INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS MONEY MARKET FUND
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS TRUST
ANNUAL REPORT
June 30, 1998
Manager and
Investment Advisor: Cadre Financial Services, Inc.
Custodian: Bank One Columbus, NA
Counsel: Drinker Biddle & Reath LLP
Distributor: Cadre Financial Services, Inc.
(through its affiliate Cadre Securities, Inc.)
Independent Accountants: PricewaterhouseCoopers LLP
<PAGE>
TO OUR PARTICIPANTS
- --------------------------------------------------------------------------------
The Investment Services for Education Associations Trust ("ISEA") was
started on October 1, 1997 with a goal to provide our schools with a high
quality investment program that would establish safety of principal and
liquidity as the primary objectives, while offering the best possible interest
rates.
The professional support team of Bank One Columbus, as custodian, Cadre
Financial Services, Inc. as investment advisor, marketing firm and
administrator, PricewaterhouseCoopers LLP as independent accountants and
Drinker, Biddle & Reath, LLP as legal counsel, continues to work with your Board
to insure that the Fund continues to operate to meet this goal.
The fiscal year which ended June 30, 1998, saw school district assets
on deposit in ISEA programs at a total of $11 million, with $7 million in the
liquid series and $4 million in fixed-term investments. A total of 40 school
districts and educational service units participated in the Fund.
The liquid and fixed-term programs are extremely important to you
because they characterize the result of an effective partnership of school
boards, school business officials, school administrators and professionals
working for the benefit of the children in our public schools and the taxpayers
who pay the bills.
These different programs have allowed each participating school
district to maximize earnings, while tailoring investments to meet their
individual needs. If you are not making full use of the liquid series, the money
market fund with check-writing capabilities, you might want to take a closer
look at how you can increase your earnings by taking advantage of this
investment opportunity. As we move into a period of reduced funds and tighter
budgets, every dollar must be stretched to the maximum. Having your operating
funds invested until they are needed is one way to do this.
Your Trustees and all of those associated with ISEA look forward to
serving you in the future. We promise to continue to work hard to help you
maximize your investment return, and help you manage the educational resources
available to you for the greater benefit of our children.
Sincerely,
The ISEA Board of Trustees and Officers
<PAGE>
BOARD OF TRUSTEES
Dr. Richard I. Bauer Cadre Securities, Inc.
Dr. Ronald E. Everett Northern Illinois University
Dr. Dale G. Jensen Minnesota Assoc. of School
Administrators
Dr. Gerard E. Keidel Michigan Assoc. of School
Administrators
Dr. Don I. Tharpe, Chairman ASBO International
Dr. Carter D. Ward, Vice Chairman Missouri School Boards Association
Susan Merry National School Boards Association
William T. Sullivan, Jr. Cadre Financial Services, Inc.
Ted C. Witt California Assoc. of School Business
Officials
OFFICERS
Chairman Dr. Don I. Tharpe
ASBO International
Vice Chairman Dr. Carter D. Ward
Missouri School Boards Association
Secretary/Treasurer William M. Sullivan, Esq.
Cadre Financial Services, Inc.
<PAGE>
ANNUAL REPORT COMMENTS - JUNE 1998
ECONOMIC OPINION - "YEAR IN REVIEW, WHAT'S AHEAD?"
The Federal Open Market Committee has left the Federal Funds level unchanged at
5.50% since the first quarter of 1997. The economy began to pick up speed
through the second half of 1997. Economic weakness in Asia, accompanied by a
strong U.S. dollar caused some doubt as to whether the domestic economy could
continue to experience strong growth. The Federal government has achieved a
budget which is balanced and may even produce a surplus. This has allowed the
Treasury to reduce the size of its debt. Debt reduction has begun to reduce the
availability of Treasury securities. This reduction coupled with demand from
overseas investors has caused a strong U.S. Treasury market and a flat yield
curve.
As we look toward the second half of 1998 and beyond, many of the concerns we
had in January have neither come to be, nor can they be discounted. Economic
turmoil in Japan and South East Asia has worsened. The U.S. stock market is
showing more volatility, and concerns of other emerging market economies are
surfacing. Indications are that the U.S. economy will continue to remain healthy
into the second half of 1998. New housing is strong which will lead to purchases
of consumer durables, after the GM strike auto sales are swift, consumer
confidence is high, unemployment is low and inflation remains in check. This
momentum should offset weakness which is coming from a decline in exports, as
much of the worlds economies are experiencing varying degrees of problems.
Paul S. Hoffman
Cadre Financial Services, Inc.
<PAGE>
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 the 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.
<PAGE>
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS MONEY MARKET FUND
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS TRUST
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
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<TABLE>
<CAPTION>
PRINCIPAL YIELD TO
AMOUNT DESCRIPTION/ MATURITY ON DATE VALUE
(IN THOUSANDS) MATURITY DATE OF PURCHASE (NOTE 2)
- -------------- ------------- ----------- --------
BANKERS' ACCEPTANCES - (3.57%)
<C> <S> <C> <C>
$ 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>
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)
- -------------- ------------- ----------- --------
REPURCHASE AGREEMENT - (21.20%)
<C> <S> <C> <C>
$ 1,507 Governmental 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>
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS MONEY MARKET FUND
INVESTMENT SERVICES FOR EDUCATION ASSOCIATIONS TRUST
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
ASSETS
Investment in securities, at value (Note 2):
<S> <C>
Bankers' 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>
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>
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
-------------
INCREASE (DECREASE) IN NET ASSETS:
<S> <C>
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 reivestment 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>
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>
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>
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>
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 7,108
(in thousands)
<FN>
* annualized
</FN>
</TABLE>
