Cash Management Fund
Treasury Instruments Money Market Fund II
Investment Portfolios Offered By
Lehman Brothers Institutional Funds Group Trust
Statement of Additional Information
May 31, 1994
As Supplemented
August 22, 1994
This Statement of Additional Information is meant to
be read in conjunction with the Prospectuses for Government
Obligations Money Market Fund and the Treasury Instruments
Money Market Fund II, each dated May 31, 1994 and the Cash
Management Fund (formerly the 100% Government Obligations
Money Market Fund), dated May 31, 1994, as supplemented
August 22, 1994, as further amended or supplemented from
time to time, and is incorporated by reference in its
entirety into those Prospectuses. Because this Statement of
Additional Information is not itself a prospectus, no
investment in shares of Government Obligations Money Market
Fund, Cash Management Fund or Treasury Instruments Money
Market Fund II should be made solely upon the information
contained herein. Copies of the Prospectuses for Government
Obligations Money Market Fund, Cash Management Fund and
Treasury Instruments Money Market Fund II may be obtained by
calling Lehman Brothers Inc. ("Lehman Brothers") at 1-800-
368-5556. Capitalized terms used but not defined herein have
the same meanings as in the Prospectuses.
TABLE OF CONTENTS
Page
The Trust 2
Investment Objective and Policies 2
Additional Purchase and Redemption
Information 5
Management of the Funds 7
Additional Information Concerning
Taxes 14
Dividends 15
Additional Yield Information 15
Additional Description Concerning
Fund Shares 17
Counsel 17
Auditors 18
Financial Statements 18
Miscellaneous 18
THE TRUST
Lehman Brothers Institutional Funds Group Trust (the
"Trust") is an open-end management investment company. The
Trust currently includes a family of portfolios, three of
which are Government Obligations Money Market, Cash
Management Fund and Treasury Instruments Money Market Fund
II (individually, a "Fund"; collectively, the "Funds").
The securities held by Government Obligations Money
Market Fund consist of obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and
repurchase agreements relating to such obligations.
Securities held by Cash Management Fund consist of U.S.
Treasury bills, notes and obligations issued or guaranteed
as to principal and interest by the U.S. Government, its
agencies or instrumentalities and repurchase agreements
relating to such obligations. Securities held by Treasury
Instruments Money Market Fund II are limited to U.S.
Treasury bills, notes and other direct obligations of the
U.S. Treasury and repurchase agreements relating to direct
Treasury obligations. Although all three Funds have the same
Investment Adviser and have comparable investment
objectives, their yields normally will differ due to their
differing cash flows and differences in the specific
portfolio securities held.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE
FUNDS' PROSPECTUSES RELATE PRIMARILY TO THE FUNDS AND
DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES,
OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE
FUNDS. INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION
REGARDING THE TRUST'S OTHER PORTFOLIOS MAY OBTAIN SEPARATE
PROSPECTUSES DESCRIBING THEM BY CONTACTING LEHMAN BROTHERS
AT 1-800-368-5556.
INVESTMENT OBJECTIVE AND POLICIES
As stated in the Funds' Prospectuses, the investment
objective of the Funds is current income with liquidity and
security of principal. The following policies supplement the
description in the Prospectuses of the investment objectives
and policies of the Funds.
The Funds are managed to provide stability of capital
while achieving competitive yields. The Investment Adviser
intends to follow a value-oriented, research-driven and
risk-averse investment strategy, engaging in a full range of
economic, strategic, credit and market-specific analyses in
researching potential investment opportunities.
Portfolio Transactions
Subject to the general control of the Trust's Board of
Trustees, Lehman Brothers Global Asset Management Inc.
("LBGAM"), the Funds' Investment Adviser, is responsible
for, makes decisions with respect to and places orders for
all purchases and sales of portfolio securities for the
Funds. Purchases of portfolio securities are usually
principal transactions without brokerage commissions. In
making portfolio investments, LBGAM seeks to obtain the best
net price and the most favorable execution of orders. To the
extent that the execution and price offered by more than one
dealer are comparable, LBGAM may, in its discretion, effect
transactions in portfolio securities with dealers who
provide the Trust with research advice or other services.
Although the Funds will not seek profits through short-term
trading, LBGAM may, on behalf of the Funds, dispose of any
portfolio security prior to its maturity if it believes such
disposition is advisable.
Investment decisions for the Funds are made
independently from those for other investment company
portfolios advised by LBGAM. Such other investment company
portfolios may invest in the same securities as the Funds.
When purchases or sales of the same security are made at
substantially the same time on behalf of such other
investment company portfolios, transactions are averaged as
to price, and available investments allocated as to amount,
in a manner which LBGAM believes to be equitable to each
portfolio, including the Funds. In some instances, this
investment procedure may adversely affect the price paid or
received by the Funds or the size of the position obtained
for the Funds. To the extent permitted by law, LBGAM may
aggregate the securities to be sold or purchased for the
Funds with those to be sold or purchased for such other
investment company portfolios in order to obtain best
execution.
The Funds will not execute portfolio transactions
through, acquire portfolio securities issued by, make
savings deposits in, or enter into repurchase agreements
with Lehman Brothers or LBGAM or any affiliated person (as
such term is defined in the Investment Company Act of 1940,
as amended (the "1940 Act") of any of them, except to the
extent permitted by the Securities and Exchange Commission
(the "SEC"). In addition, with respect to such
transactions, securities, deposits and agreements, the Funds
will not give preference to Service Organizations with which
a Fund enters into agreements. (See the applicable
Prospectus, "Management of the Fund-Service Organizations").
The Funds may seek profits through short-term trading.
The Funds' annual portfolio turnover rates will be
relatively high but the Funds' portfolio turnover is not
expected to have a material effect on their net incomes. The
portfolio turnover rate for each of the Funds is expected to
be zero for regulatory reporting purposes.
Additional Information on Investment Practices
The repurchase price under the repurchase agreements
described in the Funds' Prospectuses generally equals the
price paid by a Fund plus interest negotiated on the basis
of current short-term rates (which may be more or less than
the rate on the securities underlying the repurchase
agreement). Securities subject to repurchase agreements will
be held by the Funds' Custodian, sub-custodian or in the
Federal Reserve/Treasury bookentry system. Repurchase
agreements are considered to be loans by the Funds under the
1940 Act.
Whenever the Funds enter into reverse repurchase
agreements as described in their Prospectuses, they will
place in a segregated custodian account liquid assets having
a value equal to the repurchase price (including accrued
interest) and will subsequently monitor the account to
ensure such equivalent value is maintained. Reverse
repurchase agreements are considered to be borrowings by the
Funds under the 1940 Act.
As stated in the Funds' Prospectuses, the Funds may
purchase securities on a "when-issued" basis (i.e., for
delivery beyond the normal settlement date at a stated price
and yield). When a Fund agrees to purchase when-issued
securities, its Custodian will set aside cash or liquid
portfolio securities equal to the amount of the commitment
in a separate account. Normally, the Custodian will set
aside portfolio securities to satisfy a purchase commitment,
and in such a case such Fund may be required subsequently to
place additional assets in the separate account in order to
ensure that the value of the account remains equal to the
amount of such Fund's commitment. It may be expected that a
Fund's net assets will fluctuate to a greater degree when it
sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. Because the Funds
will set aside cash or liquid assets to satisfy their
respective purchase commitments in the manner described,
such a Fund's liquidity and ability to manage its portfolio
might be affected in the event its commitments to purchase
when-issued securities ever exceeded 25% of the value of its
assets. The Funds do not intend to purchase when-issued
securities for speculative purposes but only in furtherance
of their investment objectives. The Funds reserve the right
to sell the securities before the settlement date if it is
deemed advisable.
When a Fund engages in when-issued transactions, it
relies on the seller to consummate the trade. Failure of the
seller to do so may result in a Fund incurring a loss or
missing an opportunity to obtain a price considered to be
advantageous.
Each Fund has the ability to lend securities from its
portfolio to brokers, dealers and other financial
organizations. There is no investment restriction on the
amount of securities that may be loaned. A Fund may not lend
its portfolio securities to Lehman Brothers or its
affiliates without specific authorization from the SEC.
Loans of portfolio securities by a Fund will be
collateralized by cash, letters of credit or securities
issued or guaranteed by the U.S. government or its agencies
which will be maintained at all times in an amount equal to
at least 100% of the current market value of the loaned
securities (and will be marked to market daily). From time
to time, a Fund may return a part of the interest earned
from the investment of collateral received for securities
loaned to the borrower and/or a third party, which is
unaffiliated with the Fund or with Lehman Brothers, and
which is acting as a "finder." With respect to loans by the
Funds of their portfolio securities, the Funds would
continue to accrue interest on loaned securities and would
also earn income on loans. Any cash collateral received by
the Funds in connection with such loans would be invested in
short-term U.S. government obligations.
Investment Limitations
The Funds' Prospectuses summarize certain investment
limitations that may not be changed without the affirmative
vote of the holders of a "majority of the outstanding
shares" of the respective Fund (as defined below under
"Miscellaneous"). Investment limitations numbered 1 through
7 may not be changed without such a vote of shareholders;
investment limitations 8 through 13 may be changed by a vote
of the Trust's Board of Trustees at any time.
A Fund may not:
1. Purchase the securities of any issuer if as a
result more than 5% of the value of the Fund's assets would
be invested in the securities of such issuer, except that
25% of the value of the Fund's assets may be invested
without regard to this 5% limitation and provided that there
is no limitation with respect to investments in U.S.
government securities.
2. Borrow money except from banks or, in the case
of the Cash Management Fund and subject to specific
authorization by the Securities and Exchange Commission,
from funds advised by the Adviser or an affiliate of the
Adviser. A Fund may borrow money for temporary purposes and
then in an amount not exceeding 10% (one-third in the case
of the Cash Management Fund) of the value of the particular
Fund's total assets, or mortgage, pledge or hypothecate its
assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts
borrowed or 10% (one-third in the case of the Cash
Management Fund) of the value of the particular Fund's total
assets at the time of such borrowing. Borrowing may take the
form of a sale of portfolio securities accompanied by a
simultaneous agreement as to their repurchase. Additional
investments will not be made when borrowings exceed 5% of
the Fund's assets.
3. Make loans except that the Fund may (i) purchase
or hold debt obligations in accordance with its investment
objective and policies, (ii) may enter into repurchase
agreements for securities, (iii) may lend portfolio
securities and (iv) with respect to the Cash Management
Fund, subject to specific authorization by the Securities
and Exchange Commission, lend money to other funds advised
by the Adviser or an affiliate of the Adviser.
4. Act as an underwriter, except insofar as the
Fund may be deemed an underwriter under applicable
securities laws in selling portfolio securities.
5. Purchase or sell real estate or real estate
limited partnerships except that the Fund may invest in
securities secured by real estate or interests therein.
6. Purchase or sell commodities or commodity
contracts, or invest in oil, gas or mineral exploration or
development programs or in mineral leases.
7. 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 issuers
conducting their principal business activities in the same
industry, provided that there is no limitation with respect
to investments in U.S. government securities.
8. Knowingly invest more than 10% of the value of
the Fund's assets in securities that may be illiquid because
of legal or contractual restrictions on resale or securities
for which there are no readily available market quotations.
9. Purchase securities on margin, make short sales
of securities or maintain a short position.
10. Write or sell puts, calls, straddles, spreads or
combinations thereof.
11. Invest in securities if as a result the Fund
would then have more than 5% of its total assets in
securities of companies (including predecessors) with less
than three years of continuous operation.
12. Purchase securities of other investment
companies except as permitted under the 1940 Act or in
connection with a merger, consolidation, acquisition or
reorganization.
13. Invest in warrants.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
In General
Information on how to purchase and redeem a Fund's
shares, including the timing of placing a purchase and
redemption order, is included in its Prospectus. The
issuance of shares is recorded on the books of the Funds,
and share certificates are not issued.
The regulations of the Comptroller of the Currency
(the "Comptroller") provide that funds held in a fiduciary
capacity by a national bank approved by the Comptroller to
exercise fiduciary powers must be invested in accordance
with the instrument establishing the fiduciary relationship
and local law. The Trust believes that the purchase of
Government Obligations Money Market Fund shares, Cash
Management Fund shares and Treasury Instruments Money Market
Fund II shares by such national banks acting on behalf of
their fiduciary accounts is not contrary to applicable
regulations if consistent with the particular account and
proper under the law governing the administration of the
account.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Funds on
fiduciary funds that are invested in a Fund's Class B, Class
C or Class E shares. Institutions, including banks regulated
by the Comptroller and investment advisers and other money
managers subject to the jurisdiction of the SEC, the
Department of Labor or state securities commissions, should
consult their legal advisers before investing fiduciary
funds in a Fund's Class B, Class C or Class E shares.
Under the 1940 Act, the Funds may suspend the right of
redemption or postpone the date of payment upon redemption
for any period during which the New York Stock Exchange
("Exchange") is closed, other than customary weekend and
holiday closings, or during which trading on said Exchange
is restricted, or during which (as determined by the SEC by
rule or regulation) an emergency exists as a result of which
disposal or valuation of portfolio securities is not
reasonably practicable, or for such other periods as the SEC
may permit. (The Funds may also suspend or postpone the
recordation of the transfer of their shares upon the
occurrence of any of the foregoing conditions.) In
addition, the Funds may redeem shares involuntarily in
certain other instances if the Board of Trustees determines
that failure to redeem may have material adverse
consequences to a Fund's investors in general. Each Fund is
obligated to redeem shares solely in cash up to $250,000 or
1% of the Fund's net asset value, whichever is less, for any
one investor within a 90-day period. Any redemption beyond
this amount will also be in cash unless the Board of
Trustees determines that conditions exist which make payment
of redemption proceeds wholly in cash unwise or undesirable.
In such a case, the Fund may make payment wholly or partly
in readily marketable securities or other property, valued
in the same way as the Fund determines net asset value. See
"Net Asset Value" below for an example of when such
redemption or form of payment might be appropriate.
Redemption in kind is not as liquid as a cash redemption.
Investors who receive a redemption in kind may incur
transaction costs if they sell such securities or property,
and may receive less than the redemption value of such
securities or property upon sale, particularly where such
securities are sold prior to maturity.
Any institution purchasing shares on behalf of
separate accounts will be required to hold the shares in a
single nominee name (a "Master Account"). Institutions
investing in more than one of the Trust's portfolios, or
classes of shares must maintain a separate Master Account
for each portfolio and class of shares. Sub-accounts may be
established by name or number either when the Master Account
is opened or later.
Net Asset Value
Each Fund's net asset value per share is calculated by
dividing the total value of the assets belonging to a Fund,
less the value of any liabilities charged to such Fund, by
the total number of that Fund's shares outstanding
(irrespective of class). "Assets belonging to" a Fund
consist of the consideration received upon the issuance of
shares together with all income, earnings, profits and
proceeds derived from the investment thereof, including any
proceeds from the sale, exchange or liquidation of such
investments, any funds or payments derived from any
reinvestment of such proceeds, and a portion of any general
assets of the Trust not belonging to a particular portfolio.
Assets belonging to a particular Fund are charged with the
direct liabilities of that Fund and with a share of the
general liabilities of the Trust allocated in proportion to
the relative net assets of such Fund and the Trust's other
portfolios. Determinations made in good faith and in
accordance with generally accepted accounting principles by
the Board of Trustees as to the allocations of any assets or
liabilities with respect to a Fund are conclusive.
As stated in the Funds' Prospectuses, in computing the
net asset value of shares of the Funds for purposes of sales
and redemptions, the Funds use the amortized cost method of
valuation. Under this method, the Funds value each of their
portfolio securities at cost on the date of purchase and
thereafter assume a constant proportionate amortization of
any discount or premium until maturity of the security. As a
result, the value of a portfolio security for purposes of
determining net asset value normally does not change in
response to fluctuating interest rates. While the amortized
cost method provides certainty in portfolio valuation, it
may result in valuations for the Funds' securities which are
higher or lower than the market value of such securities.
In connection with their use of amortized cost
valuation, each of the Funds limits the dollar-weighted
average maturity of its portfolio to not more than 90 days
and does not purchase any instrument with a remaining
maturity of more than thirteen months (with certain
exceptions) (12 months in the case of Government Obligations
Money Market Fund). In determining the average weighted
portfolio maturity of each Fund, a variable rate obligation
that is issued or guaranteed by the U.S. government, or an
agency or instrumentality thereof, is deemed to have a
maturity equal to the period remaining until the
obligation's next interest rate adjustment. The Trust's
Board of Trustees has also established procedures, pursuant
to rules promulgated by the SEC, that are intended to
stabilize the net asset value per share of each Fund for
purposes of sales and redemptions at $1.00. Such procedures
include the determination at such intervals as the Board
deems appropriate, of the extent, if any, to which each
Fund's net asset value per share calculated by using
available market quotations deviates from $1.00 per share.
In the event such deviation exceeds 1/2 of 1% with respect
to a Fund, the Board will promptly consider what action, if
any, should be initiated. If the Board believes that the
amount of any deviation from the $1.00 amortized cost price
per share of a Fund may result in material dilution or other
unfair results to investors or existing investors, it will
take such steps as it considers appropriate to eliminate or
reduce to the extent reasonably practicable any such
dilution or unfair results. These steps may include selling
portfolio instruments prior to maturity; shortening the
Fund's average portfolio maturity; withholding or reducing
dividends; redeeming shares in kind; or utilizing a net
asset value per share determined by using available market
quotations.
MANAGEMENT OF THE FUNDS
Trustees and Officers
The Trust's Trustees and Executive Officers, their
addresses, principal occupations during the past five years
and other affiliations are as follows:
Name
and
Address
Posit
ion
with
the
Trust
Principal
Occupations
During Past 5
Years and
Other
Affiliations
CLINTON
J.
KENDRIC
K (1)(2
)
3 World
Financi
al
Center
New
York,
NY
10285
Chair
man
of
the
Board
and
Trust
ee
Chief
Operating
Officer,
Lehman
Brothers
Global Asset
Management
Inc.;
formerly
President and
Chief
Executive
Officer,
Hyperion
Capital
Management;
formerly
President and
Director,
Alliance
Capital
Management
CHARLES
F.
BARBER
(2)(3)
66
Glenwoo
d Drive
Greenwi
ch, CT
06830
Trust
ee
Consultant;
formerly
Chairman of
the Board,
ASARCO
Incorporated
BURT N.
DORSETT
(2)(3)
201
East
62nd
Street
New
York,
NY
10022
Trust
ee
Managing
Partner,
Dorsett
McCabe
Capital
Management,
Inc., an
investment
counseling
firm;
Director,
Research
Corporation
Technologies,
a non-profit
patent-cleari
ng and
licensing
operation;
formerly
President,
Westinghouse
Pension
Investments
Corporation;
formerly
Executive
Vice
President and
Trustee,
College
Retirement
Equities
Fund, Inc., a
variable
annuity fund;
and formerly
Investment
Officer,
University of
Rochester
EDWARD
J.
KAIER (
2)(3)
1100
One
Penn
Center
Philade
lphia,
PA
19103
Trust
ee
Partner with
the law firm
of Hepburn
Willcox
Hamilton &
Putnam
S.
DONALD
WILEY (
2)(3)
USX
Tower
Pittsbu
rgh, PA
15219
Trust
ee
Vice-Chairman
and Trustee,
H.J. Heinz
Company
Foundation;
prior to
October 1990,
Senior Vice
President,
General
Counsel and
Secretary,
H.J. Heinz
Company
PETER
MEENAN
260
Frankli
n
Street
Boston,
MA
02110
Presi
dent
Managing
Director of
Lehman
Brothers;
President of
Lehman
Brothers
Institutional
Funds Group
Trust;
formerly,
Director,
Senior Vice
President and
Director of
Institutional
Fund
Services, The
Boston
Company
Advisors,
Inc. from
February 1984
to May 1993;
Director,
Funds
Distributor,
Inc. (1992-
1993); Senior
Vice
President,
The Boston
Company
Advisors,
Inc. from
August 1984
to May 1993
JOHN M.
WINTERS
3 World
Financi
al
Center
New
York,
NY
10285
Vice
Presi
dent
and
Inves
tment
Offic
er
Senior Vice
President and
Senior Money
Market
Manager,
Lehman
Brothers,
Global Asset
Management
Inc.;
formerly
Product
Manager with
Lehman
Brothers
Capital
Markets Group
MICHAEL
C.
KARDOK
One
Exchang
e Place
Boston,
MA
02109
Treas
urer
Vice
President,
The
Shareholder
Services
Group, Inc.;
prior to May
1994, Vice
President,
The Boston
Company
Advisors,
Inc.
PATRICI
A L.
BICKIME
R
One
Exchang
e Place
Boston,
MA
02109
Secre
tary
Vice
President and
Associate
General
Counsel, The
Shareholder
Services
Group, Inc.;
prior to May
1994, Vice
President and
Associate
General
Counsel, The
Boston
Company
Advisors,
Inc.
________________
1. Considered by the Trust to be "interested persons" of
the Trust as defined in the 1940 Act.
2. Audit Committee Member.
3. Nominating Committee Member.
Mr. Dorsett serves as Trustee or Director of other
investment companies for which Lehman Brothers and LBGAM
serve as Distributor and Investment Adviser. One Trustee and
all of the Trust's Officers are affiliated with Lehman
Brothers, The Shareholder Services Group, Inc. or one of
their affiliates.
No employee of Lehman Brothers, LBGAM, or TSSG
receives any compensation from the Trust for acting as an
Officer or Trustee of the Trust. The Trust pays each Trustee
who is not a director, officer or employee of Lehman
Brothers, LBGAM or TSSG or any of their affiliates, a fee of
$20,000 per annum plus $1,250 per meeting attended and
reimburses them for travel and out-of-pocket expenses. For
the fiscal period ended January 31, 1994, such fees and
expenses totaled $9,589 for each Fund and $94,754 for the
Trust in the aggregate. As of May 13, 1994, Trustee and
Officers of the Trust as a group beneficially owned less
than 1% of the outstanding shares of each Fund.
By virtue of the responsibilities assumed by Lehman
Brothers, LBGAM, TSSG and their affiliates under their
respective agreements with the Trust, the Trust itself
requires no employees in addition to its Officers.
Distributor
Lehman Brothers acts as Distributor of the Funds'
shares. Lehman Brothers, located at 3 World Financial
Center, New York, New York 10285, is a wholly-owned
subsidiary of Lehman Brothers Holdings Inc. ("Holdings").
Prior to May 31, 1994, all of the issued and outstanding
common stock (representing 92% of the voting stock) of
Holdings was held by American Express Company ("American
Express"). On May 31, 1994, American Express distributed to
holders of common stock of American Express all outstanding
shares of common stock of Holdings. As of May 31, 1994,
Nippon Life Insurance Company owned 11.2% of the outstanding
voting securities of Holdings. Each Fund's shares are sold
on a continuous basis by Lehman Brothers. The Distributor
pays the cost of printing and distributing prospectuses to
persons who are not investors of the Funds (excluding
preparation and printing expenses necessary for the
continued registration of Fund shares) and of preparing,
printing and distributing all sales literature. No
compensation is payable by the Funds to Lehman Brothers for
its distribution services.
Lehman Brothers is comprised of several major
operating business units. Lehman Brothers Institutional
Funds Group is the business group within Lehman Brothers
that is primarily responsible for the distribution and
client service requirements of the Trust and its investors.
Lehman Brothers Institutional Funds Group has been serving
institutional clients' investment needs exclusively for more
than 20 years, emphasizing high quality individualized
service to clients.
Investment Adviser
LBGAM serves as the Investment Adviser to each of the
Funds. LBGAM, located at 3 World Financial Center, New
York, New York 10285, is a wholly-owned subsidiary of
Holdings. The investment advisory agreements provide that
LBGAM is responsible for all investment activities of the
Funds, including executing portfolio strategy, effecting
Fund purchase and sale transactions and employing
professional portfolio managers and security analysts who
provide research for the Funds.
The Investment Advisory Agreements with respect to
each of the Funds will continue in effect for a period of
two years from February 5, 1993 and thereafter from year to
year provided the continuance is approved annually (i) by
the Trust's Board of Trustees or (ii) by a vote of a
"majority" (as defined in the 1940 Act) of a Fund's
outstanding voting securities, except that in either event
the continuance is also approved by a majority of the
Trustees of the Trust who are not "interested persons" (as
defined in the 1940 Act). Each Investment Advisory Agreement
may be terminated (i) on 60 days' written notice by the
Trustees of the Trust, (ii) by vote of holders of a majority
of a Fund's outstanding voting securities, or upon 90 days'
written notice by Lehman Brothers, or (iii) automatically in
the event of its assignment (as defined in the 1940 Act).
As compensation for LBGAM's services rendered to the
Funds, the Investment Adviser is entitled to a fee, computed
daily and paid monthly, at the annual rate of .10% of the
average daily net assets of the Fund. For the period
February 8, 1993 (commencement of operations) to January 31,
1994, LBGAM was entitled to receive advisory fees in the
following amounts: the Government Obligations Money Market
Fund, $72,100, the Cash Management Fund, $27,323 and the
Treasury Instruments Money Market Fund II, $96,737. Waivers
by LBGAM of advisory fees and reimbursement of expenses to
maintain the Funds' operating expense ratios at certain
levels amounted to: the Government Obligations Money Market
Fund, $72,100 and $163,039, respectively, the Cash
Management Fund, $27,323 and $130,650, respectively, and the
Treasury Instruments Money Market Fund II, $96,737 and
$173,335, respectively. In order to maintain competitive
expense ratios during 1994 and thereafter, the Investment
Adviser and Administrator have agreed to voluntary fee
waivers and expense reimbursements for each of the Funds if
total operating expenses exceed certain levels. See
"Background and Expense Information" in each Fund's
Prospectus.
Principal Holders
At May 13, 1994, the principal holders of Class A
Shares of Government Obligations Money Market Fund were as
follows: Lehman Brothers Inc., 3 World Financial Center, New
York, NY 10285, 55.71% shares held of record; Oster & Co.,
P.O. Box 1338, Victoria, TX 77902, 8.74% shares held of
record; and Old Kent Bank and Trust, 111 Lyon Street N.W.,
Grand Rapids, MI 49503, 6.86% shares held of record. Hare &
Co., c/o Bank of New York, Special Processing Unit, One Wall
Street, New York, NY 10286 was the principal holder of Class
B Shares of Government Obligations Money Market Fund as of
May 13, 1994, with 99.99% shares held of record.
Principal holders of Class A Shares of Treasury
Instruments Money Market Fund II as of May 13, 1994, were as
follows: USNAB & Co., P.O. Box 179, Galveston, TX 77553,
73.26% shares held of record and MAC & Co., Mellon Bank,
P.O. Box 320, Pittsburg, PA 15230, 6.13% shares held of
record. As of May 13, 1994, the principal holders of Class
B Shares of Treasury Instruments Money Market Fund II were
as follows: Perusahaan Petambangan Minyak Dan Gas Bumi
Negara (Pertamina), c/o Sakura Trust Co., 350 Park Avenue,
New York, NY 10022, 84.69% shares held of record and Hare &
Co., c/o Bank of New York, Special Processing Department,
One Wall Street, New York, NY 10286, 9.25% shares held of
record.
As of August 22, 1994, there were no investors in the
Cash Management Fund and all outstanding shares were held by
Lehman Brothers. In addition, as of May 13, 1994 there were
no investors in the Class C shares of the Government
Obligations Money Market Fund and the Treasury Instruments
Money Market Fund II and all outstanding shares were held by
Lehman Brothers. Class E Shares were not offered by the Fund
at that date.
The investors described above have indicated that they
each hold their shares on behalf of various accounts and not
as beneficial owners. To the extent that any investor is the
beneficial owner of more than 25% of the outstanding shares
of a Fund, such investor may be deemed to be a "control
person" of that Fund for purposes of the 1940 Act.
Administrator and Transfer Agent
TSSG, a subsidiary of First Data Corporation, is
located at One Exchange Place, Boston, Massachusetts 02109,
and serves as the Trust's Administrator and Transfer Agent.
As the Trust's Administrator, TSSG has agreed to provide the
following services: (i) assist generally in supervising the
Funds' operations, providing and supervising the operation
of an automated data processing system to process purchase
and redemption orders, providing information concerning the
Funds to their shareholders of record, handling investor
problems, supervising the services of employees and
monitoring the arrangements pertaining to the Funds'
agreements with Service Organizations; (ii) prepare reports
to the Funds' investors and prepare tax returns and reports
to and filings with the SEC; (iii) compute the respective
net asset value per share of each Fund; (iv) provide the
services of certain persons who may be elected as trustees
or appointed as officers of the Trust by the Board of
Trustees; and (v) maintain the registration or qualification
of the Funds' shares for sale under state securities laws.
TSSG is entitled to receive, as compensation for its
services rendered under an administration agreement, an
administrative fee, computed daily and paid monthly, at the
annual rate of .10% of the average daily net assets of each
Fund. TSSG pays Boston Safe, the Fund's Custodian, a
portion of its monthly administration fee for custody
services rendered to the Funds.
Prior to May 6, 1994, The Boston Company Advisors,
Inc. ("TBCA"), an indirect, wholly-owned subsidiary of
Mellon Bank Corporation ("Mellon"), served as Administrator
of the Funds. On May 6, 1994, TSSG acquired TBCA's third
party mutual fund administration business from Mellon, and
each Fund's administration agreement with TBCA was assigned
to TSSG. For the period February 8, 1993 (commencement of
operations) to January 31, 1994, TBCA was entitled to
receive administration fees in the following amounts: the
Government Obligations Money Market Fund, $72,100, the Cash
Management Fund, $27,323 and the Treasury Instruments Money
Market Fund II, $96,737. Waivers by TBCA of administration
fees and reimbursement of expenses to maintain the Funds'
operating expense ratios at certain levels amounted to: the
Government Obligations Money Market Fund, $72,100 and
$19,087, respectively, the Cash Management Fund, $27,323 and
$9,381, respectively, and the Treasury Instruments Money
Market Fund II, $96,737 and $42,443, respectively. In order
to maintain competitive expense ratios, the Investment
Adviser and Administrator may agree to waive fees or to
reimburse the Funds if total operating expenses exceed
certain levels. See "Background and Expense Information" in
each Fund's Prospectus.
Under the transfer agency agreement, TSSG maintains
the investor account records for the Trust, handles certain
communications between investors and the Trust, distributes
dividends and distributions payable by the Trust and
produces statements with respect to account activity for the
Trust and its investors. For these services, TSSG receives a
monthly fee based on average net assets and is reimbursed
for out-of-pocket expenses.
Custodian
Boston Safe Deposit and Trust Company ("Boston Safe"),
is located at One Boston Place, Boston, Massachusetts 02108,
serves as the Custodian of the Trust pursuant to a custody
agreement. Under the custody agreement, Boston Safe holds
each Fund's portfolio securities and keeps all necessary
accounts and records. For its services, Boston Safe receives
a monthly fee from TSSG based upon the month-end market
value of securities held in custody and also receives
securities transaction charges, including out-of-pocket
expenses. The assets of the Trust are held under bank
custodianship in compliance with the 1940 Act.
Service Organizations
As stated in the Funds' Prospectuses, the Funds will
enter into an agreement with each financial institution
which may purchase Class B, Class C or Class E shares. The
Funds will enter into an agreement with each Service
Organization whose customers ("Customers") are the
beneficial owners of Class B, Class C or Class E shares that
requires the Service Organization to provide certain
services to Customers in consideration of the Funds' payment
of .25%, .35%, or .15%, respectively, of the average daily
net asset value of the respective Class beneficially owned
by the Customers. Such services with respect to the Class C
shares include: (i) aggregating and processing purchase and
redemption requests from Customers and placing net purchase
and redemption orders with a Fund's Distributor;
(ii) processing dividend payments from the Funds on behalf
of Customers; (iii) providing information periodically to
Customers showing their positions in shares; (iv) arranging
for bank wires; (v) responding to Customer inquiries
relating to the services performed by the Service
Organization and handling correspondence; (vi) forwarding
investor communications from the Funds (such as proxies,
investor reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to
Customers; (vii) acting as shareholder of record or nominee;
and (viii) other similar account administrative services.
In addition, a Service Organization at its option, may also
provide to its Customers of Class C shares (a) a service
that invests the assets of their accounts in shares pursuant
to specific or pre-authorized instructions; (b) provide sub-
accounting with respect to shares beneficially owned by
Customers or the information necessary for sub-accounting;
and (c) provide check writing services. Service
Organizations that purchase Class C shares will also provide
assistance in connection with the support of the
distribution of Class C shares to its Customers, including
marketing assistance and the forwarding to Customers of
sales literature and advertising provided by a Distributor
of the shares. Holders of Class B shares of a Fund will
receive the services set forth in (i) and (v) and may
receive one or more of the services set forth in (ii),
(iii), (iv), (vi), (vii) and (viii) above. A Service
Organization, at its option, may also provide to its
Customers of Class B shares services including:
(a) providing Customers with a service that invests the
assets of their accounts in shares pursuant to specific or
pre-authorized instruction; (b) providing sub-accounting
with respect to shares beneficially owned by Customers or
the information necessary for sub-accounting; (c) providing
reasonable assistance in connection with the distribution of
shares to Customers; and (d) providing such other similar
services as the Fund may reasonably request to the extent
the Service Organization is permitted to do so under
applicable statutes, rules, or regulations. Holders of Class
E shares of a Fund will receive the services set forth in
(i) and (v) and may receive one or more of the services set
forth in (ii), (iii), (iv), and (vii) above. A Service
Organization, and at its option, may also provide to its
Customers of Class E shares services including: (a)
providing Customers with a service that invests the assets
of their accounts in shares pursuant to specific or pre-
authorized instruction; (b) providing sub-accounting with
respect to shares beneficially owned by Customers or the
information necessary for sub-accounting; (c) providing
checkwriting services; (d) providing reasonable assistance
in connection with the distribution of shares to Clients as
requested from time to time by us, which assistance may
include forwarding sales literature and advertising provided
by us for Clients; and (e) providing such other similar
services as the Fund may reasonably request to the extent
the Service Organization is permitted to do so under
applicable statutes, rules or regulations.
Each Fund's agreements with Service Organizations are
governed by a Shareholder Services Plan (the "Plan") that
has been adopted by the Trust's Board of Trustees under Rule
12b-1 of the 1940 Act. Under this Plan, the Board of
Trustees reviews, at least quarterly, a written report of
the amounts expended under the Fund's agreements with
Service Organizations and the purposes for which the
expenditures were made. In addition, the Funds' arrangements
with Service Organizations must be approved annually by a
majority of the Trust's Trustees, including a majority of
the Trustees who are not "interested persons" of the Trust
as defined in the 1940 Act and have no direct or indirect
financial interest in such arrangements (the "Disinterested
Trustees").
The Board of Trustees has approved the Funds'
arrangements with Service Organizations based on information
provided by the Funds' service contractors that there is a
reasonable likelihood that the arrangements will benefit the
Funds and their investors by affording the Funds greater
flexibility in connection with the servicing of the accounts
of the beneficial owners of their shares in an efficient
manner. Any material amendment to the Funds' arrangements
with Service Organizations must be approved by a majority of
the Trust's Board of Trustees (including a majority of the
Disinterested Trustees). So long as the Funds' arrangements
with Service Organizations are in effect, the selection and
nomination of the members of the Trust's Board of Trustees
who are not "interested persons" (as defined in the 1940
Act) of the Trust will be committed to the discretion of
such non-interested Trustees.
For the period February 8, 1993 (commencement of
operations) to January 31, 1994, the Class B shares of the
Government Obligations Money Market Fund paid $771 in
service fees, the Class B shares of the Cash Management Fund
did not pay any service fees and the Class B shares of the
Treasury Instruments Money Market Fund II paid $35,867 in
service fees.
Expenses
The Funds' expenses include taxes, interest, fees and
salaries of the Trust's Trustees and Officers who are not
directors, officers or employees of the Trust's service
contractors, SEC fees, state securities qualification fees,
costs of preparing and printing prospectuses for regulatory
purposes and for distribution to investors, advisory,
sub-advisory and administration fees, charges of the
Custodian, certain insurance premiums, outside auditing and
legal expenses, costs of investor reports and shareholder
meetings and any extraordinary expenses. In addition to
these expenses, the individual classes of the Fund bear
certain expenses including Transfer Agent and dividend
disbursing agent fees and, with respect to Class B, C and E
shares, Service Organization fees. The Funds also pay for
brokerage fees and commissions (if any) in connection with
the purchase and sale of portfolio securities. LBGAM and
TSSG have agreed that if, in any fiscal year, the expenses
borne by a Fund exceed the applicable expense limitations
imposed by the securities regulations of any state in which
shares of the particular Fund are registered or qualified
for sale to the public, they will reimburse such Fund for
any excess to the extent required by such regulations in the
same proportion that each of their fees bears to the Fund's
aggregate fees for investment advice and administrative
services. Unless otherwise required by law, such
reimbursement would be accrued and paid on the same basis
that the advisory and administration fees are accrued and
paid by such Fund. To the Funds' knowledge, of the expense
limitations in effect on the date of this Statement of
Additional Information, none is more restrictive than two
and one-half percent (2 1/2%) of the first $30 million of a
Fund's average annual net assets, two percent (2%) of the
next $70 million of the average annual net assets and one
and one-half percent (1 1/2%) of the remaining average
annual net assets.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax
considerations generally affecting each Fund and its
investors that are not described in each Fund's Prospectus.
No attempt is made to present a detailed explanation of the
tax treatment of the Funds or their investors or possible
legislative changes, and the discussion here and in each
Fund's Prospectus is not intended as a substitute for
careful tax planning. Investors should consult their tax
advisers with specific reference to their own tax situation.
As stated in each Prospectus, each Fund of the Trust
is treated as a separate corporate entity under the Code and
qualified as a regulated investment company under the Code
and intends to so qualify in future years. In order to so
qualify for a taxable year, each Fund must satisfy the
distribution requirement described in its Prospectus, derive
at least 90% of its gross income for the year from certain
qualifying sources, comply with certain diversification
tests and derive less than 30% of its gross income from the
sale or other disposition of securities and certain other
investments held for less than three months. Interest
(including original issue discount and accrued market
discount) received by a Fund upon maturity or disposition of
a security held for less than three months will not be
treated as gross income derived from the sale or other
disposition of such security within the meaning of this
requirement. However, any other income which is attributable
to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for
this purpose.
A 4% nondeductible excise tax is imposed on regulated
investment companies that fail to distribute currently an
amount equal to specified percentages of their ordinary
taxable income and capital gain net income (excess of
capital gains over capital losses). Each Fund intends to
make sufficient distributions or deemed distributions of its
ordinary taxable income and any capital gain net income each
calendar year to avoid liability for this excise tax.
If for any taxable year a Fund does not qualify for
tax treatment as a regulated investment company, all of its
taxable income will be subject to federal income tax at
regular corporate rates without any deduction for
distributions to Fund investors. In such event, dividend
distributions would be taxable as ordinary income to the
Fund's investors to the extent of its current and
accumulated earnings and profits, and would be eligible for
the dividends received deduction in the case of corporate
shareholders.
Each Fund will be required in certain cases to
withhold and remit to the U.S. Treasury 31% of taxable
dividends or 31% of gross proceeds realized upon sale paid
to any investor who has failed to provide a correct tax
identification number in the manner required, or who is
subject to withholding by the Internal Revenue Service for
failure to properly include on his return payments of
taxable interest or dividends, or who has failed to certify
to the Fund that he is not subject to backup withholding
when required to do so or that he is an "exempt recipient."
Depending upon the extent of the Funds' activities in
states and localities in which their offices are maintained,
in which their agents or independent contractors are located
or in which they are otherwise deemed to be conducting
business, the Funds may be subject to the tax laws of such
states or localities. In addition, in those states and
localities which have income tax laws, the treatment of the
Funds and their investors under such laws may differ from
their treatment under federal income tax laws. Investors are
advised to consult their tax advisers concerning the
application of state and local taxes.
The foregoing discussion is based on federal 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.
DIVIDENDS
Net income of each of the Funds for dividend purposes
consists of (i) interest accrued and original issue discount
earned on the Fund's assets, (ii) plus the amortization of
market discount and minus the amortization of market premium
on such assets, (iii) less accrued expenses directly
attributable to the Fund and the general expenses (e.g.,
legal, accounting and trustees' fees) of the Trust prorated
to the Fund on the basis of its relative net assets. In
addition, Class B, Class C and Class E shares bear
exclusively the expense of fees paid to Service
Organizations with respect to the relevant Class of shares.
See "Management of the Funds-Service Organizations." With
respect to the Cash Management Fund dividends may be based
on estimates of net interest income for the Fund. Actual
income may differ from estimates and differences, if any,
will be included in the calculation of subsequent dividends.
As stated, the Trust uses its best efforts to maintain
the net asset value per share of each Fund at $1.00. As a
result of a significant expense or realized or unrealized
loss incurred by either of these portfolios, it is possible
that the portfolio's net asset value per share may fall
below $1.00.
ADDITIONAL YIELD INFORMATION
The "yields" and "effective yields" are calculated
separately for each class of shares of each Fund and in
accordance with the formulas prescribed by the SEC. The
seven-day yield for each class of shares is calculated by
determining the net change in the value of a hypothetical
pre-existing account in the particular Fund which has a
balance of one share of the class involved at the beginning
of the period, dividing the net change by the value of the
account at the beginning of the period to obtain the base
period return, and multiplying the base period return by
365/7. The net change in the value of an account in a Fund
includes the value of additional shares purchased with
dividends from the original share and dividends declared on
the original share and any such additional shares, net of
all fees charged to all investor accounts in proportion to
the length of the base period and the Fund's average account
size, but does not include gains and losses or unrealized
appreciation and depreciation. In addition, an effective
annualized yield quotation may be computed on a compounded
basis with respect to each class of its shares by adding 1
to the base period return for the class involved (calculated
as described above), raising that sum to a power equal to
365/7, and subtracting 1 from the result.
Similarly, based on the calculations described above,
the Funds' 30-day (or one-month) yields and effective yields
may also be calculated. Such yields refer to the average
daily income generated over a 30-day (or one-month) period,
as appropriate.
Based on the period ended January 31, 1994, the yields
and effective yields for each of the Funds were as follows:
7
- -
d
a
y
Y
i
e
l
d
7
- -
d
a
y
E
f
f
e
c
t
i
v
e
Y
i
e
l
d
7
- -
d
a
y
T
a
x
- -
E
q
u
i
v
a
l
e
n
t
Y
i
e
l
d
3
0
- -
d
a
y
Y
i
e
l
d
3
0
- -
d
a
y
E
f
f
e
c
t
i
v
e
Y
i
e
l
d
3
0
- -
d
a
y
T
a
x
- -
E
q
u
i
v
a
l
e
n
t
Y
i
e
l
d
Governm
ent
Obligat
ions
Money
Market
Fund
Class A
Shares
3
.
1
2
%
3
.
1
7
%
N
/
A
3
.
1
7
%
3
.
2
2
%
N
/
A
Class A
Shares*
*
2
.
9
9
%
3
.
0
3
%
N
/
A
3
.
0
4
%
3
.
0
8
%
N
/
A
Cash
Mangeme
nt Fund
Class A
Shares
3
.
0
7
%
3
.
1
1
%
4
.
5
1
%
3
.
1
0
%
3
.
1
4
%
4
.
4
9
%
Class A
Shares*
*
2
.
9
4
%
2
.
9
8
%
4
.
3
2
%
2
.
9
7
%
3
.
0
1
%
4
.
3
0
%
Treasur
y
Instrum
ents
Money
Market
Fund II
Class A
Shares
3
.
0
9
%
3
.
1
3
%
N
/
A
3
.
1
0
%
3
.
1
4
%
N
/
A
Class B
Shares
2
.
8
4
%
2
.
8
8
%
N
/
A
2
.
8
5
%
2
.
8
9
%
N
/
A
Class C
Shares
2
.
7
4
%
2
.
7
7
%
N
/
A
2
.
7
5
%
2
.
7
8
%
N
/
A
Class A
Shares*
*
2
.
9
6
%
3
.
0
0
%
N
/
A
2
.
9
7
%
3
.
0
1
%
N
/
A
Class B
Shares*
*
2
.
7
1
%
2
.
7
4
%
N
/
A
2
.
7
2
%
2
.
7
5
%
N
/
A
Class C
Shares*
*
2
.
6
1
%
2
.
6
4
%
N
/
A
2
.
6
2
%
2
.
6
5
%
N
/
A
**without fee waivers and/or expense reimbursements
Note: Tax Equivalent yields relate to the performance of
the Cash Management Fund when it operated with different
investment policies as the 100% Government Obligations Money
Market Fund. Tax-Equivalent yields assume a maximum Federal
Tax Rule of 31%.
Class B, Class C and Class E Shares bear the expenses
of fees paid to Service Organizations. As a result, at any
given time, the net yield of Class B, Class C and Class E
Shares could be up to .25%, .35%, and .15% lower than the
net yield of Class A Shares, respectively. The Class B and
Class C shares of the Government Obligations Money Market
Fund and the Cash Management Fund and the Class E Shares of
each of the Funds did not have activity as of January 31,
1994 and, accordingly, yield information is not available
with respect to such shares.
From time to time, in advertisements or in reports to
investors, the performance of the Funds may be quoted and
compared to that of other money market funds or accounts
with similar investment objectives and to stock or other
relevant indices. For example, the yields of the Funds may
be compared to the Donoghue's Money Fund Average, which is
an average compiled by IBC/Donoghue's MONEY FUND REPORT of
Holliston, MA 01746, a widely recognized independent
publication that monitors the performance of money market
funds, or to the average yields reported by the Bank Rate
Monitor from money market deposit accounts offered by the 50
leading banks and thrift institutions in the top five
standard metropolitan statistical areas.
The Funds' yields will fluctuate and any quotation of
yield should not be considered as representative of the
future performance of the Funds. Since yields fluctuate,
yield data cannot necessarily be used to compare an
investment in the Funds' shares with bank deposits, savings
accounts and similar investment alternatives which often
provide an agreed or guaranteed fixed yield for a stated
period of time. Investors should remember that performance
and yield are generally functions of the kind and quality of
the investments held in a portfolio, portfolio maturity,
operating expenses net of waivers and expense reimbursements
and market conditions. Any fees charged by Service
Organizations or other institutional investors with respect
to customer accounts in investing in shares of the Funds
will not be included in calculations of yield; such fees, if
charged, would reduce the actual yield from that quoted.
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES
The Trust does not presently intend to hold annual
meetings of shareholders except as required by the 1940 Act
or other applicable law. The law under certain circumstances
provides shareholders with the right to call for a meeting
of shareholders to consider the removal of one or more
Trustees. To the extent required by law, the Trust will
assist in shareholder communication in such matters.
As stated in the Prospectuses for the Funds, holders
of each Fund's shares, will vote in the aggregate and not by
class on all matters, except where otherwise required by law
and except that for each Fund only that Fund's Class B,
Class C and Class E shares will be entitled to vote on
matters submitted to a vote of shareholders pertaining to
the Fund's arrangements with Service Organizations with
respect to the relevant Class of shares. (See "Management of
the Funds-Service Organizations"). Further, shareholders of
all of the Trust's portfolios will vote in the aggregate and
not by portfolio except as otherwise required by law or when
the Board of Trustees determines that the matter to be voted
upon affects only the interests of the shareholders of a
particular portfolio. Rule 18f-2 under the 1940 Act provides
that any matter required to be submitted by the provisions
of such Act or applicable state law, or otherwise, to the
holders of the outstanding securities of an investment
company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each portfolio
affected by the matter. Rule 18f-2 further provides that a
portfolio shall be deemed to be affected by a matter unless
it is clear that the interests of each portfolio in the
matter are identical or that the matter does not affect any
interest of the portfolio. Under the Rule the approval of an
investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with
respect to a portfolio only if approved by the holders of a
majority of the outstanding voting securities of such
portfolio. However, the Rule also provides that the
ratification of the selection of independent auditors, the
approval of principal underwriting contracts and the
election of Trustees are not subject to the separate voting
requirements and may be effectively acted upon by
shareholders of the investment company voting without regard
to portfolio.
COUNSEL
Willkie Farr & Gallagher, One Citicorp Center, 153
East 53rd Street, New York, New York 10022, serves as
counsel to the Trust and will pass upon the legality of the
shares offered hereby. Willkie Farr & Gallagher also acts as
counsel to Lehman Brothers.
AUDITORS
Ernst & Young, independent auditors, serve as auditors
to the Fund and render an opinion on the Fund's financial
statements. Ernst & Young has offices at 200 Clarendon
Street, Boston, Massachusetts 02116-5072.
FINANCIAL STATEMENTS
The Trust's Annual Report for the fiscal period ended
January 31, 1994 is incorporated into this Statement of
Additional Information by reference in its entirety.
MISCELLANEOUS
Shareholder Vote
As used in this Statement of Additional Information
and the Prospectuses for the Funds, a "majority of the
outstanding shares" of a Fund or of any other portfolio
means the lesser of (1) 67% of the shares of such Fund
(irrespective of class) or of the portfolio represented at a
meeting at which the holders of more than 50% of the
outstanding shares of such Fund or portfolio are present in
person or by proxy, or (2) more than 50% of the outstanding
shares of such Fund (irrespective of class) or of the
portfolio.
Shareholder and Trustee Liability
The Trust is organized as a "business trust" under the
laws of the Commonwealth of Massachusetts. Shareholders of
such a trust may, under certain circumstances, be held
personally liable (as if they were partners) for the
obligations of the trust. The Declaration of Trust of the
Trust provides that shareholders of the Funds shall not be
subject to any personal liability for the acts or
obligations of the Trust and that every note, bond,
contract, order or other undertaking made by the Trust shall
contain a provision to the effect that the shareholders are
not personally liable thereunder. The Declaration of Trust
provides for indemnification out of the trust property of a
Fund of any shareholder of the Fund held personally liable
solely by reason of his being or having been a shareholder
and not because of his acts or omissions or some other
reason. The Declaration of Trust also provides that the
Trust shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of
the Trust and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss beyond its
investment in a Fund on account of shareholder liability is
limited to circumstances in which the Fund itself would be
unable to meet its obligations.
The Trust's Declaration of Trust provides further that
no Trustee, Officer or agent of the Trust shall be
personally liable for or on account of any contract, debt,
tort, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of the
trust estate or the conduct of any business of the Trust,
nor shall any Trustee be personally liable to any person for
any action or failure to act except by reason of his own bad
faith, willful misfeasance, gross negligence in the
performance of his duties or by reason of reckless disregard
of his obligations and duties as Trustee. It also provides
that all persons having any claim against the Trustees or
the Trust shall look solely to the trust property for
payment. With the exceptions stated, the Declaration of
Trust provides that a Trustee is entitled to be indemnified
against all liabilities and expenses reasonably incurred by
him in connection with the defense or disposition of any
proceeding in which he may be involved or with which he may
be threatened by reason of his being or having been a
Trustee, and that the Trustees have the power, but not the
duty, to indemnify officers and employees of the Trust
unless such person would not be entitled to indemnification
had he been a Trustee.
- - 12 -
shared/lehman/miscinstiut/instit/ifg/secfiling/saigv2.doc
Treasury Instruments Money Market Fund
Investment Portfolios Offered By Lehman Brothers
Institutional Funds Group Trust
Statement of Additional Information
May 31, 1994
As Supplemented
August 22, 1994
This Statement of Additional Information is meant to
be read in conjunction with the Prospectus for 100% Treasury
Instruments Money Market Fund (the "Fund") dated May 31,
1994, as amended or supplemented from time to time, and is
incorporated by reference in its entirety into the
Prospectus. Because this Statement of Additional Information
is not itself a prospectus, no investment in shares of 100%
Treasury Instruments Money Market Fund should be made solely
upon the information contained herein. Copies of the
Prospectus for the Fund may be obtained by calling Lehman
Brothers Inc. ("Lehman Brothers") at 1-800-368-5556.
Capitalized terms used but not defined herein have the same
meanings as in the Prospectuses.
TABLE OF CONTENTS
Page
The Trust 2
Investment Objective and Policies 2
Additional Purchase and Redemption Information 5
Management of the Fund 7
Additional Information Concerning Taxes 13
Dividends 14
Additional Yield Information 14
Additional Description Concerning Shares 16
Counsel 16
Auditors 17
Financial Statements 17
Miscellaneous 17
THE TRUST
Lehman Brothers Institutional Funds Group Trust (the
"Trust") is a no-load, open-end management investment
company. The Trust currently includes a family of
portfolios, one of which is the 100% Treasury Instruments
Money Market Fund portfolio.
The obligations held by the Fund are limited to U.S.
Treasury bills, notes and other direct obligations of the
U.S. Treasury. Although the Fund and the Trust's other
portfolios have the same Investment Adviser and have
comparable investment objectives, the Fund differs in that
it may not engage in repurchase agreements; its yields
normally will differ due to its differing cash flows and
differences in the specific portfolio securities held.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE
FUND'S PROSPECTUS RELATE PRIMARILY TO THE FUND AND DESCRIBE
ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS,
CONTRACTS AND OTHER MATTERS RELATING TO THE FUND. INVESTORS
WISHING TO OBTAIN SIMILAR INFORMATION REGARDING THE TRUST'S
OTHER PORTFOLIOS MAY OBTAIN SEPARATE PROSPECTUS DESCRIBING
THOSE PORTFOLIOS BY CONTACTING LEHMAN BROTHERS AT
1-800-368-5556.
INVESTMENT OBJECTIVE AND POLICIES
As stated in the Fund's Prospectus, the investment
objective of the Fund is to provide current income with
liquidity and security of principal. The following policies
supplement the description in the Prospectus of the
investment objectives and policies of the Fund.
The Fund is managed to provide stability of capital
while achieving competitive yields. The Investment Adviser
intends to follow a value-oriented, research-driven and
risk-averse investment strategy, engaging in a full range of
economic, strategic, credit and market-specific analyses in
researching potential investment opportunities.
Portfolio Transactions
Subject to the general control of the Trust's Board of
Trustees, Lehman Brothers Global Asset Management Inc.
("LBGAM"), the Fund's Investment Adviser, is responsible
for, makes decisions with respect to and places orders for
all purchases and sales of portfolio securities for the
Fund. Purchases and sales of portfolio securities are
usually principal transactions without brokerage
commissions. In making portfolio investments, LBGAM seeks to
obtain the best net price and the most favorable execution
of orders. To the extent that the execution and price
offered by more than one dealer are comparable, LBGAM may,
in its discretion, effect transactions in portfolio
securities with dealers who provide the Trust with research
advice or other services.
Investment decisions for the Fund are made
independently from those for other investment company
portfolios advised by LBGAM. Such other investment company
portfolios may invest in the same securities as the Fund.
When purchases or sales of the same security are made at
substantially the same time on behalf of such other
investment company portfolios, transactions are averaged as
to price, and available investments allocated as to amount,
in a manner which LBGAM believes to be equitable to each
portfolio, including the Fund. In some instances, this
investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtained
for the Fund. To the extent permitted by law, LBGAM may
aggregate the securities to be sold or purchased for the
Fund with those to be sold or purchased for such other
investment company portfolios in order to obtain best
execution.
The Fund will not execute portfolio transactions
through, acquire portfolio securities issued by, make
savings deposits in, or enter into repurchase agreements
with Lehman Brothers or LBGAM or any affiliated person (as
such term is defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of any of them, except to the
extent permitted by the Securities and Exchange Commission
(the "SEC"). In addition, with respect to such
transactions, securities, deposits and agreements, the Fund
will not give preference to Service Organizations with which
a Fund enters into agreements. (See the applicable
Prospectus, "Management of the Fund-Service Organizations").
The Fund may seek profits through short-term trading
and engage in short-term trading for liquidity purposes.
Increased trading may provide greater potential for capital
gains and losses, and also involves correspondingly greater
trading costs which are borne by the Fund involved. The
Fund's Investment Adviser will consider such costs in
determining whether or not a Fund should engage in such
trading. The portfolio turnover rate for the Fund is
expected to be zero for regulatory reporting purposes.
Additional Information on Portfolio Investments
As stated in the Fund's Prospectus, the Fund may
purchase securities on a "when-issued" basis (i.e., for
delivery beyond the normal settlement date at a stated price
and yield). When the Fund agrees to purchase when-issued
securities, its Custodian will set aside cash or liquid
portfolio securities equal to the amount of the commitment
in a separate account. Normally, the Custodian will set
aside portfolio securities to satisfy a purchase commitment,
and in such a case the Fund may be required subsequently to
place additional assets in the separate account in order to
ensure that the value of the account remains equal to the
amount of the Fund's commitment. It may be expected that the
Fund's net assets will fluctuate to a greater degree when it
sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. Because the Fund
will set aside cash or liquid assets to satisfy their
respective purchase commitments in the manner described, its
liquidity and ability to manage its portfolio might be
affected in the event its commitments to purchase
when-issued securities ever exceeded 25% of the value of its
assets. The Fund does not intend to purchase when-issued
securities for speculative purposes but only in furtherance
of its investment objectives. The Fund reserves the right to
sell the securities before the settlement date if it is
deemed advisable.
When the Fund engages in when-issued transactions, it
relies on the seller to consummate the trade. Failure of the
seller to do so may result in a Fund's incurring a loss or
missing an opportunity to obtain a price considered to be
advantageous.
Investment Limitations
The Fund's Prospectus summarizes certain investment
limitations that may not be changed without the affirmative
vote of the holders of a "majority of the outstanding
shares" of the Fund (as defined below under
"Miscellaneous"). Investment limitations numbered 1 through
7 may not be changed without such a vote of shareholders;
investment limitations 8 through 13 may be changed by a vote
of the Trust's Board of Trustees at any time.
The Fund may not:
1. Purchase the securities of any issuer if as a
result more than 5% of the value of the Fund's assets would
be invested in the securities of such issuer, except that up
to 25% of the value of the Fund's assets may be invested
without regard to this 5% limitation and provided that there
is no limitation with respect to investments in U.S.
government securities.
2. Borrow money except from banks for temporary
purposes and then in an amount not exceeding 10% of the
value of the particular Fund's total assets, or mortgage,
pledge or hypothecate its assets except in connection with
any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of
the Fund's total assets at the time of such borrowing.
Additional investments will not be made when borrowings
exceed 5% of the Fund's assets.
3. Make loans except that the Fund may purchase or
hold debt obligations in accordance with its investment
objective and policies.
4. Act as an underwriter, except insofar as the Fund
may be deemed an underwriter under applicable securities
laws in selling portfolio securities.
5. Purchase or sell real estate or real estate
limited partnerships except that the Fund may invest in
securities secured by real estate or interests therein.
6. Purchase or sell commodity contracts, or invest in
oil, gas or mineral exploration or development programs or
in mineral leases.
7. 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 issuers
conducting their principal business activities in the same
industry, provided that there is no limitation with respect
to investments in U.S. government securities.
8. Knowingly invest more than 10% of the value of the
Fund's assets in securities that may be illiquid because of
legal or contractual restrictions on resale or securities
for which there are no readily available market quotations.
9. Purchase securities on margin, make short sales of
securities or maintain a short position.
10. Write or sell puts, calls, straddles, spreads or
combinations thereof.
11. Invest in securities if as a result the Fund
would then have more than 5% of its total assets in
securities of companies (including predecessors) with less
than three years of continuous operation.
12. Purchase securities of other investment companies
except as permitted under the 1940 Act or in connection with
a merger, consolidation, acquisition or reorganization.
13. Invest in warrants.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
In General
The regulations of the Comptroller of the Currency
(the "Comptroller") provide that funds held in a fiduciary
capacity by a national bank approved by the Comptroller to
exercise fiduciary powers must be invested in accordance
with the instrument establishing the fiduciary relationship
and local law. The Trust believes that the purchase of 100%
Treasury Instruments Money Market Fund shares by such
national banks acting on behalf of their fiduciary accounts
is not contrary to applicable regulations if consistent with
the particular account and proper under the law governing
the administration of the account.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Fund on
fiduciary funds that are invested in their Class B, Class C
or Class E shares. Institutions, including banks regulated
by the Comptroller and investment advisers and other money
managers subject to the jurisdiction of the SEC, the
Department of Labor or state securities commissions, should
consult their legal advisers before investing fiduciary
funds in Class B, Class C or Class E shares.
Under the 1940 Act, the Fund may suspend the right of
redemption or postpone the date of payment upon redemption
for any period during which the New York Stock Exchange (the
"Exchange") is closed, other than customary weekend and
holiday closings, or during which trading on said Exchange
is restricted, or during which (as determined by the SEC by
rule or regulation) an emergency exists as a result of which
disposal or valuation of portfolio securities is not
reasonably practicable, or for such other periods as the SEC
may permit. (The Fund may also suspend or postpone the
recordation of the transfer of their shares upon the
occurrence of any of the foregoing conditions.) In addition,
the Fund may redeem shares involuntarily in certain other
instances if the Board of Trustees determines that failure
to redeem may have material adverse consequences to a Fund's
investors in general. The Fund is obligated to redeem shares
solely in cash up to $250,000 or 1% of the Fund's net asset
value, whichever is less, for any one investor within a
90-day period. Any redemption beyond this amount will also
be in cash unless the Board of Trustees determines that
conditions exist which make payment of redemption proceeds
wholly in cash unwise or undesirable. In such a case, the
Fund may make payment wholly or partly in readily marketable
securities or other property, valued in the same way as the
Fund determines net asset value. See "Net Asset Value" below
for an example of when such redemption or form of payment
might be appropriate. Redemption in kind is not as liquid as
a cash redemption. Investors who receive a redemption in
kind may incur transaction costs if they sell such
securities or property, and may receive less than the
redemption value of such securities or property upon sale,
particularly where such securities are sold prior to
maturity.
Any institution purchasing shares on behalf of
separate accounts will be required to hold the shares in a
single nominee name (a "Master Account"). Institutions
investing in more than one of the Trust's portfolios or
classes or sub-classes of shares, must maintain a separate
Master Account for each Fund's class or sub-class of shares.
Sub-accounts may be established by name or number either
when the Master Account is opened or later.
Net Asset Value
The Fund's net asset value per share is calculated by
dividing the total value of the assets belonging to a Fund,
less the value of any liabilities charged to such Fund, by
the total number of that Fund's shares outstanding
(irrespective of class). "Assets belonging to" a Fund
consist of the consideration received upon the issuance of
shares together with all income, earnings, profits and
proceeds derived from the investment thereof, including any
proceeds from the sale, exchange or liquidation of such
investments, any funds or payments derived from any
reinvestment of such proceeds, and a portion of any general
assets of the Trust not belonging to a particular portfolio.
Assets belonging to a particular Fund are charged with the
direct liabilities of that Fund and with a share of the
general liabilities of the Trust allocated in proportion to
the relative net assets of such Fund and the Trust's other
portfolios. Determinations made in good faith and in
accordance with generally accepted accounting principles by
the Board of Trustees as to the allocations of any assets or
liabilities with respect to a Fund are conclusive.
As stated in the Fund's Prospectus, in computing the
net asset value of shares of the Fund for purposes of sales
and redemptions, the Fund uses the amortized cost method of
valuation. Under this method, the Fund values each of its
portfolio securities at cost on the date of purchase and
thereafter assume a constant proportionate amortization of
any discount or premium until maturity of the security. As a
result, the value of a portfolio security for purposes of
determining net asset value normally does not change in
response to fluctuating interest rates. While the amortized
cost method provides certainty in portfolio valuation, it
may result in valuations for the Fund's securities which are
higher or lower than the market value of such securities.
In connection with their use of amortized cost
valuation, the Fund limits the dollar-weighted average
maturity of its portfolio to not more than 90 days. 100%
Treasury Instruments Money Market Fund does not purchase any
instrument with a remaining maturity of more than thirteen
months and one year, respectively (with certain exceptions).
In determining the average weighted portfolio maturity of
the Fund, a variable rate obligation that is issued or
guaranteed by the U.S. government, or an agency or
instrumentality thereof, is deemed to have a maturity equal
to the period remaining until the obligation's next interest
rate adjustment. The Trust's Board of Trustees has also
established procedures, pursuant to rules promulgated by the
SEC, that are intended to stabilize the net asset value per
share of the Fund for purposes of sales and redemptions at
$1.00. Such procedures include the determination at such
intervals, as the Board deems appropriate, of the extent, if
any, to which the Fund's net asset value per share
calculated by using available market quotations deviates
from $1.00 per share. In the event such deviation exceeds
1/2 of 1% with respect to a Fund, the Board will promptly
consider what action, if any, should be initiated. If the
Board believes that the amount of any deviation from the
$1.00 amortized cost price per share of the Fund may result
in material dilution or other unfair results to investors,
it will take such steps as it considers appropriate to
eliminate or reduce to the extent reasonably practicable any
such dilution or unfair results. These steps may include
selling portfolio instruments prior to maturity; shortening
the Fund's average portfolio maturity; withholding or
reducing dividends; redeeming shares in kind; or utilizing a
net asset value per share determined by using available
market quotations.
MANAGEMENT OF THE FUND
Trustees and Officers
The Trust's Trustees and Executive Officers, their
addresses, principal occupations during the past five years
and other affiliations are as follows:
Name
and
Address
Posi
tion
with
the
Trus
t
Principal
Occupations
During Past 5
Years and
Other
Affiliations
CLINTON
J.
KENDRIC
K (1)(2
)
3 World
Financi
al
Center
New
York,
NY
10285
Chai
rman
of
the
Boar
d
and
Trus
tee
Chief
Operating
Officer,
Lehman
Brothers
Global Asset
Management
Inc.;
formerly
President and
Chief
Executive
Officer,
Hyperion
Capital
Management;
formerly
President and
Director,
Alliance
Capital
Management
CHARLES
F.
BARBER
(2)(3)
66
Glenwoo
d Drive
Greenwi
ch, CT
06830
Trus
tee
Consultant;
formerly
Chairman of
the Board,
ASARCO
Incorporated
BURT N.
DORSETT
(2)(3)
201
East
62nd
Street
New
York,
NY
10022
Trus
tee
Managing
Partner,
Dorsett
McCabe
Capital
Management,
Inc., an
investment
counseling
firm;
Director,
Research
Corporation
Technologies,
a non-profit
patent-cleari
ng and
licensing
operation;
formerly
President,
Westinghouse
Pension
Investments
Corporation;
formerly
Executive
Vice
President and
Trustee,
College
Retirement
Equities
Fund, Inc., a
variable
annuity fund;
and formerly
Investment
Officer,
University of
Rochester
EDWARD
J.
KAIER (
2)(3)
1100
One
Penn
Center
Philade
lphia,
PA
19103
Trus
tee
Partner with
the law firm
of Hepburn
Willcox
Hamilton &
Putnam
S.
DONALD
WILEY (
2)(3)
USX
Tower
Pittsbu
rgh, PA
15219
Trus
tee
Vice-Chairman
and Trustee,
H.J. Heinz
Company
Foundation;
prior to
October 1990,
Senior Vice
President,
General
Counsel and
Secretary,
H.J. Heinz
Company
PETER
MEENAN
260
Frankli
n
Street
Boston,
MA
02110
Pres
iden
t
Managing
Director of
Lehman
Brothers;
President of
Lehman
Brothers
Institutional
Funds Group
Trust;
formerly,
Director,
Senior Vice
President and
Director of
Institutional
Fund
Services, The
Boston
Company
Advisors,
Inc. from
February 1984
to May 1993;
Director,
Funds
Distributor,
Inc. (1992-
1993); Senior
Vice
President,
The Boston
Company
Advisors,
Inc. from
August 1984
to May 1993
JOHN M.
WINTERS
3 World
Financi
al
Center
New
York,
NY
10285
Vice
Pres
iden
t
and
Inve
stme
nt
Offi
cer
Senior Vice
President and
Senior Money
Market
Manager,
Lehman
Brothers,
Global Asset
Management
Inc.;
formerly
Product
Manager with
Lehman
Brothers
Capital
Markets Group
MICHAEL
C.
KARDOK
One
Exchang
e Place
Boston,
MA
02109
Trea
sure
r
Vice
President,
The
Shareholder
Services
Group, Inc.;
prior to May
1994, Vice
President,
The Boston
Company
Advisors,
Inc.
PATRICI
A L.
BICKIME
R
One
Exchang
e Place
Boston,
MA
02109
Secr
etar
y
Vice
President and
Associate
General
Counsel, The
Shareholder
Services
Group, Inc.;
prior to May
1994, Vice
President and
Associate
General
Counsel, The
Boston
Company
Advisors,
Inc.
_______________________
1. Considered by the Trust to be "interested persons" of
the Trust as defined in the 1940 Act.
2. Audit Committee Member.
3. Nominating Committee Member.
Mr. Dorsett serves as Trustee or Director of other
investment companies for which Lehman Brothers and LBGAM
serve as Distributor and Investment Adviser. One Trustee and
all of the Trust's Officers are affiliated with Lehman
Brothers, The Shareholder Services Group, Inc. or one of
their affiliates.
No employee of Lehman Brothers, LBGAM, or TSSG
receives any compensation from the Trust for acting as an
Officer or Trustee of the Trust. The Trust pays each Trustee
who is not a director, officer or employee of Lehman
Brothers, LBGAM or TSSG or any of their affiliates, a fee of
$20,000 per annum plus $1,250 per meeting attended and
reimburses them for travel and out-of-pocket expenses.
For the fiscal period ended January 31, 1994, such
fees and expenses totalled $9,589 for the Fund, $94,754 for
the Trust in the aggregate. As of May 13, 1994, Trustees and
Officers of the Trust as a group beneficially owned less
than 1% of the outstanding shares of the Fund.
By virtue of the responsibilities assumed by Lehman
Brothers, LBGAM, TSSG and their affiliates under their
respective agreements with the Trust, the Trust itself
requires no employees in addition to its Officers.
Distributor
Lehman Brothers acts as Distributor of the Fund's
shares. Lehman Brothers, located at 3 World Financial
Center, New York, New York 10285, is a wholly-owned
subsidiary of Lehman Brothers Holdings Inc. ("Holdings").
Prior to May 31, 1994, all of the issued and outstanding
common stock (representing 92% of the voting stock) of
Holdings was held by American Express Company ("American
Express"). On May 31, 1994, American Express distributed to
holders of common stock of American Express all outstanding
shares of common stock of Holdings. As of May 31, 1994,
Nippon Life Insurance Company owned 11.2% of the outstanding
voting securities of Holdings. The Fund's shares are sold
on a continuous basis by Lehman Brothers. The Distributor
pays the cost of printing and distributing prospectuses to
persons who are not investors of the Funds (excluding
preparation and printing expenses necessary for the
continued registration of Fund shares) and of preparing,
printing and distributing all sales literature. No
compensation is payable by the Fund to Lehman Brothers for
its distribution services.
Lehman Brothers is comprised of several major
operating business units. Lehman Brothers Institutional
Funds Group is the business group within Lehman Brothers
that is primarily responsible for the distribution and
client service requirements of the Trust and its investors.
Lehman Brothers Institutional Funds Group has been serving
institutional clients' investment needs exclusively for more
than 20 years, emphasizing high quality individualized
service to clients.
Investment Adviser
LBGAM serves as the Investment Adviser to the Fund.
LBGAM, located at 3 World Financial Center, New York, New
York 10285, is a wholly-owned subsidiary of Holdings. The
investment advisory agreements provide that LBGAM is
responsible for investment activities of the Fund, including
executing portfolio strategy, effecting Fund purchase and
sale transactions and employing professional portfolio
managers and security analysts who provide research for the
Fund.
The Investment Advisory Agreement with respect to the
Fund will continue in effect for a period of two years from
February 5, 1993 and thereafter from year to year provided
the continuance is approved annually (i) by the Trust's
Board of Trustees or (ii) by a vote of a "majority" (as
defined in the 1940 Act) of a Fund's outstanding voting
securities, except that in either event the continuance is
also approved by a majority of the Trustees of the Trust who
are not "interested persons" (as defined in the 1940 Act).
Each Investment Advisory Agreement may be terminated (i) on
60 days' written notice by the Trustees of the Trust,
(ii) by vote of holders of a majority of a Fund's
outstanding voting securities, or upon 90 days' written
notice by Lehman Brothers, or (iii) automatically in the
event of its assignment (as defined in the 1940 Act).
As compensation for LBGAM's services rendered to the
Fund, the Investment Adviser is entitled to a fee, computed
daily and paid monthly, at the annual rate of .10% of the
average daily net assets of the Fund. For the period
February 8, 1993 (commencement of operations) to January 31,
1994, LBGAM was entitled to receive $70,084 for advisory
fees. Waivers by LBGAM of advisory fees and reimbursement of
expenses to maintain the Fund's operating expense ratios at
certain levels amounted to $70,084 and $128,972,
respectively. In order to maintain competitive expense
ratios during 1994 and thereafter, the Investment Adviser
and Administrator have agreed to voluntary fee waivers and
expense reimbursements for the Fund if total operating
expenses exceed certain levels. See "Background and Expense
Information" in the Fund's Prospectus.
Principal Holders
At May 13, 1994, principal holders of Class A Shares
of the Fund were as follows: WESCO, P.O. Box 380,
Schenectady, NY 12301, 56.59% shares held of record;
Firstrust Co., The National City Bank of Evansville, P.O.
Box 868, Evansville, IN 47705, 17.53% shares held of record;
Commerce Company, P.O. Box 17089, Fortworth, TX 76102, 7.20%
shares held of record; Onbank and Trust Co., P.O. Box 4983,
Syracuse, NY 13221, 6.88% shares held of record; Troy
Savings Bank, P.O. Box 58, Troy, NY 12181, 5.75% shares held
of record and Lehman Brothers Inc., 3 World Financial
Center, New York, NY 10285, 5.30% shares held of record.
As of May 13, 1994, there were no investors in the
Class B and Class C Shares of the Fund and all outstanding
shares were held by Lehman Brothers. Class E Shares were not
offered by the Fund at that date.
The investors described above have indicated that they
each hold their shares on behalf of various accounts and not
as beneficial owners. To the extent that any investor is the
beneficial owner of more than 25% of the outstanding shares
of the Fund, such investor may be deemed to be a "control
person" of that Fund for purposes of the 1940 Act.
Administrator and Transfer Agent
TSSG, a subsidiary of First Data Corporation, is
located at One Exchange Place, Boston, Massachusetts 02109,
and serves as the Trust's Administrator and Transfer Agent.
As the Trust's Administrator, TSSG has agreed to provide the
following services: (i) assist generally in supervising the
Funds' operations, providing and supervising the operation
of an automated data processing system to process purchase
and redemption orders, providing information concerning the
Funds to their shareholders of record, handling investor
problems, supervising the services of employees and
monitoring the arrangements pertaining to the Funds'
agreements with Service Organizations; (ii) prepare reports
to the Funds' investors and prepare tax returns and reports
to and filings with the SEC; (iii) compute the respective
net asset value per share of each Fund; (iv) provide the
services of certain persons who may be elected as trustees
or appointed as officers of the Trust by the Board of
Trustees; and (v) maintain the registration or qualification
of the Fund's shares for sale under state securities laws.
TSSG is entitled to receive, as compensation for its
services rendered under an administration agreement, an
administrative fee, computed daily and paid monthly, at the
annual rate of .10% of the average daily net assets of the
Fund. TSSG pays Boston Safe, the Fund's Custodian, a portion
of its monthly administration fee for custody services
rendered to the Fund.
Prior to May 6, 1994, The Boston Company Advisors Inc.
("TBCA"), an indirect, wholly-owned subsidiary of Mellon
Bank Corporation ("Mellon"), served as Administrator of the
Fund. On May 6, 1994, TSSG acquired TBCA's third party
mutual fund administration business from Mellon, and the
Fund's administration agreement with TBCA was assigned to
TSSG. For the period February 8, 1993 (commencement of
operations) to January 31, 1994, TBCA was entitled to
receive $70,084 in administration fees. Waivers by TBCA of
administration fees and reimbursement of expenses to
maintain the Fund's operating expense ratios at certain
levels amounted to $70,084 and $21,978, respectively. In
order to maintain competitive expense ratios during 1994 and
thereafter, the Investment Adviser and Administrator have
agreed to reimburse the Fund if total operating expenses
exceed certain levels. See "Background and Expense
Information" in the Fund's Prospectus.
Under the transfer agency agreement, TSSG maintains
the shareholder account records for the Trust, handles
certain communications between investors and the Trust,
distributes dividends and distributions payable by the Trust
and produces statements with respect to account activity for
the Trust and its investors. For these services, TSSG
receives a monthly fee based on average net assets and is
reimbursed for out-of-pocket expenses.
Custodian
Boston Safe Deposit and Trust Company ("Boston Safe"),
a wholly owned subsidiary of TBCA, which is a wholly-owned
subsidiary of Mellon, is located at One Boston Place,
Boston, Massachusetts 02108, and serves as the Custodian of
the Trust pursuant to a custody agreement. Under the custody
agreement, Boston Safe holds the Fund's portfolio securities
and keeps all necessary accounts and records. For its
services, Boston Safe receives a monthly fee from TSSG based
upon the month-end market value of securities held in
custody and also receives securities transaction charges,
including out-of-pocket expenses. The assets of the Trust
are held under bank custodianship in compliance with the
1940 Act.
Service Organizations
As stated in the Fund's Prospectus, the Fund will
enter into an agreement with each financial institution
which may purchase Class B, Class C or Class E shares. The
Fund will enter into an agreement with each Service
Organization whose customers ("Customers") are the
beneficial owners of Class B, Class C or Class E shares that
requires the Service Organization to provide certain
services to Customers in consideration of the Fund's payment
of .25%, .35%, or .15%, respectively, of the average daily
net asset value of the respective class held by the Service
Organization for the benefit of Customers. Such services
with respect to the Class C shares include: (i) aggregating
and processing purchase and redemption requests from
Customers and placing net purchase and redemption orders
with a Fund's Distributor; (ii) processing dividend payments
from the Funds on behalf of Customers; (iii) providing
information periodically to Customers showing their
positions in shares; (iv) arranging for bank wires;
(v) responding to Customer inquiries relating to the
services performed by the Service Organization and handling
correspondence; (vi) forwarding investor communications from
the Funds (such as proxies, investor reports, annual and
semi-annual financial statements and dividend, distribution
and tax notices) to Customers; (vii) acting as shareholder
of record or nominee; and (viii) other similar account
administrative services. In addition, a Service Organization
at its option, may also provide to its Customers of Class C
shares (a) a service that invests the assets of their
accounts in shares pursuant to specific or pre-authorized
instructions; (b) provide sub-accounting with respect to
shares beneficially owned by Customers or the information
necessary for sub-accounting; and (c) provide checkwriting
services. Service Organizations that purchase Class C shares
will also provide assistance in connection with the support
of the distribution of Class C shares to its Customers,
including marketing assistance and the forwarding to
Customers of sales literature and advertising provided by a
Distributor of the shares. Holders of Class B shares of the
Fund will receive the services set forth in (i) and (v) and
may receive one or more of the services set forth in (ii),
(iii), (iv), (vi), (vii) and (viii) above. A Service
Organization, at its option, may also provide to its
Customers of Class B shares services including:
(a) providing Customers with a service that invests the
assets of their accounts in shares pursuant to specific or
pre-authorized instruction; (b) providing sub-accounting
with respect to shares beneficially owned by Customers or
the information necessary for sub-accounting; (c) providing
reasonable assistance in connection with the distribution of
shares to Customers; and (d) providing such other similar
services as the Fund may reasonably request to the extent
the Service Organization is permitted to do so under
applicable statutes, rules, or regulations. Holders of Class
E shares of a Fund will receive the services set forth in
(i) and (v) and may receive one or more of the services set
forth in (ii), (iii), (iv) and (vii) above. A Service
Organization, and at its option, may also provide to its
Customers of Class E shares services including: (a)
providing Customers with a service that invests the assets
of their accounts in shares pursuant to specific or pre-
authorized instruction; (b) providing sub-accounting with
respect to shares beneficially owned by Customers or the
information necessary for sub-accounting; (c) providing
checkwriting services; (d) providing reasonable assistance
in connection with the distribution of shares to Clients as
requested from time to time by us, which assistance may
include forwarding sales literature and advertising provided
by us for Clients; and (e) providing such other similar
services as the Fund may reasonably request to the extent
the Service Organization is permitted to do so under
applicable statutes, rules or regulations.
The Fund's agreements with Service Organizations are
governed by a Shareholder Services Plan (the "Plan") that
has been adopted by the Trust's Board of Trustees under Rule
12b-1 of the 1940 Act. Under this Plan, the Board of
Trustees reviews, at least quarterly, a written report of
the amounts expended under the Fund's agreements with
Service Organizations and the purposes for which the
expenditures were made. In addition, the Fund's arrangements
with Service Organizations must be approved annually by a
majority of the Trust's Trustees, including a majority of
the Trustees who are not "interested persons" of the Trust
as defined in the 1940 Act and have no direct or indirect
financial interest in such arrangements (the "Disinterested
Trustees").
The Board of Trustees has approved the Fund's
arrangements with Service Organizations based on information
provided by the Fund's service contractors that there is a
reasonable likelihood that the arrangements will benefit the
Fund and their investors by affording the Fund greater
flexibility in connection with the servicing of the accounts
of the beneficial owners of their shares in an efficient
manner. Any material amendment to the Fund's arrangements
with Service Organizations must be approved by a majority of
the Trust's Board of Trustees (including a majority of the
Disinterested Trustees). So long as the Fund's arrangements
with Service Organizations are in effect, the selection and
nomination of the members of the Trust's Board of Trustees
who are not "interested persons" (as defined in the 1940
Act) of the Trust will be committed to the discretion of
such non-interested trustees.
For the period February 8, 1993 (commencement of
operations) to January 31, 1994, the Class B shares of the
Fund paid $923 in service fees.
Expenses
The Fund's expenses include taxes, interest, fees and
salaries of the Trust's Trustees and Officers who are not
directors, officers or employees of the Trust's service
contractors, SEC fees, state securities qualification fees,
costs of preparing and printing prospectuses for regulatory
purposes and for distribution to investors, advisory,
sub-advisory and administration fees, charges of the
Custodian, Transfer Agent and dividend disbursing agent,
Service Organization fees, certain insurance premiums,
outside auditing and legal expenses, costs of investor
reports and shareholder meetings and any extraordinary
expenses. The Fund also pays for brokerage fees and
commissions (if any) in connection with the purchase and
sale of portfolio securities. LBGAM and TSSG have agreed
that if, in any fiscal year, the expenses borne by a Fund
exceed the applicable expense limitations imposed by the
securities regulations of any state in which shares of the
particular Fund are registered or qualified for sale to the
public, it will reimburse such Fund for any excess to the
extent required by such regulations in the same proportion
that each of their fees bears to the Fund's aggregate fees
for investment advice, sub-investment advice and
administrative services. Unless otherwise required by law,
such reimbursement would be accrued and paid on the same
basis that the advisory and administration fees are accrued
and paid by the Fund. To the Fund's knowledge, of the
expense limitations in effect on the date of this Statement
of Additional Information, none is more restrictive than two
and one-half percent (2%) of the first $30 million of a
Fund's average annual net assets, two percent (2%) of the
next $70 million of the average annual net assets and one
and one-half percent (1%) of the remaining average annual
net assets.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax
considerations generally affecting the Fund and its
investors that are not described in the Fund's Prospectus.
No attempt is made to present a detailed explanation of the
tax treatment of the Fund or its investors or possible
legislative changes, and the discussion here and in the
Fund's Prospectus is not intended as a substitute for
careful tax planning. Investors should consult their tax
advisers with specific reference to their own tax situation.
As stated in the Prospectus, the Fund is treated as a
separate corporate entity under the Code and qualified as a
regulated investment company under the Code and intends to
so qualify in future years. In order to so qualify for a
taxable year, the Fund must satisfy the distribution
requirement described in its Prospectus, derive at least 90%
of its gross income for the year from certain qualifying
sources, comply with certain diversification tests and
derive less than 30% of its gross income from the sale or
other disposition of securities and certain other
investments held for less than three months. Interest
(including original issue discount and accrued market
discount) received by the Fund upon maturity or disposition
of a security held for less than three months will not be
treated as gross income derived from the sale or other
disposition of such securities within the meaning of this
requirement. However, any other income which is attributable
to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for
this purpose.
A 4% nondeductible excise tax is imposed on regulated
investment companies that fail to distribute currently an
amount equal to specified percentages of their ordinary
taxable income and capital gain net income (excess of
capital gains over capital losses). The Fund intends to make
sufficient distributions or deemed distributions of its
ordinary taxable income and any capital gain net income each
calendar year to avoid liability for this excise tax.
If for any taxable year the Fund does not qualify for
tax treatment as a regulated investment company, all of its
taxable income will be subject to federal income tax at
regular corporate rates without any deduction for
distributions to Fund investors. In such event, dividend
distributions would be taxable as ordinary income to the
Fund's investors to the extent of its current and
accumulated earnings and profits, and would be eligible for
the dividends received deduction in the case of corporate
shareholders.
The Fund will be required in certain cases to withhold
and remit to the U.S. Treasury 31% of taxable dividends or
31% of gross proceeds realized upon sale paid to any
investor who has failed to provide a correct tax
identification number in the manner required, or who is
subject to withholding by the Internal Revenue Service for
failure to properly include on his return payments of
taxable interest or dividends, or who has failed to certify
to the Fund that he is not subject to backup withholding
when required to do so or that he is an "exempt recipient."
Depending upon the extent of the Fund's activities in
states and localities in which their offices are maintained,
in which their agents or independent contractors are located
or in which they are otherwise deemed to be conducting
business, the Fund may be subject to the tax laws of such
states or localities. In addition, in those states and
localities which have income tax laws, the treatment of the
Fund and its investors under such laws may differ from their
treatment under federal income tax laws. Investors are
advised to consult their tax advisers concerning the
application of state and local taxes.
The foregoing discussion is based on federal 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.
DIVIDENDS
Net income of the Fund for dividend purposes consists
of (i) interest accrued and original issue discount earned
on the Fund's assets, (ii) plus the amortization of market
discount and minus the amortization of market premium on
such assets, (iii) less accrued expenses directly
attributable to the Fund and the general expenses (e.g.,
legal, accounting and trustees' fees) of the Trust prorated
to the Fund on the basis of its relative net assets. In
addition, Class B, Class C and Class E shares bear
exclusively the expense of fees paid to Service
Organizations with respect to the relevant Class of shares.
See "Management of the Fund-Service Organizations."
As stated, the Trust uses its best efforts to maintain
the net asset value per share of the Fund at $1.00. As a
result of a significant expense or realized or unrealized
loss incurred by the Fund, it is possible that the Fund's
net asset value per share may fall below $1.00.
ADDITIONAL YIELD INFORMATION
The "yields," "effective yields" and "tax-equivalent
yields" are calculated separately for each class of shares
of the Fund and in accordance with the formulas prescribed
by the SEC. The seven-day yield for each class of shares is
calculated by determining the net change in the value of a
hypothetical pre-existing account in the Fund which has a
balance of one share of the class involved at the beginning
of the period, dividing the net change by the value of the
account at the beginning of the period to obtain the base
period return, and multiplying the base period return by
365/7. The net change in the value of an account in the Fund
includes the value of additional shares purchased with
dividends from the original share and dividends declared on
the original share and any such additional shares, net of
all fees charged to all investor accounts in proportion to
the length of the base period and the Fund's average account
size, but does not include gains and losses or unrealized
appreciation and depreciation. In addition, an effective
annualized yield quotation may be computed on a compounded
basis with respect to each class of its shares by adding 1
to the base period return for the class involved (calculated
as described above), raising that sum to a power equal to
365/7, and subtracting 1 from the result. A tax-equivalent
yield for each class of the Fund's shares is computed by
dividing the portion of the yield (calculated as above) that
is exempt from federal income tax by one minus a stated
federal income tax rate and adding that figure to that
portion, if any, of the yield that is not exempt from
federal income tax.
Based on the period ended January 31, 1994, the
yields, effective yields and tax-equivalent yields for the
Fund were as follows:
7
- -
d
a
y
Y
i
e
l
d
7
- -
d
a
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E
f
f
e
c
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7
- -
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- -
E
q
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Y
i
e
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0
- -
d
a
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i
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l
d
3
0
- -
d
a
y
E
f
f
e
c
t
i
v
e
Y
i
e
l
d
3
0
- -
d
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T
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- -
E
q
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e
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i
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l
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100%
Trea
sury
Inst
rume
nts
Mone
y
Mark
et
Fund
Clas
s A
Shar
es
3
.
0
5
%
3
.
0
9
%
4
.
4
8
%
3
.
0
6
%
3
.
1
0
%
4
.
4
3
%
Clas
s B
Shar
es
2
.
8
0
%
2
.
8
4
%
4
.
1
2
%
2
.
8
1
%
2
.
8
5
%
4
.
0
7
%
Clas
s C
Shar
es
2
.
7
0
%
2
.
7
3
%
3
.
9
6
%
2
.
7
1
%
2
.
7
4
%
3
.
9
3
%
Clas
s A
Shar
es**
2
.
9
2
%
2
.
9
6
%
4
.
2
9
%
2
.
9
3
%
2
.
9
7
%
4
.
2
5
%
Clas
s B
Shar
es**
2
.
6
7
%
2
.
7
0
%
3
.
9
1
%
2
.
6
8
%
2
.
7
1
%
3
.
8
8
%
Clas
s C
Shar
es**
2
.
5
7
%
2
.
6
0
%
3
.
7
7
%
2
.
5
8
%
2
.
6
1
%
3
.
7
4
%
**without fee waivers and/or expense reimbursements
Note:Tax-equivalent yields assume a maximum Federal Tax Rate
of 31%.
Class B, Class C and Class E Shares bear the expenses
of fees paid to Service Organizations. As a result, at any
given time, the net yield of Class B and Class C Shares
could be up to .25%, .35% and .15% lower than the net yield
of Class A Shares, respectively. Class E Shares of the Fund
did not have activity as of January 31, 1994 and,
accordingly, yield information is not available with respect
to such shares.
Similarly, based on the calculations described above,
the Fund's 30-day (or one-month) yields, effective yields
and tax-equivalent yields may also be calculated. Such
yields refer to the average daily income generated over a
30-day (or one-month) period, as appropriate.
From time to time, in advertisements or in reports to
investors, the performance of the Fund may be quoted and
compared to that of other money market funds or accounts
with similar investment objectives and to stock or other
relevant indices. For example, the yields of the Fund may be
compared to the Donoghue's Money Fund Average, which is an
average compiled by IBC/Donoghue's MONEY FUND REPORT of
Holliston, MA 01746, a widely recognized independent
publication that monitors the performance of money market
funds, or to the average yields reported by the Bank Rate
Monitor from money market deposit accounts offered by the 50
leading banks and thrift institutions in the top five
standard metropolitan statistical areas.
The Fund's yields will fluctuate and any quotation of
yield should not be considered as representative of the
future performance of the Fund. Since yields fluctuate,
yield data cannot necessarily be used to compare an
investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often
provide an agreed or guaranteed fixed yield for a stated
period of time. Investors should remember that performance
and yield are generally functions of the kind and quality of
the investments held in a portfolio, portfolio maturity,
operating expenses net of waivers and expense
reimbursements, and market conditions. Any fees charged by
Service Organizations or other institutional investors with
respect to customer accounts in investing in shares of the
Fund will not be included in yield calculations; such fees,
if charged, would reduce the actual yield from that quoted.
ADDITIONAL DESCRIPTION CONCERNING FUND SHARES
The Trust does not presently intend to hold annual
meetings of shareholders except as required by the 1940 Act
or other applicable law. The law under certain circumstances
provides shareholders with the right to call for a meeting
of shareholders to consider the removal of one or more
Trustees. To the extent required by law, the Trust will
assist in shareholder communication in such matters.
As stated in the Prospectus for the Fund, holders of
the shares of the Fund will vote in the aggregate and not by
class on all matters, except where otherwise required by law
and except that only the Fund's Class B, Class C and Class E
shares, as the case may be, will be entitled to vote on
matters submitted to a vote of shareholders pertaining to
the Fund's arrangements with Service Organizations with
respect to the relevant Class of shares. (See "Management of
the Fund-Service Organizations.") Further, shareholders of
all of the Trust's portfolios will vote in the aggregate and
not by portfolio except as otherwise required by law or when
the Board of Trustees determines that the matter to be voted
upon affects only the interests of the shareholders of a
particular portfolio. Rule 18f-2 under the 1940 Act provides
that any matter required to be submitted by the provisions
of such Act or applicable state law, or otherwise, to the
holders of the outstanding securities of an investment
company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each portfolio
affected by the matter. Rule 18f-2 further provides that a
portfolio shall be deemed to be affected by a matter unless
it is clear that the interests of each portfolio in the
matter are identical or that the matter does not affect any
interest of the portfolio. Under the Rule the approval of an
investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with
respect to a portfolio only if approved by the holders of a
majority of the outstanding voting securities of such
portfolio. However, the Rule also provides that the
ratification of the selection of independent auditors, the
approval of principal underwriting contracts and the
election of trustees are not subject to the separate voting
requirements and may be effectively acted upon by
shareholders of the investment company voting without regard
to portfolio.
COUNSEL
Willkie Farr & Gallagher, One Citicorp Center, 153
East 53rd Street, New York, New York 10022, serves as
counsel to the Trust and will pass on the legality of the
shares offered hereby. Willkie Farr & Gallagher also acts as
counsel to Lehman Brothers.
AUDITORS
Ernst & Young, independent auditors, serve as auditors
to the Fund and render an opinion on the Fund's financial
statements annually. Ernst & Young has offices at 200
Clarendon Street, Boston, Massachusetts 02116-5072.
FINANCIAL STATEMENTS
The Trust's Annual Report for the fiscal period ended
January 31, 1994 is incorporated into this Statement of
Additional Information by reference in its entirety.
MISCELLANEOUS
Shareholder Vote
As used in this Statement of Additional Information
and the Prospectus for the Fund, a "majority of the
outstanding shares" of the Fund or of any other portfolio
means the lesser of (1) 67% of the shares of the Fund
(irrespective of class) or of the portfolio represented at a
meeting at which the holders of more than 50% of the
outstanding shares of such Fund or portfolio are present in
person or by proxy, or (2) more than 50% of the outstanding
shares of such Fund (irrespective of class) or of the
portfolio.
Shareholder and Trustee Liability
The Trust is organized as a "business trust" under the
laws of the Commonwealth of Massachusetts. Shareholders of
such a trust may, under certain circumstances, be held
personally liable (as if they were partners) for the
obligations of the trust. The Declaration of Trust of the
Trust provides that shareholders of the Fund shall not be
subject to any personal liability for the acts or
obligations of the Trust and that every note, bond,
contract, order or other undertaking made by the Trust shall
contain a provision to the effect that the shareholders are
not personally liable thereunder. The Declaration of Trust
provides for indemnification out of the trust property of a
Fund of any shareholder of the Fund held personally liable
solely by reason of his being or having been a shareholder
and not because of his acts or omissions or some other
reason. The Declaration of Trust also provides that the
Trust shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of
the Trust and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss beyond its
investment in a Fund on account of shareholder liability is
limited to circumstances in which the Fund itself would be
unable to meet its obligations.
The Trust's Declaration of Trust provides further that
no Trustee, Officer or agent of the Trust shall be
personally liable for or on account of any contract, debt,
tort, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of the
trust estate or the conduct of any business of the Trust,
nor shall any Trustee be personally liable to any person for
any action or failure to act except by reason of his own bad
faith, willful misfeasance, gross negligence in the
performance of his duties or by reason of reckless disregard
of his obligations and duties as Trustee. It also provides
that all persons having any claim against the Trustees or
the Trust shall look solely to the trust property for
payment. With the exceptions stated, the Declaration of
Trust provides that a Trustee is entitled to be indemnified
against all liabilities and expenses reasonably incurred by
him in connection with the defense or disposition of any
proceeding in which he may be involved or with which he may
be threatened by reason of his being or having been a
Trustee, and that the Trustees have the power, but not the
duty, to indemnify officers and employees of the Trust
unless such person would not be entitled to indemnification
had he been a Trustee.
LEHMAN\MISCINSTIT\INSTITUT\IFG\NEWPROS\100GVSAI.DOC
- -10-
PROSPECTUS
CASH MANAGEMENT FUND
An Investment Portfolio Offered By
Lehman Brothers Institutional Funds Group
Trust
Lehman Brothers Institutional Funds Group Trust
(the "Trust") is an
open-end, management investment company. The shares
described in this Prospectus
represent interests in the Cash Management Fund portfolio
(the "Fund"), one of a
family of portfolios of the Trust.
The investment objective of the Fund is to provide
current income with
liquidity and security of principal. The Fund invests in a
portfolio consisting
of U.S. Treasury bills, notes and other obligations issued
or guaranteed as to
principal and interest by the U.S. government, its agencies
or instrumentalities
and repurchase agreements relating to such obligations. The
Fund is designed to
provide a convenient means for the late day investment of
short-term assets held
by banks, trust companies, corporations, employee
benefit plans and other
institutional investors.
Fund shares may not be purchased by individuals
directly, but institutional
investors may purchase these shares for accounts maintained
by individuals. This
Prospectus describes the four classes of shares currently
offered by the Fund,
Class A shares, Class B shares, Class C shares and Class E
shares.
LEHMAN BROTHERS INC. ("LEHMAN BROTHERS") sponsors
the Fund and acts as
Distributor of its shares. LEHMAN BROTHERS GLOBAL ASSET
MANAGEMENT INC. serves
as the Fund's Investment Adviser.
The address of the Fund is One Exchange Place, Boston,
Massachusetts 02109.
The Fund can be contacted as follows: for purchase and
redemption orders only
call 1-800-851-3134; for yield information call 1-800-238-
2560 (Class A shares
code: 004; Class B shares code: 104; Class C shares code:
204; Class E shares
code: 404); for other information call 1-800-368-5556.
This Prospectus briefly sets forth certain information
about the Fund that
investors should know before investing. Investors are
advised to read this
Prospectus and retain it for future reference. Additional
information about the
Fund, contained in a Statement of Additional Information
dated May 31, 1994, as
amended or supplemented from time to time, has been filed
with the Securities
and Exchange Commission and is available to investors
without charge by calling
the Fund's Distributor at 1-800-368-5556. The
Statement of Additional
Information is incorporated in its entirety by reference
into this Prospectus.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SUCH SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENT
AGENCY. SHARES OF THE FUND INVOLVE CERTAIN INVESTMENT
RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. AN INVESTMENT IN THE FUND IS
NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE
THAT THE FUND WILL
BE ABLE TO MAINTAIN ITS NET ASSET VALUE OF $1.00 PER SHARE.
--------------------------
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.
--------------------------
LEHMAN BROTHERS
May 31, 1994
As supplemented August 22, 1994
<PAGE>
BACKGROUND AND EXPENSE INFORMATION
The following Expense Summary lists the expenses that
an investor in the
Fund can expect to incur during the Fund's current fiscal
year ending January
31, 1995. The Fund offers four separate classes of shares.
Shares of each class
represent equal, PRO RATA interests in the Fund and accrue
daily dividends in
the same manner except that Class B, Class C and Class
E shares bear fees
payable by the Fund (at the rate of .25%, .35% and .15% per
annum, respectively)
to institutions for services they provide to the
beneficial owners of such
shares. See "Management of the Fund--Service Organizations."
EXPENSE SUMMARY
<TABLE>
<CAPTION>
CLASS A CLASS B
CLASS C CLASS E
SHARES SHARES
SHARES SHARES
------- ------- ----
- --- -------
<S> <C> <C> <C>
<C>
ANNUAL FUND OPERATING EXPENSES*
(as a percentage of average net assets)
Advisory Fees....................... 0.10% 0.10%
0.10% 0.10%
Rule 12b-1 fees..................... none 0.25%
0.35% 0.15%
Other Expenses--including
Administration Fees (net of
applicable fee waivers)............ 0.16% 0.16%
0.16% 0.16%
------- ------- ----
- --- -------
Total Fund Operating Expenses....... 0.26% 0.51%
0.61% 0.41%
------- ------- ----
- --- -------
------- ------- ----
- --- -------
<FN>
- ------------------------
* The Expense Summary above has been restated to reflect
current expected fees
for the Fund's fiscal year ending January 31, 1995.
The Fund's Investment
Adviser and Administrator may voluntarily waive fees
and reimburse expenses
from time to time, in order to maintain a lower
annualized expense ratio.
Absent fee waivers, the Total Fund Operating Expenses
of Class A, Class B,
Class C and Class E would be .36%, .61%, .71% and .51%,
respectively, of the
Fund's average daily net assets.
</TABLE>
- ---------
EXAMPLE
An investor would pay the following expenses on a $1,000
investment, assuming
(1) a 5% annual return and (2) redemption at the end of
each time period with
respect to the following shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A shares:..... $3 $ 8 $15 $33
Class B shares:..... $5 $16 $29 $64
Class C shares:..... $6 $20 $34 $76
Class E shares:..... $4 $13 $23 $52
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF
ACTUAL EXPENSES AND
RATES OF RETURN, WHICH MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The purpose of the foregoing table is to assist an
investor in understanding
the various costs and expenses that an investor in the Fund
will bear directly
or indirectly. Certain Service Organizations (as defined
below) also may charge
their clients fees in connection with investments in Fund
shares, which fees are
not reflected in the table. For more complete descriptions
of the various costs
and expenses, see "Management of the Fund" in this
Prospectus and the Statement
of Additional Information.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights for the fiscal year
ended January 31,
1994 are derived from the Fund's Financial Statements
audited by Ernst & Young,
independent auditors, whose report thereon appears in the
Trust's Annual Report
dated January 31, 1994. For this period only Class A shares
were outstanding. In
addition, the following information reflects the
financial highlights of the
Fund when it operated under different investment policies
and restrictions and
maintained a lower annualized expense ratio. The financial
results of the Fund
as it is presently operated may substantially differ
from the information
stated. This information should be read in conjunction
with the financial
statements and notes thereto that also appear in the
Trust's Annual Report,
which are incorporated by reference into the
Statement of Additional
Information.
<TABLE>
<CAPTION>
PERIOD ENDED
1/31/94*
CLASS A
-------------
<S> <C>
Net asset value, beginning of period......... $1.00
Net investment income(1)..................... 0.0304
Dividends from net investment income......... (0.0304)
Net asset value, end of period............... $1.00
Total return(2).............................. 3.09%
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's)......... $41,709
Ratio of net investment income to average net
assets(3)................................... 3.11%
Ratio of operating expenses to average net
assets(3)(4)................................ 0.06%
<FN>
- ------------------------
* The Cash Management Fund (formerly 100% Government
Obligations Money Market
Fund) Class A Shares commenced operations on February
8, 1993.
(1) Net investment income before waiver of fees by the
Investment Adviser,
Administrator, Custodian and Transfer Agent and
expenses reimbursed by the
Investment Adviser and Administrator was $0.0220.
(2) Total return represents aggregate total return for the
period indicated.
(3) Annualized.
(4) Annualized expense ratio before waiver of fees by the
Investment Adviser,
Administrator, Custodian and Transfer Agent and
expenses reimbursed by the
Investment Adviser and Administrator was 0.92%.
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to provide current
income with liquidity
and security of principal. The Fund, which operates as a
diversified investment
company, invests in a portfolio consisting of U.S.
Treasury bills, notes and
other obligations issued or guaranteed as to principal and
interest by the U.S.
government, its agencies or instrumentalities and repurchase
agreements relating
to such obligations. The Fund invests only in securities
that are purchased with
and payable in U.S. dollars (I.E., U.S. dollar denominated
securities) and that
have (or,
3
<PAGE>
pursuant to regulations adopted by the Securities and
Exchange Commission, are
deemed to have) remaining maturities of 13 months or
less at the date of
purchase by the Fund. The Fund maintains a dollar-
weighted average portfolio
maturity of 90 days or less.
Securities issued or guaranteed by the U.S.
government, its agencies and
instrumentalities have historically involved little risk of
loss of principal if
held to maturity. However, due to fluctuations in
interest rates, the market
value of such securities may vary during the period a
shareholder owns shares of
the Fund. The Fund may from time to time engage in
portfolio trading for
liquidity purposes, in order to enhance its yield or
if otherwise deemed
advisable. In selling portfolio securities prior to
maturity, the Fund may
realize a price higher or lower than that paid to acquire
any given security,
depending upon whether interest rates have decreased or
increased since its
acquisition.
The Fund may purchase government securities from
financial institutions,
such as banks and broker-dealers, subject to the
seller's agreement to
repurchase them at an agreed upon time and price
("repurchase agreements"). The
securities subject to a repurchase agreement may bear
maturities exceeding 13
months, provided the repurchase agreement itself matures
in 13 months or less.
The Fund will not invest more than 10% of the value of
its net assets in
repurchase agreements which do not provide for settlement
within seven days. The
seller under a repurchase agreement will be required to
maintain the value of
the securities subject to the agreement at not less than
the repurchase price
(including accrued interest). Default by or bankruptcy
of the seller would,
however, expose the Fund to possible loss because of
adverse market action or
delay in connection with the disposition of the underlying
obligations.
The Fund may borrow funds for temporary purposes by
entering into reverse
repurchase agreements in accordance with the investment
restrictions described
below. Pursuant to such agreements, the Fund would sell
portfolio securities to
financial institutions and agree to repurchase them at an
agreed upon date and
price. The Fund would consider entering into reverse
repurchase agreements to
avoid otherwise selling securities during unfavorable market
conditions to meet
redemptions. Reverse repurchase agreements involve the
risk that the market
value of the portfolio securities sold by the Fund may
decline below the price
of the securities the Fund is obligated to repurchase.
The Fund may purchase securities on a "when-issued"
basis. When-issued
securities are securities purchased for delivery beyond
the normal settlement
date at a stated price and yield. The Fund will
generally not pay for such
securities or start earning interest on them until they are
received. Securities
purchased on a when-issued basis are recorded as an asset
and are subject to
changes in value based upon changes in the general level of
interest rates. The
Fund expects that commitments to purchase when-issued
securities will not exceed
25% of the value of its total assets absent unusual market
conditions. The Fund
does not intend to purchase when-issued securities for
speculative purposes but
only in furtherance of its investment objective.
The Fund may also lend its portfolio securities to
financial institutions in
accordance with the investment restrictions described
below. The Fund may lend
portfolio securities against collateral consisting of cash
or securities which
are consistent with the Fund's permitted investments,
which is equal at all
times to at least 100% of the value of the securities
loaned. There is no
limitation on the amount of securities that may be
loaned. Such loans would
involve risks of delay in receiving additional collateral
or in recovering the
securities loaned or
4
<PAGE>
even loss of rights in the collateral should the borrower of
the securities fail
financially. However, loans will be made only to borrowers
deemed by the Fund's
Investment Adviser to be of good standing and only
when, in the adviser's
judgment, the income to be earned from the loans justifies
the attendant risks.
There can be no assurance that the Fund will
achieve its investment
objective.
INVESTMENT LIMITATIONS
The Fund's investment objective and the policies
described above may be
changed by the Trust's Board of Trustees without a vote
of shareholders. If
there is a change in the investment objective, investors
should consider whether
the Fund remains an appropriate investment in light of
their then current
financial position and needs. The Fund's investment
limitations summarized below
may not be changed without the affirmative vote of the
holders of a majority of
its outstanding shares. (A complete list of the
investment limitations that
cannot be changed without a vote of shareholders is
contained in the Statement
of Additional Information under "Investment Objective and
Policies.")
The Fund may not:
1. Borrow money except from banks or, subject to
specific authorization
by the Securities and Exchange Commission, from other
funds advised by the
Adviser or an affiliate of the Adviser. The Fund
may borrow money for
temporary purposes and then in an amount not
exceeding one-third of the
value of the Fund's total assets, or mortgage, pledge
or hypothecate its
assets except in connection with any such borrowing
and in amounts not in
excess of the lesser of the dollar amounts borrowed
or one-third of the
value of the Fund's total assets at the time of such
borrowing. Additional
investments will not be made when borrowings exceed 5%
of the Fund's assets.
2. Make loans except that the Fund may (i)
purchase or hold debt
obligations in accordance with its investment
objective and policies, (ii)
may enter into repurchase agreements for
securities, (iii) may lend
portfolio securities and (iv) subject to specific
authorization by the
Securities and Exchange Commission, lend money to other
funds advised by the
Adviser or an affiliate of the Adviser.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Shares of the Fund are sold at the net asset value per
share of the Fund
next determined after receipt of a purchase order by
Lehman Brothers, the
Distributor of the Fund's shares. Purchase orders for shares
are accepted by the
Fund only on days on which both Lehman Brothers and the
Federal Reserve Bank of
Boston are open for business and must be transmitted to
Lehman Brothers by
telephone at 1-800-851-3134. Orders received prior to 12:00
noon, Eastern time,
for which payment has been received by Boston Safe
Deposit and Trust Company
("Boston Safe"), the Fund's Custodian, will be executed at
noon. Orders received
between noon and 3:00 P.M., Eastern time, will be executed
at 3:00 P.M., Eastern
time, if payment has been received by Boston Safe by 3:00
P.M., Eastern time.
Orders received between 3:00 P.M. and 5:00 P.M., Eastern
time, will be executed
at 5:00 P.M., Eastern time, if payment has been received by
Boston Safe by 5:30
P.M. In order to receive same day acceptance of
purchases after 3:00 P.M.,
Eastern time, investors must telephone the Lehman Brothers
Client Service Center
at 1-800-851-3134 before 5:00 P.M., Eastern time, to place
the trade and obtain
an order reference number for each trade. It is necessary
to obtain a new order
reference number for each
5
<PAGE>
investment in the Fund after 3:00 P.M., Eastern time.
Payment for Fund shares
may be made only in federal funds immediately available to
Boston Safe. (Payment
for orders which are not received or accepted by
Lehman Brothers will be
returned after prompt inquiry to the sending institution.)
The Fund may in its
discretion reject any order for shares.
The minimum aggregate initial investment by an
institution in the investment
portfolios that comprise the Trust is $1 million (with
not less than $25,000
invested in any one investment portfolio offered by
the Trust); however,
broker-dealers and other institutional investors may set
a higher minimum for
their customers. To reach the minimum initial Trust-wide
investment, purchases
of shares may be aggregated over a period of six months.
There is no minimum
subsequent investment.
Conflict of interest restrictions may apply to an
institution's receipt of
compensation paid by the Fund on fiduciary funds that are
invested in Class B,
Class C or Class E shares. See also "Management of
the Fund-- Service
Organizations." Institutions, including banks regulated by
the Comptroller of
the Currency and investment advisers and other money
managers subject to the
jurisdiction of the Securities and Exchange Commission, the
Department of Labor
or state securities commissions, should consult their
legal advisers before
investing fiduciary funds in Class B, Class C or Class E
shares.
SUBACCOUNTING SERVICES. Institutions are encouraged
to open single master
accounts. However, certain institutions may wish to use
the Transfer Agent's
subaccounting system to minimize their internal
recordkeeping requirements. The
Transfer Agent charges a fee based on the level of
subaccounting services
rendered. Institutions holding Fund shares in a fiduciary,
agency, custodial or
similar capacity may charge or pass through subaccounting
fees as part of or in
addition to normal trust or agency account fees. They may
also charge fees for
other services provided which may be related to the
ownership of Fund shares.
This Prospectus should, therefore, be read together with
any agreement between
the customer and the institution with regard to the services
provided, the fees
charged for those services and any restrictions and
limitations imposed.
REDEMPTION PROCEDURES
Redemption orders must be transmitted to Lehman
Brothers by telephone at
1-800-851-3134. Payment for redeemed shares for which a
redemption order is
received by Lehman Brothers prior to 3:00 P.M., Eastern
time, on a day that both
Lehman Brothers and the Federal Reserve Bank of Boston are
open for business is
normally made in federal funds wired to the redeeming
shareholder on the same
business day. Payment for other redemption orders which
are received between
3:00 P.M. and 4:00 P.M., Eastern time, is normally wired in
federal funds on the
next business day following redemption.
Shares are redeemed at the net asset value per share
next determined after
Lehman Brothers' receipt of the redemption order. While the
Fund intends to use
its best efforts to maintain its net asset value per
share at $1.00, the
proceeds paid to an investor upon redemption may be more or
less than the amount
invested depending upon a share's net asset value at the
time of redemption. To
allow the Fund's Investment Adviser to manage the Fund
effectively, investors
are strongly urged to initiate all investments or
redemptions of Fund shares as
early in the day as possible and to notify Lehman Brothers
at least one day in
advance of transactions in excess of $5 million.
The Fund reserves the right to wire redemption
proceeds within seven days
after receiving the redemption order if, in the judgment
of the Investment
Adviser, an earlier payment could adversely
affect the Fund. The
6
<PAGE>
Fund shall have the right to redeem involuntarily shares in
any account at their
net asset value if the value of the account is less than
$10,000 after 60 days'
prior written notice to the investor. Any such redemption
shall be effected at
the net asset value per share next determined after the
redemption order is
entered. If during the 60-day period the investor
increases the value of its
account to $10,000 or more, no such redemption shall take
place. In addition,
the Fund may redeem shares involuntarily or suspend the
right of redemption as
permitted under the Investment Company Act of 1940, as
amended (the "1940 Act"),
or under certain special circumstances described in the
Statement of Additional
Information under "Additional Purchase and Redemption
Information."
VALUATION OF SHARES--NET ASSET VALUE
The Fund's net asset value per share for purposes of
pricing purchase and
redemption orders is determined by the Fund's Administrator
as of 12:00 noon,
3:00 P.M. and 5:00 P.M., Eastern time, on each weekday,
with the exception of
those holidays on which either Lehman Brothers or the
Federal Reserve Bank of
Boston is closed. Currently, one or both of these
institutions are closed on the
customary national business holidays of New Year's Day,
Martin Luther King,
Jr.'s Birthday (observed), Presidents' Day (Washington's
Birthday), Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day
(observed), Veterans
Day, Thanksgiving Day and Christmas Day, and on the
preceding Friday or
subsequent Monday when one of these holidays falls on a
Saturday or Sunday,
respectively. The net asset value per share of the Fund is
calculated by adding
the value of all securities and other assets belonging to
the Fund, subtracting
liabilities and dividing the result by the total
number of the Fund's
outstanding shares. In computing net asset value, the Fund
uses the amortized
cost method of valuation as described in the Statement of
Additional Information
under "Additional Purchase and Redemption Information."
The Fund's net asset
value per share for purposes of pricing purchase and
redemption orders is
determined independently of the net asset values of the
shares of the Trust's
other investment portfolios.
OTHER MATTERS
In order to invest in the Fund after 3:00 P.M.,
Eastern time, investors
should contact the Lehman Brothers' Client Service
Center in advance to
establish an account with the Fund for late day
trading. Even after these
procedures are in place, investors are encouraged to
execute as many trades as
possible prior to 3:00 P.M., Eastern time. The Fund reserves
the right to refuse
any investment that would, in its sole discretion, be
disruptive to the
management of the Fund.
Fund shares are sold and redeemed without charge by the
Fund. Institutional
investors purchasing or holding Fund shares for their
customer accounts may
charge customers fees for cash management and other
services provided in
connection with their accounts. A customer should,
therefore, consider the terms
of its account with an institution before purchasing Fund
shares. An institution
purchasing or redeeming shares on behalf of its customers
is responsible for
transmitting orders to Lehman Brothers in accordance
with its customer
agreements.
DIVIDENDS
Investors of the Fund are entitled to dividends and
distributions arising
only from the net investment income and capital gains,
if any, earned on
investments held by the Fund. Shares begin accruing
dividends on the day the
purchase order for the shares is effective and continue
to accrue dividends
through the day before
7
<PAGE>
such shares are redeemed. Shareholders of record as of 5:00
P.M., Eastern time,
will be entitled to that day's dividend. Each Class' net
interest income for
dividend purposes is determined on a daily basis and
shall be declared to
shareholders of record at the time of its declaration
(including, for this
purpose, holders of shares purchased, but excluding holders
of shares redeemed
on that day). Dividends are paid monthly by wire transfer,
within five business
days after the end of the month or within five business days
after a redemption
of all of an investor's shares of a particular Class. The
Fund does not expect
to realize net long-term capital gains.
Dividends are determined in the same manner and are paid
in the same amount
for each Fund share, except that Class B, Class C and
Class E shares bear all
the expense of fees paid to Service Organizations. As a
result, at any given
time, the net yield on Class B, Class C and Class E
shares will be .25%, .35%
and .15%, respectively, lower than the net yield on Class A
shares.
Institutional investors may elect to have their
dividends reinvested in
additional full and fractional shares of the same Class
with respect to which
such dividends are declared at the net asset value of such
shares on the payment
date. Reinvested dividends receive the same tax treatment
as dividends paid in
cash. Such election, or any revocation thereof, must be
made in writing to the
Fund's Distributor at 260 Franklin Street, 18th Floor,
Boston, Massachusetts
02110 and will become effective after its receipt by
the Distributor with
respect to dividends paid.
The Fund's Transfer Agent will send each investor
or its authorized
representative an annual statement designating the
amount of dividends and
capital gains distributions, if any, made during each year
and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends
to qualify in future
years as a "regulated investment company" under the
Internal Revenue Code of
1986, as amended (the "Code"). A regulated investment
company is exempt from
federal income tax on amounts distributed to its investors.
Qualification as a regulated investment company under
the Code for a taxable
year requires, among other things, that the Fund distribute
to its investors at
least 90% of its investment company taxable income for
such year. In general,
the Fund's investment company taxable income will be
its taxable income
(including interest) 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
intends to distribute
substantially all of its investment company taxable
income each year. Such
distributions will be taxable as ordinary income to the
Fund's investors who are
not currently exempt from federal income taxes, whether
such income is received
in cash or reinvested in additional shares. It is
anticipated that none of the
Fund's distributions will be eligible for the dividends
received deduction for
corporations. The Fund does not expect to realize long-term
capital gains and,
therefore, does not contemplate payment of any "capital
gain dividends" as
described in the Code.
Dividends declared in October, November or December of
any year payable to
investors of record on a specified date in such months
will be deemed to have
been received by the investors and paid by the Fund on
December 31 of such year
in the event such dividends are actually paid during
January of the following
year.
8
<PAGE>
Many states, by statute, judicial decision or
administrative action, have
taken the position that dividends of a regulated investment
company such as the
Fund that are attributable to interest on obligations of
the U.S. Treasury and
certain U.S. government agencies and instrumentalities
are the functional
equivalent of interest from such obligations and are,
therefore, exempt from
state and local income taxes.
The Fund will provide investors annually with
information about the portion
of dividends from the Fund derived from U.S. Treasury and
U.S. government agency
obligations. Investors should be aware of the application
of their state and
local tax laws to investments in the Fund.
The foregoing discussion is only a brief summary of
some of the important
federal tax considerations generally affecting the Fund
and its investors. No
attempt is made to present a detailed explanation of the
federal, state or local
income tax treatment of the Fund or its investors and
this discussion is not
intended as a substitute for careful tax planning.
Accordingly, potential
investors in the Fund should consult their tax advisers
with specific reference
to their own tax situation.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under
the direction of the
Trust's Board of Trustees. The Trustees approve all
significant agreements
between the Trust and the persons or companies that
furnish services to the
Fund, including agreements with its Distributor,
Investment Adviser,
Administrator, Custodian and Transfer Agent. The day-to-
day operations of the
Fund are delegated to the Fund's Investment Adviser and
Administrator. The
Statement of Additional Information relating to the
Fund contains general
background information regarding each Trustee and
executive officer of the
Trust.
DISTRIBUTOR
Lehman Brothers, located at 3 World Financial Center,
New York, New York
10285, is the Distributor of the Fund's shares.
Lehman Brothers is a
wholly-owned subsidiary of Lehman Brothers Holdings, Inc.
("Holdings"). Prior to
May 31, 1994, all of the issued and outstanding common
stock (representing 92%
of the voting stock) of Holdings was held by American
Express Company. On May
31, 1994, American Express distributed to holders of
common stock of American
Express all outstanding shares of common stock of Holdings.
As of May 31, 1994,
Nippon Life Insurance Company owned 11.2% of the
outstanding voting securities
of Holdings. Lehman Brothers, a leading full service
investment firm, meets the
diverse financial needs of individuals, institutions and
governments around the
world. Lehman Brothers has entered into a Distribution
Agreement with the Trust
pursuant to which it has the responsibility for distributing
shares of the Fund.
INVESTMENT ADVISER--LEHMAN BROTHERS GLOBAL ASSET MANAGEMENT
INC.
Lehman Brothers Global Asset Management Inc. ("LBGAM"),
located at 3 World
Financial Center, New York, New York 10285, serves as
the Fund's Investment
Adviser. LBGAM is a wholly-owned subsidiary of Holdings.
LBGAM, together with
other Lehman Brother investment advisory affiliates,
serves as Investment
Adviser to investment companies and private accounts and
has assets under
management of approximately $11 billion as of July 31, 1994.
As Investment Adviser to the Fund, LBGAM, subject to
the supervision and
direction of the Trust's Board of Trustees, manages the Fund
in accordance with
its investment objective and policies, makes investment
decisions for the Fund,
places orders to purchase and sell securities on behalf of
the Fund and provides
research
9
<PAGE>
services to the Fund. For its services LBGAM is entitled
to receive a monthly
fee from the Fund at the annual rate of .10% of the value
of the Fund's average
daily net assets. For the period February 8, 1993
(commencement of operations)
to January 31, 1994, LBGAM received no advisory fees from
the Fund.
ADMINISTRATOR AND TRANSFER AGENT--THE SHAREHOLDER SERVICES
GROUP, INC.
The Shareholder Services Group, Inc. ("TSSG"),
located at One Exchange
Place, 53 State Street, Boston, Massachusetts 02109,
serves as the Fund's
Administrator and Transfer Agent. TSSG is a wholly-owned
subsidiary of First
Data Corporation. As Administrator, TSSG calculates the net
asset value of the
Fund's shares and generally assists in all aspects of the
Fund's administration
and operation. As compensation for TSSG's services as
Administrator, TSSG is
entitled to receive from the Fund a monthly fee at the
annual rate of .10% of
the value of the Fund's average daily net assets. TSSG
is also entitled to
receive a fee from the Fund for its services as Transfer
Agent. TSSG pays Boston
Safe, the Fund's Custodian, a portion of its monthly
administration fee for
custody services rendered to the Fund.
On May 6, 1994, TSSG acquired the third party mutual
fund administration
business of The Boston Company Advisors, Inc., an
indirect wholly-owned
subsidiary of Mellon Bank Corporation ("Mellon"), from
Mellon. In connection
with this transaction, Lehman Brothers assigned to TSSG
its agreement with
Mellon that Lehman Brothers and its affiliates, consistent
with any fiduciary
duties and assuming certain service quality standards are
met, would recommend
TSSG and would continue to recommend Boston Safe as the
providers of such
administration and custody services as are currently being
provided by TSSG and
Boston Safe to the Fund. This agreement expires on May 21,
2000.
CUSTODIAN--BOSTON SAFE DEPOSIT AND TRUST COMPANY
Boston Safe, a wholly owned subsidiary of The Boston
Company, Inc., located
at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's
Custodian.
SERVICE ORGANIZATIONS
Financial institutions, such as banks, savings and
loan associations and
other such institutions ("Service Organizations") and/or
institutional customers
of Service Organizations may purchase Class B, Class C or
Class E shares. These
shares are identical in all respects to Class A shares
except that they bear the
fees described below and enjoy certain exclusive voting
rights on matters
relating to these fees. The Fund will enter into an
agreement with each Service
Organization whose customers ("Customers") are the
beneficial owners of Class B,
Class C or Class E shares. That agreement requires the
Service Organization to
provide certain services to Customers in consideration of
the Fund's payment of
service fees at the annual rate of .25%, .35% or .15%,
respectively, of the
average daily net asset value of the respective Class
beneficially owned by the
Customers. Such services, which are described more fully
in the Statement of
Additional Information under "Management of the Fund--
Service Organizations,"
may include aggregating and processing purchase and
redemption requests from
Customers and placing net purchase and redemption orders
with Lehman Brothers;
processing dividend payments from the Fund on behalf of
Customers; providing
information periodically to Customers showing their
positions in shares;
arranging for bank wires; responding to Customer
inquiries relating to the
services provided by the Service Organization and
handling correspondence;
acting as shareholder of record and nominee; and providing
reasonable assistance
in connection with the distribution of shares to
Customers. Services provided
with respect to Class B shares will generally be more
limited than those
provided with respect to Class C shares and services
provided with respect to
Class E shares will generally be more limited than those
provided with respect
to Class B and Class C shares. Under the terms of the
agreements, Service
Organizations
10
<PAGE>
are required to provide to their Customers a schedule of
any fees that they may
charge Customers in connection with their investments in
Class B, Class C or
Class E shares. Class A shares are sold to financial
institutions that have not
entered into servicing agreements with the Fund in
connection with their
investments. A salesperson and any person entitled to
receive compensation for
selling or servicing shares of the Fund may receive
different compensation for
selling or servicing one Class of shares over another Class.
EXPENSES
The Fund bears all of its own expenses. The Fund's
expenses include taxes,
interest, fees and salaries of the Trust's trustees and
officers who are not
directors, officers or employees of the Fund's service
contractors, Securities
and Exchange Commission fees, state securities
qualification fees, costs of
preparing and printing prospectuses for regulatory purposes
and for distribution
to investors, advisory and administration fees, charges
of the Custodian,
certain insurance premiums, outside auditing and legal
expenses, costs of
shareholder reports and shareholder meetings and any
extraordinary expenses. In
addition to these expenses, the individual classes of the
Fund bear certain
expenses including Transfer Agent and dividend disbursing
agent fees and, with
respect to Class B, C and E shares, Service Organization
fees. The Fund also
pays for brokerage fees and commissions (if any) in
connection with the purchase
and sale of portfolio securities. LBGAM and TSSG may
voluntarily waive their
respective fees from time to time in order to maintain
competitive expense
ratios. In addition, LBGAM has agreed to reimburse the
Fund to the extent
required by applicable state law for certain expenses that
are described in the
Statement of Additional Information relating to the Fund.
Any fees charged by
Service Organizations or other institutional investors to
their customers in
connection with investments in Fund shares are not
reflected in the Fund's
expenses.
YIELDS
From time to time the "yields" and "effective yields"
for Class A, Class B,
Class C and Class E shares may be quoted in
advertisements or in reports to
investors. Yield figures are based on historical earnings
and are not intended
to indicate future performance. The "yield" quoted in
advertisements for a
particular class or sub-class of shares refers to the
income generated by an
investment in such shares over a specified period (such as
a seven-day period)
identified in the advertisement. This income is then
"annualized," that is, the
amount of income generated by the investment during that
period is assumed to be
generated each week over a 52-week or one-year 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 a
particular class or
sub-class is assumed to be reinvested. The "effective
yield" will be slightly
higher than the "yield" because of the compounding
effect of this assumed
reinvestment. Yield quotations are computed separately for
each Class of shares.
The Fund's yields may be compared to those of
other mutual funds with
similar objectives, 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, such data are
reported in national
financial publications such as IBC/DONOGHUE'S MONEY FUND
REPORT-R-, THE WALL
STREET JOURNAL and THE NEW YORK TIMES, reports prepared
by Lipper Analytical
Service, Inc. and publications of a local or regional
nature.
THE FUND'S YIELD FIGURES FOR A CLASS OF SHARES
REPRESENT PAST PERFORMANCE,
WILL FLUCTUATE AND SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE RESULTS.
The yield of any investment is generally a function of
portfolio quality and
maturity, type of investment and operating expenses. Since
holders of Class B,
Class C or Class E shares bear the service fees for services
provided by Service
Organizations, the net yield on such shares can be expected
at any given time to
be lower than the net yield on Class A shares. Any fees
charged by Service
11
<PAGE>
Organizations or other institutional investors directly to
their customers in
connection with investments in Fund shares are not
reflected in the Fund's
expenses or yields. The methods used to compute the Fund's
yields are described
in more detail in the Statement of Additional
Information. Investors may call
1-800-238-2560 (Class A shares code: 004; Class B shares
code: 104; Class C
shares code: 204; Class E shares code: 404) to obtain
current yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Trust is a Massachusetts business trust
established on November 25,
1992.
The Trust's Declaration of Trust authorizes the Board
of Trustees to issue
an unlimited number of full and fractional shares of
beneficial interest in the
Trust and to classify or reclassify any unissued shares
into one or more
additional classes of shares. The Trust is an open-end
management investment
company which currently offers 13 portfolios.The Trust
has authorized the
issuance of seven classes of shares for three of its
money market portfolios,
four classes of shares for seven of its money market
portfolios, four classes of
shares for two of its non-money market portfolios and
three classes of shares
for its other non-money market portfolio. The
Declaration of Trust further
authorizes the Trustees to classify or reclassify any class
of shares into one
or more sub-classes.
The Trust does not presently intend to hold annual
meetings of shareholders
except as required by the 1940 Act or other applicable law.
The Trust will call
a meeting of shareholders for the purpose of voting on the
question of removal
of a member of the Board of Trustees upon written request of
shareholders owning
at least 10% of the outstanding shares of the Trust entitled
to vote.
Each Fund share represents an equal proportionate
interest in the assets
belonging to the Fund. Each share, which has a par
value of $.001, has no
preemptive or conversion rights. When issued for payment
as described in this
Prospectus, shares will be fully paid and non-assessable.
Holders of the Fund's shares will vote in the aggregate
and not by class on
all matters, except where otherwise required by law and
except that only Class
B, Class C or Class E shares, as the case may be, will be
entitled to vote on
matters submitted to a vote of shareholders
pertaining to the Fund's
arrangements with Service Organizations with respect to
the relevant Class.
Further, shareholders of all of the Trust's portfolios
will vote in the
aggregate and not by portfolio except as otherwise
required by law or when the
Board of Trustees determines that the matter to be voted
upon affects only the
interests of the shareholders of a particular portfolio.
(See the Statement of
Additional Information under "Miscellaneous" for examples
where the 1940 Act
requires voting by portfolio.) Shareholders of the Trust
are entitled to one
vote for each full share held (irrespective of class
or portfolio) and
fractional votes for fractional shares held. Voting rights
are not cumulative;
and, accordingly, the holders of more than 50% of the
aggregate shares of the
Trust may elect all of the Trustees.
For information concerning the redemption of Fund
shares and possible
restrictions on their transferability, see "Purchase and
Redemption of Shares."
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL
INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE
INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS
RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION
REGARDING THE TRUST'S OTHER
PORTFOLIOS MAY OBTAIN SEPARATE PROSPECTUSES DESCRIBING THEM
BY CONTACTING LEHMAN
BROTHERS AT 1-800-368-5556.
12
<PAGE>
LEHMAN BROTHERS INSTITUTIONAL FUNDS GROUP
TRUST
Prime Money Market Fund
Prime Value Money Market Fund
Government Obligations Money Market Fund
Cash Management Fund
Treasury Instruments Money Market Fund II
100% Treasury Instruments Money Market
Fund
Municipal Money Market Fund
Tax-Free Money Market Fund
California Municipal Money Market Fund
New York Municipal Money Market Fund
------------------------
Floating Rate U.S. Government Fund
Short Duration U.S. Government Fund
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE
FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, 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 TRUST
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING BY THE TRUST
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Background and Expense Information.......... 2
Financial Highlights........................ 3
Investment Objective and Policies........... 3
Purchase and Redemption of Shares........... 5
Dividends................................... 7
Taxes....................................... 8
Management of the Fund...................... 9
Yields...................................... 11
Description of Shares....................... 12
</TABLE>
CASH
MANAGEMENT
FUND
-------------------
PROSPECTUS
May 31, 1994
As Supplemented August 22, 1994
---------------------
LEHMAN BROTHERS
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION
INCORPORATED HEREIN
RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE
INVESTMENT OBJECTIVE AND
POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS
RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING
THE TRUST'S OTHER
PORTFOLIOS MAY OBTAIN SEPARATE PROSPECTUSES DESCRIBING THEM
BY CONTACTING LEHMAN
BROTHERS AT 1-800-368-5556.
