

Each Portfolio requires a minimum initial investment of $100,000. No
minimum amount is required for subsequent investments. Additionally, without
cost, investors have the flexibility to allocate their investment among the six
Portfolios at their discretion and may change such allocation at any time,
subject to the minimum initial investment requirements of each Portfolio.
Shareholders should maintain a share balance equal to at least $50,000 in any
Portfolio in which they wish to continue to invest. The Fund reserves the right
to redeem, after 60 days' written notice, shares in subminimum accounts and
return the proceeds to shareholders. The shareholder may restore and maintain a
minimum balance during the notice period or reallocate his investment among the
Portfolios to avoid involuntary redemption. See "Redemption of Shares - Optional
Redemption by the Fund." Shareholders are also provided flexibility since shares
can be redeemed or exchanged among the six Portfolios at no extra cost. For
purposes of minimum investment requirements, investments in the Portfolios by
related shareholders may be aggregated.

Shares of each Portfolio are sold on a continuous basis without a sales
charge at the net asset value per share next determined after receipt of an
order. The Fund reserves the right to reject any subscription for the shares of
its Portfolios.

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. To purchase shares in the U.S. Treasury Money Market
Portfolio, the Domestic Prime Money Market Portfolio, the Global Money Market
Portfolio, or the Tax Exempt Money Market Portfolio, an investor should place a
telephone purchase order before 12:00 noon New York time and wire immediately
available funds to the appropriate Portfolio on the same day. These Portfolios
must receive immediately available funds by the close of business for the
purchase to be effective and dividends to be earned on the same day. If funds
are received after the close of business, the purchase will become effective and
dividends will be earned on the next business day. Purchases made by check will
be invested and begin earning income on the next business day after the check is
received.

The Limited Term Portfolio and the Tax Exempt Limited Term Portfolio.
To purchase shares in the Limited Term Portfolio or the Tax Exempt Limited Term
Portfolio, an investor should place a telephone purchase order and transfer
immediately available funds to the appropriate Portfolio. If the Portfolio
receives a telephone purchase order prior to

329543.1
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<PAGE>

4:00 p.m. New York time on any business day, the purchase of Portfolio shares is
effective and is made at the net asset value determined that day, and the
purchaser will begin earning dividends on the next business day. If the
Portfolio receives a telephone purchase order after 4:00 p.m. New York time, the
purchase is effective and is made at the net asset value determined on the next
business day, and the purchaser will begin earning dividends on the next
following business day. Purchases made by check will be invested on the next
business day after the check is received and begin earning income on the day
following investment.

329543.1
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<PAGE>

REDEMPTION OF SHARES

To redeem shares in any of the Portfolios of the Fund, an investor may
submit a redemption request to the Fund or may telephone the Fund directly at
1-800-TSR-FUND/1- 800-877-3863 and give the service representative the
shareholder's account number and the amount of the redemption. Each Portfolio
executes redemption requests at the next determined net asset value per share.
See "Net Asset Value." The Fund reserves the right to satisfy redemption
requests in cash or in securities of the Portfolio whose shares are being
redeemed. During a period of dramatic economic or market change, increased
volume may make the telephone redemption option difficult to implement.
Shareholders unable to reach the Fund by telephone may telecopy their redemption
requests to the Fund at 203-655-7719. The Fund will employ procedures to confirm
that telephone or telecopy redemption instructions are genuine, and will require
that shareholders electing such option provide a form of personal
identification. The failure of the Fund to employ such procedures may cause the
Fund to be liable for losses incurred by investors due to telephone or telecopy
redemptions based upon unauthorized or fraudulent instructions.

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. A redemption request received by the U.S. Treasury Money
Market Portfolio, the Domestic Prime Money Market Portfolio, the Global Money
Market Portfolio or the Tax Exempt Money Market Portfolio prior to 12:00 noon,
New York time is effective on that day. A redemption request received after that
time becomes effective on the next day. Proceeds of an effective redemption are
generally wired the same day in immediately available funds to the shareholder's
designated bank account. If a redemption request becomes effective on a day when
the New York Stock Exchange is open but which is not a Fund business day, the
proceeds are transferred the next business day. See "Further Redemption
Information."

The Limited Term Portfolio and the Tax Exempt Limited Term Portfolio. A
redemption request received by the Limited Term Portfolio or the Tax Exempt
Limited Term Portfolio prior to 4:00 p.m. New York time is effective on that
day. A redemption request received after that time becomes effective on the next
day. Proceeds of an effective redemption are generally wired the next business
day in immediately available funds to the shareholder's designated bank account
and, subject to "Further Redemption Information" below, in any event are
transferred within seven days.

Redemption of Shares by Check Writing. Shareholders of any of the four
Money Market Portfolios who have elected check writing on their application will
receive checks which may be used to make payments to any person or business.
Each check must be for at least $10,000. Dividends will continue to be paid
until a check is presented to the Portfolio for payment.

Optional Redemption by the Fund. Shareholders should maintain a share
balance equal to at least $50,000 per Portfolio. The Fund reserves the right to
redeem, after 60 days'

329543.1
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<PAGE>

written notice, shares in subminimum accounts and return the proceeds to
shareholders. The shareholder may restore and maintain a minimum balance during
the notice period or reallocate his investment among the Portfolios to avoid
involuntary redemption.

Further Redemption Information. Investors should be aware that
redemptions from the Fund may not be processed if a completed account
application with a certified Taxpayer Identification Number has not been
received. See "Taxes." In addition, if a customer sends a check for the purchase
of Fund shares, and those shares are redeemed before the check has cleared, the
transmittal of redemption proceeds may be delayed until 15 days after the check
used to purchase the shares has been deposited by the Fund.

Each of the Portfolios of the Fund reserves the right to suspend the
right of redemption and to postpone the date of payment upon redemption for up
to seven days and for such other periods as the Investment Company Act of 1940
may permit.

329543.1
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<PAGE>

EXCHANGE OF SHARES

An investor may, without cost, exchange shares from any of the
Portfolios of the Fund into any other Portfolio of the Fund, subject to the
$100,000 minimum initial investment requirement per Portfolio and the
maintenance of the suggested minimum balance of $50,000. See "Purchase of
Shares." Shares are exchanged on the basis of relative net asset value per
share. Exchanges are in effect redemptions from one Portfolio and purchases of
another Portfolio; and the Portfolio's purchase and redemption procedures and
requirements are applicable to exchanges. An exchange pursuant to this exchange
privilege is treated for federal income tax purposes as a sale on which a
shareholder may realize a taxable gain or loss. See "Purchase of Shares" and
"Redemption of Shares."

329543.1
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<PAGE>

DIVIDENDS AND DISTRIBUTIONS

Net investment income 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. Substantially all the realized
net capital gains for the Portfolios, if any, are declared and paid on an annual
basis. 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 Money Market Portfolios earn
dividends on the business day their purchase is effective but not on the
business day their redemption is effective. 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."

329543.1
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<PAGE>

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. See "Net Asset Value" in
the Statement of Additional Information.

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 securities, indications as to values from dealers and general market
conditions. High quality securities with effective maturities of one year 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 may not be 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 under "Net Asset Value" in
the Statement of Additional Information. 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, 12:00 noon New York time; the Limited Term Portfolio and the
Tax Exempt Limited Term Portfolio, 4:00 p.m. New York time.

329543.1
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<PAGE>

YIELD AND TOTAL RETURN INFORMATION

The Portfolios may from time to time include yield, effective yield and
total return information in advertisements or reports to shareholders or
prospective investors. The "yield" 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 refers to the income generated by an
investment in the Portfolio over a seven-day period (which period will be stated
in the advertisement). The Limited Term Portfolio and Tax Exempt Limited Term
Portfolio yield refers to income generated by an investment in these Portfolios
over a thirty-day period. This income is then "annualized." That is, the amount
of income generated by the investment during that month is assumed to be
generated each month over a 12-month period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when annualized,
the income earned by an investment in the Portfolio is assumed to be reinvested.
The "effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. The "total return" of the
Limited Term Portfolio and the Tax Exempt Limited Term Portfolio is required to
be included in any advertisement containing the yield of any of these non-money
market funds. Total return is the average annual total return for the period
which began at the inception of the Portfolio and ended on the date of the most
recent balance sheet, and is computed by finding the average annual compound
rates of return over the period that would equate the initial amount invested to
the ending redeemable value. For a description of the methods used to calculate
total return, see the Fund's Statement of Additional Information. Yield,
effective yield and total return may fluctuate daily and do not provide a basis
for determining future yields, effective yields or total returns.

All or substantially all of the dividends paid by the U.S. Treasury
Money Market Portfolio represent a pass-through of income received on the
Portfolio's direct investment in U.S. Treasury obligations, and, as a result,
will not be subject to state and local income taxation in many states. The U.S.
Treasury Money Market Portfolio may, from time to time, advertise a tax
equivalent yield. The tax equivalent yield is a comparison of the taxable yield
necessary to produce an after-tax yield equivalent to that of a fund which
invests in obligations that are exempt from state and local income taxes, based
upon the applicable state's or municipality's highest marginal rate. The Tax
Exempt Money Market Portfolio and the Tax Exempt Limited Term Portfolio may also
advertise tax equivalent yield. Tax equivalent yield for the Tax Exempt Money
Market and Tax Exempt Limited Term Portfolios is a comparison of the taxable
yield necessary to produce an after-tax yield equivalent to that of a fund which
invests in obligations that are exempt from federal income taxes. Tax equivalent
yield for the Tax Exempt Money Market and Tax Exempt Limited Term Portfolios is
calculated by applying the stated federal income tax rate to only the net
investment income exempt from federal income taxation. For a description of the
methods used to calculate the Portfolios' tax equivalent yield, see the Fund's
Statement of Additional Information.

329543.1
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<PAGE>

DESCRIPTION OF COMMON STOCK

The Fund was incorporated in Maryland on August 17, 1987. The
authorized capital stock of the Fund consists of twenty billion shares of stock
having a par value of one tenth of one cent ($.001) per share. The Fund's Board
of Directors is authorized to divide the 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, 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.

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.

329543.1
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<PAGE>

DISTRIBUTION PLAN

The Fund has adopted a distribution and service plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (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. There are no fees or expenses
chargeable to the Fund under the Plans and the Fund's Board of Directors has
adopted the Plans in case certain expenses of the Fund might be considered to
constitute indirect payment by the Fund of distribution expenses. If a payment
of advisory fees by the Fund to the Advisor should be deemed to be indirect
financing by the Fund of the distribution of its shares, such payments are
authorized by 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, to
pay promotional and administrative expenses in connection with the offer and
sale of shares of the Portfolios, including 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 the year.

The Glass-Steagall 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 re-registered 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 interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.

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, $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.

329543.1
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<PAGE>

TAXES

The Fund has elected to qualify under the Internal Revenue Code of
1986, as amended (the "Code"), as a regulated investment company. As a regulated
investment company, the Fund will not be subject to federal income taxes on the
investment company taxable income and 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. 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
qualification 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 will be taxed to it at corporate rates and no distribution will qualify
as tax exempt.

The Fund has adopted a policy of declaring dividends daily in an amount
based on its net investment income. The amount of each daily dividend may differ
from actual net investment income calculated in accordance with federal income
tax principles. Dividend distributions generally will be made on the twentieth
day of each month. Dividends paid from taxable income and distributions of any
realized short term capital gains (whether from tax exempt or taxable
obligations) are taxable to shareholders as ordinary income for federal income
tax purposes, whether received in cash or reinvested in additional shares of the
Fund. Dividends paid from taxable income by a Portfolio 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 after December 31.
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. Investors in each Portfolio can receive distributions in cash or have them
reinvested in additional shares of the Portfolio. 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. While shares of
the Fund are sold primarily to corporations and other institutional investors,
the Advisor has reserved the right to accept subscriptions for Fund shares from
individuals. 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. However,
at least 80% 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. 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

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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 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 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 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 could reach a
conclusion different from that reached by counsel.

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 is 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 Fund is required, subject to certain exemptions, to withhold at a
rate of 31% from dividends paid or credited to shareholders in addition to the
proceeds from the redemption of Portfolio shares, if a correct taxpayer
identification number, certified when required, is not on file with the Fund.
Corporate investors are not subject to this requirement.

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

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<PAGE>

their treatment under the federal income tax laws. 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 Portfolio that are derived from such interest will also be free from state
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 income 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.

The Code imposes a nondeductible 4% excise tax on a Portfolio unless it
meets certain requirements with respect to distributions of net ordinary income
and capital gain net income. It is anticipated that this provision will not have
any material impact on a Portfolio.

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. The Tax Reform Act

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<PAGE>

of 1986 eliminated the preferential treatment previously available for net
capital gains. However, the Revenue Reconciliation Act of 1990 restored, in
limited circumstances, a preferential tax rate for net capital gains.
Distributions attributable to short-term capital gains (whether from tax exempt
or taxable obligations) are taxable as ordinary income. 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.

All taxable dividends from investment company taxable income are
taxable as ordinary income. It is not expected that any income distributions
from the Portfolios will qualify for the dividends received deduction for
corporations.

The Tax Reform Act of 1986 contained a provision limiting miscellaneous
itemized deductions for individuals and certain other shareholders, such as
estates or 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, the 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
remaining Portfolios will qualify as publicly-offered regulated investment
companies when activated.

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 interest earned on municipal bonds in accordance with Section 103 of
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 effect on the Fund and its investors for federal
and/or state and local income tax purposes. Investors in

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<PAGE>

the Fund should consult their tax advisors about the federal, state and local
tax consequences of an investment in the Fund in light of their own individual
circumstances.

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CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT

Custodial Trust Company, 101 Carnegie Center, Princeton, New Jersey
08540 is custodian for the Fund's cash and securities. The Custodian does not
assist in, and is not responsible for, investment decisions involving assets of
the Fund. Furman Selz Incorporated, the Fund's Administrator, also acts as the
Fund's transfer and dividend agent.

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