As filed with the Securities and Exchange Commission on February 27, 1998
Registration No. 33-17604
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement Under The Securities Act Of 1933 [x]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 18 [x]
and/or
Registration Statement Under The Investment Company Act Of 1940 [x]
Amendment No. 19 [x]
(Check appropriate box or boxes)
THE TREASURER'S FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o Gabelli Fixed Income LLC
19 Old Kings Highway South, Darien, Connecticut 06820-4526
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (203) 655-1999
Ronald S. Eaker
Gabelli Fixed Income LLC
19 Old Kings Highway South
Darien, Connecticut 06820-4526
(Name and Address of Agent for Service)
Copy to: Michael R. Rosella, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
It is proposed that this filing will become effective:
(check appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[x] on February 27, 1998 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)
[_] on (date) pursuant to paragraph (a) of Rule 485
The Registrant declares that an indefinite amount of its common stock, par value
$.001 per share, is being registered by this Registration Statement pursuant to
Section 24(f) under the Investment Company Act of 1940, as amended, and Rule
24f-2 thereunder, and the Registrant filed a Rule 24f-2 Notice for its fiscal
year ended on October 31, 1997 on January 21, 1998.
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1
<PAGE>
THE TREASURER'S FUND, INC.
Registration Statement on Form N-1A
Cross Reference Sheet --
Pursuant to Rule 404(c)
Part A
Item No. Prospectus Heading
- ------- -----------------
1. Cover Page Cover Page
2. Synopsis Summary; Table of Fees and Expenses
3. Condensed Financial Information Selected Per Share Data and Ratios;
Selected Per Share Income and
Capital Changes; Yield and Total
Return Information
4. General Description of Registrant Investment Objectives and Policies;
Description of Common Stock
5. Management of the Fund Management of the Fund; Custodian,
Transfer Agent and Dividend Agent;
Distribution Plan
5A. Management's Discussion of Fund *
Performance
6. Capital Stock and Other Securities Description of Common Stock;
Purchase of Shares; Exchange of
Shares; Redemption of Shares;
Dividends and Distributions; Taxes
7. Purchase of Securities Being Offered Purchase of Shares; Net Asset
Value; Distribution Plan
8. Redemption or Repurchase Redemption of Shares; Net Asset
Value
9. Legal Proceedings None
- ----------
* Not applicable
2
<PAGE>
Part B Caption in Statement
Item No. of Additional Information
- ------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Portfolios and Their
Objectives; Description of Common
Stock
13. Investment Objectives and Policies The Portfolios and their Objectives
14. Management of the Fund Management of the Fund
15. Control Persons and Principal Management of the Fund
Holders of Securities
16. Investment advisery and Other Management of the Fund;
Services Distribution Plan
17. Brokerage Allocation and Other Brokerage and Portfolio Turnover
Practices
18. Capital Stock and Other Description of Common Stock
Securities
19. Purchase, Redemption and Pricing Purchase, Redemption and Exchange
of Securities Being Offered
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Yield Quotations Computation of Yield
of Money Market Funds
23. Financial Statements
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* Not applicable
3
<PAGE>
PROSPECTUS February 27, 1998
The Treasurer's Fund, Inc.
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. At this time, only the Domestic Prime Money Market, Tax Exempt Money
Market and U.S. Treasury Money Market Portfolios of the Fund have been activated
by the Advisor. 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.
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.
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 Gabelli Fixed Income Distributors, Inc., 19 Old Kings Highway
South, Darien, Connecticut 06820-4526, Attention: The Treasurer's Fund or call
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.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
Summary..................................................................... 1
Table of Fees and Expenses.................................................. 3
Financial Highlights........................................................ 4
U.S. Treasury Money Market Portfolio........................................ 8
Domestic Prime Money Market Portfolio....................................... 9
Global Money Market Portfolio............................................... 10
Tax Exempt Money Market Portfolio........................................... 12
Limited Term Portfolio...................................................... 14
Tax Exempt Limited Term Portfolio........................................... 15
Additional Investment Information and
Risk Factors............................................................ 17
Investment Restrictions..................................................... 24
Management of the Fund...................................................... 25
Purchase of Shares.......................................................... 28
Redemption of Shares........................................................ 29
Exchange of Shares.......................................................... 30
Dividends and Distributions................................................. 30
Net Asset Value............................................................. 31
Yield and Total Return Information.......................................... 31
Description of Common Stock................................................. 32
Distribution Plan........................................................... 32
Taxes....................................................................... 33
Custodian, Transfer Agent and
Dividend Agent.......................................................... 36
General Information......................................................... 36
<PAGE>
The Treasurer's Fund Portfolios
SUMMARY
<TABLE>
<CAPTION>
Quality Ratings**
Maturity Representative*
Objectives Restrictions Investments Moody's S&P
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Money Market Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <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 asset Maximum maturity of
value per share. individual securities: 397 days
Domestic Prime Money Market Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Composed of prime quality U.S. Maximum weighted U.S. Government obligations -- --
dollar denominated money market average maturity: 90 days Commercial paper P-1 A-1
obligations of domestic issuers Maximum maturity of Negotiable CDs -- --
only. Seeks to maintain a individual securities: 397 days Bankers acceptances -- --
stable $1 net asset value per Short term corporate
share. obligations Aa or Aaa Aa or Aaa
Global Money Market Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Composed of prime quality U.S. Maximum weighted U.S. Government obligations -- --
dollar denominated money market average maturity: 90 days Commercial paper P-1 A-1
obligations of domestic and Maximum maturity of Negotiable CDs -- --
foreign issuers. Seeks to individual securities: 397 days Bankers acceptances -- --
maintain a stable $1 net asset Eurodollar and Yankee CDs -- --
value per share. Short term corporate and
government obligations Aa or Aaa Aa or Aaa
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 Short term municipal bonds MIG-2 SP-2
from federal income tax. Seeks Maximum maturity of Tax exempt commercial paper Aa or Aaa Aa or Aaa
to maintain a stable $1 net individual securities: 397 days Variable and floating rate P-1 or P-2 A-1 or A-2
asset value per share demand notes VMIG-1 or SP-1 or
VMIG-2 SP-2
Limited Term Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Composed of prime quality U.S. Maximum weighted U.S. Government obligations -- --
dollar denominated securities. average maturity: 2 years Commercial paper P-1 A-1
Seeks to obtain a current yield Maximum maturity of Corporate notes, bonds and
greater than that obtainable individual securities: 3 years other obligations Aa or Aaa Aa or Aaa
from the Money Market Asset-backed debt Aa or Aaa Aa or Aaa
Portfolios by actively managing Negotiable CDs -- --
securities in the short and Eurodollar and Yankee CDs -- --
intermediate maturity ranges. Hedging instruments -- --
Net asset value per share will Private placements -- --
fluctuate.
Tax Exempt Limited Term Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Composed of municipal Maximum weighted Municipal notes MIG-1 or SP-1 or
securities exempt from federal average maturity: 3 years Intermediate term municipal bonds MIG-2 SP-2
income tax. Seeks to obtain a Maximum maturity of Tax exempt commercial paper A, Aa or A, Aa or
current yield greater than individual securities: 5 years Variable and floating rate Aaa Aaa
that obtainable from the Tax demand notes P-1 or P-2 A-1 or A-2
Exempt Money Market Portfolio Hedging instruments VMIG-1 or SP-1 or
by actively managing securities Private placements VMIG-2 SP-2
in the short and intermediate -- --
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.
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 and individuals.
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. At this
time, only the Domestic Prime Money Market, Tax Exempt Money Market and U.S.
Treasury Money Market Portfolios of the Fund have been activated by the Advisor.
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 Fixed Income LLC, 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, fund accounting 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.
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.
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. From time to time, Gabelli Fixed Income LLC 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. Additionally, the Fund may
reduce the investment minimums under certain circumstances.
2
<PAGE>
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 and individuals:
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
-- consolidated monthly statement for all six Portfolios
o liquidity:
-- telephone purchase orders for the four Money Market Portfolios
received before 12:00 noon Eastern 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 Eastern 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 Eastern 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 Eastern time will be made
at that day's NAV and wired the next business day.
TABLE OF FEES AND EXPENSES
Annual Fund Operating Expenses
(as a percentage of average net assets)
Domestic Prime Tax Exempt U.S. Treasury
Money Market Money Market Money Market
Portfolio Portfolio Portfolio
------ ------ ------
Management Fees................ .30% .30% .30%
Other Operating Expenses....... .22% .23% .31%
---- ---- ----
Total Fund Operating Expenses.. .52% .53% .61%
==== ==== ====
3
<PAGE>
Example:
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
Domestic Prime Tax Exempt U.S. Treasury
Money Market Money Market Money Market
Portfolio Portfolio Portfolio
------ ------ ------
1 Year............ $ 5 $ 5 $ 6
3 Years........... 17 17 20
5 Years........... 29 30 34
10 Years.......... 65 66 76
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 Domestic Prime Money Market, Tax Exempt Money Market and U.S.
Treasury 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 fiscal years 1990 through 1997 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.
4
<PAGE>
Domestic Prime
Money Market Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended October 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(e)
<S> <C> <C> <C> <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 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Income from Investment
Operations:
Net Investment Income(b) 0.050 0.049 0.054 0.035 0.028 0.038 0.061 0.080 0.090 0.057
Net Realized Gain
(Loss) on Investments 0.000 0.000 (0.002) 0.000 0.000 0.000 0.001 0.000 0.000 0.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Total from Investment
Operations 0.050 0.049 0.052 0.035 0.028 0.038 0.062 0.080 0.090 0.057
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Less Distributions:
Dividends from Net
Investment Income (0.049) (0.049) (0.054) (0.035) (0.028) (0.038) (0.061) (0.080) (0.090) (0.057)
Dividends from Net
Realized Gain on
Investments (0.001) (0.000) (0.000) (0.000) (0.000) (0.000) (0.001) (0.000) (0.000) (0.000)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Total Distributions (0.050) (0.049) (0.054) (0.035) (0.028) (0.038) (0.062) (0.080) (0.090) (0.057)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Contributions from
Affiliate(c) ----- ----- 0.002 ----- ----- ----- ----- ----- ----- -----
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
Net Asset Value:
End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ======== ======== ======== ======== =======
Total Return(a) 5.19% 5.12% 5.50% 3.56% 2.90% 3.82% 6.42% 8.26% 9.29% 7.33%(f)
Ratios/Supplemental Data:
Net Assets, End of
Period (in thousands) $280,339 $236,812 $169,297 $143,744 $145,021 $169,357 $205,282 $155,732 $185,068 $95,073
Ratio of Operating
Expenses to Average
Net Assets(d) 0.52% 0.52% 0.50% 0.53% 0.55% 0.54% 0.49% 0.45% 0.45% 0.45%(f)
Ratio of Interest
Expenses to Average Net
Assets --- 0.01% 0.02% 0.13% 0.07% --- 0.39% 0.59% 0.08% ---
Ratio of Net Investment
Income to Average
Net Assets 4.99% 4.93% 5.33% 3.49% 2.82% 3.82% 6.12% 7.99% 8.98% 7.33%(f)
Decrease reflected in
above expense ratios
due to undertakings
by the Advisor/
Administrator ----- 0.01% 0.01% ----- ----- 0.01% 0.06% 0.09% 0.16% 0.40%(f)
</TABLE>
- --------------
(a) Total return represents aggregate total return off a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends.
(b) Net investment income before fees waived by the administrator for the
years ended October 31, 1996, 1995 and 1994 was $0.048, $0.053, and
$0.034, respectively.
(c) During the year ended October 31, 1995, the Portfolio realized losses on
the sale of certain securities. Pursuant to an undertaking, losses in the
amount of $262, 913 were reimbursed to the Portfolio by the former
Adviser.
4(d) Operating expense ratios before custodian fee credits on cash balances
maintained with the custodian and fees waived by the administrator for the
years ended October 31, 1996 and 1995 were 0.54% and 0.53%, respectively.
(e) The Domestic Prime Money Market Portfolio commenced operations on December
18, 1987.
(f) Annualized.
5
<PAGE>
Tax-Exempt
Money Market Portfolio
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended October 31,
1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <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 $ 1.000
-------- -------- -------- -------- -------- ------- ------- -------
Income from Investment
Operations:
Net Investment Income(b) 0.031 0.030 0.034 0.022 0.021 0.031 0.047 0.058
Total from Investment
Operations 0.031 0.030 0.034 0.022 0.021 0.031 0.047 0.058
-------- -------- -------- -------- -------- ------- ------- -------
Less Distributions:
Dividends from Net
Investment Income (0.031) (0.030) (0.034) (0.022) (0.021) (0.031) (0.047) (0.058)
Total Distributions (0.031) (0.030) (0.034) (0.022) (0.021) (0.031) (0.047) (0.058)
-------- -------- -------- -------- -------- ------- ------- -------
Net Asset Value:
End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ======= ======= =======
Total Return(a) 3.12% 3.04% 3.42% 2.21% 2.16% 3.19% 4.83% 5.94%
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands) $192,834 $158,507 $140,826 $133,951 $117,751 $95,751 $86,486 $89,620
Ratio of Operating Expenses
to Average Net Assets(c) 0.52% 0.52% 0.50% 0.53% 0.57% 0.58% 0.49% 0.45%
Ratio of Net Investment
Income to Average Net
Assets 3.07% 3.00% 3.35% 2.18% 2.15% 3.10% 4.71% 5.77%
Decrease reflected in above
expense ratios due to
undertakings by the
Advisor/Administrator 0.00% 0.00% 0.01% 0.01% 0.00% 0.02% 0.09% 0.16%
</TABLE>
Fiscal Year Ended October 31,
1989 1988(d)
Net Asset Value:
Beginning of Period $ 1.000 $ 1.000
------- -------
Income from Investment
Operations:
Net Investment Income(b) 0.061 0.045
Total from Investment
Operations 0.061 0.045
------- -------
Less Distributions:
Dividends from Net
Investment Income (0.061) (0.045)
Total Distributions (0.061) (0.045)
------- -------
Net Asset Value:
End of Period $ 1.000 $ 1.000
======= =======
Total Return(a) 6.31% 5.19%(e)
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands) $68,193 $57,561
Ratio of Operating Expenses
to Average Net Assets(c) 0.45% 0.45%(e)
Ratio of Net Investment
Income to Average Net
Assets 6.12% 5.20%(e)
Decrease reflected in above
expense ratios due to
undertakings by the
Advisor/Administrator 0.27% 0.57%(e)
- ----------
(a) Total return represents aggregate total return off a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends.
(b) Net investment income before fees waived by the administrator for the
years ended October 31, 1995 and 1994 was $0.033, and $0.021,
respectively.
(c) Operating expense ratios before custodian fee credits on cash balances
maintained with the custodian for the years ended October 31, 1997 and
1996 were 0.53% and 0.54%, respectively. The operating expense ratio
before custodian fee credits on cash balances maintained with the
custodian and fees waived by the administrator for the year ended October
31, 1995 was 0.53%. The operating expense ratio before fees waived by the
administrator for the year ended October 31, 1994 was 0.54%.
(d) The Tax Exempt Money Market Portfolio commenced operations on December 18,
1987.
(e) Annualized.
6
<PAGE>
U. S. Treasury
Money Market Portfolio
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended October 31,
1997 1996 1995 1994 1993 1992 1991 1990(c)
<S> <C> <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 $ 1.000
------- ------- ------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net Investment Income 0.047 0.047 0.051 0.033 0.026 0.034 0.055 0.019
Net Realized Gain (Loss)
on Investments 0.001 -- -- -- -- -- 0.002 --
------- ------- ------- -------- -------- -------- -------- --------
Total from Investment
Operations 0.048 0.047 0.051 0.033 0.026 0.034 0.057 0.019
------- ------- ------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net
Investment Income (0.047) (0.047) (0.051) (0.0353 (0.026) (0.034) (0.055) (0.019)
Dividends from Net Realized
Gain on Investments (0.001) -- -- -- -- (0.002) (0.002) --
------- ------- ------- -------- -------- -------- -------- --------
Total Distributions (0.048) (0.047) (0.051) (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 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======== ======== ======== ======== ========
Total Return(a) 4.91% 4.83% 5.27% 3.31% 2.60% 3.68% 6.06% 1.82%(d)
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands) $85,204 $90,761 $94,834 $138,205 $224,071 $254,899 $281,257 $130,337
Ratio of Operating Expenses
to Average Net Assets(b) 0.60% 0.60% 0.54% 0.49% 0.47% 0.45% 0.49% 0.45%(d)
Ratio of Net Investment
Income to Average Net
Assets 4.74% 4.70% 5.10% 3.07% 2.55% 3.38% 5.50% 7.17%(d)
Decrease reflected in above
expense ratios due to under-
takings by the Advisor/ 0.00% 0.00% 0.00% 0.00% 0.00% 0.01% 0.03% 0.19%(d)
Administrator
</TABLE>
- ----------
(a) Total return represents aggregate total return off a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends.
(b) Operating expense ratios before custodian fee credits on securities
lending income for the year ended October 31, 1997 was 0.61%. Operating
expense ratios before custodian fee credits on cash balances maintained
with the custodian for the years ended October 31, 1996 and 1995 were
0.63% and 0.56%, respectively.
(c) The U.S. Treasury Money Market Portfolio commenced operations July 25,
1990.
(d) Annualized.
7
<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 consistent with the
requirements of 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.
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. 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.
8
<PAGE>
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."
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 rated the securities (collectively, the "Requisite NRSROs"); (ii)
securities which are subject to a Demand Feature or Guarantee (as such terms are
defined in Rule 2a-7 of the Investment Company Act of 1940) which have received
a rating in the highest short-term rating category from an NRSRO or the
guarantor of which has received a rating in the highest short-term rating
category from an NRSRO with respect to a class of debt obligations (or any debt
obligation within that class) that is comparable in priority and security to the
guarantee (unless the guarantor directly or indirectly, controls, is controlled
by or is under common control with the issuer or the security subject to the
guarantee); and the issuer of the Demand Feature or Guarantee, or another
institution, has undertaken promptly to notify the holder of the security in the
event the Demand Feature or Guarantee is substituted
9
<PAGE>
with another Demand Feature or Guarantee; and (iii) unrated securities
determined by the Fund's Board of Directors to be of comparable quality. In
addition, Securities with remaining maturities of 397 days or less but that at
the time of issuance were long-term securities (i.e. with maturities greater
than 366 days) are deemed unrated and may be purchased if such had received a
long-term rating from the Requisite NRSROs in one of the three highest rating
categories (in addition to a determination by the Fund's Board that the security
is equivalent to a First Tier Eligible Security). Provided, however, that such
may not be purchased if it (i) does not satisfy the rating requirements set
forth in the preceding sentence and (ii) has received a long-term rating from
any NRSRO that is not within the three highest long-term rating categories. A
determination of comparability by the Board of Directors is made on the basis of
its credit evaluation of the issuer, which may include an evaluation of a letter
of credit, guarantee, insurance or other credit facility issued in support of
the securities or participation certificates. While there are several
organizations that currently qualify as NRSROs, two examples of NRSROs are
Standard & Poor's Rating Group, a division of McGraw-Hill, Inc. ("S&P") and
Moody's Investors Service, Inc. ("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 Security, or (3) is determined to no longer present minimal
credit risks, or an event of insolvency occurs with respect to the issuer of a
Portfolio security or the provider of any Demand Feature or Guarantee, 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 addition, the Portfolio
is permitted to lend its securities. For a discussion of these transactions, see
"Additional Investment Information and Risk Factors."
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
10
<PAGE>
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 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 ("NRSROs") or in such categories by the only
NRSRO that has rated the securities (collectively, the "Requisite NRSROs"); (ii)
securities which are subject to a Demand Feature or Guarantee (as such terms are
defined in Rule 2a-7 of the Investment Company Act of 1940) which have received
a rating in the highest short-term rating category from an NRSRO or the
guarantor of which has received a rating in the highest short-term rating
category from an NRSRO with respect to a class of debt obligations (or any debt
obligation within that class) that is comparable in priority and security to the
guarantee (unless the guarantor directly or indirectly, controls, is controlled
by or is under common control with the issuer or the security subject to the
guarantee); and the issuer of the Demand Feature or Guarantee, or another
institution, has undertaken promptly to notify the holder of the security in the
event the Demand Feature or Guarantee is substituted with another Demand Feature
or Guarantee; and (iii) unrated securities determined by the Fund's Board of
Directors to be of comparable quality. In addition, Municipal Obligations with
remaining maturities of 397 days or less but that at the time of issuance were
long-term securities (i.e. with maturities greater than 366 days) are deemed
unrated and may be purchased if such had received a long-term rating from the
Requisite NRSROs in one of the three highest rating categories (in addition to a
determination by the Fund's Board that the securities rating is equivalent to a
First Tier Eligible Security). Provided, however, that such may not be purchased
if it (i) does not satisfy the rating requirements set forth in the preceding
sentence and (ii) it has received a long-
11
<PAGE>
term rating from any NRSRO that is not within the three highest long-term rating
categories. A determination of comparability by the Board of Directors is made
on the basis of its credit evaluation of the issuer, which may include an
evaluation of a letter of credit, guarantee, insurance or other credit facility
issued in support of the securities 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.
In addition, in the event that a security (1) is in default, (2) ceases to
be an Eligible Security, or (3) is determined to no longer present minimal
credit risks, or in event of insolvency occurs with respect to the issuer of a
Portfolio security or the provider of any demand feature or guarantee, 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 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."
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 total assets in
such obligations; however, it reserves the right to invest up to 20% of its
total assets in taxable obligations (including securities the interest income on
which may be subject to alternative minimum tax). 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.
12
<PAGE>
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 exceptions, 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 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 sale contracts (which normally provide for
title to the leased asset to pass eventually to the government issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements for the issuance
of debt. The debt-issuance limitations of many state constitutions and statutes
are deemed to be inapplicable because of the inclusion in many leases or
contracts of "non-appropriation" clauses that provide that the governmental
issuer has no obligation to make future payments under the lease or contract
unless money is appropriated for such purpose by the appropriate legislative
body on a yearly or other periodic basis. These types of municipal leases may be
considered illiquid and 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 canceled.
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
13
<PAGE>
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"); (ii) Municipal
Obligations which are subject to a Demand Feature or Guarantee (as such terms
are defined in Rule 2a-7 of the Investment Company Act of 1940) which have
received a rating in the highest short-term rating category from an NRSRO or the
guarantor of which has received a rating in the highest short-term rating
category from an NRSRO with respect to a class of debt obligations (or any debt
obligation within that class) that is comparable in priority and security to the
guarantee (unless the guarantor directly or indirectly, controls, is controlled
by or is under common control with the issuer or the security subject to the
guarantee); and the issuer of the Demand Feature or Guarantee, or another
institution, has undertaken promptly to notify the holder of the security in the
event the Demand Feature or Guarantee is substituted with another Demand Feature
or Guarantee, and (iii) unrated Municipal Obligations determined by the Fund's
Board of Directors to be of comparable quality. In addition, Municipal
Obligations with remaining maturities of 397 days or less but that at the time
of issuance were long-term securities (i.e. with maturities greater than 366
days) are deemed unrated and may be purchased if such had received a long-term
rating from the Requisite NRSROs in one of the three highest rating categories
(in addition to a determination by the Fund's Board that the securities rating
is equivalent to a First Tier Eligible Security). Provided, however, that such
may not be purchased if it (i) does not satisfy the rating requirements set
forth in the preceding sentence and (ii) it has received a long-term rating from
any NRSRO that is not within the three highest long-term rating categories. A
determination of comparability by the Board of Directors is made on the basis of
its credit evaluation of the issuer, which may include an evaluation of a letter
of credit, guarantee, insurance or other credit facility issued in support of
the 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 by the Portfolio, the quality
of an investment may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Portfolio. If this occurs, the Board of
Directors of the Fund shall reassess 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 or an event of insolvency occurs with respect to the issuer
of a Portfolio security or the provider of any Demand Feature or Guarantee, 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 total 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
14
<PAGE>
and portfolio lending will be subject to income taxation. For a discussion of
these transactions, see "Additional Investment Information and Risk Factors."
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%.
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."
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
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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.
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.
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.
The Tax Exempt Limited Term Portfolio seeks to maintain a current yield
that is greater than that 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
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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 annual portfolio turnover rate of not
greater than 200%.
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 and Risk Factors."
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 from 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 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."
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.
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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 net 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 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 Portfolios 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.
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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 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
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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.
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 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
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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 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
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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
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
GNMA Mortgage-Backed Securities are mortgage-backed securities
representing part ownership of a pool of mortgage loans. These loans issued by
lenders such as mortgage bankers, commercial banks, and savings and loan
associations are either insured by the Federal Housing Administration (FHA) or
guaranteed by the Veterans Administration (VA). A "pool" or group of such
mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. Once approved by GNMA (a U.S. Government
corporation within the U.S. Department of Housing and Urban Development) the
timely payment of interest and principal is guaranteed by the full faith and
credit of the U.S. Government.
As mortgage-backed securities, GNMAs differ from bonds in that principal
is paid back by the borrower over the length of the loan rather than returned in
a lump sum at maturity. GNMAs are called "pass-through" securities because both
interest and principal payments, including prepayments, are passed through to
the holder of the security (in this case, the Portfolio).
The payment of principal of the underlying mortgages may exceed the
minimum required by the schedule of payments for the mortgages. Such prepayments
are made at the option of the mortgagors for a wide variety of reasons
reflecting their individual circumstances and may involve capital losses if the
mortgages were purchased at a premium. For example, mortgagors may speed up the
rate at which they prepay their mortgages when interest rates decline
sufficiently to encourage refinancing. A Portfolio, when such prepayments are
passed through to it, may be able to reinvest them only at a lower rate of
interest. The Advisor, in determining the attractiveness of GNMAs relative to
alternative fixed income securities, and in choosing specific GNMA issues, will
have made assumptions as to the likely speed of prepayment. Actual experience
may vary from these assumptions, resulting in a higher or lower investment
return than anticipated.
FNMA 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.
FHLMC 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. FHLMC issues Federal Home Loan Mortgage
Corporation Participation Certificates ("PCs") which represent interests in
mortgages from FHLMC's mortgage portfolio. FHLMC guarantees the timely payment
of interest and ultimate collection of principal, but PCs are not backed by the
full faith and credit of the U.S. Government.
FHLMC PCs differ from FNMA pass-throughs in that the mortgages underlying
PCs are mostly conventional mortgages rather than FHA insured or VA guaranteed
mortgages, although FHLMC has
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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 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, and such unconditional demand feature qualifies as an
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<PAGE>
Eligible Security, or (ii) the instrument is not subject to an unconditional
demand feature but does qualify as an Eligible Security. 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. 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 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.
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.
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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 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.
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.
Advisor. Effective April 14, 1997, Gabelli Fixed Income LLC 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
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<PAGE>
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 Fixed Income LLC, with offices at 19 Old Kings Highway South,
Darien, Connecticut 06820-4526, is a Delaware limited liability company
organized in 1997. It is the successor advisor to Gabelli O'Connor Fixed Income
Mutual Fund Management LP, which managed the Fund since its inception. Gabelli
Fixed Income LLC is a registered investment advisor under the Investment
Advisers Act of 1940. Mr. Mario J. Gabelli is the Chairman of the Board of
Gabelli Funds, Inc., which holds a majority interest in the Advisor. As a result
of this relationship, Mr. Gabelli may be deemed to be a "controlling person" of
the Advisor. As of December 31, 1997, the Advisor served as investment advisor
for assets aggregating in excess of $1.5 billion. The Advisor is an affiliate of
Darien Associates, LLC, which, as of December 31, 1997, served as investment
advisor for assets aggregating in excess of $200 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
$12 billion as of December 31, 1997.
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. 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 and Sub-Administrator. Gabelli Funds, Inc. ("Gabelli")
assumed responsibility as Administrator pursuant to an Administration Agreement
with each of the Portfolios, whereby Gabelli provides management and
administrative services necessary for the Fund, other than those provided by the
Investment Advisor, subject to the supervision of the Fund's Board of Directors.
As compensation for its services, the Portfolios pay the Administrator a
fee, computed and accrued daily and payable monthly, in accordance with the
following schedule: i) 0.10% of the first $500 million of aggregate average
daily net assets of the Fund, (ii) 0.65% of the next $250 million of aggregate
average daily net assets of the Fund, (iii) 0.055% of the next $250 million of
aggregate average daily net assets of the Fund, and (iv) 0.050% of all aggregate
average daily net assets of the Fund over $1 billion.
BISYS Fund Services (the "Sub-Administrator"), which is a subsidiary of
The BISYS Group, Inc. ("BISYS"), has been retained by the Administrator to
perform certain administrative services. BISYS, headquartered in Little Falls,
New Jersey, is a publicly owned company engaged in information processing, loan
servicing and 401(k) administration and recordkeeping services to and through
banking and other financial organizations. BISYS and its affiliates, BISYS Fund
Services and BISYS Fund Services, Inc., have their principal place of business
at 3435 Stelzer Road, Columbus, Ohio 43219.
BISYS Fund Services, Inc. provides the Fund with all accounting related
services. For the accounting services provided, BISYS Fund Services, Inc. shall
be paid a fee of $20,000 per Portfolio per year.
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<PAGE>
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, Accounting
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.
PURCHASE OF SHARES
Gabelli Fixed Income 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.
Shares of the Fund may be purchased through Participating Organizations.
Certain organizations may charge the investor a fee for their services. Such
fees may vary among these organizations, and such organizations may impose
higher or lower initial or subsequent investment requirements than those
established by the Fund. Services provided by these organizations may include
allowing the investor to establish a margin account and to borrow on the value
of the Fund's shares in that account.
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. However, under certain circumstances,
the Fund may waive the investment minimums.
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. No third party or foreign checks will be accepted. Purchases
made by mail should be sent to The Treasurer's Fund, Inc., P.O. Box 3808,
Boston, Massachusetts, 02266-8308.
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<PAGE>
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 Eastern 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 4:00 p.m. Eastern 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. Eastern 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.
Other Purchase Information. Requests in "good order" must include the
following documentation: (a) A letter of instruction, if required, signed by all
registered owners of the shares in the exact names in which they are registered;
(b) Any required signature guarantees (see "Signature Guarantees" below); and
(c) Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit sharing
plans and other organizations.
Signature Guarantees. To protect shareholder accounts, the Funds and its
transfer agent from fraud, signature guarantees are required to enable the Funds
to verify the identity of the person who has authorized a redemption from an
account. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareowner(s) and
the registered address and (2) share transfer requests. Shareholders may contact
the Funds at 1-800-TSR-FUND/1-800-877-3863 for further details.
By Wire. To initially purchase shares by a Federal fund wire, an investor
should first telephone the Fund at 1-800-TSR-FUND/1-800-877-3863 to obtain a new
account number. The investor should instruct a Federal Reserve System member
bank to wire funds to:
State Street Bank and Trust Company
ABA #11-0000-28 REF DDA #99046187
Re: The Treasurer's Fund
A/C #
--------------------------------
Account of (Registered Owner)
--------------------------
225 Franklin Street, Boston, MA 02110
For initial purchased by wire, the investor should promptly complete and
mail the application to the address shown above for mail purchases. There may be
a charge by your bank for transmitting the money by bank wire but State Street
Bank and Trust Company does not charge investors in the Fund for the receipt of
wire transfers. If you are planning to wire funds, it is suggested that you
instruct your bank early in the day so the wire transfer can be accomplished the
same day.
By Mail. Purchases to open new accounts which are mailed should be sent to
The Treasurer's Fund, Inc., P.O. Box 3808, Boston, Massachusetts 02266-8308,
together with the completed account application.
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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 Eastern
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. Eastern 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.
Dividends will continue to be paid until a check is presented to the Portfolio
for payment. It is not possible to use a check to close out your account.
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' 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.
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<PAGE>
Requests in "good order" must include the following documentation: (a) A
letter of instruction, if required, signed by all registered owners of the
shares in the exact names in which they are registered; (b) Any required
signature guarantees (see "Signature Guarantees" above); and (c) Other
supporting legal documents, if required, in the case of estates, trusts,
guardianships, custodianships, corporations, pension and profit sharing plans
and other organizations.
EXCHANGE OF SHARES
Investors may, without cost, exchange shares from any of the Portfolios of
the Fund into any other Portfolio of the Fund or other mutual funds managed by
Gabelli Funds, Inc. or its affiliates, which are abailable for sale in their
state. Exchanges into other Portfolios of the Fund are 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." Investors who
wish to exchange shares of the Portfolios for shares of other Gabelli mutual
funds should obtain and review its prospectus. 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." Telephone Redemption will
be suspended for a period of up to 30 days following a telephonic address
change.
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."
If you elect to receive distributions in cash and checks (1) are returned
and marked as "undeliverable" or (2) remain uncashed for six months, your cash
election will be changed automatically and your future dividend and capital
gains distributions will be reinvested in the Fund at the per share net asset
value determined as of the date of payment of the distribution. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation.
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
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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 Money Market Portfolios computes its net asset value twice
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 Eastern time; the Limited Term
Portfolio and the Tax Exempt Limited Term Portfolio, 4:00 p.m. Eastern time.
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, Global Money Market Portfolio and 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 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
the Portfolios' yield, effective yield and 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
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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.
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. The Fund does not issue
certificates evidencing Fund shares.
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
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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, 1997, the Advisor made payments
under the Plans to or on behalf of Participating Organizations in the amount of
$541,876 with regard to the U.S. Treasury Money Market Portfolio, the Tax Exempt
Money Market Portfolio and the Domestic Prime Money Market Portfolio
(representing .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.
TAXES
The active Portfolios of the Fund have qualified and intend to continue to
qualify under the Internal Revenue Code of 1986, as amended (the "Code"), as a
regulated investment company. As a regulated investment company, each Portfolio
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
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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 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. 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 are expected to be reinvested and dividends
that are declared and automatically reinvested satisfy the distribution
requirement, the Fund expects to satisfy the distribution requirement even if it
owns obligations with original issue discount. Shareholders will realize taxable
income on the automatic reinvestment of dividends that are attributable to
original issue discount on taxable obligations.
The 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 their treatment under the federal income tax laws.
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
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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.
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 long-term capital gains regardless of the length of time
shareholders have owned their shares. Capital gain dividends will be designated
as such in a written notice to investors mailed not later than 60 days after a
Portfolio taxable year closes. A shareholder may also recognize a taxable gain
or loss if the shareholder sells or redeems shares. Any gain or loss arising
from (or treated as arising from ) the sale or redemption of shares will be a
capital gain or loss, except in the case of a dealer in securities. Capital
gains realized by corporations are generally taxed at the same rate as ordinary
income. However, capital gains are taxable at a maximum rate of 28% to
non-corporate shareholders who have a holding period of more than 12 months, and
20% for non-corporate shareholders who have a holding period of more than 18
months. Corresponding maximum rate and holding period rules apply with respect
to capital gains dividends distributed by the Fund, without regard to the length
of time the shares have been held by the shareholder. Shareholders will be
advised as to what portion of capital gains are to be treated as 28% rate
capital gain or 20% rate capital gain (for noncorporate shareholders) (or 10%
rate gain for noncorporate shareholders who are subject to the 15% marginal tax
bracket for ordinary income). The deduction of capital losses is subject to
limitations.
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 accrued market discount will be long-term capital gain. However,
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. If a shareholder receives a capital gain
dividend and sells shares after holding them for six months or less (not
including as part of the period held, 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 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 the Fund should consult their tax
advisors about the federal,
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state and local tax consequences of an investment in the Fund in light of their
own individual circumstances.
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. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, serves as the Fund's transfer agent and dividend agent
pursuant to a Transfer Agency Agreement with the Fund and receives a fee for
such services. Boston Financial Data Services, Inc., an affiliate of State
Street Bank and Trust Company, serves as the Fund's shareholder accounting
agent.
GENERAL INFORMATION
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value. Failure to adequately address this issue could have potentially serious
repercussions. The Adviser is in the process of working with the Fund's service
providers to prepare for the year 2000. Based on information currently
available, the Adviser does not expect that the Fund will incur significant
operating expenses or be required to incur materials costs to be year 2000
compliant. Although the Adviser does not anticipate that the year 2000 issue
will have a material impact on the Fund's ability to provide service at current
levels, there can be no assurance that steps taken in preparation for the year
2000 will be sufficient to avoid any adverse impact on the Fund.
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<PAGE>
PART B
THE TREASURER'S FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
February 27, 1998
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of The Treasurer's Fund, Inc. dated
February 27, 1998, as it may be amended from time to time, a copy of which may
be obtained without charge by writing to Gabelli Fixed Income Distributors,
Inc., 19 Old Kings Highway South, Darien, Connecticut 06820-4526. This Statement
of Additional Information is incorporated by reference into the Prospectus in
its entirety.
<PAGE>
TABLE OF CONTENTS
Page
THE PORTFOLIOS AND THEIR POLICIES ......................................... 1
Investments and Investment Techniques Common to Two or More Portfolios .... 7
Change in Ratings................................................... 7
Management Strategies............................................... 7
Municipal Obligations............................................... 8
Amortized Cost Valuation of Portfolio Securities.................... 9
Variable Rate Demand Instruments.................................... 10
When-Issued Securities.............................................. 11
Stand-by Commitments................................................ 12
Repurchase Agreements............................................... 13
Reverse Repurchase Agreements....................................... 14
Participation Interests............................................. 14
Bank Obligations, Certificates of Deposit and Bankers' Acceptances.. 14
Mortgage-Backed Securities.......................................... 15
Foreign Securities.................................................. 16
Privately Placed Securities......................................... 16
Hedging Instruments................................................. 17
Loan of Portfolio Securities........................................ 18
Puts for the Tax Exempt Portfolios.................................. 19
INVESTMENT RESTRICTIONS ................................................... 19
MANAGEMENT OF THE FUND .................................................... 22
Directors and Officers ................................................ 22
Investment Advisor .................................................... 26
Fees ............................................................... 27
Expense Limitation .................................................... 27
Administrator.......................................................... 28
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT............................... 29
TAXES ..................................................................... 29
PURCHASE, REDEMPTION AND EXCHANGE ......................................... 34
DIVIDENDS AND DISTRIBUTIONS ............................................... 34
NET ASSET VALUE ........................................................... 34
COMPUTATION OF YIELD ...................................................... 35
Tax Equivalent Yield .................................................. 36
Computation of Total Return ........................................... 37
DESCRIPTION OF COMMON STOCK ............................................... 37
DISTRIBUTION PLANS ........................................................ 39
<PAGE>
BROKERAGE AND PORTFOLIO TURNOVER .......................................... 40
Brokerage ............................................................. 40
Portfolio Turnover .................................................... 40
COUNSEL AND INDEPENDENT AUDITORS .......................................... 41
RATINGS OF MUNICIPAL AND CORPORATE OBLIGATIONS ............................ 42
Unrated Bonds ......................................................... 43
Commercial Paper Ratings .............................................. 43
Description of Standard & Poor's Corporation's
two highest commercial paper ratings................................ 43
Description of Moody's Investors Service, Inc.'s
two highest commercial paper ratings................................ 44
Money Market Fund Ratings.............................................. 44
Description of Standard & Poor's Corporation's
two highest money market fund ratings............................... 44
Description of Moody's Investors Service, Inc.'s
two highest money market fund ratings............................... 44
FINANCIAL STATEMENTS....................................................... 44
<PAGE>
The Treasurer's Fund, Inc.
THE PORTFOLIOS AND THEIR OBJECTIVES
(See the Fund's Prospectus dated February 27, 1998)
The Treasurer's Fund, Inc. (the "Fund") is a diversified, no-load, fixed
income mutual fund consisting of six portfolios (the "Portfolios") which are
designed to meet the short and intermediate term investment needs of
corporations and institutional cash managers including individuals. There are no
sales loads or exchange or redemption fees associated with the Fund. The
investment objectives stated in the Prospectus for each Portfolio are
fundamental and may be changed only with the approval of a majority of
outstanding shares of that Portfolio.
The investment objectives and policies of the U.S. Treasury Money Market
Portfolio are sought through the following additional strategies employed in the
management of the Portfolio which are described under "Investments and
Investment Techniques Common to Two or More Portfolios":
1. Change in Ratings
2. Amortized Cost Valuation of Portfolio Securities
3. When-Issued Securities
4. Repurchase Agreements
5. Reverse Repurchase Agreements
6. Loan of Portfolio Securities
The investment objectives and policies of the Domestic Prime Money Market
Portfolio are sought through the following additional strategies employed in the
management of the Portfolio which are described under "Investments and
Investment Techniques Common to Two or More Portfolios":
1. Change in Ratings
2. Amortized Cost Valuation of Portfolio Securities
3. Variable Rate Demand Instruments
4. When-Issued Securities
5. Repurchase Agreements
6. Reverse Repurchase Agreements
7. Private Placements
8. Participation Interests
9. Mortgage-Backed Securities
10. Bank Obligations, Certificates of Deposit and Bankers' Acceptances
11. Loan of Portfolio Securities
The investment objectives and policies of the Global Money Market
Portfolio are sought through the following additional strategies employed in the
management of the Portfolio which are described under "Investments and
Investment Techniques Common to Two or More Portfolios":
1. Change in Ratings
2. Amortized Cost Valuation of Portfolio Securities
3. Variable Rate Demand Instruments
4. When-Issued Securities
5. Repurchase Agreements
6. Reverse Repurchase Agreements
7. Private Placements
8. Participation Interests
9. Mortgage-Backed Securities
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10. Bank Obligations, Certificates of Deposit and Bankers' Acceptances
11. Loan of Portfolio Securities
12. Foreign Securities
The investment objectives and policies of the Tax Exempt Money Market
Portfolio are sought through the following additional strategies employed in the
management of the Portfolio which are described under "Investments and
Investment Techniques Common to Two or More Portfolios":
1. Change in Ratings
2. Municipal Obligations
3. Amortized Cost Valuation of Portfolio Securities
4. Variable Rate Demand Instruments
5. When-Issued Securities
6. Stand-By Commitments
7. Repurchase Agreements
8. Reverse Repurchase Agreements
9. Private Placements
10. Participation Interests
11. Mortgage-Backed Securities
12. Bank Obligations, Certificates of Deposit and Bankers' Acceptances
13. Loan of Portfolio Securities
The investment objectives and policies of the Limited Term Portfolio are
sought through the following additional strategies employed in the management of
the Portfolio which are described under "Investments and Investment Techniques
Common to Two or More Portfolios":
1. Change in Ratings
2. Management Strategies
3. Amortized Cost Valuation of Portfolio Securities
4. Variable Rate Demand Instruments
5. When-Issued Securities
6. Repurchase Agreements
7. Reverse Repurchase Agreements
8. Participation Interests
9. Hedging Instruments
10. Private Placements
11. Mortgage-Backed Securities
12. Bank Obligations, Certificates of Deposit and Bankers' Acceptances
13. Loan of Portfolio Securities
14. Foreign Securities
The investment objectives and policies of the Tax Exempt Limited Term
Portfolio are sought through the following additional strategies employed in the
management of the Portfolio which are described under "Investments and
Investment Techniques Common to Two or More Portfolios":
1. Change in Ratings
2. Management Strategies
3. Municipal Obligations
4. Amortized Cost Valuation of Portfolio Securities
5. Variable Rate Demand Instruments
6. When-Issued Securities
7. Stand-By Commitments
8. Repurchase Agreements
9. Reverse Repurchase Agreements
10. Participations
11. Hedging Instruments
12. Private Placements
13. Mortgage-Backed Securities
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14. Bank Obligations Certificates of Deposit and Bankers' Acceptances
15. Loan of Portfolio Securities
Investments and Investment Techniques
Common to Two or More Portfolios
Change in Ratings. Subsequent to its purchase by a Portfolio, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
required for purchases by that Portfolio. With regard to the Limited Term
Portfolio and the Tax Exempt Limited Term Portfolio, neither event requires the
elimination of such securities from these Portfolios, but the Advisor will
consider such an event to be relevant in its determination of whether these
Portfolios should continue to hold such securities. To the extent that the
ratings accorded by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("S&P") for securities may change as a result of changes in
these ratings systems, the Advisor will attempt to use comparable ratings as
standards for its investment in debt securities in accordance with the
investment policies contained therein. However, if these Portfolios hold any
variable rate demand instruments with stated maturities in excess of one year,
such instruments must maintain their high quality rating or must be sold from
these Portfolios. See "Variable Rate Demand Instruments" herein. With regard to
the U.S. Treasury Money Market Portfolio, the Domestic Prime Money Market
Portfolio, the Global Money Market Portfolio and the Tax Exempt Money Market
Portfolio, the Board of Directors of the Fund shall reassess promptly whether
the security presents minimal credit risks and shall cause these Portfolios to
take such action as the Board of Directors determines is in the best interest of
these Portfolios and their shareholders. However, reassessment is not required
if the security is disposed of or matures within five business days of the
Advisor becoming aware of the new rating and provided further that the Board of
Directors is subsequently notified of the Advisor's actions.
In addition, in the event that a security (1) is in default, (2) ceases to
be an Eligible Security under Rule 2a-7, or (3) is determined to no longer
present minimal credit risks or an event of insolvency occurs with respect to
the issuer of a Portfolio security or the provider of any demand feature or
guarantee, these Portfolios will dispose of the security absent a determination
by the Fund's Board of Directors that disposal of the security would not be in
the best interests of these Portfolios. In the event that the security is
disposed of, it shall be disposed of as soon as practicable consistent with
achieving an orderly disposition by sale, exercise of any demand feature, or
otherwise. In the event of a default with respect to a security which
immediately before default accounted for 1/2 of 1% or more of a Portfolio's
total assets, that Portfolio shall promptly notify the Securities and Exchange
Commission of such fact and of the actions that such Portfolio intends to take
in response to the situation.
Management Strategies. In pursuit of their investment objectives the
Limited Term Portfolio and the Tax Exempt Limited Term Portfolio seek to
increase returns by actively managing securities in the short term and
intermediate term ranges. However, the Portfolios seek to minimize market risk
by employing a "laddered" portfolio approach as opposed to a market timing
approach. In addition, the Portfolios seek investments in securities which the
Advisor believes to be undervalued and, therefore, have capital appreciation
potential. The laddered approach to portfolio management involves the
maintenance of securities positions of varying amounts staggered at appropriate
points along the fixed income yield curve in an effort to maximize income and to
minimize interest rate risk. Assuming a positively sloping yield curve, a
portfolio designed with a 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.
Municipal Obligations. (1) Municipal Bonds are debt obligations of states,
cities, counties, municipalities and municipal agencies (all of which are
generally referred to as "municipalities") which generally have a maturity at
the time of issue of one year or more and which are issued to raise funds for
various public purposes such as construction of a wide range of public
facilities, to refund outstanding obligations and to obtain funds for
institutions and facilities.
The two principal classifications of Municipal Bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Issuers of general obligation bonds include states,
counties, cities, towns and other governmental units. The principal of, and
interest on, revenue bonds are payable from the
3
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income of specific projects or authorizations and generally are not supported by
the issuer's general power to levy taxes. In some cases, revenues derived from
specific taxes are pledged to support payments on a revenue bond.
In addition, certain kinds of "private activity bonds" are issued by or on
behalf of public authorities to provide funding for various privately operated
industrial facilities (hereinafter referred to as "industrial revenue bonds" or
"IRBs"). Interest on the IRBs is generally exempt, with certain exceptions, from
federal income tax pursuant to Section 103(a) of the Internal Revenue Code,
provided the issuer and corporate obligor thereof continue to meet certain
conditions. (See "Taxes".) IRBs are, in most cases, revenue bonds and do not
generally constitute the pledge of the credit of the issuer of such bonds. The
payment of the principal and interest on IRBs usually depends solely on the
ability of the user of the facilities financed by the bonds or other guarantor
to meet its financial obligations and, in certain instances, the pledge of real
and personal property as security for payment. If there is not an established
secondary market for the IRBs, the IRBs will be supported by letters of credit,
guarantees, insurance or other credit facilities that meet the high quality
criteria of the Portfolios stated in the Prospectus and provide a demand feature
which may be exercised by the Portfolios to provide liquidity. In accordance
with investment restriction 12 (see "Investment Restrictions" section), the
Portfolios are permitted to invest up to 10% of the net assets in high quality,
short-term Municipal Obligations (including IRBs) that may not be readily
marketable or have a liquidity feature.
(2) The principal kinds of Municipal Notes include tax anticipation notes,
bond anticipation notes, revenue anticipation notes and grant anticipation
notes. Notes sold in anticipation of collection of taxes, a bond sale or receipt
of other revenues are usually general obligations of the issuing municipality or
agency.
(3) Issues of Municipal Commercial Paper typically represent very short
term, unsecured, negotiable promissory notes. These obligations are often issued
to meet seasonal working capital needs of municipalities or to provide interim
construction financing and are paid from general revenues of municipalities or
are refinanced with long term debt. In most cases Municipal Commercial Paper is
backed by letters of credit, lending agreements, note repurchase agreements or
other credit facility agreements offered by banks or other institutions which
may be called upon in the event of default by the issuer of the commercial
paper.
(4) Municipal Leases, which may take the form of a lease or an installment
purchase or conditional sale contract, are issued by state and local governments
and authorities to acquire a wide variety of equipment and facilities such as
fire and sanitation vehicles, telecommunications equipment and other capital
assets. Municipal Leases frequently have special risks not normally associated
with general obligation or revenue bonds. Leases and installment purchases or
conditional sale contracts (which normally provide for title to the leased asset
to pass eventually to the government issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"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 obligation, the number of dealers willing to purchase or sell the
obligations and the number of other potential buyers and the nature of the
marketplace for the obligations, including the time needed to dispose of the
obligations and the method of soliciting offers. If the Board determines that
any municipal leases are illiquid, such leases will be subject to the 10%
limitation on investments in illiquid securities. The Board of Directors is also
responsible for determining the credit quality of municipal leases, on an
ongoing basis, including an assessment of the likelihood that the lease will not
be canceled.
The Fund expects that, on behalf of the Tax Exempt Money Market Portfolio
and the Tax Exempt Limited Term Portfolio, it will not invest more than 25% of
each Portfolio's total assets in municipal obligations whose issuers are located
in the same state or more than 25% of each Portfolio's total assets in
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municipal obligations the security of which is derived from any one category.
There could be economic, business or political developments which might affect
all municipal obligations of a similar type. However, the Fund believes that the
most important consideration affecting risk is the quality of particular issues
of municipal obligations rather than factors affecting all, or broad classes of,
municipal obligations.
Amortized Cost Valuation of Portfolio Securities. Pursuant to Rule 2a-7
under the Investment Company Act of 1940 (the "Rule"), each of the U.S. Treasury
Money Market Portfolio, the Domestic Prime Money Market Portfolio, the Global
Money Market Portfolio and the Tax Exempt Money Market Portfolio (the "Money
Market Portfolios") uses the amortized cost method of valuing its investments,
which facilitates the maintenance of the Money Market Portfolios' per share net
asset value at $1.00. The amortized cost method involves initially valuing a
security at its cost and thereafter amortizing to maturity any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument.
Consistent with the provisions of the Rule, the Money Market Portfolios
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having effective maturities of 397 days or less, and
invest only in securities determined by or under the direction of the Board of
Directors to be of high quality with minimal credit risks.
The Board of Directors has also established procedures designed to
stabilize, to the extent reasonably possible, the Money Market Portfolios' price
per share as computed for the purpose of sales and redemptions at $1.00. Such
procedures include review of the Money Market Portfolios' investments by the
Board of Directors at such intervals as they deem appropriate to determine
whether each Portfolio's net asset value calculated by using available market
quotations or market equivalents (i.e., determination of value by reference to
interest rate levels, quotations of comparable securities and other factors)
deviates from $1.00 per share based on amortized cost. Market quotations and
market equivalents used in such review may be obtained from an independent
pricing service approved by the Board of Directors.
The extent of deviation between any Money Market Portfolio's net asset
value based upon available market quotations or market equivalents and $1.00 per
share based on amortized cost, will be periodically examined by the Board of
Directors. If such deviation exceeds 1/2 of 1%, the Board of Directors will
promptly consider what action, if any, will be initiated. In the event the Board
of Directors determines that a deviation exists which may result in material
dilution or other unfair results to investors or existing shareholders, they
will take such corrective action as they regard to be necessary and appropriate,
including the sale of portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding part or
all of dividends or payment of distributions from capital or capital gains;
redemptions of shares in kind; or establishing a net asset value per share by
using available market quotations or equivalents. Each Money Market Portfolio
may hold cash for the purpose of stabilizing its net asset value per share.
Holdings of cash, on which no return is earned, would tend to lower the yield on
the Money Market Portfolios' shares.
Variable Rate Demand Instruments. The Domestic Prime Money Market
Portfolio, Global Money Market Portfolio, Tax Exempt Money Market Portfolio,
Limited Term Portfolio and Tax Exempt Limited Term Portfolio may purchase
variable rate demand instruments.
Variable rate demand instruments that the Portfolios will purchase are tax
exempt Municipal Obligations or taxable (variable amount master demand notes)
debt obligations that provide for a periodic adjustment in the interest rate
paid on the instrument and permit the holder to demand payment of the unpaid
principal balance plus accrued interest at specified intervals upon a specified
number of days' notice either from the issuer or by drawing on a bank letter of
credit, a guarantee, insurance or other credit facility issued with respect to
such instrument.
The variable rate demand instruments in which the Portfolios may invest
are payable on not more than thirty calendar days' notice either on demand or at
specified intervals not exceeding one year depending upon the terms of the
instrument. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily to up to one year and their
adjustments are based upon the prime rate of a bank or other appropriate
interest rate adjustment index as provided in the respective instruments. The
Fund will decide which variable rate demand instruments it will purchase in
accordance with procedures prescribed
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by its Board of Directors to minimize credit risks. A Portfolio utilizing the
amortized cost method of valuation may only purchase variable rate demand
instruments if (i) the instrument is subject to an unconditional demand feature,
exercisable by the Portfolio in the event of default in the payment of principal
or interest on the underlying securities, and such unconditional demand feature
qualifies as an Eligible Security. If an instrument is ever deemed to be of less
than high quality, the Portfolio either will sell it in the market or exercise
the demand feature.
The variable rate demand instruments that the Portfolios may invest in
include participation certificates purchased by the Portfolios from banks,
insurance companies or other financial institutions in fixed or variable rate,
tax-exempt Municipal Obligations (expected to be concentrated in IRBs) or
taxable debt obligations (variable amount master demand notes) owned by such
institutions or affiliated organizations. A participation certificate gives the
Portfolios an undivided interest in the obligation in the proportion that the
Portfolio's participation interest bears to the total principal amount of the
obligation and provides the demand repurchase feature described below. Where the
institution issuing the participation does not meet the Portfolio's high quality
standards, the participation is backed by an irrevocable letter of credit or
guaranty of a bank (which may be a bank issuing a confirming letter of credit,
or a bank serving as agent of the issuing bank with respect to the possible
repurchase of the certificate of participation or a bank serving as agent of the
issuer with respect to the possible repurchase of the issue) or insurance policy
of an insurance company that the Board of Directors of the Fund has determined
meets the prescribed quality standards for the Portfolio. However, immediately
after the acquisition of any securiites subject to a demand feature of guarantee
(as such terms are defined in the Rule), with respect to 75% of the total assets
of each of the Money Market Portfolios, not more than 10% of such assets may be
invested in securities that are subject to a guarantee or demand feature from
the same institution. Each of the Money Market Portfolios, however, may only
invest more than 10% of its assets in securities subject to a guarantee or
demand feature issued by a non-controlled person (as such term is defined in the
Rule). The Portfolios have the right to sell the participation certificate back
to the institution and, where applicable, draw on the letter of credit,
guarantee or insurance after no more than 30 days' notice either on demand or at
specified intervals not exceeding 397 days (depending on the terms of the
participation), for all or any part of the full principal amount of the
Portfolio's participation interest in the security, plus accrued interest. The
Portfolios intend to exercise the demand only (1) upon a default under the terms
of the bond documents, (2) as needed to provide liquidity to the Portfolio in
order to make redemptions of the Portfolio shares, or (3) to maintain a high
quality investment portfolio. The institutions issuing the participation
certificates will retain a service and letter of credit fee (where applicable)
and a fee for providing the demand repurchase feature, in an amount equal to the
excess of the interest paid on the instruments over the negotiated yield at
which the participations were purchased by the Portfolio. The total fees
generally range from 5% to 15% of the applicable prime rate* or other interest
rate index. With respect to insurance, the Portfolios will attempt to have the
issuer of the participation certificate bear the cost of the insurance, although
the Portfolios retain the option to purchase insurance if necessary, in which
case the cost of insurance will be an expense of the Portfolio subject to the
expense limitation on investment company expenses prescribed by any state in
which the Portfolio's shares are qualified for sale. The Advisor has been
instructed by the Fund's Board of Directors to continually monitor the pricing,
quality and liquidity of the variable rate demand instruments held by the
Portfolio, including the participation certificates, on the basis of published
financial information and reports of the rating agencies and other bank
analytical services to which the Portfolio may subscribe. Although these
instruments may be sold by the Portfolio, the Portfolio intends to hold them
until maturity, except under the circumstances stated above (see "Taxes").
While the value of the underlying variable rate demand instruments may
change with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The Portfolios may contain variable rate demand instruments on which
stated minimum or maximum rates, or maximum rates set by state law limit the
degree to which interest on such variable rate demand instruments may fluctuate;
to the extent it does, increases or decreases in value may be somewhat greater
than would be the case without such limits. Additionally, the Portfolios may
contain variable rate demand participation certificates in fixed rate Municipal
Obligations and taxable debt obligations. The fixed rate of interest on these
obligations will be a ceiling on the variable rate of the participation
certificate. In the event that interest rates increased so that the variable
rate
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exceeded the fixed rate on the obligations, the obligations could no longer be
valued at par and this may cause the Portfolios to take corrective action,
including the elimination of the instruments. Because the adjustment of interest
rates on the variable rate demand instruments is made in relation to movements
of the applicable banks' "prime rate", or other interest rate adjustment index,
the variable rate demand instruments are not comparable to long-term fixed rate
securities.1 Accordingly, interest rates on the variable rate demand instruments
may be higher or lower than current market rates for fixed rate obligations or
obligations of comparable quality with similar maturities.
For purposes of determining whether a variable rate demand instrument held
by a Portfolio matures within 397 days from the date of its acquisition, the
maturity of the instrument will be deemed to be the longer of (1) the period
required before the Portfolio is entitled to receive payment of the principal
amount of the instrument or (2) the period remaining until the instrument's next
interest rate adjustment. The maturity of a variable rate demand instrument will
be determined in the same manner for purposes of computing the Portfolios'
dollar-weighted average portfolio maturity. If a variable rate demand instrument
ceases to meet the investment criteria of the Portfolio, it will be sold in the
market or through exercise of the repurchase demand.
When-Issued Securities. All Portfolios may purchase debt obligations
offered on a "when-issued" or "delayed delivery" basis. When so offered, the
price, which is generally expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement date occurs
within one month of the purchase of debt obligations; during the period between
purchase and settlement, no payment is made by the purchaser to the issuer and
no interest accrues to the purchaser. To the extent that assets of a Portfolio
are not invested prior to the settlement of a purchase of securities, that
Portfolio will earn no income; however, it is intended that each Portfolio will
be fully invested to the extent practicable and subject to the policies stated
above. While when-issued securities may be sold prior to the settlement date, it
is intended that each Portfolio will purchase such securities with the purpose
of actually acquiring them unless a sale appears desirable for investment
reasons. At the time the Portfolio makes the commitment to purchase a debt
obligation on a when-issued basis, it will record the transaction and reflect
the value of the security in determining its net asset value. The Fund does not
believe that the net asset value or income of the Portfolios' securities
portfolios will be adversely affected by their purchase of debt obligations on a
when-issued basis. Each Portfolio will establish a segregated account in which
it will maintain cash and liquid high grade debt securities equal in value to
commitments for when-issued securities. Such segregated securities either will
mature or, if necessary, be sold on or before the settlement date.
Stand-by Commitments. When the Portfolios purchase Municipal Obligations
they may also acquire stand-by commitments from banks and other financial
institutions with respect to such Municipal Obligations. Under a stand-by
commitment, a bank or broker-dealer agrees to purchase at the Portfolio's option
a specified Municipal Obligation at a specified price with same day settlement.
A stand-by commitment is the equivalent of a "put" option acquired by the
Portfolio with respect to a particular Municipal Obligation held in its
portfolio.
The amount payable to the Portfolio upon its exercise of a stand-by
commitment normally would be (1) the acquisition cost of the Municipal
Obligation (excluding any accrued interest that the Portfolio paid on the
acquisition), less any amortized market premium or plus any amortized market or
original issue discount during the period the Portfolio owned the security plus
(2) all interest accrued on the security since the last interest payment date
during the period the security was owned by the Portfolio. Absent unusual
circumstances relating to a change in market value, the Portfolio would value
the underlying Municipal Obligation at amortized cost. Accordingly, the amount
payable by a bank or dealer during the time a stand-by commitment is exercisable
would be substantially the same as the market value of the underlying Municipal
Obligation.
- ----------
(1) The "prime rate" is generally the rate charged by a bank to its most
creditworthy customers for short term loans. The prime rate of a particular bank
may differ from other banks and will be the rate announced by each bank on a
particular day. Changes in the prime rate may occur with great frequency and
generally become effective on the date announced.
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The Portfolio's right to exercise a stand-by commitment would be
unconditional and unqualified. A stand-by commitment would not be transferable
by the Portfolio, although it could sell the underlying Municipal Obligation to
a third party at any time.
The Advisor expects that stand-by commitments generally will be available
without the payment of any direct or indirect consideration. However, if
necessary and advisable, the Portfolio may pay for stand-by commitments either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to such a commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by commitments held in the Portfolio would not
exceed 1/2 of 1% of the value of the Portfolio's total assets calculated
immediately after each stand-by commitment was acquired.
The Portfolio would enter into stand-by commitments only with banks and
other financial institutions that, in the Advisor's opinion, present minimal
credit risks and where the issuer of the Municipal Obligation meets the
investment criteria of the Portfolio. The Portfolio's reliance upon the credit
of these banks and broker-dealers would be supported by the value of the
underlying Municipal Obligations held by the Portfolio that were subject to the
commitment.
The Portfolio intends to acquire stand-by commitments solely to facilitate
Portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The purpose of this practice is to permit the Portfolio to be
fully invested in securities the interest on which is exempt from federal income
taxes while preserving the necessary liquidity to purchase securities on a
when-issued basis, to meet unusually large redemptions and to purchase at a
later date securities other than those subject to the stand-by commitment.
The acquisition of a stand-by commitment would not affect the valuation or
assumed maturity of the underlying Municipal Obligations which will continue to
be valued in accordance with the amortized cost method. Stand-by commitments
acquired by the Portfolios would be valued at zero in determining net asset
value. In those cases in which the Portfolio paid directly or indirectly for a
stand-by commitment, its cost would be reflected as unrealized depreciation for
the period during which the commitment is held by the Portfolio. Stand-by
commitments would not affect the dollar weighted average maturity of the
Portfolio. The maturity of a security subject to a stand-by commitment is longer
than the stand-by repurchase date.
The stand-by commitments that the Portfolios may enter into are subject to
certain risks, which include the ability of the issuer of the commitment to pay
for the securities at the time the commitment is exercised, the fact that the
commitment is not marketable by the Portfolios, and that the maturity of the
underlying security will generally be different from that of the commitment.
In addition, the Portfolio may apply to the Internal Revenue Service for a
ruling, or seek from its counsel an opinion, that interest on Municipal
Obligations subject to stand-by commitments will be exempt from federal income
taxation (see "Taxes"). In the absence of a favorable tax ruling or opinion of
counsel, the Portfolios will not engage in the purchase of securities subject to
stand-by commitments.
Repurchase Agreements. When a Portfolio purchases securities, it may enter
into a repurchase agreement with the seller wherein the seller agrees, at the
time of sale, to repurchase the security at a mutually agreed upon time and
price. A Portfolio may enter into repurchase agreements with member banks of the
Federal Reserve System and with broker-dealers who are recognized as primary
dealers in United States government securities by the Federal Reserve Bank of
New York. Although the securities subject to the repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than 397 days after the Portfolio's acquisition of the securities and normally
would be within a shorter period of time. The resale price will be in excess of
the purchase price, reflecting an agreed upon market rate effective for the
period of time the Portfolio's money will be invested in the security, and will
not be related to the coupon rate of the purchased security. At the time a
Portfolio enters into a repurchase agreement the value of the underlying
security, including accrued interest, will be equal to or exceed the value of
the repurchase agreement, and, in the case of a repurchase agreement exceeding
one day, the seller will agree that the value of the underlying security,
including accrued interest, will at all times be equal to or exceed the value of
the repurchase agreement. Each
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Portfolio may engage in a repurchase agreement with respect to any security in
which that Portfolio is authorized to invest, even though the underlying
security may mature in more than one year. The collateral securing the seller's
obligation must be of a credit quality at least equal to the Portfolio's
investment criteria for Portfolio securities and will be held by the Portfolio's
Custodian or in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase agreement
is deemed to be a loan from a Portfolio to the seller subject to the repurchase
agreement and is therefore subject to that Portfolio's investment restriction
applicable to loans. It is not clear whether a court would consider the
securities purchased by a Portfolio subject to a repurchase agreement as being
owned by that Portfolio or as being collateral for a loan by that Portfolio to
the seller. In the event of the commencement of bankruptcy or insolvency
proceedings with respect to the seller of the securities before repurchase of
the security under a repurchase agreement, a Portfolio may encounter delay and
incur costs before being able to sell the security. Delays may involve loss of
interest or decline in price of the security. If the court characterized the
transaction as a loan and a Portfolio has not perfected a security interest in
the security, that Portfolio may be required to return the security to the
seller's estate and be treated as an unsecured creditor of the seller. As an
unsecured creditor, a Portfolio would be at the risk of losing some or all of
the principal and income involved in the transaction. As with any unsecured debt
obligation purchased for a Portfolio, the Advisor seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligor, in this case the seller. Apart from the risk of bankruptcy or
insolvency proceedings, there is also the risk that the seller may fail to
repurchase the security, in which case a Portfolio may incur a loss if the
proceeds to that Portfolio of the sale to a third party are less than the
repurchase price. However, if the market value of the securities subject to the
repurchase agreement becomes less than the repurchase price (including
interest), the Portfolio involved will direct the seller of the security to
deliver additional securities so that the market value of all securities subject
to the repurchase agreement will equal or exceed the repurchase price. It is
possible that a Portfolio will be unsuccessful in seeking to impose on the
seller a contractual obligation to deliver additional securities.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by a Portfolio pursuant to an agreement to repurchase
the securities at an agreed upon price and date. Each Portfolio is permitted to
enter into reverse repurchase agreements for liquidity purposes or when it is
able to purchase other securities which will produce more income than the cost
of the agreement. Each Portfolio may enter into reverse repurchase agreements
only with those member banks of the Federal Reserve System and broker-dealers
who are recognized as primary dealers in U.S. government securities by the
Federal Reserve Bank of New York whose creditworthiness has been reviewed and
found satisfactory by the Fund's Board of Directors. When engaging in reverse
repurchase transactions, the Portfolios will maintain, in a segregated account
with its Custodian, securities equal in value to those subject to the agreement.
These agreements are considered to be borrowings and therefore are included in
the asset restriction contained under "Investment Restrictions" relating to
borrowings.
The Portfolio could experience delays in recovering securities in the
event of the bankruptcy of the other party to a reverse repurchase agreement and
could experience a loss to the extent that the value of the securities may have
decreased in the meantime.
Participation Interests. The Domestic Prime Money Market Portfolio, Global
Money Market Portfolio, Tax Exempt Money Market Portfolio, Limited Term
Portfolio and the Tax Exempt Limited Term Portfolio may purchase from banks
participation interests in all or part of specific holdings of Municipal or
other debt obligations (including corporate loans). Where the institution
issuing the participation does not meet the Portfolio's quality standards, the
participation may be backed by an irrevocable letter of credit or guarantee that
the Board of Directors has determined meets the prescribed quality standards of
each Portfolio. Thus, even if the credit of the selling bank does not meet the
quality standards of a Portfolio, the credit of the entity issuing the credit
enhancement will. Each Portfolio will have the right to sell the participation
interest back to the bank for the full principal amount of the Portfolio's
interest in the Municipal or debt obligation plus accrued interest, but only (1)
as required to provide liquidity to that Portfolio, (2) to maintain the quality
standards of each Portfolio's investment portfolio or (3) upon a default under
the terms of the debt obligation. The selling bank may receive a fee from a
Portfolio in connection with the arrangement. When purchasing bank participation
interests, the Portfolio will treat
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both the bank and the underlying borrower as the issuer of the instrument for
the purpose of complying with the diversification requirement of investment
restriction number 3 discussed below.
Bank Obligations, Certificates of Deposit and Bankers' Acceptances. All
the Portfolios, except the U.S. Treasury Money Market Portfolio, may purchase
certificates of deposit, bankers' acceptances and other obligations issued or
guaranteed by the 50 largest banks in the United States. For this purpose banks
are ranked by total deposits as shown by their most recent annual financial
statements. The "other obligations" in which the Portfolio may invest include
instruments (such as bankers' acceptances, commercial paper and certificates of
deposit) issued by U.S. subsidiaries of the 50 largest banks in the U.S. where
the instruments are guaranteed as to principal and interest by such banks. In
addition, the Global Money Market Portfolio and the Limited Term Portfolio may
also purchase certificates of deposit, bankers' acceptances and other
obligations (or instruments secured by such obligations) of (i) domestic banks
subject to regulation by the U.S. Government or its agencies (such as the
Federal Reserve Board, the Comptroller of the Currency, or the FDIC) and having
total assets of over $1 billion unless their obligations are guaranteed by their
parent bank, which has assets of over $5 billion; (ii) foreign branches of these
banks ("Euros"); (iii) United States branches of foreign banks of equivalent
size ("Yankees"); and (iv) foreign banks. The Portfolio limits investments in
foreign bank obligations to U.S. dollar denominated obligations of foreign banks
which have more than $10 billion of assets, are among the 75 largest in the
world, and have branches or agencies in the U.S. See "Foreign Securities" herein
for further discussion of the risks inherent in such investments. At the time
the Portfolio invests in any certificate of deposit, bankers' acceptance or
other bank obligation, the issuer or its parent must have its debt rated within
the quality standards of the Portfolio or if unrated be of comparable quality as
determined by the Fund's Board of Directors.
Mortgage-Backed Securities. Certain of the Portfolios may purchase
securities issued or guaranteed by federal agencies 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 ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC").
GNMA Mortgage-Backed Securities are mortgage-backed securities
representing part ownership of a pool of mortgage loans. These loans issued by
lenders such as mortgage bankers, commercial banks, and savings and loan
associations are either insured by the Federal Housing Administration (FHA) or
guaranteed by the Veterans Administration (VA). A "pool" or group of such
mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. Once approved by GNMA (a U.S. Government
corporation within the U.S. Department of Housing and Urban Development) the
timely payment of interest and principal is guaranteed by the full faith and
credit of the U.S. Government.
As mortgage-backed securities, GNMAs differ from bonds in that principal
is paid back by the borrower over the length of the loan rather than returned in
a lump sum at maturity. GNMAs are called "pass-through" securities because both
interest and principal payments, including prepayments, are passed through to
the holder of the security (in this case, the Portfolio).
The payment of principal of the underlying mortgages may exceed the
minimum required by the schedule of payments for the mortgages. Such prepayments
are made at the option of the mortgagors for a wide variety of reasons
reflecting their individual circumstances and may involve capital losses if the
mortgages were purchased at a premium. For example, mortgagors may speed up the
rate at which they prepay their mortgages when interest rates decline
sufficiently to encourage refinancing. A Portfolio, when such prepayments are
passed through to it, may be able to reinvest them only at a lower rate of
interest. The Advisor, in determining the attractiveness of GNMAs relative to
alternative fixed income securities, and in choosing specific GNMA issues, will
have made assumptions as to the likely speed of prepayment. Actual experience
may vary from these assumptions, resulting in a higher or lower investment
return than anticipated.
FNMA is a U.S. Government sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases residential mortgages from a list of
approved seller/services, which include state and federally-chartered
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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.
FHLMC 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. FHLMC issues Federal Home Loan Mortgage
Corporation Participation Certificates ("Pcs") which represent interests in
mortgages from FHLMC's mortgage portfolio. FHLMC guarantees the timely payment
of interest and ultimate collection of principal, but Pcs are not backed by the
full faith and credit of the U.S. Government.
FHLMC Pcs differ from FNMA pass-throughs in that the mortgages underlying
Pcs are mostly conventional mortgages rather than FHA insured or VA guaranteed
mortgages, although FHLMC has occasionally purchased FHA or VA loans. However,
in several other respects (such as the monthly pass-through of interest and
principal and the unpredictability of future prepayment experience) Pcs are
similar to FNMAs.
The Portfolios, except the U.S. Treasury Money Market Portfolio, may also
invest in Collateralized Mortgage Obligations ("CMOs"), a type of
mortgage-backed security. CMOs are debt securities collateralized by
mortgage-backed certificates issued by federal agencies or U.S. Government
sponsored corporations such as GNMA, FNMA and FHLMC. The payment of CMOs depends
upon the cash flow from the pool of mortgages represented by the mortgage-backed
certificates.
CMOs are divided into multiple classes. Generally, the interest on the
classes is distributed currently to the holders of each class. However,
principal is not paid in this manner. Instead, holders of the first class
receive all payments of principal until their bond is fully paid. Thereafter,
principal is paid on each succeeding class with the earliest maturing securities
retired first.
One or more classes, usually the last, may be zero-coupon bonds ("Z
bonds"). The cash flow that would otherwise be used to pay interest on this
class is used instead to pay principal on the earlier maturing classes. After
all prior classes are retired, the Z bond pays interest and principal until
final maturity. Interest accrued but not paid on the Z bond is added to the
principal of the Z bond and thereafter accrues interest.
Any guarantee or insurance on a mortgage-backed certificate does not
extend to a Portfolio's investments in CMOs. There is a possibility of limited
liquidity as there is no assurance that a secondary market will develop for CMOs
or, if such market does develop, that it will provide a Portfolio with liquidity
or remain for the term of the investment. If an event of default occurs with
respect to the CMOs purchased by a Portfolio, there can be no assurance that the
collateral pledged as security therefor will be sufficient to pay the principal
and interest due on such bonds. The payment of principal of the underlying
mortgages may exceed the minimum required by the schedule of payments for the
mortgages. Such prepayments are made at the option of the mortgagors for a wide
variety of reasons reflecting their individual circumstances and may involve
capital losses if the mortgages were purchased at a premium. For example,
mortgagors may speed up the rate at which they prepay their mortgages when
interest rates decline sufficiently to encourage refinancing. The Advisor, in
determining the attractiveness of CMO's relative to alternative fixed income
securities, and in choosing specific CMO issues, will have made assumptions as
to the likely speed of prepayment. Actual experience may vary from these
assumptions, resulting in a higher or lower investment return than anticipated.
Foreign Securities. The Global Money Market Portfolio and the Limited Term
Portfolio may invest in certain foreign securities. Investment in obligations of
foreign issuers and in foreign branches of domestic banks involves somewhat
different investment risks from those affecting obligations of United States
domestic issuers. There may be limited publicly available information with
respect to foreign issuers and foreign issuers are not generally subject to
uniform accounting, auditing and financial standards and requirements comparable
to those applicable to domestic companies. There may also be less government
supervision and regulation of foreign securities exchanges, brokers and listed
companies than in the United States. Foreign securities markets have
substantially less volume than national securities exchanges and securities of
some foreign companies are less liquid and more volatile than securities of
comparable domestic companies. Brokerage commissions and other transaction costs
on foreign securities exchanges
11
<PAGE>
are generally higher than in the United States. Dividends and interest paid by
foreign issuers may be subject to withholding and other foreign taxes, which may
decrease the net return on foreign investments as compared to dividends and
interest paid to the Portfolio by domestic companies. Additional risks include
future political and economic developments, the possibility that a foreign
jurisdiction might impose or change withholding taxes on income payable with
respect to foreign securities, the possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits and the possible
adoption of foreign governmental restrictions such as exchange controls.
Privately Placed Securities. All the Portfolios, except the U.S. Treasury
Money Market Portfolio, may invest in securities issued as part of privately
negotiated transactions between an issuer and one or more purchasers. Except
with respect to securities subject to Rule 144A of the Securities Act of 1933
which are discussed below, these securities are typically not readily
marketable, and therefore are considered illiquid securities. The price these
Portfolios pay for illiquid securities, and any price received upon resale, may
be lower than the price paid or received for similar securities with a more
liquid market. Accordingly, the valuation of privately placed securities by
these Portfolios will reflect any limitations on their liquidity. As a matter of
policy, none of the Portfolios will invest more than 10% of the market value of
the total assets of the Portfolio in repurchase agreements maturing in over
seven days and other illiquid investments. The Portfolios may purchase
securities that are not registered ("restricted securities") under the
Securities Act of 1933 (the "Securities Act"), but can be offered and sold to
"qualified institutional buyers" under Rule 144A under the Securities Act. These
Portfolios may also purchase certain commercial paper issued in reliance on the
exemption from regulations in Section 4(2) of the Securities Act ("4(2) Paper").
However, each Portfolio will not invest more than 10% of its net assets in
illiquid investments, which include securities for which there is no ready
market, securities subject to contractual restriction on resale, certain
investments in asset-backed and receivable-backed securities and restricted
securities (unless, with respect to these securities and 4(2) Paper, the Fund's
Directors continuously determine, based on the trading markets for the specific
restricted security, that it is liquid). The Directors may adopt guidelines and
delegate to the Investment Advisor the daily function of determining and
monitoring liquidity of restricted securities and 4(2) Paper. The Directors,
however, will retain sufficient oversight and be ultimately responsible for the
determinations.
Since it is not possible to predict with assurance exactly how this market
for restricted securities sold and offered under Rule 144A will develop, the
Directors will carefully monitor the Portfolios investments in these securities,
focusing on such factors, among others, as valuation, liquidity and availability
of information. This investment practice could have the effect of increasing the
level of illiquidity in the Portfolios to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities.
Hedging Instruments. Hedging is a means of transferring risk which an
investor does not desire to assume during an uncertain market environment. The
Limited Term Portfolio and the Tax Exempt Limited Term Portfolio are permitted
to enter into transactions solely (a) to hedge against changes in the market
value of portfolio securities or (b) to close out or offset existing positions.
The transactions must be appropriate for the reduction of risk; they cannot be
for speculation. The Limited Term Portfolio and the Tax Exempt Limited Term
Portfolio may (a) sell futures contracts on non-municipal and municipal debt
securities and indexes of non-municipal and municipal debt securities,
respectively, and (b) purchase or write (sell) options on these futures, on
non-municipal and municipal debt securities and on indexes of non-municipal and
municipal debt securities traded on registered securities exchanges and contract
markets, respectively.
Financial futures contracts obligate the seller to deliver a specific type
of security, at a specified time for a specified price. The contracts may be
satisfied by actual delivery of the securities or by an offsetting transaction.
There are risks associated with the use of futures contracts for hedging
purposes. In certain market conditions, as with rising interest rates, futures
contracts may not completely offset a decline in value of portfolio securities.
It may not always be possible to execute a buy or sell order at the desired
price or to close out an open position due to market conditions, limits on open
positions, and/or daily price fluctuation limits. Changes in market interest
rates may differ substantially from those anticipated when hedge positions were
established. If a Portfolio has hedged against rising interest rates and they
decline, the value of the Portfolio will increase, but at least part of the
benefit of the increase will be lost because of losses in the Portfolio's
futures positions. The Portfolio may have to sell securities to meet daily
12
<PAGE>
maintenance margin requirements. The risk of loss to the Portfolio is
theoretically unlimited when the Portfolio sells a futures contract because the
Portfolio is obligated to make delivery unless the contract is closed out,
regardless of fluctuations in the price of the underlying security.
The Portfolios may also purchase put options or write (sell) call options
on non-municipal debt securities. In the event that options on municipal debt
securities became available, the Tax Exempt Limited Term Portfolio would
consider purchasing or selling these options. The Portfolios may purchase call
options and write (sell) put options on debt securities to close out open
positions, purchase put options to protect its holding from a decline in market
value, and write call options. The Portfolios may also purchase put options and
write call options on futures contracts which are traded on a United States
exchange or board of trade and enter into closing transactions with respect to
these options. The Portfolios may use options on futures contracts under the
same conditions it uses put and call options on debt securities. The effect of a
futures contract may also be created by simultaneous purchase of a put and sale
of a call option on the same security. When the Portfolio purchases a put option
or call option, the maximum risk of loss to the Portfolio is the price of the
option purchased. The use of options as a hedge rather than financial futures
contracts may result in partial hedges because of the limits inherent in the
exercise prices. The Portfolio will not invest more than 5% of its net assets in
premiums on put options.
The Tax Exempt Limited Term Portfolio may also utilize futures contracts
on municipal bond indexes or related put and call options on these index
contracts. The Portfolio's strategies in employing these contracts would be
similar to the strategies applicable to futures and options contracts generally.
The Portfolio may also buy put options and sell call options on municipal bond
index futures or on municipal bond indexes.
The hedging activities of the Portfolios are subject to several additional
restrictions. A Portfolio may not enter into futures contracts or related
options if immediately thereafter the sum of the amount of initial and variation
margin deposits on outstanding futures contracts and premiums paid for related
options would exceed 20% of the market value of its total assets. In addition,
it may not enter into futures contracts or purchase or sell related options
(other than offsetting existing positions) if immediately thereafter the sum of
the amount of initial margin deposits on outstanding futures contracts and
premiums paid for related options would exceed 5% of the market value of its
total assets. A Portfolio's ability to engage in hedging activities is also
restricted by the requirements to "cover" any sale of a futures contract with
securities held in the Portfolio and to establish and maintain segregated
accounts (which may be invested only in liquid assets such as cash, U.S.
government securities and other high grade debt obligations) equal to the amount
of any futures contract purchased by the Portfolio. A segregated account freezes
those assets of the Portfolio and renders them unavailable for sale or other
disposition. These requirements may thus reduce the Portfolio's flexibility in
making investment decisions with respect to such assets. The Portfolios' ability
to engage in hedging activities may be further limited by certain income tax
considerations. See "Taxes".
To the extent the Portfolios use hedging instruments which do not involve
specific portfolio securities, offsetting price changes between the hedging
instruments and the securities being hedged will not always be possible, and
market value fluctuations of the Portfolio may not be completely eliminated.
When using hedging instruments that do not specifically correlate with
securities in the Portfolio, the Advisor will attempt to create a very closely
correlated hedge. Hedging activities based on non-municipal debt securities or
indexes may not correlate as closely to the Portfolios as hedging activities
based on municipal debt securities or indexes. Less closely correlated hedges
are likely to occur if a Portfolio hedges municipal securities with a futures
contract on United States government obligations, other non-municipal securities
or an index that does not include municipal securities. This type of hedging
activity may be useful to a Portfolio, especially where closely correlated
hedging activities based on municipal securities or indexes are not available.
Brokerage commissions on financial futures and options transactions and
premium costs for purchasing options may tend to reduce a Portfolio's yield.
Loan of Portfolio Securities. Each Portfolio may from time to time lend
securities on a short term basis to banks, brokers and dealers and receive as
collateral cash, securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, or irrevocable bank letters of credit (or any
13
<PAGE>
combination thereof), which collateral will be marked to market daily and will
be required to be maintained at all times in an amount equal to at least 100% of
the current value of the loaned securities plus accrued interest. Such loans are
not made with respect to any Portfolio if as a result the aggregate of all
outstanding loans exceeds one-third of the value of the Portfolio's total
assets. Securities lending will afford a Portfolio the opportunity to earn
additional income because the Portfolio will continue to be entitled to the
interest payable on the loaned securities and also will either receive as income
all or a portion of the interest on the investment of any cash loan collateral
or, in the case of collateral other than cash, a fee negotiated with the
borrower. Such loans will be terminable at any time. Loans of securities involve
risks of delay in receiving additional collateral or in recovering the
securities lent or even loss of rights in the collateral in the event of the
insolvency of the borrower of the securities. A Portfolio will have the right to
retain record ownership of loaned securities in order to exercise beneficial
rights. A Portfolio may pay reasonable fees in connection with arranging such
loans. The Portfolio will not lend its securities to any officer, partner,
Director, employee, or affiliate of the Fund, or the Advisor.
Puts for the Tax Exempt Portfolios. The Tax Exempt Money Market Portfolio
and the Tax Exempt Limited Term Portfolio may purchase municipal bonds or notes
with the right to resell them at an agreed price or yield within a specified
period prior to maturity to facilitate portfolio liquidity. This right to resell
is known as a put. The aggregate price paid for securities with puts may be
higher than the price which otherwise would be paid. Consistent with the
investment objectives of these Portfolios and subject to the supervision of the
Directors, the purpose of this practice is to permit the Portfolios to be fully
invested in tax exempt securities while maintaining the necessary liquidity to
purchase securities on a when-issued basis, to meet unusually large redemptions,
to purchase at a later date securities other than those subject to the put and
in the case of the Tax Exempt Limited Term Portfolio, to facilitate the
Advisor's ability to manage the portfolio actively. The principal risk of puts
is that the put writer may default on its obligation to repurchase. The Advisor
will monitor each writer's ability to meet its obligations under puts. See
"Investment Restrictions" and "Taxes" herein.
The amortized cost method is used by the Domestic Prime Money Market
Portfolio, the Global Money Market Portfolio and the Tax Exempt Money Market
Portfolio to value any municipal securities; no value is assigned to any puts on
such municipal securities. This method is also used by the Tax Exempt Limited
Term Portfolio to value certain high quality municipal securities which meet the
requirements specified for use of the amortized cost method; when these
securities are subject to puts separate from the underlying securities, no value
is assigned to the puts. The cost of any such put is carried as an unrealized
loss from the time of purchase until it is exercised or expires.
INVESTMENT RESTRICTIONS
Unless specified to the contrary, the following restrictions may not be
changed as to a Portfolio without the approval of a majority of the outstanding
voting securities of that Portfolio which, under the Investment Company Act of
1940 and the rules thereunder and as used in this Statement of Additional
Information, means the lesser of (1) 67% of the shares of a Portfolio present at
a meeting if the holders of more than 50% of the outstanding shares of that
Portfolio are present in person or by proxy, or (2) more than 50% of the
outstanding shares of a Portfolio.2
The Fund may not, on behalf of a Portfolio:
(1) with regard to the Domestic Prime Money Market Portfolio and the
Global Money Market Portfolio, invest more than 5% of their total assets
in securities of any one issuer; however, the Portfolios may invest more
than 5% of their total assets in the First Tier Securities of a single
issuer for a period of up to three business days;
(2) purchase securities (including warrants) other than those
described in the Prospectus as fundamental;
- ----------
(2) Any investment restrictions herein which involve a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
or encumbrance of securities or assets of, or borrowings by, the Portfolio.
14
<PAGE>
(3) with respect to 75% of the Portfolio's total assets, invest more
than 5% of the value of the total assets in the securities of any one
issuer, except obligations issued or guaranteed by the U.S. Government or
its agencies and instrumentalities;
(4) purchase the securities of any issuer if such purchase would
cause more than 10% of the voting securities of such issuer to be held by
the Portfolio or if such securities were purchased for the purpose of
exercising control;
(5) borrow money, except (a) from banks for extraordinary or
emergency purposes (not for leveraging or investment) or (b) by engaging
in reverse repurchase agreements, provided that (a) and (b) in the
aggregate do not exceed an amount equal to one-third of the value of the
total assets of that Portfolio less its liabilities (not including the
amount borrowed) at the time of borrowing, and further provided that 300%
asset coverage is maintained at all times;
(6) purchase securities while borrowings (excluding reverse
repurchase agreements entered into for other than extraordinary or
emergency purposes) exceed 5% of the Portfolio's total assets;
(7) mortgage, pledge, or hypothecate any assets except that a
Portfolio may pledge not more than one-third of its total assets to secure
borrowings made in accordance with Investment Restriction (5) above.
However, although not a fundamental policy of the Fund, as a matter of
operating policy in order to comply with certain state statutes, no
Portfolio will pledge its assets in excess of an amount equal to 10% of
net assets;
(8) act as underwriter of securities issued by others, except to the
extent that the purchase of securities in accordance with the Portfolio's
investment objectives and policies directly from the issuer thereof and
the later disposition thereof may be deemed to be underwriting;
(9) make loans to other persons, except loans of portfolio
securities and except to the extent that the purchase of debt obligations
in accordance with the Portfolio's investment objectives and policies and
the entry into repurchase agreements may be deemed to be loans;
(10) issue senior securities, except as appropriate to evidence
indebtedness which a Portfolio is permitted to incur pursuant to
Investment Restriction (5) and except for shares of the various series
which may be established by the Board of Directors;
(11) purchase and sell real estate or invest in real estate limited
partnerships or in limited partnership interests in real estate investment
trusts which are not readily marketable (although a Portfolio may invest
in securities of companies which deal in real estate and in other
permitted investments secured by real estate), commodities, commodities
contracts or oil and gas interests;
(12) invest more than 10% of the market value of the Portfolio's net
assets in illiquid investments including repurchase agreements maturing in
more than seven days and foreign securities, privately placed securities
(including short term debt obligations issued pursuant to Section 4(2) of
the Securities Act of 1933) and bank participation interests for which a
readily available market does not exist;
(13) sell securities short or purchase securities on margin, or
engage in the purchase and sale of a put, call, straddle or spread option
or in writing such option except to the extent that securities subject to
a demand obligation and stand-by commitments may be purchased as set forth
herein and except that the Limited Term Portfolio and the Tax Exempt
Limited Term Portfolio may purchase hedging instruments as described
herein;
(14) acquire securities of other investment companies;
(15) lend portfolio securities in an amount exceeding in the
aggregate one-third of the market value of the Portfolio's total assets,
less liabilities other than obligations created by these transactions;
15
<PAGE>
(16) invest more than 5% of the value of a Portfolio's total assets
in the securities of issuers where the entity providing the revenues from
which the issue is to be paid has a record, including predecessors, of
fewer than three years of continuous operation, except obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities.
The Fund may not, on behalf of the Portfolio or Portfolios specified:
(17) with respect to the Tax Exempt Money Market Portfolio and the
Tax Exempt Limited Term Portfolio, under normal market conditions,
purchase securities if such purchase would cause less than 80% of the
Portfolio's net assets to be invested in securities the income from which
is exempt from regular federal income tax;
(18) with respect to the U.S. Treasury Money Market Portfolio, the
Domestic Prime Money Market Portfolio, Global Money Market Portfolio and
Limited Term Portfolio, invest more than 25% of the value of the
Portfolio's total assets in securities of companies in the same industry
(excluding U.S. Government securities and, as to Domestic Prime Money
Market Portfolio and Global Money Market Portfolio only, certificates of
deposit and bankers' acceptances of domestic banks); and
(19) with respect to the Tax Exempt Money Market Portfolio and Tax
Exempt Limited Term Portfolio, purchase (i) pollution control and
industrial revenue bonds or (ii) securities which are not Municipal
Obligations, if in either case the purchase would cause more than 25% of
the value of the Portfolio's total assets to be invested in companies in
the same industry (for the purposes of this restriction wholly-owned
finance companies are considered to be in the industry of their parents if
their activities are primarily related to financing the activities of the
parents).
MANAGEMENT OF THE FUND
Directors and Officers
The Directors and Officers of the Fund and their principal occupations
during the last five years are set forth below.
Name, Age, Position(s) Principal Occupations During
with Fund and Address Past Five Years
- --------------------- ----------------------------
* Thomas E. O'Connor, 54.................... Consultant to the Adviser since
Director April 1997. President of Thomas
19 Old Kings Highway South E. O'Connor & Co., Inc., the
Darien, Connecticut 06820-4526 general partner of Thomas E.
O'Connor & Co. L.P., which was
the general partner of the former
Advisor and Gabelli O'Connor
Fixed Income Management Co.
(1985-1997)
+ Felix J. Christiana, 73................... Retired Senior Vice President,
Director Dollar Dry Dock Savings Bank.
35 Club Point Drive Director/Trustee of The Gabelli
White Plains, New York 10604 Gabelli Asset Fund, Equity Series Funds,
Inc., Gabelli Global Series
Funds, Inc., Gabelli Global
Multimedia Trust Inc., The
Gabelli Value Fund Inc., The
Gabelli Convertible Securities
Fund, Inc., The Gabelli Equity
Trust Inc. and The Gabelli Growth
Fund.
- ----------
* "Interested person" of the Fund, as defined in the Investment Company Act.
+ Director, trustee or officer of investment companies advised by Gabelli
Funds, Inc.
16
<PAGE>
Name, Age, Position(s) Principal Occupations During
with Fund and Address Past Five Years
- --------------------- ----------------------------
Robert C. Kolodny, M.D., 53............... Physician, author and lecturer
Director (self-employed) (1983-present).
885 Oenoke Ridge Road General Partner of KBS
New Canaan, Connecticut 06840 Partnership, KBS II Investment
Partnership, KBS III Investment
Partnership, KBS IV Limited
Partnership, KBS New Dimensions,
L.P., KBS Global Opportunities,
L.P. and KBS VII Limited
Partnership, private investment
partnerships (1981-present).
Medical Director and Chairman of
the Board of the Behavioral
Medicine Institute (1983-
present).
+ Anthony R. Pustorino, 72.................. Retired President of (1961- 1989)
Director and consultant to Pustorino,
515 Madison Avenue Puglisi & Co., P.C., certified
New York, New York 10022 public accountants; Professor,
Pace University (1965- present).
Director/Trustee of The Gabelli
Asset Fund, The Gabelli Growth
Fund, The Gabelli Value Fund Inc.
and The Gabelli Convertible
Securities Fund, The Gabelli
Equity Trust Inc., Gabelli
Capital Series Fund, Gabelli
Global Multimedia Trust Inc. and
Gabelli Equity Series Funds, Inc.
Mary E. Hauck, 55......................... Retired Senior Portfolio manager
Director of the Gabelli. O'Connor Fixed
21 Bishop Park Road Income Mutual Fund Management
P.O. Box 295 Company.
Pound Ridge, New York 10576
- ----------
* "Interested person" of the Fund, as defined in the Investment Company Act.
+ Director, trustee or officer of investment companies advised by Gabelli
Funds, Inc.
17
<PAGE>
Name, Age, Position(s) Principal Occupations During
with Fund and Address Past Five Years
- --------------------- ----------------------------
+* Karl Otto Pohl, 65....................... Partner of Sal Oppenheim Jr. &
Director Cie. (Private investment bank);
One Corporate Center Former President of the Deutsche
Rye, New York 10580 Bundesbank (Germany's Central
Bank) and Chairman of its Central
Bank Council (1980-1991);
Currently board member of IBM
World Trade Europe/Middle
East/Africa Corp.; Bertelsmann
AG; Zurich
Versicherungs-Gesellschaft
(insurance); the International
Advisory Board of General
Electric Company; the
International Council for JP
Morgan & Co.; the Board of
Supervisory Directors of ROBECo/o
Group; and the Supervisory Board
of Royal Dutch (petroleum
company); Advisory Director of
Unilever N.V. and Unilever
Deutschland; German Governor,
International Monetary Fund
(1980-1991); Board Member, Bank
for International Settlements
(1980-1991); Chairman, European
Economic Community Central Bank
Governors (1990-1991);
Director/Trustee of all the funds
in the Gabelli family of funds.
+ Anthony J. Colavita, 61................... President and Attorney at Law in
Director the law firm of Anthony J.
575 White Plains Road Colavita, P.C. since 1961;
Eastchester, New York 10709 Director/ Trustee of several of
the funds in the Gabelli family
of funds.
Richard N. Daniel, 61....................... Chairman and Chief Executive
Director Officer, Handy and Harman.
One Corporate Center
Rye, New York 10580-1434
+ Werner J. Roeder, M.D., 57................ Director of Surgery, Lawrence
Director Hospital and practicing private
77 Pondfield Road physician. Director/ Trustee of
Broncsville, New York 10708 several of the funds in the
Gabelli family of funds.
+ Anthonie C. Van Ekris, 62................. Managing Director, Balmac
Director International. Director of Stahal
One Corporate Center Hardmayer A.Z. Director/ Trustee
Rye, New York 10580 of several of the funds in the
Gabelli family of funds.
+ Bruce N. Alpert, 46....................... Vice President, Chief Operating
Vice President Officer of The Gabelli Funds,
One Corporate Center Inc. since 1988 and an officer of
Rye, New York 10580 all funds advised by Gabelli
Funds, Inc. and its affiliates.
Ronald S. Eaker, 37....................... Senior Portfolio manager of the
President and Chief Investment Officer Advisor and its predecessor,
19 Old Kings Highway Gabelli O'Connor Fixed Income
South Darien, Connecticut 06820-4526 Management Co.
- ----------
* "Interested person" of the Fund, as defined in the Investment Company Act.
+ Director, trustee or officer of investment companies advised by Gabelli
Funds, Inc.
18
<PAGE>
Name, Age, Position(s) Principal Occupations During
with Fund and Address Past Five Years
- --------------------- ----------------------------
Henley L. Smith, 41....................... Senior Portfolio Manager of the
Vice President and Advisor and its predecessor.
Investment Officer Prior to joining the Advisor in
19 Old Kings Highway South 1987, he was portfolio manager at
Darien, Connecticut 06820-4526 Manufacturers Hanover Investment
Corp. where he began in 1984.
From 1982-1984 he was a portfolio
manager for Manufacturers Hanover
Trust Company.
Judith Raneri, 30 ....................... Investment Officer of the Advisor
Secretary, Treasurer and and its predecessor since 1989.
Investment Officer Vice President and Portfolio
19 Old Kings Highway Manager of the Gabelli U.S.
South Darien, Connecticut 06820-4526 Treasury Money Market Fund. Vice
President of Gabelli Funds
Division of Gabelli Funds, Inc.
since April 1997.
Georgette L. Horton, 32................... Director of the Sub-Administrator
Vice President since October 1996. Prior to
125 West 55th Street joining the Sub-Administrator,
New York, New York 10019 she was Assistant Vice President
of Regional Sales at PaineWebber
from June 1993 to September 1996.
From June 1992 to May 1993, she
was a Marketing Representative
for Eaton Vance Distributors.
Frank Deutchki, 43........................ Registration and Compliance
Vice President Officer of the Sub-
3435 Stelzer Road Administrator, April 1996 to
Columbus, Ohio 43219 present; Vice President, Chase
Global Funds Service, September
1995 through April 1996; Vice
President, Mutual Funds Service
Company, 1989 through September
1995.
Compensation Table
Aggregate Compensation Aggregate Compensation
Name of Person, Position from Fund* from Fund Complex
- ------------------------ ----------------------
Felix J. Christiana, Director $6,500 $84,999
Mary E. Hauck, Director $6,500 $6,500
Robert C. Kolodny, M.D.,
Director $6,500 $6,500
Anthony R. Pustorino, Director $6,500 $95,499
Anthony Colavita, Director $3,691 $75,368
Richard Daniel, Director $3,691 $3,691
Werner Roeder, Director $3,691 $19,691
Anthony van Ekris, Director $3,691 $55,189
Karl Otto Pohl, Director $3,191 $95,619
There are no pension, retirement or other benefits payable by the Fund to
any director or officer of the Fund.
- ----------
* The total compensation paid to such persons by the Fund during the fiscal
year ending October 31, 1997.
19
<PAGE>
Investment Advisor
The investment advisor for the Fund is Gabelli Fixed Income LLC, with
offices at 19 Old Kings Highway South, Darien, Connecticut 06820-4526, a
Delaware limited liability company organized in 1997. As of the date of this
Statement of Additional Information, the Advisor is an investment manager,
administrator or advisor only for the assets of the Fund and separate managed
accounts for corporations, institutions, pension trusts, profit sharing trusts
and high net worth individuals. Gabelli Fixed Income LLC is a registered
investment advisor under the Investment Advisers Act of 1940. Mario J. Gabelli
is the Chairman of the Board of Directors of Gabelli Funds, Inc., which is the
majority owner of the Adviser. As a result, Mr. Gabelli may be deemed to be a
"controlling person" of the Advisor. As of December 31, 19967 the Advisor served
as investment advisor for assets aggregating in excess of $1.5 billion. The
Advisor is an affiliate of Darien Associates which, as of December 31, 1997,
served as investment advisor for assets aggregating in excess of $200 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 $12 billion as of December 31, 1997. Prior to April 14,
1997, Gabelli O'Connor Fixed Income Mutual Funds Management Company served as
the Fund's Advisor ("Former Advisor").
Pursuant to the Advisory Agreements for each of the Portfolios, the
Advisor manages the Fund's portfolio of securities and makes decisions with
respect to the purchase and sale of investments, subject to the general
supervision of the Board of Directors of the Fund.
The Advisor provides persons satisfactory to the Board of Directors of the
Fund to serve as officers of the Fund. Such officers, as well as certain other
employees and directors of the Fund, may be directors, officers or employees of
the Advisor or its affiliates.
The Advisor also provides the Fund with supervisory personnel who will be
responsible for supervising the performance of administrative services,
accounting and related services, net asset value and yield calculation, reports
to and filings with regulatory authorities, and services relating to such
functions. However, the Administrator will provide personnel who will be
responsible for performing the operational components of such services. The
personnel rendering such supervisory services may be employees of the Advisor,
of its affiliates or of other organizations. The Advisory Agreement was approved
on October 16, 1996 by the Board of Directors, including a majority of the
directors who are not interested persons (as defined in the Investment Company
Act of 1940) of the Fund or the Advisor. The Advisory Agreement was also
presented to and approved by a majority of the shareholders of each of the
Portfolios of the Fund at a meeting of the shareholders on April 14, 1997.
The Advisory Agreement has a term which extends to March 31, 1999 and may
be continued in force thereafter for successive twelve-month periods, provided
that such continuance is specifically approved annually by majority vote of the
respective Portfolio's outstanding voting securities or by the Fund's Board of
Directors, and in either case by a majority of the directors who are not parties
to the Advisory Agreement or interested persons of any such party, by votes cast
in person at a meeting called for the purpose of voting on such matter.
The Advisory Agreements are terminable without penalty by the Portfolio on
sixty days' written notice when authorized either by majority vote of the
outstanding voting shares of the Portfolio or by a vote of a majority of the
Fund's Board of Directors, or by the Advisor on sixty days' written notice, and
will automatically terminate in the event of an assignment. The Advisory
Agreements provide that in the absence of willful misfeasance, bad faith or
gross negligence on the part of the Advisor, or of reckless disregard of its
obligations thereunder, the Advisor shall not be liable for any action or
failure to act in accordance with its duties thereunder.
Fees. Set forth below as a percentage of average daily net assets are the
advisory fees paid to the Advisor for each Portfolio pursuant to the Advisory
Agreements: the U.S. Treasury Money Market Portfolio, .30%; the Domestic Prime
Money Market Portfolio, .30%; the Global Money Market Portfolio, .30%; the Tax
Exempt Money Market Portfolio, .30%; the Limited Term Portfolio, .45%; and the
Tax
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Exempt Limited Term Portfolio, .45%. Any portion of the total fees received by
the Advisor may be used by the Advisor to provide shareholder and administrative
services and for distribution of Fund shares. See "Financial Statements" herein.
Advisory Fees Paid by the Fund
For the Year Ended October 31
1997 1996 1995
Domestic Prime Money Market Portfolio $827,784 $657,103 $458,599
Tax Exempt Money Market Portfolio 541,424 455,634 403,955
U.S. Treasury Money Market Portfolio 311,763 263,957 307,543
None of these amounts, for the fiscal years ended October 31, 1995, 1996
and 1997 were voluntarily and irrevocably waived by the Advisor for any of these
Portfolios. As of the date hereof, the other three Portfolios have not been
activated by the Advisor. The Advisor may continue to irrevocably waive its
rights to any portion of the advisory fees and may use any portion of the
advisory fees for purposes of shareholder and administrative services and
distribution of the Fund's shares pursuant to the Fund's Distribution and
Service Plans.
Expense Limitation
The Advisor has agreed to reimburse a Portfolio for its expenses
(exclusive of interest, taxes, brokerage, and extraordinary expenses) which in
any year exceed the limits on investment company expenses prescribed by any
state in which the Portfolio's shares are qualified for sale. For the purpose of
this obligation to reimburse expenses, the Portfolio's annual expenses are
estimated and accrued daily, and any appropriate estimated payments are made to
it on a monthly basis. From time to time, the Advisor may voluntarily assume
certain expenses of any Portfolio of the Fund. This would have the effect of
lowering the overall expense ratio of that Portfolio and of increasing yield to
investors in that Portfolio. Subject to the obligations of the Advisor to
reimburse a Portfolio for its excess expenses as described above, the Portfolios
have, under the respective Advisory Agreements, confirmed their obligation for
payment of all their other expenses, including without limitation: fees payable
to the Advisor, Administrator, Custodian, Transfer Agent and Dividend Agent;
brokerage and commission expenses; federal, state or local taxes, including
issuance and transfer taxes incurred by or levied on them; commitment fees,
certain insurance premiums and membership fees and dues in investment company
organizations; interest charges on borrowings; telecommunications expenses;
recurring legal and accounting expenses; costs of organizing and maintaining the
Fund's existence as a corporation; compensation, including directors' fees, of
any directors, officers or employees who are not also officers of the Advisor or
its affiliates and costs of other personnel providing administrative and
clerical services; costs of stockholders' services and costs of stockholders'
reports, proxy solicitations, and corporate meetings; fees and expenses of
registering their shares under the appropriate Federal securities laws and of
qualifying their shares under applicable state securities laws, including
expenses attendant upon the initial registration and qualification of these
shares and attendant upon renewals of, or amendments to, those registrations and
qualifications; and expenses of preparing, printing and delivering the
Prospectus to existing shareholders and of printing shareholder application
forms for shareholder accounts.
The Fund may from time to time hire its own employees or contract to have
management services performed by third parties, and the management of the Fund
intends to do so whenever it appears advantageous to the Fund. The Fund's
expenses for employees and for such services are among the expenses subject to
the expense limitation described above.
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Administrator and Sub-Administrator
Administrator. The Administrator for the Fund is Gabelli Funds, Inc. (the
"Administrator"). Pursuant to the Administration Agreement for each of the
Portfolios, the Administrator provides all management and administrative
services reasonably necessary for the Fund, other than those provided by the
Advisor, subject to the supervision of the Fund's Board of Directors. Because of
the services rendered the Fund by the Administrator and the Fund's Advisor, the
Fund itself may not require any employees other than its officers, none of whom
receive compensation from the Fund.
For the services rendered to the Fund by the Administrator, each Portfolio
pays the Administrator a fee, computed daily and payable monthly, in accordance
with the following schedule: (i) .10% of the first $500 million of aggregate
average daily net assets of the Fund, (ii) .065% of the next $250 million of
aggregate average daily net assets of the Fund, (iii) .055% of the next $250
million of aggregate average daily net assets of the Fund, and (iv) .050% of all
aggregate average daily net assets of the Fund over $1 billion.
Under the Administration Agreement for each Portfolio, the Administrator
provides all administrative services, including, without limitation: (i)
provides services of persons competent to perform such administrative and
clerical functions as are necessary to provide effective administration of the
Fund, including maintaining certain books and records described in Rule 31a-1
under the 1940 Act, and reconciling account information and balances among the
Fund's Custodian and Advisor; (ii) oversees the performance of administrative
and professional services to the Fund by others, including the Fund's Custodian;
(iii) prepares, but does not pay for, the periodic updating of the Fund's
Registration Statement, Prospectus and Statement of Additional Information in
conjunction with Fund counsel, including the printing of such documents for the
purpose of filings with the Securities and Exchange Commission and state
securities administrators, prepares the Fund's tax returns, and prepares reports
to the Fund's shareholders and the Securities and Exchange Commission; (iv)
prepares in conjunction with Fund counsel, but does not pay for, all filings
under the securities or "Blue Sky" laws of such states or countries as are
designated by the Distributor, which may be required to register or qualify, or
continue the registration or qualification, of the Fund and/or its shares under
such laws; (v) prepares notices and agendas for meetings of the Fund's Board of
Directors and minutes of such meetings in all matters required by the 1940 Act
to be acted upon by the Board; (vi) monitors daily and periodic compliance with
respect to all requirements and restrictions of the Investment Company Act, the
Internal Revenue Code and the Prospectus; and (vii) monitors and evaluates daily
income and expense accruals, and sales and redemptions of shares of the
Portfolios.
Sub-Administrator. Gabelli Funds, Inc. (the "Administrator") has entered
into a Sub-Administration Agreement with BISYS Fund Services, Inc. ("BISYS" or
the "Sub-Administrator"), pursuant to which the Sub-Administrator provides
certain administrative services necessary for the Fund's operations. These
services include the preparation and distribution of materials for meetings of
the Fund's Board of Directors, compliance testing of Fund activities and
assistance in the preparation of proxy statements, reports to shareholders and
other documentation. The Sub-Administrator's services do not include the
investment advisory and portfolio management services provided by the Adviser.
For the services rendered and related expenses borne by BISYS, the Administrator
pays BISYS a prorated monthly fee based upon a prorated portion (as described
below) of the assets of all registered management investment companies for which
BISYS serves as Sub-Administrator that are advised by Gabelli Fixed Income
L.L.C., Gabelli Funds, Inc., Westwood Management Corp. (formerly known as Teton
Advisers, LLC) or their affiliates ("BISYS-administered Investment Companies").
The fee is computed daily at the annual rate of .0625% of the BISYS-administered
Investment Companies' average daily net assets (with a minimum annual fee of
$20,000 per portfolio) up to $350 million and .0425% of any net assets above
$350 million, and .0225% of any assets above $700 million, which, together with
the services to be rendered, are subject to negotiation between the parties and
both parties retain the right unilaterally to terminate the arrangement on not
less than 60 days' notice. BISYS, headquartered in Little Falls, New Jersey, is
a publicly owned company engaged in information processing, loan servicing and
401(K) administration and recordkeeping
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services to and through banking and other financial organizations. BISYS and its
affiliates, BISYS Fund Services and BISYS Fund Services, Inc., have their
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
Prior to April 14, 1997, BISYS Fund Services, Inc. served as Administrator
pursuant to an Administration Agreement with the Fund. BISYS also provides the
Fund with all accounting services, including (i) daily computation of net asset
value for each Portfolio; (ii) maintenance of security ledgers and books and
records as required by the Investment Company Act; (iii) production of the
Portfolio and general ledger reports; (iv) reconciliation of accounting records;
and (v) calculation of yield and average maturity for each Portfolio.
Accounting services are provided by BISYS Fund Services, Inc., which is
paid a fee of $1,667 per Portfolio per month.
The actual fees paid to Furman Selz LL C, the administrator of the Fund
through December 31, 1996, for administrative services provided for the period
November 1, 1996 through December 31, 1996 were $41,275 for the Domestic Prime
Money Market Portfolio, $26,636 for the Tax Exempt Money Market Portfolio and
$16,324 for the U.S. Treasury Money Market Portfolio. The fees paid to BISYS
Fund Services, the administrator of the Fund from January 1, 1997 through April
13, 1997, for all administrative and accounting services rendered for the year
ended October 31, 1997 were $73,942 for the Domestic Prime Money Market
Portfolio, $49,099 for the Tax Exempt Money Market Portfolio and $32,694 for the
U.S. Treasury Money Market Portfolio. BISYS Fund Services waived its fees for
acting as transfer and dividend agent for the Portfolios. The fees paid to
Gabelli Funds, Inc. (the "Administrator") for the period April 14, 1997 through
October 31, 1997 were $150,417 for the Domestic Prime Money Market Portfolio,
$97,370 for the Tax Exempt Money Market Portfolio and $52,908 for the U.S.
Treasury Money Market Portfolio.
The Sub-Administration Agreement is terminable, without the payment of any
penalty, by a vote of the majority of relevant Portfolio shareholders, by the
Board of Directors of the Fund or the Administrator, respectively, on sixty
days' written notice. The Administration Agreement shall remain in effect for
one periods, subject to annual approval of the Fund's Board of Directors. The
Administration Agreement provides that in the absence of willful misfeasance,
bad faith or negligence on the part of the Administrator, or reckless disregard
of its obligations thereunder, the Administrator shall not be liable for any
action or failure to act in accordance with its duties thereunder.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
Custodial Trust Company, 101 Carnegie Center, Princeton, New Jersey 08540
is the Fund's Custodian. Pursuant to a Custodian Agreement with the Fund, it is
responsible for maintaining the books and records of the Fund's portfolio
securities and cash. Subject to the supervision of the Advisor and
Administrator, the Custodian maintains the Fund's portfolio transaction records.
State Street Bank and Trust Company serves as transfer agent and dividend agent
for the Fund and Boston Financial Data Services, Inc., an affiliate of State
Street Bank and Trust Company, serves as the Fund's shareholder accounting agent
pursuant to a Transfer Agency Agreement. Pursuant to such Agreement, the
Transfer Agent, among other things, performs the following services in
connection with the Fund's Shareholders of record: maintenance of shareholder
records for each of the Fund's Shareholders of record; processing shareholder
purchase and redemption orders; processing transfers and exchanges of shares of
the Fund on the shareholder files and records; processing dividend payments and
reinvestments; and assistance in the mailing of shareholder reports and proxy
solicitation materials.
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TAXES
The active Portfolios of the Fund have qualified and intend to continue to
qualify under the Internal Revenue Code of 1986, as amended ("Code"), as a
regulated investment company. As a regulated investment company, each Portfolio
will not be subject to federal income taxes on its investment company taxable
income and its long-term capital gains that it distributes to its shareholders,
provided that at least 90% of its investment company taxable income and at least
90% of its tax exempt net interest income for the taxable year is distributed
and numerous other requirements concerning regulated investment companies are
satisfied. The Fund's policy is to distribute as dividends each year 100% (and
in no event less than 90%) of its investment company taxable income and tax
exempt net interest income. Each Portfolio will be treated as a separate
corporation and generally will have to comply with the qualifications and other
requirements applicable to regulated investment companies without regard to
other Portfolios. If for any taxable year a Portfolio does not qualify as a
regulated investment company, all of its taxable income would be taxable at
corporate rates and no distributions would qualify as tax exempt.
The Fund has adopted a policy of declaring dividends daily in an amount
based on its net investment income. The amount of each daily dividend may differ
from actual net investment income calculated in accordance with federal income
tax principles. Dividend distributions will be made on the twentieth day of each
month. Dividends paid from taxable income, if any, and distributions of any
realized short term capital gains (whether from tax exempt or taxable
obligations) are taxable to shareholders as ordinary income, whether received in
cash or reinvested in additional shares of the Fund. Dividends paid by the Fund
from taxable income on December 31 will be treated as received by shareholders
on such date (and subject to tax in the shareholder's tax year in which such
date occurs) for federal income tax purposes, notwithstanding actual receipt of
the dividend in the following calendar year. Distributions of net realized
capital gains after utilization of capital loss carryforwards, if any, are made
in October and, if necessary, to meet applicable distribution requirements,
shortly after October 31, the Portfolios' fiscal year-end, except that the U.S.
Treasury Money Market Portfolio, the Domestic Prime Money Market Portfolio, the
Global Money Market Portfolio and the Tax Exempt Money Market Portfolio include
net short-term capital gain in their daily declarations of income. Distributions
paid by the Portfolios (including distributions of tax exempt interest) may
result in a liability (or increased liability) under the alternative minimum
tax.
Distributions of tax exempt income are not subject to regular federal
income taxes, but may be subject to the alternative minimum tax. Distributions
derived from interest on certain private activity bonds that are exempt from
regular federal income tax are specifically treated as tax preference items and
may subject individual or corporate shareholders to liability (or increased
liability) under the alternative minimum tax. At least 80 percent of the net
assets of the Tax Exempt Money Market Portfolio and Tax Exempt Limited Term
Portfolio will be invested in municipal obligations, the interest income on
which is not treated as a tax preference item under the alternative minimum tax.
However, because 75% of the difference between adjusted current earnings
(including, generally, tax exempt income) and alternative minimum taxable income
(determined without regard to this item) is an addition to the corporate
alternative minimum tax base, all distributions derived from interest that is
exempt from regular federal income tax are included in adjusted current earnings
and may subject corporate shareholders to, or increase their liability under,
the alternative minimum tax. 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 the variable rate demand instruments and participation
certificates, the Fund is relying on the opinion of Battle Fowler LLP, counsel
to the Fund, that it will be treated for Federal income tax purposes as the
owner thereof and that the interest on the underlying tax exempt obligations
will be tax exempt to the Fund. Counsel has pointed out that the IRS has
announced that it will not ordinarily issue
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advance rulings on the question of ownership of securities or participation
interests therein subject to a put and, as a result, the IRS could reach a
conclusion different from that reached by counsel.
The Fund may be subject to state or local tax in jurisdictions in which
the Fund is organized or may be deemed to be doing business. However,
Connecticut and Maryland tax regulated investment companies in a manner that is
generally similar to the federal income tax rules described herein.
Distributions may be subject to state and local income taxes. In addition,
the treatment of the Fund and its shareholders in those states that have income
tax laws might differ from their treatment under the federal income tax laws.
Some states exempt from state personal income tax distributions received from
the Fund only to the extent such distributions are derived from interest on
obligations issued by such state or its municipalities or political
subdivisions. Shareholders should 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 and
local income taxes. To the extent required by applicable state laws and within
any applicable time period following the end of the Fund's taxable year, the
Fund intends to send each shareholder a tax information notice describing the
federal and state tax status of dividends paid to investors for the prior tax
year.
The exemption from state and local income taxation, if available, does not
preclude states from assessing other taxes, such as personal property taxes and
estate and inheritance taxes, on the value of an investor's shares in the U.S.
Treasury Money Market Portfolio. In addition, states may impose taxes on capital
gains distributed by such Portfolio and may include the value of Portfolio
shares and the income attributable thereto in the measure of state or municipal
franchise taxes imposed on a corporate investor's privilege of doing business in
the state or municipality.
If the Fund acquires debt instruments that were originally issued at a
discount, e.g., zero coupon bonds, it will be required to include annually in
gross income or, in the case of tax-exempt instruments issued at a discount, in
tax-exempt income, a portion of the "original issue discount" that accrues over
the term of the obligation regardless of whether the income is received by the
Fund, and to make distributions accordingly. To insure that the Fund has
sufficient cash to meet this distribution requirement, the Fund may borrow funds
on a short-term basis or sell certain investments. Since a substantial
percentage of the Fund's dividends are expected to be reinvested and dividends
that are declared and automatically reinvested satisfy the distribution
requirement, the Fund expects to satisfy the distribution requirement even if it
owns obligations with original issue discount. Shareholders will realize taxable
income on the automatic reinvestment of dividends that are attributable to
original issue discount on taxable obligations.
The Code imposes a nondeductible 4% excise tax on a Portfolio unless it
meets certain requirements with respect to distributions of ordinary income and
capital gain net income. The formula requires payment to shareholders during a
calendar year of distributions representing at least 98% of each Portfolio's
ordinary income for the calendar year, plus at least 98% of the excess of its
capital gains over its capital losses realized during the one-year period ending
October 31 during such year, which shall be
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reduced (but not below net capital gain) by the amount of the Portfolio's net
ordinary loss for the year. It is anticipated that this provision will not have
any material impact on any Portfolio.
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. Capital gain dividends will be designated as such in a
written notice to investors mailed not later than 60 days after a Portfolio
taxable year closes. A shareholder may also recognize a taxable gain or loss if
the shareholder sells or redeems shares. Any gain or loss arising from (or
treated as arising from) the sale or redemption of shares will be a capital gain
or loss, except in the case of a dealer in securities. Capital gains realized by
corporations are generally taxed at the same rate as ordinary income. However,
capital gains are taxable at a maximum rate of 28% to non-corporate shareholders
who have a holding period of more than 12 months, and 20% for non-corporate
shareholders who have a holding period of more than 18 months. Corresponding
maximum rate and holding period rules apply with respect to capital gains
dividends distributed by the Fund, without regard to the length of time the
shares have been held by the shareholder. Shareholders will be advised as to
what portion of capital gains are to be treated as "mid-term" or "long-term"
gains and 20% for long term gains (10% for non-corporate shareholders who are
subject to the 15% marginal tax bracket for ordinary income)). The deduction of
capital losses is subject to limitations. Distributions attributable to
short-term capital gains (whether from tax exempt or taxable obligations) are
taxable as ordinary income for federal income tax purposes.
Generally, on the sale or exchange of obligations held for more than one
year, gain realized by a Portfolio that is not attributable to original issue
discount or accrued market discount will be long-term capital gain. However,
gain on the disposition of a bond purchased at a market discount generally will
be treated as ordinary income, rather than capital gain, to the extent of
accrued market discount. If a shareholder receives a capital gain dividend and
sells shares after holding them for six months or less (not including as part of
the period held, periods during which the shareholder holds an offsetting
position), then any loss realized on the sale will be treated as long-term
capital loss to the extent of such capital gain dividend. If any net capital
gains are retained by a Portfolio for reinvestment, requiring federal income
taxes to be paid thereon by such Portfolio, the Portfolio will elect to treat
such capital gains as having been distributed to shareholders. As a result,
shareholders will report such capital gains as net capital gains, will be able
to claim their share of federal income taxes paid by the Portfolio on such gains
as a credit against their own federal income tax liability, and will be entitled
to increase the adjusted tax basis of their Portfolio shares by 65% of their
share of the undistributed gain. Distributions of net capital gains are not
eligible for the dividends received deduction.
All taxable dividends from investment company taxable income are taxable
as ordinary income. It is not expected that any income distributions from the
Portfolios will qualify for the dividends received deduction for corporations.
The Code permits the character of tax exempt interest distributed by a
regulated investment company to flow through as tax exempt interest to its
shareholders, provided that at least 50% of the value of its assets at the end
of each quarter of its taxable year is invested in state, municipal and other
obligations the
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interest on which is exempt under Section 103(a) of the Code. The Tax Exempt
Money Market Portfolio and Tax Exempt Limited Term Portfolio intend to satisfy
this 50% requirement in order to permit their distributions attributable to tax
exempt interest to be treated as such for federal income tax purposes in the
hands of their shareholders. Distributions to shareholders of tax exempt
interest earned by these Portfolios for the taxable year are therefore not
subject to regular federal income tax, although, as described above, they may be
subject to the individual and corporate alternative minimum taxes.
Any short-term capital loss realized upon the redemption of shares of the
Tax Exempt Money Market Portfolio or the Tax Exempt Limited Term Portfolio
within six months from the date of their purchase will be disallowed to the
extent of any tax exempt dividends received during such six-month period,
although the period may be reduced under Treasury Regulations to be prescribed.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the value of a share on the reinvestment date.
Shareholders are required to report tax exempt interest on their federal
income tax returns. Redemptions of shares, including exchanges for shares of
another Portfolio, may result in tax consequences (gain or loss) to shareholders
and are also subject to reporting requirements.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Tax Exempt Money Market Portfolio and the Tax Exempt Limited Term
Portfolio will not be deductible for federal income tax purposes. In addition,
interest incurred or continued to purchase shares of the other Portfolios is
generally treated as investment interest, and in the case of corporate taxpayers
is deductible only to the extent of net investment income. Under rules used by
the Internal Revenue Service to determine when borrowed funds are used for the
purpose of purchasing or carrying particular assets, the purchase of shares may
be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of shares.
Section 147(a) of the Code prohibits exemption from taxation of interest
on certain governmental obligations to persons who are "substantial users" (or
persons related thereto) of facilities financed by such obligations. The Tax
Exempt Money Market Portfolio and the Tax Exempt Limited Term Portfolio have not
undertaken any investigation as to the users of the facilities financed by tax
exempt bonds in their portfolios.
In South Carolina v. Baker, the U.S. Supreme Court held that the federal
government may constitutionally require states to register bonds they issue and
may subject the interest on such bonds to federal tax if not registered, and the
Court further held that there is no constitutional prohibition against the
federal government's taxing the interest earned on municipal bonds. The Supreme
Court decision affirms the authority of the federal government to regulate and
control municipal bonds and to tax such bonds in the future. The decision does
not, however, affect the current exemption from taxation of the interest earned
on municipal bonds in accordance with Section 103 of the Code.
Under the federal income tax law, the Portfolios will be required to
report to the Internal Revenue Service all distributions of taxable income and
capital gains as well as gross proceeds from the redemption or exchange of
Portfolio shares, except in the case of exempt shareholders, which include most
corporations. Under the backup withholding provisions of Section 3406 of the
Code, distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and their required certifications regarding
their status under the federal income tax law. A special exception is available
for proceeds from the redemption or exchange of Portfolio shares if a
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Portfolio maintains a constant net asset value per share. If the withholding
provisions are applicable, any such distributions and proceeds, whether taken in
cash or reinvested in additional shares, will be reduced by the amounts required
to be withheld. Corporate shareholders should provide the Portfolios with their
taxpayer identification numbers and certify their exempt status in order to
avoid possible unnecessary application of backup withholding.
In January of each year (or earlier, if necessary to satisfy state and
local income tax notice requirements), the Portfolios will issue to each
shareholder a statement of the federal income tax status of all distributions,
including: in the case of the Tax Exempt Money Market Portfolio and the Tax
Exempt Limited Term Portfolio, a statement of the percentage of the prior
calendar year's distributions which the respective Portfolio has designated as
tax exempt, the percentage of such tax exempt distributions treated as a tax
preference item for purposes of the alternative minimum tax, and the source on a
state-by-state basis of all distributions; and, in the case of the U.S. Treasury
Money Market Portfolio, all applicable state and local income tax information.
The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. persons, i.e., U.S. citizens and residents
and U.S. domestic corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of a Portfolio, including the possibility
that such a shareholder may be subject to a U.S. withholding tax at a rate of
30% (or at a lower rate under an applicable income tax treaty) on amounts
constituting ordinary income received by such person, where such amounts are
treated as income from U.S. sources under the Code.
The federal, state and local income tax rules that apply to the Fund and
its shareholders have changed extensively in recent years, and investors should
recognize that additional changes may be made in the future, some of which could
have an adverse affect on the Fund and its investors for federal and/or state
and local tax purposes. Shareholders should consult their tax advisors about the
application of the provisions of Federal, state and local tax law described in
this statement of additional information in light of their particular federal
and state tax situations.
PURCHASE, REDEMPTION AND EXCHANGE
Gabelli Fixed Income 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. The material relating to the purchase,
redemption and exchange of Portfolio shares in the Prospectus is incorporated
herein by reference and investors should refer to the Prospectus for information
relating to these areas.
DIVIDENDS AND DISTRIBUTIONS
Net investment income is declared as dividends daily and paid monthly; if
an investor's shares are redeemed during a month, accrued but unpaid dividends
are paid with the redemption proceeds. Substantially all the realized net
capital gains for the Portfolios, if any, are declared and paid on an annual
basis (except for net short-term capital gains for the Money Market Portfolios).
Dividends are payable to shareholders of record at the time of declaration.
Dividends of each Portfolio are automatically reinvested in additional
Portfolio shares unless the shareholder has elected to have them paid in cash.
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The net investment income of the Fund for each business day is determined
immediately prior to the determination of net asset value at 12:00 noon. Net
investment income for other days is determined at the time net asset value is
determined on the prior business day. Shares of the Limited Term Portfolio and
the Tax Exempt Limited Term Portfolio earn dividends on the business day their
redemption is effective but not on the business day their purchase is effective.
See "Purchase of Shares" and "Redemption of Shares" in the Prospectus.
NET ASSET VALUE
Net asset value per share for each of the Portfolios is determined by
subtracting from the value of the Portfolio's total assets the amount of its
liabilities and dividing the remainder by the number of its outstanding shares.
The U.S. Treasury Money Market Portfolio, the Domestic Prime Money Market
Portfolio, the Global Money Market Portfolio and the Tax Exempt Money Market
Portfolio value all portfolio securities by the amortized cost method in
accordance with Rule 2a-7 under the Investment Company Act of 1940. This method
attempts to maintain a constant net asset value per share of $1.00. No
assurances can be given that this goal can be attained.
In the case of the Limited Term Portfolio and the Tax Exempt Limited Term
Portfolio, the value of each security for which readily available market
quotations exist is based on a decision as to the broadest and most
representative market for the security; the value is based either on the last
sale price on a national securities exchange, or, in the absence of recorded
sales, at the readily available closing bid price on such exchanges, or at the
quoted bid price in the over-the-counter market. Assets for which market
quotations are not readily available are valued in accordance with procedures
established by the Fund's Board of Directors, including use of an independent
pricing service or services which use prices based on yields or prices of
comparable municipal securities, indications as to values from dealers and
general market conditions. High quality securities with effective maturities of
397 calendar days or less generally will be valued by the amortized cost method.
Each of the Portfolios computes its net asset value once daily on Monday
through Friday, except that the net asset value is not computed for a Portfolio
on a day in which no orders to purchase, sell or redeem Portfolio shares have
been received or on the holidays listed herein. The Fund does not determine net
asset value per share on the following holidays: New Year's Day, Martin Luther
King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas.
The Portfolios compute net asset value as follows: the U.S. Treasury Money
Market Portfolio, the Domestic Prime Money Market Portfolio, the Global Money
Market Portfolio and the Tax Exempt Money Market Portfolio (the "Money Market
Portfolios"), 12:00 noon Eastern Time; the Limited Term Portfolio and the Tax
Exempt Limited Term Portfolio, 4:00 p.m. Eastern Time. The days on which a
Fund's net asset value is determined are its business days.
The Money Market Portfolios utilize the amortized cost method of
valuation. Amortized cost valuation involves valuing an instrument at its cost
and thereafter assuming a constant amortization to maturity of any discount or
premium, except that if fluctuating interest rates cause the market value of the
Portfolios to deviate more than l/2 of l% from the value determined on the basis
of amortized cost, the Board of Directors will consider whether any action
should be initiated, as described in the following paragraph. Although the
amortized cost method provides certainty in valuation, it may result in periods
during which the value of an instrument is higher or lower than the price an
investment company would receive if the instrument were sold.
The Fund's Board of Directors has established procedures to stabilize, to
the extent reasonably possible, these Portfolios' net asset value at $l.00 per
share. These procedures include a review of the extent of any deviation of net
asset amortized cost per share. Should that deviation exceed 1/2 of 1%, the
Board will consider whether any action should be initiated to eliminate or
reduce material dilution or other
29
<PAGE>
unfair results to shareholders. Such action may include redemption of shares in
kind, selling portfolio securities prior to maturity, reducing or withholding
dividends and utilizing a net asset value per share as determined by using
available market quotations. The Money Market Portfolios will maintain a dollar-
weighted average portfolio maturity of 90 days or less, will not purchase any
instrument with an effective maturity greater than 397 days, will limit
portfolio investments, including repurchase agreements, to those United States
dollar-denominated instruments that the Fund's Board of Directors determines
present minimal credit risks, and will comply with certain reporting and
recordkeeping procedures. The Fund has also established procedures to ensure
compliance with the requirement that portfolio securities meet the high quality
criteria. See "Investments and Investment Techniques Common to Two or More
Portfolios", herein.
COMPUTATION OF YIELD
The current and effective yields of the Money Market Portfolios may be
quoted in reports, sales literature, and advertisements published by the Fund.
Current yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one share at the beginning of a seven-day calendar period, dividing the net
change in account value of the account at the beginning of the period, and
multiplying the return over the seven-day period by 365/7. For purposes of the
calculation, net change in account value reflects the value of additional shares
purchased with dividends from the original share and dividends declared on both
the original share and any such additional shares, but does not reflect realized
gains or losses or unrealized appreciation or depreciation. Effective yield is
computed by annualizing the seven-day return with all dividends reinvested in
additional Portfolio shares.
The yields of the Domestic Prime Money Market Portfolio, the Tax Exempt
Money Market Portfolio and the U.S. Treasury Money Market Portfolio for the
seven-day period ended October 31, 1997 were 5.09%, 3.20% and 5.07%,
respectively.
The Limited Term Portfolio and Tax Exempt Limited Term Portfolio are not
money market funds and must compute their yield in a different fashion. These
Portfolios compute yield based on a 30-day (or one month) period ended on the
date of the most recent balance sheet included in the registration statement,
computed by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
a - b
-----
YIELD = 2[(cd + 1)^6 - 1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to dividends.
d = the maximum offering price per share on the last day
of the period.
Actual future yields will depend on the type, quality, and maturities of
the investments held by the Portfolios, changes in interest rates on
investments, and the Portfolios' expenses during the period.
Tax Equivalent Yield
The Tax Exempt Money Market Portfolio and Tax Exempt Limited Term
Portfolio may from time to time advertise their tax equivalent yield.
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<PAGE>
Tax equivalent yield is computed based upon a 30-day (or one month) period
ended on the date of the most recent balance sheet included in the Statement of
Additional Information, computed by dividing that portion of the yield of the
Portfolio (as computed pursuant to the formulae previously discussed) which is
tax exempt by one minus a stated income tax rate and adding the product to that
portion, if any, of the yield of the Portfolio that is not tax exempt. The tax
equivalent yields for these Portfolios also may fluctuate daily and do not
provide a basis for determining future yields.
The U.S. Treasury Money Market Portfolio may also advertise a tax
equivalent yield for one or more of the states and municipalities wherein all or
substantially all of that Portfolio's dividends represent a pass-through of
income received on direct obligations of the U.S. Government and, as a result,
are not subject to such state's income tax. The U.S. Treasury Money Market
Portfolio's advertisement of a tax equivalent yield reflects the taxable yield
that an investor subject to that state's or municipality's highest marginal tax
rate would have had to receive in order to realize the same level of after-tax
yield as an investment in the U.S. Treasury Money Market Portfolio would have
produced. Tax equivalent yield is calculated by dividing the portion of the U.S.
Treasury Money Market Portfolio's yield that is not subject to state or
municipal taxes (calculated as described above) by the result of subtracting the
state's or municipality's highest marginal tax rate from 1, and adding the
resulting figure to that portion, if any, of the U.S. Treasury Money Market
Portfolio's yield that is subject to state or municipal income tax. All
dividends paid by the U.S. Treasury Money Market Portfolio are subject to
federal income taxation at applicable rates.
Computation of Total Return
The total return of the Limited Term and the Tax Exempt Limited Term
Portfolios must be displayed in any advertisement containing the yield of any of
these Portfolios. Total return is the average annual total return for the 1-, 5-
and 10-year period ended on the date of the most recent balance sheet included
in the Statement of Additional Information, computed by finding the average
annual compounded rates of return over 1-, 5- and 10-year periods that would
equate the initial amount invested to the ending redeemable value according to
the following formula:
n
P(1+T) = ERV
Where:
P = a hypothetical initial investment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000
payment made at the beginning of the 1-, 5- or
10- year periods at the end of the 1-, 5- or
10-year periods (or fractions thereof).
Because the Limited Term and the Tax Exempt Limited Term Portfolios have
not had a registration in effect for 1, 5 or 10 years, the period during which
the registration has been effective shall be substituted.
Yield information may be useful for reviewing the performance of the
Portfolio and for providing a basis for comparison with other investment
alternatives. However, unlike bank deposits or other investments which pay a
fixed yield for a stated period of time, the Portfolios' yield does fluctuate,
and this should be considered when reviewing performance or making comparisons.
From time to time evaluations of performance of the Portfolios made by
independent sources may be used in advertisements concerning the Portfolios.
These sources may include Lipper Analytical Services, Wiesenberger Investment
Company Service, IBC's Money Fund Report, Barron's, Business Week,
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<PAGE>
Changing Times, Financial World, Forbes, Fortune, Money, Personal Investor, Bank
Rate Monitor, and The Wall Street Journal.
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on August 17, 1987. The Fund was
formerly named the Gabelli-O'Connor Treasurer's Fund, Inc. At a meeting of the
shareholders held on March 6, 1989, the shareholders of the Fund voted to amend
the Amended Articles of Incorporation to change the name of the Fund to The
Treasurer's Fund, Inc. The authorized capital stock of the Fund consists of
twenty billion shares of common stock having a par value of one tenth of one
cent ($.001) per share ("Common Stock"). The Fund's net assets at the close of
business on January 31, 1998 were valued at $200,152,368.74 for the Tax Exempt
Money Market Portfolio, $267,360,118.42 for the Domestic Prime Money Market
Portfolio and $95,338,058.66 for the U.S. Treasury Money Market Portfolio. The
Fund's Board of Directors is authorized to divide the unissued shares into
separate series of stock, each series representing a separate, additional
investment portfolio. The Board currently has authorized the division of the
unissued shares into six series of Common Stock, one for each of the Portfolios.
Shares of all series will have identical voting rights, except where, by law,
certain matters must be approved by a majority of the shares of the affected
series. Each share of any series of shares when issued has equal dividend,
distribution, liquidation and voting rights within the series for which it was
issued, and each fractional share has those rights in proportion to the
percentage that the fractional share represents of a whole share. Shares will be
voted in the aggregate. There are no conversion or preemptive rights in
connection with any shares of the Fund. All shares, when issued in accordance
with the terms of the offering, will be fully paid and nonassessable. Shares are
redeemable at net asset value, at the option of the shareholder.
As of January 29, 1998, the officers and directors of the Fund,
collectively, beneficially owned, directly or indirectly (including the power to
vote or to dispose of any shares), less than 1% of the total outstanding shares
of each of the Fund's Portfolios.
As of January 29, 1998 the following persons or entities owned as much as
5% of the indicated Portfolio's outstanding shares:
Name and Address Portfolio in Percentage of
of record or Number of which shares Ownership of
beneficial owner shares owned are owned Portfolio
- ------------- ------------ ------------ ------------
Bear Stearns Securities Corp. 12,916,146 Tax Exempt 6.45%
1 Metrotech Center North
Brooklyn, NY 11201-3870
Bear Stearns Security Corp. 6,883,989 U.S. Treasury 7.17%
1 Metrotech Center North
Brooklyn, NY 11201-3870
The shares held by Bear Stearns & Co. Inc. are held on behalf of
individual client accounts.
The shares of the Fund have non-cumulative voting rights, which means that
the holders of more than 50% of the shares outstanding voting for the election
of directors can elect 100% of the directors if the holders choose to do so,
and, in that event, the holders of the remaining shares will not be able to
elect any person or persons to the Board of Directors. The Fund does not issue
certificates evidencing Fund shares.
As a general matter, the Fund will not hold annual or other meetings of
the Funds' shareholders. This is because the By-laws of the Fund provide for
annual meetings only (a) for the election of directors, (b) for approval of the
Fund's revised investment advisory agreement with respect to a particular class
or series of stock, (c) for approval of revisions to the Fund's distribution
agreement with respect to a particular class or series of stock, and (d) upon
the written request of holders of shares entitled to cast not less than
twenty-five percent of all the votes entitled to be cast at such meeting. Annual
and other meetings may be required
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<PAGE>
with respect to such additional matters relating to the Fund as may be required
by the Investment Company Act of 1940 (the "Act") including the removal of Fund
directors and communication among shareholders, any registration of the Fund
with the Securities and Exchange Commission or any state, or as the Directors
may consider necessary or desirable. Each Director serves until the next meeting
of shareholders called for the purpose of considering the election or reelection
of such Director or of a successor to such Director, and until the election and
qualification of his or her successor, elected at such meeting, or until such
Director sooner dies, resigns, retires or is removed by the vote of the
shareholders.
Rule 18f-2 under the Act provides that any matter required to be submitted
by the provisions of the Act or applicable state law, or otherwise, to the
holders of the outstanding voting securities of an investment company such as
the Fund shall not be deemed to have been effectively acted upon unless approved
by the holders of a majority of the outstanding shares of each class or series
affected by such matter, i.e., by a majority of the outstanding shares of each
Portfolio. Rule 18f-2 further provides that a class or series shall be deemed to
be affected by a matter unless it is clear that the interests of each class or
series in the matter are substantially identical or that the matter does not
affect any interest of such class or series. However, the Rule exempts the
selection of independent public accountants, the approval of principal
distribution contracts and the election of directors from the separate voting
requirements of the Rule.
DISTRIBUTION PLANS
The Fund has adopted a shareholder servicing and administration plan (the
"Plan"), pursuant to Rule 12b-1 under the Act (the "Rule") for each Portfolio of
the Fund. The Rule provides that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. Although there are no fees or expenses chargeable to
the Fund under the Plans, the Fund's Board of Directors has adopted the Plans in
case certain expenses of the Fund might be considered to constitute indirect
payments by the Fund of distribution expenses. If a payment by the Fund to the
Advisor of advisory fees should be deemed to be indirect financing by the Fund
of the distribution of its shares, such payments would be authorized under the
Plans.
The Plans provide that the Advisor may make payments from time to time
from its own resources, which may include the advisory fee and past profits for
the following purposes: to pay promotional and administrative expenses in
connection with the offer and sale of the shares of the Portfolios, including
payments to participating organizations for performing shareholder servicing and
related administrative functions and for providing assistance in distributing
the Fund's shares. The Advisor, in its sole discretion, will determine the
amount of such payments made pursuant to the Plans, provided that such payments
will not increase the amount which the Fund is required to pay to the Advisor
for any fiscal year under the Advisory Agreement in effect for that year.
The Glass-Steagell Act limits the ability of a depository institution to
become an underwriter or distributor of securities. However, it is the Fund
management's position that banks are not prohibited from acting in other
capacities for investment companies, such as providing administrative and
shareholder account maintenance services and receiving compensation from the
Advisor for providing such services. However, this is an unsettled area of the
law and if a determination contrary to the Fund management's position is made by
a bank regulatory agency or court concerning shareholder servicing and
administration payments to banks from the Advisor, any such payments will be
terminated and any shares registered in the banks' names, for their underlying
customers, will be reregistered in the name of the customers at no cost to the
Fund or its shareholders. In addition, state securities laws on this issue may
differ from the interpretation of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
The Plans provide that they may continue in effect for successive annual
periods provided they are approved by the shareholders or by the Board of
Directors, including a majority of directors who are not interested persons of
the Fund and who have no direct or indirect interest in the operation of the
Plans, or in the agreements related to the Plans. On February 18, 1998, the
Board of Directors approved the continuance of all of the Plans until February
28, 1999. The Plans for the Domestic Prime Money Market Portfolio and the Tax
Exempt Money Market Portfolio were approved by a majority of the affected
Portfolio's shareholders at the annual meeting on March 6, 1989. The Plan for
the U.S. Treasury Money
33
<PAGE>
Market Portfolio was approved by a majority of that Portfolio's shareholders on
March 14, 1991. The Plans further provide that they may not be amended to
increase materially the costs which may be spent by the Fund for distribution
pursuant to the Plans without shareholder approval, and the other material
amendments must be approved by the directors in the manner described in the
preceding sentence. The Plans may be terminated at any time by a vote of a
majority of the disinterested directors of the Fund or the Fund's shareholders.
Although there are no fees or expenses chargeable to the Fund under the Plans,
for the fiscal year ended October 31, 1997, the Advisor made payments under the
Plans to or on behalf of participating organizations in the amount of $541,876
with regard to the U.S. Treasury Money Market Portfolio, the Tax Exempt Money
Market Portfolio and the Domestic Prime Money Market Portfolio (representing
.10% of the average daily net assets of certain accounts within each of those
Portfolios). Although these payments were not made by the Fund, each may be
deemed an indirect payment by the Fund.
BROKERAGE AND PORTFOLIO TURNOVER
Brokerage
The Fund's purchases and sales of portfolio securities usually are
principal transactions. Portfolio securities are normally purchased directly
from the issuer, from banks and financial institutions or from an underwriter or
market maker for the securities. There usually are not brokerage commissions
paid for such purchases. Any transactions for which the Fund pays a brokerage
commission will be effected at the best price and execution available. Purchases
from underwriters of portfolio securities include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers include the spread between the bid and asked price. The Fund may
purchase participation certificates in variable rate Municipal Obligations with
a demand feature from banks or other financial institutions at a negotiated
yield to the Fund based on the applicable interest rate adjustment index for the
security. The interest received by the Fund is net of a fee charged by the
issuing institution for servicing the underlying obligation and issuing the
participation certificate, letter of credit, guarantee or insurance and
providing the demand repurchase feature.
Allocation of transactions, including their frequency, to various dealers
is determined by the Advisor in its best judgment and in a manner deemed in the
best interest of shareholders of the Fund rather than by a formula. The primary
consideration is prompt execution of orders in an effective manner at the most
favorable price. No preference in purchasing portfolio securities will be given
to banks or dealers that are Participating Organizations.
Investment decisions for the Fund will be made independently from those
for any other investment companies or accounts that may be or become managed by
the Advisor or its affiliates. If, however, the Fund and other investment
companies or accounts managed by the Advisor are simultaneously engaged in the
purchase or sale of the same security, the transactions may be averaged as to
price and allocated equitably to each account. In some cases, this policy might
adversely affect the price paid or received by the Fund or the size of the
position obtainable for the Fund. In addition, when purchases or sales of the
same security for the Fund and for other investment companies managed by the
Advisor occur contemporaneously, the purchase or sale orders may be aggregated
in order to obtain any price advantage available to large denomination
purchasers or sellers.
No portfolio transactions are executed with the Advisor or its affiliates
acting as principal. In addition, the Fund will not buy bankers' acceptances,
certificates of deposit or commercial paper from the Advisor or its affiliates.
Portfolio Turnover
Each Portfolio's average annual portfolio turnover rate, i.e., the ratio
of the lesser of sales or purchases to the monthly average value of the
portfolio (excluding from both the numerator and the denominator all securities
with maturities at the time of acquisition of one year or less) is expected to
be high. Purchases and sales are made for each Portfolio whenever necessary in
the Advisor's opinion, to meet the Portfolio's objective.
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<PAGE>
COUNSEL AND INDEPENDENT AUDITORS
Legal Matters for the Fund are passed upon by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019 have been
selected as independent auditors for the Fund.
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<PAGE>
RATINGS OF MUNICIPAL AND CORPORATE OBLIGATIONS
Description of Moody's Investors Service, Inc.'s municipal and corporate
bond ratings:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A posses favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
establishing cash flow of funds for their servicing or by established and
broad-based access to the market for refinancing, or both. Loans bearing the
designation MIG 2 are of high quality, with margins of protection ample although
not so large as in the preceding group. A short-term issue having a demand
feature (i.e., payment relying on external liquidity and usually payable on
demand rather than fixed maturity dates) is differentiated by Moody's with the
use of the Symbol VMIG, instead of MIG.
Moody's also provides credit ratings for tax exempt commercial paper.
These are promissory obligations (1) not having an original maturity in excess
of nine months, and (2) backed by commercial banks. Notes bearing the
designation P-1 have a superior capacity for repayment. Notes bearing the
designation P-2 have a strong capacity for repayment.
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<PAGE>
Description of Standard & Poor's Corporation's municipal and corporate
bond ratings:
AAA -- Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in the highest rated
categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic condition or changing circumstances are more likely
to lead to a weakened capacity to pay interest and repay principal for bonds in
this category than for bonds in higher rated categories.
BB, B, CC, CCC -- Bonds rated BB, B, CC, CCC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lower degree of speculation and CCC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C -- Bonds rated C are income bonds on which no interest is being paid.
D -- Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
S&P's top ratings for municipal notes issued after July 29, 1984 are SP-1
and SP-2. The designation SP-1 indicates a very strong capacity to pay principal
and interest. A "+" is added for those issues determined to possess overwhelming
safety characteristics. An "SP-2" designation indicates a satisfactory capacity
to pay principal and interest.
Unrated Bonds. Bonds which are unrated expose the investor to risks with
respect to the issuer's capacity to pay interest and principal which are similar
to the risks of rated- rated obligations. The safety of an investment in an
unrated obligation, therefore, is more reliant as a general proposition on an
investment advisor's judgment, analysis and experience than an investment in a
higher rated obligation.
Commercial Paper Ratings
Description of Standard & Poor's Corporation's two highest commercial
paper ratings:
A -- Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1 -- This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2 -- Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
Description of Moody's Investors Service, Inc.'s two highest commercial
paper ratings:
Moody's employs the following designations, both judged to be investment
grade, to indicate the relative repayment capacity of rated issues: Prime-1,
highest quality; Prime-2, higher quality.
37
<PAGE>
Money Market Fund Ratings
Description of Standard & Poor's Corporation's two highest money market
fund ratings:
AAAm -- Safety is excellent. Superior capacity to maintain principal value
and limit exposure to loss.
AAm -- Safety is very good. Strong capacity to maintain principal value
and limit exposure to loss.
Description of Moody's Investors Service, Inc.'s two highest money market
fund ratings:
Aaa -- Money Market Funds rated Aaa have superior quality assets and
management.
Aa -- Money Market Funds rated Aa have strong quality assets and
management.
FINANCIAL STATEMENTS
The audited financial statements for the Fund dated October 31, 1997 and
the Reprt of Ernst & Young LLP thereon, are incorporated herein by reference to
the Trust's Annual Report. The Annual Report is available upon request and
without charge.
e
38
<PAGE>
THE TREASURER'S FUND, INC.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements (for those portfolios activated by the Advisor
- Domestic Prime Money Market, Tax Exempt Money Market and U.S.
Treasury Money Market):
Included in Part A of the Registration Statement:
(1) Financial Highlights for each of the periods indicated
therein.
Included in Part B of the Registration Statement, and incorporated
by reference to the Fund's Annual Report dated October 31, 1997:
(2) Statement of Net Assets, October 31, 1997.
(3) Statement of Operations for the year ended October 31,
1997.
(4) Statement of Changes in Net Assets for each of the two
years in the period ended October 31, 1997.
(5) Fiancial Highlights for each of the five years in the
period ended October 31, 1997.
(6) Notes to the Financial Statements.
(7) Report of Ernst & Young LLP, independent auditors, dated
December 18, 1997.
(b) Exhibits.
* (1) Amended and Restated Articles of Incorporation of the
Registrant.
* (2) Amended and Restated By-laws of the Registrant.
(3) Not applicable.
** (4) Form of certificate for shares of Common Stock, par
value $.001 per share, of the Registrant.
* (5) Form of Advisory Agreement between the Registrant and
Gabelli Fixed Income LLC.
* (6) Distribution Agreement between the Registrant and
Gabelli Fixed Income Distributors, Inc.
- ----------
* Filed herewith.
** Filed with Post-Effective Amendment No. 2 to Registration Statement No.
33-17604 on March 10, 1989, and incorporated herein by reference.
C-1
<PAGE>
(7) Not applicable.
* (8) Custody Agreement between the Registrant and Custodial
Trust Company.
* (9.1) Administration Agreement between the Registrant and
Gabelli Funds, Inc.
* (9.2) Sub-Administration Agreement between Gabelli Funds,
Inc. (the Administrator) and BISYS Fund Services
Limited Partnership, d/b/a BISYS Fund Services Inc.
* (9.3) Transfer Agent Agreement between the Registrant and
State Street Bank and Trust Company.
* (9.4) Fund Accounting Agreement between the Registrant and
BISYS Fund Services, Inc.
* (10.1) Opinion of Battle Fowler LLP, as to the legality of the
securities being registered, including their consent to
the filing thereof and to the use of their name under
the heading "Taxes" in the Prospectus and Statement of
Additional Information.
* (11) Consent of Independent Auditors.
(12) Not applicable.
*** (13) Written assurance of Thomas E. O'Connor that his
purchase of shares of the Registrant was for investment
purposes without any present intention of redeeming or
reselling.
(14) Not applicable.
* (15) Distribution and Service Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940 for each
portfolio series of the Registrant.
* (17) Financial Data Schedules (for EDGAR filing only).
Item 25. Persons Controlled by or Under Common Control with Registrant.
None
- -----------
* Filed herewith.
*** Filed with Post-Effective Amendment No. 4 to the Registration Statement
No. 33-17604 on May 11, 1990, and incorporated herein by reference.
C-2
<PAGE>
Item 26 Number of Holders of Securities.
Number of Record Holders
Title of Class as of January 29, 1998
-------------- ----------------------
Common Stock
(par value $.001)
-- U.S. Treasury Money Market Portfolio 3,232
-- Domestic Prime Money Market Portfolio
Series 16,125
-- Global Money Market Portfolio Series 1
-- Tax Exempt Money Market Portfolio Series 5,149
-- Limited Term Portfolio Series 1
-- Tax Exempt Limited Term Portfolio Series 1
Item 27. Indemnification.
Registrant incorporates herein by reference its response to Item 27
of the Registration Statement filed with the Commission on January 28,
1987.
Item 28. Business and Other Connections of Investment Adviser.
The description of Gabelli Fixed Income LLC under the caption
"Management of the Fund" in the Prospectus and in the Statement of
Additional Information constituting parts A and B, respectively, of the
Registration Statement are incorporated herein by reference.
Registrant's investment adviser, Gabelli Fixed Income LLC, is a
registered investment adviser.
Gabelli Funds, Inc. ("Gabelli"), a New York corporation, has
purchased substantially all of the partnership interest of Thomas E.
O'Connor & Co. L.P. ("TOC & Co. L.P."), a Delaware corporation, in
Gabelli-O'Connor Fixed Income Mutual Funds Management Co., the Fund's
former investment adviser (the "Former Adviser"). In addition, Gabelli has
purchased the partnership interests owned by TOC & Co. L.P. in an
affiliated company, Gabelli-O'Connor Fixed Income Management Co. The
Former Adviser and its affiliated company have been merged into a newly
created Delaware limited liability company, Gabelli Fixed Income L.L.C.,
which will be the successor registered investment adviser to the Fund.
Gabelli Fixed Income, Inc., a wholly owned subsidiary of Gabelli,
currently holds 80.1% of the interests in such entity and the remaining
19.9% interest is owned by senior officers of the Former Adviser.
Item 29. Principal Underwriters.
(a) Gabelli Fixed Income Distributors, Inc., the Registrant's
distributor, currently is not a distributor for any other registered
investment companies.
(b) The following are the directors and officers of Gabelli Fixed Income
Distributors, Inc. The principal business address of each of these
persons is 19 Old Kings Highway South, Darien, Connecticut
06820-4526.
C-3
<PAGE>
Positions and Offices Positions and Offices
Name With Distributor With Registrant
- ---- --------------------- ---------------------
Thomas E. O'Connor President Director
Ronald S. Eaker Vice President President; Chief
Investment Officer
Henley L. Smith Vice President and Vice President;
Secretary Investment Officer
(c) Not applicable.
Item 30. Location of Accounts and Records.
Accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules promulgated thereunder
are maintained in the physical possession of the Registrant; at Gabelli Fixed
Income LLC, the Registrant's advisor; at Custodial Trust Company, the
Registrant's custodian; at Gabelli Funds, Inc., the Fund's Administrator; and at
BISYS Fund Services Limited Partnership, d/b/a BISYS Fund Services, the
Registrant's sub-administrator, and BISYS Fund Services, Inc. the Registrant's
fund accounting agent, and State Street Bank and Trust Company, the Registrant's
transfer agent and dividend agent.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
C-4
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Directors
The Treasurer's Fund, Inc.
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of The Treasurer's Fund, Inc.
(comprising the Domestic Prime Money Market, Tax Exempt Money Market, and U.S.
Treasury Money Market Portfolios) as of October 31, 1997, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and others. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting The Treasurer's Fund, Inc. at
October 31, 1997, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for each of the indicated periods, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
December 18, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Darien, and State of Connecticut, on the 27th day of February, 1998.
The Treasurer's Fund, Inc.
(Registrant)
By: /s/ Ronald S. Eaker
-------------------------------
Ronald S. Eaker, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
(1) Principal Executive
Officer
President
/s/ Ronald S. Eaker and Chief February 27, 1998
----------------------------- Investment
Ronald S. Eaker Officer
(2) Principal Financial and
Accounting Officer
/s/ Judith Raneri Treasurer February 27, 1998
-----------------------------
Judith Raneri
(3) Majority of Directors
Thomas E. O'Connor ) Directors February 27, 1998
Felix J. Christiana )
Mary E. Hauck )
Robert C. Kolodny, M.D )
Karl Otto Pohl )
Anthonie C. van Ekris )
Anthony J. Colavita ) By:/s/ Ronald S. Eaker
Anthony R. Pustorino ) ---------------------
Richard N. Daniel ) Ronald S. Eaker
Werner J. Roeder, M.D. ) Attorney-in-Fact*
* An executed copy of the power of attorney for all of the Directors except
Mr. O'Connor are filed herewith.
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
GABELLI-0'CONNOR TREASURER'S FUND INC.
State Department
of Assessments and Taxation
State of Maryland 3-16-89 at 10:35am
Pursuant to the provisions of Section 2-609 of the Maryland General
Corporation Law, Gabelli-O'Connor Treasurer's Fund, Inc. (the "Corporation"), a
Maryland corporation having its principal office in Baltimore City, hereby
certifies that:
FIRST: The Corporation desires to amend and restate its charter as
currently in effect.
SECOND: The amendment to the charter of the corporation effected hereby is
to amend the name of the corporation.
THIRD: The amendment and the restatement of the charter of the Corporation
herein certified was approved by a majority of the entire Board of Directors of
the Corporation, followed by the written consent of the holder of all of the
outstanding shares of the Corporation entitled to vote.
FOURTH: The provisions hereinafter set forth in the Articles of
Restatement are all the provisions of the charter of the Corporation as
currently in effect.
FIFTH: The current address of the principal office of the Corporation in
the State of Maryland is Prentice Hall Corporation System, Maryland, 111 South
Calvert Street, Suite 1400, Baltimore, Maryland 21202.
SIXTH: The name and the address of the current resident agent of the
Corporation in the State of Maryland is Prentice Hall Corporation System,
Maryland is Prentice Hall Corporation System, Maryland, 111 South Calvert
Street, Suite 1400, Baltimore, Maryland 21202.
SEVENTH: The number of directors of the Corporation is seven, and the
names of the directors of the Corporation currently in office are:
<PAGE>
Thomas E. O'Connor
Felix J. Christiana
Robert C. Kolodny, M.D.
Jeffrey P. Parker
Anthony R. Pustorino
Gary L. Roubos
Anthonie C. van Ekris
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
GABELLI-O'CONNOR TREASURER'S FUND, INC.
FIRST: (1) The name of the incorporator is Allyssa Rollack.
(2) The incorporator's post office address is 280 Park Avenue, New York,
New York 10017.
(3) The incorporator is over eighteen years of age.
(4) The incorporator is forming the corporation named in these Articles of
Incorporation under the General Corporation Law of the State of Maryland.
SECOND: The name of the corporation (hereinafter called the "Corporation")
is The Treasurer's Fund, Inc.
THIRD: The purposes for which the Corporation is formed are:
(a) to conduct, operate and carry on the business of an investment
company;
(b) to subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or
otherwise dispose of notes, bills, bonds, debentures and other negotiable
or non-negotiable instruments, obligations and evidences of indebtedness
issued or guaranteed as to principal and interest by the United States
Government, or any agency or instrumentality thereof, any State or local
government, or any agency or instrumentality thereof, or any other
securities of any kind issued by any corporation or other issuer
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<PAGE>
organized under the laws of the United States or any State, territory or
possession thereof or any foreign country or any subdivision thereof or
otherwise, to pay for the same in cash or by the issue of stock, including
treasury stock, bonds and notes of the Corporation or otherwise; and to
exercise any and all rights, powers and privileges of ownership or
interest in respect of any and all such investments of every kind and
description including and without limitation, the right to consent and
otherwise act with respect thereto; with power to designate one or more
persons, firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any said investments;
(c) to conduct research and investigations in respect of securities,
organizations, business and general business and financial conditions in
the United States of America and elsewhere for the purpose of obtaining
information pertinent to the investment and employment of the assets of
the Corporation and to procure any and all of the foregoing to be done by
others as independent contractors and to pay compensation therefor;
(d) to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the
assets of the Corporation, and to endorse, guarantee or undertake the
performance of any obligation, contract or engagement of any other person,
firm, association or corporation;
(e) to issue, sell, distribute, repurchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal
in, shares of stock of the Corporation, including shares of stock of the
Corporation in fractional denominations, and to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of shares
of stock of the Corporation, any funds or property of the Corporation,
whether capital or surplus or otherwise, to the full extent now or
hereafter permitted by the laws of the State of Maryland and by these
Articles of Incorporation;
(f) to conduct its business, promote its purposes, and carry on its
operations in any and all of its branches and maintain offices both within
and
-3-
<PAGE>
without the State of Maryland, in any and all States of the United States
of America, in the District at Columbia, and in any or all commonwealths,
territories, dependencies, colonies, possessions, agencies, or
instrumentalities of the United States of America and of foreign
governments;
(g) to carry out all or any part of the foregoing purposes or
objects as principal or agent, or in conjunction with any other person,
firm, association, corporation or other entity, or as a partner or member
of a partnership, syndicate or joint venture or otherwise, and in any part
of the world to the same extent and as fully as natural persons might or
could do;
(h) to have and exercise all of the powers and privileges conferred
by the laws of the State of Maryland upon corporations formed under the
laws of such State; and
(i) to do any and all such further acts and things and to exercise
any and all such further powers and privileges as may be necessary,
incidental, relative, conducive, appropriate or desirable for the
foregoing purposes.
The enumeration herein of the objects and purposes of the Corporation
shall be construed as powers as well as objects and purposes and shall not be
deemed to exclude by inference any powers, objects or purposes which the
Corporation is empowered to exercise, whether expressly by force of the laws of
the State of Maryland now or hereafter in effect, or impliedly by the
reasonable construction of the said law.
FOURTH: The post office address of the principal office of the Corporation
within the State of Maryland is 111 South Calvert Street, Suite 1400,
Baltimore, MD 21202.
The resident agent of the Corporation in the State of Maryland is
Prentice-Hall Corporation System, Maryland, at 111 South Calvert Street, Suite
1400, Baltimore, MD 21202.
FIFTH: (1) (a) The total number of shares of stock of all classes which
the Corporation shall have authority to issue is twenty billion
(20,000,000,000), all of which stock shall have a par value of One Tenth of One
Cent ($.001) per share. The aggregate par value of all authorized shares of
stock of the Corporation is Twenty Million Dollars ($20,000,000).
-4-
<PAGE>
(b) Unless otherwise prohibited by law, so long as the
Corporation is registered as an open-end investment company under the Investment
Company Act of 1940, the Board of Directors of the Corporation is authorized,
without the approval of the holders of any outstanding shares, to increase or
decrease the aggregate number of shares of stock that the Corporation shall have
authority to issue, but the aggregate number of shares may not be decreased by
the Board of Directors below the aggregate number of shares then outstanding.
(2)(a) The Board of Directors of the Corporation is authorized
to classify or to reclassify, from time to time, any unissued shares of stock of
the Corporation, whether now or hereafter authorized, by setting, changing or
eliminating the preference, conversion or other rights, voting powers,
restrictions, limitations as to dividends, and qualifications or terms and
conditions of or rights to require redemption of the stock and, pursuant to
such classification or reclassification, to increase or decrease the number of
authorized shares of any class, but the number of shares of any class shall not
be reduced by the Board of Directors below the number of shares thereof then
outstanding.
(b) Without limiting the generality of the foregoing, the
dividends and distributions of investment income and capital gains with respect
to the stock of the Corporation, and with respect to each class that hereafter
may be created, shall be in such amount as may be declared from time to time by
the Board of Directors, and such dividends and distributions may vary from class
to class to such extent and for such purposes as the Board of Directors may deem
appropriate, including but not limited to, the purpose of complying with
requirements of regulatory or legislative authorities.
(3) Until such time as the Board of Directors shall provide
otherwise in accordance with section (2) of this Article FIFTH, two billion
(2,000,000,000) shares of the authorized shares of stock of the Corporation
shall be allocated to each of the following six classes of Common Stock:
Gabelli-O'Connor Money Market Portfolio Common Stock, Gabelli-O'Connor High
Yield Money Market Portfolio Common Stock, Gabelli-O'Connor Short/Intermediate
Bond Portfolio Common Stock, Gabelli-O'Connor Tax Exempt Money Market Portfolio
Common Stock, Gabelli-O'Connor Tax Exempt Short/Intermediate Bond Portfolio
Common Stock, and Gabelli-O'Connor Auction Rate Preferred Portfolio Common
Stock. The balance of eight billion (8,000,000,000) shares of such stock may be
issued in any of these classes, or in any new class or classes each comprising
such number of shares and having such designations, such
-5-
<PAGE>
powers, preferences and rights and such qualifications, limitations and
restrictions thereof as shall be fixed and determined from time to time by
resolution or resolutions providing for the issuance of such stock adopted by
the Board of Directors. Each class of stock of the Corporation and the holders
thereof shall be subject to the following provisions.
(a) As more fully set forth hereafter, the assets and
liabilities and the income and expenses of each class of the Corporation's stock
shall be determined separately and, accordingly, the net asset value, the
dividends payable to holders, and the amounts distributable in the event of
dissolution of the Corporation to holders of shares of the Corporation's stock
may vary from class to class. Except for these differences and certain other
differences hereafter set forth, each class of the Corporation's stock shall
have the same preference, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of and rights to require redemption.
(b) All consideration received by the Corporation for the
issue or sale of shares of a class of the Corporation's stock, together with all
income, earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation thereof, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may be,
shall irrevocably belong to that class for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of account of the
Corporation. Such consideration, income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
belonging to" that class.
(c) The assets belonging to a class of the Corporation's stock
shall be charged with the liabilities of the Corporation with respect to that
class and with that class's share of the liabilities of the Corporation not
attributable to any particular class, in the latter case in the proportion that
the net asset value of that class bears to the net asset value of all classes of
the Corporation's stock as determined in accordance with Article NINTH of these
Articles of Incorporation. The determination of the Board of Directors shall be
conclusive as to the allocation of liabilities, including accrued expenses and
reserves, and assets to a particular class or classes.
-6-
<PAGE>
(d) each holder of stock of the Corporation, upon request to
the Corporation (accompanied by surrender of the appropriate stock certificate
or certificates in proper form for transfer, if any certificates have been
issued to represent such shares) shall be entitled to require the Corporation to
redeem, to the extent that the Corporation may lawfully effect such redemption
under the laws of the State of Maryland, all or any part of the shares of stock
standing in the name of such holder on the books of the Corporation at a price
per share equal to the net asset value per share computed in accordance with
Article NINTH hereof.
(e)(i) The term "Minimum Amount" when used herein shall mean
Ten Thousand Dollars ($10,000) unless otherwise fixed by the Board of Directors
from time to time, provided that the Minimum Amount may not in any event exceed
Twenty-Five Thousand Dollars ($25,000). The Board of Directors may establish
differing Minimum Amounts for each class of the Corporation's stock and for
holders of shares of each class of stock based on such criteria as the Board of
Directors may deem appropriate.
(ii) If the net asset value of the shares of a class of the
Corporation's stock held by a stockholder shall be less than the Minimum Amount
then in effect with respect to shares of that class or with respect to shares of
that class held by the stockholders in the same category as that stockholder,
the Corporation may redeem all of those shares, upon notice given in accordance
with paragraph (iv) of this subsection (e), to the extent that the Corporation
may lawfully effect such redemption under the laws of the State of Maryland.
(iii) The Corporation shall be entitled but not required to
redeem shared of stock from any stockholder or stockholders, to the extent and
at such times as the Board of Directors shall, in its absolute discretion,
determine to be necessary or advisable to prevent the Corporation from
qualifying as a "personal holding company", within the meaning of the Internal
Revenue Code of 1954, as amended from time to time. Notice shall be given in
accordance with paragraph (iv) of this subsection (e).
(iv) The notice referred to in paragraphs (ii) and (iii) of
this subsection (e) shall be in writing personally delivered or deposited in the
mail, at least thirty days (or such other number of days as may be specified
from time to time by the Board of Directors) prior to such redemption. If
mailed, the notice shall be addressed to the stockholder at his or her post
office address as shown on the
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<PAGE>
books of the corporation, and sent by certified or registered mail postage
prepaid. The price for shares acquired by the Corporation pursuant to this
subsection (e) shall be an amount equal to the net asset value of such shares,
computed in accordance with Article NINTH hereof.
(f) Payment by the Corporation for shares of stock of the
Corporation surrendered to it for redemption shall be made by the Corporation
within seven business days of such surrender out of the funds legally available
therefor, [ILLEGIBLE] holders of stock of the Corporation to redeem shares of
stock and may postpone the right of such holders to receive payment for any
shares when permitted or required to do so by applicable statutes or
regulations. Payment of the aggregate of such price may be made in cash or, at
the option of the Corporation, wholly or partly in such portfolio securities of
the Corporation as the Corporation shall select.
(g) The right of any holder of stock of the Corporation
redeemed by the Corporation as provided in subsection (d) or (e) of this section
(3) to receive dividends thereon and all other rights of such holder with
respect to such shares shall terminate at the time as of which the purchase or
redemption price of such shares is determined, except the right of such holder
to receive (i) the redemption price of such shares from the Corporation or its
designated agent and (ii) any dividend or distribution to which such holder has
previously become entitled as the record holder of such shares on the record
date for such dividend or distribution. If shares of stock are redeemed by the
Corporation pursuant to subsection (e) of this section (3) and certificates
representing the redeemed shares have been issued, the redemption price need not
be paid by the Corporation until the certificates have been received by the
Corporation or its agent duly endorsed for transfer.
(h) The Corporation shall be entitled to purchase shares of
its stock, to the extent that the Corporation may lawfully effect such purchase
under the laws of the State of Maryland, upon such terms and conditions and for
such consideration as the Board of Directors shall deem advisable, by agreement
with the stockholder at a price not exceeding the net asset value per share
computed in accordance with Article NINTH hereof.
(i) The net asset value of each share of a class of the
Corporation's stock issued and sold or redeemed or purchased at net asset value
shall be the net asset value per
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<PAGE>
share of the shares of that class determined in accordance with Article NINTH
hereof based on the assets belonging to that class less the liabilities charged
to that class.
(j) In the absence of any specification as to the purpose for
which shares of stock of the Corporation are redeemed or purchased by it, all
shares so redeemed or purchased shall be deemed to be retired in the sense
contemplated by the laws of the State of Maryland and the number of the
authorized shares of stock of the Corporation shall not be reduced by the number
of any shares redeemed or purchased by it.
(k) Shares of each class of stock shall be entitled to such
dividends or distributions, in stock or cash or both, as may be declared from
time to time by the Board of Directors, acting in its sole discretion, with
respect to such class, provided that dividends or distributions shall be paid on
shares of a class of stock only out of lawfully available assets belonging to
that class.
(l) For the purpose of allowing the net asset value per share
of a class of the Corporation's stock to remain constant, the Corporation shall
be entitled to declare, pay and credit as dividends daily the net income (which
may include or give effect to realized and unrealized gains and losses, as
determined in accordance with the Corporation's accounting and portfolio
valuation policies) of the Corporation allocated to that class. If the amount so
determined for any day is negative, the Corporation shall be entitled, without
the payment of monetary compensation but in consideration of the interest of the
Corporation and its stockholders in maintaining a constant net asset value per
share of the class, to redeem pro rata from all the stockholders of record of
shares of the class at the time of such redemption (in proportion to their
respective holdings thereof) such number of outstanding shares of the class, or
fractions thereof, as shall be required to permit the net asset value per share
of the class to remain constant.
(m) In the event of the liquidation or dissolution of the
Corporation, the stockholders of a class of the Corporation's stock shall be
entitled to receive, as a class, out of the assets of the Corporation available
for distribution to stockholders, the assets belonging to that class. The assets
so distributable to the stockholders of a class shall be distributed among such
stockholders in proportion to the number of shares of that class held by them
and recorded on the books of the Corporation. In the event that there are any
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<PAGE>
assets available for distribution that are not attributable to any particular
class of stock, such assets shall be allocated to all classes in proportion to
the net asset value of the respective classes and then distributed to the
holders of stock of each class in proportion to the net asset value of the
shares of that class held by the respective holders.
(n) On each matter submitted to a vote of the stockholders,
each holder of a share of stock shall be entitled to one vote for each such
share, standing in such holder's name on the books of the Corporation
irrespective of the class thereof; provided, however, that to the extent class
voting is required by the Investment Company Act of 1940 or regulations as from
time to time amended, or the laws of the State of Maryland as to any such
matter, those requirements shall apply.
(o) The Corporation may issue shares of stock in fractional
denominations to the same extent as its whole shares, and shares in fractional
denominations shall be shares of stock having proportionately to the respective
fractions represented thereby all the rights of whole shares, including without
limitation, the right to vote, the right to receive dividends and distributions,
and the right to participate upon liquidation of the Corporation, but excluding
the right to receive a stock certificate representing fractional shares.
(4) No holder of any shares of stock of the Corporation
shall be entitled as of right to subscribe for, purchase, or otherwise acquire
any such shares which the Corporation shall issue or propose to issue; and any
and all of the shares of stock of the Corporation, whether now or hereafter
authorized, may be issued, or may be reissued or transferred if the same have
been reacquired and have treasury status, by the Board of Directors to such
persons, firms, corporations and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in its discretion
may determine, without first offering same, or any thereof, to any said holder.
(5) All persons who shall acquire stock or other securities of
the Corporation shall acquire the same subject to the provisions of these
Articles of Incorporation, as from time to time amended.
SIXTH: The number of directors of the Corporation, until such number
shall be increased pursuant to the By-Laws of the Corporation, shall be two. The
number of directors shall
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never be less than the number prescribed by the General Corporation Law of the
State of Maryland and shall never be more than twenty. The names of the persons
who shall act as directors of the Corporation until the first annual meeting or
until their successors are duly chosen and qualify are Thomas E. O'Connor and
Mary Elizabeth Hauk.
SEVENTH: The following provisions are inserted for purpose of
defining, limiting and regulating the powers of the Corporation and of the Board
of Directors and stockholders.
(a) The business and affairs of The Corporation shall be
managed under the direction of the Board of Directors which shall have and may
exercise all powers of the Corporation except those powers which are by law, by
these Articles of Incorporation or by the By-Laws conferred upon or reserved to
the stockholders. In furtherance and not in limitation of the powers conferred
by law, the Board of Directors shall, have power:
(i) to make, alter and repeal the By-Laws of the Corporation;
(ii) to issue and sell, from time to time, shares of any class
of the Corporation's stock in such amounts and on such terms and conditions, and
for such amount and kind of consideration, as the Board of Directors shall
determine, provided that the consideration per share to be received by the
Corporation shall be not less than the greater of the net asset value per share
of that class of stock at such time computed in accordance with Article NINTH
hereof or the par value thereof;
(iii) from time to time to set apart out of any assets of the
Corporation otherwise available for dividends a reserve or reserves for working
capital or for any other proper purpose or purposes, and to reduce, abolish or
add to any such reserve or reserves from time to time as said Board of Directors
may deem to be in the best interests of the Corporation; and to determine in its
discretion what part of the assets of the Corporation available for dividends in
excess of such reserve or reserves shall be declared in dividends and paid to
the stockholders of the Corporation; and
(iv) from time to time to determine to what extent and at what
times and places and under what conditions and regulations the accounts, books
and records of the Corporation, or any of them, shall be open to the inspection
of the stockholders; and no stockholder shall have any right to inspect any
account or book or document of the Corporation,
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except as conferred by the laws of the State of Maryland, unless and until
authorized to do so by resolution of the Board of Directors or of the
stockholders of the Corporation.
(b) Notwithstanding any provision of the General Corporation
Law of the State of Maryland requiring a greater proportion than a majority of
the votes of all classes or of any class of the Corporation's stock entitled to
be cast in order to take or authorize any action, any such action may be taken
or authorized upon the concurrence of a majority of the aggregate number of
votes entitled to be cast thereon subject to any applicable requirements of the
Investment Company Act of 1940, as from time to time in effect, or rules or
orders of the Securities and Exchange Commission or any successor thereto.
(c) Except as may otherwise be expressly provided by
applicable statutes or regulatory requirements, the presence in person or by
proxy of the holders of one-third of the shares of stock of the Corporation
entitled to vote shall constitute a quorum at any meeting of the stockholders.
(d) Any determination made in good faith and, so far as
accounting matters are involved, in accordance with generally accepted
accounting principles by or pursuant to the discretion of the Board of
Directors, as to the amount of the assets, debts, obligations, or liabilities of
the Corporation, as to the amount of any reserves or charges set up and the
propriety thereof, as to the time of or purposes for creating such reserves or
charges, as to the use, alteration or cancellation of any reserves or charges
(whether or not any debt, obligation or liability for which such reserves or
charges shall have been created shall have been paid or discharged or shall by
then or thereafter required to be paid or discharged), as to the value of or the
method of valuing any investment owned or held by the Corporation, as to the
market value or fair value of any investment or fair value of any other asset of
the Corporation, as to the allocation of any asset of the Corporation to a
particular class or classes of the Corporation's stock, as to the charging of
any liability of the Corporation to a particular class or classes of the
Corporation's stock, as to the number of shares of the Corporation
outstanding, as to the estimated expense to the Corporation in connection with
purchases of its shares, as to the ability to liquidate investments in orderly
fashion, or as to any other matters relating to the issue, sale, purchase and/or
other acquisition or disposition of investments or shares of the Corporation,
shall be final and conclusive and shall be binding upon the Corporation and all
holders of its shares, past,
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present and future, and shares of the Corporation are issued and sold on the
condition and understanding that any and all such determinations shall be
binding as aforesaid.
(e) Except to the extent prohibited by the Investment Company
Act of 1940, as amended, or rules, regulations or orders thereunder promulgated
by the Securities and Exchange Commission or any successor thereto or by
the By-Laws of the Corporation, a director, officer or employee of the
Corporation shall not be disqualified by his or her position from dealing or
contracting with the Corporation, nor shall any transaction or contract of the
Corporation be void or voidable by reason of the fact that any director, officer
or employee or any firm of which any director, officer or employee is a member
or any corporation of which any director, officer or employee is a stockholder,
officer or director, is in any way interested in such transaction or contract;
provided that in case a director, or a firm or corporation of which a director
is a member, stockholder, officer or director, is so interested, such fact shall
be disclosed to or shall have been known by the Board of Directors or a majority
thereof; and any director of the Corporation who is so interested, or who is a
member, stockholder, officer or director of such firm or corporation, may be
counted in determining the existence of a quorum at any meeting of the Board of
Directors of the Corporation which shall authorize any such transaction or
contract, wi
th like force and effect as if he or she were not such director, or
member, stockholder, officer or director of such firm or corporation.
(f) Specifically and without limitation of the foregoing
subsection (e) but subject to the exception therein prescribed, the Corporation
may enter into management or advisory, underwriting, distribution and
administration contracts and other contracts, and may otherwise do business,
with Gabelli-O'Connor Fixed Income Mutual Funds Co. and any subsidiary or
affiliate of such partnership or any affiliates of any such affiliate, or the
partners, officers and employees thereof, and may deal freely with one another
notwithstanding that the Board of Directors of the Corporation may be composed
in part of partners, officers or employees of such partnership and/or its
subsidiaries or affiliates and that officers of the Corporation may have been,
be or become partners, directors, officers, or employees of such firm, and/or
its subsidiaries or affiliates, and neither such management or advisory,
underwriting, distribution or administration contracts nor any other contract or
transaction between the Corporation and such partnership and/or its subsidiaries
or affiliates shall be invalidated or in any way affected thereby, nor shall any
director or officer of the Corporation be liable to the Corporation or to
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any stockholder or creditor thereof or to any person for any loss incurred by it
or such stockholder under or by reason of such contract or transaction; provided
that nothing herein shall protect any director or officer of the Corporation
against any liability to the Corporation or to its security holders to which
such director or officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office; and provided always that such
contract or transaction shall have been on terms that were not unfair to the
Corporation at the time at which it was entered
EIGHTH: Subject to the requirements of the Investment Company Act of
1940 and rules promulgated thereunder, as from time to time amended, to the
maximum extent permitted by the General Corporation Law of the State of Maryland
as from time to time amended, the Corporation shall indemnify its currently
acting and its former directors and officers and those persons who, at the
request of the Corporation, serve or have served another corporation,
partnership, joint venture, trust or other enterprise in one or more of such
capacities.
NINTH: For the purpose of the computation of net asset value
referred to in these Articles of Incorporation, the following rules shall apply:
(a) The net asset value of each share of a class of the
Corporation's stock issued or sold at its net asset value shall be the net asset
value per share of that class when next determined as provided in paragraph (d)
of this Article NINTH following acceptance by the Corporation of the
subscription or other agreement with respect to the issue or sale of such share.
(b) The net asset value of each share of a class of the
Corporation's stock redeemed by the Corporation at the request of its holder
shall be the net asset value per share of that class when next determined as
provided in paragraph (d) of this Article NINTH following the time the
Corporation receives a request for redemption of such share in good order with
all appropriate documentation, including stock certificates, if any, duly
endorsed for transfer.
(c) The net asset value of each share of a class of the
Corporation's stock purchased or redeemed by it otherwise than upon request for
redemption by its holder shall be the net asset value per share of that class of
the Corporation's stock when next determined as provided in paragraph (d)
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Maryland, and all rights conferred upon stockholders herein are granted subject
to this reservation.
IN WITNESS WHEREOF, THE TREASURER'S FUND, INC., has caused
these presents to be signed in its name and on its behalf by its President and
attested by its Secretary on March 6, 1989.
THE TREASURER'S FUND, INC.
By: /s/ Thomas E. O'Connor
---------------------------
Thomas E. O'Connor
Attest:
By: /s/ Mary E. Hauck
--------------------------
Secretary
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<PAGE>
THE UNDERSIGNED, President of THE TREASURER'S FUND, INC., who
executed on behalf of said Corporation the foregoing Amended and Restated
Articles of Incorporation, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the foregoing
Amended and Restated Articles of Incorporation to be the corporate act of said
Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ Thomas E. O'Connor
---------------------------
Thomas E. O'Connor
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BY-LAWS
OF
THE TREASURER'S FUND, INC.
a Maryland corporation
ARTICLE I
Offices
Section 1. Principal Office in Maryland. The Corporation shall have
a principal office in the City of Baltimore, State of Maryland.
Section 2. Other Offices. The Corporation may have offices also at
such other places within and without the State of Maryland as the Board of
Directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of stockholders shall be held
at such place, either within the State of Maryland or at such other place within
the United States, as shall be fixed from time to time by the Board of
Directors.
Section 2. Annual Meetings. The Corporation shall not be required to
hold an annual meeting of its stockholders in any year in which none of the
following is required to be acted on by the holders of any class or series of
stock under the Investment Company Act of 1940: (a) election of the directors,
(b) approval of the Corporation's investment advisory agreement with respect to
a particular class or series; (c) ratification of the selection of independent
public accountants; and (d) approval of the Corporation's distribution agreement
with respect to a particular class or series. In the event that the Corporation
shall be required to hold an annual meeting of stockholders by the Investment
Company Act of 1940, such meeting of stockholders shall be held on a date fixed
from
<PAGE>
time to time by the Board of Directors not less than ninety nor more than one
hundred twenty days following the end of such fiscal year of the Corporation.
Section 3. Notice of Annual Meeting. Written or printed notice of an
annual meeting, stating the place, date and hour thereof, shall be given to each
stockholder entitled to vote thereat not less than ten nor more than ninety days
before the date of the meeting.
Section 4. Special Meetings. Special meetings of stockholders may be
called by the chairman, the president or by the Board of Directors and shall be
called by the secretary upon the written request of holders of shares entitled
to cast not less than twenty-five percent of all the votes entitled to be cast
at such meeting. Such request shall state the purpose or purposes of such
meeting and the matters proposed to be acted on thereat. In the case of such
request for a special meeting, upon payment by such stockholders to the
Corporation of the estimated reasonable cost of preparing and mailing a notice
of such meeting, the secretary shall give the notice of such meeting. The
secretary shall not be required to call a special meeting to consider any matter
which is substantially the same as a matter acted upon at any special meeting of
stockholders held within the preceding twelve months unless requested to do so
by the holders of shares entitled to cast not less than a majority of all votes
entitled to be cast at such meeting.
Section 5. Notice of Special Meeting. Written or printed notice of a
special meeting of stockholders, stating the place, date, hour and purpose
thereof, shall be given by the secretary to each stockholder entitled to vote
thereat not less than ten nor more than ninety days before the date fixed for
the meeting.
Section 6. Business of Special Meetings. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice thereof.
Section 7. Quorum. Except as may otherwise be expressly provided by
applicable statutes or regulations, the holders of one-third of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business.
Section 8. Voting. When a quorum is present at any meeting, the
affirmative vote of a majority of the votes cast
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shall decide any question brought before such meeting, unless the question is
one upon which by express provision of the Investment Company Act of 1940, as
from time to time in effect, or other statutes or rules or orders of the
Securities and Exchange Commission or any successor thereto or of the Articles
of Incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
Section 9. Proxies. Each stockholder shall at every meeting of
stockholders be entitled to one vote in person or by proxy for each share of the
stock having voting power held by such stockholder, but no proxy shall be voted
after eleven months from its date, unless otherwise provided in the proxy.
Section 10. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date which shall be
not more than ninety days and, in the case of a meeting of stockholders, not
less than ten days prior to the date on which the particular action requiring
such determination of stockholders is to be taken. In lieu of fixing a record
date, the Board of Directors may provide that the stock transfer books shall be
closed for a stated period, but not to exceed, in any case, twenty days. If the
stock transfer books are closed for the purpose of determining stockholders
entitled to notice of or to vote at a meeting of stockholders, such books shall
be closed for at least ten days immediately preceding such meeting. If no record
date is fixed and the stock transfer books are not closed for the determination
of stockholders: (1) the record date for the determination of stockholders
entitled to notice of, or to vote at, a meeting of stockholders shall be at the
close of business on the day on which notice of the meeting of stockholders is
mailed or the day thirty days before the meeting, whichever is the closer date
to the meeting; and (2) the record date for the determination of stockholders
entitled to receive payment of a dividend or an allotment of any rights shall be
at the close of business on the day on which the resolution of the Board of
Directors, declaring the dividend or allotment of rights, is adopted, provided
that the payment or allotment date shall not be more than ninety days after the
date of the adoption of such resolution.
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Section 11. Inspectors of Election. The directors, in advance of any
meeting, may, but need not, appoint one or more inspectors to act at the meeting
or any adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his or her
ability. The inspectors, if any, shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting or any stockholder, the inspector or
inspectors, if any, shall make a report in writing of any challenge, question or
matter determined by him or her or them and execute a certificate of any fact
found by him or her or them.
Section 12. Informal Action by Stockholders. Except to the extent
prohibited by the Investment Company Act of 1940, as from time to time in
effect, or rules or orders of the Securities and Exchange Commission or any
successor thereto, any action required or permitted to be taken at any meeting
of stockholders may be taken without a meeting if a consent in writing, setting
forth such action, is signed by all the stockholders entitled to vote on the
subject matter thereof and any other stockholders entitled to notice of a
meeting of stockholders (but not to vote thereat) have waived in writing any
rights which they may have to dissent from such action, and such consent and
waiver are filed with the records of the Corporation.
ARTICLE III
Board of Directors
Section 1. Number of Directors. The number of directors shall be
fixed at no less than two nor more than
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twenty. Within the limits specified above, the number of directors shall be
fixed from time to time by the Board of Directors, but the tenure of office of a
director in office at the time of any decrease in the number of directors shall
not be affected as a result thereof. The directors shall be elected to hold
office at the annual meeting of stockholders, except as provided in Section 2 of
this Article, and each director shall hold office until the next annual meeting
of stockholders or until his successor is elected and qualifies. Any director
may resign at any time upon written notice to the Corporation. Any director may
be removed, either with or without cause, at any meeting of stockholders duly
called and at which a quorum is present by the affirmative vote of the majority
of the votes entitled to be cast thereon, and the vacancy in the Board of
Directors caused by such removal may be filled by the stockholders at the time
of such removal. Directors need not be stockholders.
Section 2. Vacancies and Newly Created Directorships. Any vacancy
occurring in the Board of Directors for any cause, including an increase in the
number of directors, may be filled by the stockholders or by a majority of the
remaining members of the Board of Directors even if such majority is less than a
quorum. So long as the Corporation is a registered investment company under the
Investment Company Act of 1940, vacancies in the Board of Directors may be
filled by a majority of the remaining members of the Board of Directors only if,
immediately after filling any such vacancy, at least two-thirds of the
directors then holding office shall have been elected to such office at a
meeting of stockholders. A director elected by the Board of Directors to fill a
vacancy shall be elected to hold office until the next annual meeting of
stockholders or until his successor is elected and qualifies.
Section 3. Powers. The business and affairs of the Corporation shall
be managed under the direction of the Board of Directors which shall exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Articles of Incorporation or by these By-Laws
conferred upon or reserved to the stockholders.
Section 4. Annual Meeting. The first meeting of each newly elected
Board of Directors shall be held immediately following the adjournment of the
annual meeting of stockholders and at the place thereof. No notice of such
meeting to the directors shall be necessary in order legally to constitute the
meeting, provided a quorum shall be present. In the event such meeting is not so
held, the meeting may be held at such time and place as shall be specified in a
notice given as
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hereinafter provided for special meetings of the Board of Directors.
Section 5. Other Meetings. The Board of Directors of the Corporation
or any committee thereof may hold meetings, both regular and special, either
within or without the State of Maryland. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board of Directors. Special meetings of
the Board of Directors may be called by the chairman, the president or by two or
more directors. Notice of special meetings of the Board of Directors shall be
given by the secretary to each director at least three days before the meeting
if by mail or at least 24 hours before the meeting if given in person or by
telephone or by telegraph. The notice need not specify the business to be
transacted.
Section 6. Quorum and Voting. At meetings of the Board of Directors,
two of the directors in office at the time, but in no event less than one-third
of the entire Board of Directors, shall constitute a quorum for the transaction
of business. When required pursuant to Section 15(c) under the Investment
Company Act of 1940 or Rule 12b-l thereunder a quorum shall also require the
presence in person of a majority of directors who are not parties to a contract
or agreement to be voted upon or interested persons of any such party. The
action of a majority of the directors present at a meeting at which a quorum is
present shall be the action of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 7. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, appoint from among its
members an executive committee and other committees of the Board of Directors,
each committee to be composed of two or more of the directors of the
Corporation. The Board of Directors may, to the extent provided in the
resolution, delegate to such committees, in the intervals between meetings of
the Board of Directors, any or all of the powers of the Board of Directors in
the management of the business and affairs of the Corporation, except the power
to declare dividends, to issue stock, to recommend to stockholders any action
requiring stockholders' approval, to amend the by-laws or to approve any merger
or share exchange which does not require stockholders' approval. Such committee
or committees shall have the name or names as may be determined from time to
time by resolution adopted by the Board of
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Directors. Unless the Board of Directors designates one or more directors as
alternate members of any committee, who may replace an absent or disqualified
member at any meeting of the committee, the members of any such committee
present at any meeting and not disqualified from voting may, whether or not they
constitute a quorum, unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member of such committee. At meetings of any such committee, a majority of the
members or alternate members of such committee shall constitute a quorum for the
transaction of business and the act of a majority of the members or alternate
members present at any meeting at which a quorum is present shall be the act of
the committee.
Section 8. Minutes of Committee Meetings. The committees shall keep
regular minutes of their proceedings.
Section 9. Informal Action by Board of Directors and Committees. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if a
written consent thereto is signed by all members of the Board of Directors or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or committee.
Section 10. Meetings by Conference Telephone. Except to the extent
prohibited by the Investment Company Act of 1940, as from time to time in
effect, or rules or orders of the Securities and Exchange Commission or any
successor thereto, the members of the Board of Directors or any committee
thereof may participate in a meeting of the Board of Directors or committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time and such participation shall constitute presence in person at such meeting.
Section 11. Fees and Expenses. The directors may be paid their
expenses of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like reimbursement and
compensation for attending committee meetings.
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ARTICLE IV
Notices
Section 1. General. Notices to directors and stockholders mailed to
them at their post office addresses appearing on the books of the Corporation
shall be deemed to be given at the time when deposited in the United States
mail.
Section 2. Waiver of Notice, Whenever any notice is required to be
given under the provisions of the statutes, of the Article of Incorporation or
of these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed the equivalent of notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
ARTICLE V
Officers
Section 1. General. The officers of the Corporation shall be chosen
by the Board of Directors at its first meeting after each annual meeting of
stockholders and shall be a chairman of the Board of Directors, a president, a
secretary and a treasurer. The Board of Directors may also choose such vice
presidents and additional officers or assistant officers as it may deem
advisable. Any number of offices, except the offices of president and vice
president, may be held by the same person. No officer shall execute, acknowledge
or verify any instrument in more than one capacity if such instrument is
required by law to be executed, acknowledged or verified by two or more
officers.
Section 2. Other Officers and Agents. The Board of Directors may
appoint such other officers and agents as it desires who shall hold their
offices for such terms and shall exercise such power and performing such duties
as shall be determined from time to time by the Board of Directors.
Section 3. Tenure of Officers. The officers of the Corporation shall
hold office at the pleasure of the Board of
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Directors. Each officer shall hold his or her office until his or her successor
is elected and qualifies or until his or her earlier resignation or removal. Any
officer may resign at any time upon written notice to the Corporation. Any
officer elected or appointed by the Board of Directors may be removed at any
time by the Board of Directors when, in its judgment, the best interests of the
Corporation will be served thereby. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise shall be filled by the
Board of Directors.
Section 4. Chairman of the Board of Directors. The chairman of the
Board of Directors shall be the chief executive officer of the Corporation,
shall preside at all meetings of the stockholders and of the Board of Directors,
shall have general and active management of the business of the Corporation and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. The chairman shall execute on behalf of the Corporation, and may
affix the seal or cause the seal to be affixed to, all instruments requiring
such execution except to the extent that signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation.
Section 5. President. The president shall, in the absence of the
chairman of the Board of Directors, preside at all meetings of the stockholders
or of the Board of Directors. The president shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The president
shall execute bonds, mortgages and other contracts requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation.
Section 6. Vice Presidents. The vice presidents shall act under the
direction of the president and in the absence or disability of the president
shall perform the duties and exercise the power of the president. They shall
perform such other duties and have such other powers as the president or the
Board of Directors may from time to time prescribe. The Board of Directors may
designate on or more executive vice presidents or may otherwise specify the
order of seniority of the vice presidents and, in that event, the duties and
powers of the president shall descend to the vice presidents in the specified
order of seniority.
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Section 7. Secretary. The secretary shall act under the direction of
the president. Subject to the direction of the president, the secretary shall
attend all meetings of the Board of Directors and all meetings of stockholders
and record the proceedings in a book to be kept for that purpose and shall
perform like duties for the committees designated by the Board of Directors when
required. The secretary shall give, or cause to be given, notice of all meetings
of stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the president or the Board of
Directors. The secretary shall keep in safe custody the seal of the Corporation
and shall affix the seal or cause it to be affixed to any instrument requiring
it.
Section 8. Assistant Secretaries. The assistant secretaries in the
order of their seniority, unless otherwise determined by the president or the
Board of Directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary. They shall perform
such other duties and have such other powers as the president or the Board of
Directors may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under the direction of
the president. Subject to the direction of the president he shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. The treasurer shall disburse the funds of the Corporation as may
be ordered by the president or the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the president and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his or her transactions as treasurer and of the financial
condition of the Corporation.
Section 10. Assistant Treasurers. The assistant treasurers in the
order of their seniority, unless otherwise determined by the president or the
Board of Directors, shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer. They shall perform
such other duties and have such other powers as the president or the Board of
Directors may from time to time prescribe.
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<PAGE>
ARTICLE VI
Certificates of Stock
Section 1. General. Every holder of stock of the Corporation who has
made full payment of the consideration for such stock shall be entitled upon
request to have a certificate, signed by, or in the name of the Corporation by,
the president or a vice president and countersigned by the treasurer or an
assistant. treasurer or the secretary or an assistant secretary of the
Corporation, certifying the number and class of whole shares of stock owned by
such holder in the Corporation.
Section 2. Fractional Share Interests or Scrip. The Corporation may,
but shall not be obliged to, issue fractions of a share of stock, arrange for
the disposition of fractional interests by those entitled thereto, pay in cash
the fair value of fractions of a share of stock as of the time when those
entitled to receive such fractions are determined, or issue scrip or other
evidence of ownership which shall entitle the holder to receive a certificate
for a full share of stock upon the surrender of such scrip or other evidence of
ownership aggregating a full share. Fractional shares of stock shall have
proportionately to the respective fractions represented thereby all the rights
of whole shares, including the right to vote, the right to receive dividends and
distributions and the right to participate upon liquidation of the Corporation,
excluding, however, the right to receive a stock certificate representing such
fractional shares. The Board of Directors may cause such scrip or evidence of
ownership to be issued subject to the condition that it shall become void if not
exchanged for certificates representing full shares of stock before a specified
date or subject to the condition that the shares of stock for which such scrip
or evidence of ownership is exchangeable may be sold by the Corporation and the
proceeds thereof distributed to the holders of such scrip or evidence of
ownership, or subject to any other reasonable conditions which the Board of
Directors shall deem advisable, including provision for forfeiture of such
proceeds to the Corporation if not claimed within a period of not less than
three years after the date of the original issuance of scrip certificates.
Section 3. Signatures on Certificates. Any of or all the signatures
on a certificate may be a facsimile. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall cease to be such
officer before such certificate is issued, it may be issued with
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the same effect as if he or she were such officer at the date of issue. The seal
of the Corporation or a facsimile thereof may, but need not, be affixed to
certificates of stock.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of any affidavit of that
fact by the person claiming the certificate or certificates to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his or her legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate or
certificates alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the registered owner
of shares, and if a certificate has been issued to represent such shares upon
surrender to the Corporation or a transfer agent of the Corporation of a
certificate for shares of stock duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, subject to the Corporation's
rights to redeem or purchase such shares, it shall be the duty of the
Corporation, if it is satisfied that all provisions of the Articles of
Incorporation, of the By-Laws and of the law regarding the transfer of shares
have been duly complied with, to record the transaction upon its books, issue a
new certificate to the person entitled thereto upon request for such
certificate, and cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation shall be entitled to
recognize the person registered on its books as the owner of shares to be the
exclusive owner for all purposes including, redemption, voting and dividends,
and the Corporation shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by the laws of Maryland.
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ARTICLE VII
Miscellaneous
Section 1. Reserves. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for repairing or maintaining any property of
the Corporation, or for the purchase of additional property, or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any such reserve.
Section 2. Dividends. Dividends upon the stock of the Corporation
may, subject to the provisions of the Articles of Incorporation and of the
provisions of applicable law, be declared by the Board of Directors at any time.
Dividends may be paid in cash, in property or in shares of the Corporation's
stock, subject to the provisions of the Articles of Incorporation and of
applicable law.
Section 3. Capital Gains Distributions. The amount and number of
capital gains distributions paid to the stockholders during each fiscal year
shall be determined by the Board of Directors. Each such payment shall be
accompanied by a statement as to the source of such payment, to the extent
required by law.
Section 4. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 6. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words, "Corporate
Seal, Maryland". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in another manner reproduced.
Section 7. Filing of By-Laws. A certified copy of the By-Laws,
including all amendments, shall be kept at the principal office of the
Corporation in the State of Maryland.
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<PAGE>
Section 8. Annual Report. The books of account of the Corporation
shall be examined by an independent firm of public accountants at the close of
each annual fiscal period of the Corporation and at such other times, if any, as
may be directed by the Board of Directors of the Corporation. Within one hundred
and twenty days of the close of each annual fiscal period a report based upon
such examination at the close of that fiscal period shall be mailed to each
stockholder of the Corporation of record at the close of such annual fiscal
period, unless the Board of Directors shall set another record date, at his
address as the same appears on the books of the Corporation. Each such report
shall contain such information as is required to be set forth therein by the
Investment Company Act of 1940 and the rules and regulations promulgated by the
Securities and Exchange Commission thereunder. Such report shall also be
submitted at the annual meeting of the stockholders and filed within twenty days
thereafter at the principal office of the Corporation in the State of Maryland.
Section 9. Stock Ledger. The Corporation shall maintain at its
principal office outside of the State of Maryland an original or duplicate stock
ledger containing the names and addresses of all stockholders and the number of
shares of stock held by each stockholder. Such stock ledger may be in written
form or in any other form capable of being converted into written form within a
reasonable time for visual inspection.
Section 10. Ratification of Accountants by Stockholders. At every
annual meeting of the stockholders of the Corporation otherwise called there
shall be submitted for ratification or rejection the name of the firm of
independent public accountants which has been selected for the current fiscal
year in which such annual meeting is held by a majority of those members of the
Board of Directors who are not investment advisers of, or interested person (as
defined in the Investment Company Act of 1940) of, an investment adviser of, or
officers or employees of, the Corporation.
Section 11. Custodian. All securities and similar investments owned
by the Corporation shall be held by a custodian which shall be either a trust
company or a national bank of good standing, having a capital surplus and
undivided profits aggregating not less than two million dollars ($2,000,000), or
a member firm of the New York Stock Exchange, Inc. The terms of custody of such
securities and cash shall include such provisions required to be contained
therein by the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder by the Securities and Exchange Commission.
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<PAGE>
Upon the resignation or inability to serve of any such custodian the
Corporation shall (a) use its best efforts to obtain a successor custodian, (b)
require the cash and securities of the Corporation held by the custodian to be
delivered directly to the successor custodian, and (c) in the event that no
successor custodian can be found, submit to the stockholders of the Corporation,
before permitting delivery of such cash and securities to anyone other than a
successor custodian, the question whether the Corporation shall be dissolved or
shall function without a custodian; provided, however, that nothing herein
contained shall prevent the termination of any agreement between the Corporation
and any such custodian by the affirmative vote of the holders of a majority of
all the stock of the Corporation at the time outstanding and entitled to vote.
Upon its resignation or inability to serve and pending action by the.
Corporation as set forth in this section, the custodian may deliver any assets
of the Corporation held by it to a qualified bank or trust company in the City
of New York, or to a member firm of the New York Stock Exchange, Inc. selected
by it, such assets to be held subject to the terms of custody which governed
such retiring custodian.
Section 12. Investment Advisers. The Corporation may enter into one
or more management or advisory, underwriting, distribution or administration
contracts with any person, firm, partnership, association or corporation but
such contract or contracts shall continue in effect only so long as such
continuance is specifically approved, annually by a majority of the Board of
Directors or by vote of the holders of a majority of the voting securities of
the Corporation, and in either case by vote of a majority of the directors who
are not parties to such contracts or interested persons (as defined in the
Investment Company Act of 1940) of any such party cast in person at a meeting
called for the purpose of voting on such approval.
ARTICLE VIII
Amendments
The Board of Directors shall have the power, by a majority vote of
the entire Board of Directors at any meeting thereof, to make, alter and repeal
by-laws of the Corporation.
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ADVISORY AGREEMENT
THE TREASURER'S FUND, INC.
[ ] MONEY MARKET PORTFOLIO
Darien, Connecticut
April 14, 1997
Gabelli Fixed Income L.L.C.
19 Old Kings Highway South
Darien, Connecticut 06820
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We propose to engage in the business of investing and reinvesting
our assets in securities of the type, and in accordance with the limitations,
specified in our Articles of Incorporation, By-Laws and Registration Statement
filed with the Securities and Exchange Commission under the Investment Company
Act of 1940 (the "1940 Act") and the Securities Act of 1933, including the
Prospectus forming a part thereof (the "Registration Statement"), all as from
time to time in effect, and in such manner and to such extent as may from time
to time be authorized by our Board of Directors. We enclose copies of the
documents listed above and will furnish you such amendments thereto as may be
made from time to time.
2. (a) We hereby employ you to manage the investment and
reinvestment of our assets as above specified, and, without limiting the
generality of the foregoing, to provide the management and other services
specified below.
(b) Subject to the general control of our Board of Directors,
you will make decisions with respect to all purchases and sales of our portfolio
securities. To carry out such deci sions, you are hereby authorized, as our
agent and attorney-in-fact, for our account and at our risk and in our name, to
place orders for the investment and reinvestment of our assets. In all
purchases, sales and other transactions in our portfolio securities you are
authorized to exercise full discretion and act for us in the same manner and
with the same force and effect as our corporation itself might or could do with
respect to such purchases, sales or other transactions, as well as with respect
to all other things necessary or incidental to the furtherance or conduct of
such purchases, sales or other transactions.
(c) You will report to our Board of Directors at each meeting
thereof all changes in our portfolio since your prior report, and will also keep
us in touch with important developments affecting our portfolio and, on your own
initiative, will furnish us from time to time with such information as you may
believe appropriate for this purpose, whether concerning the individual entities
whose securities are included in our portfolio, the activities in which such
entities engage, Federal income tax policies applicable to our investments, or
the conditions prevailing in the money market or the economy generally. You will
also furnish us with such statistical and analytical information with respect to
our portfolio securities as you may believe appropriate or as
<PAGE>
we may reasonably request. In making such purchases and sales of our portfolio
securities, you will comply with the policies set from time to time by our Board
of Directors as well as the limitations imposed by our Articles of
Incorporation, the provisions of the Internal Revenue Code relating to regulated
investment companies and the 1940 Act, and the limitations contained in the
Registration Statement.
(d) It is understood that you will from time to time employ,
subcontract with or otherwise associate with yourself, entirely at your expense
such persons as you believe to be particularly fitted to assist you in the
execution of your duties hereunder. While this agreement is in effect, you or
persons affiliated with you, other than us ("your affiliates"), will provide
persons satisfactory to our Board of Directors to be elected or appointed
officers or employees of our corporation. These shall be a president, a
secretary, a treasurer, and such additional officers and employees as may
reasonably be necessary for the conduct of our business.
(e) You or your affiliates will also provide supervisory
personnel without charge, who may be our officers and who will be 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. Such
personnel may be your employees or employees of your affiliates or of other
organizations. It is understood that we may retain, at our expense, an
administrator to perform the operational components of the functions and
services listed herein.
(f) You or your affiliates will also furnish us, without
charge, such additional administrative and management supervision and such
office facilities as you may believe appropriate or as we may reasonably request
subject to the requirements of any regulatory authority to which you may be
subject. You or your affiliates will also pay the expenses of promoting and
advertising the sale of our shares (other than the costs of preparing, printing
and filing our Registration Statement, printing copies of the Prospectus
contained therein for existing shareholders of the Fund and complying with other
applicable regulatory requirements), and of printing and distributing the Fund's
Prospectus to prospective investors. To the extent that you or your affiliates
directly, or through Gabelli Fixed Income Distributors, Inc. (the
"Distributor"), may make payments to securities dealers and other third parties
who engage in the sale of our shares or who render shareholder support services,
and that such payments may be deemed indirect financing of an activity primarily
intended to result in the sale of shares of the Portfolios within the context of
Rule 12b-1 under the 1940 Act (the "Rule"), then such payments by you shall be
deemed to be authorized under the Portfolio's Distribution and Service Plan
adopted pursuant to the Rule. You will, in your sole discretion, determine the
amount of such payments and may from time to time in your sole discretion
increase or decrease the amount of such payments; provided, however, that no
such payment will increase the amount the Portfolio is required to pay you or
the Distributor under this Agreement or any agreement. Any payments made by you
for the purpose of distributing shares of the Portfolio are subject to
compliance with the terms of written agreements in a form satisfactory to the
Fund's Board of Directors to be entered into by you and the participating
organization. It is understood that you, in your sole discretion, may reimburse
the Distributor for any of such expenses that it may incur on your behalf.
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<PAGE>
3. We agree, subject to the limitations described below, to be
responsible for, and hereby assume the obligation for payment of, all our
expenses including: (a) brokerage and commission expenses; (b) Federal, state or
local taxes, including issue and transfer taxes incurred by or levied on us; (c)
commitment fees, certain insurance premiums and membership fees and dues in
investment company organizations; (d) interest charges on borrowings; (e)
charges and expenses of our custodian and administrator; (f) charges and
expenses relating to the issuance, redemption, transfer and dividend disbursing
functions for us; (g) telecommunications expenses; (h) recurring and
non-recurring legal and accounting expenses; (i) costs of organizing and
maintaining our existence as a corporation; (j) compensation, including
directors' fees, of any of our directors, officers or employees who are not your
officers or officers of your affiliates, and costs of other personnel providing
administrative and clerical services to us; (k) costs of providing shareholders'
services and costs of shareholders' reports, proxy solicitations, and corporate
meetings; (l) fees and expenses of registering our shares under the appropriate
Federal securities laws and of qualifying our shares under applicable state
securities laws, including expenses attendant upon the initial registration and
qualification of our shares and attendant upon renewals of, or amendment to,
those registrations and qualifications; (m) expenses of preparing, printing and
delivering our initial registration statement and of preparing, printing and
delivering our Prospectus to our existing shareholders and of printing
shareholder application forms for shareholder accounts; and (n) payment of the
fees provided for herein, in the Distribution Agreement and in the
Administrative Services Agreement. Our obligation for the foregoing expenses is
limited by your agreement to be responsible, while this Agreement is in effect,
for any amount by which our annual operating expenses (excluding taxes,
brokerage, interest and extraordinary expenses) exceed the limits on investment
company expenses prescribed by any state in which the Fund's shares are
qualified for sale.
4. We will expect of you, and you will give us the benefit of, your
best judgment and efforts in rendering these services to us, and we agree as an
inducement to your undertaking these services that you will not be liable
hereunder for any mistake of judgment or for any other cause, provided that
nothing herein shall protect you against any liability to us or to our security
holders by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your reckless disregard of
your obligations and duties hereunder.
5. In consideration of the foregoing we will pay you a fee at the
annual rate of thirty one-hundredths of one percent (0.30%) of our average daily
net assets. Your fee will be accrued by us daily, and will be payable on the
last day of each calendar month for services performed hereunder during that
month or on such other schedule as you shall request of us in writing. You may
waive your right to any fee to which you are entitled hereunder, provided such
waiver is delivered to us in writing. Any reimbursement of our expenses, to
which we may become entitled pursuant to paragraph 3 hereof, will be paid to us
at the end of the month for which those expenses are accrued, at the same time
as we pay you your fee for that month.
6. This Agreement will become effective on April 14, 1997 and shall
continue in effect until November 30, 1998 and thereafter for successive
twelve-month periods (computed from each December 1), provided that such
continuation is specifically approved at least annually by our Board of
Directors or by a majority vote of the holders of our outstanding voting
securities, as defined in the 1940 Act, and, in either case, by a majority of
those of our directors who are neither party to this Agreement nor, other than
by their service as directors of the corporation, interested persons, as defined
in the 1940 Act, of any such person who is party to this Agreement. Upon the
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<PAGE>
effectiveness of this Agreement, it shall supersede all previous Agreements
between us covering the subject matter hereof. This Agreement may be terminated
at any time, without the payment of any penalty, by vote of a majority of our
outstanding voting securities, as defined in the 1940 Act, or by a vote of a
majority of our entire Board of Directors, on sixty days' written notice to you,
or by you on sixty days' written notice to us.
7. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the Securities and Exchange Commission.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE TREASURER'S FUND, INC.
By:
--------------------------------
ACCEPTED: April 14, 1997
GABELLI FIXED INCOME L.L.C.
By: Gabelli Fixed Income, Inc.,
Managing Member
By:
------------------------------
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DISTRIBUTION AGREEMENT
THE TREASURER'S FUND, INC.
19 Old Kings Highway South
Darien, Connecticut 06820-4526
April 14, 1997
Gabelli Fixed Income Distributors, Inc.
19 Old Kings Highway South
Darien, Connecticut 06820-4526
Gentlemen:
1. In consideration of the agreements on your part herein contained
and of the payment by us to you of a fee of $1 per year and on the terms and
conditions set forth herein, we have agreed that you shall be, for the period of
this agreement, a distributor, as our agent, for the unsold portion of each
series of such number of shares of our common stock, $.001 par value per share,
as may be effectively registered from time to time under the Securities Act of
1933, as amended (the "1933 Act"). This agreement is being entered into pursuant
to the Distribution and Service Plan (the "Plan") adopted by us on behalf of
each of our portfolio series in accordance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").
2. We hereby agree that you will act as our agent, and hereby
appoint you our agent, to offer, and to solicit offers to subscribe to, the
unsold balance of shares of each series of our common stock as shall then be
effectively registered under the 1933 Act. All subscriptions for shares of our
common stock obtained by you shall be directed to us for acceptance and shall
not be binding on us until accepted by us. You shall have no authority to make
binding subscriptions on our behalf. We reserve the right to sell shares of each
series of our common stock through other distributors or directly to investors
through subscriptions received by us at our principal office in Darien,
Connecticut. The right given to you under this agreement shall not apply to any
shares of our common stock issued in connection with (a) the merger or
consolidation of any other investment company with us, (b) our acquisition by
purchase or otherwise of all or substantially all of the assets or stock of any
other investment company, or (c) the reinvestment in shares of our common stock
by our stockholders of dividends or other distributions or any other offering by
us of securities to our stockholders.
<PAGE>
3. You will use your best efforts to obtain subscriptions to shares
of each series of our common stock upon the terms and conditions contained
herein and in our Prospectus, as in effect from time to time. You will send to
us promptly all subscriptions placed with you. We shall furnish you from time to
time, for use in connection with the offering of shares of our common stock,
such other information with respect to us and shares of our common stock as you
may reasonably request. We shall supply you with such copies of our Registration
Statement and Prospectus, as in effect from time to time, as you may request.
Except as we may authorize in writing, you are not authorized to give any
information or to make any representation that is not contained in the
Registration Statement or Prospectus, as then in effect. You may use employees,
agents and other persons, at your cost and expense, to assist you in carrying
out your obligations hereunder, but no such employee, agent or other person
shall be deemed to be our agent or have any rights under this Agreement. You may
sell our shares to or through qualified brokers, dealers and financial
institutions under selling and servicing agreements provided that no dealer,
financial institution or other person shall be appointed or authorized to act as
our agent without our written consent. We acknowledge that you and Gabelli Fixed
Income L.L.C. (the "Advisor") may arrange for organizations whose customers or
clients are shareholders of our corporation ("Participating Organizations") to
enter into agreements with the Advisor pursuant to which the Participating
Organizations will be compensated directly by the Advisor, or through you, for
providing assistance in the distribution of our shares and for the performance
of shareholder servicing and related administrative functions not performed by
the Advisor, the Administrator or the Transfer Agent. Such payments will be made
only pursuant to written agreements approved in form and substance by our Board
of Directors to be entered into by the Advisor and the Participating
Organizations. It is recognized that we shall have no obligation or liability to
you, them or any Participating Organization for any such payments under the
agreements with Participating Organizations. Our obligation is solely to make
payments to the Advisor under the Advisory Agreement. It is understood that the
Advisor may, in its sole discretion, reimburse you for any of these expenses, or
for any other expenses for which the Advisor is responsible under the Advisory
Agreement, that you may incur on its behalf. All sales of our shares effected
through you will be made in compliance with all applicable federal securities
laws and regulations and the Constitution, rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD").
4. We reserve the right to suspend the offering of shares of our
common stock at any time, in the absolute discretion of our Board of Directors,
and upon notice of such suspension you shall cease to offer shares of our common
stock hereunder.
5. Both of us will cooperate with each other in taking such action
as may be necessary to qualify shares of our common stock for sale under the
securities laws of such states as we may designate, provided, that you shall not
be required to register as a broker-dealer or file a consent to service of
process in any such state where you are not now so registered. Pursuant to an
Advisory Agreement dated April 14, 1997 between us and the Advisor, we will pay
all fees and expenses of registering shares of all series of our common stock
under the 1933 Act and of qualification of shares of all series of our common
stock, and to the extent necessary, our
2
<PAGE>
qualification under applicable state securities laws. You will pay all expenses
relating to your broker-dealer qualification.
6. We represent to you that our Registration Statement and
Prospectus have been carefully prepared to date in conformity with the
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Securities and Exchange Commission (the "SEC") thereunder. We represent and
warrant to you, as of the date hereof, that our Registration Statement and
Prospectus contain all statements required to be stated therein in accordance
with the 1933 Act and the 1940 Act and the SEC's rules and regulations
thereunder; that all statements of fact contained therein are or will be true
and correct at the time indicated or the effective date as the case may be; and
that neither our Registration Statement nor our Prospectus, when they shall
become effective or be authorized for use, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of shares
of our common stock. We will from time to time file such amendment or amendments
to our Registration Statement and Prospectus as, in the light of future
development, shall, in the opinion of our counsel, be necessary in order to have
our Registration Statement and Prospectus at all times contain all material
facts required to be stated therein or necessary to make any statements therein
not misleading to a purchaser of shares of our common stock. If we shall not
file such amendment or amendments within fifteen days after the receipt of a
written request from you to do so, you may, at your option, terminate this
agreement immediately. We will not file any amendment to our Registration
Statement or Prospectus without giving you reasonable notice thereof in advance;
provided, however, that nothing in this agreement shall in any way limit our
right to file such amendments to our Registration Statement or Prospectus, of
whatever character, as we may deem advisable, such right being in all respects
absolute and unconditional. We represent and warrant to you that any amendment
to our Registration Statement or Prospectus hereafter filed by us will be
carefully prepared in conformity within the requirements of the 1933 Act and the
1940 Act and the SEC's rules and regulations thereunder and will, when it
becomes effective, contain all statements required to be stated therein in
accordance the 1933 Act and the 1940 Act and the SEC's rules and regulations
thereunder; that all statements of fact contained therein will, when the same
shall become effective, be true and correct; and that no such amendment, when it
becomes effective, will include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of our shares.
7. We agree to indemnify, defend and hold you, and any person who
controls you within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which you or any such controlling
person may incur, under the 1933 Act or the 1940 Act, or under common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in our Registration Statement or Prospectus in effect
from time to time or arising out of or based upon any alleged omission to state
a material fact required to be stated in either of them or necessary to make the
statements in either of them not misleading; provided, however, that in no event
shall anything herein contained be so construed as to protect you against any
liability to us or our security
3
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holders to which you would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of your duties,
or by reason of your reckless disregard of your obligations and duties under
this agreement. Our agreement to indemnify you and any such controlling person
is expressly conditioned upon our being notified of any action brought against
you or any such controlling person, such notification to be given by letter or
by telegram addressed to us at our principal office in Darien, Connecticut, and
sent to us by the person against whom such action is brought within ten days
after the summons or other first legal process shall have been served. The
failure so to notify us of any such action shall not relieve us from any
liability which we may have to the person against whom such action is brought
other than on account of our indemnity agreement contained in this paragraph 7.
We will be entitled to assume the defense of any suit brought to enforce any
such claim, and to retain counsel of good standing chosen by us and approved by
you. In the event we do elect to assume the defense of any such suit and retain
counsel of good standing approved by you, the defendant or defendants in such
suit shall bear the fees and expenses of any additional counsel retained by any
of them; but in case we do not elect to assume the defense of any such suit, or
in case you, in good faith, do not approve of counsel chosen by us, we will
reimburse you or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel retained by
you or them. Our indemnification agreement contained in this paragraph 7 and our
representations and warranties in this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of you or any
controlling person and shall survive the sale of any shares of our common stock
made pursuant to subscriptions obtained by you. This agreement of indemnity will
inure exclusively to your benefit, to the benefit of your successors and
assigns, and to the benefit of your controlling persons and their successors and
assigns. We agree promptly to notify you of the commencement of any litigation
or proceeding against us in connection with the issue and sale of any shares of
our common stock.
8. You agree to indemnify, defend and hold us, our several officers
and directors, and any person who controls us within the meaning of Section 15
of the 1933 Act, free and harmless from and against any and all claims, demands,
liabilities, and expenses (including the cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which we, our officers and directors, or any such
controlling person, may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement or Prospectus as in effect from time to time, or shall arise out of or
be based upon any alleged omission to state a material fact in connection with
such information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. Your agreement
to indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action being brought
against us, our officers or directors or any such controlling person, such
notification to be given by letter or telegram addressed to you at your
principal office in Darien, Connecticut, and sent to you by the person against
whom such action is brought, within ten days after the summons or other first
legal process shall have been served. You shall have a right to
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control the defense of such action, with counsel of your own choosing,
satisfactory to us, if such action is based solely upon such alleged
misstatement or omission on your part, and in any other event you and we, our
officers or directors or such controlling person shall each have the right to
participate in the defense or preparation of any such action. The failure so to
notify you of any such action shall not relieve you from any liability which you
may have to us, to our officers or directors, or to such controlling person
other than on account of your indemnity agreement contained in this paragraph 8.
9. We agree to advise you immediately:
(a) of any request by the SEC for amendments to our
Registration Statement or Prospectus or for additional information.
(b) of the issuance by the SEC of any stop order suspending
the effectiveness of our Registration Statement or Prospectus or the initiation
of any proceedings for that purpose.
(c) of the happening of any material event which makes untrue
any statement made in our Registration Statement or Prospectus or which requires
the making of a change in either of them in order to make the statements therein
not misleading, and
(d) of all action of the SEC with respect to any amendments to
our Registration Statement or Prospectus.
10. This Agreement will become effective on the date hereof and will
remain in effect until March 31, 1998 and thereafter for successive twelve-month
periods (computed from each March 31st), provided that such continuation is
specifically approved at least annually by vote of our Board of Directors and of
a majority of those of our directors who are not interested persons (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Plan or in any agreements related to the Plan, cast in person
at a meeting called for the purpose of voting on this Agreement. This Agreement
may be terminated at any time, without the payment of any penalty, by vote of a
majority of our entire Board of Directors, or by a vote of a majority of our
Directors who are not interested persons (as defined in the 1940 Act) and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreement related to the Plan, or by vote of a majority of our outstanding
voting securities, as defined in the Act, on sixty days' written notice to you,
or by you on sixty days' written notice to us.
11. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the SEC thereunder.
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12. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees who may also be a
director, officer or employee of ours, or of a person affiliated with us, as
defined in the 1940 Act, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a
similar or dissimilar nature, or to render services of any kind to another
corporation, firm, individual or association.
If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE TREASURER'S FUND, INC.
By
-----------------------------
Accepted:
April 14, 1997
GABELLI FIXED INCOME DISTRIBUTORS, INC.
By
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6
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CUSTODIAL TRUST COMPANY
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Member F.D.I.C
CUSTODY AGREEMENT
This AGREEMENT, dated as of November 19, 1987, by and between Gabelli -
O'Connor Treasurer's Fund, Inc., a diversified, open-end management investment
company registered under the Investment Company Act of 1940 (the "1940 Act"),
organized under the laws of the State of Maryland (hereinafter called the
"Fund"), and Custodial Trust Company, a trust company organized under the laws
of the State of New Jersey (hereinafter called the "Custodian").
W I T N E S S E T H:
WHEREAS, the Fund desires that its securities and cash be held and
administered by the Custodian pursuant to this Agreement;
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Fund and the Custodian hereby agree as follows:
28 West State Street, Trenton, NJ 08608 609/5950
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(1) "Authorized Person" shall mean any member of the Board of Directors,
any Officer or any other person duly authorized by the Board of Directors to
give Oral Instructions and Written Instructions on behalf of the Fund and named
in Exhibit A hereto or in such resolutions of the Board of Directors, certified
by an Officer, as may be received by the Custodian from time to time.
(2) "Board of Directors" shall mean the Board of Directors of the Fund or,
when permitted under the 1940 Act, the Executive Committee thereof, if any.
(3) "Book-Entry System" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part
350, or in such book-entry regulations of federal agencies as are substantially
in the form of such Subpart O.
(4) "Custody Account" shall mean the account in the name of the Fund,
which is provided for in Section 2 of Article III of this Agreement.
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(5) "Foreign Securities", shall mean Securities as defined in paragraph
(C)(i) of Rule 17f-5 under the 1940 Act.
(6) "Foreign Securities Depository" shall mean a securities depository as
defined in subparagraphs (C)(2)(iii) and (iv) of Rule 17f-5 under the 1940 Act.
(7) "Foreign Sub-custodian" shall mean a foreign banking institution which
is named in Exhibit B hereto.
(8) "NASD" shall mean The National Association of Securities Dealers, Inc.
(9) "Officer" shall mean the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Fund.
(10) "Oral Instructions" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Fund shall cause all Oral
Instructions to be confirmed by Written Instructions. If such Written
Instructions confirming Oral Instructions are not received by the Custodian
prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Fund. If Oral Instructions vary
from the Written Instructions which purport to confirm them, the Custodian shall
notify the Fund of such
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variance but unless confirming Written Instructions are received promptly after
such notification, such Oral Instructions will govern.
(11) "Portfolio" shall mean a separate investment portfolio represented by
one of the several separate series of stock into which the shares of the Fund
may from time to time be divided.
(12) "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
(13) "Securities Depository" shall mean a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the Securities and
Exchange Act of 1934, which acts as a system for the central handling of
Securities where all Securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of the Securities.
(14) "Securities" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities or other
obligations, and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein, or any similar
property or assets that the Custodian has the facilities to clear and to
service.
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(15) "Written Instructions" shall mean (i) written communications actually
received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from a person reasonably
believed by the Custodian to be an Authorized Person, or (iii) communications
between electro-mechanical or electronic devices provided that the use of such
devices and the procedures for the use thereof shall have been approved by
resolutions of the Board of Directors, a copy of which, certified by an Officer,
shall have been delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
(1) Appointment. The Fund hereby constitutes and appoints the
Custodian as custodian of all the Securities and cash at any time owned by or in
the possession of the Fund during the period of this Agreement, including
Securities it desires to be held in places within the United States and
Securities it desires to be held outside the United States.
(2) Acceptance. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
(1) Segregation. All Securities and non-cash property held by the
Custodian for the account of the Fund (other than
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Securities maintained in a Securities Depository or Book-Entry System) shall be
physically segregated from other Securities and non-cash property in the
possession of the Custodian and shall be identified as subject to this
Agreement.
(2) Custody Account. The Custodian shall open and maintain in its trust
department a custody account in the name of the Fund, subject only to draft or
order of the Custodian, in which the Custodian shall deposit and keep all
Securities, cash and other assets of the Fund delivered to it.
(3) Portfolio Sub-Accounts. The Custodian shall maintain within the
Custody Account an appropriately denominated sub-account for each Portfolio of
the Fund, in which the Custodian shall record all transactions which are
identified in Proper Instructions as being transactions in Securities, cash or
other assets belonging to such Portfolio.
(4) Appointment of Agents. The Custodian may appoint, and at any time
remove, any domestic bank or trust company which is qualified to act as a
custodian under the 1940 Act as its agent to carry out such of the provisions of
this Agreement as it may determine, and may also open and maintain one or more
banking accounts with such a bank or trust company (any such accounts to be in
the name of the Custodian and subject only to its draft or order), provided,
however, that the appointment of any such agent or opening and maintenance of
any such accounts shall be at the Custodian's expense and shall not relieve the
Custodian of any of its obligations or liabilities under this Agreement.
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<PAGE>
(5) Delivery of Assets to Custodian. The Fund shall deliver to the
Custodian all of the Fund's Securities, cash and other assets, including all
payments of income, payments of principal or capital distributions received by
the Fund with respect to Securities, cash or other assets owned by the Fund at
any time during the period of this Agreement. The Custodian will not be
responsible for such Securities, cash or other assets until actually received by
it. The Custodian will be entitled to reverse any credits made on the Fund's
behalf where such credits have been previously made and cash is not finally
collected.
(6) Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Fund in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Fund in any Securities
Depository or Book-Entry System, the Fund shall deliver to the
Custodian a resolution of the Board of Directors, certified by
an Officer, authorizing and instructing the Custodian on an
on-going basis to deposit in such Securities Depository or
Book-Entry System all Securities eligible for deposit therein
and to make use of such Securities Depository or Book-Entry
System to the extent possible and practical in connection with
its performance hereunder, including, without limitation, in
connection with settlements of
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<PAGE>
purchases and sales of Securities, loans of Securities, and
deliveries and returns of collateral consisting of Securities.
So long as such Securities Depository or Book-Entry System
shall continue to be employed for the deposit of Securities of
the Fund, the Fund shall annually re-adopt such resolution and
deliver a copy thereof, certified by an Officer, to the
Custodian.
(b) Securities of the Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account ("Depository
Account") of the Custodian in such Book-Entry System or
Securities Depository which includes only assets held by the
Custodian as a fiduciary, custodian or otherwise for
customers.
(c) If Securities purchased by the Fund are to be held in a
Book-Entry System or Securities Depository, the Custodian
shall pay for such Securities upon (i) receipt of advice from
the Book-Entry System or Securities Depository that such
Securities have been transferred to the Depository Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a
Book-Entry System or Securities Depository, the Custodian
shall transfer such Securities upon (i) receipt of advice
from the Book-Entry System or Securities Depository that
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<PAGE>
payment for such Securities has been transferred to the
Depository Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment
for the account of the Fund. Upon request, the Custodian shall
furnish to the Fund copies of daily transaction sheets
reflecting, by Portfolio, each day's transactions in a
Book-Entry System or Securities Depository for the account of
the Fund.
(d) The Custodian shall provide the Fund with copies of any report
obtained by the Custodian on the accounting system of any
Book-Entry System or Securities Depository, or on the internal
accounting controls and procedures for safeguarding Securities
deposited in such Book-Entry System or Securities Depository.
(e) At its election, the Fund shall be subrogated to the rights of
the Custodian with respect to any claim against a Book-Entry
System or Securities Depository or any other person for any
loss or damage to the Fund arising from the use of such
Book-Entry System or Securities Depository, if and to the
extent that the Fund has not been made whole for any such loss
or damage.
(7) Disbursement of Moneys from Custody Account. Upon receipt of Proper
Instructions, the Custodian shall disburse
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<PAGE>
moneys in the Custody Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only (i) in
the case of Securities (other than options on Securities,
futures contracts and options on futures contracts), against
the delivery to the Custodian (or any bank or trust company
doing business in the United States or abroad which is
qualified under the 1940 Act to act as a custodian and has
been designated by the Custodian as its agent for this
purpose) of such Securities registered as provided in Section
10 of this Article III, or in proper form for transfer; in the
case of options on Securities, against delivery to the
Custodian (or such bank or trust company) of such receipts as
are required by the customs prevailing among dealers in such
options; and in the case of futures contracts and options on
futures contracts, against delivery to the Custodian (or such
bank or trust company) of evidence of title thereto in favor
of the Fund or any nominee referred to in Section 10 of this
Article III; or (ii) in the case of a purchase effected
through a Book-Entry System or Securities Depository, in
accordance with the conditions set forth in Section 6 of this
Article III; or (iii) in the case of repurchase or reverse
repurchase agreements entered into by the Fund, against
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<PAGE>
delivery of the purchased Securities either in certificate
form or through an entry crediting the Custodian's account at
a Federal Reserve Bank with such Securities;
(b) In payment of the redemption price of shares of the Fund as
provided in Article VI of this Agreement;
(c) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest; taxes; administration,
investment management, investment advisory, accounting,
transfer agent and legal fees; and Custodian and other
operating expenses of the Fund, whether or not such expenses
are to be in whole or in part capitalized or treated as
deferred expenses;
(d) For transfer in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the
"1934 Act") and a member of the NASD, relating to compliance
with rules of The Options Clearing Corporation and of any
registered national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Fund;
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<PAGE>
(e) For transfer in accordance with the provisions of any
agreement among the Fund, the Custodian, and a futures
commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any contract market (or any
similar organization or organizations) regarding account
deposits in connection with transactions by the Fund;
(f) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution
(including the Custodian or a Foreign Sub-custodian), which
deposit or account has a term of one year or less; and
(g) For any other proper purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of
the Board of Directors, certified by an Officer, specifying
the amount and purpose of such payment, declaring such purpose
to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
(8) Delivery of Securities from Custody Account. Upon receipt of Proper
Instructions, the Custodian shall release and deliver Securities of the Fund
only:
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<PAGE>
(a) Upon the sale of Securities for the account of the Fund but
only against receipt of payment therefor in cash, by certified
or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of
Section 6 of this Article III;
(c) To an offeror's depository agent in connection with tender or
other similar offers for Securities of the Fund; provided
that, in any such case, the cash or other consideration is to
be delivered to the Custodian;
(d) To the issuer thereof or its agent when Securities of the Fund
are called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(e) To the issuer thereof or its agent for (i) transfer into the
name of the Fund, any nominee or nominees of the Custodian or
the Fund, or a Foreign Sub-custodian or any nominee thereof,
or (ii) exchange for a different number of certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
Securities are to be delivered to the Custodian;
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<PAGE>
(f) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(g) For exchange or conversion pursuant, to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the issuer of such Securities, or pursuant to
provisions for conversion contained in such Securities, or
pursuant to any deposit agreement, including surrender or
receipt of underlying Securities in connection with the
issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any,
are to be delivered to the Custodian;
(h) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by the Fund;
(i) In the case of warrants, rights or similar Securities, upon
the exercise thereof, provided that, in any such case, the
new Securities and cash, if any, are to be delivered to the
Custodian;
(j) For delivery in connection with any loans of Securities, but
only against receipt of such collateral as the Fund shall have
specified to the Custodian in Proper Instructions;
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<PAGE>
(k) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, but only
against receipt by the Custodian of the amounts borrowed;
(l) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of
the Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD,
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange
(or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions
by the Fund;
(n) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a futures
commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any contract market (or any
similar organization or organizations) regarding account
deposits in connection with transactions by the Fund; or
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<PAGE>
(o) For any other proper corporate purpose, but only upon receipt,
in addition to Proper Instructions, of a copy of a resolution
of the Board of Directors, certified by an Officer,
specifying the Securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such Securities shall be
made.
(9) Actions Not Requiring Proper Instructions. Unless instructed by the
Fund, the Custodian shall with respect to all Securities held for the Fund;
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed, or
retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments;
(d) Make payments to itself or others for minor out of pocket
expenses of handling Securities or other similar items,
provided that all such payments shall be accounted for to the
Fund;
(e) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
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<PAGE>
(f) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax laws or
the laws or regulations of any other taxing authority now or
hereafter in effect, and prepare and submit reports to the
Internal Revenue Service ("IRS") and to the Fund at such time,
in such manner and containing such information as is
prescribed by the IRS;
(g) Hold for the fund, either directly or, with respect to
Securities held therein, through a Book-entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(h) In general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of the
Fund.
(10) Registration and Transfer of Securities. All Securities held for the
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-entry System if eligible therefor. All other Securities held for the Fund
may be registered in the name of the Fund or the Custodian, in the name of any
nominee of the Fund, in the name of any such nominee of the Custodian or of a
Foreign Sub-custodian as the Custodian or the Foreign Sub-custodian,
respectively, may from time to time determine or in the name of
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a Book-Entry System, Securities Depository, Foreign Securities Depository or
any nominee of any thereof. The Fund shall furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of any of the nominees hereinabove
referred to or in the name of a Book-entry System, Securities Depository, or
Foreign Securities Depository, any Securities registered in the name of the
Fund.
(11) Records. (a) The Custodian shall maintain, by Portfolio, complete and
accurate records with respect to Securities, cash or other property held for
the Fund, including (a) journals or other records of original entry containing
an itemized daily record in detail of all receipts and deliveries of Securities
(including certificate numbers, if any) and all receipts and disbursements of
cash; (b) ledgers (or other records) reflecting (i) Securities in transfer, (ii)
Securities in physical possession, (iii) monies borrowed and monies loaned
(together with a record of the collateral therefor and substitutions of such
collateral), (iv) dividends and interest received, and v) dividends receivable
and interest accrued; (c) cancelled checks and bank records related thereto; and
(d) such other books and records as are required to be kept by Rule 31a-1 under
the 1940 Act. The Custodian shall keep such other books and records of the Fund
as the Fund shall reasonably request.
(b) All such books and records maintained by the Custodian shall (a) be
maintained in a form acceptable to the Fund and in compliance with rules and
regulations of the
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Securities and Exchange Commission, (b) be the property of the Fund and at all
times during the regular business hours of the Custodian, be made available upon
request for inspection by duly authorized officers, employees or agents of the
Fund and employees or agents of the Securities and Exchange Commission, and (c)
if required to be maintained by Rule 31a-1 under the 1940 Act, be preserved for
the periods prescribed in Rule 31a-2 under the 1940 Act.
(12) Portfolio Reports by Custodian. The Custodian shall, with respect to
each Portfolio, furnish the Fund with a daily activity statement and a summary
of all transfers to or from the sub-account of such Portfolio on the day
following such transfers. At least monthly and from time to time, the Custodian
shall furnish the Fund with a detailed statement, by Portfolio, of the
Securities and moneys held for the Fund under this Agreement.
(13) Other Reports by Custodian. The Custodian shall provide the Fund, at
such times as the Fund may reasonably request, with reports by the Fund's
independent public accountants on the accounting system, internal accounting
controls and procedures for safeguarding Securities, which are employed by the
Custodian.
(14) Proxies and Other Materials. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of the Fund or a
nominee of the Fund, to be promptly executed by the registered holder of such
Securities, without indication of the manner in which such
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proxies are to be voted, and shall promptly deliver to the Fund such proxies,
all proxy soliciting materials and all notices relating to such Securities.
(15) Information on Corporate Actions. The Custodian shall promptly
transmit to the Fund all written information received by the Custodian from
issuers of Securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall promptly transmit to the Fund all written
information received by the Custodian from issuers of the Securities whose
tender or exchange is sought and from the party (or its agents) making the
tender or exchange offer. If the Fund desires to take action with respect to any
tender offer, exchange offer or other similar transaction, the Fund shall notify
the Custodian at least five business days prior to the date on which the
Custodian is to take such action.
ARTICLE IV
DUTIES OF THE CUSTODIAN WITH
RESPECT TO PROPERTY OF
THE FUND HELD OUTSIDE THE UNITED STATES
(1) Appointment of Foreign Sub-Custodian. In each foreign country in which
Securities and other assets of the Fund are to be held, the Custodian shall
employ, as sub-custodian for such Securities and assets, the Foreign
Sub-custodian whose name is set forth opposite the name of such foreign country
in Exhibit B hereto, provided that the Custodian shall not commence such
employment or enter into a sub-custody agreement providing therefor until
receipt by it of Written Instructions to do so.
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<PAGE>
(2) Assets to be Held. The Custodian shall limit the Securities and other
assets maintained in the custody a Foreign Sub-custodian to: (a) Foreign
Securities, and (b) cash and cash equivalents in such amounts as the Fund may
determine.
(3) Foreign Securities Depositories. Assets of the Fund may be maintained
in Foreign Securities Depositories.
(4) Segregation of Securities. The agreement pursuant to which the
Custodian employs a Foreign Sub-custodian shall require that such Foreign
Sub-custodian establish a custody account for the Custodian on behalf of the
Fund and physically segregate in that account the Securities and other assets of
the Fund that it holds and, in the event that the Foreign Sub-custodian
deposits the Fund's Securities in a Foreign Securities Depository, that it shall
identify on its books as belonging to the Custodian, as custodian for the Fund,
the Securities so deposited.
(5) Agreements with Foreign Sub-custodians. The agreement pursuant to
which the Custodian employs a Foreign Sub-custodian shall provide that (a) the
Fund's assets will not be subject to any right, charge, security, interest, lien
or claim of any kind in favor of such Foreign Sub-custodian or its creditors,
except a claim of payment for their safe custody or administration; (b)
beneficial ownership of the Fund's assets will be freely transferable without
the payment of money or value other than for safe custody or administration; (c)
adequate records will be maintained identifying the assets as belonging to the
Fund; (d) officers or other representatives of
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the Custodian or of the Fund, including (to the extent permitted under
applicable law) the independent public accountants for the Fund, will be given
access to the books and records of such Foreign Sub-custodian relating to its
performance under its agreement with the Custodian; and (e) assets of the Fund
held by the Foreign Sub-custodian will be subject only to the instructions of
the Custodian or its agents. The Custodian shall not enter into any such
agreement with a Foreign Sub-custodian unless it shall first have received a
copy of a resolution of the Board of Directors, certified by an Officer,
approving such agreement as required by Rule 17f-5 under the 1940 Act.
(6) Reports by Custodian. The Custodian shall supply to the Fund from time
to time, as mutually agreed upon, reports in respect of the safekeeping of the
Securities and other assets of the Fund held by Foreign Sub-custodians,
including, but not limited to, advices or notifications of transfers of
Securities to or from the account maintained by Foreign Sub-custodians for the
Custodian on behalf of the Fund.
(7) Transactions in Foreign Custody Account.
(a) Upon receipt (with respect to Foreign Securities) of Proper
Instructions given in any of the cases specified in Section 8
of Article III of this Agreement, the Custodian shall cause
the Foreign Sub-custodian holding such Foreign Securities of
the Fund to transfer, exchange or deliver them in
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accordance with generally accepted trade practice in the
applicable local market;
(b) Upon receipt (with respect to monies of the Fund held in a
foreign country) of Proper Instructions given in any of the
cases specified in Section 7 of Article III of this Agreement,
the Custodian shall cause the Foreign Sub-custodian holding
such monies of the Fund to disburse them, in accordance with
generally accepted trade practice in the applicable local
market;
(c) Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Securities
received for the account of the Fund and delivery of Foreign
Securities of the Fund shall be effected in accordance with
the customary or established securities trading or processing
practices and procedures in the local jurisdiction or market
in which the transaction occurs, including, without
limitation, delivering Foreign Securities to the purchaser
thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of
receiving later payment for such Foreign Securities from such
purchaser or dealer; and
d) Upon receipt of Proper Instructions, the Custodian shall cause
each Foreign Sub-custodian holding assets of the Fund to use
reasonable efforts to
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promptly reclaim the amount by which any withholding tax
imposed on such assets by any foreign governmental authority
exceeds the withholding tax payable under tax treaties in
effect between the United States and the country of such
foreign governmental authority.
(8) Liability of Foreign Sub-Custodians. The agreement pursuant to which
the Custodian employs a Foreign Sub-custodian shall require such Foreign
Sub-custodian to exercise reasonable care in the performance of its duties and
to indemnify and hold the Fund and the Custodian harmless from and against any
loss, damage, cost, expense (including attorneys' fees and disbursements),
liability or claim arising out of any willful misfeasance, bad faith or gross
negligence of such Foreign Sub-custodian in the performance of its obligations
under such agreement or out of its reckless disregard of such obligations. At
its election, the Fund shall be subrogated to the rights of the Custodian with
respect to any claims against such Foreign Sub-custodian as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent that
the Fund has not been made whole for any such loss, damage, cost, expense,
liability or claim.
(9) Liability of Custodian. The appointment of a Foreign Sub-custodian
shall not relieve the Custodian of any its obligations under this Agreement.
(10) Monitoring Responsibilities. The Custodian shall each year furnish to
the Fund information concerning each
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Foreign Sub-custodian which shall be similar in kind and scope to that which the
Custodian may have furnished to the Fund in connection with the initial approval
by the Fund of the agreement pursuant to which the Custodian employs such
Foreign Sub-custodian.
ARTICLE V
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
(1) Purchase of Securities. Promptly upon each purchase of Securities for
the Fund, Written Instructions shall be delivered to the Custodian, specifying
(a) the Portfolio for which the purchase was made, (b) the name of the issuer or
writer of such Securities, and the title or other description thereof, (c) the
number of shares, principal amount (and accrued interest, if any) or other
units purchased, (d) the date of purchase and settlement, (e) the purchase price
per unit, (f) the total amount payable upon such purchase, and (g) the name of
the person to whom such amount is payable. The Custodian shall upon receipt of
such Securities purchased by the Fund pay out of the moneys held for the
account of such Portfolio the total amount specified in such Written
Instructions to the person named therein. The Custodian shall not be under any
obligation to pay out moneys to cover the cost of a purchase of Securities for
the Fund, if in the Custody Account there is insufficient cash available to the
Portfolio for which such purchase was made.
(2) Sale of Securities. Promptly upon each sale of Securities by the Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
Portfolio from or by which
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<PAGE>
the sale was made, (b) the name of the issuer or writer of such Securities, and
the title or other description thereof, (c) the number of shares, principal
amount (and accrued interest, if any), or other units sold, (d) the date of sale
and settlement (e) the sale price per unit, (f) the total amount payable upon
such sale, and (g) the person to whom such Securities are to be delivered. Upon
receipt of the total amount payable to the Fund as specified in such Written
Instructions, the Custodian shall deliver such Securities to the person
specified in such Written Instructions. Subject to the foregoing, the Custodian
may accept payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in Securities.
ARTICLE VI
REDEMPTION OF FUND SHARES
(1) Transfer of Funds. From such funds as may be available for the
purpose, and upon receipt of Proper Instructions specifying that the funds are
required to redeem shares issued by the Fund, the Custodian shall wire each
amount specified in such Proper Instructions to or through such bank as the Fund
may designate with respect to such amount in such Proper Instructions.
(2) No Duty Regarding Paying Banks. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 1 of this Article VI of any amount paid
by the Custodian to such bank in accordance with such Proper Instructions.
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<PAGE>
ARTICLE VII
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in an account by the Custodian pursuant to Section 6 of
Article III hereof,
(a) in accordance with the provisions of any agreement among the
Fund, the Custodian and a broker-dealer registered under the
1934 Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection
with options purchased or written by the Fund or commodity
futures contracts or options thereon purchased or sold by the
Fund,
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<PAGE>
(c) which constitute collateral for loans of Securities made by
the Fund,
(d) for purposes of compliance by the Fund with requirements under
the 1940 Act for the maintenance of segregated accounts by
registered investment companies in connection with reverse
repurchase agreements and when-issued, delayed delivery and
firm commitment transactions, and
(e) for other proper corporate purposes, but only upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors, certified by an Officer,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate
purposes.
Each segregated account established under this Article VIII shall be
established and maintained for a single Portfolio only. All Proper Instructions
relating to a segregated account shall specify the Portfolio involved.
ARTICLE VIII
CONCERNING THE CUSTODIAN
(1) Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Fund for any loss, damages, cost, expense (incuding
attorneys' fees
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and disbursements), liability or claim which does not arise from willful
misfeasance, bad faith or gross negligence on the part of the Custodian or
reckless disregard by the Custodian of its obligations under this Agreement. The
Custodian shall be entitled to rely on and may act upon advice of counsel on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. The Custodian shall not be under any
obligation at any time to ascertain whether the Fund is in compliance with the
1940 Act, the regulations thereunder, the provisions of its charter documents or
by-laws, or its investment objectives and policies as then in effect.
(2) Actual Collection Required. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Fund or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
(3) No Responsibility for Title, etc. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
(4) Duty to Collect. The Custodian shall not be under any obligation to
effect collection of any amount payable on or with respect to Securities if
such Securities are in default, or if payment is refused after due demand or
presentation, unless
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and until (a) it shall be directed to take such action by Written Instructions
and (b) it shall be assured to its satisfaction of reimbursement of its costs
and expenses in connection with any such action.
(5) Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
(6) Express Duties Only. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
(7) Co-operation. The Custodian shall cooperate with and supply necessary
information, by Portfolio, to the entity or entities appointed by the Fund to
keep the books of account of the Fund and/or compute the value of the assets of
the Fund.
ARTICLE IX
INDEMNIFICATION
(1) Indemnification. The Fund shall indemnify and hold harmless the
Custodian, any sub-custodian and any nominee of the Custodian or of such
sub-custodian from and against any loss, damages, cost, expense (including
attorneys' fees and
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disbursements), liability (including, without limitation, liability arising
under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or
foreign securities and/or banking laws) or claim arising directly or indirectly
(a) from the fact that Securities are registered in the name of any such
nominee, or (b) from any action or inaction by the Custodian (i) at the request
or direction of or in reliance on the advice of the Fund or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or, in the case of any sub-custodian, under the agreement
approved by the Fund pursuant to which it is employed by the Custodian, provided
that neither the Custodian nor any sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations under this
Agreement in the case of the Custodian or under such agreement approved by the
Fund in the case of a sub-custodian.
(2) Indemnity to be Provided. If the Fund requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Fund shall have provided indemnity
therefor to the Custodian in an amount and form satisfactory to the Custodian.
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<PAGE>
(3) Security. If the Fund requests the Custodian to advance cash or
Securities for any purpose, and the Custodian does so, or in the event that the
Custodian or its nominee shall incur, in connection with its performance under
this Agreement, any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability or claim (except such as may arise from its or its
nominee's willful misfeasance, bad faith or gross negligence or reckless
disregard of its obligations under this Agreement), then, in any such event,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail promptly to repay or indemnify the Custodian,
the Custodian shall be entitled to utilize available cash of the Fund and to
dispose of other Fund assets to the extent necessary to obtain reimbursement or
indemnification.
ARTICLE X
FORCE MAJEURE
Neither the Custodian nor the Fund shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances,; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor,
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material, equipment or transportation; provided, however, that the Custodian in
the event of a failure or delay (i) shall not discriminate against the Fund in
favor of any other customer of the Custodian in making computer time and
personnel available to input or process the transactions contemplated by this
Agreement and (ii) shall use its best efforts to ameliorate the effects of any
such failure or delay.
ARTICLE XI
TERMINATION
(1) Termination. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. Upon the date set forth in such notice this Agreement
shall terminate, and the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on that date deliver directly to the successor
custodian all Securities and cash then owned by the Fund and held by it as
Custodian, provided that the Fund shall have paid to the Custodian all fees,
expenses and other amounts to the payment or reimbursement of which it shall
then be entitled. The Fund may at any time immediately terminate this Agreement
in the event of the appointment of a conservator or receiver for the Custodian
by regulatory authorities in the State of New Jersey or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
(2) Fund as Custodian. If a successor custodian is not designated by the
Fund, the Fund shall upon the date specified
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in the notice of termination of this Agreement and upon (a) the delivery by the
Custodian to the Fund of all Securities (other than any Securities held in a
Book-Entry System) and cash then owned by the Fund, and (b) the transfer of any
Securities held in a Book-Entry System to an account of or for the Fund, be
deemed to be its own custodian and the Custodian shall be relieved of all
obligations under this Agreement.
ARTICLE XII
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation and payment of
out-of-pocket expenses as agreed upon from time to time by the Fund and the
Custodian. The fees and other charges in effect on the date hereof and
applicable to the Fund are set forth in Exhibit C attached hereto.
ARTICLE XIII
GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
ARTICLE XIV
REFERENCES TO CUSTODIAN
The Fund shall not circulate any printed matter which contains any
reference to the Custodian without the prior written approval of the Custodian,
excepting printed matter contained in the Fund's prospectus or statement of
additional
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information and such other printed matter as merely identifies the Custodian as
custodian for the Fund. The Fund shall submit printed matter requiring approval
to the Custodian in draft form, allowing sufficient time for review by the
Custodian and its counsel prior to any deadline for printing.
ARTICLE XV
NOTICES
Notices and any other writing authorized or required by this Agreement
shall be delivered or mailed first class postage prepaid, if to the Fund, to
Gabelli - O'Connor Treasurer's Fund, Inc., C/O Gabelli - O'Connor Fixed Income
Mutual Funds Management Co., 8 Sound Shore Drive, Greenwich, Connecticut 06830,
Attention: President or, if to the Custodian, Custodial Trust Company, 28 West
State Street, Trenton, New Jersey 08608, Attention: Vice President-Trust
Operations, or to such other address as either the Fund or the Custodian may
hereafter specify to the other by notice in writing.
ARTICLE XVI
BUSINESS DAYS
Nothing contained in this Agreement is intended to require or shall
require the Custodian to perform any function or duties on a day other than a
Business Day. A Business Day is a day on which the Custodian is open for
business.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, and their respective seals to be hereto affixed, all
as of this day of November, 1987.
ATTEST: GABELLI - O'CONNOR TREASURER'S
FUND, INC
/s/ Mary E. Hauck By /s/ Thomas O'Connor
- -------------------------- --------------------------
ATTEST: CUSTODIAN TRUST COMPANY
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- -------------------------- --------------------------
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EXHIBIT A
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Gabelli - O'Connor Treasurer's Fund, Inc. to administer the
Custody Account.
Name Signature
---- ---------
Thomas E. O'Connor /s/ Thomas E. O'Connor
- ------------------------ ------------------------
Mary B. Hauck /s/ Mary B. Hauck
- ------------------------ ------------------------
Henley L. Smith /s/ Henley L. Smith
- ------------------------ ------------------------
<PAGE>
EXHIBIT B
FOREIGN SUB-CUSTODIANS
Australia - National Australia Bank
Belgium - Morgan Guaranty Trust Co. of N.Y.
Canada - Canadian Imperial Bank of Commerce
Denmark - Privatbanken A/S
Finland - Union Bank of Finland Ltd.
France - Morgan Guaranty Trust Co. of N.Y.
Germany - Morgan Guaranty Trust Co. of N.Y.
Hong Kong - Citibank Hong Kong
Italy - Banca Commerciale Italiana
Japan - Citibank Tokyo
Netherlands - Morgan Bank Nederland
Norway - Bergen Bank
Singapore - Citibank Singapore
Spain - Banco de Santander
Sweden - Skandinaviska Enskilda Banken
Switzerland - Morgan Guaranty Trust Co. of N.Y.
Thailand - The HongKong & Shanghai Banking Corporation
United Kingdom - National Westminster Bank PLC
<PAGE>
EXHIBIT C
CUSTODY FEES
Custodian shall charge for its services as custodian of the Securities,
cash and other assets of the Fund held in the United States a daily custody fee
of 1/365th (1/366th in a leap year) of 0.02% (two basis points) of the first
$300 million in average daily net assets of the Fund and of 1/365th (1/366th in
a leap year) of 0.01% (one basis point) of the average daily net assets of the
Fund in excess of $300 million. Such fee shall be payable on the first Business
Day after the end of the month during which it accrued.
For purposes of calculating the custody fee (whether for assets held in or
outside the United States), net assets of the Fund shall mean the sum of the net
assets of each of the Portfolios of the Fund. In determining net assets for
purposes of calculating the custody fee (whether for assets held in or outside
the United States), Securities in a Portfolio shall be valued by the method
which is set forth in the Fund's prospectus, as in effect from time to time, as
the method for valuing such Securities.
Each daily custody fee shall be calculated as a percentage of the average
daily net assets of the Fund for a period from and including (a) the first day
of the then current fiscal year of the Fund to and including (b) the day
immediately preceding the day for which such fee is being calculated,
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<PAGE>
provided that during the first fiscal year of the Fund such period shall run
from and including the date Fund assets are first committed to the custody of
the Custodian.
In addition, the Custodian shall charge a transaction fee of $25 for each
receive, deliver or redemption of Securities in the United States.
The monthly custody fee and transaction fees for assets held outside the
United States shall be in such amounts as the Fund and Custodian shall from time
to time agree.
C-2
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 14th day of April, 1997, by and between
THE TREASURER'S FUND, INC., a Maryland corporation (the "Company"), and GABELLI
FUNDS, INC. (the "Administrator"), a New York corporation.
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several series of shares of beneficial interest ("Shares");
and
WHEREAS, the Company desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such series of the Company as the Company and the Administrator may agree on
("Portfolios") and as listed on Schedule A attached hereto and made a part of
this Agreement, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Company and the Administrator hereby agree as
follows:
ARTICLE 1. Retention of the Administrator; Conversion to the Services. The
Company hereby engages the Administrator to act as the administrator of the
Portfolios and to furnish the Portfolios with the management and administrative
services as set forth in Article 2 below (collectively, the "Services").
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Company in any way and shall
not be deemed an agent of the Company.
ARTICLE 2. Administrative Services. The Administrator shall perform or
supervise the performance by others of other administrative services in
connection with the operations of the Portfolios, and, on behalf of the Company,
will investigate, assist in the selection of and conduct relations with
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. The
Administrator shall provide the directors of the Company with such reports
regarding investment performance as they may reasonably request but shall have
no responsibility for supervising the performance by any investment adviser or
sub-adviser of its responsibilities.
The Administrator shall provide the Company with regulatory reporting, all
necessary office space, equipment, personnel, compensation and facilities
(including facilities for meetings of shareholders ("Shareholders") and
directors of the Company) for handling the affairs of the Portfolios and such
other services as the Administrator shall, from time to time, determine to be
necessary to perform its obligations under this Agreement. In addition, at the
request of the Board
1
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of Directors, the Administrator shall make reports to the Company's directors
concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator shall:
(a) calculate contractual Company expenses and control all disbursements
for the Company, and as appropriate compute the Company's yields,
total return, expense ratios, portfolio turnover rate and, if
required, portfolio average dollar-weighted maturity;
(b) assist Company counsel with the preparation of prospectuses,
statements of additional information, registration statements and
proxy materials;
(c) prepare such reports, applications and documents (including reports
regarding the sale and redemption of Shares as may be required in
order to comply with Federal and state securities law) as may be
necessary or desirable to register the Company's Shares with state
securities authorities, monitor the sale of Company Shares for
compliance with state securities laws, and file with the appropriate
state securities authorities the registration statements and reports
for the Company and the Company's Shares and all amendments thereto,
as may be necessary or convenient to register and keep effective the
Company and the Company's Shares with state securities authorities
to enable the Company to make a continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Company's investment
adviser, communications to Shareholders, including the annual report
to Shareholders, coordinate the mailing of prospectuses, notices,
proxy statements, proxies and other reports to Company Shareholders,
and supervise and facilitate the proxy solicitation process for all
shareholder meetings, including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Company with, among others,
the Company's investment adviser, distributor, custodian, transfer
agent and fund accountant;
(f) supervise the Company's transfer agent with respect to the payment
of dividends and other distributions to Shareholders;
(g) calculate performance data of the Company and its Portfolios for
dissemination to information services covering the investment
company industry;
(h) coordinate and supervise the preparation and filing of the Company's
tax returns;
(i) examine and review the operations and performance of the various
organizations providing services to the Company or any Portfolio of
the Company, including,
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<PAGE>
without limitation, the Company's investment adviser, distributor,
custodian, fund accountant, transfer agent, outside legal counsel
and independent public accountants, and at the request of the Board
of Trustees, report to the Board on the performance of
organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and printing of
the Company's semi-annual and annual reports to Shareholders;
(k) assist with the design, development, and operation of the Company
Portfolios, including new classes, investment objectives, policies
and structure;
(l) provide individuals reasonably acceptable to the Company's Board of
Directors to serve as officers of the Company, who will be
responsible for the management of certain of the Company's affairs
as determined by the Company's Board of Directors;
(m) advise the Company and its Board of Directors on matters concerning
the Company and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Company in
accordance with the requirements of Rules 17g-1 and 17d-1(7) under
the 1940 Act as such bonds and policies are approved by the
Company's Board of Directors;
(o) monitor and advise the Company and its Portfolios on their
registered investment company status under the Internal Revenue Code
of 1986, as amended;
(p) perform all administrative services and functions of the Company and
each Portfolio to the extent administrative services and functions
are not provided to the Company or such Portfolio pursuant to the
Company's or such Portfolio's investment advisory agreement,
distribution agreement, custodian agreement, transfer agent
agreement and fund accounting agreement;
(q) furnish advice and recommendations with respect to other aspects of
the business and affairs of the Portfolios as the Company and the
Administrator shall determine desirable; and
(r) prepare and file with the SEC the semi-annual report for the Company
on Form N-SAR and all required notices pursuant to Rule 24f-2.
The Administrator shall perform such other services for the Company that
are mutually agreed upon by the parties from time to time. Such services may
include performing internal audit examinations; mailing the annual reports of
the Portfolios; preparing an annual list of Shareholders;
3
<PAGE>
and mailing notices of Shareholders' meetings, proxies and proxy statements, for
all of which the Company will pay the Administrator's out-of-pocket expenses.
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own expense
the executive, supervisory and clerical personnel necessary to perform its
obligations under this Agreement. The Administrator shall also provide the items
which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Company as well as all directors of the
Company who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Company retained by the Trustees of the
Company to perform services on behalf of the Company.
(B) The Company. The Company assumes and shall pay or cause to be paid all
other expenses of the Company not otherwise allocated herein, including, without
limitation, organization costs, taxes, expenses for legal and auditing services,
the expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing Shareholders, all expenses incurred in connection with
issuing and redeeming Shares, the costs of custodial services, the cost of
initial and ongoing registration of the Shares under Federal and state
securities laws, fees and out-of-pocket expenses of directors who are not
affiliated persons of the Administrator or the Investment Adviser to the Company
or any affiliated corporation of the Administrator or the Investment Adviser,
insurance, interest, brokerage costs, litigation and other extraordinary or
nonrecurring expenses, and all fees and charges of investment advisers to the
Company.
ARTICLE 4. Compensation of the Administrator.
(A) Administration Fee. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Company shall pay to the Administrator compensation at an annual
rate specified in Schedule A attached hereto. Such compensation shall be
calculated and accrued daily, and paid to the Administrator monthly. The Company
shall also reimburse the Administrator for its reasonable out-of-pocket
expenses, including the travel and lodging expenses incurred by officers and
employees of the Administrator in connection with attendance at Board meetings.
(B) Survival of Compensation Rights. All rights of compensation under this
Agreement for services performed as of the termination date shall survive the
termination of this Agreement.
ARTICLE 5. Limitation of Liability of the Administrator. The duties of the
Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission
4
<PAGE>
in carrying out its duties hereunder, except a loss resulting from willful
misfeasance, bad faith or negligence in the performance of its duties, or by
reason of reckless disregard of its obligations and duties hereunder, except as
may otherwise be provided under provisions of applicable law which cannot be
waived or modified hereby. (As used in this Article 5, the term "Administrator"
shall include directors, officers, employees and other agents of the
Administrator as well as the Administrator itself.)
So long as the Administrator acts in good faith and with due diligence and
without negligence, the Company assumes full responsibility and shall indemnify
the Administrator and hold it harmless from and against any and all actions,
suits and claims, whether groundless or otherwise, and from and against any and
all losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of said administration, transfer agency, and
dividend disbursing relationships to the Company or any other service rendered
to the Company hereunder. The indemnity and defense provisions set forth herein
shall indefinitely survive the termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Company may be asked to indemnify or hold the
Administrator harmless, the Company shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Company promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Company, but failure to do so in good faith shall not affect the rights
hereunder.
The Company shall be entitled to participate at its own expense or, if it
so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Company elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the
Company and satisfactory to the Administrator, whose approval shall not be
unreasonably withheld. In the event that the Company elects to assume the
defense of any suit and retain counsel, the Administrator shall bear the fees
and expenses of any additional counsel retained by it. If the Company does not
elect to assume the defense of a suit, it will reimburse the Administrator for
the reasonable fees and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Company at any time for instructions
and may consult counsel for the Company or its own counsel and with accountants
and other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
5
<PAGE>
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. The Administrator will not be held to have
notice of any change of authority of any officers, employees or agents of the
Company until receipt of written notice thereof from the Company.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Company are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that directors, officers, employees
and Shareholders of the Company are or may be or become interested in the
Administrator, as directors, officers, employees and shareholders or otherwise
and that partners, officers and employees of the Administrator and its counsel
are or may be or become similarly interested in the Company, and that the
Administrator may be or become interested in the Company as a Shareholder or
otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall be
as specified in Schedule A hereto.
ARTICLE 8. Assignment. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
the Administrator may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder. The
Administrator shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor and provided further,
that the Administrator shall be responsible, to the extent provided in Article 5
hereof, for all acts of such subcontractor as if such acts were its own. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
ARTICLE 9. Amendments. This Agreement may be amended by the parties hereto
only if such amendment is specifically approved (i) by the vote of a majority of
the directors of the Company, and (ii) by the vote of a majority of the
directors of the Company who are not parties to this Agreement or interested
persons of any such party, cast in person at a Board of Directors meeting called
for the purpose of voting on such approval.
For special cases, the parties hereto may amend such procedures set forth
herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Company does not conflict with or violate any requirements of
its Articles of Incorporation or then-current prospectuses, or any rule,
regulation or requirement of any regulatory body.
ARTICLE 10. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Company shall be prepared and maintained at the expense of
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<PAGE>
the Administrator, but shall be the property of the Company and will be made
available to or surrendered promptly to the Company on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Company and follow the
Company's instructions as to permitting or refusing such inspection; provided
that the Administrator may exhibit such records to any person in any case where
it is advised by its counsel that it may be held liable for failure to do so,
unless (in cases involving potential exposure only to civil liability) the
Company has agreed to indemnify the Administrator against such liability.
ARTICLE 11. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other party
at the following address: if to the Administrator, to it at One Corporate
Center, Rye, New York 10580; if to the Company, to it at 19 Old Kings Highway
South, Darien, Connecticut 06820, or at such other address as such party may
from time to time specify in writing to the other party pursuant to this
Section.
ARTICLE 13. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable provisions of the 1940
Act. To the extent that the applicable laws of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the 1940 Act,
the latter shall control.
ARTICLE 14. Multiple Originals. This Agreement may be executed in two or
more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
THE TREASURER'S FUND, INC.
By:______________________________________
Attest:__________________________________
GABELLI FUNDS, INC.
By:______________________________________
Attest:__________________________________
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<PAGE>
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF APRIL 14, 1997
BETWEEN THE TREASURER'S FUND, INC.
AND
GABELLI FUNDS, INC.
Portfolios: This Agreement shall apply to all Portfolios of The Treasurer's
Fund, Inc., either now or hereafter created (collectively, the
"Portfolios"). The current portfolios of the Company are set forth
below: U.S. Treasury Money Market Portfolio, Domestic Prime Money
Market Portfolio, Global Money Market Portfolio, Tax Exempt Money
Market Portfolio, Limited Term Portfolio and Tax Exempt Limited
Term Portfolio.
Fees: Pursuant to Article 4, in consideration of services rendered and
expenses assumed pursuant to this Agreement, the Company will pay
the Administrator on the first business day of each month, or at
such time(s) as the Administrator shall request and the parties
hereto shall agree, a fee computed daily at the annual rate of:
.10% of the first $500 million of aggregate average daily
net assets of each Portfolio of the Company; .065% of the
next $250 million of aggregate average daily net assets of
each Portfolio of the Company; .055% of the next $250
million of aggregate average daily net assets of each
Portfolio of the Company; and .050% of all aggregate average
daily net assets of each Portfolio of the Company over $1
billion.
The fee for the period from the day of the month this Agreement is
entered into until the end of that month shall be prorated
according to the proportion which such period bears to the full
monthly period. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be
prorated according to the proportion which such period bears to
the full monthly period and shall be payable upon the date of
termination of this Agreement.
For purposes of determining the fees payable to the Administrator,
the value of the net assets of a particular Portfolio shall be
computed in the manner described in the Company's Declaration of
Company or in the Prospectus or Statement of Additional
Information respecting that Portfolio as from time to time is in
effect for the computation of the value of such net assets in
connection with the determination of the liquidating value of the
shares of such Portfolio.
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<PAGE>
The parties hereby confirm that the fees payable hereunder shall
be applied to each Portfolio as a whole, and not to separate
classes of shares within the Portfolios.
Term: The initial term of this Agreement (the "Initial Term") shall be
for a period commencing on the date this Agreement is executed by
both parties and ending on the date that is one year thereafter.
This Agreement shall be renewed automatically for successive
periods of one year after the Initial Term, provided that such
continuation is specifically approved at least annually by the
Company's Board of Directors or by a majority vote of the holders
of the Company's outstanding voting securities, as defined in the
1940 Act, and, in either case, by a majority of those Directors
who are neither party to this Agreement nor, other than by their
service as Directors of the Company, interested persons, as
defined in the 1940 Act, of any such person who is party to this
Agreement. Upon the effectiveness of this Agreement, it shall
supersede all previous agreements between the parties hereto
covering the subject matter hereof. This Agreement may be
terminated at any time, without the payment of any penalty, by
vote of a majority of the Company's outstanding voting securities,
as defined in the 1940 Act, or by a vote of a majority of the
Company's entire Board of Directors, on sixty days' written notice
to the Administrator, or by the Administrator on sixty days'
written notice to the Company. In the event of a material breach
of this Agreement by either party, the non-breaching party shall
notify the breaching party in writing of such breach and upon
receipt of such notice, the breaching party shall have 45 days to
remedy the breach. In the event the breach is not remedied within
such time period, the nonbreaching party may immediately terminate
this Agreement.
Notwithstanding the foregoing, after such termination for so long
as the Administrator, with the written consent of the Company, in
fact continues to perform any one or more of the services
contemplated by this Agreement or any schedule or exhibit hereto,
the provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full
force and effect. Compensation due the Administrator and unpaid by
the Company upon such termination shall be immediately due and
payable upon and notwithstanding such termination. The
Administrator shall be entitled to collect from the Company, in
addition to the compensation described in this Schedule A, the
amount of all of the Administrator's cash disbursements for
services in connection with the Administrator's activities in
effecting such termination, including without limitation, the
delivery to the Company and/or its designees of the Company's
property, records, instruments and documents, or any copies
thereof. Subsequent to such termination, for a reasonable fee, the
Administrator will provide the Company with reasonable access to
any Company documents or records remaining in its possession.
2
SUB-ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of May, 1997, by and between
GABELLI FUNDS, INC. (the "Administrator"), and BISYS FUND SERVICES LIMITED
PARTNERSHIP, d/b/a BISYS FUND SERVICES ("BISYS").
WHEREAS, the Administrator is responsible for the provision of
administrative services to The Treasurer's Fund, Inc. (the "Company") and each
of the Portfolios (hereinafter referred to individually as a "Portfolio" and
collectively as the "Portfolios") of the Company;
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Administrator desires to retain BISYS to assist it in
performing administrative services with respect to each Portfolio and BISYS is
willing to perform such services on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Administrator and BISYS hereby agree as follows:
ARTICLE 1. Retention of BISYS. The Administrator hereby engages BISYS to
furnish each Portfolio with the administrative services as set forth in Article
2 below (collectively, the "Services"). BISYS shall, for all purposes herein, be
deemed to be an independent contractor and, unless otherwise expressly provided
or authorized, shall have no authority to act for or represent the Administrator
or the Company in any way.
ARTICLE 2. Administrative Services. BISYS shall perform or supervise the
performance by others of administrative services in connection with the
operations of the Portfolios, and, on behalf of the Company, will investigate,
assist in the selection of and conduct relations with custodians, depositories,
accountants, legal counsel, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and persons in any other capacity deemed to be
necessary or desirable for the Portfolios' operations. BISYS shall provide the
Trustees of the Company with such reports regarding investment performance as
they may reasonably request but shall have no responsibility for supervising the
performance by any investment adviser or sub-adviser of its responsibilities.
BISYS shall provide the Company with regulatory reporting, all necessary
office space, equipment, personnel, compensation and facilities (including
facilities for meetings of shareholders ("Shareholders") and Directors of the
Company) for handling the affairs of the Portfolios and such other services as
BISYS and the Administrator shall, from time to time, determine to be necessary
to perform BISYS' obligations under this Agreement. In addition, at the request
of the Board of Directors, BISYS shall make reports to the Company's Directors
concerning the performance of its obligations hereunder.
<PAGE>
Without limiting the generality of the foregoing, BISYS shall:
(a) calculate contractual Company expenses and provide necessary
instructions for all disbursements for the Company, and as
appropriate compute the Company's yields, total return, expense
ratios, portfolio turnover rate, average commission rate and, if
required, portfolio average dollar-weighted maturity;
(b) assist Company counsel with the preparation of prospectuses,
statements of additional information, registration statements and
proxy materials;
(c) prepare such reports, applications and documents (including reports
regarding the sale and redemption of Shares as may be required in
order to comply with Federal and state securities law) as may be
necessary or desirable to register the Company's Shares with state
securities authorities, monitor the sale of Company Shares for
compliance with state securities laws, and file with the appropriate
state securities authorities the registration statements and reports
for the Company and the Company's Shares and all amendments thereto,
as may be necessary or convenient to register and keep effective the
Company and its Shares with state securities authorities to enable
the Company to make a continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Administrator,
communications to Shareholders, including the annual report to
Shareholders, coordinate the mailing of prospectuses, notices, proxy
statements, proxies and other reports to Shareholders, and supervise
and facilitate the proxy solicitation process for all shareholder
meetings, including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Company with, among others,
the Company's investment adviser, distributor, custodian, transfer
agent and fund accountant;
(f) supervise the Company's transfer agent with respect to the payment
of dividends and other distributions to Shareholders;
(g) calculate performance data of the Portfolios for dissemination to
information services covering the investment company industry;
(h) prepare or cause to be prepared at its expense the filing of the
Company's tax returns;
(i) examine and review the operations and performance of the various
organizations providing services to the Company or any Portfolio,
including, without limitation, the investment adviser, distributor,
custodian, fund accountant, transfer agent, outside legal counsel
and independent public accountants, and, at the request of the Board
of Directors, report to the Board on the performance of such
organizations;
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<PAGE>
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and printing of
the Company's quarterly, semi-annual and annual reports to
Shareholders;
(k) assist with the design, development, and operation of the
Portfolios, including new classes, investment objectives, policies
and structure;
(l) provide individuals reasonably acceptable to the Company's Board of
Directors to serve as officers of the Company, who will be
responsible for the management of certain of the Company's affairs
as determined by the Company's Board of Directors;
(m) advise the Company and its Board of Directors on matters concerning
the Company and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Company in
accordance with the requirements of Rules 17g-1 and 17d-1(7) under
the 1940 Act as such bonds and policies are approved by the
Company's Board of Directors;
(o) monitor and advise the Company and its Portfolios on their regulated
investment company status under the Internal Revenue Code of 1986,
as amended;
(p) perform all administrative services and functions of the Company and
each Portfolio to the extent administrative services and functions
are not provided to the Company or such Portfolio pursuant to the
Company's or such Portfolio's administration agreement, investment
advisory agreement, distribution agreement, custodian agreement,
transfer agent agreement and fund accounting agreement;
(q) furnish advice and recommendations with respect to other aspects of
the business and affairs of the Portfolios as the Administrator and
BISYS shall determine desirable;
(r) prepare and file with the SEC the semi-annual report for the Company
on Form N-SAR and all required notices pursuant to Rule 24f-2;
(s) assist the Company with respect to SEC examinations, including the
furnishing of documents and information, as appropriate, and
responding to SEC examination letters; and
(t) assist the Company in preparing for Board meetings by (i)
coordinating board book production and distribution, (ii) preparing
Board agendas, (iii) preparing the BISYS section of Board materials,
(iv) preparing special Board meeting materials, including but not
limited to, materials relating to annual contract approvals and
12b-1 plan
3
<PAGE>
approvals, as agreed upon by the parties, and (v) such other Board
meeting functions that are agreed upon by the parties.
BISYS shall perform such other services for the Company that are mutually
agreed upon by the parties from time to time. Such services may include
performing internal audit examinations; mailing the annual reports of the
Portfolios; preparing an annual list of Shareholders; and mailing notices of
Shareholders' meetings, proxies and proxy statements, for all of which the
Administrator will pay or cause to be paid BISYS' reasonable out-of-pocket
expenses.
ARTICLE 3. Allocation of Charges and Expenses.
(A) BISYS. BISYS shall furnish at its own expense the executive,
supervisory and clerical personnel necessary to perform its obligations under
this Agreement. BISYS shall also provide the items which it is obligated to
provide under this Agreement, and shall pay all compensation, if any, of
officers of the Company as well as all Directors of the Company who are
affiliated persons of BISYS or any affiliated company of BISYS; provided,
however, that unless otherwise specifically provided, BISYS shall not be
obligated to pay the compensation of any employee of the Company retained by the
Directors of the Company to perform services on behalf of the Company.
(B) The Administrator. The Administrator hereby represents that the
Company has undertaken to pay or cause to be paid all other expenses of the
Company not otherwise allocated herein, including, without limitation,
organization costs, taxes, expenses for legal and auditing services, the
expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing Shareholders, all expenses incurred in connection with
issuing and redeeming Shares, the costs of custodial services, the cost of
initial and ongoing registration of the Shares under Federal and state
securities laws, fees and out-of-pocket expenses of Directors who are not
affiliated persons of the Administrator or the Investment Adviser to the Company
or any affiliated corporation of the Administrator or the Investment Adviser,
insurance, interest, brokerage costs, litigation and other extraordinary or
nonrecurring expenses, and all fees and charges of investment advisers to the
Company.
ARTICLE 4. Compensation of BISYS.
(A) Sub-Administration Fee. For the services rendered, the facilities
furnished and the expenses assumed by BISYS pursuant to this Agreement, the
Administrator shall pay to BISYS compensation at an annual rate specified in
Schedule A attached hereto.
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<PAGE>
(B) Survival of Compensation Rights. All rights of compensation under this
Agreement for services performed as of the termination date shall survive the
termination of this Agreement.
ARTICLE 5. Limitation of Liability of BISYS. The duties of BISYS shall be
confined to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against BISYS hereunder. BISYS shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any act or
omission in carrying out its duties hereunder, except a loss resulting from
willful misfeasance, bad faith or negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of applicable law which
cannot be waived or modified hereby. (As used in this Article 5, the term
"BISYS" shall include partners, officers, employees and other agents of BISYS as
well as BISYS itself.)
So long as BISYS acts in good faith and with due diligence and without
negligence, the Administrator assumes full responsibility and shall indemnify
BISYS and hold it harmless from and against any and all actions, suits and
claims, whether groundless or otherwise, and from and against any and all
losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of BISYS' actions taken or nonactions with
respect to the performance of services hereunder. The indemnity and defense
provisions set forth herein shall indefinitely survive the termination of this
Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Administrator may be asked to indemnify or
hold BISYS harmless, the Administrator shall be fully and promptly advised of
all pertinent facts concerning the situation in question, and it is further
understood that BISYS will use all reasonable care to identify and notify the
Administrator promptly concerning any situation which presents or appears likely
to present the probability of such a claim for indemnification against the
Administrator, but failure to do so in good faith shall not affect the rights
hereunder.
The Administrator shall be entitled to participate at its own expense or,
if it so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Administrator elects to assume the
defense of any such claim, the defense shall be conducted by counsel chosen by
the Administrator and satisfactory to BISYS, whose approval shall not be
unreasonably withheld. In the event that the Administrator elects to assume the
defense of any suit and retain counsel, BISYS shall bear the fees and expenses
of any additional counsel retained by it. If the Administrator does not elect to
assume the defense of a suit, it will reimburse BISYS for the reasonable fees
and expenses of any counsel retained by BISYS.
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<PAGE>
BISYS may apply to the Administrator at any time for instructions and may
consult counsel for the Administrator or its own counsel and with accountants
and other experts with respect to any matter arising in connection with BISYS'
duties, and BISYS shall not be liable or accountable for any action taken or
omitted by it in good faith in accordance with such instruction or with the
opinion of such counsel, accountants or other experts.
Also, BISYS shall be protected in acting upon any document which it
reasonably believes to be genuine and to have been signed or presented by the
proper person or persons. BISYS will not be held to have notice of any change of
authority of any officers, employees or agents of the Administrator until
receipt of written notice thereof from the Administrator.
ARTICLE 6. Activities of BISYS. The services of BISYS rendered hereunder
are not to be deemed to be exclusive. BISYS is free to render such services to
others and to have other businesses and interests. It is understood that
directors, officers, employees and Shareholders are or may be or become
interested in BISYS, as officers, employees or otherwise and that partners,
officers and employees of BISYS and its counsel are or may be or become
similarly interested in the Company, and that BISYS may be or become interested
in the Company as a Shareholder or otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall be
as specified in Schedule A hereto.
ARTICLE 8. Assignment. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
BISYS may, with the prior consent of the Administrator, at its expense,
subcontract with any entity or person concerning the provision of the services
contemplated hereunder. BISYS shall not, however, be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that BISYS shall be responsible, to the extent provided in
Article 5 hereof, for all acts of such subcontractor as if such acts were its
own. This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective successors and permitted assigns.
ARTICLE 9. Amendments. This Agreement may be amended if such amendment is
specifically approved in writing by the parties hereto.
ARTICLE 10. Certain Records. BISYS shall maintain customary records in
connection with its duties as specified in this Agreement. Any records required
to be maintained and preserved pursuant to Rules 31a-1 and 31a-2 under the 1940
Act which are prepared or maintained by BISYS on behalf of the Company shall be
prepared and maintained at the expense of BISYS, but shall be the property of
the Company and will be made available to or surrendered promptly to the Company
on request.
6
<PAGE>
In case of any request or demand for the inspection of such records by
another party, BISYS shall notify the Administrator and follow the
Administrator's instructions as to permitting or refusing such inspection;
provided that BISYS may exhibit such records to any person in any case where it
is advised by its counsel that it may be held liable for failure to do so,
unless (in cases involving potential exposure only to civil liability) the
Administrator or the Company has agreed to indemnify BISYS against such
liability.
ARTICLE 11. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. Notice. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other party
at the following address: if to BISYS, to it at 3435 Stelzer Road, Columbus,
Ohio 43219, Attention: George O. Martinez, Esq.; if to the Administrator, to it
at One Corporate Center, Rye, New York 10580-1434, Attention: Bruce N. Alpert,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
ARTICLE 13. Confidential Information. Each party acknowledges that it may
acquire knowledge and information relating to the other party and its affiliates
or the Company including, but not limited to, information pertaining to business
plans, employees, customers and/or suppliers, and that all such knowledge and
information acquired or developed is and shall be confidential and proprietary
information (all such confidential and proprietary information is herein
collectively referred to as the "Confidential Information"). Each party agrees
to hold the Confidential Information in strict confidence, to refrain from
directly or indirectly disclosing it to others or using it in any way except for
purposes of performing services hereunder, and to prevent any unauthorized
person access to it either before or after termination of this Agreement,
without the prior written consent of the other party. Both parties further agree
to take all action reasonable and necessary to protect the confidentiality of
the Confidential Information. The parties shall use their best efforts to have
their directors, officers, employees and agents agree to the terms of this
Section. The obligations of the parties contained in this section shall survive
termination of this Agreement. Neither party's confidentiality obligations under
this provision shall apply to such information that (i) was in the public domain
or available to a third party without restrictions at or prior to the time such
information was made known to such party, (ii) had been independently known to
such party at the time of disclosure from persons who were not subject to
similar confidentiality obligations, or (iii) is required to be disclosed by law
(except that each party will use best efforts to give the other party written
notice prior to any such disclosure).
7
<PAGE>
ARTICLE 14. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Ohio and the applicable provisions of the 1940
Act. To the extent that the applicable laws of the State of Ohio, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
ARTICLE 15. Multiple Originals. This Agreement may be executed in two or
more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
GABELLI FUNDS, INC.
By:/s/ Bruce Alpert
------------------------------------
Title: VP & COO
---------------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By:/s/ George O. Martinez
------------------------------------
Title: Senior Vice President
---------------------------------
8
<PAGE>
SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
DATED AS OF MAY 1, 1997
BETWEEN GABELLI FUNDS, INC.
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Portfolios: This Agreement shall apply to all Portfolios, either now or
hereafter created, of the Company. The current Portfolios are
set forth below.
U. S. Treasury Money Market Portfolio
Domestic Prime Money Market Portfolio
Global Money Market Portfolio
Tax Exempt Money Market Portfolio
Limited Term Portfolio
Tax Exempt Limited Term Portfolio
Fees: Pursuant to Article 4, in consideration of services rendered
and expenses assumed pursuant to this Agreement, the
Administrator will pay BISYS on the first business day of each
month, or at such time(s) as BISYS shall request and the
parties hereto shall agree, a fee based upon a prorated
portion (as more particularly described below) of the assets
of all registered management investment companies for which
BISYS serves as Subadministrator that are advised by Teton
Advisers, LLC, Gabelli Funds, Inc., Gabelli Fixed Income
L.L.C. or their affiliates ("BISYS-administered Investment
Companies"). Such fee shall be computed daily at the annual
rate of:
Six and one-quarter one-hundredths of one percent
(.0625%) of the BISYS-administered Investment Companies'
average daily net assets up to $350 million.
Four and one-quarter one-hundredths of one percent
(.0425%) of the BISYS-administered Investment Companies'
average daily net assets in excess of $350 million up to
$700 million.
Two and one-quarter one-hundredths of one percent
(.0225%) of the BISYS-administered Investment Companies'
average daily net assets in excess of $700 million.
The prorated portion of the fees that are payable to BISYS
under this Agreement shall be that portion of the fees
described above that is attributable to the average daily net
assets of the Portfolios. The fees set forth above shall be
subject to a minimum annual fee of $20,000 for each Portfolio.
Such fees shall be paid to BISYS
A-1
<PAGE>
on the first business day of each month or at such other
time(s) as the parties may agree upon.
The fee for the period from the day of the month this
Agreement is entered into until the end of that month shall be
prorated according to the proportion which such period bears
to the full monthly period. Upon any termination of this
Agreement before the end of any month, the fee for such part
of a month shall be prorated according to the proportion which
such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement.
For purposes of determining the fees payable to BISYS, the
value of the net assets of a particular Portfolio shall be
computed in the manner described in the Company's Articles of
Incorporation or in the Prospectus or Statement of Additional
Information respecting that Portfolio as from time to time is
in effect for the computation of the value of such net assets
in connection with the determination of the liquidating value
of the shares of such Portfolio.
The parties hereby confirm that the fees payable hereunder
shall be applied to each Portfolio as a whole, and not to
separate classes of shares within the Portfolios.
Term: The initial term of this Agreement (the "Initial Term") shall
commence on May 1, 1997 and shall remain in effect through
December 31, 1997. This Agreement shall be renewed
automatically for successive periods of one year after the
Initial Term, unless written notice of nonrenewal is provided
by either party not less than 90 days prior to the end of the
Initial Term or 90 days advance written notice of termination
is provided by either party at any time following the Initial
Term. In the event of any breach of this Agreement by either
party, the non-breaching party shall notify the breaching
party in writing of such breach and upon receipt of such
notice, the breaching party shall have 45 days to remedy the
breach. In the event any material breach is not remedied
within such time period, the nonbreaching party may
immediately terminate this Agreement.
Notwithstanding the foregoing, after such termination for so
long as BISYS, with the written consent of the Administrator,
in fact continues to perform any one or more of the services
contemplated by this Agreement or any schedule or exhibit
hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall
continue in full force and effect. Compensation due BISYS and
unpaid by the Administrator upon such termination shall be
immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the
Administrator, in addition to the compensation described in
this Schedule A, all costs reasonably incurred in connection
with BISYS' activities in effecting such termination,
including without limitation, the delivery to the Company
and/or its designees of the Company's property, records,
instruments and documents,
A-2
<PAGE>
or any copies thereof. To the extent that BISYS may retain in
its possession copies of any Company documents or records
subsequent to such termination which copies had not been
requested by the Administrator on behalf of the Company in
connection with the termination process described above, BISYS
will provide the Company with reasonable access to such
copies; provided, however, that, in exchange therefor, the
Administrator shall reimburse BISYS for all costs reasonably
incurred in connection therewith.
A-3
TRANSFER AGENCY AND SERVICE AGREEMENT
between
THE TREASURER'S FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
1G - Domestic Corp/Series
95
<PAGE>
TABLE OF CONTENTS
Page
----
1. Terms of Appointment; Duties of the Bank ............................. 97
2. Fees and Expenses .................................................... 99
3. Representations and Warranties of the Bank ........................... 100
4. Representations and Warranties of the Fund ........................... 100
5. Wire Transfer Operating Guidelines ................................... 101
6. Data Access and Proprietary Information .............................. 102
7. Indemnification ...................................................... 104
8. Standard of Care ..................................................... 105
9. Covenants of the Fund and the Bank ................................... 105
10. Termination of Agreement ............................................. 106
11. Additional Funds ..................................................... 106
12. Assignment ........................................................... 107
13. Amendment ............................................................ 107
14. Massachusetts Law to Apply ........................................... 107
15. Force Majeure ........................................................ 107
16. Consequential Damages ................................................ 107
17. Merger of Agreement .................................................. 108
18. Counterparts ......................................................... 108
19. Reproduction of Documents ............................................ 108
96
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the day of ,1997, by and between THE TREASURER'S FUND,
INC., a Maryland corporation, having its principal office and place of business
at 19 Old Kings Highway South, Darien, Connecticut 06820-4526 (the "Fund"), and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its
principal office and place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in six (6) series, the U.S.
Treasury Money Market Portfolio, Domestic Prime Money Market Portfolio, Global
Money Market Portfolio, Tax Exempt Money Market Portfolio, Limited Term
Portfolio and Tax Exempt Limited Term Portfolio (each such series, together with
all other series subsequently established by the Fund and made subject to this
Agreement in accordance with Article 10, being herein referred to as a
"Portfolio", and collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its
transfer agent, dividend disbursing agent, custodian of certain retirement plans
and agent in connection with certain other activities, and the Bank desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Terms of Appointment; Duties of the Bank
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund,
on behalf of the Portfolios, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the Fund's
authorized and issued shares of its common stock, $ par value, ("Shares"),
dividend disbursing agent, custodian of certain retirement plans and agent
in connection with any accumulation, open-account or similar plans
provided to the shareholders of each of the respective Portfolios of the
Fund ("Shareholders") and set out in the currently effective prospectus
and statement of additional information ("prospectus") of the Fund on
behalf of the applicable Portfolio, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
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<PAGE>
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation thereof
to the Custodian of the Fund authorized pursuant to the
Articles of Incorporation of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Fund;
(v) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over
or cause to be paid over in the appropriate manner such monies
as instructed by the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and distributions
declared by the Fund on behalf of the applicable Portfolio;
(viii) Issue replacement certificates for those certificates alleged
to have been lost, stolen or destroyed upon receipt by the
Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at its option,
may issue replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such
indemnity;
(ix) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing and
(x) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule l7Ad-l0(e) a record of the total number
of shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Bank shall also provide the Fund on a regular basis with the
total number of shares which are authorized and issued and
outstanding and shall have no obligation, when recording the
issuance of shares, to monitor the issuance of such shares or
to take cognizance of any laws relating to the issue or sale
of such shares, which functions shall be the sole
responsibility of the Fund.
98
<PAGE>
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing Shareholder proxies, Shareholder reports and
prospectuses to current Shareholders, withholding taxes on U.S.
resident and non-resident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms required
with respect to dividends and distributions by federal authorities
for all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information and (ii)
provide a system which will enable the Fund to monitor the total
number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for the Fund's blue sky State
registration status is solely limited to the initial establishment
of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement between
the Fund on behalf of each Portfolio and the Bank per the attached
service responsibility schedule. The Bank may at times perform only
a portion of these services and the Fund or its agent may perform
these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
2. Fees and Expenses
2.1 For the performance by the Bank pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Bank an annual
maintenance fee for each Shareholder account as set out in the initial fee
schedule attached hereto. Such fees and out-of-pocket expenses and
advances identified under Section 2.2 below may be changed from time to
time subject to mutual written agreement between the Fund and the Bank.
99
<PAGE>
2.2 In addition to the fee paid under Section 2.1 above, the Fund agrees on
behalf of each of the Portfolios to reimburse the Bank for out-of-pocket
expenses, including but not limited to confirmation production, postage,
forms, telephone, microfilm, microfiche, mailing and tabulating proxies,
records storage, or advances incurred by the Bank for the items set out in
the fee schedule attached hereto. In addition, any other expenses incurred
by the Bank at the request or with the consent of the Fund, will be
reimbursed by the Fund on behalf of the applicable Portfolio.
2.3 The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the receipt of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all shareholder accounts shall be advanced
to the Bank by the Fund at least seven (7) days prior to the mailing date
of such materials.
3. Representations and Warranties of the Bank
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. Representations and Warranties of the Fund
The Fund represents and warrants to the Bank that:
4.1 It is a corporation duly organized and existing and in good standing under
the laws of the State of Maryland.
4.2 It is empowered under applicable laws and by its Articles of Incorporation
and By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Articles of Incorporation and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
100
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4.4 It is an open-end and diversified management investment company registered
under the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective and will remain
effective, and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of the Fund being
offered for sale.
5. Wire Transfer Operating Guidelines/Articles 4A of the Uniform Commercial
Code
5.1 The Bank is authorized to promptly debit the appropriate Fund
account(s) upon the receipt of a payment order in compliance with
the selected security procedure (the "Security Procedure") chosen
for funds transfer and in the amount of money that the Bank has been
instructed to transfer. The Bank shall execute payment orders in
compliance with the Security Procedure and wit the Fund instructions
on the execution date provided that such payment order is received
by the customary deadline for processing such a request, unless the
payment order specifies a later time. All payment orders and
communications received after this the customary deadline will be
deemed to have been received the next business day.
5.2 The Fund acknowledges that the Security Procedure it has designated
on the Fund Selection Form was selected by the Fund from security
procedures offered by the Bank. The Fund shall restrict access to
confidential information relating to the Security Procedure to
authorized persons as communicated to the Bank in writing. The Fund
must notify the Bank immediately if it has reason to believe
unauthorized persons may have obtained access in such information or
of any change in the Fund's authorized personnel. The Bank shall
verify the authenticity of all Fund instructions according to the
Security Procedure.
5.3 The Bank shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the
account number, the account number shall take precedence and govern.
5.4 The Bank reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the
collected balance in the account to be charged at the time of the
Bank's receipt of such payment order; (b) if initiating such payment
order would cause the Bank, in the Bank's sole judgement, to exceed
any volume, aggregate dollar, network, time, credit or similar
limits which are applicable to the Bank; or (c) if the Bank, in good
faith, is unable to satisfy itself that the transaction has been
properly authorized.
101
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5.5 The Bank shall use reasonable efforts to act on all authorized
requests to cancel or amend payment orders received in compliance
with the Security Procedure provided that such requests are received
in a timely manner affording the Bank reasonable opportunity to act.
However, the Bank assumes no liability if the request for amendment
or cancellation cannot be satisfied.
5.6 The Bank shall assume no responsibility for failure to detect any
erroneous payment order provided that the Bank complies with the
payment order instructions as received and the Bank complies with
the Security Procedure. The Security Procedure is established for
the purpose of authenticating payment orders only and not for the
detection of errors in payment orders.
5.7 The Bank shall assume no responsibility for lost interest with
respect to the refundable amount of any unauthorized payment order,
unless the Bank is notified of the unauthorized payment order within
thirty (30) days of notification by the Bank of the acceptance of
such payment order. In no event (including failure to execute a
payment order) shall the Bank be liable for special, indirect or
consequential damages, even if advised of the possibility of such
damages.
5.8 When the Fund initiates or receives Automated Clearing House credit
and debit entries pursuant to these guidelines and the rules of the
National Automated Clearing House Association and the New England
Clearing House Association, the Bank will act as an Originating
Depository Financial Institution and/or receiving depository
Financial Institution, as the case may be, with respect to such
entries. Credits given by the Bank with respect to an ACH credit
entry are provisional until the Bank receives final settlement for
such entry from the Federal Reserve Bank. If the Bank does not
receive such final settlement, the Fund agrees that the Bank shall
receive a refund of the amount credited to the Fund in connection
with such entry, and the party making payment to the Fund via such
entry shall not be deemed to have paid the amount of the entry.
5.9 Confirmation of Bank's execution of payment orders shall ordinarily
be provided within twenty four (24) hours notice of which may be
delivered through the Bank's proprietary information systems, or by
facsimile or call-back. Fund must report any objections to the
execution of an order within thirty (30) days.
6. Data Access and Proprietary Information
6.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by the Bank as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by the Bank
on data bases under the control and ownership of the Bank ("Data Access
Services") constitute copyrighted, trade secret, or other proprietary
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information (collectively, "Proprietary Information") of substantial value
to the Bank or other third party. In no event shall Proprietary
Information be deemed Customer Data. The Fund agrees to treat all
Proprietary Information as proprietary to the Bank and further agrees that
it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, the Fund agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated
in writing by the Bank and solely in accordance with the Bank's
applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently
obtained, to infirm in a timely manner of such fact and dispose of
such information in accordance with the Bank's instructions;
(d) to refrain from causing or allowing the data acquired hereunder from
being retransmitted to any other computer facility or other
location, except with the prior written consent of the Bank;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary
Information at common law, under federal copyright law and under
other federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 6. The obligations of this Section shall
survive any earlier termination of this Agreement.
6.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may
obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to make no
claim against the Bank arising out of the contents of such third-party
data, including, but not limited to, the accuracy thereof. DATA ACCESS
SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN
CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE
BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
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6.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information, then in such event the Bank shall be entitled to rely
on the validity and authenticity of such instruction without undertaking
any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by the Bank from time to
time.
7. Indemnification
7.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct;
(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of
the Fund hereunder;
(c) The reliance on or use by the Bank or its agents or subcontractors
of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have
been prepared, maintained or performed by the Fund or any other
person or firm on behalf of the Fund including but not limited to
any previous transfer agent or registrar;
(d) The reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio;
(e) The offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be
registered or in violation of any stop order or other determination
or ruling by any federal or any state agency with respect to the
offer or sale of such Shares and
(f) The negotiations and processing of checks made payable to
prospective or existing Shareholders tendered to the Bank for the
purchase of Shares, such checks are commonly known as "third party
checks."
7.2 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Bank
under this Agreement, and the Bank and its agents or subcontractors shall
not be liable and shall be indemnified by the Fund on behalf of the
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applicable Portfolio for any action taken or omitted by it in reliance
upon such instructions or upon the opinion of such counsel. The Bank, its
agents and subcontractors shall be protected and indemnified in acting
upon any paper or document, reasonably believed to be genuine and to have
been signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided the Bank or its agents or
subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. The Bank, its agents and subcontractors shall also
be protected and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile signatures of
the officers of the Fund, and the proper countersignature of any former
transfer agent or former registrar, or of a co-transfer agent or
co-registrar.
7.3 In order that the indemnification provisions contained in this Section 7
shall apply, upon the assertion of a claim for which the Fund may be
required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend
against said claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in any case in
which the Fund may be required to indemnify the Bank except with the
Fund's prior written consent.
8. Standard of Care
The Bank shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct or that of its
employees.
9. Covenants of the Fund and the Bank
9.1 The Fund shall on behalf of each of the Portfolios promptly furnish to the
Bank the following:
(a) A certified copy of the resolution of the Board of Directors of the
Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the Fund and
all amendments thereto.
9.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account
105
<PAGE>
of, such certificates, forms and devices.
9.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Fund Act of 1940, as amended, and
the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the
Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules,
and will be surrendered promptly to the Fund on and in accordance with its
request.
9.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
9.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
10. Termination of Agreement
10.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
10.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund on behalf of the applicable Portfolio(s). Additionally,
the Bank reserves the right to charge for any other reasonable expenses
associated with such termination and a charge equivalent to the average of
three (3) months' fees.
11. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to the U.S. Treasury Money Market Portfolio, Domestic Prime Money
Market Portfolio, Global Money Market Portfolio, Tax Exempt Money Market
Portfolio, Limited Term Portfolio and Tax Exempt Limited Term Portfolio
with respect to which it desires to have the Bank render services as
transfer agent under the terms hereof, it shall so notify the Bank in
writing, and if the Bank agrees in writing to provide such services, such
series of Shares shall become a Portfolio hereunder.
106
<PAGE>
12. Assignment
12.1 Except as provided in Section 12.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
12.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
12.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc.,
a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(2) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(2)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(2) or (iii) a
BFDS affiliate; provided, however, that the Bank shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor as
it is for its own acts and omissions.
13. Amendment
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Board of
Directors of the Fund.
14. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of
Massachusetts.
15. Force Majeure
In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.
16. Consequential Damages
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
107
<PAGE>
17. Merger of Agreement
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
18. Counterparts
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
19. Reproduction of Documents
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties
hereto each agree that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not
such reproduction was made by a party in the regular course of business,
and that any enlargement, facsimile or further reproduction shall likewise
be admissible in evidence.
108
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
THE TREASURER'S FUND, INC.
BY:
------------------------------
ATTEST:
- ------------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
--------------------------------
Executive Vice President
ATTEST:
- ------------------------------
109
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase X
of Shares.
2. Issue Shares and hold Shares in X
Shareholders accounts.
3. Receive redemption requests. X
4. Effect transactions 1-3 above X
directly with broker-dealers.
5. Pay over monies to redeeming X
Shareholders.
6. Effect transfers of Shares. X
7. Prepare and transmit dividends and X
distributions.
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and X
accurate control book for each
issue of securities.
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current X
Shareholders.
15. Withhold taxes on U.S. resident X
and non-resident alien accounts.
110
<PAGE>
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury X
Department forms.
17. Prepare and mail account and X
confirmation statements for
Shareholders.
18. Provide Shareholder account X X
information.
19. Blue sky reporting. X
* Such services are more fully described in Section 1.2 (a), (b) and (c) of
the Agreement.
THE TREASURER'S FUND, INC.
BY:
--------------------------------
ATTEST:
- ------------------------------
STATE STREET BANK AND TRUST
COMPANY
BY:
--------------------------------
Executive Vice President
ATTEST:
- ------------------------------
111
<PAGE>
[LOGO] State Street
STATE STREET BANK AND TRUST COMPANY
THE TREASURER'S FUND FEE SCHEDULE
GENERAL
Fees are based on annual per shareholder account charges for account maintenance
plus out-of-pocket expenses.
ANNUAL MAINTENANCE CHARGES
Fees are billable on a monthly basis at the rate of 1/12 of the annual fee. A
charge is made for an account in the month that an account opens or closes.
OPEN ACCOUNTS First Year Second Year
- ------------- ---------- -----------
The U.S. Treasury Money Market Portfolio $7.50 $9.50
Tax Exempt Money Market Portfolio $7.50 $9.50
Domestic Prime Money Market Portfolio $7.50 $9.50
Closed Accounts (All Funds) $1.50 $1.50
Manual Transaction Fee (All Funds) $1.50 None
IRA Custodial Fees (Shareowner)
Annual Maintenance $10.00/per SSN for plans with combined assets under
$25,000.00
OUT-OF-POCKET EXPENSES
Out-of-Pocket expenses include, but are not limited to: Confirmation statements,
postage, forms audio response, ACH, telephone, microfilm, microfiche, and
expenses incurred at the specific direction of the Fund.
THE TREASURER'S FUND STATE STREET BANK & TRUST CO.
By: By: /s/ [ILLEGIBLE]
------------------------ ------------------------
Title: Title:
---------------------- ----------------------
Date: Date: July 28, 1997
---------------------- ----------------------
112
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 1st day of May, 1997 between THE TREASURER'S FUND,
INC. (the "Company"), a Maryland corporation having its principal place of
business at 19 Old Kings Highway South, Darien, Connecticut 06820, and BISYS
FUND SERVICES, INC. ("BISYS"), a corporation organized under the laws of the
State of Delaware and having its principal place of business at 3435 Stelzer
Road, Columbus, Ohio 43219.
WHEREAS, the Company desires that BISYS perform certain fund accounting
services for each investment portfolio of the Company, all as now or hereafter
may be established from time to time (individually referred to herein as the
"Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services.
(a) Maintenance of Books and Records. BISYS will keep and maintain
the following books and records of each Fund pursuant to Rule
31a-1 under the Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily record in detail
of all purchases and sales of securities, all receipts
and disbursements of cash and all other debits and
credits, as required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense
accounts, including interest accrued and interest
received, as required by subsection (b)(2)(I) of the
Rule;
(iii) Separate ledger accounts required by subsection
(b)(2)(ii) and (iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8)
of the Rule.
(b) Performance of Daily Accounting Services. In addition to the
maintenance of the books and records specified above, BISYS
shall perform the following accounting services daily for each
Fund:
<PAGE>
(i) Calculate the net asset value per share utilizing prices
obtained from the sources described in subsection
1(b)(ii) below;
(ii) Obtain security prices from independent pricing
services, or if such quotes are unavailable, then obtain
such prices from each Fund's investment adviser or its
designee, as approved by the Company's Board of
Directors;
(iii) Verify and reconcile with the Funds' custodian all daily
trade activity;
(iv) Compute, as appropriate, each Fund's net income and
capital gains, dividend payables, dividend factors,
7-day yields, 7-day effective yields, 30-day yields, and
weighted average portfolio maturity;
(v) Review daily the net asset value calculation and
dividend factor (if any) for each Fund prior to release
to shareholders, check and confirm the net asset values
and dividend factors for reasonableness and deviations,
and distribute net asset values and yields to NASDAQ;
(vi) Report to the Company the daily market pricing of
securities in any money market Funds, with the
comparison to the amortized cost basis;
(vii) Determine unrealized appreciation and depreciation on
securities held in variable net asset value Funds;
(viii) Amortize premiums and accrete discounts on securities
purchased at a price other than face value, if requested
by the Company;
(ix) Update fund accounting system to reflect rate changes,
as received from a Fund's investment adviser, on
variable interest rate instruments;
(x) Post Fund transactions to appropriate categories;
(xi) Accrue expenses of each Fund according to instructions
received from the Company's Administrator or its
designee;
(xii) Determine the outstanding receivables and payables for
all (1) security trades, (2) Fund share transactions and
(3) income and expense accounts;
2
<PAGE>
(xiii) Provide accounting reports in connection with the
Company's regular annual audit and other audits and
examinations by regulatory agencies; and
(xiv) Provide such periodic reports as the parties shall agree
upon, as set forth in a separate schedule.
(c) Special Reports and Services.
(i) BISYS may provide additional special reports upon the
request of the Company or a Fund's investment adviser,
which may result in an additional charge, the amount of
which shall be agreed upon between the parties.
(ii) BISYS may provide such other similar services with
respect to a Fund as may be reasonably requested by the
Company, which may result in an additional charge, the
amount of which shall be agreed upon between the
parties.
(d) Additional Accounting Services. BISYS shall also perform the
following additional accounting services for each Fund:
(i) Provide monthly a download (and hard copy thereof) of
the financial statements described below, upon request
of the Company. The download will include the following
items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the following:
(A) federal and state income tax returns and federal
excise tax returns;
(B) the Company's semi-annual reports with the
Securities and Exchange Commission ("SEC") on Form
N-SAR;
(C) the Company's annual, semi-annual and quarterly
(if any) shareholder reports;
(D) registration statements on Form N-1A and other
filings relating to the registration of shares;
3
<PAGE>
(E) the monitoring of each Fund's status as a
regulated investment company under Subchapter M of
the Internal Revenue Code, as amended;
(F) annual audit by the Company's auditors; and
(G) examinations performed by the SEC.
2. Compensation.
BISYS shall be entitled to receive an annual fee from each Fund of
$20,000. Such fee shall be payable by each Fund in twelve (12) installments, on
the first day of each month, or at such other time(s) as the parties may agree
upon.
3. Reimbursement of Expenses.
In addition to paying BISYS the fees referred to in Section 2
hereof, the Company agrees to reimburse BISYS for its out-of-pocket expenses in
providing services hereunder, including without limitation the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Company;
(b) The cost of microfilm or microfiche of records or other
materials;
(c) Any expenses BISYS shall incur at the written direction of an
officer of the Company thereunto duly authorized; and
(d) Any additional expenses reasonably incurred by BISYS in the
performance of its duties and obligations under this
Agreement.
4. Effective Date.
This Agreement shall become effective as of the date first written
above (the "Effective Date").
5. Term.
The initial term of this Agreement (the "Initial Term") shall
commence on May 1, 1997 and shall remain in effect through December 31, 1997.
This Agreement shall be renewed automatically for successive periods of one year
after the Initial Term, unless written notice of nonrenewal is provided by
either party not less than 90 days prior to the end of the Initial Term or 90
days' advance written notice of termination is provided by either party at any
time following the Initial Term. In the event of any breach of this Agreement by
either party, the non-breaching party shall notify the breaching party in
writing of such breach and upon receipt of such notice, the
4
<PAGE>
breaching party shall have 45 days to remedy the breach. In the event any
material breach is not remedied within such time period, the nonbreaching party
may immediately terminate this Agreement.
Notwithstanding the foregoing after such termination for so long as
BISYS, with the written consent of the Company, in fact continues to perform any
one or more of the services contemplated by this Agreement or any schedule or
exhibit hereto, the provisions of this Agreement, including without limitation
the provisions dealing with indemnification, shall continue in full force and
effect. Compensation due BISYS and unpaid by the Company upon such termination
shall be immediately due and payable upon and notwithstanding such termination.
BISYS shall be entitled to collect from the Company, in addition to the
compensation described in this Agreement, all costs reasonably incurred in
connection with BISYS' activities in effecting such termination, including
without limitation, the delivery to the Company and/or its designees of the
Company's property, records, instruments and documents, or any copies thereof.
To the extent that BISYS may retain in its possession copies of any Company
documents or records subsequent to such termination which copies had not been
requested on behalf of the Company in connection with the termination process
described above, BISYS will provide the Company with reasonable access to such
copies; provided however, that, in exchange therefor, the Company shall
reimburse BISYS for all costs reasonably incurred in connection therewith.
6. Standard of Care; Reliance on Records and Instructions;
Indemnification.
BISYS shall use its best efforts to insure the accuracy of all
services performed under this Agreement, but shall not be liable to the Company
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Company agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS's actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests with
respect to a Fund given or made to BISYS by a duly authorized representative of
the Company; provided that this indemnification shall not apply to actions or
omissions of BISYS in cases of its own bad faith, willful misfeasance,
negligence or from reckless disregard by it of its obligations and duties, and
further provided that prior to confessing any claim against it which may be the
subject of this indemnification, BISYS shall give the Company written notice of
and reasonable opportunity to defend against said claim in its own name or in
the name of BISYS.
5
<PAGE>
7. Record Retention and Confidentiality.
BISYS shall keep and maintain on behalf of the Company all books and
records which the Company is, or may be, required to keep and maintain pursuant
to any applicable statutes, rules and regulations, including without limitation
Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as amended (the
"1940 Act") relating to the maintenance of books and records in connection with
the services to be provided hereunder. BISYS further agrees that all such books
and records shall be the property of the Company and to make such books and
records available for inspection by the Company or by the Securities and
Exchange Commission at reasonable times and otherwise to keep confidential all
books and records and other information relative to the Company and its
shareholders; except when requested to divulge such information by
duly-constituted authorities or court process.
8. Uncontrollable Events.
BISYS assumes no responsibility hereunder, and shall not be liable,
for any damage, loss of data, delay or any other loss whatsoever caused by
events beyond its reasonable control.
9. Reports.
BISYS will furnish to the Company's properly authorized auditors,
investment advisers, examiners, distributors, dealers, underwriters, salesmen,
insurance companies and others designated by the Company in writing, such
reports and at such times as are prescribed pursuant to the terms and the
conditions of this Agreement to be provided or completed by BISYS, or as
subsequently agreed upon by the parties pursuant to an amendment hereto. The
Company agrees to examine, or cause an authorized representative of the Company
to examine, each such report or copy promptly and will report or cause to be
reported any errors or discrepancies therein.
10. Rights of Ownership.
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of BISYS.
All records and other data except such computer programs and procedures are the
exclusive property of the Company and all such other records and data will be
furnished to the Company in appropriate form as soon as practicable after
termination of this Agreement for any reason.
11. Return of Records.
BISYS may at its option at any time, and shall promptly upon the
Company's demand, turn over to the Company and cease to retain, BISYS' files,
records and documents created and maintained by BISYS pursuant to this Agreement
which are no longer needed by BISYS in the performance of its services or for
its legal protection. If not so turned over, such documents and records will be
retained by BISYS for six years from the year of creation. At the end of such
six-year
6
<PAGE>
period, such records and documents will be turned over to the Company unless the
Company authorizes in writing the destruction of such records and documents.
12. Representations of the Company.
The Company certifies to BISYS that: (1) as of the close of business
on the Effective Date, each Fund that is in existence as of the Effective Date
has authorized unlimited shares, and (2) this Agreement has been duly authorized
by the Company and, when executed and delivered by the Company, will constitute
a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
13. Representations of BISYS.
BISYS represents and warrants that: (1) the various procedures and
systems which BISYS has implemented with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause the records, and other
data of the Company and BISYS' records, data, equipment facilities and other
property used in the performance of its obligations hereunder are adequate and
that it will make such changes therein from time to time as are required for the
secure performance of its obligations hereunder, and (2) this Agreement has been
duly authorized by BISYS and, when executed and delivered by BISYS, will
constitute a legal, valid and binding obligation of BISYS, enforceable against
BISYS in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
14. Insurance.
BISYS shall notify the Company should any of its insurance coverage
be canceled or reduced. Such notification shall include the date of change and
the reasons therefor. BISYS shall notify the Company of any material claims
against it with respect to services performed under this Agreement, whether or
not they may be covered by insurance, and shall notify the Company from time to
time as may be appropriate of the total outstanding claims made by BISYS under
its insurance coverage.
15. Information Furnished by the Company.
The Company has furnished to BISYS the following:
(a) Copies of the Articles of Incorporation of the Company and of
any amendments thereto, certified by the proper official of
the state in which each such document has been filed.
7
<PAGE>
(b) Copies of the Company's Bylaws and any amendments thereto.
(c) A list of all the officers of the Company, together with
specimen signatures of those officers who are authorized to
instruct BISYS in all matters.
(d) Two copies of the Prospectuses and Statements of Additional
Information for each Fund.
16. Information Furnished by BISYS.
(a) BISYS has furnished to the Company the following:
(i) BISYS' Articles of Incorporation; and
(ii) BISYS' Bylaws and any amendments thereto.
(b) BISYS shall, upon request, furnish certified copies of
corporate actions covering the following matters:
(i) Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this
Agreement; and
(ii) Authorization of BISYS to act as BISYS and to provide
the accounting services hereunder.
17. Amendments to Documents.
The Company shall furnish BISYS written copies of any amendments to,
or changes in, any of the items referred to in Section 15 hereof forthwith upon
such amendments or changes becoming effective. In addition, the Company agrees
that no amendments will be made to the Prospectuses or Statements of Additional
Information of the Company which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Company
first obtains BISYS' approval of such amendments or changes.
18. Compliance with Law.
The Company represents and warrants that the Company has assumed
full responsibility for the preparation, contents and distribution of each
prospectus of the Company as to compliance with all applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the 1940 Act and
any other laws, rules and regulations of governmental authorities having
jurisdiction. BISYS shall have no obligation to take cognizance of any laws
relating to the sale of the Company's shares. The Company represents and
warrants that no shares of the Company
8
<PAGE>
will be offered to the public until the Company's registration statement under
the Securities Act and the 1940 Act has been declared or becomes effective.
19. Notices.
Any notice required or permitted to be given by either party to the
other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at the
following address: if to the Company, at 19 Old Kings Highway South, Darien,
Connecticut 06820, Attention: _______________; and if to BISYS, at 3435 Stelzer
Road, Columbus, Ohio 43219, Attention: George O. Martinez, Esq., or at such
other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
20. Headings.
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
21. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto except by the
specific written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
22. Governing Law.
This Agreement shall be construed and enforced in accordance with
the laws of the State of Ohio and the applicable provisions of the 1940 Act. To
the extent that the applicable laws of the State of Ohio, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
23. Proprietary and Confidential Information.
BISYS agrees on behalf of itself and its officers and employees to
treat confidentially and as proprietary information of the Company all records
and other information relative to the Company and prior, present, or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Company, which approval
shall not be unreasonably withheld and may not be withheld where BISYS may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Company.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE TREASURER'S FUND, INC.
By: /s/ Bruce Alpert
----------------------------------
Title: Vice President
-------------------------------
BISYS FUND SERVICES, INC.
By: /s/ George O. Martinez
----------------------------------
Title: Senior Vice President
-------------------------------
10
<PAGE>
Dated: May 1, 1997
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
THE TREASURER'S FUND, INC.
AND
BISYS FUND SERVICES, INC.
FUNDS
This Agreement shall apply to all Funds, either now or hereafter created, of the
Company as set forth below. The current Funds of the Company are also set forth
below.
U. S. Treasury Money Market Portfolio
Domestic Prime Money Market Portfolio
Global Money Market Portfolio
Tax Exempt Money Market Portfolio
Limited Term Portfolio
Tax Exempt Limited Term Portfolio
A-1
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Felix J. Christiana, whose
signature appears below, hereby constitutes and appoints Bruce N. Alpert, Ronald
S. Eaker and Henley L. Smith and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, in any and all capacities, the Registration Statement on Form N-1A, No.
33-17604, and any and all amendments thereto filed by The Treasurer's Fund, Inc.
(the "Fund"), with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorney and agent deems
necessary or advisable to enable the Fund to comply with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorney and agent shall do or cause to be done by virtue hereof.
/s/ Felix J. Christiana
------------------------------------
Felix J. Christiana
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Anthony J. Colavita, whose
signature appears below, hereby constitutes and appoints Bruce N. Alpert, Ronald
S. Eaker and Henley L. Smith and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, in any and all capacities, the Registration Statement on Form N-1A, No.
33-17604, and any and all amendments thereto filed by The Treasurer's Fund, Inc.
(the "Fund"), with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorney and agent deems
necessary or advisable to enable the Fund to comply with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorney and agent shall do or cause to be done by virtue hereof.
/s/ Anthony J. Colavita
------------------------------------
Anthony J. Colavita
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Richard N. Daniel, whose
signature appears below, hereby constitutes and appoints Bruce N. Alpert, Ronald
S. Eaker and Henley L. Smith and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, in any and all capacities, the Registration Statement on Form N-1A, No.
33-17604, and any and all amendments thereto filed by The Treasurer's Fund, Inc.
(the "Fund"), with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorney and agent deems
necessary or advisable to enable the Fund to comply with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorney and agent shall do or cause to be done by virtue hereof.
/s/ Richard N. Danial
------------------------------------
Richard N. Daniel
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Dr. Robert C. Kolodny, whose
signature appears below, hereby constitutes and appoints Bruce N. Alpert, Ronald
S. Eaker and Henley L. Smith and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, in any and all capacities, the Registration Statement on Form N-1A, No.
33-17604, and any and all amendments thereto filed by The Treasurer's Fund, Inc.
(the "Fund"), with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorney and agent deems
necessary or advisable to enable the Fund to comply with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorney and agent shall do or cause to be done by virtue hereof.
/s/ Robert C. Kolodny
------------------------------------
Dr. Robert C. Kolodny
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Thomas E. O'Connor, whose
signature appears below, hereby constitutes and appoints Bruce N. Alpert, Ronald
S. Eaker and Henley L. Smith and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, in any and all capacities, the Registration Statement on Form N-1A, No.
33-17604, and any and all amendments thereto filed by The Treasurer's Fund, Inc.
(the "Fund"), with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorney and agent deems
necessary or advisable to enable the Fund to comply with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorney and agent shall do or cause to be done by virtue hereof.
/s/ Thomas E. O'Connor
------------------------------------
Thomas E. O'Connor
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Karl Otto Pohl, whose signature
appears below, hereby constitutes and appoints Bruce N. Alpert, Ronald S. Eaker
and Henley L. Smith and each of them, with full power of substitution, as his
true and lawful attorney and agent to execute in his name and on his behalf, in
any and all capacities, the Registration Statement on Form N-1A, No. 33-17604,
and any and all amendments thereto filed by The Treasurer's Fund, Inc. (the
"Fund"), with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended, and
any and all other instruments which such attorney and agent deems necessary or
advisable to enable the Fund to comply with the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, the rules, regulations
and requirements of the Securities and Exchange Commission, and the securities
or Blue Sky laws of any state or other jurisdiction; and the undersigned hereby
ratifies and confirms as his own act and deed any and all that such attorney and
agent shall do or cause to be done by virtue hereof.
/s/ Karl Otto Pohl
------------------------------------
Karl Otto Pohl
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Anthony R. Pustorino, whose
signature appears below, hereby constitutes and appoints Bruce N. Alpert, Ronald
S. Eaker and Henley L. Smith and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, in any and all capacities, the Registration Statement on Form N-1A, No.
33-17604, and any and all amendments thereto filed by The Treasurer's Fund, Inc.
(the "Fund"), with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorney and agent deems
necessary or advisable to enable the Fund to comply with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorney and agent shall do or cause to be done by virtue hereof.
/s/ Anthony R. Pustorino
------------------------------------
Anthony R. Pustorino
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Dr. Werner J. Roeder, whose
signature appears below, hereby constitutes and appoints Bruce N. Alpert, Ronald
S. Eaker and Henley L. Smith and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, in any and all capacities, the Registration Statement on Form N-1A, No.
33-17604, and any and all amendments thereto filed by The Treasurer's Fund, Inc.
(the "Fund"), with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorney and agent deems
necessary or advisable to enable the Fund to comply with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorney and agent shall do or cause to be done by virtue hereof.
/s/ Werner J. Roeder
------------------------------------
Dr. Werner J. Roeder
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Anthonie C. van Ekris, whose
signature appears below, hereby constitutes and appoints Bruce N. Alpert, Ronald
S. Eaker and Henley L. Smith and each of them, with full power of substitution,
as his true and lawful attorney and agent to execute in his name and on his
behalf, in any and all capacities, the Registration Statement on Form N-1A, No.
33-17604, and any and all amendments thereto filed by The Treasurer's Fund, Inc.
(the "Fund"), with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorney and agent deems
necessary or advisable to enable the Fund to comply with the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, the rules,
regulations and requirements of the Securities and Exchange Commission, and the
securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorney and agent shall do or cause to be done by virtue hereof.
/s/ Anthonie C. van Ekris
------------------------------------
Anthonie C. van Ekris
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Mary E. Hauck, whose signature
appears below, hereby constitutes and appoints Bruce N. Alpert, Ronald S. Eaker
and Henley L. Smith and each of them, with full power of substitution, as her
true and lawful attorney and agent to execute in her name and on her behalf, in
any and all capacities, the Registration Statement on Form N-1A, No. 33-17604,
and any and all amendments thereto filed by The Treasurer's Fund, Inc. (the
"Fund"), with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended, and
any and all other instruments which such attorney and agent deems necessary or
advisable to enable the Fund to comply with the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, the rules, regulations
and requirements of the Securities and Exchange Commission, and the securities
or Blue Sky laws of any state or other jurisdiction; and the undersigned hereby
ratifies and confirms as her own act and deed any and all that such attorney and
agent shall do or cause to be done by virtue hereof.
/s/ Mary E. Hauck
------------------------------------
Mary E. Hauck
CONSENT OF BATTLE FOWLER LLP
We consent to the reference to our firm under the heading "Taxes" in the
Prospectus and Statement of Additional Information included in Amendment No. 18
to the Registration Statement on Form N-1A of The Treasurer's Fund as filed with
the Securities and Exchange Commission on February 27, 1998.
BATTLE FOWLER LLP
New York, New York
February 27, 1998
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Counsel and Independent Auditors" and to the use of our report
dated December 18, 1997 in this Registration Statement (Form N-1A No. 33-17604)
of The Treasurer's Fund, Inc.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
February 24, 1998
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