<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1999
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. 19 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 20 [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
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 877-3863
RONALD S. EAKER
GABELLI FIXED INCOME LLC
ONE CORPORATE CENTER
RYE, NEW YORK 10580-1434
(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)
[X] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (B)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (A) OF RULE 485
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A) (2)
[ ] ON (DATE) PURSUANT TO PARAGRAPH (A) (2) OF RULE 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
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THE TREASURER'S FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET --
PURSUANT TO RULE 404(C)
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PART A
ITEM NO. PROSPECTUS HEADING
- -------- ------------------
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1. Front and Back Cover Pages Front Cover; Back Cover
2. Risk/Return Summary: Investments, Risks, and Risk/Return Summary and Fund Expenses
Performance
3. Risk/Return Summary: Fee Table Risk/Return Summary and Fund Expenses
4. Investment Objectives, Principal Investment Investment Objectives, Policies and Risks
Strategies and Related Risks
5. Management's Discussion of Fund Performance Risk/Return Summary and Fund Expenses
6. Management, Organization, and Capital Structure Fund Management
7. Shareholder Information Shareholder Information
8. Distribution Arrangements Fund Management
9. Financial Highlights Information Financial Highlights
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 Advisory and Other Management of the Fund; Distribution Plan
Services
17. Brokerage Allocation and Other Brokerage and Portfolio Turnover
Practices
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2
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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 Not applicable
22. Calculations of Yield Quotations Computation of Yield
of Money Market Funds
23. Financial Statements
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3
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THE TREASURER'S FUND
PROSPECTUS
MARCH 1, 1999
U.S. TREASURY MONEY MARKET PORTFOLIO
DOMESTIC PRIME MONEY MARKET PORTFOLIO
TAX EXEMPT MONEY MARKET PORTFOLIO
GLOBAL MONEY MARKET PORTFOLIO
QUESTIONS?
CALL 1-800-TSR-FUND
OR YOUR INVESTMENT REPRESENTATIVE.
AS OF THE DATE OF THIS PROSPECTUS, THE GLOBAL MONEY MARKET
PORTFOLIO, DISCUSSED IN THIS PROSPECTUS, HAS NOT BEEN
ACTIVATED BY THE ADVISOR.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THE
SHARES DESCRIBED IN THIS PROSPECTUS OR DETERMINED WHETHER
THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
TABLE OF CONTENTS
THE TREASURER'S FUND, INC. IS A MUTUAL FUND DESIGNED TO MEET THE DISTINCTIVE
CASH MANAGEMENT OBJECTIVES OF TREASURERS AND FINANCIAL OFFICERS OF CORPORATIONS
AND OTHER INSTITUTIONS AND INDIVIDUALS.
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CAREFULLY REVIEW THIS RISK/RETURN SUMMARY AND FUND EXPENSES
IMPORTANT SECTION, WHICH
SUMMARIZES EACH 3-5
PORTFOLIO'S INVESTMENTS,
RISKS, PAST PERFORMANCE,
AND FEES.
REVIEW THIS SECTION FOR INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INFORMATION ON INVESTMENT
STRATEGIES AND THEIR RISKS. 6-12
REVIEW THIS SECTION FOR FUND MANAGEMENT
DETAILS ON THE PEOPLE AND
ORGANIZATIONS WHO OVERSEE 12 THE INVESTMENT ADVISOR
THE PORTFOLIOS. 12 THE DISTRIBUTOR
REVIEW THIS SECTION FOR SHAREHOLDER INFORMATION
DETAILS ON HOW SHARES ARE
VALUED, HOW TO PURCHASE, 13 PURCHASING SHARES
SELL AND EXCHANGE SHARES, 14 SELLING SHARES
RELATED CHARGES AND 14 GENERAL POLICIES ON SELLING SHARES
PAYMENTS OF DIVIDENDS AND 16 EXCHANGING SHARES
DISTRIBUTIONS. 16 PRICING OF FUND SHARES
16 DIVIDENDS, DISTRIBUTIONS AND TAXES
17 DISTRIBUTION ARRANGEMENTS
FINANCIAL HIGHLIGHTS
18
BACK COVER
20 WHERE TO LEARN MORE ABOUT THIS FUND
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2
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RISK/RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY OF THE MONEY MARKET PORTFOLIOS
INVESTMENT OBJECTIVES The Portfolios seek to maximize current
income, and to maintain liquidity and a
stable net asset value of $1.00 per share.
PRINCIPAL INVESTMENT STRATEGIES The Portfolios are "money market funds" that
invest primarily in short term investments.
[ ] THE U.S. TREASURY MONEY MARKET
PORTFOLIO will invest primarily in
short term U.S. Treasury
obligations.
[ ] THE DOMESTIC PRIME MONEY MARKET
PORTFOLIO will invest primarily in
short term, prime quality, domestic
debt obligations.
[ ] THE TAX EXEMPT MONEY MARKET
PORTFOLIO will invest primarily in
short term municipal debt
obligations which are exempt from
federal income tax.
[ ] THE GLOBAL MONEY MARKET PORTFOLIO
will invest primarily in short term
foreign and domestic corporate and
government debt obligations.
PRINCIPAL INVESTMENT RISKS An investment in the Portfolios is not
insured or guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Portfolios
seek to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in the
Portfolios.
[ ] THE U.S. TREASURY MONEY MARKET
PORTFOLIO
- Loss of state tax exemption if
minimum levels of U.S. Treasury
obligations are not maintained.
[ ] THE DOMESTIC PRIME MONEY MARKET
PORTFOLIO
- The value of any fixed rate
investments will generally
decline when interest rates
increase.
[ ] THE TAX EXEMPT MONEY MARKET
PORTFOLIO will not be exempt from
federal income tax with respect to:
- taxable obligations
- municipal obligations that the
IRS has successfully asserted
are not tax exempt obligations
[ ] THE GLOBAL MONEY MARKET PORTFOLIO
- The value of any fixed rate
investments will generally
decline when interest rates
increase.
- Foreign securities involve
additional risks, such as
political, economic or
regulatory factors in foreign
countries that affect the
securities or their issuers.
WHO MAY WANT TO INVEST? Consider investing in the Portfolios if you:
[ ] ARE SEEKING PRESERVATION OF CAPITAL
[ ] HAVE A LOW RISK TOLERANCE
[ ] ARE WILLING TO ACCEPT LOWER
POTENTIAL RETURNS IN EXCHANGE FOR A
HIGHER DEGREE OF SAFETY
[ ] ARE INVESTING SHORT-TERM RESERVES
These Portfolios will not be appropriate for
anyone seeking high total returns.
3
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RISK/RETURN SUMMARY OF THE MONEY MARKET PORTFOLIOS
The charts and table below show how the Money Market Portfolios have performed
and provide some indication of the risks of investing in the Portfolios by
showing how their performance has varied from year to year. The bar charts show
changes in the Portfolios' yearly performance since inception to demonstrate how
the Portfolios have performed at differing times. For current yield information
on the Portfolios, call 1-800-TSR-FUND (1-800-877-3863). The Money Market
Portfolios' yields appear in the Wall Street Journal each Thursday. Of course,
past performance does not indicate how the Portfolios will perform in the
future.
U.S. TREASURY MONEY MARKET PORTFOLIO YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
1991 1992 1993 1994 1995 1996 1997 1998
Percentage 5.64% 3.31% 2.60% 3.66% 5.35% 4.78% 4.96% 4.93%
Best quarter: 1st Qtr 1991 1.57%
Worst quarter: 2nd Qtr 1993 0.62%
DOMESTIC PRIME MONEY MARKET PORTFOLIO
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Percentage 9.28% 8.16% 5.90% 3.50% 2.89% 3.88% 5.59% 5.00% 5.17% 5.07%
Best quarter: 2nd Qtr 1989 2.37%
Worst quarter: 2nd Qtr 1993 0.70%
TAX EXEMPT MONEY MARKET PORTFOLIO
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Percentage 6.32% 5.94% 4.53% 2.89% 2.09% 2.41% 3.44% 2.98% 3.18% 3.00%
Best quarter: 2nd Qtr 1989 1.62%
Worst quarter: 1st Qtr 1994 0.46%
GLOBAL MONEY MARKET PORTFOLIO
This Portfolio has not been activated by the Advisor, therefore performance
information in unavailable at this time.
4
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RISK/RETURN SUMMARY OF THE MONEY MARKET PORTFOLIOS
FEES AND EXPENSES
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As an investor in the Money U.S. DOMESTIC TAX
Market Portfolios, you will pay TREASURY PRIME EXEMPT GLOBAL
the following fees and expenses
when you buy and hold shares. Shareholder fees None None None None
Annual Fund operating expenses (fees paid directly from your
are paid out of Portfolio investment)
assets, and are reflected in
the Portfolios' yields. --------------------------------------------------------------------------------
Annual Portfolio operating expenses
(expenses that are deducted from
Portfolio assets)
--------------------------------------------------------------------------------
Management fees .30% .30% .30% .30%
--------------------------------------------------------------------------------
Distribution and service (12b-1) None None None None
fees
--------------------------------------------------------------------------------
Other expenses .27% .23% .22% .27%(a)
--------------------------------------------------------------------------------
Total annual Portfolio operating .57% .53% .52% .57%
expenses
--------------------------------------------------------------------------------
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EXPENSE EXAMPLE
Use the example shown here to 1 Year 3 Years 5 Years 10 Years
compare fees and expenses with
those of other Funds. It U.S. TREASURY MONEY MARKET $58 $183 $318 $714
illustrates the amount of fees --------------------------
and expenses you would pay, PORTFOLIO
assuming the following: ---------
- - $10,000 investment --------------------------------------------------------------------------------
- - 5% annual return
- - redemption at the end of each DOMESTIC PRIME MONEY MARKET $54 $170 $296 $665
period ---------------------------
- - no changes in the Portfolios' PORTFOLIO
operating expenses ---------
--------------------------------------------------------------------------------
Because this example is hypothetical
and for comparison only, your actual TAX EXEMPT MONEY MARKET $53 $167 $291 $653
costs may be higher or lower. ------------------------
PORTFOLIO
---------
--------------------------------------------------------------------------------
GLOBAL MONEY MARKET PORTFOLIO (b) $58 $183 $318 $714
-----------------------------
--------------------------------------------------------------------------------
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(a) There are no sales charges for purchasing or redeeming fund shares nor fees
to exchange to another fund.
(b) Estimated. The Global Money Market Portfolio
has not commenced operations operations.
5
<PAGE> 9
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
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. There can be no assurance that the Portfolio can achieve these objectives
or that it will be able to maintain 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.
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.
PRINCIPAL INVESTMENT STRATEGIES
At least 65% of the Portfolio's total assets will consist of:
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UNITED STATES TREASURY OBLIGATIONS United States Treasury obligations are issued by the United
States Treasury and 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.
REPURCHASE AGREEMENTS -- which are The Portfolio may also invest in repurchase agreements which are
collateralized by U.S. Treasury collateralized by U.S. Treasury obligations. Interest income derived
obligations. 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. The Portfolio may also engage in reverse repurchase
agreements.
</TABLE>
6
<PAGE> 10
RISK FACTORS
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
shareholders, the Portfolio must maintain specified minimum levels of U.S.
Treasury obligation investments. If a state's requirement is not met, then none
of the Portfolio's interest income would be tax exempt 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. These
state requirements may change and investors should consult their own tax
advisors regarding these state tax issues.
Interest income on U.S. Treasury obligations is not 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.
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. There can be no assurance that the Portfolio can achieve these
objectives or that it will be able to maintain 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.
PRINCIPAL INVESTMENT STRATEGIES
The Domestic Prime Money Market Portfolio will invest primarily in the following
obligations:
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.
7
<PAGE> 11
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.
COMMERCIAL PAPER AND Commercial paper and other short term
OTHER SHORT TERM domestic corporate obligations, including
CORPORATE OBLIGATIONS 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 "Investments and Investment Techniques
Common to Two or More Portfolios" in the Statement of Additional Information.
RISK FACTORS
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. Because interest rates on fixed rate investments fluctuate in
response to economic factors, rates on the Portfolio's investment may vary,
rising or falling with interest rates generally. The value of the Portfolio's
securities varies inversely with short-term interest rates, the amount of
outstanding debt and other factors. This means that the value of the Portfolio's
investments generally increase as short-term interest rates fall and decreases
as short-term interest rates rise. For a 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.
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. 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.
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.
8
<PAGE> 12
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.
PRINCIPAL INVESTMENT STRATEGIES
The Tax Exempt Money Market 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). Such tax exempt
obligations consist of the following:
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. 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.
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. Municipal
leases frequently have special risks not
normally associated with general
obligation or revenue bonds. 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" in the Statement of
Additional Information.
For further description of these obligations, see "Investment Techniques Common
to Two or More Portfolios" in the Statement of Additional Information.
RISK FACTORS
The Portfolio will only purchase high quality tax exempt money market
instruments that have been determined by the Fund's Board of Directors to
present minimal credit risks and that are "Eligible
9
<PAGE> 13
Securities" at the time of acquisition so that the Portfolio is able to employ
the amortized cost method of valuation. Interest income of the Portfolio will
not be exempt from Federal income tax with respect to the following:
- taxable obligations
- municipal obligations that the IRS has successfully asserted are not
tax exempt obligations
Payment of interest and preservation of capital are dependent upon the
continuing ability of issuers and/or obligors of municipal and public authority
debt obligations to meet their payment obligations. Special factors may
negatively affect the value of municipal securities, and, as a result, the
Portfolio's share price. These factors include political or legislative changes,
uncertainties relating to the tax status of the securities or the rights of
investors in the securities. For a detailed discussion of the quality
requirements applicable to municipal bonds, municipal notes, municipal leases
and other municipal obligations, see "Investments and Investment Techniques
Common to Two or More Portfolios" in the Statement of Additional Information.
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. There can be no assurance that the Portfolio can achieve these objectives
or that it will be able to maintain a stable net asset value of $1 per share.
The Portfolio seeks to produce a higher yield than the Domestic Prime Money
Market Portfolio by investing in the securities of issuers located in at least
three countries (including the United States). The securities invested in by the
Global Money Market Portfolio, described below, have effective maturities of
397 days or less.
The investment objectives stated above are fundamental and may be changed only
with the approval of a majority of the outstanding shares of the Portfolio.
PRINCIPAL INVESTMENT STRATEGIES
The Global Money Market Portfolio will invest primarily in the following
obligations:
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.
10
<PAGE> 14
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;
(iii) United States branches of foreign
banks of equivalent size; 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.
COMMERCIAL PAPER AND Commercial paper and other short term
OTHER SHORT TERM domestic corporate obligations,
CORPORATE OBLIGATIONS including corporate bonds, variable
amount master demand notes and
participation 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, and
commercial paper and other short term
obligations issued by foreign
governments.
RISK FACTORS
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. Because
interest rates on fixed rate investments fluctuate in response to economic
factors, rates on the Portfolio's investments may vary, rising or falling with
interest rates generally. The value of the Portfolio's securities varies
inversely with short-term interest rates, the amount of outstanding debt and
other factors. This means that the value of the Portfolio's investments
generally increase as short-term interest rates fall and decreases as short-term
interest rates rise. To the extent that the Portfolio is invested in foreign
securities, such as Eurodollar certificates, it may be subject to some foreign
investment risk. Eurodollar certificates of deposit may not be subject to some
foreign investment risk. Eurodollar certificates of deposit may not be subject
to the same regulatory requirements as certificates issues by U.S. banks and
associated income may be subject to the imposition of foreign taxes. 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.
11
<PAGE> 15
RISK FACTORS (ALL PORTFOLIOS)
YEAR 2000 Like other funds and business organizations around the world, the Fund
could be adversely affected if the computer systems used by the Advisor, the
Fund's other service providers and companies in which the Fund invests do not
properly process and calculate date-related information for the year 2000 and
beyond. The Fund has been informed that the Advisor and the Fund's other service
providers are taking steps to minimize the risk associated with the Year 2000
problem, including inventorying of software systems, determining inventory items
that may not function properly after December 31, 1999, reprogramming or
replacing such systems and retesting for Year 2000 readiness and obtaining
assurances from their vendors and suppliers in the same manner. Non-compliant
Year 2000 systems upon which the Fund is dependent may result in errors and
account maintenance failures. The Fund has no reason to believe that (1) the
Year 2000 plans of the Fund's key service providers for services critical to the
Fund's operations will not be completed by December 31, 1999, and (2) the costs
currently associated with the implementation of their plans will have material
adverse impact on the business, operations or financial condition of the Fund or
its service providers.
Since the ultimate costs or consequences of incomplete or untimely resolution of
the Year 2000 problem are unknown to the Fund at this time, there may be costs
or consequences having a material adverse impact on the Fund's key service
providers, your account records and/or the operations or investments of the
Fund. The Fund and the Advisor will continue to monitor developments relating to
this issue, including the development of contingency plans for providing back-up
computer services in the event of a systems failure.
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISOR
Gabelli Fixed Income LLC, (the "Advisor"), One Corporate Center, Rye, NY 10580
is a Delaware limited liability company organized in 1997 and is the successor
company to Gabelli-O'Connor Fixed Income Mutual Funds Management Co. formed in
1987. As of December 31, 1998, Gabelli Fixed Income LLC manages more than $1.4
billion in assets. Through its portfolio management team, Gabelli Fixed Income
LLC makes the day-to-day investment decisions and continuously reviews,
supervises and administers the Portfolios' investment programs.
For these advisory services, the Advisor was paid a fee of .30% of average net
assets during the fiscal year ended October 31, 1998. 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 Portfolio shares.
THE DISTRIBUTOR
Gabelli Fixed Income Distributors, Inc. is the Fund's distributor. Its address
is One Corporate Center, Rye, NY 10580.
The Statement of Additional Information has more detailed information about the
Advisor and other service providers.
12
<PAGE> 16
PURCHASING SHARES
All investments made by regular mail or personal delivery, whether initial or
subsequent, should be sent to:
BY REGULAR MAIL BY OVERNIGHT DELIVERY
------------------------- -----------------------------
The Treasurer's Fund, Inc. The Treasurer's Fund, Inc.
PO Box 3808 c/o BFDS
Boston, MA 02266-3808 66 Brooks Drive
Braintree, MA 02184
For Initial Investment:
1. Carefully read and complete the application.
2. Make check, bank draft or money order payable to "The Treasurer's Fund,
Inc."
3. Mail or deliver application and payment to the address above.
For Subsequent Investments:
1. Use the investment slip attached to your account statement. Or, if
unavailable, provide the following information:
- Portfolio
- Amount invested
- Account name and number
2. Make check, bank draft or money order payable to "The Treasurer's Fund,
Inc."
3. Mail or deliver investment slip and payment to the address above.
By Wire Transfer
For Initial Investment:
Call 1-800-TSR-FUND (1-800-877-3863) to obtain a new account number. Promptly
mail the completed application to the address shown above for mail purchases;
and
For All Investments:
Instruct your bank to wire transfer your investment to:
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
Routing Number: ABA #011-0000-28
Re: The Treasurer's Fund, Inc.
REF DDA# 99046187
A/C#___________________
Your name
Note: Your bank may charge a wire transfer fee.
<PAGE> 17
MINIMUM INVESTMENTS
You may purchase Funds through the Distributor or participating organizations,
which may charge additional fees and may require higher or lower minimum
investments or impose other limitations on buying and selling shares.
MINIMUM MINIMUM
INITIAL INVESTMENT SUBSEQUENT INVESTMENT
$ 100,000 $ 0
----------------------------------------------------
All purchases must be in U.S. dollars. A fee will be charged for any
checks that do not clear. Third-party checks are not accepted. Your
purchase of shares will be effective on the same business day if the
Portfolio's transfer agent receives your order by 12 noon, eastern
time, and receives your form of payment by 4:00 p.m., eastern time.
Otherwise, your purchase will be effective on the next business day.
A Fund may waive its minimum purchase requirement and the Distributor
may reject a purchase order if it considers it in the best interest of
the Fund and its shareholders.
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise.
SELLING SHARES
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares or a
redemption of shares.
- -------------------------------------------------------------------------------
Withdrawing Money from Your Investment
You may sell your shares at any time. Your sales price will be the next
NAV after your sell order is received by the Fund, its transfer agent,
or your investment representative. See section on "General Policies on
Selling Shares" below.
- -------------------------------------------------------------------------------
GENERAL POLICIES ON SELLING SHARES
BY BANK WIRE VIA TELEPHONE
1. Call 1-800-TSR-FUND (1-800-877-3863) with your account number and the
amount of the redemption.
2. If you are unable to reach the Fund by telephone, you may telecopy your
redemption request to the Fund at 914-921-2416.
NOTE: If you call by 12 noon, eastern time, your payment will normally be wired
to your bank on the same business day. If you call after that time, your payment
will be wired to your bank on the next business day.
<PAGE> 18
BY BANK WIRE VIA MAIL
Submit a redemption request to the Fund. To obtain a redemption request form,
call 1-800-TSR-FUND.
BY CHECK WRITING
You may write checks to make payments to any person or business on your account.
To obtain checks, complete the check writing section of the Account Application
or contact the Fund to obtain a signature card. Dividends and distributions will
continue to be paid up to the day the check is presented for payment. You must
maintain the minimum required account balance of $50,000 per Portfolio and you
may not close your account by writing a check.
SIGNATURE GUARANTEES
Signature guarantees are required on redemption requests for the following:
* The check is not being mailed to the address on your account
* The check is not being made payable to the owner of the account
* The redemption proceeds are being transferred to another person's
Portfolio account.
A signature guarantee can be obtained from most banks and securities dealers.
Notarized signatures are not considered a signature guarantee.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to ensure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. If appropriate
precautions have not been taken, the Fund may be liable for losses due to
unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INVESTMENT
When you have made an investment by check, your redemption proceeds will not be
mailed until the Transfer Agent is satisfied that the check has cleared (which
may require up to 15 business days). You can avoid this delay by purchasing
shares with a certified check or federal funds wire.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the SEC in order to protect remaining shareholders.
CLOSING OF SMALL ACCOUNTS
If your account falls below $50,000, the Fund may ask you to increase your
balance. If it is still below $50,000 after 60 days, the Fund may close your
account and send you the proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are
15
<PAGE> 19
reinvested in your account. Checks that remain uncashed for six months will be
canceled and the money reinvested in the Portfolio.
EXCHANGING SHARES
You can exchange your shares in one Portfolio for shares of another Portfolio of
the Fund or other mutual funds managed by Gabelli Funds or its affiliates.
You must meet the minimum investment requirements for the Portfolio into which
you are exchanging. Exchanges from one Fund to another are taxable.
INSTRUCTIONS FOR EXCHANGING SHARES
- ----------------------------------------------------------------------
Exchanges may be made by sending a written request to The Treasurer's
Fund, Inc., PO Box 3808, Boston, MA 02266-3808 or by calling
1-800-TSR-FUND (1-800-877-3863).
Please provide the following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security number)
- Dollar value or number of shares to be exchanged
- The name of the Portfolios from/into which the exchange is to be made
See "Selling Shares" for important information about telephone
transactions.
PRICING OF FUND SHARES
- ----------------------
HOW NAV IS CALCULATED
The NAV is calculated each business day by adding the total value of the
Portfolio's investments and other assets, subtracting its liabilities and then
dividing that figure by the number of outstanding shares of the Portfolio:
NAV =
Total Assets - Liabilities
--------------------------
Number of Shares
Outstanding
The Portfolios' net asset value, or NAV, is expected to be constant at
$1.00 per share, although this value is not guaranteed. The NAV is
determined at 12 noon, eastern time, on days the New York Stock
Exchange is open. The Portfolios value their securities at their
amortized cost. This method involves valuing an instrument at its cost
and thereafter applying a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income a Portfolio receives in the form of interest is paid out, less
expenses, to its shareholders. Each Portfolio declares dividends from net
investment income on every business day. Dividends on the Portfolios are paid
monthly. Capital gains for the Portfolios are distributed at least annually.
16
<PAGE> 20
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
The Portfolios expect that their dividends will primarily consist of net
investment income or, if any, short-term capital gains as opposed to long-term
capital gains.
With respect to the U.S. Treasury, Domestic Prime and Global Money Market
Portfolios, dividends (including distributions from net investment income and
short-term capital gains) are taxable as ordinary income. With respect to the
Tax Exempt Money Market Portfolio, distributions of tax exempt income are not
subject to regular federal income tax, but may be subject to the alternative
minimum tax, and distributions of interest on taxable obligations, as well as
any net short-term capital gains, are taxable as ordinary income. Depending on
your residence for tax purposes, distributions also may be subject to state and
local taxes, including withholding taxes. Dividends are taken into account for
tax purposes in the year in which they are declared, even if they appear on your
account statement the following year. You will be notified in January each year
about the federal tax status of distributions made by the Portfolios. With
respect to the U.S. Treasury Money Market Portfolio, distributions of interest
on U.S. government obligations may be exempt from state and local taxes.
- -------------------------------------------------------------------------------
TAX IDENTIFICATION NUMBER
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions proceeds paid to shareholders who have not
provided the Fund with their Taxpayer Identification Number in compliance with
IRS rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
- -------------------------------------------------------------------------------
Foreign shareholders may be subject to special withholding requirements. Consult
your tax advisor about the federal, state and local tax consequences in your
particular circumstances.
DISTRIBUTION ARRANGEMENTS
The Fund has adopted a distribution and service plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act 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
Rule 12b-1. 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
17
<PAGE> 21
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.
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand the Funds'
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the tables
represent the rate that you would have earned on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by Ernst & Young LLP, independent auditors, whose unqualified
report, along with the Fund's financial statements, are included in the
Statement of Additional Information, which is available upon request.
U.S. Treasury Money Market Portfolio
Selected data for a share outstanding throughout each year:
<TABLE>
<CAPTION>
Year Ended October 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income 0.048 0.047 0.047 0.051 0.033
Net realized and unrealized gain on 0.001 0.001 ---- ---- ----
investments
Total from investment operations 0.049 0.048 0.047 0.051 0.033
Distributions to shareholders from:
Net investment income (0.048) (0.047) (0.047) (0.051) (0.033)
Net realized gain on investments (0.001) (0.001) ---- ---- ----
Total distributions (0.049) (0.048) (0.047) (0.051) (0.033)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total return + 5.03% 4.91% 4.83% 5.27% 3.31%
===== ===== ===== ===== =====
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) $110,879 $85,204 $90,761 $94,834 $138,205
Ratio of net investment income to average 4.83% 4.74% 4.70% 5.10% 3.07%
net assets
Ratio of operating expenses to average 0.51% 0.61% (a) 0.63% (a) 0.56% (a) 0.49%
net assets
</TABLE>
+ Total return represents aggregate total return of hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends.
(a) Operating expense ratios after custodian fee credits on securities lending
income for the years ended October 31, 1997, 1996 and 1995 were 0.60%,
0.60% and 0.54%, respectively.
18
<PAGE> 22
<TABLE>
<CAPTION>
TAX EXEMPT MONEY MARKET PORTFOLIO
Selected data for a share outstanding throughout each year:
Year Ended October 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Operating Performance:
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income 0.030 0.031 0.030 0.034 (a) 0.022 (a)
Distribution to shareholders from:
Net investment income (0.030) (0.031) (0.030) (0.034) (0.022)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total return + 3.08% 3.12% 3.04% 3.42% 2.21%
===== ===== ===== ===== =====
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) $213,590 $192,834 $158,507 $140,826 $133,951
Ratio of net investment income to average net 3.04% 3.07% 3.00% 3.35% 2.18%
assets
Ratio of operating expenses to average net assets 0.50% 0.53% 0.54% 0.53% 0.54%
(b)
</TABLE>
+ Total return represents aggregate total return of hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends.
(a) 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.
(b) Operating expense ratios after custodian fee credits on cash balances
maintained with the custodian for the years ended October 31, 1998, 1997
and 1996 were 0.48%, 0.52% and 0.52%, respectively. The operating expense
ratio after custodian fee credits on cash balances maintained with the
custodian and fees waived by the administrator for the year ended October
31, 1994 was 0.53%.
DOMESTIC PRIME MONEY MARKET PORTFOLIO
Selected data for a share outstanding throughout each year:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income 0.050 0.050 0.049(a) 0.054(a) 0.035(a)
Net realized and unrealized gain (loss) on --- --- --- (0.002) ---
investments
Total from investment operations 0.050 0.050 0.049 0.052 0.035
----- ----- --- --- ---
Distributions to shareholders from:
Net investment income (0.050) (0.049) (0.049) (0.054) (0.035)
Net realized gain on investments -- (0.001) (b) -- -- --
-----------
Total distributions (0.050) (0.050) (0.049) (0.054) (0.035)
Contributions from affiliate ---- ---- ---- 0.002(c) ----
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total return + 5.15% 5.19% 5.12% 5.50% 3.56%
===== ===== ===== ===== =====
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) $357,850 $280,339 $236,812 $169,297 $143,744
Ratio of net investment income to average net assets 5.03% 4.99% 4.93% 5.33% 3.49%
Ratio of operating expenses to average net assets 0.54% 0.52% 0.54%(d) 0.53%(d) 0.53%(d)
Ratio of interest expense to average net asset ---- ---- 0.01% 0.02% 0.13%
</TABLE>
+ Total return represents aggregate total return of hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends.
(a) 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.
(b) $0.001 of the capital gain distributed in the fiscal year 1997 pertain to
fiscal year 1996 realized capital gains as dictated by IRS code
section 855.
(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 Advisor.
(d) Operating expense ratios after custodian fee credits on cash balances
maintained with the custodian and fees waived by the administrator for the
year end October 31, 1996 and 1995 were 0.52% and 0.50%, respectively. The
operating expense ratio after fees waived by the administrator for the year
ended October 31, 1994 was 0.53%.
19
<PAGE> 23
FOR MORE INFORMATION:
For more information about the Fund, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS:
The Fund's semi-annual and audited annual reports to shareholders contain
detailed information on the Fund's investments. In the annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Fund, including their
operations and investment policies. It is incorporated by reference, and is
legally considered a part of this prospectus.
- ------------------------------------------------------------------------------
You can get free copies of Reports and SAI, prospectuses of other Funds in the
Gabelli family, or request other information and discuss your questions about
the Fund by contacting:
The Treasurer's Fund, Inc.
One Corporate Center
Rye, NY 10580
Telephone: 1-800-TSR-FUND
www.gabelli.com
- ------------------------------------------------------------------------------
You can review the Fund's reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
- For a fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009 or calling
1-800-SEC-0330.
- Free from the Commission's Website at http://www.sec.gov.
(Investment Company Act file no. 811-5347)
===============================================================================
20
<PAGE> 24
THE TREASURER'S FUND
================================================================================
-----------
PROSPECTUS
-----------
MARCH 1, 1999
LIMITED TERM PORTFOLIO
TAX EXEMPT LIMITED TERM PORTFOLIO
QUESTIONS?
CALL 1-800-TSR-FUND
OR YOUR INVESTMENT REPRESENTATIVE.
AS OF THE DATE OF THIS PROSPECTUS, THE
LIMITED TERM PORTFOLIO AND THE TAX
EXEMPT LIMITED TERM PORTFOLIO HAVE NOT
BEEN ACTIVATED BY THE ADVISOR.
THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED THE SHARES DESCRIBED IN
THIS PROSPECTUS OR DETERMINED WHETHER
THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
<PAGE> 25
TABLE OF CONTENTS
================================================================================
THE TREASURER'S FUND, INC. IS A MUTUAL FUND DESIGNED TO MEET THE DISTINCTIVE
CASH MANAGEMENT OBJECTIVES OF TREASURERS AND FINANCIAL OFFICERS OF CORPORATIONS
AND OTHER INSTITUTIONS AND INDIVIDUALS.
================================================================================
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH SUMMARIZES EACH PORTFOLIO'S
INVESTMENTS, RISKS, PAST PERFORMANCE, AND FEES.
RISK/RETURN SUMMARY AND FUND EXPENSES
3-5
================================================================================
REVIEW THIS SECTION FOR INFORMATION ON INVESTMENT STRATEGIES AND THEIR RISKS.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
6-11
================================================================================
REVIEW THIS SECTION FOR DETAILS ON THE PEOPLE AND ORGANIZATIONS WHO OVERSEE THE
PORTFOLIOS.
FUND MANAGEMENT
11 THE INVESTMENT ADVISOR
11 PORTFOLIO MANAGERS
11 THE DISTRIBUTOR
================================================================================
REVIEW THIS SECTION FOR DETAILS ON HOW SHARES ARE VALUED, HOW TO PURCHASE, SELL
AND EXCHANGE SHARES, RELATED CHARGES AND PAYMENTS OF DIVIDENDS AND
DISTRIBUTIONS.
SHAREHOLDER INFORMATION
12 PURCHASING SHARES
13 SELLING SHARES
14 GENERAL POLICIES ON SELLING SHARES
15 EXCHANGING SHARES
15 PRICING OF FUND SHARES
15 DIVIDENDS, DISTRIBUTIONS AND TAXES
16 DISTRIBUTION ARRANGEMENTS
================================================================================
FINANCIAL HIGHLIGHTS
17
================================================================================
BACK COVER
18 WHERE TO LEARN MORE ABOUT THIS FUND
<PAGE> 26
RISK/RETURN SUMMARY AND FUND EXPENSES
================================================================================
RISK/RETURN SUMMARY OF THE LIMITED TERM PORTFOLIO
INVESTMENT OBJECTIVES The Portfolio seeks to maximize current
income consistent with moderate risk of
capital.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio invests primarily in a
laddered portfolio with a maximum weighted
average maturity of two years. The Portfolio
invests primarily in domestic and foreign
corporate and government debt obligations
that are rated no less than Aa by Moody's or
AA by S&P, or the equivalent.
PRINCIPAL INVESTMENT RISKS Because the value of the Portfolio's
investments will fluctuate with market
conditions, so will the value of your
investment in the Portfolio. The value of
the Portfolio's fixed rate securities varies
inversely with interest rates, the amount of
outstanding debt and other factors. You
could lose money on your investment in the
Portfolio, or the Portfolio could
underperform other investments. Some of the
Portfolio's holdings may underperform its
other holdings.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you
are:
[_] LOOKING TO ADD A MONTHLY INCOME
COMPONENT TO YOUR PORTFOLIO
[_] WILLING TO ACCEPT THE RISKS OF PRICE
AND DIVIDEND FLUCTUATIONS
This Portfolio will not be appropriate for
anyone:
[_] INVESTING EMERGENCY RESERVES
[_] SEEKING SAFETY OF PRINCIPAL
<PAGE> 27
RISK/RETURN SUMMARY OF THE TAX EXEMPT LIMITED TERM PORTFOLIO
INVESTMENT OBJECTIVES The Portfolio seeks to maximize current
income exempt from federal income tax
consistent with moderate risk of capital.
PRINCIPAL INVESTMENT STRATEGIES The Portfolio invests primarily in a
laddered portfolio of undervalued municipal
debt obligations which are exempt from
federal income tax with a maximum weighted
average maturity of three years. The
Portfolio invests in debt securities rated
no less than A by Moody's or S&P, or the
equivalent, and in short term municipal
obligations rated no less than VMIG-2 by
Moody's, SP-2 by S&P or the equivalent.
PRINCIPAL INVESTMENT RISKS Because the value of the Portfolio's
investments will fluctuate with market
conditions, so will the value of your
investment in the Portfolio. Interest income
of the Portfolio will not be exempt from
federal income tax with respect to the
following:
* taxable obligations
* municipal obligations that the IRS has
successfully asserted are not tax
exempt obligations
You could lose money on your investment in
the Portfolio, or the Portfolio could
underperform other investments. Some of the
Portfolio's holdings may underperform its
other holdings.
WHO MAY WANT TO INVEST? Consider investing in the Portfolio if you
are:
[_] LOOKING TO ADD A MONTHLY INCOME
COMPONENT TO YOUR PORTFOLIO
[_] WILLING TO ACCEPT THE RISKS OF PRICE AND
DIVIDEND FLUCTUATIONS
[_] WILLING TO ACCEPT LOWER POTENTIAL
RETURNS IN EXCHANGE FOR INCOME THAT IS
EXEMPT FROM FEDERAL INCOME TAX
This Portfolio will not be appropriate for
anyone:
[_] INVESTING EMERGENCY RESERVES
[_] SEEKING SAFETY OF PRINCIPAL
[_] WHO DOES NOT BENEFIT FROM INCOME THAT IS
EXEMPT FROM FEDERAL INCOME TAX
4
<PAGE> 28
RISK/RETURN SUMMARY OF THE LIMITED TERM PORTFOLIOS
FEES AND EXPENSES
As an investor in the Limited Term Portfolios, you will pay the following fees
and expenses when you buy and hold shares. Annual Portfolio operating expenses
are paid out of Portfolio assets, and are reflected in the share price.
<TABLE>
<CAPTION>
LIMITED TAX EXEMPT
TERM LIMITED TERM
PORTFOLIO PORTFOLIO
<S> <C> <C>
Shareholder fees None None
(fees paid directly from your
investment)
- --------------------------------------------------------------------------------
Annual Portfolio operating expenses
(expenses that are deducted from
Portfolio assets)
- --------------------------------------------------------------------------------
Management fees .45% .45%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees .25% .25%
- --------------------------------------------------------------------------------
Other expenses .30% .30%
- --------------------------------------------------------------------------------
Total annual Portfolio operating 1.00% 1.00%
expenses
- --------------------------------------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
Use the example shown here to compare fees and expenses with those of other
Funds. It illustrates the amount of fees and expenses you would pay, assuming
the following:
* $10,000 investment
* 5% annual return
* redemption at the end of each period
* no changes in the Portfolios' operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
LIMITED TERM PORTFOLIO $102 $318
- ----------------------
- ------------------------------------------------------------------------------------------------------
TAX EXEMPT LIMITED TERM PORTFOLIO $102 $318
- -----------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 29
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
================================================================================
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. There can be no assurance that
the Limited Term Portfolio will be able to achieve this objective.
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.
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%. A
higher portfolio turnover rate involves greater transaction expenses which must
be borne directly by the Portfolio (and thus, indirectly by its shareholders),
and affect Portfolio performance. In addition, a high rate of portfolio turnover
may result in the realization of larger amounts of capital gains which, when
distributed to the Portfolio's shareholders, are taxable to them.
PRINCIPAL INVESTMENT STRATEGIES
- -------------------------------
The Portfolio will invest primarily in the following investments, with varying
and longer maturities:
UNITED STATES GOVERNMENT Obligations issued or guaranteed by the
OBLIGATIONS 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.
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.
COMMERCIAL PAPER AND OTHER SHORT Commercial paper and other short term
TERM CORPORATE OBLIGATIONS domestic corporate obligations, including
corporate bonds, variable amount master
demand notes and participations in corporate
loans.
6
<PAGE> 30
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, when
purchasing securities with effective maturities in excess of one year the
Portfolio will purchase only domestic issues.
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.
However, the Portfolio also has a greater level of risk than a money market fund
because it is more volatile. The Portfolio seeks to increase returns by actively
managing securities in the short term and intermediate term ranges. 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 (i.e., higher interest rates for long maturities), 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.
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.
The Limited Term Portfolio's rated debt securities must be rated Aa or higher by
Moody's or AA or higher by S&P, or the equivalent. Rated domestic and foreign
commercial paper must be rated Prime-1 by Moody's or A-1 by S&P, or the
equivalent. The Portfolio may also invest in unrated securities if, in the
opinion of the Fund's Board of Directors, such securities are of comparable
quality to the rated securities in which the Portfolio may invest. These
standards must be satisfied at the time an investment is made. If the quality of
the investment later declines, the Portfolio may continue to hold the
investment. However, if the Portfolio holds any variable rate demand instruments
with stated maturities in excess of one year, such instruments must maintain
their high quality rating or must be sold from the Portfolio.
RISK FACTORS
The Portfolio will only purchase high quality debt instruments, with varying and
longer maturities than a money market portfolio. Because interest rates on fixed
rate investments fluctuate in response to economic factors, rates on the
Portfolio's investments may vary, rising or falling with interest rates
generally. The value of the Portfolio's securities varies inversely with
interest rates, the amount of outstanding debt and other factors. This means
that the value of the Portfolio's investments generally increase as interest
rates fall and decreases as interest rates rise.
7
<PAGE> 31
To the extent that the Portfolio is invested in foreign securities, such as
Eurodollar certificates, it may be subject to some foreign investment risk.
Eurodollar certificates of deposit may not be subject to the same regulatory
requirements as certificates issues by U.S. banks and associated income may be
subject to the imposition of foreign taxes. 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.
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. There can be no assurance that the Tax Exempt Limited
Term Portfolio will be able to achieve these objectives.
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.
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%. A
higher portfolio turnover rate involves greater transaction expenses which must
be borne directly by the Portfolio (and thus, indirectly by its shareholders),
and affect Portfolio performance. In addition, a high rate of portfolio turnover
may result in the realization of larger amounts of capital gains which, when
distributed to the Portfolio's shareholders, are taxable to them.
PRINCIPAL INVESTMENT STRATEGIES
- -------------------------------
The Tax Exempt Limited Term 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 Portfolio will invest in tax exempt
securities whose interest, in the opinion of bond counsel at the date of
issuance, is exempt from federal income tax. Such tax exempt obligations consist
of the following:
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.
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.
8
<PAGE> 32
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. Municipal leases frequently have
special risks not normally associated with
general obligation or revenue bonds. 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" in the
Statement of Additional Information.
Any realized capital gains will be subject to federal income taxes. Interest on
these securities may be subject to state and local income taxes.
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.
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.
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, (i.e., higher interest rates for longer
maturities), 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.
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.
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. The 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.
9
<PAGE> 33
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 brokers-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.
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" in the Statement of Additional
Information.
RISK FACTORS
The Portfolio will invest in high quality tax exempt municipal debt obligations,
with varying and longer maturities than a money market portfolio. Because
interest rates on fixed rate investments fluctuate in response to economic
factors, rates on the Portfolio's investments may vary, rising or falling with
interest rates generally. The value of the Portfolio's securities varies
inversely with interest rates, the amount of outstanding debt and other factors.
This means that the value of the Portfolio's investments generally increase as
interest rates fall and decreases as interest rates rise.
Interest income of the Portfolio will not be exempt from Federal income tax with
respect to the following:
* taxable obligations
* municipal obligations that the IRS has successfully asserted are not
tax exempt obligations
Payment of interest and preservation of capital are dependent upon the
continuing ability of issuers and/or obligors of municipal and public authority
debt obligations to meet their payment obligations. Special factors may
negatively affect the value of municipal securities, and, as a result, the
Portfolio's share price. These factors include political or legislative changes,
uncertainties relating to the tax status of the securities or the rights of
investors in the securities. The value of municipal securities in the Portfolio
can also be affected by market reaction to legislative consideration of various
tax reform proposals. See "Management Strategies" in the statement of Additional
Information. There is also the risk that issuers will prepay fixed rate
obligations when interest rates fall, forcing the Portfolio to re-invest in
obligations with lower interest rates than the original obligations. For a
detailed discussion of the quality requirements applicable to municipal bonds,
municipal leases and other municipal obligations, see "Investment
10
<PAGE> 34
and Investment Techniques Common to Two or More Portfolios" in the Statement of
Additional Information.
RISK FACTORS (BOTH PORTFOLIOS)
YEAR 2000 Like other funds and business organizations around the world, the Fund
could be adversely affected if the computer systems used by the Advisor, the
Fund's other service providers and companies in which the Fund invests do not
properly process and calculate date-related information for the year 2000 and
beyond. The Fund has been informed that the Advisor and the Fund's other service
providers are taking steps to minimize the risk associated with the Year 2000
problem, including inventorying of software systems, determining inventory items
that may not function properly after December 31, 1999, reprogramming or
replacing such systems and retesting for Year 2000 readiness and obtaining
assurances from their vendors and suppliers in the same manner. Non-compliant
Year 2000 systems upon which the Fund is dependent may result in errors and
account maintenance failures. The Fund has no reason to believe that (1) the
Year 2000 plans of the Fund's key service providers for services critical to the
Fund's operations will not be completed by December 31, 1999, and (2) the costs
currently associated with the implementation of their plans will have material
adverse impact on the business, operations or financial condition of the Fund or
its service providers.
Since the ultimate costs or consequences of incomplete or untimely resolution of
the Year 2000 problem are unknown to the Fund at this time, there may be costs
or consequences having a material adverse impact on the Fund's key service
providers, your account records and/or the operations or investments of the
Fund. The Fund and the Advisor will continue to monitor developments relating to
this issue, including the development of contingency plans for providing back-up
computer services in the event of a systems failure.
FUND MANAGEMENT
================================================================================
THE INVESTMENT ADVISOR
Gabelli Fixed Income LLC, (the "Advisor"), One Corporate Center, Rye, NY 10580
is a Delaware limited liability company organized in 1997 and is the successor
of Gabelli-O'Connor Fixed Income Management Mutual Funds Co. formed in 1987. As
of December 31, 1998, Gabelli Fixed Income LLC manages more than $1.4 billion in
assets.
For these advisory services, the Portfolios, if activated by the Advisor, would
have paid .45% of average net assets during the fiscal year ended October 31,
1998. 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 Portfolio shares.
PORTFOLIO MANAGERS
Through its portfolio management team, Gabelli Fixed Income LLC makes the
day-to-day investment decisions and continuously reviews, supervises and
administers the Portfolios' investment programs.
11
<PAGE> 35
THE DISTRIBUTOR
Gabelli Fixed Income Distributors, Inc. is the Fund's distributor. Its address
is One Corporate Center, Rye, NY 10580.
The Statement of Additional Information has more detailed information about the
Advisor and other service providers.
SHAREHOLDER INFORMATION
================================================================================
PURCHASING SHARES
- -----------------
All investments made by regular mail or personal delivery, whether initial or
subsequent, should be sent to:
BY REGULAR MAIL BY OVERNIGHT DELIVERY
--------------- ---------------------
The Treasurer's Fund, Inc. The Treasurer's Fund, Inc.
PO Box 3808 c/o BFDS
Boston, MA 02266-3808 66 Brooks Drive
Braintree, MA 02184
For Initial Investment:
1. Carefully read and complete the application.
2. Make check, bank draft or money order payable to "The Treasurer's Fund,
Inc."
3. Mail or deliver application and payment to the address above.
For Subsequent Investments:
1. Use the investment slip attached to your account statement. Or, if
unavailable, provide the following information:
* Portfolio
* Amount invested
* Account name and number
2. Make check, bank draft or money order payable to "The Treasurer's Fund,
Inc."
3. Mail or deliver investment slip and payment to the address above.
BY WIRE TRANSFER
For Initial Investment:
Call 1-800-TSR-FUND (1-800-877-3863) to obtain a new account number. Promptly
mail the completed application to the address shown above for mail purchases;
and
12
<PAGE> 36
For All Investments:
Instruct your bank to wire transfer your investment to:
STATE STREET BANK AND TRUST COMPANY
225 FRANKLIN STREET, BOSTON, MA 02110
ROUTING NUMBER: ABA #011-0000-28
RE: THE TREASURER'S FUND, INC.
REF DDA# 99046187
A/C#___________________
YOUR NAME
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
MINIMUM INVESTMENTS
You may purchase Funds through the Distributor or participating organizations,
which may charge additional fees and may require higher or lower minimum
investments or impose other limitations on buying and selling shares.
<TABLE>
<CAPTION>
MINIMUM MINIMUM
INITIAL INVESTMENT SUBSEQUENT INVESTMENT
<S> <C>
$ 100,000 $ 0
----------------------------------------------------
</TABLE>
All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks are not accepted. Your purchase of shares will
be effective on the same business day if the Portfolio's transfer agent receives
your order and your form of payment by 4:00 p.m., eastern time. Otherwise, your
purchase will be effective on the next business day, and at the next determined
net asset value.
A Fund may waive its minimum purchase requirement and the Distributor may reject
a purchase order if it considers it in the best interest of the Fund and its
shareholders.
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise.
SELLING SHARES
- --------------
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares or a
redemption of shares.
- --------------------------------------------------------------------------------
WITHDRAWING MONEY FROM YOUR INVESTMENT
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Fund, its transfer agent, or your
investment representative. See section on "General Policies on Selling Shares"
below.
- --------------------------------------------------------------------------------
13
<PAGE> 37
GENERAL POLICIES ON SELLING SHARES
- ----------------------------------
BY BANK WIRE VIA TELEPHONE
1. Call 1-800-TSR-FUND (1-800-877-3863) with your account number and the amount
of the redemption.
2. If you are unable to reach the Fund by telephone, you may telecopy your
redemption request to the Fund at 914-921-2416.
NOTE: If you call by 4:00 p.m., eastern time, your payment will normally be
wired to your bank on the same business day. If you call after that time, your
payment will be wired to your bank on the next business day.
BY BANK WIRE VIA MAIL
Submit a redemption request to the Fund. To obtain a redemption request form,
call 1-800-TSR-FUND.
SIGNATURE GUARANTEES
Signature guarantees are required on redemption requests for the
following:
* The check is not being mailed to the address on your account
* The check is not being made payable to the owner of the account
* The redemption proceeds are being transferred to another person's
Portfolio account.
A signature guarantee can be obtained from most banks and securities dealers.
Notarized signatures are not considered a signature guarantee.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to ensure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. If appropriate
precautions have not been taken, the Fund may be liable for losses due to
unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INVESTMENT
When you have made an investment by check, your redemption proceeds will not be
mailed until the Transfer Agent is satisfied that the check has cleared (which
may require up to 15 business days). You can avoid this delay by purchasing
shares with a certified check or federal funds wire.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the SEC in order to protect remaining shareholders.
CLOSING OF SMALL ACCOUNTS
If your account falls below $50,000, the Fund may ask you to increase your
balance. If it is still below $50,000 after 60 days, the Fund may close your
account and send you the proceeds at the current NAV.
14
<PAGE> 38
UNDELIVERABLE REDEMPTION CHECKS
If distribution checks (1) are returned and marked as "undeliverable" or
(2) remain uncashed for six months, your account will be changed automatically
so that all future distributions are reinvested in your account. Checks that
remain uncashed for six months will be canceled and the money reinvested in the
Portfolio.
EXCHANGING SHARES
- -----------------
You can exchange your shares in one Portfolio for shares of another Portfolio of
the Fund or other mutual funds managed by Gabelli Funds or its affiliates.
You must meet the minimum investment requirements for the Portfolio into which
you are exchanging. Exchanges from one Fund to another are taxable.
INSTRUCTIONS FOR EXCHANGING SHARES
- --------------------------------------------------------------------------------
Exchanges may be made by sending a written request to The Treasurer's Fund,
Inc., PO Box 3808, Boston, MA 02266-3808 or by calling 1-800-TSR-FUND
(1-800-877-3863).
Please provide the following information:
* Your name and telephone number
* The exact name on your account and account number
* Taxpayer identification number (usually your Social Security number)
* Dollar value or number of shares to be exchanged
* The names of the Portfolios from/to which the exchange is to be made
See "Selling Shares" for important information about telephone transactions.
PRICING OF FUND SHARES
- ----------------------
HOW NAV IS CALCULATED
The NAV is calculated each business day by adding the total value of the
Portfolio's investments and other assets, subtracting its liabilities and then
dividing that figure by the number of outstanding shares of the Portfolio:
NAV =
TOTAL ASSETS - LIABILITIES
--------------------------
Number of Shares
Outstanding
Per share net asset value, or NAV, for each non-Money Market Fund is determined
and its shares are priced at the close of regular trading on the New York Stock
Exchange, normally at 4:00 p.m., eastern time, on days the Exchange is open.
Your order for purchase, sale or exchange of shares is priced at the next NAV
calculated after your order is received by the Fund. This is what is known as
the offering price.
The Portfolios' securities are generally valued at current market prices. If
market quotations are not available, prices will be based on fair value as
determined by the Fund's Directors.
15
<PAGE> 39
DIVIDENDS, DISTRIBUTIONS AND TAXES
- ----------------------------------
Any income a Portfolio receives in the form of interest or dividends are paid
out, less expenses, to its shareholders. Each Portfolio declares dividends from
net investment income on every business day. Dividends on the Portfolios are
paid monthly. Capital gains for the Portfolios are distributed at least
annually.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
The Portfolios expect that their dividends will primarily consist of net
investment income or, if any, short-term capital gains as opposed to long-term
capital gains.
With respect to the Limited Term Portfolio, dividends (including distributions
from net investment income and short-term capital gains) are taxable as ordinary
income. With respect to the Tax Exempt Limited Term Portfolio, distributions of
tax exempt income are not subject to regular federal income tax, but may be
subject to the alternative minimum tax, and distributions of interest on taxable
obligations, as well as any net short-term capital gains, are taxable as
ordinary income. Depending on your residence for tax purposes, distributions may
be subject to state and local taxes, including withholding taxes. Dividends are
taken into account for tax purposes in the year in which they are declared, even
if they appear on your account statement the following year. You will be
notified in January each year about the federal tax status of distributions made
by the Portfolios.
- --------------------------------------------------------------------------------
TAX IDENTIFICATION NUMBER
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions proceeds paid to shareholders who have not
provided the Fund with their Taxpayer Identification Number in compliance with
IRS rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
- --------------------------------------------------------------------------------
Foreign shareholders may be subject to special withholding requirements. Consult
your tax advisor about the federal, state and local tax consequences in your
particular circumstances.
DISTRIBUTION ARRANGEMENTS
- -------------------------
The Fund has adopted a distribution and service plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act 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
Rule 12b-1. 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.
16
<PAGE> 40
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.
FINANCIAL HIGHLIGHTS
================================================================================
At this time, the Limited Term Portfolio and the Tax Exempt Limited Term
Portfolio have not been activated by the Advisor.
17
<PAGE> 41
FOR MORE INFORMATION:
For more information about the Fund, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS:
The Fund's semi-annual and audited annual reports to shareholders contain
detailed information on the Fund's investments. In the annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. These
funds have not commenced operations so that such reports are not yet available.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Fund, including their
operations and investment policies. It is incorporated by reference, and is
legally considered a part of this prospectus.
- --------------------------------------------------------------------------------
YOU CAN GET FREE COPIES OF REPORTS AND SAI, PROSPECTUSES OF OTHER FUNDS IN THE
GABELLI FAMILY, OR REQUEST OTHER INFORMATION AND DISCUSS YOUR QUESTIONS ABOUT
THE FUND BY CONTACTING:
THE TREASURER'S FUND, INC.
ONE CORPORATE CENTER
RYE, NY 10580
TELEPHONE: 1-800-TSR-FUND
www.gabelli.com
- --------------------------------------------------------------------------------
You can review the Fund's reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
* For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
* Free from the Commission's Website at http://www.sec.gov.
(Investment Company Act file no. 811-5347)
18
<PAGE> 42
THE TREASURER'S FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1999
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of The Treasurer's Fund, Inc. dated
March 1, 1999, 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.,
One Corporate Center, Rye, New York 10580-1434. This Statement of Additional
Information is incorporated by reference into the Prospectus in its entirety.
<PAGE> 43
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
THE PORTFOLIOS AND THEIR OBJECTIVES ............................................... 1
Investments and Investment Techniques Common to Two or More Portfolios ............ 1
Change in Ratings......................................................... 1
Eligible Securities....................................................... 2
Management Strategies..................................................... 3
Municipal Obligations..................................................... 3
Amortized Cost Valuation of Portfolio Securities.......................... 4
Variable Rate Demand Instruments.......................................... 5
When-Issued Securities.................................................... 6
Stand-by Commitments...................................................... 6
Repurchase Agreements..................................................... 7
Reverse Repurchase Agreements............................................. 8
Participation Interests................................................... 8
Bank Obligations, Certificates of Deposit and Bankers' Acceptances........ 9
United States Government Obligations...................................... 9
Mortgage-Backed Securities................................................ 10
Foreign Securities........................................................ 11
Privately Placed Securities............................................... 11
Hedging Instruments....................................................... 12
Loan of Portfolio Securities.............................................. 13
Puts for the Tax Exempt Portfolios........................................ 13
INVESTMENT RESTRICTIONS ........................................................... 13
MANAGEMENT OF THE FUND ............................................................ 15
Directors and Officers ........................................................ 15
Investment Advisor ............................................................ 18
Fees ..................................................................... 18
Administrator.................................................................. 18
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT....................................... 20
TAXES .......................................................................... 20
PURCHASE, REDEMPTION AND EXCHANGE ................................................. 24
DIVIDENDS AND DISTRIBUTIONS ....................................................... 24
NET ASSET VALUE ................................................................... 24
COMPUTATION OF YIELD .............................................................. 25
Tax Equivalent Yield .......................................................... 26
Computation of Total Return ................................................... 26
DESCRIPTION OF COMMON STOCK ....................................................... 27
DISTRIBUTION PLANS ................................................................ 28
</TABLE>
i
<PAGE> 44
<TABLE>
<S> <C>
BROKERAGE AND PORTFOLIO TURNOVER .................................................. 29
Brokerage ..................................................................... 29
Portfolio Turnover ............................................................ 29
SERVICE PROVIDERS ................................................................. 30
RATINGS OF MUNICIPAL AND CORPORATE OBLIGATIONS .................................... 31
Municipal & Corporate Bond Ratings............................................. 31
Description of Moody's Investors Service, Inc.'s municipal and
corporate bond ratings.................................................... 31
Description of Standard & Poor's Corporation's municipal and
corporate bond ratings.................................................... 32
Unrated Bonds ................................................................. 32
Commercial Paper Ratings ...................................................... 32
Description of Standard & Poor's Corporation's
two highest commercial paper ratings...................................... 32
Description of Moody's Investors Service, Inc.'s
two highest commercial paper ratings...................................... 32
Money Market Fund Ratings...................................................... 33
Description of Standard & Poor's Corporation's
two highest money market fund ratings..................................... 33
Description of Moody's Investors Service, Inc.'s
two highest money market fund ratings..................................... 33
FINANCIAL STATEMENTS............................................................... 34
</TABLE>
ii
<PAGE> 45
THE TREASURER'S FUND, INC.
THE PORTFOLIOS AND THEIR OBJECTIVES
(SEE THE FUND'S PROSPECTUS DATED MARCH 1, 1999)
The Treasurer's Fund, Inc. (the "Fund") is a diversified, no-load, fixed
income mutual fund consisting of six portfolios (the "Portfolios") designed to
meet the short and intermediate term investment needs of individuals,
corporations and institutional cash managers. At this time, only the U.S.
Treasury Money Market Portfolio, the Domestic Prime Money Market Portfolio, and
the Tax Exempt Money Market Portfolio have been activated by the Advisor. 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 Portfolios are sought through
the following additional strategies employed in the management of the Portfolios
which are described under "Investments and Investment Techniques Common to Two
or More Portfolios":
<TABLE>
<CAPTION>
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
U.S. Domestic Tax
Treasury Prime Global Exempt Tax Exempt
Money Money Money Money Limited Limited
Market Market Market Market Term Term
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Change in Ratings X X X X X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Eligible Securities X X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Management Strategies X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Municipal Obligations X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Amortized Cost Valuation of Portfolio X X X X
Securities
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Variable Rate Demand Instruments X X X X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
When-Issued Securities X X X X X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Stand-By Commitments X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Repurchase Agreements X X X X X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Reverse Repurchase Agreements X X X X X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Participation Interests X X X X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Bank Obligations, Certificates of Deposit X X X X X
and Bankers' Acceptances
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
United States Government Obligations X X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Mortgage-Backed Securities X X X X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Foreign Securities X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Privately Placed Securities X X X X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Hedging Instruments X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Loan of Portfolio Securities X X X X X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
Puts for the Tax Exempt Portfolios X X
- ---------------------------------------------- ----------- ----------- ---------- ----------- ---------- -----------
</TABLE>
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
<PAGE> 46
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" below. 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.
Eligible Securities. The Domestic Prime Money Market Portfolio, the Global
Money Market Portfolio and the Tax-Exempt Money Market Portfolio may only
purchase dollar-denominated securities that have been determined by the Fund's
Board of Directors to present minimal credit risks. Securities purchased for the
Domestic and Global Money Market Portfolios must also have been First Tier
Eligible Securities at the time of acquisition. Securities purchased for the
Tax-Exempt Money Market Portfolio must also have been Eligible Securities at the
time of acquisition. The term Eligible Securities means: (i) securities which
have or are deemed to have remaining maturities of 397 days or less and rated in
the two highest short-term rating categories by any two nationally recognized
statistical rating organizations ("NRSROs") or in such categories by the only
NRSRO that has rated the Municipal Obligations (collectively, the "Requisite
NRSROs"); or (ii) unrated securities determined by the Fund's Board of Directors
to be of comparable quality. First Tier Eligible Securities are Eligible
Securities which are rated in the highest category by NRSROs or are determined
to be of comparable quality to the highest rated securities.
In addition, securities which have or are deemed to have remaining
maturities of 397 days or less but that at the time of issuance were long-term
securities (i.e. with maturities greater than 366 days) are deemed unrated and
may be purchased if such had received a long-term rating from the Requisite
NRSROs in one of the three highest rating categories. A determination of
comparability by the Board of Directors is made on the basis of its credit
evaluation of the issuer, which may include an evaluation of a letter of credit,
guarantee, insurance or other credit facility issued in support of the
securities. While there are several organizations that currently qualify as
NRSROs, two examples of NRSROs are Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies ("S&P") and Moody's Investors Service, Inc.
("Moody's"). The two highest ratings by S&P and Moody's are "AAA" and "AA" by
S&P in the case of long-term bonds and notes or "Aaa" and "Aa" by Moody's in the
case of bonds; "SP-1" and "SP-2" by S&P or "MIG-1" and "MIG-2" by Moody's in the
case of notes; "A-1" and "A-2" by S&P or "Prime-1" and "Prime-2" by Moody's in
the case of tax-exempt commercial paper. The highest rating in the case of
variable and floating demand notes is "VMIG-1" by Moody's or "SP-1/AA" by S&P.
Such instruments may produce a lower yield than would be available from less
highly rated instruments.
Subsequent to its purchase by the Portfolio, a rated security 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
promptly reassess 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 (i) is in default, (ii)
ceases to be an Eligible Security under Rule 2a-7 of the 1940 Act or (iii) is
determined to no longer present minimal credit risks, or an event of insolvency
occurs with respect to the issues of a portfolio security or the provider of
any Demand Feature or Guarantee, the
2
<PAGE> 47
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. Disposal of the security shall occur as soon as
practicable consistent with achieving an orderly disposition by sale, exercise
of any demand feature or otherwise. In the event of a default with respect to a
security which immediately before default accounted for 1/2 of 1% or more of the
Portfolio's total assets, the Portfolio shall promptly notify the SEC of such
fact and of the actions that the 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 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 (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
3
<PAGE> 48
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. 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 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.
4
<PAGE> 49
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 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 securities 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").
5
<PAGE> 50
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 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
- ----------------------------------
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.
6
<PAGE> 51
date during the period the security was owned by the Portfolio. Absent unusual
circumstances relating to a change in market value, the Portfolio would value
the underlying Municipal Obligation at amortized cost. Accordingly, the amount
payable by a bank or dealer during the time a stand-by commitment is exercisable
would be substantially the same as the market value of the underlying Municipal
Obligation.
The Portfolio's right to exercise a stand-by commitment would be
unconditional and unqualified. A stand-by commitment would not be transferable
by the Portfolio, although it could sell the underlying Municipal Obligation to
a third party at any time.
The Advisor expects that stand-by commitments generally will be available
without the payment of any direct or indirect consideration. However, if
necessary and advisable, the Portfolio may pay for stand-by commitments either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to such a commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by 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. Repurchase agreements that do not mature
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within seven days of purchase will be deemed illiquid and will be subject to the
10% limitation. Each Portfolio may engage in a repurchase agreement with respect
to any security in which that Portfolio is authorized to invest, even though the
underlying security may mature in more than one year. The collateral securing
the seller's obligation must be of a credit quality at least equal to the
Portfolio's investment criteria for Portfolio securities and will be held by the
Portfolio's Custodian or in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase agreement
is deemed to be a loan from a Portfolio to the seller subject to the repurchase
agreement and is therefore subject to that Portfolio's investment restriction
applicable to loans. It is not clear whether a court would consider the
securities purchased by a Portfolio subject to a repurchase agreement as being
owned by that Portfolio or as being collateral for a loan by that Portfolio to
the seller. In the event of the commencement of bankruptcy or insolvency
proceedings with respect to the seller of the securities before repurchase of
the security under a repurchase agreement, a Portfolio may encounter delay and
incur costs before being able to sell the security. Delays may involve loss of
interest or decline in price of the security. If the court characterized the
transaction as a loan and a Portfolio has not perfected a security interest in
the security, that Portfolio may be required to return the security to the
seller's estate and be treated as an unsecured creditor of the seller. As an
unsecured creditor, a Portfolio would be at the risk of losing some or all of
the principal and income involved in the transaction. As with any unsecured debt
obligation purchased for 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. The terms of certain of the
participations in corporate loans in which a Portfolio may invest may not enable
the Portfolio to sell such instrument to the bank, and the secondary markets, if
any, for such instruments are extremely limited. When purchasing bank
participation interests, the Portfolio will treat both the bank and the
underlying borrower as the issuer of the instrument for the purpose of complying
with the diversification requirement of investment restriction number 3
discussed below.
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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.
United States Government Obligations. The Domestic Prime Money Market
Portfolio, the Global Money Market Portfolio and the Limited Term Portfolio 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.
Securities issued or guaranteed as to principal and interest by the United
States Government may be acquired by the Domestic Prime Money Market Portfolio,
the Global Money Market Portfolio and the Limited Term Portfolio 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" ("TIGRs") and "Certificates of
Accrual on Treasury Securities" ("CATS"). These 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.
These Portfolios may also invest in stripped mortgage-backed securities that
represent beneficial ownership interests in either principal or interest
distributions on certain mortgage pass-through certificates which are guaranteed
by the Federal National Mortgage Association. Such certificates are held by a
trust which sells such securities through the Federal Reserve.
Securities guaranteed as to principal and interest by the United States
Government, its agencies or instrumentalities are deemed to include securities
for which the payment of principal and interest is backed by an irrevocable
letter of credit issued by the United States Government, its agencies or
instrumentalities.
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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 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
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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 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 net 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
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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
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".
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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
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)
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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, except obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities; however, the Portfolios may
invest more than 5% of their total assets in the First Tier Securities of a
single issuer for a period of up to three business days;
(2) purchase securities (including warrants) other than those described in
the Prospectus as fundamental;
(3) except for the Domestic Prime Money Market Portfolio which is subject
to Investment Restriction (1) above, 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
- -----------------------
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> 59
(including short term debt obligations issued pursuant to Section 4(2) of the
Securities Act of 1933) and bank participation interests for which a readily
available market does not exist;
(13) sell securities short or purchase securities on margin, or engage in
the purchase and sale of a put, call, straddle or spread option or in writing
such option except to the extent that securities subject to a demand obligation
and stand-by commitments may be purchased as set forth herein and except that
the Limited Term Portfolio and the Tax Exempt Limited Term Portfolio may
purchase hedging instruments as described herein;
(14) acquire securities of other investment companies;
(15) lend portfolio securities in an amount exceeding in the aggregate
one-third of the market value of the Portfolio's total assets, less liabilities
other than obligations created by these transactions;
(16) invest more than 5% of the value of a Portfolio's total assets in the
securities of issuers where the entity providing the revenues from which the
issue is to be paid has a record, including predecessors, of fewer than three
years of continuous operation, except obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
The Fund may not, on behalf of the Portfolio or Portfolios specified:
(17) with respect to the Tax Exempt Money Market Portfolio and the Tax
Exempt Limited Term Portfolio, under normal market conditions, purchase
securities if such purchase would cause less than 80% of the Portfolio's net
assets to be invested in securities the income from which is exempt from regular
federal income tax and not subject to alternative minimum 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, 55....... Consultant to the Advisor since April 1997.
Director President of Thomas E. O'Connor & Co., Inc.,
One Corporate Center the general partner of Thomas E. O'Connor &
Rye, New York 10580 Co. L.P., which was the general partner of
the former Advisor and Gabelli O'Connor
Fixed Income Management Co. (1985-1997)
- --------------------------
* "Interested person" of the Fund, as defined in the Investment Company Act.
15
<PAGE> 60
<TABLE>
<CAPTION>
NAME, AGE, POSITION(S) PRINCIPAL OCCUPATIONS DURING
WITH FUND AND ADDRESS PAST FIVE YEARS
- --------------------- ----------------------------
<S> <C>
+ Felix J. Christiana, 74......................... Retired Senior Vice President, Dollar Dry Dock
Director Savings Bank. Director/Trustee of 8 other
35 Club Point Drive Gabelli funds.
White Plains, New York 10604
Robert C. Kolodny, M.D., 54..................... Physician, author and lecturer (self-employed)
Director (1983-present). General Partner of KBS
885 Oenoke Ridge Road Partnership, KBS II Investment Partnership,
New Canaan, Connecticut 06840 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, 73......................... Retired President of (1961- 1989) and consultant
Director to Pustorino, Puglisi & Co., P.C., certified public
515 Madison Avenue accountants; Professor, Pace University (1965-
New York, New York 10022 present). Director/Trustee of 8 other Gabelli funds.
Mary E. Hauck, 56 ............................. Retired Senior Portfolio manager of the Gabelli
Director O'Connor Fixed Income Mutual Fund
21 Bishop Park Road Management Company.
P.O. Box 295
Pound Ridge, New York 10576
+* Karl Otto Pohl, 69 ............................. Member of the shareholder committee of Sal
Director Oppenheim Jr. & Cie. (Private investment bank);
One Corporate Center Former President of the Deutsche Bundesbank
Rye, New York 10580 (Germany's Central Bank) and Chairman of its Central
Bank Council (1980-1991); Currently board
member of Gabelli Asset Management, Inc.;
Zurich Versicherungs-Gesellschaft
(insurance); International Council for JP
Morgan & Co., & Trizeeltahn Corp.
Director/Trustee of 14 other Gabelli
- -------------------------
+ Director, trustee or officer of investment companies advised by Gabelli
Funds, LLC or its affiliates.
* "Interested person" of the Fund, as defined in the Investment Company Act.
</TABLE>
16
<PAGE> 61
<TABLE>
<S> <C>
funds.
+ Anthony J. Colavita, 62......................... President and Attorney at Law in the law firm of
Director Anthony J. Colavita, P.C. since 1961; Director/
575 White Plains Road Trustee of 12 other Gabelli funds.
Eastchester, New York 10709
Richard N. Daniel, 62........................... Former Chairman and Chief Executive Officer,
Director Handy and Harman.
One Corporate Center
Rye, New York 10580-1434
</TABLE>
17
<PAGE> 62
<TABLE>
<CAPTION>
NAME, AGE, POSITION(S) PRINCIPAL OCCUPATIONS DURING
WITH FUND AND ADDRESS PAST FIVE YEARS
- --------------------- ------------------------------
<S> <C>
+ Werner J. Roeder, M.D., 58 ..................... Director of Surgery, Lawrence Hospital
Director and practicing private physician. Director/
77 Pondfield Road Trustee of 6 other Gabelli funds.
Bronxsville, New York 10708
+ Anthonie C. van Ekris, 63........................ Managing Director, Balmac International.
Director Director of Stahal Hardmayer A.Z. Director/
One Corporate Center Trustee of 9 other Gabelli funds.
Rye, New York 10580
+ Bruce N. Alpert, 47............................. Executive Vice President, Chief Operating Officer
Vice President of Gabelli Funds, LLC since 1988; President and
One Corporate Center Director of Gabelli Advisers, Inc. and an officer of
Rye, New York 10580 all funds advised by Gabelli Funds, LLC and its affiliates.
Ronald S. Eaker, 38............................ Senior Portfolio Manager of the Advisor and
President and Chief Investment Officer its predecessor, Gabelli-O'Connor Fixed Income
One Corporate Center Management Co.
Rye, New York 10580-1434
Henley L, Smith, 42....................... Senior Portfolio Manager of the Advisor and its
Vice President and Investment Officer Predecessor. Prior to joining the Advisor in 1987,
One Corporate Center he was portfolio manager at Manufacturers Hanover
Rye, New York 10580-1434 Investment Corp. where he began in 1984. From
1982-1984, he was portfolio manager for
Manufacturers Hanover Trust Company.
Judith Raneri, 31.......................... Investment Officer of the Advisor and its
Secretary, Treasurer and Investment Officer predecessor since 1989. Vice President and
One Corporate Center Portfolio Manager of the Gabelli U.S. Treasury
Rye, New York 10580 Money Market Fund. Vice President of Gabelli
Funds Division of Gabelli Funds, Inc. since April
1997. Vice President of Gabelli Funds, LLC since
February 1999.
</TABLE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
AGGREGATE COMPENSATION AGGREGATE COMPENSATION
NAME OF PERSON, POSITION FROM FUND* FROM FUND COMPLEX
- ------------------------ ------------------------ ----------------------
<S> <C> <C>
Felix J. Christiana, Director $6,000 $88,500
Mary E. Hauck, Director $6,000 $6,000
Robert C. Kolodny, M.D., Director $6,000 $6,000
Anthony R. Pustorino, Director $6,000 $100,500
J. Colavita, Director $6,000 $82,000
Richard N. Daniel, Director $6,000 $6,000
Werner J. Roeder, Director $6,000 $25,500
Anthony van Ekris, Director $6,000 $57,500
Karl Otto Pohl++, Director $6,000 $98,466
Thomas O'Connor, Director $ 0 $ 0
</TABLE>
There are no pension, retirement or other benefits payable by the Fund to
any director or officer of the Fund.
- ---------------------
+ Director, trustee or officer of investment companies advised by Gabelli Funds,
LLC or its affiliates.
++ Mr. Pohl is a director of Gabelli Asset Management, Inc., the indirect parent
company of the Advisor.
18
<PAGE> 63
Investment Advisor
The investment advisor for the Fund is Gabelli Fixed Income LLC, with
offices at One Corporate Center, Rye, New York 10580-1434, 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 Advisors Act of 1940. Mario J. Gabelli is the Chairman of
the Board of Directors of Gabelli Asset Management Inc., which is the indirect
majority owner of the Advisor. As a result, Mr. Gabelli may be deemed to be a
"controlling person" of the Advisor. As of December 31, 1998 the Advisor and its
affiliate, Darien Associates, served as investment advisor for assets
aggregating in excess of $1.4 billion. The Advisor is an affiliate of Gabelli
Asset Management Inc. which, through its affiliates, including the Advisor, acts
as an investment manager, administrator or advisor for assets aggregating in
excess of $16.3 billion as of December 31, 1998. 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.
Fees. Set forth below as a percentage of average daily net assets are the
advisory fees paid to the Advisor for each Portfolio pursuant to the Advisory
Agreements: the U.S. Treasury Money Market Portfolio, .30%; the Domestic Prime
Money Market Portfolio, .30%; the Global Money Market Portfolio, .30%; the Tax
Exempt Money Market Portfolio, .30%; the Limited Term Portfolio, .45%; and the
Tax Exempt Limited Term Portfolio, .45%. Any portion of the total fees received
by the Advisor may be used by the Advisor to provide shareholder and
administrative services and for distribution of Fund shares. See "Financial
Statements" herein.
<TABLE>
<CAPTION>
Advisory Fees Paid by the Fund
For the Years Ended October 31
------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Domestic Prime Money Market Portfolio $886,379 $827,784 $657,103
------------------------------------- -------- -------- --------
Tax Exempt Money Market Portfolio 575,919 541,424 455,634
--------------------------------- ------- ------- -------
U.S. Treasury Money Market Portfolio 296,590 311,763 263,957
------------------------------------ ------- ------- -------
</TABLE>
None of these amounts, for the fiscal years ended October 31, 1998, 1997
and 1996, 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 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.
ADMINISTRATOR AND SUB-ADMINISTRATOR
Administrator. The Administrator for the Fund is Gabelli Funds, LLC (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
19
<PAGE> 64
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. The Administrator has entered into a Sub-Administration
Agreement with BISYS Fund Services, LP ("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. Prior to April 14,
1997, BISYS Fund Services, Inc. served as Administrator pursuant to an
Administration Agreement with the Fund. The Sub-Administrator's services do not
include the investment advisory and portfolio management services provided by
the Advisor. For the services rendered and related expenses borne by BISYS, the
Administrator pays BISYS a 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, LLC, Gabelli Advisers, Inc., 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 and through banking
and other financial organizations. BISYS and its affiliates, BISYS Fund Services
LP and BISYS Fund Services, Inc., have their principal place of business at 3435
Stelzer Road, Columbus, Ohio 43219.
BISYS also provides the Fund with all accounting services, including (1)
daily computation of net asset value for each Portfolio; (2) maintenance of
security ledgers and books and records as required by the Investment Company
Act; (3) production of the Portfolio and general ledger reports; (4)
reconciliation of accounting recorPortfolio. 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 BISYS for all administrative services rendered for
the year ended October 31, 1998 were $102,069 for the Domestic Prime Money
Market Portfolio, $66,587 for the Tax Exempt Money Market Portfolio and $34,507
for the U.S. Treasury Money Market Portfolio The fees paid to Gabelli Funds,
Inc. (the "Administrator") for the year ended October 31, 1998 were $283,544 for
the Domestic Prime Money
20
<PAGE> 65
Market Portfolio, $185,110 for the Tax Exempt Money Market Portfolio and $94,993
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 period, 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: maintains shareholder records
for each of the Fund's Shareholders of record; processes shareholder purchase
and redemption orders; processes transfers and exchanges of shares of the Fund
on the shareholder files and records; processes dividend payments and
reinvestments; and assists in the mailing of shareholder reports and proxy
solicitation materials.
TAXES
Each of the active Portfolios of the Fund has qualified under the Internal
Revenue Code of 1986, as amended ("Code"), as a regulated investment company.
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. The Portfolios intend
to continue to qualify as regulated investment companies. Qualification relieves
the Portfolios of federal income taxes on taxable income and long-term capital
gains distributed to their shareholders, provided that at least 90% of their
investment company taxable income and 90% of their net tax exempt interest
income is distributed and numerous other requirements 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. If 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 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. The Fund believes that this provision will not have
any material impact on any Portfolio.
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, 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. It is not expected that any income
distributions from the Portfolios will qualify for the dividends received
deduction for corporations.
The Code permits tax exempt interest distributed by a regulated investment
company to flow through as exempt interest dividends to its shareholders,
provided that at least 50% of the value of its assets at the end of each quarter
of its taxable year is invested in state, municipal and other obligations the
interest on which is exempt under Section
21
<PAGE> 66
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 by their
shareholders as exempt interest dividends for federal income tax purposes.
Distributions of exempt interest dividends are not subject to regular federal
income taxes, but may be subject to the alternative minimum tax. 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 (offset by any capital loss carry forwards) 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 derived from interest on certain private activity bonds that
are exempt from regular federal income tax are tax preference items that may
subject individual or corporate shareholders to liability (or increased
liability) under the alternative minimum tax. However, 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.
In addition, 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 exempt
from regular federal income tax 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 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 the Fund will be treated for federal income tax purposes as
the owner of an interest in the underlying debt obligations and that the
interest received will be tax exempt to the Fund to the same extent that the
interest on the underlying obligations will be tax exempt. Counsel has pointed
out that the IRS has announced that it will not ordinarily issue advance rulings
on the question of ownership of securities or participation interests therein
subject to a put and, as a result, the IRS could reach a conclusion different
from that reached by counsel.
The Fund may be subject to state or local tax in jurisdictions in which the
Fund is organized or may be deemed to be doing business. However, New York 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 distributions received from the Fund from state personal
income tax to the extent such distributions are derived from interest on
obligations issued by such state or its municipalities or political
subdivisions.
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.
22
<PAGE> 67
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.
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, for purposes of determining its distribution
requirements 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. 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.
However, since the Fund expects that a substantial percentage of its dividends
will be reinvested, and since 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 attributable to original issue discount on taxable obligations.
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.
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. 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. 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.
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.
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.
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, long term
capital gains of non-corporate shareholders are taxable at a maximum rate of 20%
for shareholders who have a holding period of more than 12 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. The Portfolios will advise
shareholders as to what portion of their distributions will be treated as long
term capital gains. The deduction of capital losses is subject to limitations.
Any short-term capital loss realized by shareholders 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 exempt interest dividends received during such six-month
period.
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<PAGE> 68
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 (including exempt
interest dividends) 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.
The U.S. Supreme Court has determined 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 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
interest on 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.
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 the Portfolios 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
Portfolios 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 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. Shareholders should provide the
Portfolios with their taxpayer identification numbers and corporate shareholders
should 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
24
<PAGE> 69
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"), a registered
broker-dealer and member of the National Association of Securities Dealers,
Inc., 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, solicits orders for the purchase of
Fund shares, provided that any subscriptions and orders are not binding on the
Fund until accepted by the Fund as principal. The material relating to the
purchase, redemption and exchange of Portfolio shares in the Prospectus is
incorporated herein by reference and investors should refer to the Prospectus
for information relating to these areas.
DIVIDENDS AND DISTRIBUTIONS
Net investment income is declared as dividends daily and paid monthly; if
an investor's shares are redeemed during a month, accrued but unpaid dividends
are paid with the redemption proceeds. Substantially all the realized net
capital gains for the Portfolios, if any, are declared and paid on an annual
basis (except for net short-term capital gains for the Money Market Portfolios).
Dividends are payable to shareholders of record at the time of declaration.
Dividends of each Portfolio are automatically reinvested in additional
Portfolio shares unless the shareholder has elected to have them paid in cash.
The net investment income of the Fund for each business day is determined
immediately prior to the determination of net asset value at 12:00 noon. Shares
of the Limited Term Portfolio and the Tax Exempt Limited Term Portfolio earn
dividends on the business day their purchase is effective but not on the
business day their redemption is effective. See "Purchasing Shares" and "Selling
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 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 61 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
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<PAGE> 70
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 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, 1998 were 4.91%, 3.82% and 4.20%,
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)(to the power of 6) - 1]
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<PAGE> 71
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 receive dividends.
d = the maximum offering price per share on the
last day of the period.
Actual future yields will depend on the type, quality, and maturities of
the investments held by the Portfolios, changes in interest rates on
investments, and the Portfolios' expenses during the period.
TAX EQUIVALENT YIELD
The Tax Exempt Money Market Portfolio and Tax Exempt Limited Term Portfolio
may from time to time advertise their tax equivalent yield.
Tax equivalent yield is computed 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. It is computed by dividing by one that portion of the
yield of the Portfolio (as computed pursuant to the formulae previously
discussed) which is tax exempt 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. It is 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:
P(1+T)n(exponent) = 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 $1000 payment made at the
beginning of the 1-, 5- or 10- year
periods at the end of the 1-, 5- or
10-year periods (or fractions thereof).
Because the Limited Term and the Tax Exempt Limited Term Portfolios have
not had a registration in effect for 1, 5 or 10 years, the period during which
the registration has been effective shall be substituted.
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<PAGE> 72
Yield information may be useful for reviewing the performance of the
Portfolio and for providing a basis for comparison with other investment
alternatives. However, unlike bank deposits or other investments which pay a
fixed yield for a stated period of time, the Portfolios' yield does fluctuate,
and this should be considered when reviewing performance or making comparisons.
From time to time evaluations of performance of the Portfolios made by
independent sources may be used in advertisements concerning the Portfolios.
These sources may include Lipper Analytical Services, Wiesenberger Investment
Company Service, IBC's Money Fund Report, Barron's, Business Week, Changing
Times, Financial World, Forbes, Fortune, Money, Personal Investor, Bank Rate
Monitor, and The Wall Street Journal.
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on August 17, 1987. The Fund was
formerly named the Gabelli-O'Connor Treasurer's Fund, Inc. At a meeting of the
shareholders held on March 6, 1989, the shareholders of the Fund voted to amend
the Amended Articles of Incorporation to change the name of the Fund to The
Treasurer's Fund, Inc. The authorized capital stock of the Fund consists of
twenty billion shares of common stock having a par value of one tenth of one
cent ($.001) per share ("Common Stock"). The Fund's net assets at the close of
business on October 31, 1998 were valued at $213,590,057 for the Tax Exempt
Money Market Portfolio, $357,849,629 for the Domestic Prime Money Market
Portfolio and $110,879,479 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 February 4, 1999, 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 February 4, 1999, the following persons or entities owned as
much as 5% of the indicated Portfolio's outstanding shares:
<TABLE>
<CAPTION>
NAME AND ADDRESS PORTFOLIO IN PERCENTAGE OF
OF RECORD OR NUMBER OF WHICH SHARES OWNERSHIP OF
BENEFICIAL OWNER SHARES OWNED ARE OWNED PORTFOLIO
---------------- ------------ --------- ---------
<S> <C> <C> <C>
Bear Stearns Security Corp. 9,663,052.4500 Tax Exempt Money 5.18%
1 Metrotech Center North Market Portfolio
Brooklyn, NY 11201-3870
Independent Trust Corp 21,940,401.3400 Domestic Prime 5.63%
Trust Funds 84 B Money Market
Account # 19875907 Fund 404 Portfolio
15255 S 94th Avenue, Suite 303
Orland Park, IL 60462-3897
Bear Stearns Securities Corp. 10,000,000.0000 U.S. Treasury 7.55%
1 Metrotech Center North Money Market
Brooklyn, NY 11201-3870 Portfolio
Bear Stearns Security Corp. 9,685,339.5900 U.S. Treasury 7.31%
</TABLE>
28
<PAGE> 73
1 Metrotech Center North Money Market
Brooklyn, NY 11201-3870 Portfolio
The shares held by Bear Stearns Security Corp. 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 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-Steagall Act limits the ability of a depository institution to
become an underwriter or distributor of securities. However, it is the Fund
management's position that banks are not prohibited from acting in other
capacities for investment companies, such as providing administrative and
shareholder account maintenance services and receiving compensation from the
Advisor for providing such services. However, this is an unsettled area of the
law and if a determination contrary to the Fund management's position is made by
a bank regulatory agency or court concerning shareholder servicing and
administration payments to banks from the Advisor, any such payments will
29
<PAGE> 74
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.
30
<PAGE> 75
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 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, 1998, the Advisor made
payments under the Plans to or on behalf of participating organizations in the
amount of $585,227 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.
31
<PAGE> 76
SERVICE PROVIDERS
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.
Custodial Trust Company is the Custodian for the Fund's cash and securities
and is located at 101 Carnegie Center, Princeton, New Jersey 08540.
State Street Bank and Trust Company ("State Street") is the Transfer and
Dividend Disbursing Agent for the Fund's shares. Boston Financial Data
Services, Inc., an affiliate of State Street, performs the shareholder services
on behalf of State Street and is located at the BFDS Building, 2 Heritage Drive,
North Quincy, Massachusetts 02171.
32
<PAGE> 77
RATINGS OF MUNICIPAL AND CORPORATE OBLIGATIONS
MUNICIPAL AND CORPORATE BOND RATINGS
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
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 are 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. 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.
33
<PAGE> 78
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 degrees.
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 conditions 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 lowest 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.
34
<PAGE> 79
MONEY MARKET FUND RATINGS
Description of Standard & Poor's Corporation's two highest money market
fund ratings:
AAAm -- Safety is excellent for money market funds with this rating.
Capacity to maintain principal value and limit exposure to loss is superior.
AAm -- Safety is very good for money market funds with this rating. They
have a 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.
35
<PAGE> 80
FINANCIAL STATEMENTS
The audited financial statements for the Fund dated October 31, 1998 and
the Report of Ernst & Young LLP thereon, are incorporated herein by reference to
the Fund's Annual Report. The Annual Report is available upon request and
without charge.
36
<PAGE> 81
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 26th day of February 1999.
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- -----
<S> <C> <C>
(1) Principal Executive
Officer
President
/s/ Ronald S. Eaker and Chief February 26, 1999
------------------- Investment
Ronald S. Eaker Officer
(2) Principal Financial and
Accounting Officer
/s/ Judith Raneri Treasurer February 26, 1999
-----------------
Judith Raneri
(3) Majority of Directors
Thomas E. O'Connor ) Directors February 26, 1999
Felix J. Christiana )
Mary E. Hauck )
Robert C. Kolodny, M.D )
Karl Otto Pohl )
Anthonie C. van Ekris )
Anthony J. Colavita )
Anthony R. Pustorino ) By:/s/ Ronald S. Eaker
Richard N. Daniel ) -------------------
Werner J. Roeder, M.D. ) Ronald S. Eaker
Attorney-in-Fact*
</TABLE>
* An executed copy of the power of attorney for all of the Directors
except Mr. O'Connor was filed as an Exhibit to Post-Effective Amendment No. 19,
filed on February 27, 1998.
<PAGE> 82
THE TREASURER'S FUND, INC.
PART C - OTHER INFORMATION
Item 23. 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, 1998:
(2) Statement of Net Assets, October 31, 1998.
(3) Statement of Operations for the year ended October 31, 1998.
(4) Statement of Changes in Net Assets for each of the two years
in the period ended October 31, 1998.
(5) Financial Highlights for each of the five years in the period
ended October 31, 1998.
(6) Notes to the Financial Statements.
(7) Report of Ernst & Young LLP, independent auditors, dated
December 10, 1998.
(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 with Post-Effective Amendment No. 19 to Registration Statement No.
33-17604 on February 27, 1998, and incorporated herein by reference.
** Filed with Post-Effective Amendment No. 2 to Registration Statement No.
33-17604 on March 10, 1989, and incorporated herein by reference.
1
<PAGE> 83
(7) Not applicable.
* (8) Custody Agreement between the Registrant and Custodial
Trust Company.
* (9.1) Sub-Administration Agreement between Gabelli Funds, Inc.
(the Administrator) and BISYS Fund Services Limited
Partnership, d/b/a BISYS Fund Services LP
* (9.2) Transfer Agent Agreement between the Registrant and State
Street Bank and Trust Company.
* (9.3) 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. FILED HEREWITH.
(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). FILED
HEREWITH.
Item 24. Persons Controlled by or Under Common Control with Registrant.
None
- -----------
* Filed with Post-Effective Amendment No. 19 to Registration Statement No.
33-17604 on February 27, 1998, and incorporated herein by reference.
*** Filed with Post-Effective Amendment No. 4 to the Registration Statement
No. 33-17604 on May 11, 1990, and incorporated herein by reference.
2
<PAGE> 84
Item 25. Indemnification.
Registrant incorporates herein by reference its response to Item
27 of the Registration Statement filed with the Commission on January
28, 1987.
Item 26. 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 advisor (the "Former Advisor"). 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 Advisor 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 advisor to
the Fund. Gabelli Fixed Income, Inc., a wholly owned subsidiary of
Gabelli Asset Management Inc., currently holds 80.1% of the interests
in the Advisor and the remaining 19.9% interest is owned by senior
officers of Gabelli Fixed Income L.L.C. Gabelli Fixed Income L.L.C. is
also an affiliate of Gabelli Funds, LLC, and GAMCO Investors, Inc.,
registered investment advisers.
Item 27. 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 One Corporate Center, Rye, New York
10580-1434.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH DISTRIBUTOR WITH REGISTRANT
---- -------------- --------------
<S> <C> <C>
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
</TABLE>
(c) Not applicable.
3
<PAGE> 85
Item 28. 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 29. Management Services.
Not applicable.
Item 30. Undertakings.
(a) Not applicable.
(b) Not applicable.
4
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Service Providers" and to the use of our report dated
December 10, 1998, which is incorporated by reference in this Registration
Statement (Form N-1A No. 33-17604) of The Treasurer's Fund, Inc.
/s/ Ernst & Young LLP
New York, New York
December 10, 1998
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