<PAGE> 1
As filed with the Securities and Exchange Commission on July 15, 1997.
Registration No. 333-17789/811-7967
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Pre-effective Amendment No. 1
Post-effective Amendment No.
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 1
Investment Services for Education Associations Trust
(Exact name of Registrant as Specified in Charter)
1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899-1347
(Address of Principal Executive Office (ZIP Code))
Registrant's Telephone Number: (516) 467-0200
Michael P. Malloy
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practical after the
effective date of this Registration Statement.
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, Registrant has registered an indefinite number of shares of its beneficial
interest, which includes Investment Services for Education Associations Money
Market Fund, under the Securities Act of 1933.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE> 2
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS TRUST
CROSS-REFERENCE SHEET
Between Items Enumerated in Part A
of Form N-1A and Prospectus
ITEM NUMBER CAPTION
OF FORM N-1A IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial *
Information
4. General Description The Trust; Eligible Participants;
of Registrant Investment Objective and
Policies; General Information
5. Management of Fund Management of the Fund
5a. Management's Discussion *
of Fund Performance
6. Capital Stock and General Information;
Other Securities Distributions and Taxes
7. Purchase of Securities How to Invest in the Fund
Being Offered
8. Redemption or Repurchase Redemptions
9. Pending Legal Proceedings *
Between Items Enumerated in Part B
of Form N-1A and Statement of Additional Information
ITEM NUMBER CAPTION IN STATEMENT
OF FORM N-1A OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information *
and History
<PAGE> 3
13. Investment Objectives Investment Objective and
and Policies Management Policies
14. Management of the Fund Management of the Fund
15. Control Persons and Management of the Fund
Principal Holders of
Securities
16. Investment Advisory Investment Advisory Agreement;
and Other Services Plan
17. Brokerage Allocation Portfolio Transactions
and Other Practices
18. Capital Stock and Information About the Fund
Other Securities
19. Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value
Being Offered
20. Tax Status Additional Information About
Taxes
21. Underwriters Distribution Agreement
22. Calculation of Fund Performance
Performance Data
23. Financial Statements Financial Statements
- --------------------
* Omitted since answer is negative or inapplicable
<PAGE> 4
PART A - PROSPECTUS
<PAGE> 5
- --------------------------------------------------------------------------------
PROSPECTUS _____________, 1997
- --------------------------------------------------------------------------------
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS TRUST
The Investment Services for Education Associations Money Market Fund
(the "Fund") is an investment portfolio of the Investment Services for Education
Associations Trust (the "Trust"), which is an open-end, management investment
company. The Fund operates as a money market mutual fund, with the goal to
provide as high a level of current income as is consistent with the preservation
of capital and liquidity. Investment in the Fund is limited to investors who are
education related entities.
Participants may invest or redeem shares without charge or penalty.
Unlimited checkwriting redemption privileges are available to Participants.
This Prospectus sets forth concisely information about the Fund that a
person should know before investing. It should be read and retained for future
reference. Additional information about the Fund, contained in a Statement of
Additional Information dated __________, 1997, has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. For a free copy, write to the address or call the telephone number
listed under "General Information" in this Prospectus.
TABLE OF CONTENTS
EXPENSE SUMMARY........................................ 1
THE TRUST; ELIGIBLE PARTICIPANTS....................... 2
INVESTMENT OBJECTIVE AND POLICIES...................... 2
HOW TO INVEST IN THE FUND.............................. 5
REDEMPTIONS............................................ 6
SHAREHOLDER SERVICES................................... 8
MANAGEMENT OF THE FUND................................. 8
YIELD INFORMATION...................................... 11
DISTRIBUTIONS AND TAXES................................ 12
GENERAL INFORMATION.................................... 13
SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY, GUARANTEED BY,
OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENTAL AGENCY. THE FUND SEEKS TO MAINTAIN ITS NET ASSET VALUE PER SHARE AT
$1.00 FOR PURPOSES OF PURCHASES AND REDEMPTIONS, ALTHOUGH THERE CAN BE NO
<PAGE> 6
ASSURANCE THAT IT WILL BE ABLE TO DO SO ON A CONTINUOUS BASIS. INVESTMENT IN THE
FUND INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 7
EXPENSE SUMMARY
The purpose of the following table is to assist you in understanding
the various costs and expenses borne by the Fund. Investors bear these expenses
indirectly because such expenses reduce the amount of income paid by the Fund to
investors as dividends.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<TABLE>
<S> <C>
Management Fees (After Fee Waiver) (1).......................... .00%
12b-1 Fees...................................................... .07%
Other Expenses ................................................. .55%
----
Total Fund Operating Expenses (After Fee Waiver and
Expense Reimbursement).......................................... .62%
====
</TABLE>
- -------------------
(1) No Management Fees are payable through the period ending January 1,
1998. Thereafter, Management Fees are payable at an annual rate of .30%
of average daily net assets. Until January 1, 1998, and thereafter
subject to revision or termination upon 90 days' notice to the Fund,
Cadre Financial Services, Inc. ("Cadre Financial") has agreed to waive
fees and reimburse expenses, to the extent necessary, to maintain the
Fund's total operating expenses (excluding interest, taxes and
extraordinary expenses) at an annual rate of not more than .85% of the
Fund's average net assets for the particular fiscal year. Absent these
fee waivers, Total Fund Operating Expenses would be .92% of the Fund's
average net assets (of which .30% would consist of Management Fees,
.07% would consist of Rule 12b-1 fees, and .55% would consist of Other
Expenses).
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS
<S> <C> <C>
You would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return
and (2) redemption at the
end of each time period. $6.36 $20.03
</TABLE>
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL
INVESTMENT RETURN AND OPERATING EXPENSES MAY BE GREATER OR LESS THAN THOSE
INDICATED. THE FUND IS NEW AND THE ABOVE FIGURES ARE BASED ON ADJUSTMENTS AND
EXPENSES EXPECTED TO BE INCURRED DURING THE FUND'S CURRENT FISCAL YEAR.
-1-
<PAGE> 8
THE TRUST; ELIGIBLE PARTICIPANTS
The Trust is a Delaware business trust. The Fund is a diversified
investment portfolio of the Trust. Only education related entities are eligible
to invest in the Fund.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE. The objective of the Fund is to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity. There can be no assurance that the Fund's investment objective will
be achieved.
To achieve its investment objective, the Fund invests in short-term
money market instruments, consisting exclusively of securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, time
deposits and certificates of deposit, bankers' acceptances, repurchase
agreements and high grade commercial paper and other short-term corporate
obligations.
The Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Fund uses the amortized cost method of
valuing its securities pursuant to Rule 2a-7 ("Rule 2a-7") under the Investment
Company Act of 1940 (the "1940 Act"), certain requirements of which are
summarized below. There can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
The Fund is required to maintain a dollar-weighted average portfolio
maturity of 90 days or less, and purchase only instruments having remaining
maturities of 13 months or less. It will invest only in U.S. dollar denominated
securities which present minimal credit risks, as determined in accordance with
procedures established by the Board of Trustees, and will be "Eligible
Securities" as defined by the Securities and Exchange Commission. Eligible
Securities are (a) securities that are either (i) rated at the time of purchase
in one of the two highest rating categories for debt obligations by at least two
nationally recognized statistical rating organizations (or one rating
organization if the instrument was rated by only one such organization) or, (ii)
are comparable in priority and security with an instrument issued by an issuer
which has such ratings, and (b) securities that are unrated but are of
comparable quality as determined in accordance with procedures established by
the Board of Trustees. The nationally recognized statistical rating
organizations ("NRSROs") currently rating instruments of the type the Fund may
purchase are Moody's Investors Service, Inc., Standard and Poor's Rating Group,
Division of McGraw Hill, Duff & Phelps, Credit Co. and Fitch Investors Service,
Inc. Their ratings are described in the Appendix to the Fund's Statement of
Additional Information.
-2-
<PAGE> 9
PORTFOLIO SECURITIES. The Fund may purchase securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
Obligations of certain agencies and instrumentalities of the U.S. Government,
for example, Government National Mortgage Association pass-through certificates,
are supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality; and
others, such as those issued by the Student Loan Marketing Association, are
supported only by the credit of the agency or instrumentality. Securities issued
or guaranteed by the U.S. Government and its agencies and instrumentalities have
historically involved little risk of loss of principal if held to maturity.
However, no assurance can be given that the U.S. Government would provide
financial support to any agency or instrumentality if it is not obligated to do
so by law.
The Fund may purchase U.S. dollar denominated bank obligations such as
time deposits, certificates of deposit and bankers' acceptances. Time deposits
are non-negotiable deposits maintained in a banking institution for a specified
period of time (in no event longer than seven days) at a stated interest rate.
Certificates of deposit are certificates evidencing the obligation of a bank to
repay funds deposited with it for a specified period of time. Bankers'
acceptances are credit instruments evidencing the obligation of a bank to pay a
draft drawn on it by a customer. These instruments reflect the obligations both
of the bank and of the drawer to pay the face amount of the instrument upon
maturity.
The Fund may also enter into repurchase agreements. Repurchase
agreements involve the acquisition by the Fund of an underlying debt instrument,
subject to the seller's agreement to repurchase the instrument at an agreed upon
time and price. The Fund's custodian or sub-custodian will have custody of, and
will hold in a segregated account, securities acquired by the Fund under a
repurchase agreement. Repurchase agreements are considered by the staff of the
Securities and Exchange Commission to be loans by the Fund. The Fund will enter
into repurchase agreements only with domestic banks with total assets in excess
of one billion dollars or primary government securities dealers reporting to the
Federal Reserve Bank of New York, with respect to securities of the type in
which the Fund may invest. The seller under a repurchase agreement will be
required to maintain the value of the securities subject to the agreement in an
amount that exceeds the repurchase price, and such value will be monitored by
Cadre Financial on an ongoing basis. Certain costs may be incurred by the Fund
in connection with the sale of the securities if the seller does not repurchase
them in accordance
-3-
<PAGE> 10
with the repurchase agreement. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the securities, realization on the
securities by the Fund may be delayed or limited. The Fund will consider on an
ongoing basis the creditworthiness of the institutions with which it enters into
repurchase agreements.
The Fund's investments in commercial paper consist of short-term,
unsecured promissory notes issued to finance short-term credit needs. The
commercial paper purchased by the Fund may consist of direct obligations issued
by domestic and foreign entities.
The Fund also may purchase floating and variable rate demand notes,
which are obligations ordinarily having stated maturities in excess of one year,
but which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding one year, in each case upon not more than 30
days' notice. Variable rate demand notes include master demand notes which are
obligations that permit the Fund to invest fluctuating amounts, which may change
daily without penalty, pursuant to direct arrangements between the Fund, as
lender, and the borrower. The interest rates on these notes fluctuate from time
to time. The issuer of such obligations normally has a corresponding right,
after a given period, to prepay in its discretion the outstanding principal
amount of the obligations plus accrued interest upon a specified number of days'
notice to the holder of such obligations. The interest rate on a floating rate
demand obligation is based on a known lending rate, such as a bank's prime rate,
and is adjusted automatically each time such obligation is adjusted
automatically at specified intervals. Frequently, such obligations are secured
by letters of credit or other credit support arrangements provided by banks.
Because these obligations are direct lending arrangements between the lender and
borrower, it is not contemplated that such instruments will generally be traded,
and there generally is no secondary market for these obligations, although they
are redeemable at face value. Accordingly, where these obligations are not
secured by letters of credit or other credit support arrangements, the Fund's
right to redeem is dependent on the ability of the borrower to pay principal and
interest on demand. Such obligations frequently are not rated by credit rating
agencies, and the Fund may invest in unrated obligations only if Cadre Financial
determines that at the time of investment the obligations are of comparable
quality to the other obligations in which the Fund may invest in accordance with
procedures established by the Board of Trustees. The Fund will not invest more
than 10% of the value of its net assets in floating or variable rate demand
obligations as to which it cannot exercise the demand feature on not more than
seven days' notice if there is no secondary market available for these
obligations, and in other securities that are illiquid. Cadre Financial will
-4-
<PAGE> 11
continuously monitor the creditworthiness of issuers of variable and floating
rate instruments in which the Fund invests, and their ability to repay principal
and interest.
In accordance with current SEC regulations, the Fund intends, as a
non-fundamental policy, to limit investments in the securities of any single
issuer (other than securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements fully collateralized by
such securities) to not more than 5% of the value of its total assets at the
time of purchase, except that 25% of the value of the Fund's total assets may be
invested in any one issuer for a period of up to three business days, and
securities subject to certain unconditional demand features are subject to
different diversification requirements as described in the Statement of
Additional Information. In addition, the Fund will limit its investments in all
securities that are not first tier securities (as defined by the SEC), to 5% of
its total assets, with investment in any one such issuer being limited to no
more than 1% of its total assets or $1 million, whichever is greater, measured
at the time of purchase.
CERTAIN ADDITIONAL POLICIES. This paragraph describes certain
fundamental policies of the Fund which cannot be changed without approval by the
holders of a majority (as defined in the 1940 Act) of the Fund's outstanding
shares. The Fund may not (i) borrow money or issue senior securities, except to
the extent permitted by the 1940 Act or (ii) purchase the securities of any
issuer (other than obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities and repurchase agreements collateralized by
such obligations, and other than as permitted under Rule 2a-7) if, as a result,
(a) more than 25% of the value of the Fund's total assets would be invested in
the securities of a single issuer, or (b) with respect to 75% of its total
assets, more than 5% of the value of its total assets would be invested in the
securities of a single issuer, or it would own more than 10% of the outstanding
voting securities of a single issuer.
HOW TO INVEST IN THE FUND
ELIGIBILITY FOR PARTICIPATION. Only education related entities are
eligible to invest in the Fund.
INVESTING IN THE FUND. An initial investment in the Fund must be
preceded or accompanied by a properly completed registration form. An investor
is required to certify in its registration form that it is an education related
entity. A properly completed registration form must be on file when making a
redemption from an account. The registrations should be forwarded to:
-5-
<PAGE> 12
Attention: New Accounts
Cadre Financial Services, Inc.
905 Marconi Avenue
Ronkonkoma, NY 11779-7255
An initial investment of at least $1.00 is required. Subsequent
investments for an existing account may be made by phone and need not be
accompanied by a completed registration form.
All payments should be in U.S. dollars by wire transfer, Depository
Transfer Check ("DTC"), Automated Clearing House Credits ("ACH") or by check.
Purchases will not be effected until payments made in other than Federal Funds
are converted to Federal Funds, which is ordinarily within two business days of
receipt. Purchase orders are only effected on a day on which both the Fund's
custodian and the New York Stock Exchange (the "Exchange") are open for business
(a "Business Day"). If an order is received by Cadre Financial by 5:00 p.m. New
York Time on a Business Day and Federal Funds are received by 5:00 p.m. New York
Time on the same Business Day, the order will be effected that Business Day at
the net asset value per share next determined after receipt by Cadre Financial
of the order. If an order is received by Cadre Financial after 5:00 p.m. New
York Time on a Business Day or Federal Funds are received after 5:00 p.m. New
York Time on the same Business Day, the order will be effected on the next
Business Day.
For purchases by wire transfer call the Fund's toll-free number
1-800-221-4524, Ext. 2, and for purchases by DTC or ACH call the Custodian's
toll-free number 1-800-245-6524.
The net asset value per share of the Fund is the value of all
securities and other assets owned by the Fund, less its liabilities, divided by
the number of outstanding shares of the Fund. The net asset value per share of
the Fund is determined on each Business Day as of 5:00 p.m. New York Time. In
computing net asset value, the Fund uses the amortized cost method of valuation
as described in the Statement of Additional Information under "Determination of
Net Asset Value."
REDEMPTIONS
GENERAL. Participants may request redemption of shares at any time.
Redemption requests should be transmitted to Cadre Financial Services, Inc., 905
Marconi Avenue, Ronkonkoma, New York 11779-7255. When a request is received in
proper form, the Fund will redeem the shares at the next determined net asset
value. Written redemption requests must be signed by an authorized person noted
on the registration form.
-6-
<PAGE> 13
Redemption proceeds of at least $10,000 will be wired to any member
bank of the Federal Reserve System, for deposit in a Participant's account, in
accordance with the redemption request. Amounts under $10,000 will be paid by
check.
The Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of the
transfer of its shares) for such periods as are permitted under the 1940 Act.
CHECK REDEMPTION PRIVILEGE. Participants may use the Fund's free and
unlimited checkwriting services by completing a checkwriting authorization form
and signing the two custodian bank signature cards. Participants may issue
checks in any dollar amount. Checks will be honored only if they are properly
signed by a person authorized on the signature card. Although the checkwriting
service is free, there is a charge for stop-payments or if the Fund cannot
honor a redemption check due to insufficient funds or other valid reasons.
Checkwriting privileges may be modified or terminated at any time by the Fund.
REDEMPTION BY WIRE OR TELEPHONE. Shares may be redeemed by wire or
telephone as long as the person requesting such withdrawal has been authorized
on the registration form. Wire or telephone requests will generally be honored
the same Business Day as long as the Fund is notified by 5:00 p.m. New York Time
(earnings stop the same day). The redemption proceeds will be wired to the
Participant's bank account, so long as the amount is $10,000 or more. If less, a
check will be issued in payment of the redemption. No charge is currently
imposed for wiring redemption proceeds. The Fund reserves the right to wire
redemption proceeds up to seven days after receiving the redemption order if, in
the judgment of the investment adviser, an earlier payment could adversely
affect the Fund. In making redemption requests the names of the registered
shareholders and their account numbers must be supplied.
Neither the Fund nor any service provider of the Fund will be
responsible for any loss or expense for acting upon any telephone instructions
that are reasonably believed to be genuine. In attempting to confirm that
telephone instructions are genuine, the Fund will use such procedures as are
considered reasonable, including requesting certain personal or account
information to confirm the identity of the shareholder.
REDEMPTION PAYMENT BY AUTOMATED CLEARING HOUSE (ACH). Redemption
payments may be by ACH as long as the person requesting the ACH debit is
authorized on the registration form. A participant may call the Fund's toll-free
number 1-800-221-4524, Ext. 2, by 5:00 pm New York Time, and request an ACH
withdrawal. Such withdrawal will become effective the same Business Day and will
be in the Participant's designated bank
-7-
<PAGE> 14
account in "collected funds." Earnings on the Participant's account continue the
day the withdrawal request is initiated. There is no minimum redemption payments
required for redemption payments by ACH.
SHAREHOLDER SERVICES
Participants may open as many accounts with the Fund as they desire.
Each account may utilize the Fund's checkwriting services.
Participants may call the Fund's toll-free number 1-800-221-4524, Ext.
2, prior to 5:00 p.m. New York Time any Business Day to make an internal
transfer between their different Fund accounts the same day. (Earnings stop
accruing in an account when the withdrawal is effected, and start accruing when
such transfer is effected).
Participants will receive the confirmation reflecting an opening
balance, activity and closing balance each day their account has activity. A
monthly statement will be sent to each participant, reflecting an opening
balance, all transactions for the month and a closing share balance. In
addition, the statement will reflect the earnings for the month (also
year-to-date) and capital gains for the year.
Participants currently receive the Fund's unaudited financial
statements after the end of each calendar quarter. Once a year, participants
will receive the Fund's audited annual financial statements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Board of Trustees of the Trust is
responsible for the general supervision of the business and affairs of the
Trust.
INVESTMENT ADVISER. Cadre Financial Services, Inc., located at 905
Marconi Avenue, Ronkonkoma, New York, 11779-7255, serves as the Fund's
investment adviser. Subject to the direction of the Board of Trustees, it is
responsible for the overall management of the Trust's investment affairs under
the terms of an Investment Advisory Agreement. Pursuant to such Investment
Advisory Agreement, Cadre Financial is responsible for supervising continuously
the investment program of the Fund, determining what investments shall be
purchased or sold by the Fund and arranging for the purchase and sale of
investments held by the Fund. Cadre Financial will be paid fees monthly for its
services as investment adviser calculated as a percentage of the Fund's average
daily net assets. Such fees are payable at an
-8-
<PAGE> 15
annual rate of .15% of such assets. However, no fees are payable through the
period ending January 1, 1998. Cadre Financial serves as investment adviser to
collective, short-term investment funds established for a number of local
governmental municipal and health care entities. Two of those funds are
registered under the 1940 Act. As of March 31, 1997, Cadre Financial and its
affiliates managed or administered approximately $5.55 billion in assets. Cadre
Financial is a subsidiary of AMBAC Inc. ("AMBAC"). AMBAC is a holding company
that provides through its affiliates financial guarantee insurance and financial
services to clients.
ADMINISTRATOR. Cadre Financial also serves as the Fund's administrator
under the terms of an Administration Agreement. Pursuant to such Administration
Agreement, Cadre Financial is responsible for: furnishing to the Fund
facilities, equipment and personnel to carry out administrative services,
including reports to shareholders and the Securities and Exchange Commission;
calculating the net asset value for the Fund's shares; paying the costs of
maintaining the Fund's offices and necessary equipment; preparing the Fund's tax
returns; maintaining the Fund's books and records; providing facilities to
receive and process applications to invest in Fund shares; and answering
inquiries during normal business hours from shareholders concerning the status
of their account and the Fund's investment program. Cadre Financial will be paid
fees monthly for its services as administrator as a percentage of the Fund's
average daily net assets. Such fees are payable at an annual rate of .15% of
such assets. However, no fees are payable through the period ending January 1,
1998.
During the period ending January 1, 1998, and thereafter subject to
revision or termination upon 90 days' notice to the Fund, Cadre Financial has
agreed to waive fees and reimburse expenses, to the extent necessary, to
maintain the Fund's total operating expenses (excluding interest, taxes, and
ordinary expenses) at an annual rate of not more than .85% of the Fund's average
net assets for the particular fiscal year. This has the effect of lowering the
overall expense ratio of the Fund and increasing the yield to the participants
at the time such amounts are reimbursed. The Fund will not pay Cadre at a later
time for any fees waived or operating expenses reimbursed. See "Management of
the Fund - Trust Expenses."
TRANSFER AGENT AND DISTRIBUTOR. Cadre Financial is the Fund's transfer
and dividend disbursing agent, and Cadre Securities, Inc. ("Cadre Securities"),
an affiliate of Cadre Financial and a subsidiary of AMBAC, also located at 905
Marconi Avenue, Ronkonkoma, New York, 11779-7255, is the Fund's distributor.
-9-
<PAGE> 16
CUSTODIAN. Bank One Columbus, NA, 100 East Broad Street, Columbus, OH
43271 is the Fund's custodian.
OTHER. The Fund has a Plan under which the Fund may compensate
organizations ("Organizations") for certain functions, including without
limitation for: (a) license of its logos in informational materials prepared
regarding the Fund; (b) conferring with, advising and providing the Fund and
Cadre Financial, Cadre Securities and their affiliates (collectively, the
"Service Providers"), information about the members of or persons associated
with the Organization and others who are eligible to invest in the Fund in order
to assist Cadre Financial, Cadre Securities, and their affiliates in providing
services to the Fund and its shareholders; (c) scheduling and announcing through
its publications, informational meetings and seminars at which representatives
of Cadre Securities will discuss the Fund and related matters; (d) conferring
with Service Providers as to local facilities to be used in connection with the
administration and operation of the Fund; (e) assisting in the preparation and
dissemination of information with respect to the existence of the Fund; (f)
allowing the use of its publications to give information on how to obtain
material concerning the Fund; (g) conferring with the Service Providers
regarding coordination of efforts and the resolution of operational difficulties
that may arise between the Fund and persons that are or may become shareholders
in the Fund; (h) providing Cadre Securities with mailing lists of potential
investors in the Fund; and (i) retaining industry associations and others to
assist the Organization in fulfilling its obligations under the Agreement with
the Trust. Payments by the Fund under the Plan will be calculated daily and paid
monthly at a rate of up to .02% of the average daily net asset value of Shares
of the Fund; and .05% of the average daily net asset value of Shares owned of
record or beneficially by members of persons associated with the Organization.
Such fee may be allocated among the specific functions.
TRUST EXPENSES. The Fund's service contractors bear all expenses in
connection with the performance of their services (including expenses of all
employees or office space and facilities necessary to provide services) and the
Fund bears the expenses incurred in its operations (including interest, taxes,
expenses of Trustees, legal and audit expenses and custodial fees). From
time-to-time, Cadre Financial and/or the Fund's other service contractors may
waive fees and/or assume certain expenses of the Fund. This will have the effect
of increasing yield to investors at the time such fees are not received or
amounts are assumed and decreasing yield when such fees or amounts are
reimbursed.
Cadre Financial has agreed to pay all of the Fund's organizational
expenses, which the Trust estimates will be approximately $42,670. The Fund will
begin reimbursing Cadre
-10-
<PAGE> 17
Financial for those expenses ratably during the 60 month period after the Fund
reaches $25,000,000 in total assets for a period of 30 consecutive days.
YIELD INFORMATION
From time to time, yield and effective yield of the Fund may be quoted
in advertisements, sales literature or reports to shareholders. Both yield
figures are based on historical earnings and are not intended to indicate future
performance. It can be expected that these yields will fluctuate substantially.
The yield of the Fund refers to the income generated by an investment in the
Fund over a seven-day period (which period will be stated in the advertisement).
This income is then annualized. That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52 week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly, but, when annualized, the income earned by an investment
in the Fund is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment. The Fund's yield and effective yield may reflect fee waivers
and/or absorbed expenses pursuant to any undertaking that may be in effect.
Yield information is useful in reviewing the Fund's performance, but
because yields will fluctuate, under certain conditions such information may not
provide a basis for comparison with domestic bank deposits, other investments
which pay a fixed yield for a stated period of time, or other investment
companies which may use a different method of computing yield. Yield is
generally a function of the kind and quality of the instruments held in a
portfolio, portfolio maturity, operating expenses and market conditions.
The yields of the Fund may be compared to those of other mutual funds,
and to those of products offered by banks and thrifts, to other relevant indices
or to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
Fund's yields may be compared to Donoghue's Money Fund Averages, which are
averages compiled by Donoghue's Money Fund Report. Yield data as reported in
national financial publications, including Lipper Analytical Services, Inc.,
IBC/Donoghue's Money Fund Report, Forbes, Barron's, The Wall Street Journal and
The New York Times, or in publications of a local or regional nature, may also
be used in comparing the yield of the Fund.
-11-
<PAGE> 18
DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. Shareholders of the Fund are entitled to
dividends and distributions arising from net investment income and net realized
gains, if any, earned by investments held by the Fund. The Fund declares
dividends from net investment income daily and pays such dividends monthly.
Shares begin accruing dividends on the day the purchase order for the shares is
executed and continue to accrue dividends through and including the day before
the redemption order for the shares is executed. Although the Fund does not
expect to realize net long-term capital gains, any such capital gains as may be
realized will be distributed at least once a year.
Dividends are paid in the form of additional full and fractional shares
of the Fund, unless the shareholder elects to receive dividends in cash.
Reinvested dividends receive the same tax treatment as dividends paid in cash.
Such election or any revocation thereof must be made in writing to Cadre
Financial at 905 Marconi Avenue Campus, Ronkonkoma, New York 11779-7255, and
will become effective with respect to dividends paid after its receipt by the
dividend disbursing agent.
The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
it is intended that the Fund will qualify as a regulated investment company as
long as such qualification is in the best interest of its shareholders. Such
qualification generally relieves the Fund of liability for federal income taxes
to the extent its earnings are distributed in accordance with applicable
provisions of the Code.
In connection with such tax qualification, the Fund contemplates
declaring as dividends at least 90% of its investment company taxable income for
each taxable year. An investor in the Fund who receives a dividend derived from
investment company taxable income (which includes any excess of net short-term
capital gain over net long-term capital loss) must treat it is as ordinary
income in the computation of his gross income, whether such dividend is paid in
cash or additional shares of the Fund.
Because all of the net investment income of the Fund is expected to be
derived from earned interest, it is anticipated that all dividends paid by the
Fund will be taxable as ordinary income to shareholders who are not exempt from
Federal income taxes and that no part of any distribution paid by the Fund will
be eligible for the dividends received deduction for corporations.
Although the Fund anticipates that it will not have net long-term
capital gain, any distribution of the Fund's excess of
-12-
<PAGE> 19
net long-term capital gain over its net short-term capital loss will be taxable
to shareholders of the Fund as long-term capital gain regardless of how long the
shareholders has held shares of the Fund.
Dividends declared in December of any year payable to shareholders of
record on a specified date in December will be deemed for Federal income tax
purposes to have been paid by the Fund and received by shareholders on December
31, if such dividends are paid during January of the following year.
Shareholders will be advised at least annually as to the Federal income
tax consequences of dividends and distributions made each year. The information
above is only a summary of some of the federal tax consequences generally
affecting the Fund and its Participants.
OTHER TAX INFORMATION. In addition to federal taxes, participants may
be subject to state or local taxes on their investment. Participants should
consult their tax advisers to determine whether the Fund is suitable to their
particular tax situation.
When participants sign their registration form, they will be asked to
certify that their Social Security or Taxpayer Identification Number is correct
and that they are not subject to back-up withholding for failing to report
income to the IRS. If participants do not comply with IRS regulations, the IRS
can require the Fund to withhold 31% of distributions from their account.
GENERAL INFORMATION
The Trust was organized as a Delaware business trust on December 4,
1996. The Amended and Restated Agreement of Trust (the "Trust Instrument")
permits the Board of Trustees to issue an unlimited number of full and
fractional shares of beneficial interest of one or more investment portfolios
("Portfolio"), or classes thereof, as the Trustees shall from time to time
create and establish. Each share represents an equal proportionate interest in
the Fund. All dividends and distributions on shares of a Portfolio will be
distributed pro rata to shareholders of that class. The Trustees may classify or
reclassify any unissued shares of any Portfolio, or class thereof, into one or
more additional Portfolios or classes. The Fund does not intend to issue share
certificates. The Fund is the initial Portfolio of the Trust.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held, and will vote in
the aggregate, except as otherwise
-13-
<PAGE> 20
expressly required by law or when the Board of Trustees determines that the
matter to be voted on affects only the interest of shareholders of a particular
Portfolio or class thereof.
The Trust is not required under Delaware law to hold annual shareholder
meetings and intends to do so only if required by the 1940 Act. However,
pursuant to the Trust Instrument, special meetings of shareholders will be
called by the Trustees upon written request of shareholders owning, at least a
majority of the shares outstanding and entitled to vote, except to the extent
that a lesser percentage is prescribed by the 1940 Act. Additionally, pursuant
to an undertaking by the Trust with the SEC, shareholders have the right to call
a meeting of shareholders to consider the removal of one or more Trustees and
such meeting will be called when requested in writing by the holders of record
of 10% or more of the Trust's outstanding shares. To the extent required by law,
the Trust will assist in shareholder communications in such matters. The Board
of Trustees will call a meeting of shareholders for the purpose of electing
Trustees if, at any time, less than a majority of the Trustees holding office at
the time had been elected by shareholders.
Cadre Financial maintains a record of share ownership and sends
investors confirmations and statements of account. Shareholder inquires may be
made by writing to the Fund at 905 Marconi Avenue, Ronkonkoma, New York
11779-7255, or by calling 1-800-221-4524, Ext. 215.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
-14-
<PAGE> 21
PART B - STATEMENT OF ADDITIONAL INFORMATION
<PAGE> 22
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS TRUST
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information, which is not a prospectus,
should be read in conjunction with the current Prospectus of the Investment
Services of Education Associations Money Market Fund (the "Fund") dated
______________, 1997, as it may be revised from time to time. To obtain a copy
of the Fund's Prospectus, please write to Cadre Financial Services, Inc. at 905
Marconi Avenue, Ronkonkoma, New York 11779-7255 or call (800) 221-4524, Ext. 2.
Cadre Financial Services, Inc. ("Cadre Financial") serves as the
Fund's investment adviser and transfer and dividend disbursing agent. Cadre
Securities, Inc. ("Cadre Securities"), an affiliate of Cadre Financial, is the
Fund's distributor.
Capitalized terms used but not defined herein have the same meaning as
in the Prospectus.
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES................ 1
MANAGEMENT OF THE FUND...................................... 3
INVESTMENT ADVISORY AGREEMENT............................... 5
ADMINISTRATION AGREEMENT.................................... 6
THE PLAN.................................................... 6
DISTRIBUTION AGREEMENT...................................... 7
DETERMINATION OF NET ASSET VALUE............................ 8
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............. 9
FUND PERFORMANCE............................................ 9
ADDITIONAL INFORMATION ABOUT TAXES.......................... 12
PORTFOLIO TRANSACTIONS...................................... 14
INFORMATION ABOUT THE FUND.................................. 14
CUSTODIAN, COUNSEL AND INDEPENDENT AUDITORS................. 16
MISCELLANEOUS............................................... 16
FINANCIAL STATEMENTS........................................ FS-1
APPENDIX.................................................... A-1
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information or in
the Prospectus in connection with the offering made by the Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Fund, Cadre Financial or Cadre Securities. The
Prospectus does not constitute an offering by the Fund, Cadre
<PAGE> 23
Financial or by Cadre Securities in any jurisdiction in which such offering may
not lawfully be made.
_________________, 1997
<PAGE> 24
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following policies and limitations supplement those set forth in
the Prospectus. Unless otherwise noted, whenever an investment policy or
limitation states a maximum percentage of the Fund's assets that may be invested
in any security or other asset, or sets forth a policy regarding quality
standards, such standard or percentage limitation shall be determined
immediately after and as a result of the Fund's acquisition of such security or
other asset. Accordingly, any later increase or decrease beyond the specified
policy or limitation resulting from a change in values, net assets, or other
circumstances will not be considered when determining whether the investment
complies with the Fund's investment policies and limitations.
The Fund's fundamental investment limitations cannot be changed without
approval of a "majority of the outstanding voting securities" (as defined in the
Investment Company Act of 1940 (the "1940 Act")) of the Fund. However, except
for the fundamental investment limitations set forth below and those identified
as such in the Prospectus, the investment policies and limitations described in
this Statement of Additional Information and the Prospectus are not fundamental
and may be changed without shareholder approval.
The following and those described as "certain fundamental policies" in
the Prospectus are the Fund's fundamental investment limitations. The Fund may
not:
(1) Purchase any securities which would cause 25% or more of the value
of its total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, provided that (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government, any state, territory or possession
of the United States, the District of Columbia or any of their authorities,
agencies, instrumentalities or political subdivisions and repurchase agreements
secured by such instruments, (b) wholly-owned finance companies will be
considered to be in the industries of their parents if their activities are
primarily related to financing the activities of the parents, (c) utilities will
be divided according to their services, for example, gas, gas transmission,
electric and gas, electric and telephone will each be considered a separate
industry, and (d) personal credit and business credit business will be
considered separate industries.
(2) Underwrite the securities of other issuers, except to the extent
that the purchase of securities directly from the issuer thereof in accordance
with the Fund's investment objective, policies and limitations may be deemed to
be underwriting.
-1-
<PAGE> 25
(3) Purchase or sell real estate unless acquired as the result of
ownership of securities (but this shall not prevent the Fund from purchasing and
selling marketable securities issued by companies or other entities or
investment vehicles that deal in real estate or interests therein, nor shall
this prevent the Fund from purchasing interest in pools of real estate mortgage
loans).
(4) Make loans to others, except through the purchase of debt
obligations and through repurchase agreements as described in the Prospectus.
(5) Purchase or sell commodities or commodity contracts, except it may
engage in futures contracts, and related options and options on securities or
indices of securities and similar instruments.
The following are nonfundamental policies that may be changed without
shareholder approval. The Fund may not:
(1) Sell securities short, or write or purchase put or call options,
except in connection with futures contracts, and related options and options on
securities or indices of securities and similar instruments.
(2) Invest in companies for the purpose of exercising control.
(3) Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of assets and
except as may be otherwise permitted under the Investment Company Act of 1940.
(4) Purchase securities on margin, make short sales of securities or
maintain a short position, except (a) in connection with the purchase or sale of
commodities or commodities contracts, including futures contracts, and related
options and in options on securities or indices of securities and similar
instruments, and (b) the Fund may obtain short-term credit as may be necessary
for the clearance of purchases and sales of portfolio securities.
As stated in the Prospectus, the Fund intends, as a non-fundamental
policy, to diversify its investments in accordance with current SEC regulations.
A security that has an unconditional demand feature ("Put") which is issued by a
person that, directly or indirectly, does not control, and is not controlled by
or under common control with, the issuer of the security (a "Put Issued By A
Non-Control Person") is subject to the following diversification requirements:
immediately after the acquisition of the security, the Fund may not have
invested more than 10% of its total assets in securities issued by or subject to
Puts from the same person, except that the Fund may
-2-
<PAGE> 26
invest up to 25% of its total assets in securities subject to Puts Demand
Features of persons that are first tier securities (as defined by the SEC). A
Put that is not a Put Issued By A Non-Control Person may not exceed 10% of
assets.
MANAGEMENT OF THE FUND
Trustees and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below.
<TABLE>
<CAPTION>
Positions with Principal Occupation
Name and Address the Trust Age During Past Five Years
- ---------------- --------- --- ----------------------
<S> <C> <C> <C>
Richard I. Bauer* Trustee 57 President, Cadre
568 High Street Securities, Inc. since
Pottstown, Pennsylvania 19464 1994; Director, Cadre
Securities, Inc.;
Director and Senior Vice
President, Cadre
Financial Services,
Inc.; Director, Keystone
Federal Credit Union;
and Executive Vice
President, Cadre
Financial Services, Inc.
(1990-1994).
Ronald E. Everett Trustee 55 Professor, Northern
Illinois Association of Illinois University; and
School Business Officials Executive Director,
244 Graham Hall Illinois Association of
Northern Illinois University School Business Officials.
DeKalb, Illinois 60115
Dale G. Jensen Trustee 56 Executive Director,
Minnesota Association of Minnesota Association of
School Administrators School Administrators.
1884 Como Avenue
St. Paul, Minnesota 55108
Gerard E. Keidel Trustee 57 Executive Director,
Michigan Association of Michigan Association of
School Administrators School Administrators;
421 W. Kalamazoo Director, Michigan Liquid
Lansing, Michigan 48933 Asset Fund; Director, SET,
Inc. (Insurance Pools);
Director, SEG, Inc.
(Insurance Pools);
Superintendent of Schools,
Mona Shore Schools (1976-
1991);
</TABLE>
-3-
<PAGE> 27
<TABLE>
<CAPTION>
Positions with Principal Occupation
Name and Address the Trust Age During Past Five Years
- ---------------- --------- --- ----------------------
<S> <C> <C> <C>
William T. Sullivan, Jr.* Trustee 51 Chairman, Chief Executive Officer and
905 Marconi Avenue Director, Cadre Financial Services,
Ronkonkoma, New York 11779 Inc.; Chairman and Director, Cadre
Securities, Inc.; Director, Investment
Services for Educational Associations;
and Trustee, Cadre Network Health
Financial Services Trust.
Donald I. Tharpe* Chairman of the 45 Executive Director,
Association of School Board, President and Association of School
Business Officials Treasurer Business Officials
International International.
11401 North Shore Drive
Reston, Virginia 22090
Carter D. Ward Trustee 51 Executive Director,
2100 I-70 Drive S.W. Missouri School Boards
Columbia, Missouri 65203 Association; and Director,
Missouri Securities
Investment Program.
Ted C. Witt Trustee 40 Executive Director and
California Association of Chief Executive Officer,
School Business Officials California Association of
1531 I Street School Business Officials;
#310 Director of Community and
Sacramento, California 95814 Government Relations, San
Juan Unified School
District (1986 to 1992).
William M. Sullivan** Secretary 30 General Counsel, Cadre
905 Marconi Avenue Financial Services, Inc.;
Ronkonkoma, New York 11779 and Vice President of
Cadre Securities, Inc.
</TABLE>
- ---------------------
* Messrs. Bauer, Sullivan and Tharpe are "interested" persons of the
Trust as defined in the 1940 Act.
** William M. Sullivan, Secretary of the Trust, is the son of William T.
Sullivan, a trustee of the Trust.
No Trustee or officer receives fees for serving in that capacity.
However, each Trustee who is not an affiliate of Cadre Financial receives
reimbursement of expenses incurred in attending meetings.
-4-
<PAGE> 28
INVESTMENT ADVISORY AGREEMENT
The Fund employs Cadre Financial to furnish investment advisory
services. Under Cadre Financial's Investment Advisory Agreement with the Fund
dated July 1, 1997, Cadre Financial acts as investment adviser and, subject to
the supervision of the Board of Trustees, directs the investments of the Fund in
accordance with its investment objective, policies and limitations as described
in the Fund's Prospectus. Cadre Financial also provides the Fund with all
necessary office facilities and personnel for servicing the Fund's investments,
and pays the salaries of all personnel of Cadre Financial and its affiliates
performing services relating to research, statistical and investment activities.
Cadre Financial will be paid fees monthly for its services as
investment advisor calculated as a percentage of the Fund's average daily net
assets. Such fees are payable at an annual rate of .15% of such assets. However,
no fees are payable through the period ending January 1, 1998.
The Investment Advisory Agreement provides that Cadre Financial shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the performance of the Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence in the performance of its duties or
from reckless disregard by it of its duties and obligations thereunder. The
Agreement will continue in effect until June 30, 1999 and thereafter will be
extended for successive periods of one year, provided that each such extension
is specifically approved (a) by vote of a majority of those members of the
Trust's Board of Trustees who are not interested persons of any party to the
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Trust's Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund. The Agreement is terminable at
any time without cause and without penalty by the Trust's Board of Trustees or
by a vote of a majority of the Trust's outstanding shares upon 60 days' notice
to Cadre Financial, or by Cadre Financial upon 60 days' notice to the Trust, and
terminates automatically upon its "assignment" (as defined in the 1940 Act).
Cadre Financial and Cadre Securities are subsidiaries of AMBAC
Inc.
-5-
<PAGE> 29
ADMINISTRATION AGREEMENT
Cadre Financial, subject of the supervision of the Board of Trustees,
provides the administrative services necessary for the operation of the Fund.
These services include providing office space and office equipment and related
services; supervising all aspects of the Fund's operations, other than
investment operations managed by the investment adviser, marketing the Fund's
shares, and those operations managed by the Fund's custodian; and furnishing
reports, evaluations and analysis for the Board of Trustees. Cadre Financial
will bear all expenses in connection with the performance of its services under
the Administration Agreement. Cadre Financial will be paid fees monthly for its
services as administrator calculated as a percentage of the Fund's average daily
net assets. Such fees are payable at an annual rate of .15% of such assets.
However, no fees are payable through the period ending January 1, 1998.
The Administration Agreement provides that Cadre Financial shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with the performance of the Agreement, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties or from reckless disregard by it of its duties and
obligations thereunder. The Agreement will continue in effect until June 30,
1999 and thereafter will be extended for successive periods of one year,
provided that each such extension is specifically approved (a) by vote of a
majority of those members of the Trust's Board of Trustees who are not
interested persons of any party to the Agreement, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the Trust's Board
of Trustees or by vote of a majority of the outstanding voting securities of the
Fund. The Agreement is terminable at any time without cause and without penalty
by the Trust's Board of Trustees or by a vote of a majority of the Trust's
outstanding shares upon 60 days' notice to Cadre Financial, or by Cadre
Financial upon 60 days' notice to the Trust, and terminates automatically upon
its "assignment" (as defined in the 1940 Act).
THE PLAN
The Plan has been adopted under Rule 12b-1 (the "Rule") under
the 1940 Act. In accordance with the Rule, the Plan provides that a written
report of the amounts expended under the Plan, and the purposes for which such
expenditures were incurred, will be made to the Board of Trustees for its review
at least quarterly. In addition, the Plan provides that it may not be amended to
increase materially the costs which shares of the Fund may bear for distribution
under to the Plan without approval of the
-6-
<PAGE> 30
Fund's shareholders, and that other material amendments of the Plan must be
approved by a majority of the Board of Trustees, and by a majority of the
trustees who are neither "interested persons" (as defined in the 1940 Act) of
the Trust nor have any direct or indirect financial interest in the operation of
the Plan, or in any agreements entered into in connection with the Plan, by vote
cast in person at a meeting called for the purpose of considering such
amendments (the "Non-Interested Plan Trustees"). The selection and nomination of
the trustees of the Trust who are not "interested persons" of the Trust have
been committed to the discretion of the Non-Interested Plan Trustees.
The Trust's Board of Trustees has concluded that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders. The Plan is
subject to annual reapproval by a majority of the Trust's Board of Trustees,
including a majority of the Non-Interested Plan Trustees and is terminable
without penalty at any time with respect to the Fund by a vote of a majority of
the Non-Interested Plan Trustees or by vote of the holders of a majority of the
outstanding shares of the Fund. Any agreement entered into pursuant to the Plan
with an organization is terminable with respect to the Fund without penalty, at
any time, by vote of a majority of the Non-Interested Plan Trustees, by vote of
the holders of a majority of the outstanding shares of the Fund, or by the
organization. Each agreement will also terminate automatically in the event of
its assignment.
The Fund has entered into Agreements under the Plan with the
Association of School Business Officials International ("ASBO"), the American
Association of School Administrators ("ASSA") and the National School Boards
Association ("NSBA"). ASBO will be paid an aggregate fee at an annual rate of
.02% of the Fund's average daily net asset value of Shares and .05% of the
average daily net assets of Shares owned of record or beneficially by Fund
members of ASBO. AASA and NSBA will each be paid an aggregate fee at an annual
rate of .05% of the average daily net assets of Shares owned of record or
beneficially by Fund members of each respective organization.
-7-
<PAGE> 31
DISTRIBUTION AGREEMENT
The Fund has entered into a Distribution Agreement with Cadre
Securities, Inc. an affiliate of Cadre Financial and a subsidiary of AMBAC Inc.,
dated July 1, 1997. Cadre Securities, Inc. will act as the Fund's distributor,
selling shares on a continuous basis as agent, although Cadre Securities, Inc.
is not obligated to sell any particular number of shares. The distributor bears
the costs and expenses of printing and distributing to prospective investors
copies of any prospectuses, statements of additional information and annual and
interim reports of the Fund (after such items have been prepared and set in type
by the Fund) which are used in connection with the offering of shares, and the
costs and expenses of preparing, printing and distributing any other literature
used by the distributor or furnished by it in connection with the offering of
the Fund's shares for sale to the public. The Agreement will continue in effect
until June 30, 1999 and thereafter will be extended for successive periods of
one year, provided that each such extension is specifically approved (a) by vote
of a majority of those members of the Trust's Board of Trustees who are not
interested persons of any party to the Agreement, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the Trust's Board
of Trustees or by vote of a majority of the outstanding voting securities of the
Fund. The Agreement is terminable at any time without cause and without penalty
by the Trust's Board of Trustees or by a vote of a majority of the Trust's
outstanding shares upon 60 days' notice to Cadre Securities, Inc., or by Cadre
Securities, Inc. upon 60 days' notice to the Trust, and terminates automatically
upon its "assignment" (as defined in the 1940 Act).
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is calculated by adding the
value of all portfolio securities and other assets belonging to the Fund,
subtracting the liabilities charged to the Fund, and dividing the result by the
number of shares of the Fund outstanding.
The valuation of the Fund's instruments using amortized cost and the
concomitant maintenance of the Fund's net asset value at $1 per share is
permitted in accordance with Rule 2a-7 under the 1940 Act, pursuant to which the
Fund must adhere to certain conditions. Amortized cost involves valuing an
instrument at its cost and thereafter assuming 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. While this method provides
certainty in valuation, it may result
-8-
<PAGE> 32
in valuations that are higher or lower than the price the Fund would receive if
it sold the instrument.
The Board of Trustees has established procedures designed to stabilize,
to the extent reasonably practicable, the Fund's net asset value calculated on
the basis of amortized cost. The Trustees will review the Fund's holdings, at
such intervals as they deem appropriate, to determine whether the net asset
value calculated by using available market quotations deviates from $1 per share
and, if so, whether such deviation may result in material dilution or is
otherwise unfair to existing shareholders. If the Trustees determine that such a
deviation exists, they will consider such corrective action, if any, as they
deem necessary or appropriate, which may include, without limitation, selling
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity, withholding dividends, reducing the number
of outstanding shares without monetary consideration, redeeming shares in kind,
or establishing net asset value by using available market quotations.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund are sold on a continuous basis by Cadre Securities.
As described in the Prospectus, shares of the Fund are sold and redeemed at
their net asset value as next determined after receipt of the purchase or
redemption order.
The Trust may suspend the right or redemption or postpone the date of
payment for shares of the Fund for more than seven days during any period when
(a) trading in the markets the Fund normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC, exists; (b) the
New York Stock Exchange is closed (other than customary weekend and holiday
closings); or (c) the SEC has by order permitted such suspension. (The Trust may
also suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions.)
If the Trust's Board of Trustees determines that conditions exist which
make payment of redemption proceeds wholly in cash unwise or undesirable, the
Trust may make payment wholly or partly in readily marketable securities or
other property. In such an event, a participant would incur transaction costs in
selling the securities or other property. The Trust has committed that it will
pay all redemption requests by a participant of record in cash, limited in
amount with respect to each participant during any ninety-day period to the
lesser of $250,000 or 1% of the net asset value at the beginning of such period.
-9-
<PAGE> 33
FUND PERFORMANCE
The Fund may quote its performance in various ways. All performance
information supplied by the Fund in advertising is historical and is not
intended to indicate future returns. The Fund's yield and total return fluctuate
in response to market conditions and other factors.
YIELD CALCULATIONS. To compute the Fund's current yield for a period,
the net change in value of a hypothetical account containing one share (such net
change being inclusive of the value of any additional shares issued in
connection with distributions of net investment income as well as net investment
income accrued on both the original share and any such additional shares, but
exclusive of realized gains and losses from the sale of securities and
unrealized appreciation and depreciation) is divided by the value of the account
at the beginning of the period to obtain a base period return, which is
multiplied by 365/7. The Fund may also calculate an "effective yield" with
respect to shares of the Fund by adding 1 to the base period return (calculated
as above), raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result. Yields quoted in advertising may be based on historical
seven-day periods.
Yield information may be useful in reviewing the Fund's performance and
in providing a basis for comparison with other investment alternatives. However,
the Fund's yield fluctuates, unlike investments that pay a fixed interest rate
over a stated period of time. When comparing investment alternatives, investors
should also note the quality and maturity of the portfolio securities held by
the respective investment companies they have chosen to consider.
Investors should recognize that in periods of declining interest rates
the Fund's yield will generally tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates the Fund's yield will
generally tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to the Fund from the continuous sale of its shares will
likely be invested in instruments producing lower yields than the balance of the
Fund's portfolio, thereby reducing the current yield of the Fund. In periods of
rising interest rates, generally the opposite can be expected to occur.
The Fund's performance may be compared in advertisements, sales
literature or in reports to shareholders to the performance of other mutual
funds in general or to the performance of particular types of mutual funds,
especially those with similar objectives. This comparative performance could be
expressed as a ranking prepared by Lipper Analytical Services, Inc. ("Lipper"),
an independent service that monitors the performance of mutual
-10-
<PAGE> 34
funds. The Lipper performance analysis ranks funds on the basis of yield,
assuming reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to performance rankings, the Fund may compare its
total expense ratio to the average total expense ratio of all money market funds
as tracked by Lipper. A fund's total expense ratio is a significant factor in
comparing money market investments because of its effect on net yield.
Advertisements, sales literature or reports to shareholders may from time to
time also include a discussion and analysis of the Fund's performance, including
without limitation, those factors, strategies and techniques that, together with
market conditions and events, materially affected the Fund's performance.
The Fund may also include calculations in communications to
shareholders that describe hypothetical investment results. (Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of any Fund.) Such calculations may from time to time include
discussions or illustrations of the effects of compounding in advertisements.
"Compounding" refers to the fact that, if dividends or other distributions on a
Fund investment are reinvested by being paid in additional Fund shares, any
future income of a Fund would increase the value of the Fund investment more
quickly than if dividends or other distributions had been paid in cash. The Fund
may also include discussions or illustrations of the potential investment goals
of a prospective investor (including but not limited to tax and/or retirement
planning), investment management techniques, policies or investment suitability
of the Fund, economic conditions, legislative developments (including pending
legislation), the effects of inflation and historical performance of various
asset classes. From time to time advertisements or communications to
shareholders may summarize the substance of information contained in shareholder
reports (including the investment composition of a Fund), as well as the views
of the investment adviser as to current market, economic, trade and interest
rate trends, legislative, regulatory and monetary developments, investment
strategies and related matters believed to be of relevance to a Fund. The Fund
may also include in advertisements charts, graphs or drawings which illustrate
the potential risks and rewards of investment in various investment vehicles. In
addition, advertisements or shareholder communications may include a discussion
of certain attributes or benefits to be derived by an investment in the Fund and
may include testimonials as to the investment adviser's capabilities by clients.
Such advertisements or communications may include symbols, headlines or other
material which highlight or summarize the information discussed in more detail
therein. With proper authorization, the Fund may reprint articles (or excerpts)
written regarding the Fund and provide them to prospective shareholders.
Performance
-11-
<PAGE> 35
information with respect to the Fund is generally available by calling
1-800-221-4524.
The Fund may also compare its performance to several products offered
by banks and thrifts. Unlike the Fund, certain bank and thrift products such as
Money Market Deposit Accounts, Super NOW Accounts, and Certificates of Deposit
are insured by the Federal Deposit Insurance Corporation. The Fund may compare
its yield, both the 7-day annualized current yield and the "effective yield," to
those of Money Market Accounts, Super NOW Accounts, and Certificates of Deposit
quoted in the Bank Rate Monitor National Index, an average of the quoted rates
for 100 leading banks and thrifts in 10 U.S. cities, chosen to represent the 10
largest Consumer Metropolitan Statistical Areas. In addition, the Fund may
compare its yield to the Auction Average Discount Rate for 182-day Treasury
Bills. Six-month Treasury Bills are issued at a discount from their face value
in weekly auctions. Consequently, their yield is quoted as a yield to maturity
reflecting the accretion of the discount as the bill matures. The Fund may also
compare its yield to the Federal Funds rate, which is the interest rate that
banks charge each other for overnight loans through the Federal Reserve System
to meet reserve requirements. Both the yield on 6-month Treasury Bills and the
Federal Funds rate are considered to be sensitive indicators of interest rates
trends.
In addition to the publications listed in the Fund's Prospectus, yield
data as reported in the following publications may be used in comparing the
yields of the Fund to those of other mutual funds with similar investment
objectives: Business Week, Investor's Business Daily, Kiplinger, U.S. News,
Financial World, USA Today, Morningstar, Mutual Fund Monitor, and American
Banker.
ADDITIONAL INFORMATION ABOUT TAXES
The following is only a summary of certain additional considerations
generally affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning. Investors
are advised to consult their tax advisers with specific reference to their own
tax situations.
The Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"). By following this
policy, the Fund expects to eliminate or reduce to a nominal amount the federal
income taxes to which it may be subject. If for any taxable year the Fund does
not qualify for the special federal tax treatment afforded regulated investment
companies, all of the Fund's taxable income would be
-12-
<PAGE> 36
subject to tax at regular corporate rates (without any deduction for
distributions to shareholders). In such event, the Fund's dividend distributions
to shareholders would be taxable as ordinary income to the extent of the current
and accumulated earnings and profits of the Fund and would be eligible for the
dividends received deduction in the case of corporate shareholders.
Qualification as a regulated investment company under the Code
requires, among other things, that the Fund distribute to its shareholders an
amount equal to at least the sum of 90% of its investment company taxable income
and tax-exempt income, if any, net of certain deductions for each taxable year.
In general, the Fund's investment company taxable income will be its taxable
income, subject to certain adjustments and excluding the excess of any net
long-term capital gain for the taxable year over the net short-term capital
loss, if any, for such year. The Fund will be taxed on its undistributed
investment company taxable income, if any.
The Fund will not be treated as a regulated investment company under
the Code if 30% or more of the Fund's gross income for a taxable year is derived
from gains realized on the sale of other disposition of securities and certain
other investments held for less than three months (the "Short-Short Test").
Interest (including original issue and market discount) received by the Fund
upon maturity or disposition of a security held for less than three months will
not be treated as gross income derived from the sale or other disposition of
such security within the meaning of this requirement. However, any other income
that is attributable to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for this purpose.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareholders as long-term capital gains,
regardless of how long the shareholder has held the distributing Fund's share
and whether such gains are received in cash or additional Fund shares. The Fund
will designate such a distribution as a capital gain dividend in a written
notice mailed to shareholders after the close of the Fund's taxable year.
Ordinary income of individuals is taxable at a maximum marginal rate of
39.6%; however, because of limitations on itemized deductions otherwise
allowable and the phase-out of personal exemptions, the maximum effective
marginal rate of tax for some taxpayers may be higher. An individual's long-term
capital gains are taxable at a maximum nominal rate of 28%. For corporations,
long-term capital gains and ordinary income are both taxable at a maximum
nominal rate of 35%.
-13-
<PAGE> 37
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses) for each calendar year. The Fund intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and any
capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.
The Trust will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or gross sale proceeds
realized paid to shareholders who have failed to provide a correct tax
identification number in the Revenue Service for failure to properly include on
their return payments of taxable interest or dividends or who have failed to
certify to the Trust that they are not subject to backup withholding when
required to do so or that are "exempt recipients."
OTHER INFORMATION
Depending upon the extent of activities in states and localities in
which its offices are maintained, in which its agents or independent contractors
are located or in which it is otherwise deemed to be conducting business, the
Fund may be subject to the tax laws of such states or localities.
The foregoing discussion is based on tax laws and regulations which are
in effect on the date of this Statement of Additional Information. Such laws and
regulations may be changed by legislative or administrative action.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased directly from the issuer
or an underwriter or a market maker for the securities. Usually no brokerage
commissions are paid by the Fund for such purchases. Purchases from underwriters
of portfolio securities include a concession paid by the issuer to the
underwriter and the purchase price paid to market makers for the securities may
include the spread between the bid and asked price.
Cadre Financial shall attempt to obtain the best net price and
execution in connection with portfolio transactions. Subject to that primary
consideration, dealers may be selected for research, statistical or other
services to enable Cadre Financial to supplement its own research and analysis
with the views and information of other securities firms. Securities
transactions are not directed to securities firms in consideration of sales of
Fund shares or of shares of other funds advised by Cadre Financial.
-14-
<PAGE> 38
Research services furnished by brokers through which the Fund effects
securities transactions may be used by Cadre Financial in advising other funds
it advises and, conversely, research services furnished to Cadre Financial by
brokers in connection with other funds Cadre Financial advises may be used by
Cadre Financial in advising the Fund.
INFORMATION ABOUT THE FUND
The Fund is a portfolio of the Investment Services for Education
Associations Trust, which was organized as a Delaware business trust on December
4, 1996. The Amended and Restated Agreement of Trust (the "Trust Instrument")
permits the Board of Trustees to create additional series (portfolios). At this
time, the Fund is the only portfolio that has been created.
Under the Trust Instrument, the beneficial interest in the Trust may be
divided into an unlimited number of full and fractional transferable shares. The
Trust Instrument authorizes the Board of Trustees to classify or reclassify any
unissued shares of the Trust into one or more additional classes by setting or
changing in any one or more respects, their respective designations,
preferences, conversion or other rights, voting powers, restrictions,
limitations, qualifications and terms and conditions of redemption. Pursuant to
such authority, the Board of Trustees has authorized the issuance of one class
of shares representing interests in the Fund. The Trustees may classify or
reclassify any particular class of shares into one or more series.
Each share of the Trust has a par value of $0.0001, represents an equal
proportionate interest in the Fund, and is entitled to such dividends and
distributions of the income earned on the Fund's assets as are declared at the
discretion of the Trustees. Shares of the Fund have no preemptive rights and
only such conversion or exchange rights as the Board of Trustees may grant in
its discretion. When issued for payment as described in the Prospectus, the
Fund's shares will be fully paid and non-assessable by the Trust. In the event
of the termination of the Trust or the Fund, shareholders of the Fund would be
entitled to receive the assets available for distribution belonging to the Fund,
and a proportionate distribution of any general assets not belonging to any
particular portfolio which are available for distribution. Shareholders of the
Fund are entitled to participate in the net distributable assets of the Fund on
liquidation, based on the number of shares of the Fund that are held by each of
them.
There will normally be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected
-15-
<PAGE> 39
by shareholders, at which time the Trustees then in office will call a
shareholders meeting for the election of Trustees. Shares of the Trust have
noncumulative voting rights and, accordingly, the holders of more than 50% of
the Trust's outstanding shares (irrespective of class) may elect all of the
Trustees. Except as set forth above and in the Prospectus, the Trustees will
continue to hold office and may appoint successor Trustees.
The Trust Instrument authorizes the Board of Trustees, without
shareholder approval, to issue shares to a party or parties and for such amount
and type of consideration and on such terms, subject to applicable law, as the
Trustees may deem appropriate. The Board of Trustees may issue fractional shares
and shares held in the treasury. The Board of Trustees has full power and
authority, in their sole discretion, and without obtaining shareholder approval,
to divide or combine the shares or any class or series thereof into a greater or
lesser number, to classify or reclassify any issued shares or any class or
series thereof into one or more classes or series of shares, and to take such
other action with respect to the Trust's shares as the Board of Trustees may
deem desirable.
The Trust Instrument provides that the Trustees and officers, when
acting in their capacity as such, will not be personally liable to any person
other than the Trust or a beneficial owner for any act, omission or obligation
of the Trust, or any Trustee or any officer of the Trust. Neither a Trustee nor
an officer of the Trust shall be liable for any act or omission in his capacity
as Trustee or as an officer of the Trust, or for any act or omission of any
officer (or other officer) or employee of the Trust or of any other person or
party, provided that the Trust Instrument does not protect any Trustee or
officer against any liability to the Trust or to shareholders of record to which
he would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee or the duties of such officer.
CUSTODIAN, COUNSEL AND INDEPENDENT AUDITORS
Bank One Columbus, NA, 100 East Broad Street, Columbus, OH 43271 is the
Fund's custodian.
Drinker Biddle & Reath LLP, 1345 Chestnut Street, Suite 1100,
Philadelphia, Pennsylvania 19107, serves as counsel to the Company.
Price Waterhouse LLP, ("Price Waterhouse"), 201 North Service Road,
Melville, New York 11747, has been selected as the Fund's independent auditors.
The financial statement included in this Statement of Additional Information has
been
-16-
<PAGE> 40
included in reliance on the report of Price Waterhouse given on the authority of
said firm as experts in auditing and accounting.
MISCELLANEOUS
As used in this Statement of Additional Information and the Prospectus,
a "majority of the outstanding shares" of the Fund, with respect to the approval
of an investment advisory agreement or a change in a fundamental investment
policy, means the lesser of (1) 67% of the shares of the Fund represented at a
meeting at which the holders of more than 50% of the outstanding shares of the
Fund are present in person or by proxy, or (2) more than 50% of the outstanding
shares of such Fund.
-17-
<PAGE> 41
Report of Independent Accountants
To the Shareholder and Board of Directors
of Investment Services for Education Associations Trust
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Investment Services
for Education Associations Trust (the "Fund") at June 23, 1997, in conformity
with generally accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
201 North Service Road
Melville, New York 11747
June 23, 1997
FS-1
<PAGE> 42
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS TRUST
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 23,1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Cash ............................................... $150,000
Deferred organizational expenses (Note 1) .......... 42,670
--------
Total Assets ................................... 192,670
LIABILITIES:
Organizational expenses payable (Note 1) ........... 42,670
--------
Commitments (Notes 1 and 2) ........................
Net Assets ..................................... $150,000
========
Net Assets Value Per Share (150,000 shares of beneficial
interest outstanding; unlimited authorized shares of
beneficial interest of $.0001 par value) ........... $ 1.00
</TABLE>
Note 1 - Investment Services for Education Associations Trust (the "Fund") was
organized as a Delaware business trust on December 4, 1996. To date, the Fund
has had no transactions other than those relating to organizational matters and
the sale of 150,000 shares of beneficial interest for $150,000 to the
Association of School Business Officials International ("ASBO International").
The Fund is registered under the Investment Company Act of 1940, as amended
(the "Act"), as an open-end, diversified management investment company.
Organizational expenses of the Fund incurred prior to the offering of the
Fund's shares will be paid by Cadre Financial Services, Inc. (the
"Administrator"). It is currently estimated that the Administrator will incur
and be reimbursed by the Fund for approximately $42,670 in organizational
expenses. These expenses will be deferred and amortized by the Fund on the
straight-line method over a period not to exceed five years from the date of
commencement of the Fund's operations. The Fund will begin reimbursing the
Administrator for these expenses when Fund assets reach or exceed $25,000,000
for a period of at least 30 days. In the event that at any time during the
five year period beginning with the date of the commencement of operations the
initial shares acquired by ASBO International prior to such date are redeemed,
by any holder thereof, the redemptions proceeds payable in respect of such
shares will be reduced by the pro rata share (based on the proportionate share
of the initial shares redeemed to the total number of original shares
outstanding at the time of redemption) of the then unamortized deferred
organizational expenses as of the date of such redemption. In the event that
the Fund liquidates before the deferred organizational expenses are fully
amortized, ASBO International shall bear such unamortized deferred
organizational expenses.
Note 2 - The Fund has entered into a management agreement with the
Administrator. Certain officers and/or trustees of the Fund are officers and/or
directors of the Administrator. The Fund has retained the Administrator to
manage the Fund's business affairs, supervise the overall day-to-day operations
of the Fund
FS-2
<PAGE> 43
(other than rendering investment advice) and provide all administrative services
to the Fund. Under the terms of an administration agreement (the "Administration
Agreement"), the Administrator maintains certain of the Fund's books and records
and furnishes, at its own expense, such office space, facilities, equipment,
supplies, clerical help and bookkeeping and certain legal services as the Fund
may reasonably require in the conduct of its business, including the preparation
of prospectuses, statements of additional information, proxy statements and
reports required to be filed with federal and state securities commissions
(except insofar as the participation or assistance of independent accountants
and attorneys is, in the opinion of the Administrator, necessary or desirable).
In addition, the Administrator pays the salaries of all personnel, including
officers of the Fund, who are employees of the Administrator. The Administrator
also bears the cost of the Fund's telephone service, heat, light, power and
other utilities.
As full compensation for the services and facilities furnished to the
Fund and expenses of the Fund assumed by the Administrator, the Fund will pay
the Administrator monthly compensation calculated daily by applying the annual
rate of 0.15% of the daily net assets of the Fund determined as of the close of
each business day.
Pursuant to an investment advisory agreement (the "Advisory Agreement")
with Cadre Financial Services, Inc. (the "Adviser"), the Fund has retained the
Adviser to invest the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Adviser obtains and evaluates
such information and advice relating to the economy, securities markets, and
specific securities as it considers necessary or useful to continuously manage
the assets of the Fund in a manner consistent with its investment objectives. In
addition, the Adviser pays the salaries of all personnel, including officers of
the Fund, who are employees of the Adviser.
As full compensation for the services furnished to the Fund and
expenses of the Fund, assumed by the Adviser, the Fund pays the Adviser monthly
compensation calculated daily by applying the annual rate of 0.15% of the daily
net assets of the Fund determined as of the close of each business day.
Shares of the Fund will be distributed by Cadre Securities, Inc., (the
"Distributor"), an affiliate of the Administrator, during the initial and
continuous offering of the Fund's shares. The Distributor will bear the expense
of all promotional and distribution related activities on behalf of the Fund,
including the payment of commissions and incentive compensation for sales of the
Fund shares, if any, to account executives and others who engage in or support
distribution of shares or who service the shareholder accounts including
overhead and telephone expense; the distribution of prospectuses and reports
used in connection with the offering of Fund shares to the public; and the
preparation, printing and distribution of sales literature and
FS-3
<PAGE> 44
other advertising materials. The Distributor may utilize other broker/dealers to
support the distribution of shares of the Fund.
The Fund has adopted a Plan pursuant to Rule 12b-1 under the Act (the
"Plan"). The Plan provides that the Fund may compensate organizations
("Organizations") for certain functions regarding the effective development and
distribution of interests in the Fund. The Fund has entered into Agreements
under the Plan with the following Organizations: the Association of School
Business Officials International, the American Association of School
Administrators and the National School Boards Association. The Organizations pay
the salaries of their personnel, including officers of the Fund who are
employees of the Organizations.
Payments by the Fund under the Plan will be calculated daily and paid
monthly at a rate of up to: .02% of the average daily net asset value of shares
of the Fund; and .05% of the average daily net asset value of shares owned of
record or beneficially by members of or persons associated with the
Organization. Such fee will be allocated based upon specific functions
performed.
The Administrator is also the transfer agent of the Fund's shares,
dividend disbursing agent for payment of dividends and distributions on Fund
shares and agent for shareholders under various investment plans.
Cadre Financial Services, Inc. has undertaken to assume all Fund
expenses (in excess of .85%), and to waive the compensation provided for in its
Investment Advisory Agreement and Administration Agreement until January 1,
1998.
FS-4
<PAGE> 45
APPENDIX
Description of Moody's Investors Service, Inc.'s commercial paper ratings:
PRIME-1 (or related supporting institutions) have a superior capacity
for repayment of short-term promissory obligations. Prime-1 repayment capacity
will normally be evidenced by the following characteristics:
- Leading market positions in well established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance
on debt and ample asset protection.
- Broad margins in earning coverage of fixed financial charges
and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2 (or related supporting institutions) have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S 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 edged". Interest payments are protected by a large or 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 the "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 fluctuation of
protective elements may be of greater amplitude or there may be
A-1
<PAGE> 46
other elements present which make the long-term risks appear somewhat larger
than in "Aaa" securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements:
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
DESCRIPTION OF STANDARDS & POOR'S CORPORATION'S COMMERCIAL PAPER RATINGS:
A-1 - This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics will be denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated A-1.
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong capacity to pay
interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal, although such issues are somewhat more
A-2
<PAGE> 47
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher-rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues 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 debt in this category than in higher-rated categories.
DESCRIPTION OF FITCH INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS:
FITCH-1 - (Highest Grade) Commercial paper assigned this rating is
regarded as having the strongest degree of assurance for timely payment.
FITCH-2 - (Very Good Grade) Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than the strongest
issues.
DESCRIPTION OF FITCH INVESTORS SERVICE, INC. CORPORATE BOND RATINGS:
AAA - Bonds of this rating are regarded as strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions, and
liable to but slight market fluctuation other than through changes in the money
rate. The factor last named is of importance, varying with the length of
maturity. Such bonds are mainly senior issues of strong companies, and are most
numerous in the railway and public utility fields, though some industrial
obligations have this rating. The prime feature of an AAA bond is of showing of
earnings several times or many times interest requirements with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Other features may enter, such as a wide margin of
protection through collateral security or direct lien on specific property as in
the case of high-class equipment certificates or bonds that are first mortgages
on valuable real estate. Sinking funds or voluntary reduction of the debt, by
call or purchase are often factors, while guarantee or assumption by parties
other than the original debtor may influence the rating.
AA - Bonds in this group are of safety virtually beyond question, and
as a class are readily salable while many are highly active. Their merits are
not greatly unlike those of the "AAA" class, but a bond so rated may be of
junior though strong lien - in many cases directly following an AAA bond - or
the margin of safety is strikingly broad. The issue may be the obligation of a
small company, strongly secured but influenced as
A-3
<PAGE> 48
to rating by the lesser financial power of the enterprise and more local type of
market.
DESCRIPTION OF DUFF & PHELPS INC. COMMERCIAL PAPER RATINGS:
DUFF 1 - Very high certainty of timely payment. Liquidity factors are
excellent and supported by strong fundamental protection factors. Risk factors
are minor.
DUFF 2 - Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
DESCRIPTION OF DUFF & PHELPS INC. CORPORATE BOND RATINGS:
DUFF 1 - Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
DUFF 2, 3, 4 - High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
A-4
<PAGE> 49
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(1) Included in Part A of the Registration Statement:
None.
(2) Included in Part B of the Registration Statement:
Report of Independent Accounts
Statement of Assets and Liabilities
Notes to Financial Statements
(3) All required financial statements are included in Part B
hereof. All other financial statements and schedules are
inapplicable.
(b) Exhibits
(1) Amended and Restated Agreement of Trust (the "Trust
Instrument") dated December 11, 1996(1)
(2) By-laws(1)
(5) Form of Investment Advisory Agreement(1)
(6) Form of Distribution Agreement(1)
(7) None
(8) Form of Custody Agreement
(9) Form of Administration Agreement(1)
(10) Opinion of Drinker Biddle and Reath LLP(2)
(11) (a) Consent of Price Waterhouse LLP
(b) Consent of Drinker Biddle and Reath LLP
(13) Form of Purchase Agreement
(14) None
(15) Plan and Form of Agreement
(16) None
(17) Financial Data Schedule
(18) None
- -------------------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form N-1A, File No. 333- 17789/811-7967 filed with the Securities and
Exchange Commission on December 13, 1996.
(2) To be filed with Registrant's Rule 24f-2 notice.
C-1
<PAGE> 50
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registration is controlled by its Board of Trustees. As of June 23,
1997, all of the outstanding shares of the Registrant will be held by
Association of School Business Officials International. As of the date
of this Registration Statement, no person is controlled by or under
common control with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Number of Record Holders
TITLE OF CLASS as of June 23, 1997
- -------------- ------------------------
<S> <C>
Investment Services for Education 1
Associations Money Market Fund
</TABLE>
ITEM 27. INDEMNIFICATION
The provisions of Sections 8.2 through 8.4 of Article VIII of the Trust
Instrument incorporated herein by reference as Exhibit (1) are
incorporated by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling
persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by trustees, officers or controlling persons of Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such trustees, officers or controlling persons in connection with the
securities being registered, Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against
C-2
<PAGE> 51
public policy as expressed in the Act and will be governed by the final
adjudication of such issues.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Cadre Financial Services, Inc. ("Cadre Financial") and its affiliates
provide financial services to a number of local governmental, municipal
and other entities such as school districts, municipalities and park
districts. The financial services include investment management and
advisory services to liquid asset funds formed by those entities. One
of those funds is an "investment company" under the Investment Company
Act of 1940. Cadre Financial also provides cash flow management
services and assists advisory clients in implementing fixed-rate,
fixed-term investment programs by investing in certificates of deposit,
government securities, commercial paper and similar fixed-rate,
fixed-term investments.
The list required by this Item 28 of the officers and directors of
Cadre Financial, together with information as to any business
profession, vocation or employment of substantial nature engaged in by
such officers and directors during the past two years, is incorporated
herein by reference to Schedules A and D of Form ADV filed by Cadre
Financial pursuant to the Investment Advisers Act of 1940 (SEC File No.
8015048).
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Cadre Securities, Inc., the Fund's principal underwriter, acts
as a principal underwriter and adviser to one other investment
company registered under the Investment Company Act of 1940,
the California Hospital and Health Facilities Liquid Asset
Fund. It also acts as distributor for certain collective
short-term investment programs operated for local
governmental, municipal and other entities.
(b) For information as to the business, profession, vocation or
employment of a substantial nature of each of the principal
underwriter, its officers and directors, reference is made to
Cadre Securities, Inc.'s Form BD File No. 42025.
(c) Not Applicable
C-3
<PAGE> 52
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The names and addresses of the persons maintaining principal possession
of the accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules are
as follows:
Cadre Financial Services, Inc.
905 Marconi Avenue
Ronkonkoma, NY 11779-7255
(records relating to its function as investment adviser, administrator
and transfer agent; such records will include but not be limited to,
minutes books, charter and by-laws)
Cadre Securities, Inc.
905 Marconi Avenue
Ronkonkoma, NY 11779-7255
(records relating to its function as distributor)
Bank One Columbus, NA
100 E. Broad Street
Columbus, OH 43271
Pittsburgh, PA 15259-0001
(records relating to its function as custodian)
ITEM 31. MANAGEMENT SERVICES
Not Applicable
ITEM 32. UNDERTAKINGS
The Registrant hereby undertakes:
(a) Not applicable.
(b) (1) to file a post-effective amendment, using financial
statements which need not be certified, within four to six
months from the effective date of this Registration Statement.
(2) to call a meeting of shareholders for the purpose of
voting upon the question of removal of a trustee or trustees
when requested in writing to do so by the holders of at least
10% of the Registrant's outstanding shares of stock entitled
to vote and in connection with such meeting to comply
C-4
<PAGE> 53
with the provisions of Section 16(c) of the Investment Company
Act of 1940 relating to shareholder communications.
C-5
<PAGE> 54
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment No. 1 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Herndon,
and State of Virginia as of the 11th day of July, 1997.
INVESTMENT SERVICES FOR EDUCATION
ASSOCIATIONS TRUST
/s/ Donald I. Tharpe
-------------------------------
Donald I. Tharpe
President
(Signature and Title)
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the 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>
/s/ Donald I. Tharpe Chairman of the Board, July 11, 1997
- ---------------------------- President and Treasurer
Donald I. Tharpe (Chief Executive Officer,
Chief Accounting Officer
and Chief Financial Officer)
/s/ Richard I. Bauer Trustee July 11, 1997
- ----------------------------
Richard I. Bauer
- ---------------------------- Trustee
Ronald E. Everett
/s/ Dale G. Jensen Trustee July 11, 1997
- ----------------------------
Dale G. Jensen
/s/ Gerard E. Keidel Trustee July 11, 1997
- ----------------------------
Gerard E. Keidel
/s/ William T. Sullivan, Jr. Trustee July 11, 1997
- ----------------------------
William T. Sullivan, Jr.
- ---------------------------- Trustee
Carter D. Ward
/s/ Ted C. Witt Trustee July 11, 1997
- ----------------------------
Ted C. Witt
</TABLE>
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
- ------ ------- ----
<S> <C> <C>
(8) Form of Custody Agreement
(11)(a) Consent of Price Waterhouse LLP
(11)(b) Consent of Drinker Biddle & Reath LLP
(13) Form of Purchase Agreement
(15) Plan and Form of Agreement
(17) Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit (8)
BANK ONE TRUST COMPANY, NA
STANDARD CUSTODY AGREEMENT
Execution Form
Name of Principal: Investment Services for Education
Associations Trust (ISEA)
Address of Principal: c/o Cadre Consulting Services Inc.
905 Marconi Avenue
Ronkonkoma, NY 11779
Execution Date:
Effective Date:
----------------------------
This Standard Custody Agreement is entered into on the Execution Date set forth
above, effective on the Effective Date set forth above, by and between the above
named Principal ("Principal") and Bank One Trust Company, NA, ("Custodian"),
with its principal offices located at 100 East Broad Street, Columbus, Ohio
43271- 0193. In consideration of the mutual covenants and conditions of this
agreement, the Custodian and Principal hereby agree to the provisions of this
agreement attached hereto and the Schedules, if any, of this agreement attached
hereto.
IN WITNESS WHEREOF, this agreement is executed by Custodian and the Principal on
the Execution Date.
CUSTODIAN PRINCIPAL
Bank One Trust Company, NA Investment Services for Education
Associations Trust (ISEA)
By: By:
---------------------------------- -------------------------------
Printed Name: Printed Name:
Title: Title:
Dated: Dated:
By:
Printed Name:
Title:
Dated:
-1-
<PAGE> 2
BANK ONE TRUST COMPANY, NA
STANDARD CUSTODY AGREEMENT
Table of Contents for Provisions
<TABLE>
<S> <C>
Section 1 Appointment of Custodian
Section 2 Delivery of Securities, Cash and Other Property
Section 3 Accounts
Section 4 Proper Instructions
Section 5 Collection of Income
Section 6 Short-Term Investments
Section 7 Payment of Monies
Section 8 Duties of Custodian with Respect to Securities of
the Principal Held by Custodian
Section 9 Voting and Other Actions
Section 10 Responsibility of Custodian
Section 11 Records and Reports
Section 12 Effective Period, Termination and Interpretive and
Additional Provisions
Section 13 Successor Custodian
Section 14 Compensation of Custodian and Reimbursement of
Expenses
Section 15 Notices
Section 16 Overdrafts or Indebtedness
Section 17 Governing Law
Section 18 Severability
Section 19 Non-Waiver
Section 20 No Third Party Benefit
Section 21 Captions
Section 22 Dispute Resolution and Arbitration
Section 23 Confidentiality
Section 24 Entire Agreement
</TABLE>
-2-
<PAGE> 3
BANK ONE TRUST COMPANY, NA
STANDARD CUSTODY AGREEMENT
PROVISIONS
These Provisions are applicable to the Standard Custody Agreement between the
Custodian and the Principal described in the foregoing Execution Form.
1. APPOINTMENT OF CUSTODIAN. Subject to the terms and conditions of
this agreement, the Principal hereby appoints and Custodian hereby accepts the
appointment by the Principal as custodian for certain cash, securities and other
property owned by the Principal and delivered to Custodian.
2. DELIVERY OF SECURITIES, CASH AND OTHER PROPERTY. The Principal shall
deliver to Custodian cash, securities and other property. Custodian shall accept
for deposit hereunder additional cash, securities and property upon receiving
written notice from Principal. Custodian shall only be responsible for custody
hereunder of cash, securities and property delivered to it and then only while
the cash, securities and property are held in and as a part of the custodial
account, unless the cash, securities and property are not held in and as part of
the custodial account as the result of Custodian's negligence or willful
misconduct. Such cash, securities (hereinafter "Securities") and other property
held in and as part of the custodial account shall hereinafter be referred to as
the "Assets."
3. ACCOUNTS. Custodian shall open and maintain a separate account or
accounts in the name of the Principal, subject only to draft or order by
Custodian pursuant to the terms of this agreement, and shall maintain in such
account or accounts all Assets received by it for the account of the Principal.
All separate accounts governed by this agreement are listed in Schedule B
attached hereto.
4. PROPER INSTRUCTIONS. For purposes of this agreement, "proper
instructions" shall mean (a) any oral authorizations, instructions or approvals
of any kind transmitted to Custodian in person or by telephone by a person
believed in good faith by Custodian to be a person authorized by a resolution of
the Board of Directors of the Principal; or (b) written authorizations,
instructions, or approvals of any kind transmitted to Custodian by mail,
personal delivery, facsimile, telegram or other written means by a person
believed in good faith by Custodian to be a person authorized by a resolution of
the Board of Directors of the Principal to give such authorizations,
instructions or approvals on behalf of the Principal. The Principal shall
confirm any oral authorization, instruction or approval described
-3-
<PAGE> 4
in (a), above, the same business day by transmittal to Custodian of a written
authorization, instruction or approval described in (b), above.
5. COLLECTION OF INCOME. Custodian shall collect all income
and other payments with respect to registered Securities held hereunder to which
the Principal shall be entitled by law or pursuant to custom in the securities
business, and shall collect all income and principal and other payments with
respect to bearer Securities if, on the date of payment by the issuer, such
Securities are held by Custodian or agent thereof, and shall deposit such income
and principal, as collected, into the Principal's account. Without limiting the
generality of the foregoing, Custodian shall detach and present for payment all
coupons and other income and principal items requiring presentation as and when
they become due, shall collect dividends and interest when due on Securities
held hereunder, and shall endorse and deposit for collection, in the name of the
Principal, checks, drafts, and other negotiable instruments on the same day as
received.
With respect to Securities of foreign issuers, while Custodian
will use its best efforts to collect any monies which may to its knowledge
become collectible arising from such Securities, including dividends, interest
and other income, it is understood that Custodian shall be under no
responsibility for any failure or delay in effecting such collections or giving
such notices.
Custodian shall not be under any obligation or duty to take
action to effect collection of any amount, if the Securities (domestic or
foreign) on which such amount is payable are in default and payment is refused
after due demand or presentation. Custodian will, however, promptly notify the
Principal in writing of such default and refusal to pay.
6. SHORT-TERM INVESTMENTS. Principal has provided Custodian
with a copy of its Amortized Cost Procedures. It is contemplated that Principal
will, from time to time, provide Custodian with written guidelines setting forth
specific short term interest bearing and short term discount obligations which
are acceptable to Principal, and Custodian agrees to act within said guidelines.
In the absence of written guidelines from Principal, Custodian
is specifically authorized, empowered and directed to invest any short term
monies in the following provided such investment is permitted by Principal's
Amortized Cost Procedures:
(i) Securities of any open-end management money
market type investment company registered under
the Investment Company Act of 1940, as amended
-4-
<PAGE> 5
(the "1940 Act"), which would be regarded by prudent
businessmen as a safe investment. The fact that
Custodian, any affiliate of Custodian, or any
affiliate of BANC ONE CORPORATION is providing
services to and receiving remuneration from the
foregoing investment company or investment trust as
investment advisor, custodian, transfer agent,
registrar, or otherwise shall not preclude Custodian
from investing in the securities of such investment
company or investment trust;
(ii) Savings accounts, time deposit accounts,
certificates of deposit, money market funds or other
evidences of deposit issued by Bank One, Columbus,
N.A. and/or any other national bank, savings and loan
institution, state member bank, state non-member
bank, or other depository institution which now or in
the future is an affiliate or subsidiary of Custodian
or of BANC ONE CORPORATION.
7. PAYMENT OF MONIES. Custodian shall pay out monies from
the custodian account in the following cases only:
(a) Upon the purchase of Securities for the account of
the Principal but only (i) against the delivery of
such Securities to Custodian (or any bank, banking
firm or trust company doing business in the United
States or abroad which has been designated by
Custodian as its agent for this purpose) registered
in the name of the Principal or in the name of a
nominee of the Principal or in the name of a nominee
of Custodian or in proper form for transfer; (ii) in
the case of a purchase effected through a Securities
Depository, in accordance with the conditions set
forth in Section 8 below; or (iii) in the case of
repurchase agreements entered into between the
Principal and another bank or broker-dealer, against
delivery of Securities either in certificate form or
through an entry crediting Custodian's account at the
Federal Reserve Bank with such securities.
(b) In connection with conversion, exchange or
surrender of Securities owned by the Principal as
set forth in Section 8 of this agreement;
(c) For any other purpose of the Principal, but only upon
receipt of proper instructions from the Principal
specifying the amount of such payment, setting forth
the purpose for which such payment
-5-
<PAGE> 6
is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom
such payment is to be made.
8. DUTIES OF CUSTODIAN WITH RESPECT TO SECURITIES OF THE
PRINCIPAL HELD BY CUSTODIAN.
(a) Deposit of Securities. Custodian may deposit the
Assets:
(i) in the bank vault of Custodian;
(ii) in such other banks or trust companies as
Custodian may deem appropriate provided such
Custodian meets the requirements of the 1940
Act;
(iii) in its accounts with a clearing agency
registered with the Securities and
Exchange Commission (the "Commission")
under Section 17A of the Securities
Exchange Act of 1934 (the "Exchange
Act"), which acts as a securities
depository (the "Securities
Depository"); or
(iv) in a book-entry account which is
maintained for the Custodian by a
Federal Reserve Bank (the "Book Entry
Account").
(b) Securities Depository and Book Entry Accounts. So
long as Custodian maintains any account pursuant
to subparagraphs (a)(iii) or (a)(iv) above for the
Principal, Custodian shall:
(i) deposit the Securities in such an
account that includes only assets held
for the Principal;
(ii) with respect to Securities transferred
to the account of the Principal,
identify as belonging to the Principal a
quantity of such Securities in the
fungible bulk of Securities (A)
registered in the name of Custodian or
its nominee, or (B) shown on Custodian's
account on the books of the Securities
Depository, the Book-Entry Account, or
Custodian's agent;
-6-
<PAGE> 7
(iii) promptly send to the Principal reports
received from the appropriate Federal
Reserve Bank or Securities Depository on its
system of internal accounting control; and
(iv) send to the Principal such reports of the
systems of internal accounting control of
Custodian and its agents through which such
Securities are deposited as are available
and as the Principal may reasonably request
from time to time.
(c) Holding Securities. Custodian shall hold and
physically segregate for the account of the Principal
all Assets owned by the Principal other than
Securities held in a Securities Depository or Book
Entry Account, as provided in subparagraphs (a) and
(b) of this Section 8.
(d) Registration of Securities. Securities held by
Custodian (other than bearer Securities) shall be
registered in the name of the Principal or in the
name of any nominee of the Principal or of any
nominee of Custodian. All Securities accepted by
Custodian on behalf of the Principal under the
terms of this agreement shall be in "street name"
or other good delivery form.
(e) Delivery of Securities. Custodian shall release
and deliver Securities owned by the Principal held
by Custodian or in a Securities Depository or Book
Entry Account for Custodian only upon receipt of
proper instructions, which may be continuing
instructions when Principal and Custodian
specifically agree in writing, and only in the
following cases:
(i) Upon the sale of such Securities for the
account of the Principal and the receipt
of payment therefor;
(ii) Upon the receipt of payment in connection
with any repurchase agreement related to
such Securities entered into by the
Principal;
(iii) In the case of a sale effected through a
Securities Depository or Book Entry
Account, in accordance with the
-7-
<PAGE> 8
provisions of subparagraphs (a) and (b)
of this section 8;
(iv) In connection with tender or other similar
offers for Securities owned by the
Principal, provided that, in any such case,
the cash or other consideration is to be
delivered to Custodian;
(v) To the issuer thereof or its agent when such
Securities are called, redeemed, retired, or
otherwise become payable, provided that, in
any such case, the cash or other
consideration is to be delivered to
Custodian;
(vi) To the issuer thereof, or its agent, for
transfer into the name of the Principal,
or into the name of any nominee or
nominees of Custodian, or for exchange
for a different number of bonds,
certificates or other evidence
representing the same aggregate face
amount or number of units, or for
exchange of interim receipts or
temporary securities for definitive
securities, provided that, in any such
case, the new Securities are to be
delivered to Custodian;
(vii) To the broker selling the same for
examination in accordance with "street
delivery" custom provided that Custodian may
adopt such procedures to ensure their prompt
return to Custodian by the broker in the
event the broker elects not to accept them;
(viii) For exchange or conversion pursuant to
any plan of merger, consolidation,
recapitalization, reorganization, or
readjustment of the Securities of the
issuer of such Securities, or pursuant
to provisions for conversion contained
in such Securities, provided that, in
any such case, the new Securities and
cash, if any, are to be delivered to
Custodian.
(ix) In the case of warrants, rights or
similar Securities, the surrender
-8-
<PAGE> 9
thereof upon the exercise of such warrants,
rights or similar Securities or the
surrender of interim receipts or temporary
Securities for definitive Securities,
provided that, in any such case, the new
Securities and cash, if any, are to be
delivered to Custodian;
(x) For delivery in connection with any loans of
Securities made by the Principal, but only
against receipt of adequate collateral as
specified from time to time by proper
instructions of the Principal;
(xi) For delivery as security in connection with
any borrowings by the Principal requiring a
pledge of assets by the Principal but only
against receipt of amounts borrowed;
(xii) For delivery in accordance with the
provisions of any agreement among the
Principal, Custodian and a broker-dealer
registered under the Exchange Act and a
member of the National Association of
Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of
The Options Clearing Corporation (the
"O.C.C.") and of any registered national
securities exchange or any similar
organization, regarding escrow or other
arrangements in connection with
transactions of the Principal; and
(xiii) For any other purpose of the Principal,
but only upon receipt of proper
instructions from the Principal
specifying the Securities to be
delivered, setting forth the purpose for
which such delivery is to be made,
declaring such purpose to be a proper
purpose, and naming the person or
persons to whom delivery of such
Securities shall be made.
(f) Security Holdings Disclosure. Custodian is not
authorized and shall not disclose the name,
address or security positions of the Principal in
response to requests concerning shareholder
communications under Section 14 of the Exchange
Act, the rules and regulations thereunder, and any
-9-
<PAGE> 10
similar statute, regulation, or rule in effect
from time to time.
9. VOTING AND OTHER ACTIONS. Custodian shall promptly
deliver or mail to the Principal all forms of proxies and all notices of
meetings affecting or relating to Securities held for the account of the
Principal. Upon receipt of proper instructions, Custodian shall execute and
deliver such proxies or other authorizations as may be required. Neither
Custodian nor its nominee shall vote any Securities or execute any proxy to vote
the same or give any consent to take any other action with respect thereto.
Custodian shall release and deliver such Securities and take
any other action as directed by the Principal, with respect to dividends,
splits, distributions, spin-offs, puts, calls, conversions, redemptions,
tenders, exchanges, mergers, reorganizations, rights, warrants or any other
similar activity relating to the Securities. Custodian shall request direction
of Principal upon receipt of actual notice where Principal has an option as to
any such activity. For purposes of this paragraph, Custodian shall be deemed to
have actual notice if any such activity is published in one or more of the
following publications: J.J. Kenny's Munibase System, Financial Card Service,
Xitek, Inc., Standard & Poors' Called Bond Listing, Depository Trust
Reorganization Notices, and The Wall Street Journal. If Custodian does not have
actual notice of such activity, any such activity will be handled by Custodian
on a "best efforts" basis.
10. RESPONSIBILITY OF CUSTODIAN. Custodian shall be liable
for any loss or damage resulting from its action or omission to act hereunder,
except for any such loss or damage arising out of its negligence or willful
misconduct. Subject to the foregoing, as long as and to the extent that it
exercises reasonable care, Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto received by
it or delivered by it pursuant to this agreement and Custodian shall be held
harmless in acting upon proper instructions and shall be entitled to receive as
conclusive proof of any fact or matter required to be ascertained by it
hereunder, a certificate by the President, Treasurer, or Secretary or Assistant
Secretary of the Principal. Custodian may receive and accept a certified
resolution of the Board of Directors of the Principal as conclusive evidence of
the authority of any person to act in accordance with such vote.
Custodian shall be entitled to rely upon and may act upon
advice of counsel (who may or may not be counsel for the Principal) on all
matters, and shall be without liability for any action reasonably taken or
omitted in good faith and without negligence pursuant to such advice.
-10-
<PAGE> 11
If the Principal requires Custodian to take any action with
respect to Securities, which action involves the payment of monies or which
action may, in the opinion of Custodian, result in Custodian's or its nominee's
being liable for the payment of money or incurring liability of some other form,
the Principal, as a prerequisite to requiring Custodian to take such action,
shall provide indemnity to Custodian in an amount and form satisfactory to
Custodian.
Principal hereby agrees to indemnify Custodian and hold
Custodian harmless from and against any and all costs, expenses, damages,
liabilities and claims (including reasonable attorneys' fees and accountants'
fees) sustained or incurred by or asserted against Custodian by reason or as a
result of any action or inaction, or arising out of Custodian's performance
hereunder; provided, that Principal shall not indemnify Custodian for those
costs, expenses, damages, liabilities or claims arising out of Custodian's
negligence or willful misconduct. This indemnity shall be a continuing
obligation of Principal, its successors and assigns, notwithstanding the
termination of this agreement.
Custodian shall not be responsible or liable for any failure
or delay in the performance of its obligations under this agreement arising out
of or caused directly or indirectly, by circumstances beyond its reasonable
control, including without limitation: acts of God; earthquakes; fires; floods;
wars; civil or military disturbance; sabotage; epidemics; riots; interruptions,
loss or malfunctions of utilities, communications service; accidents; labor
disputes; acts of civil or military authority; governmental action; or inability
to obtain labor, material, equipment or transportation.
Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
agreement.
Custodian shall provide Principal with any report obtained by
Custodian on the system of internal accounting control of the Book-Entry
Accounts used hereunder and the Securities Depositories used hereunder, and with
such reports on its own systems of internal accounting control as Principal may
reasonably request from time to time.
11. RECORDS AND REPORTS. Principal hereby acknowledges that
it may have the right to receive broker confirmations within the time period
prescribed by 12 C.F.R. Section 12.5 at no additional cost. In lieu of receiving
such confirmations within such time period, Custodian and Principal agree to the
alternative procedures set forth in this Section 11. Custodian shall create and
maintain records relating to its activities and obligations under this agreement
as Custodian and the Principal shall agree to and in such manner as will meet
the obligations of
-11-
<PAGE> 12
the Principal, if any, under Federal and State tax laws and any other law or
administrative rules or procedures which may be applicable to the Principal,
including without limitation the 1940 Act. All such records shall remain the
property of the Principal, and shall be open to the inspection and audit at
reasonable times by duly authorized officers, employees or agents of the
Principal. Custodian shall, at the Principal's request, supply the Principal
with a tabulation of Securities owned by the Principal and held by Custodian and
shall supply to the Principal a report from time to time as the parties shall
agree of all monies received or paid on behalf of the Principal and of the
resultant cash balance, and such other reports as the Principal may reasonably
request. Upon the reasonable request of Principal, copies of any such books and
records shall be provided by Custodian to Principal or the Principal's
authorized representative, and the Principal shall reimburse Custodian its
expenses of providing such copies. Upon reasonable request of Principal,
Custodian shall provide in hard copy or on micro-film, whichever Custodian
elects, any records included in any such delivery which are maintained by
Custodian on a computer disk, or are similarly maintained, and Principal shall
reimburse the Custodian for its expenses of providing such hard copy or
micro-film.
12. EFFECTIVE PERIOD, TERMINATION AND INTERPRETIVE AND ADDITIONAL
PROVISIONS. This agreement shall become effective as of the date first set forth
on the Execution Form of this agreement and may be terminated by either party by
90 days advance notice. Upon termination hereof, the Principal shall pay to
Custodian such compensation as may be due as of the date of such termination,
and shall likewise reimburse Custodian for its costs, expenses and disbursements
as contemplated by this agreement. Upon termination, except as otherwise
provided herein including the payment of all monies owed to Custodian as set
forth in Section 14 and except for any liability of the Custodian to the
Principal, all obligations of each party to the other party hereunder, except
the obligations regarding the use of reasonable care, shall cease.
In connection with the operation of this agreement, Custodian and
the Principal may agree from time to time on such provisions interpretive or in
addition to the provisions of this agreement as may in their joint opinion be
consistent with the general tenor of this agreement. Any such interpretive or
additional provisions shall be signed by both parties and annexed hereto,
provided that no such interpretive or additional provisions shall contravene any
applicable federal or state law regulations.
13. SUCCESSOR CUSTODIAN. If a successor custodian is appointed by the
Principal, Custodian shall, upon termination, deliver to such successor
custodian, duly endorsed and in form
-12-
<PAGE> 13
for transfer, all Securities then held hereunder and all other property of the
Principal deposited with or held by it hereunder and Custodian shall be released
of all duties and obligations under this agreement. If no such successor
custodian is appointed and this agreement is terminated pursuant to Section 12,
Custodian shall, in like manner, at its office, upon receipt of proper
instructions from the Principal, deliver such property in accordance with such
instructions. Delivery and release of Securities and other property shall be
made provided Custodian shall have no liability for shipping or insurance costs
associated therewith and full payment has been made to Custodian of all its
compensation, costs, expenses and other amounts hereunder.
In the event that property of the Principal remains in the
possession of Custodian after the date of termination hereof owing to the
failure of the Principal to appoint a successor custodian or provide proper
instructions, Custodian shall be entitled to compensation for its services
during such period and the provisions of this agreement relating to the duties
and obligations of Custodian shall remain in full force and effect.
Alternatively, Custodian shall have the right to commence an action in the
nature of an interpleader, and seek to deposit the property in a court of
competent jurisdiction.
14. COMPENSATION OF CUSTODIAN AND REIMBURSEMENT OF EXPENSES.
Custodian shall be entitled to compensation for its services as set forth in
Schedule A attached hereto and made a part hereof (the "Fee Schedule"), for
reimbursement of its out of pocket expenses as provided in this agreement, and
for all other necessary and proper disbursements and expenses made or incurred
by Custodian in the performance of its duties and obligations under this
agreement. The Principal shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of Securities made hereunder.
The Principal shall promptly pay or reimburse Custodian for
the payment of any expense or liability named by the Principal, including but
not limited to the following payments for the account of the Principal: delivery
charges, insurance, interest, taxes, management, accounting and legal fees, and
other operating expenses of the Principal.
15. NOTICES. Any notices required or desired to be given to
any party hereto shall be in writing, shall be addressed to such other party at
that party's address set forth at the beginning of this agreement and shall be
deemed given when deposited in the United States mail, certified, return receipt
requested, or actually received by the party to whom it was addressed if
delivered by an alternate method. Any party may change the address to which
notices or other communications are to be given by giving the other party notice
of such change.
-13-
<PAGE> 14
16. OVERDRAFTS OR INDEBTEDNESS. If Custodian, in its sole discretion,
advances cash on behalf of the Principal which results in an overdraft because
the cash held by Custodian for the account of the Principal shall be
insufficient to pay the total amount payable upon a purchase of Securities as
set forth in proper instructions or which results in an overdraft for some other
reason, or if the Principal is for any other reason indebted to Custodian
(including any amount owed by Principal to Custodian pursuant to Section 14,
above, and except for other borrowings for temporary or emergency purposes using
securities as collateral pursuant to a separate agreement), such overdraft or
indebtedness shall be deemed to be a loan made by Custodian to the Principal
payable on demand and shall bear interest from the date incurred at a rate per
annum (based on a 360-day year for the actual number of days involved) equal to
2% over the prime rate in effect from time to time as announced by The Wall
Street Journal under the section titled Money Rates, or any successor title,
such rate to be adjusted on the effective date of any change in such prime rate.
In addition, to the extent permitted by the Investment Company Act of 1940, the
Principal hereby grants to and agrees that Custodian shall have a continuing
lien and security interest in and to any property at any time held by it for the
benefit of the Principal or in which the Principal may have an interest which is
then in Custodian's possession or control or in possession or control, of any
third party acting on Custodian's behalf. The Principal authorizes Custodian, in
its sole discretion, at any time to charge any such overdraft or indebtedness
together with interest due thereon against any balance of account standing to
the Principal's credit on the Custodian's books.
17. GOVERNING LAW. This agreement shall be construed and enforced
according to the laws of the State of Ohio and all provisions shall be
administered according to the laws of said State, except as said laws are
superseded or preempted by any Federal law.
18. SEVERABILITY. The intention of the parties to this agreement is to
comply fully with all laws, rules, regulations and public policies, and this
agreement shall be construed consistently with all laws, rules, regulations and
public policies to the extent possible. If and to the extent that any court of
competent jurisdiction determines it is impossible to construe any provision of
this agreement consistently with any law, rule, regulation or public policy and
consequently holds that provision to be invalid, such holding shall in no way
affect the validity of the other provisions of this agreement, which shall
remain in full force and effect.
19. NON-WAIVER. No failure by any party to insist upon compliance with
any term of this agreement, to exercise any option, enforce any right, or seek
any remedy upon any default of
-14-
<PAGE> 15
any other party shall affect, or constitute a waiver of, the first party's right
to insist upon such strict compliance, exercise that option, enforce that right,
or seek that remedy with respect to that default or any prior, contemporaneous,
or subsequent default. No custom or practice of the parties at variance with any
provision of this agreement shall affect or constitute a waiver of, any party's
right to demand strict compliance with all provisions of this agreement.
20. NO THIRD PARTY BENEFIT. This agreement is intended for the
exclusive benefit of the parties to this agreement and their respective
successors and assigns, and nothing contained in this agreement shall be
construed as creating any rights or benefits in or to any third party.
21. CAPTIONS. The captions of the various sections of this agreement
are not part of the context of this agreement, but are only labels to assist in
locating those sections and shall be ignored in construing this agreement.
22. DISPUTE RESOLUTION AND ARBITRATION. Any controversy or claim
arising out of or relating to this agreement, or the breach of the same, shall
be settled through consultation and negotiation in good faith and a spirit of
mutual cooperation. However, if those attempts fail, the parties agree that any
misunderstandings or disputes arising from this agreement shall be decided by
arbitration which shall be conducted, upon request by either party, before three
(3) arbitrators (unless both parties agree on one (1) arbitrator) designated by
the American Arbitration Association (the "AAA"), in accordance with the terms
of the Commercial Arbitration Rules of the AAA, and, to the maximum extent
applicable, the United States Arbitration Act (Title 9 of the United States
Code), or if such Act is not applicable, any substantially equivalent state law.
The parties further agree that the arbitrator(s) will decide which party must
bear the expenses of the arbitration proceedings.
23. CONFIDENTIALITY. Custodian shall treat confidentially and as
proprietary information of Principal's records and other information relative to
Principal and prior, present or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder. Notwithstanding the foregoing, Custodian
shall have the right to disclose such records and other information to any
Federal or State authority with whom Principal or its shares are registered, and
Custodian shall further have the right to exhibit any such records and
information to any person whenever it receives an opinion from its counsel that
there is a reasonable likelihood that Custodian will be held liable for the
failure to exhibit such records or information to such person, provided,
however, that in connection with any such disclosure
-15-
<PAGE> 16
Custodian shall promptly notify Principal that such disclosure is to be made.
24. ENTIRE AGREEMENT. This agreement represents the entire agreement
between the parties and may not be modified or amended except by a writing
signed by the party to be charged, except as otherwise provided herein.
-16-
<PAGE> 17
BANK ONE TRUST COMPANY, NA
STANDARD CUSTODY AGREEMENT
SCHEDULE A
FEE SCHEDULE
This Schedule A sets forth the compensation agreed upon by Investment
Services for Education Associations Trust (ISEA) (the "Principal") to be paid to
Bank One Trust Company, NA (the "Custodian") pursuant to the terms and
conditions of Section 14 of the Standard Custody Agreement effective October 27,
1995 and executed by such parties. Any changes to the fee schedule shall be by
execution of a new Schedule A.
I. INITIAL ACCEPTANCE FEE - Waived
II. ANNUAL BASE FEE - $7,500
(a) ASSET HOLDINGS - Waived
(b) TRADES
DTC/Fed Eligible $10.00 per transaction
DTC/Fed Ineligible $10.00 per transaction
GNMA's & Other
Amortized Securities $10.00 per principal paydown
NOTE: Transaction fees for all other types of assets are
negotiable.
(c) ASSET FEE
$0.00003 times the market value of the assets under custody
III. SPECIAL FEES
Wire $5.00
Check Cut $2.00
* Pass through charges for Exception Services
-17-
<PAGE> 18
IV. TERMINATION FEE - Waived
For purposes of this Schedule A, a "transaction" will be defined as any purchase
or sale of a security, free receipt, free delivery, and corporate reorganization
items such as tenders, mergers, and acquisitions.
Additional fees will be negotiated for accounts in excess of those listed on
Schedule B of the Custody Agreement.
Effective Date of this Fee Schedule: , 1997
----------
CUSTODIAN PRINCIPAL
Bank One Trust Company, NA Investment Services for Education
Associations Trust (ISEA)
By: By:
---------------------- -------------------------
Printed Name: Printed Name:
Title: Title:
Dated: Dated:
-18-
<PAGE> 1
Exhibit (11)(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated June
23, 1997, relating to the Statement of Assets and Liabilities of Investment
Services for Education Associations Trust, which appears in such Statement of
Additional Information and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the heading "Custodian, Counsel and
Independent Auditors" in such Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
201 North Service Road
Melville, New York 11747
July 10, 1997
<PAGE> 1
Exhibit (11)(b)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to
the reference to our Firm under the caption "Custodian, Counsel and Independent
Auditors" in the Statement of Additional Information that is included in
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A under
the Securities Act of 1933 and the Investment Company Act of 1940, as amended,
of Investment Services for Education Associations Trust. This consent does not
constitute a consent under section 7 of the Securities Act of 1933, and in
consenting to the use of our name and the references to our Firm under such
caption we have not certified any part of the Registration Statement and do not
otherwise come within the categories of persons whose consent is required under
said section 7 or the rules and regulations of the Securities and Exchange
Commission thereunder.
/s/ DRINKER BIDDLE & REATH LLP
----------------------------------
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
July 11, 1997
<PAGE> 1
Exhibit (13)
PURCHASE AGREEMENT
Investment Services For Education Associations Trust (the
"Trust"), a Delaware business trust, and Association of School Business
Officials International ("Buyer") hereby agree with each other as follows:
1. The Trust hereby offers Buyer and Buyer hereby purchases
150,000 shares of beneficial interest in the Trust's Money Market Fund (the
"Fund") (such shares in the Trust being hereinafter collectively known as
"Shares") in consideration for the payment of $150,000. Buyer hereby
acknowledges purchase of the Shares and the Trust hereby acknowledges receipt
from Buyer of fund in the amount of $150,000 in full payment for the Shares.
2. Buyer represents and warrants to the Trust that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
3. Costs incurred by the Trust in connection with its
organization, registration and the initial public offering of Shares have been
deferred and will be amortized on a straight-line basis over a period of five
years from the date upon which the Trust commences its investment activities. If
any of the original Shares purchased by Buyer hereunder are redeemed by any
holder thereof prior to the end of such period, the redemption proceeds will be
reduced by the pro rata share of the unamortized expenses as of the date of
redemption. The pro rata share by which the proceeds are reduced will be derived
by dividing the number of original Shares of the Fund being redeemed by the
total number of original Shares outstanding at the time of redemption. If, for
any reason, said reduction of redemption proceeds is not in fact made by the
Trust in the event of such a redemption, Buyer agrees to reimburse the Trust
immediately for any unamortized organizational expenses in the proportion stated
above.
4. This Agreement is executed by or on behalf of the Trust and
the obligations hereunder are not binding upon any of the Trustees, officers or
shareholders of the Trust individually but are binding only upon the Trust and
its assets and property.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of day of July, 1997.
----
(SEAL)
INVESTMENT SERVICES FOR EDUCATION
ASSOCIATIONS TRUST
By:
-----------------------------------
Name: Donald I. Tharpe
Title: President
ASSOCIATION OF SCHOOL BUSINESS
OFFICIALS INTERNATIONAL
By:
-----------------------------------
Name:
Title:
<PAGE> 1
Exhibit (15)
Investment Services for Education Associations Trust
THE PLAN
July 1, 1997
This Plan (the "Plan") has been adopted by the Board of Trustees of
Investment Services for Education Associations Trust (the "Company") in
conformance with Rule 12b-1 under the Investment Company Act of 1940 (the
"Act").
Section 1. Payments. The Company may compensate organizations
("Organizations") for, including without limitation for: (a) license of its
logos in informational materials prepared regarding the Fund; (b) conferring
with, advising and providing the Company and the Company's Adviser,
Administrator, Distributor and their affiliates (collectively, the "Service
Providers"), information about the members of or persons associated with the
Organization and others who are eligible to invest in the Investment Services
for Education Associations Money Market Fund (the "Fund") in order to assist the
Company's Adviser, Administrator and their affiliates in providing services to
the Fund and its shareholders; (c) scheduling and announcing through its
publications, informational meetings and seminars at which representatives of
Service Providers, who are licensed as securities salesmen, will discuss the
Fund and related matters; (d) conferring with Service Providers as to local
facilities to be used in connection with the administration and operation of the
Fund; (e) assisting in the preparation and dissemination of information with
respect to the existence of the Fund; (f) allowing the use of its publications
to give information on how to obtain materials concerning the Fund; (g)
conferring with the Service Providers regarding coordination of efforts and the
resolution of operational difficulties that may arise between the Fund and
persons that are or may become shareholders in the Fund; (h) providing the
Company's Distributor with mailing lists of potential investors in the Fund; and
(i) retaining industry associations and others to assist the Organization in
providing the functions required under the Agreement. Payments by the Company
under the Plan will be calculated daily and paid monthly at a rate of up to:
.02% of the average daily net asset value of shares ("Shares") of the Fund; and
.05% of the average daily net asset value of Shares owned of record or
beneficially by members or persons associated with the Organizations. Such fee
may be allocated among the specific functions described in (a)-(i) above. For
purposes of determining the compensation payable under the Plan, the net asset
value of the outstanding Shares shall be computed in the manner specified in the
Company's then current prospectus and statement of additional information for
the Shares.
<PAGE> 2
Section 2. Payments Under the Plan. Payments to an Organization under
Section 1 of the Plan will be to compensate the Organizations for functions
provided.
Section 3. Reports of Distributor. So long as the Plan is in effect,
the Company's Distributor shall provide to the Company's Board of Trustees, and
the Trustees shall review, at least quarterly, a written report of the amounts
expended pursuant to the Plan and the purposes for which such expenditures were
made.
Section 4. Approval of Plan. The Plan will become effective
immediately, as to the Shares, upon its approval by (a) a majority of the
outstanding Shares, and (b) a majority of the Board of Trustees, including a
majority of the Trustees who are not "interested persons" (as defined in the
Act) of the Company and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with the
Plan, pursuant to a vote cast in person at a meeting called for the purpose of
voting on the approval of the Plan.
Section 5. Continuance of Plan. The Plan shall continue in effect for
so long as its continuance is specifically approved at least annually by the
Company's Board of Trustees in the manner described in Section 4.
Section 6. Amendments. The Plan may be amended at any time by the Board
of Trustees provided that (a) any amendment to increase materially the costs
which the Shares may bear for distribution pursuant to the Plan shall be
effective only upon approval by a vote of a majority of the outstanding Shares,
and (b) any material amendments of the terms of the Plan shall become effective
only upon approval as provided in paragraph 4(b) hereof.
Section 7. Termination. The Plan is terminable, as to any class of
shares, without penalty at any time by (a) a vote of a majority of the Trustees
who are not "interested persons" (as defined in the Act) of the Company and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements entered into in connection with the Plan, or (b) a vote of a
majority of the outstanding Shares of such class.
Section 8. Selection/Nomination of Trustees. While this Plan is in
effect, the selection and nomination of those Trustees who are not "interested
persons" (as defined in the Act) of the Company shall be committed to the
discretion of such non-interested Trustees.
Section 9. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way
-2-
<PAGE> 3
define or delimit any of the provisions hereof or otherwise affect their
construction or effect.
-3-
<PAGE> 4
- --------------------------------------------------------------------------------
-----------------------------------------
AGREEMENT
Between
INVESTMENT SERVICES FOR EDUCATION
ASSOCIATIONS TRUST
and
---------------------------------
---------------------------
, 1997
---------
-----------------------------------------
<PAGE> 5
AGREEMENT
This Agreement, executed on _______, 1997, is made by and between
Investment Services for Education Associations Trust (the "Trust") and
_____________ (the "Organization"):
RECITALS
The Trust is registered with the Securities and Exchange Commission as
an open-end, diversified investment company under the Investment Company Act of
1940 and the shares ("Shares") of the Trust's Investment Services for Education
Associations Money Market Fund (the "Fund") are in the process of being
registered under the Securities Act of 1933;
The Trust desires to avail itself of the experience and assistance of
the Organization.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
APPOINTMENT, DUTIES AND FEES
1.1 APPOINTMENT. The Trust hereby retains the Organization on the
terms and for the period set forth in this Agreement, and the Organization
hereby accepts such appointment and agrees to the terms of this Agreement.
1.2 Functions. The Organization shall:
(a) License the use of its logos in informational materials
prepared regarding the Fund;
(b) Confer with, advise and provide the Trust, the Trust's
Adviser and its affiliates (collectively, the "Service Providers"), information
about the members of the Organization and others who are eligible to invest in
the Fund in order to assist the Trust's Adviser, Administrator and its
affiliates in providing services to the Fund and its shareholders;
(c) Schedule and announce through its publications,
informational meetings and seminars at which representatives of the Trust's
Distributor, who are licensed as securities salesmen, will discuss the Fund and
related matters;
<PAGE> 6
(d) Confer with the Trust's Adviser and Administrator as to
local facilities to be used in connection with the administration and operation
of the Fund;
(e) Assist in the preparation and dissemination of information
with respect to the existence of the Fund;
(f) Allow the use of its publications to give information on
how to obtain materials concerning the Fund;
(g) Confer with the Fund and the Trust's Adviser and
Administrator regarding coordination of efforts and the resolution of
operational difficulties that may arise between the Fund and persons that are or
may become shareholders in the Fund;
(h) Provide the Trust's Distributor with mailing lists of
potential shareholders in the Fund; and
(i) Retain education industry associations and others to
assist the Organization in fulfilling its obligations under this Agreement.
1.3 LIMITATIONS ON ACTIONS OF THE ORGANIZATION. The Organization
understands that neither it nor any other person whom it may retain as provided
in Section 1.2(i) shall have any discretion to accept or reject the application
of any person to become a shareholder in the Fund. It will forward all requests
for information regarding the Fund received by it directly to the Trust's
Administrator for appropriate action. The Organization further understands and
agrees that neither it nor any person it retains as a consultant as provided in
Section 1.2(i) will:
(a) Accept application or registration forms from persons
seeking to become shareholders by buying Shares of the Fund;
(b) Accept any cash, checks, wire transfers, or other forms of
payment from any person that may be remitted for the purchase of Shares in the
Fund;
(c) Deliver any Prospectus, Statement of Additional
Information or other informational or advertising document prepared in
connection with the offering of Shares by the Fund to any person or potential
participant in the Fund;
(d) Engage in the offer or sale of Shares of the Fund; or
(e) Permit its employees and agents, or the employees and
agents of any other person retained pursuant to Section 1.2(i), to engage in,
3
<PAGE> 7
and shall take reasonable action to prevent such employees and agents from
engaging in, the activities described in this Section 1.3.
1.4 FEES. The Trust agrees to pay to the Organization for its services
hereunder as consultant a fee, which shall be calculated daily, and payable
monthly in an amount equal to ___% of the average daily net asset value of
Shares and ___% of the average daily net asset value of Shares owned of record
or beneficially by members of the Organization.* For purposes of determining the
fees payable hereunder, the average daily net asset value of the Shares shall be
computed in the manner specified in the Trust's Registration Statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of the Shares involved for purposes of purchases and
redemptions. The fee rate stated above may be prospectively increased or
decreased by the Trust, in its sole discretion, at any time upon notice to the
Organization. Further, the Trust may, in its discretion and without notice,
suspend or withdraw the sale of Shares, including without limitation the sale of
Shares for the account of any member of the Organization.
The Organization may, in its discretion, assign and pay, or direct the
Trust to pay, to any person retained as permitted by Section 1.2(i) a portion of
the fees payable under this Section 1.4, and the Trust agrees that it will pay
such portion of the fees as may be directed in writing by the Organization.
ARTICLE 2
LIMITATION OF LIABILITY
The Organization shall not be liable for any error in judgement or
mistake of law or for any loss suffered by the Trust in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or negligence, on its part in the performance of its
duties under this Agreement; provided, the foregoing shall not limit the
Organization's liability with respect to any breaches by it of this Agreement.
The Organization shall not be liable for the payment of any of the
administrative costs of the Fund.
ARTICLE 3
DURATION AND TERMINATION
3.1 DURATION OF AGREEMENT. This Agreement shall become effective
immediately upon approval by a majority of the outstanding shares of the Fund
and by a majority of the members of the Board of Trustees of the Trust who are
not parties to this Agreement or "interested persons" of any such party (as that
term is used in the Investment Company Act of 1940, as amended (the "1940
Act")), cast in person at a meeting of the Board of Trustees called for the
purpose of voting on the approval of this Agreement. This Agreement shall remain
in effect until June 30, 1998 and shall continue from year to year thereafter,
but
- --------------
*Such fee may be allocated among the specific functions in Section 1.2.
4
<PAGE> 8
only so long as such continuance is approved at least annually either by the
vote of a majority of the Board of Trustees consisting of members who are not
parties to this Agreement or "interested persons" of any such party (as that
term is used in the 1940 Act) or by vote of a majority of the outstanding shares
of the Fund.
If the Organization ceases to act as a consultant under this Agreement,
the Trust agrees that, at the Organization's request, it will take all necessary
steps to discontinue use of any logo of the Organization's or other indication
of the Organization support of the Fund.
ARTICLE 4
MISCELLANEOUS
4.1 REPRESENTATIONS. Neither the Organization nor any of the
Organization's officers, employees or agents are authorized to make any
representations concerning the Trust or the Shares except those contained in the
Trust's applicable prospectus and statements of additional information for the
Shares, copies of which will be supplied to you by the Trust, or in such
supplemental literature or advertising as may be authorized by the Trust in
writing.
4.2 INDEPENDENT CONTRACTOR. For all purposes of this Agreement the
Organization will be deemed to be an independent contractor, and will have no
authority to act as agent for the Trust in any matter or in any respect.
4.3 REPORTS. The Organization shall furnish the Trust, its Distributor
or their designees with such information as it or they may reasonably request
(including, without limitation, periodic certifications confirming the provision
of the functions described herein), and will otherwise cooperate with the Trust,
its Distributor and their designees (including, without limitation, any auditors
designated by the Trust), in connection with the preparation of reports to the
Trust's Board of Trustees concerning this Agreement and the monies paid or
payable by the Trust pursuant hereto, as well as any other reports or filings
that may be required by law.
4.4 OTHER AGREEMENTS. The Trust may enter into other similar Agreements
with any other person or persons without the Organization's consent.
4.5 RULE 12b-1. The Organization represents, warrants and agrees that
this Agreement has been entered into pursuant to Rule 12b-1 under the 1940 Act,
and is subject to the provisions of said Rule, as well as any other applicable
rules or regulations promulgated by the Securities and Exchange Commission.
5
<PAGE> 9
4.6 CAPTIONS. The captions in this Agreement are included for
convenience of reference only and shall in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
4.7 SEVERABILITY. If any provision of this Agreement shall be held
invalid under any applicable statute or regulation or by a decision of a court
of competent jurisdiction, such invalidity shall not affect any provision of
this Agreement that can be given effect without the invalid provision, and, to
this end, the provisions hereof are severable.
4.8 NOTICES. Notices or consent of any kind required or permitted under
this Agreement shall be in writing and shall be deemed duly delivered if
delivered in person or if mailed by certified mail, return receipt requested,
postage paid, to the appropriate party as follows:
a. If to the Trust:
c/o Ambac Cadre Financial Services, Inc.
905 Marconi Avenue,
Ronknokoma, Ny 11779-7255
Attn: William M. Sullivan, Esq.
with a copy to;
Michael P. Malloy
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
b. If to the Organization:
_______________________
_______________________
_______________________
_______________________
or at such other address as shall be specified by either party by notice given
in the manner required by this Section 4.8.
6
<PAGE> 10
4.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof.
4.10 APPLICABLE LAW. This Agreement shall be deemed to have been
executed in the State of Delaware and the substantive laws of the State of
Delaware shall govern the construction of this Agreement and the rights and
remedies of the respective parties hereto.
4.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
INVESTMENT SERVICES FOR EDUCATION
ASSOCIATIONS TRUST
By _________________________________
Its _____________________________
By _________________________________
Its _____________________________
7
<TABLE> <S> <C>
<ARTICLE> 6
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUN-23-1997
<PERIOD-END> JUN-23-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 192,670
<TOTAL-ASSETS> 192,670
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 42,670
<TOTAL-LIABILITIES> 42,670
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 150,000
<SHARES-COMMON-STOCK> 150,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 150,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 150,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 150,000
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
