<PAGE> 1
MONEY MARKET FUND
INVESTMENT SERVICES FOR
EDUCATION ASSOCIATIONS TRUST
905 Marconi Avenue
Ronkonkoma, New York 11779
................................................................................
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.
................................................................................
Shareholders may invest or redeem shares without charge or
penalty. Unlimited checkwriting redemption privileges are
available to Shareholders.
................................................................................
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 October 30, 1998, 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.
................................................................................
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 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.
................................................................................
The date of this Prospectus is October 30, 1998
<PAGE> 2
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.
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees (After Fee Waiver)..................... 0.00%
12b-1 Fees (After Fee Waiver).......................... 0.07%
Other Expenses......................................... 0.68%
----
Total Fund Operating Expenses (After Fee Waiver and 0.85%
Expense Reimbursement) (1)............................
====
</TABLE>
- ---------------
(1) 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 1.05% of the Fund's average net assets (of which .30%
would consist of Management Fees, .07% would consist of Rule 12b-1 fees, and
.68% would consist of Other Expenses).
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------ ------- ------- --------
<S> <C> <C> <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. $9 $27 $47 $105
</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
TABLE SETS FORTH MANAGEMENT FEES AND OTHER EXPENSES WITH RESPECT TO SHARES OF
THE FUND FOR THE PERIOD ENDED JUNE 30, 1998, AS RESTATED TO REFLECT CURRENT FEES
THAT WOULD HAVE BEEN APPLICABLE HAD THEY BEEN IN EFFECT DURING SUCH YEAR OR
PERIOD.
2
<PAGE> 3
FINANCIAL HIGHLIGHTS
The following audited "Financial Highlights" set forth certain investment
results for shares of the Fund, and should be read in conjunction with the
Fund's audited financial statements and related notes which are included in the
Statement of Additional Information. Further information about the performance
of the Fund is available in the Fund's Annual Report to Shareholders. Both the
Statement of Additional Information and the Annual Report to Shareholders may be
obtained, free of charge, by calling the number listed under "General
Information" in this Prospectus.
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS
MONEY MARKET FUND
(SELECTED PER SHARE DATA FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD
INDICATED)
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1998(1)
----------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 1.00
----------
Income from Investment Operations:
Net investment income..................................... 0.038
Less Dividends:
Dividends from net investment income...................... (0.038)
Net Asset Value, End of Period.............................. $ 1.00
==========
Total Return................................................ 3.88%*
Ratios/Supplemental Data:
Net Assets, End of Period................................... $7,108,260
Ratios of Net Operating Expenses to Average Net Assets:
Before reimbursement/waiver............................... 1.05%**
After reimbursement/waiver................................ 0.46%**
Ratios of Net Investment Income to Average Net Assets:
Before reimbursement/waiver............................... 4.56%**
After reimbursement/waiver................................ 5.10%**
</TABLE>
- ---------------
(1) The Fund commenced operations on October 1, 1997.
* Unannualized
** Annualized
3
<PAGE> 4
THE TRUST; ELIGIBLE SHAREHOLDERS
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, as amended, (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 includes generally, (a) securities that are rated (or issued by an
issuer, or in certain cases, guaranteed by a guarantor, which is rated with
respect to comparable securities) 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 (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 IBCA, Inc. Their ratings are described in the Appendix to the Fund's
Statement of Additional Information.
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 of the Federal Home Loan Mortgage Corporation, 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.
4
<PAGE> 5
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 physical possession of
securities acquired by the Fund under a repurchase agreement, or will hold
book-entry securities in the name of the Fund or the Custodian. 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 at least equal to 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 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 397 days, 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
5
<PAGE> 6
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 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 Securities and Exchange Commission ("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
guarantees 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.
Year 2000. Like other investment companies, financial and business
organizations and individuals around the world, the Fund could be affected
adversely if the computer systems used by the Advisor, the Fund's other service
providers, and others do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 Problem." The Advisor, and the Fund's other service providers
have informed the Trust that they are taking steps to address the Year 2000
Problem with respect to the computer systems that they use. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Fund as a result of the Year 2000 Problem.
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. The Fund's compliance with the diversification provision
described above under the heading "Portfolio Securities" will be deemed to be
compliance with the foregoing fundamental diversification limitation.
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
6
<PAGE> 7
related entity. A properly completed registration form must be on file when
making a redemption from an account. The registrations should be forwarded to:
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 4:00 p.m. New
York Time on a Business Day and Federal Funds are received the close of the
Federal Reserve wire that 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
4:00 p.m. New York Time on a Business Day or Federal Funds are received after
the close of the Federal Reserve wire that 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 Fund's
toll-free number 1-800-221-4524, Ext. 2.
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 4:00 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. Shareholders 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.
Redemption proceeds of at least $10,000 will be wired to any member bank of
the Federal Reserve System, for deposit in a Shareholder's account, in
accordance with the redemption request. Amounts under $10,000 generally 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. Shareholders may use the Fund's free and
unlimited checkwriting services by completing a checkwriting authorization form
and signing the two custodian bank signature cards. Shareholders 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-
7
<PAGE> 8
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 4:00 p.m. New York Time. The
redemption proceeds will be wired to the Shareholder's bank account, so long as
the amount is $10,000 or more. If less, a check will generally 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 shareholder may call the Fund's toll-free number
1-800-221-4524, Ext. 2, by 4:00 p.m. New York Time, and request an ACH
withdrawal. Such withdrawal will become effective the same Business Day and will
be in the Shareholder's designated bank account in "collected funds." There is
no minimum redemption payments required for redemption payments by ACH.
SHAREHOLDER SERVICES
Shareholders may open as many accounts with the Fund as they desire. Each
account may utilize the Fund's checkwriting services.
Shareholders may call the Fund's toll-free number 1-800-221-4524, Ext. 2,
prior to 4:00 p.m. New York Time any Business Day to make an internal transfer
between their different Fund accounts the same day.
Shareholders 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 shareholder, 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.
Shareholders currently receive the Fund's unaudited financial statements
after the end of each calendar quarter. Once a year, shareholders 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. ("Cadre Financial"),
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
8
<PAGE> 9
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 annual rate of .15% of such assets. However,
no fees were payable through the period ended June 30, 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 October
26, 1998, Cadre Financial and its affiliates managed or administered
approximately $3.0 billion in assets. Cadre Financial is a wholly-owned
subsidiary of Ambac Capital Corporation which, in turn, is a wholly-owned
subsidiary of Ambac Financial Group, 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 were payable through the period ended June 30,
1998.
During the period ended June 30, 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 extraordinary
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 shareholders
at the time such amounts are reimbursed. The Fund will not pay Cadre Financial
at a later time for any fees waived or operating expenses reimbursed, except for
organizational expenses.
Transfer Agent and Distributor. Cadre Financial is the Fund's transfer and
dividend disbursing agent, and Cadre Securities, Inc. ("Cadre Securities"),
located at 905 Marconi Avenue, Ronkonkoma, New York, 11779-7255, is the Fund's
distributor. Cadre Securities, an affiliate of Cadre Financial, is also a
wholly-owned subsidiary of Ambac Capital Corporation, which, in turn, is a
wholly-owned subsidiary of Ambac.
Custodian. Bank One Columbus, NA, 100 East Broad Street, Columbus, OH 43271
is the Fund's custodian.
Other. The Fund has adopted a Plan in conformance with Rule 12b-1 under the
1940 Act under which the Fund may pay royalties to or may otherwise compensate
an organization ("Organization") for certain functions, including without
limitation for: (a) license of its name and 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;
9
<PAGE> 10
(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/or 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 up to
.05% of the average daily net asset value of Shares owned of record or
beneficially by members of persons associated with an Organization. Such fee may
be allocated among the specific functions described in (a)-(i) above. An
organization may provide one or more of those functions, and an Organization's
provision of any function is not dependent upon it providing any other
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 paid by the Fund
or amounts are assumed by service contractors, and decreasing yield when such
fees or amounts are reimbursed or paid by the Fund.
YIELD AND OTHER PERFORMANCE INFORMATION
From time to time, yield, effective yield and total return of the Fund may
be quoted in advertisements, sales literature or reports to shareholders.
Performance is based on historical earnings and is not intended to indicate
future performance. It can be expected that performance will fluctuate. 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 performance 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 performance 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 performance.
Performance is generally a function of the kind and quality of the instruments
held in a portfolio, portfolio maturity, operating expenses and market
conditions.
10
<PAGE> 11
The performance 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 performance may be compared to Donoghue's Money Fund Averages, which are
averages compiled by Donoghue's Money Fund Report. Performance 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 performance of the Fund.
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 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 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 a shareholder 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.
11
<PAGE> 12
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 Shareholders.
Other Tax Information. In addition to federal taxes, shareholders may be
subject to state or local taxes on their investment. Shareholders should consult
their tax advisers to determine whether the Fund is suitable to their particular
tax situation.
When shareholders 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 a shareholder does not comply with IRS regulations, the
IRS can require the Fund to withhold 31% of of the amount distributable to the
shareholder.
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 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.
12
<PAGE> 13
[This Page Intentionally Left Blank]
<PAGE> 14
[This Page Intentionally Left Blank]
<PAGE> 15
[This Page Intentionally Left Blank]
<PAGE> 16
Investors are advised to read this
Prospectus and retain it for future
reference.
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.
................................................................................
TABLE OF CONTENTS
................................................................................
<TABLE>
<S> <C>
EXPENSE SUMMARY 2
......................................................................................................................
FINANCIAL HIGHLIGHTS 3
......................................................................................................................
THE TRUST; ELIGIBLE SHAREHOLDERS 4
......................................................................................................................
INVESTMENT OBJECTIVE AND POLICIES 4
......................................................................................................................
HOW TO INVEST IN THE FUND 6
......................................................................................................................
REDEMPTIONS 7
......................................................................................................................
SHAREHOLDER SERVICES 8
......................................................................................................................
MANAGEMENT OF THE FUND 8
......................................................................................................................
YIELD AND OTHER PERFORMANCE INFORMATION 10
......................................................................................................................
DISTRIBUTIONS AND TAXES 11
......................................................................................................................
GENERAL INFORMATION 12
......................................................................................................................
</TABLE>
-----------------------------------------
MONEY MARKET FUND
INVESTMENT SERVICES FOR
EDUCATION ASSOCIATIONS TRUST
-----------------------------------------
PROSPECTUS
OCTOBER 30, 1998
<PAGE> 17
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 October
30, 1998, 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................................... 2
INVESTMENT ADVISORY AGREEMENT............................ 4
ADMINISTRATION AGREEMENT................................. 5
THE PLAN................................................. 6
DISTRIBUTION AGREEMENT................................... 6
DETERMINATION OF NET ASSET VALUE......................... 7
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION........... 7
FUND PERFORMANCE......................................... 8
ADDITIONAL INFORMATION ABOUT TAXES....................... 10
PORTFOLIO TRANSACTIONS................................... 12
INFORMATION ABOUT THE FUND............................... 12
CUSTODIAN, COUNSEL AND INDEPENDENT AUDITORS.............. 13
MISCELLANEOUS............................................ 14
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,
<PAGE> 18
Cadre Financial or by Cadre Securities in any jurisdiction in which such
offering may not lawfully be made.
October 30, 1998
<PAGE> 19
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, as amended, (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.
(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.
<PAGE> 20
(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 a guarantee which satisfies certain
provisions under Rule 2a-7 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 Securities and
Exchange Commission ("SEC") regulations. A security that has a guarantee which
satisfies certain provisions under Rule 2a-7 under the Investment Company Act of
1940 (a "Guarantee") (other than certain types of Guarantees provided by the
issuer of the underlying security and Guarantees which are U.S. Government
securities) 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
Guarantees from the same person, except that the Fund may invest up to 25% of
its total assets in securities subject to Guarantees that are first tier
securities (as defined by the SEC) and that are provided 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
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.
-2-
<PAGE> 21
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITIONS WITH PRINCIPAL OCCUPATION DURING PAST
- ---------------- THE TRUST AGE FIVE YEARS
--------- --- ----------
<S> <C> <C> <C>
Richard I. Bauer* Trustee 58 President, Cadre Securities, Inc.
568 High Street since 1994; Director, Cadre
Pottstown, Pennsylvania 19464 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 56 Professor, Northern Illinois
Illinois Association of School Business University; and Executive Director,
Officials Illinois Association of School
244 Graham Hall Business Officials.
Northern Illinois University
DeKalb, Illinois 60115
Dale G. Jensen 58 Executive Director, Minnesota
Minnesota Association of Association of School Administrators.
School Administrators
1884 Como Avenue
St. Paul, Minnesota 55108
Gerard E. Keidel Trustee 58 Executive Director, Michigan
Michigan Association of Association of School Administrators;
School Administrators Director, Michigan Liquid Asset Fund;
421 W. Kalamazoo Director, SET, Inc. (Insurance Pools);
Lansing, Michigan 48933 Director, SEG, Inc. (Insurance Pools);
Superintendent of Schools, Mona Shore
Schools (1976-1991);
Susan P. Merry Trustee 51 Associate Executive Director, National
1680 Duke Street School Boards Association
Alexandria, VA 22314
Chairman, Chief Executive Officer and
William T. Sullivan, Jr.* 52 Director, Cadre Financial Services,
905 Marconi Avenue Inc.; Chairman and Director, Cadre
Ronkonkoma, New York 11779 Securities, Inc.; and Trustee, Cadre
Network Health Financial Services
Trust.
Don I. Tharpe* Chairman of the Board, 46 Executive Director, Association of
Association of School President and Treasurer School Business Officials
Business Officials International.
International
11401 North Shore Drive
Reston, Virginia 22090
Carter D. Ward Vice Charman 53 Executive Director, Missouri School
2100 I-70 Drive S.W. Boards Association; and Director,
Columbia, Missouri 65203 Missouri Securities Investment Program.
</TABLE>
-3-
<PAGE> 22
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITIONS WITH PRINCIPAL OCCUPATION DURING PAST
- ---------------- THE TRUST AGE FIVE YEARS
--------- --- ----------
<S> <C> <C> <C>
Ted C. Witt Trustee 42 Executive Director and Chief Executive
California Association of Officer, California Association of
School Business Officials School Business Officials; Director of
1531 I Street Community and Government Relations,
#310 San Juan Unified School District (1986
Sacramento, California 95814 to 1992).
William M. Sullivan** Secretary 30 General Counsel, Cadre Financial
905 Marconi Avenue Services, Inc.; and Vice President of
Ronkonkoma, New York 11779 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.
As of March 30, 1998, the Trustees and officers of the Trust, as a
group, own less than 1% of the Fund's Shares.
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 were payable through the period ended June 30, 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
-4-
<PAGE> 23
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 each wholly-owned
subsidiaries of Ambac Capital Corporation, which in turn is a wholly-owned
subsidiary of Ambac Financial Group, Inc.
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 were payable through the period ended June 30, 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).
-5-
<PAGE> 24
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 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") 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. NSBA will 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 that Organization. Pursuant to the Plan, the Fund may enter
into additional Agreements with other Organizations.
DISTRIBUTION AGREEMENT
The Fund has entered into a Distribution Agreement with Cadre
Securities, 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
-6-
<PAGE> 25
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 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.
-7-
<PAGE> 26
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 shareholder would incur transaction costs in
selling the securities or other property. The Trust has committed that it will
pay all redemption requests by a shareholder of record in cash, limited in
amount with respect to each shareholder during any ninety-day period to the
lesser of $250,000 or 1% of the net asset value at the beginning of such period.
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.
Based on the foregoing, the 7-day yield and 7-day effective yield for
the Fund for the period ended June 30, 1998 was 4.82% and 4.94%, respectively.
Performance 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 performance 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 performance will generally tend to be somewhat higher than prevailing
market rates, and in
-8-
<PAGE> 27
periods of rising interest rates the Fund's performance 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 performance 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 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 information with respect to the Fund is generally available by
calling 1-800-221-4524.
-9-
<PAGE> 28
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 performance to that 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 performance 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 performance 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,
performance data as reported in the following publications may be used in
comparing the performances 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 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
-10-
<PAGE> 29
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.
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. Capital gains on
securities held by individuals for more than 12 months are taxable at a maximum
rate of 20%. For corporations, long-term capital gains and ordinary income are
both taxable at a maximum nominal rate of 35%.
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 paid
to shareholders who have failed to provide a correct tax identification number
in the manner required, who are subject to withholding by the Internal 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.
-11-
<PAGE> 30
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.
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.
As of the close of the Fund's most recent fiscal year the Fund held
securities of its regular brokers or dealers, Goldman Sachs & Co., Merrill
Lynch & Co., General Motors Acceptance Corporation and HSBC Securities, in the
amounts of $348,000, $298,000, $298,000 and $1,507,000, respectively.
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
-12-
<PAGE> 31
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 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.
PricewaterhouseCoopers LLP, ("Price Waterhouse"), 201 North Service
Road, Melville, New York 11747, has been selected as the Fund's independent
auditors.
-13-
<PAGE> 32
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.
At October 26, 1998, the name, address and percentage of ownership of
the entities which held as record owners more than 5% of the outstanding Shares
of the Fund were as follows:
NAME AND ADDRESS % OF OWNERSHIP
- ---------------- --------------
Association of School Business 6.06%
Officials International
11401 North Shore Drive
Reston, VA 22090
Michigan Association of School 18.04%
Administrators
421 W. Kalamazoo
Lansing, MI 48933
Missouri School Boards Association 6.38%
2100 I-70 Drive SW
Columbia, MO 65203
National School Boards Association 6.26%
1680 Duke Street
Alexandria, VA 22314
Washington Association of 10.07%
School Administrators
825 5th Avenue SE
Olympia, WA 98501
-14-
<PAGE> 33
Minnesota School Boards Association 13.00%
1900 West Jefferson Avenue
St. Peter, MN 56082
Minnesota Association of School 6.50%
Administrators
1884 Como Avenue
St. Paul, MN 55108
-15-
<PAGE> 34
FINANCIAL STATEMENTS
The Fund's audited statement of assets and liabilities at June 30,
1998, related notes thereto and the report of the independent accountants
thereon, are included in this Statement of Additional Information. The audited
financial statements included in this Statement of Additional Information have
been included in reliance on the report of PricewaterhouseCoopers LLP, given on
the authority of said firm as experts in auditing and accounting.
FS-1
<PAGE> 35
REPORT OF INDEPENDENT ACCOUNTANTS
July 31, 1998
To the Board of Trustees and Participants of the
Investment Services for Education Associations Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Investment Services for
Education Associations Trust (the "Fund") at June 30, 1998, the result of its
operations for the period then ended, the changes in its net assets and the
financial highlights for the period then ended, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at June 30, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
225 Broad Hollow Road
Melville, NY 11747-4862
<PAGE> 36
Investment Services for Education Associations Money Market Fund
Investment Services for Education Associations Trust
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Yield to
Amount Description/ Maturity on Date Value
(in thousands) Maturity Date of Purchase (Note 2)
- ------------- ------------- ---------------- --------
<S> <C> <C> <C>
BANKERS' ACCEPTANCES-(3.57%)
$ 117 Citibank 5.78% $116,644
July 20, 1998
137 Citibank 5.78 137,012
July 21, 1998
--------
Total bankers' acceptances 253,656
(amortized cost $253,656) --------
COMMERCIAL PAPER-(31.49%)
300 General Motors Acceptance Corp. 5.65 298,068
August 12, 1998
350 Goldman Sachs & Co. 5.65 347,857
August 10, 1998
300 Merrill Lynch & Co. 5.66 298,064
August 12, 1998
350 National Rural Utilities 5.64 347,808
August 11, 1998
300 Nations Bank Corp. 5.70 299,582
July 10, 1998
300 Proctor & Gamble Co. 5.61 298,717
July 29, 1998
350 Riverwoods Funding Corp. 5.65 348,015
August 7, 1998
--------
Total commercial paper 2,238,111
(amortized cost $2,238,111) ========
</TABLE>
<PAGE> 37
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS MONEY MARKET FUND
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS TRUST
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT DESCRIPTION/ MATURITY ON DATE VALUE
(IN THOUSANDS) MATURITY DATE OF PURCHASE (NOTE 2)
- -------------- ------------- ---------------- ----------
<S> <C> <C> <C>
REPURCHASE AGREEMENT -- (21.20%)
$1,507 Government National Mortgage 5.78% $1,507,000
Assoc. $1,550,000 due July 15, 1998
(purchased June 30, 1998; subject to
irrevocable agreement to resell to
HSBC Securities on July 1, 1998) ----------
Total repurchase agreements 1,507,000
(amortized cost $1,507,000) ----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- (39.30%)
1,000 Federal Home Loan Mortgage Corp. 5.93 1,000,000
July 1, 1998
1,000 Federal Home Loan Mortgage Corp. 5.59 990,757
August 31, 1998
800 Federal National Mortgage Assoc. 5.72 803,150
September 10, 1998 ---------
Total U.S. government agency
obligations (amortized cost $2,793,907) 2,793,907
----------
Total investments -- 95.56% 6,792,674
(amortized cost $6,792,674)
Cash and other assets in excess
of liabilities -- 4.44% 315,586
----------
Net assets -- 100.0% $7,108,260
==========
</TABLE>
<PAGE> 38
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS MONEY MARKET FUND
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS TRUST
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investment in securities, at value (Note 2):
Banker's acceptances $ 253,656
Commercial paper 2,238,111
Repurchase agreement 1,507,000
U.S. government agency obligations 2,793,907
----------
Total investments, at value 6,792,674
Cash 273,122
Cash paid pending liquidation 53,330
Deferred organization costs (Note 2) 66,395
Interest receivable 19,541
Other assets 2,153
----------
Total assets 7,207,215
----------
LIABILITIES
Custodian fee payable 1,618
Audit fee payable 6,000
Deferred organization costs payable (Note 3) 66,395
Due to Cadre 24,942
----------
Total liabilities 98,955
----------
Net assets (equivalent to $1.00 per share on
7,108,260 shares of beneficial interest outstanding) $7,108,260
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 39
Investment Services for Education Associations Money Market Fund
Investment Services for Education Associations Trust
STATEMENT OF OPERATIONS
For the period ended June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment income $ 334,408
---------
Expenses (Note 3):
Manager and investment advisory fees 8,927
Administration fees 8,927
Custodian fees 15,863
Audit fees 6,000
Legal fees 11,350
Liability insurance expense 6,459
Consulting fees 1,302
Trustee expense 2,865
Registration expense 1,000
---------
Total expenses 62,693
Less reimbursement of fees (13,130)
Less waived fees (19,156)
---------
Net expenses 30,407
---------
Investment income-net and net increase
in net assets resulting from operations $304,001
=========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE> 40
Investment Services for Education Associations Money Market Fund
Investment Services for Education Associations Trust
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year
ended
June 30, 1998
-------------
<S> <C>
Increase (Decrease) in Net Assets:
Operations:
Net investment income $ 304,001
------------
Net increase in net assets resulting
from operations 304,001
------------
Dividends and distributions to shareholders from:
Net investment income (304,001)
------------
Total dividends and distributions to shareholders (Note 4) (304,001)
------------
Share Transactions:
Net Proceeds from sales of shares 23,682,510
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions 304,001
Cost of shares redeemed (16,878,251)
------------
Net increase in net assets resulting from
share transactions 7,108,260
------------
Total increase in net assets 7,108,260
Net Assets
Beginning of period --
------------
End of period $ 7,108,260
============
OTHER INFORMATION:
Share Transactions:
Shares sold 23,682,510
Shares issued to shareholders in reinvestment of
dividends and distributions 304,001
Shares redeemed (16,878,251)
------------
Net (decrease) increase in shares outstanding 7,108,260
============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE> 41
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS MONEY MARKET FUND
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
- -------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF THE FUND
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. The Fund was established on
December 4, 1996, with the adoption of a declaration of trust. The Fund is a
diversified investment portfolio of the Trust. The Fund commenced operations on
October 1, 1997.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS
The Fund has adopted Governmental Accounting Standards Statement No. 31,
"Accounting and Financial Reporting for Certain Investments and for External
Investment Pools" (GASB 31), at July 1, 1997. Under this Statement, the Fund's
investments are reported at amortized cost, which approximates market value.
The adoption of this Statement did not have a significant impact on the Fund's
financial position or results of operations.
ACCOUNTING FOR INVESTMENTS
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). In computing net investment income, the Fund
amortizes any premiums or discounts on securities owned. Gains or losses
realized upon the sale of such securities are based on their amortized cost and
are determined on the identified cost method. Interest accrued on securities
purchased under agreement to resell is included in interest receivable.
INVESTMENT TRANSACTION RESTRICTIONS
The Fund is not permitted to engage in the trading of investment instruments
with or through the Manager and Investment Advisor.
INCOME TAX STATUS
It is the Fund's policy to comply with the requirements of Subchapter M of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its participants. Therefore, no
provision for Federal income taxes has been made.
<PAGE> 42
Investment Services for Education Associations Money Market Fund
Investment Services for Education Associations Trust
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (continued)
- --------------------------------------------------------------------------------
Securities purchased under agreement to resell
Securities purchased under agreement to resell entered into with certain broker
dealers are secured by U.S. government or agency obligations. However, due to
the short-term nature of securities purchased under agreement to resell, the
Fund does not take possession of the collateral pledged, but is held by the
Custodian. Securities purchased under agreement to resell are collateralized at
102% of the obligation's principal and interest value to ensure that the value
of the underlying collateral is at least equal to repurchase price. In the event
of default on the obligation to repurchase, the Fund has the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults and the value of the collateral declines, realization of the
investment value by the Fund may be limited.
Deferred organization costs
Deferred organization costs will be amortized on a straight line basis over five
years. Such organization costs have been advanced by the Manager and Investment
Advisor, Cadre Financial Services, Inc. ("Cadre"). The Fund will reimburse Cadre
for such costs ratably from October 1, 1998, through September 30, 2003.
Use of estimates in financial statement preparation
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
NOTE 3 - FUND EXPENSES
Investment advisory fee
Pursuant to an Investment Advisory agreement with the Fund, the Investment
Advisor, Cadre provides investment advice and generally supervises the
investment program of the Fund. Cadre is entitled to a fee at an annual rate
equal to 0.15% of the Fund's average daily net assets. Such fee is calculated
daily and paid monthly.
Administration fee
Under an Administration Agreement with the Fund, the Administrator, Cadre,
services all participants' accounts, determines and allocates income of the
Fund, provides administrative personnel, equipment and office space,
determines the net asset value of the Fund on a daily basis and performs all
related administrative services. The Administrator also pays the Fund's
expenses for printing certain documents and for administrative costs of the
Fund (such as postage, telephone charges and computer time). Cadre is paid a
fee at an annual rate equal to 0.15% of the Fund's average daily net assets.
<PAGE> 43
Investment Services for Education Associations Money Market Fund
Investment Services for Education Associations Trust
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (continued)
- -------------------------------------------------------------------------------
Such fee is calculated daily and paid monthly.
12b-1 Plan
The Fund has adopted a plan in conformance with Rule 12b-1 under the 1940 Act
under which the Fund may pay royalties to or may otherwise compensate an
organization for certain functions. The Fund has separate agreements with the
Association of School Business Officials ("ASBO International") and the
National School Board Association ("NSBA"), referred to as the Consultants.
Pursuant to these agreements, the Consultants will provide certain services to
fund shareholders. The Consultants are paid a fee at an annual rate equal to
0.02% of the average daily net asset value of shares owned of record or
beneficially by members of ASBO International and 0.05% of the average daily
net asset value of shares owned of record or beneficially by members of NSBA.
Such fee is calculated daily and paid monthly.
Waived fees
For the period October 1, 1997 to June 30, 1998, Cadre waived its
administration, investment advisory fees and consulting fees. Total waived fees
were $19,156.
Reimbursed fees
For the period October 1, 1997 to June 30, 1998, Cadre partially reimbursed the
Fund for fees associated with legal, insurance and trustee services. Total
reimbursed fees were $13,130.
Due to Cadre
For the period October 31, 1997 to June 30, 1998, Cadre paid the expenses of
the Fund for fees associated with custodian, legal, insurance and trustee
services. These paid fees totaled $24,942. The Fund will reimburse Cadre for
such costs ratably from July 1, 1998 through June 30, 1999.
Other Fund expenses
The Fund pays expenses incurred by its Trustees and officers (in connection
with the discharge of their duties), insurance for the Trustees, fees of the
Custodian, audit fees and legal fees.
NOTE 4 - DIVIDENDS AND DISTRIBUTIONS
On a daily basis, the Fund declares dividends and distributions from its net
investment income and net realized gains or losses from securities transactions,
if any. Such dividends and distributions are payable to participants of record
at the time of the previous computation of the Fund's net asset value.
<PAGE> 44
Investment Services for Education Associations Money Market Fund
Investment Services for Education Associations Trust
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding for the nine month
period ended June 30, 1998 is as follows:
<TABLE>
<CAPTION>
For the nine month
period ended
June 30, 1998
------------------
<S> <C>
Investment Income............................................. $ 0.042
Operating expenses (Note 3)................................... 0.004
------------------
Investment income - net....................................... 0.038
Dividends and distributions to participants (Note 4).......... (0.038)
------------------
Change in net asset value..................................... *
------------------
Net asset value, end of period................................ $ 1.00
==================
Total investment return....................................... *5.19%
Expenses, before reimbursement/waiver......................... *1.05%
Expenses, net of reimbursement/waiver......................... *0.46%
Net investment income, before reimbursement/waiver............ *4.56%
Net investment income, net of reimbursement/waiver............ *5.10%
Number of shares outstanding at end of year (in thousands).... 7,108
</TABLE>
- -------------------
* annualized
<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 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.
A-1
<PAGE> 46
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 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 IBCA, 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.
A-2
<PAGE> 47
DESCRIPTION OF FITCH IBCA, 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 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-3
