PROSPECTUS
Tax-Free Money Market Fund
An Investment Portfolio Offered By
Lehman Brothers Institutional Funds Group Trust
Lehman Brothers Institutional Funds Group Trust (the
"Trust") is a no-load, open-end, management investment company.
The shares described in this Prospectus represent interests in the
Tax-Free Money Market Fund portfolio (the "Fund"), one of a family
of portfolios of the Trust.
The Fund's investment objective is to provide investors with
as high a level of current income exempt from federal income tax
as is consistent with relative stability of principal. The Fund
invests substantially all of its assets in short-term tax-exempt
obligations issued by state and local governments and tax-exempt
derivative securities.
Fund shares may not be purchased by individuals directly,
but institutional investors may purchase shares for accounts
maintained by individuals. The Fund currently offers three classes
of shares. In addition to Class A shares, institutional investors
may purchase on behalf of their customers Class B or Class C
shares which accrue daily dividends in the same manner as Class A
shares but bear all fees payable by the Fund to institutional
investors for certain services they provide to the beneficial
owners of such shares. See "Management of the Fund_Service
Organizations."
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: 008; Class B
shares code: 108; Class C shares code: 208); 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
BACKGROUND AND EXPENSE INFORMATION
The following Expense Summary lists the costs and 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 three
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 the Class B and Class C shares bear fees
payable by the Fund (at the rate of .25% and .35% 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
C
l
a
s
s
A
S
h
a
r
e
s
C
l
a
s
s
B
S
h
a
r
e
s
C
l
a
s
s
C
S
h
a
r
e
s
Annual Fund Operating Expenses
(as a percentage of average net assets)
Advisory Fees (net of
applicable fee waivers)*
0
.
0
8
%
0
.
0
8
%
0
.
0
8
%
Rule 12b-1 fees
n
o
n
e
.
2
5
%
.
3
5
%
Other Expenses _ including
Administration Fees
(net of applicable fee waivers)*
0
.
0
8
%
0
.
0
8
%
0
.
0
8
%
Total Fund Operating
Expenses (after fee waivers)*
.
1
6
%
.
4
1
%
.
5
1
%
___________
* The Expense Summary above has been restated to reflect
current expected fees and the Fund's Investment Adviser's and
Administrator's voluntary fee waiver and expense reimbursement
arrangements in effect for the Fund's fiscal year ending
January 31, 1995.
In order to maintain a competitive expense ratio during
1994, the Fund's Investment Adviser and Administrator have
voluntarily agreed to waive fees and reimburse expenses if and to
the extent that total operating expenses (other than taxes,
interest, brokerage fees and commissions, Rule 12b-1 fees and
extraordinary expenses) exceed .16% of average daily net assets
through December 31, 1994. For 1995 and thereafter, the Investment
Adviser and Administrator intend to continue voluntarily to waive
fees and reimburse expenses to the extent necessary to maintain an
annualized expense ratio at a level no greater than .18% of
average daily net assets. The voluntary fee waiver and expense
reimbursement arrangements described above will not be changed
unless investors are provided at least 60 days' advance notice.
The maximum annual contractual fees payable to the Investment
Adviser and Administrator total .20% of average daily net assets.
Absent fee waivers, the Total Fund Operating Expenses of Class A,
Class B and Class C are expected to be .26%, .51% and .61%,
respectively, of the Funds' average daily net assets.
_____
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:
1
Y
e
a
r
3
Y
e
a
r
s
5
Y
e
a
r
s
1
0
Y
e
a
r
s
Class A shares:
$
2
$
5
$
9
$
2
0
Class B shares:
$
4
$
1
3
$
2
3
$
5
2
Class C shares:
$
5
$
1
6
$
2
9
$
6
4
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF ACTUAL
EXPENSES AND RATES OF RETURN, WHICH MAY BE GREATER OR LESSER 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.
FINANCIAL HIGHLIGHTS
The following financial highlights for the fiscal year ended
January 31, 1994 is 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. 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.
P
e
r
i
o
d
E
n
d
e
d
1
/
3
1
/
9
4
*
C
l
a
s
s
A
Net asset value, beginning of period
$
1
.
0
0
Net investment income(1)
0
.
0
2
2
8
Dividends from net investment income
(
0
.
0
2
2
8
)
Net asset value, end of period
$
1
.
0
0
Total return(2)
2
.
3
0
%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's)
$
5
9
,
7
3
5
Ratio of net investment income to
average net assets(3)
2
.
3
8
%
Ratio of net operating expenses to
average net assets(3)(4)
0
.
1
1
%
___________
* The Tax-Free 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 $0.0093.
(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 1.52%.
INVESTMENT OBJECTIVE AND POLICIES
In General
The Fund's investment objective is to provide investors with
as high a level of current income exempt from federal income tax
as is consistent with relative stability of principal.
In pursuing its investment objective, the Fund, which
operates as a diversified investment company, invests
substantially all of its assets in a diversified portfolio of
short-term tax-exempt obligations issued by or on behalf of
states, territories and possessions of the United States, the
District of Columbia, and their respective authorities, agencies,
instrumentalities and political subdivisions and tax-exempt
derivative securities such as tender option bonds, participations,
beneficial interests in trusts and partnership interests
(collectively "Municipal Obligations"). The Fund will not
knowingly purchase securities the interest on which is subject to
federal income tax. Although it has no present intent to do so,
however, the Fund may invest up to 20% of its assets in securities
the income from which may be a specific tax preference item for
purposes of the federal individual and corporate alternative
minimum tax. See "Taxes."
Opinions relating to the validity of Municipal Obligations
and to the exemption of interest thereon from federal income tax
are rendered by bond counsel to the respective issuers at the time
of issuance, and opinions relating to the validity of and the
tax-exempt status of payments received by the Fund from tax-exempt
derivative securities are rendered by counsel to the respective
sponsors of such securities. The Fund and its Investment Adviser
will rely on such opinions and will not review independently the
underlying proceedings relating to the issuance of Municipal
Obligations, the creation of any tax-exempt derivative securities
or the bases for such opinions.
Portfolio Quality and Diversification. The Fund will purchase
only Municipal Obligations which are "First Tier Eligible
Securities" (as defined by the Securities and Exchange Commission)
and which present minimal credit risks as determined by the
Investment Adviser pursuant to guidelines approved by the Trust's
Board of Trustees. First Tier Eligible Securities consist of
(i) securities that either (a) have short-term debt ratings at the
time of purchase within the highest rating category assigned by at
least two unaffiliated nationally recognized statistical rating
organizations ("NRSROs") (or one NRSRO if the security was rated
by only one NRSRO), or (b) are issued by issuers with such
ratings, and (ii) certain securities that are unrated (including
securities of issuers that have long-term but not short-term
ratings) but are of comparable quality as determined by the
Investment Adviser and/or sub-Investment Adviser pursuant to
guidelines approved by the Trust's Board of Trustees. The Appendix
to the Statement of Additional Information includes a description
of applicable NRSRO ratings.
Except during temporary defensive periods, the Fund will
invest substantially all, but in no event less than 80%, of its
total assets in obligations the interest on which is exempt from
federal income tax with remaining maturities of thirteen months or
less as determined in accordance with the rules of the Securities
and Exchange Commission. The Fund maintains a dollar-weighted
average portfolio maturity of 90 days or less. The Fund may hold
uninvested cash reserves pending investment, during temporary
defensive periods, including when suitable tax-exempt obligations
are unavailable. There is no percentage limitation on the amount
of assets which may be held uninvested. Uninvested cash reserves
will not earn income.
Investment Limitations
There can be no assurance that the Fund will achieve its
investment objective. The investment limitations enumerated below
and the Fund's policy of investing at least 80% of its total
assets in obligations the interest on which is exempt from federal
income tax are fundamental and may not be changed by the Trust's
Board of Trustees without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. The Fund's investment
objective and other investment policies described above may be
changed by the Board of Trustees at any time. 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. (A complete list of the
investment limitations that cannot be changed without a vote of
investors is contained in the Statement of Additional Information
under "Investment Objective and Policies.")
The Fund may not:
1. Borrow money except from banks for temporary purposes
and then in amounts not in excess of 10% of the value of the
Fund's assets at the time of such borrowing; or mortgage, pledge
or hypothecate any 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.
2. 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.
3. 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, provided that there is no limitation with respect
to investments in U.S. government securities.
Types of Municipal Obligations
The two principal classifications of Municipal Obligations
which may be held by the Fund are "general obligation" securities
and "revenue" securities. General obligation securities are
secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from
the proceeds of a special excise tax or other specific revenue
source such as the user of the facility being financed. Revenue
securities include private activity bonds which are not payable
from the unrestricted revenues of the issuer. Consequently, the
credit quality of private activity bonds is usually directly
related to the credit standing of the corporate user of the
facility involved.
The Tax Reform Act of 1986 substantially revised provisions
of prior law affecting the issuance and use of proceeds of certain
tax-exempt obligations. A new definition of private activity bonds
was applied to many types of bonds, including those which were
industrial development bonds under prior law. Interest on private
activity bonds is tax-exempt only if the bonds fall within certain
defined categories of qualified private activity bonds and meet
the requirements specified in those respective categories. The Act
generally did not change the tax treatment of bonds issued to
finance governmental operations. The changes generally apply to
bonds issued after August 15, 1986, with certain transitional rule
exemptions. As used in this Prospectus, the term "private activity
bonds" also includes industrial development revenue bonds issued
pursuant to the Internal Revenue Code of 1986, as amended.
The Fund's portfolio may also include "moral obligation"
bonds, which are normally issued by special purpose public
authorities. If the issuer of moral obligation bonds is unable to
meet its debt service obligations from current revenues, it may
draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality
which created the issuer.
Other Investment Practices
Municipal Obligations purchased by the Fund may include
variable rate demand notes. Such notes may not be rated by credit
rating agencies, but unrated notes purchased by the Fund will be
determined by the Fund's Investment Adviser to be of comparable
quality at the time of purchase to rated instruments purchasable
by the Fund. Where necessary to ensure that a note is a First Tier
Eligible Security, the Fund will require that the issuer's
obligation to pay the principal of the note be backed by a
conditional bank letter or line of credit, guarantee or commitment
to lend. While there may be no active secondary market with
respect to a particular variable rate demand note purchased by the
Fund, the Fund may, upon the notice specified in the note, demand
payment of the principal of the note at any time or during
specified periods not exceeding thirteen months, depending upon
the instrument involved, and may resell the note at any time to a
third party. The absence of such an active secondary market,
however, could, in some instances, make it difficult for the Fund
to dispose of a variable rate demand note if the issuer were to
default on its payment obligation or during periods that the Fund
is not entitled to exercise its demand rights, and the Fund could,
for this or other reasons, suffer a loss to the extent of the
default. While, in general, the Fund will invest only in
securities that mature within thirteen months of purchase, the
Fund may invest in variable rate demand notes which have nominal
maturities in excess of thirteen months, if such instruments carry
demand features that comply with conditions established by the
Securities and Exchange Commission.
The Fund may also purchase Municipal Obligations 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.
In addition, the Fund may acquire "stand-by commitments"
with respect to Municipal Obligations held in its portfolio. Under
a stand-by commitment, a dealer would agree to purchase at the
Fund's option specified Municipal Obligations at a specified
price. The Fund will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its
rights thereunder for trading purposes.
Although the Fund may invest more than 25% of its net assets
in (i) Municipal Obligations whose issuers are in the same state
and (ii) Municipal Obligations the interest on which is paid
solely from revenues of similar projects, it does not presently
intend to do so on a regular basis. To the extent the Fund's
assets are concentrated in Municipal Obligations that are payable
from the revenues of similar projects, are issued by issuers
located in the same state or are private activity bonds, the Fund
will be subject to the peculiar risks presented by the laws and
economic conditions relating to such states, projects and bonds to
a greater extent than it would be if its assets were not so
concentrated.
The Fund may purchase tender option bonds. A tender option
bond is a municipal obligation (generally held pursuant to a
custodial arrangement) having a relatively long maturity and
bearing interest at a fixed rate substantially higher than
prevailing short-term tax exempt rates, that has been coupled with
the agreement of a third party, such as a bank, broker-dealer or
other financial institution, pursuant to which such institution
grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face
value thereof. As consideration for providing the option, the
financial institution receives periodic fees equal to the
difference between the municipal obligation's fixed coupon rate
and the rate, as determined by a remarketing or similar agent at
or near the commencement of such period, that would cause the
securities, coupled with the tender option, to trade at or near
par on the date of such determination. Thus, after payment of this
fee, the security holder effectively holds a demand obligation
that bears interest at the prevailing short-term tax exempt rate.
The Fund's Investment Adviser will consider on an ongoing basis
the creditworthiness of the issuer of the underlying municipal
obligation, of any custodian and of the third party provider of
the tender option. In certain instances and for certain tender
option bonds, the option may be terminable in the event of a
default in payment of principal or interest on the underlying
municipal obligations and for other reasons. Additionally, the
above description of tender option bonds is meant only to provide
an example of one possible structure of such obligations, and the
Fund may purchase tender option bonds with different types of
ownership, payment, credit, and/or liquidity arrangements.
The Fund may acquire custodial receipts or certificates
underwritten by securities dealers or banks that evidence
ownership of future interest payments, principal payments or both,
on certain municipal obligations. The underwriter of these
certificates or receipts typically purchases municipal obligations
and deposits the obligations in an irrevocable trust or custodial
account with a custodian bank, which then issues receipts or
certificates that evidence ownership of the periodic unmatured
coupon payments and the final principal payment on the
obligations. Although under the terms of a custodial receipt, the
Fund would be typically authorized to assert its rights directly
against the issuer of the underlying obligation, the Fund could be
required to assert through the custodian bank those rights as may
exist against the underlying issuer. Thus, in the event the
underlying issuer fails to pay principal and/or interest when due,
the Fund may be subject to delays, expenses and risks that are
greater than those that would have been involved if the Fund had
purchased a direct obligation of the issuer. In addition, in the
event that the trust or custodial account in which the underlying
security has been deposited is determined to be an association
taxable as a corporation instead of a non-taxable entity, the
yield on the underlying security would be reduced in recognition
of any taxes paid.
The Fund may purchase from financial institutions tax-exempt
participation interests in Municipal Obligations. A participation
interest gives the Fund an undivided interest in the Municipal
Obligation in the proportion that the Fund's participation
interest bears to the total amount of the Municipal Obligation.
These instruments may have floating or variable rates of interest.
If the participation interest is unrated, it will be backed by an
irrevocable letter of credit or guarantee of a bank that the
Trust's Board of Trustees has determined meets certain quality
standards or the payment obligation otherwise will be
collateralized by obligations of the U.S. government and its
agencies and instrumentalities. The Fund will have the right, with
respect to certain participation interests, to demand payment, on
a specified number of days' notice, for all or any part of the
Fund's interest in the Municipal Obligation, plus accrued
interest. The Fund will invest no more than 5% of its total assets
in participation interests.
The Fund will not knowingly invest more than 10% of the
value of its total net assets in illiquid securities, including
time deposits and repurchase agreements having maturities longer
than seven days. Securities that have readily available market
quotations are not deemed illiquid for purposes of this limitation
(irrespective of any legal or contractual restrictions on resale).
The Fund may invest in commercial obligations issued in reliance
on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended
("Section 4(2) paper"). The Fund may also purchase securities that
are not registered under the Securities Act of 1933, as amended,
but which can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities").
Section 4(2) paper is restricted as to disposition under the
federal securities laws, and generally is sold to institutional
investors such as the Fund who agree that they are purchasing the
paper for investment and not with a view to public distribution.
Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional
investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in the Section 4(2)
paper, thus providing liquidity. Rule 144A securities generally
must be sold to other qualified institutional buyers. If a
particular investment in Section 4(2) paper or Rule 144A
securities is not determined to be liquid, that investment will be
included within the 10% limitation on investment in illiquid
securities. The Fund's Investment Adviser will monitor the
liquidity of such restricted securities under the supervision of
the Board of Trustees. See "Investment Objective and
Policies_Additional Information and Investment Practices_Illiquid
Securities" in the Statement of Additional Information.
The value of the Fund's portfolio securities can be expected
to vary inversely with changes in prevailing interest rates.
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 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 prior to noon for which
payment is received between noon and 4:00 P.M., Eastern time, will
be executed at 4:00 P.M. Orders received after noon, and orders
for which payment has not been received by 4:00 P.M., Eastern
time, will not be accepted and notice thereof will be given to the
institution placing the order. 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 Trust-wide initial 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 in
connection with the investment of fiduciary funds in Class B or
Class C 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, are urged to consult their legal advisers before
investing fiduciary funds in Class B or Class C 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 before noon,
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 investor on the same business
day. Payment for redeemed shares for which a redemption order is
received by Lehman Brothers after noon, Eastern time, on such a
business day is normally made in federal funds wired to the
redeeming investor 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 net 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 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 noon and 4:00 P.M., Eastern time, on each
weekday, with the exception of those holidays on which either the
New York Stock Exchange 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 of the Fund, subtracting liabilities, and dividing the
result by the total number of the Fund's outstanding shares
(irrespective of class or sub-class). 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
value of the Trust's other investment portfolios.
Other Matters
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 Fund 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. The
Fund's net investment income is declared daily as a dividend to
shareholders of record at the close of business on the day of
declaration. Shares begin accruing dividends on the day the
purchase order for the shares is effected and continue to accrue
dividends through the day before such shares are redeemed.
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 and
Class C shares bear all the expense of fees paid to Service
Organizations. As a result, at any given time, the net yield on
Class B and Class C shares will be .25% and .35%, 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 of shares 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,
15th Floor, Boston, Massachusetts 02110-9624, and will become
effective after its receipt by the Distributor, with respect to
dividends paid.
The Shareholder Services Group, Inc. ("TSSG"), as Transfer
Agent, will send each investor or its authorized representative an
annual statement designating the amount of any 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 the sum of 90% of its
exempt-interest income net of certain deductions and 90% of its
investment company taxable income for such year. Dividends derived
from exempt-interest income may be treated by the Fund's investors
as items of interest excludable from their gross income under
Section 103(a) of the Code, unless under the circumstances
applicable to the particular investor the exclusion would be
disallowed. (See the Statement of Additional Information under
"Additional Information Concerning Taxes.")
If the Fund should hold certain private activity bonds
issued after August 7, 1986, investors must include, as an item of
tax preference, the portion of dividends paid by the Fund that is
attributable to interest on such bonds in their federal
alternative minimum taxable income for purposes of determining
liability (if any) for the 24% alternative minimum tax applicable
to individuals and the 20% alternative minimum tax and the
environmental tax applicable to corporations. Corporate investors
must also take all exempt-interest dividends into account in
determining certain adjustments for federal alternative minimum
and environmental tax purposes. The environmental tax applicable
to corporations is imposed at the rate of .12% on the excess of
the corporation's modified federal alternative minimum taxable
income over $2,000,000. Investors receiving Social Security
benefits should note that all exempt-interest dividends will be
taken into account in determining the taxability of such benefits.
To the extent, if any, dividends paid to investors are
derived from taxable income or from long-term or short-term
capital gains, such dividends will not be exempt from federal
income tax, whether such dividends are paid in the form of cash or
additional shares, and may also be subject to state and local
taxes. Under state or local law, the Fund's distributions of net
investment income may be taxable to investors as dividend income
even though a substantial portion of such distributions may be
derived from interest on tax-exempt obligations which, if realized
directly, would be exempt from such income taxes.
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.
Investors will be advised at least annually as to the
federal income tax consequences of distributions made each year.
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 Brothers
investment advisory affiliates, serves as Investment Adviser to
investment companies and private accounts and has assets under
management of approximately $15 billion as of March 31, 1994.
As Investment Adviser to the Fund, LBGAM will among other
things, participate in the formulation of the Fund's investment
policies, analyze economic trends affecting the Fund and monitor
and evaluate the Fund's investment objective and policies and the
Fund's investment performance. 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.
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 or Class C 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 or Class C
shares that 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% or .35%, respectively of
the average daily net asset value of the respective Class
beneficially owned by 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 investor 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. Under the terms of the agreements, Service
Organizations 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 or Class C 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 other 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, transfer agent and dividend disbursing agent, Service
Organization fees, certain insurance premiums, outside auditing
and legal expenses, costs of investor reports and investor
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. In order to maintain a
competitive expense ratio during 1994, LBGAM and TSSG have agreed
voluntarily to reimburse the Fund if and to the extent that the
Fund's total operating expenses (other than taxes, interest,
brokerage fees and commissions, Rule 12b-1 fees under the 1940 Act
and extraordinary expenses) exceed .16% of average daily net
assets through December 31, 1994. The Investment Adviser and
Administrator intend to continue voluntarily to waive fees to the
extent necessary to maintain an annualized expense ratio at a
level no greater than .18% of average daily net assets thereafter.
This voluntary reimbursement will not be changed unless investors
are at a level provided at least 60 days' advance notice. In
addition, these service providers have 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," "effective yields" and
"tax-equivalent yields" for Class A, Class B or Class C shares may
be quoted in advertisements or in reports to investors. Yield
quotations are computed separately for each Class of shares. 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 of 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 such
period 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.
The "tax-equivalent yield" demonstrates the level of taxable yield
necessary to produce an after- tax yield equivalent to the Fund's
tax-free yield for each class or sub-class of shares. It is
calculated by increasing the yield (calculated as above) by the
amount necessary to reflect the payment of federal taxes at a
stated rate. The "tax-equivalent yield" will always be higher than
the "yield ."
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, 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. For example, such data are reported in national
financial publications such as IBC/Donoghue's Money Fund Report,
Ibbotson Associates of Chicago, The Wall Street Journal and The
New York Times, reports prepared by Lipper Analytical Services,
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 and
Class C 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 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: 008; Class B shares code: 108; Class C shares code: 208) to
obtain current yield information.
DESCRIPTION OF SHARES
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 offers thirteen portfolios: Prime Money Market Fund
(Class A, Class B and Class C), Prime Value Money Market Fund
(Class A, Class B, Class C and Class D), Government Obligations
Money Market Fund (Class A, Class B, Class C and Class D), 100%
Government Obligations Money Market Fund (Class A, Class B and
Class C), Treasury Instruments Money Market Fund (Class A, Class B
and Class C), Treasury Instruments Money Market Fund II (Class A,
Class B and Class C), 100% Treasury Instruments Money Market Fund
(Class A, Class B and Class C), Tax-Free Money Market Fund
(Class A, Class B and Class C), Municipal Money Market Fund
(Class A, Class B, Class C and Class D), California Municipal
Money Market Fund (Class A, Class B and Class C), New York
Municipal Money Market Fund (Class A, Class B and Class C),
Floating Rate U.S. Government Fund (Premier and Select Shares),
and Short Duration U.S. Government Fund (Premier and Select
Shares). Shares of the New York Municipal Money Market Fund are
not currently sold to the public. 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 investors except as required by the 1940 Act or other
applicable law. The Trust will call a meeting of investors for the
purpose of voting upon the question of removal of a member of the
Board of Trustees upon written request of investors 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 or Class C shares, as the case
may be, will be entitled to vote on matters submitted to a vote of
investors pertaining to the Fund's arrangements with Service
Organizations with respect to the relevant Class. Further,
investors of all of the Fund and 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
investors of a particular portfolio. (See the Statement of
Additional Information under "Additional Description Concerning
Fund Shares" for examples where the 1940 Act requires voting by
portfolio.) Investors 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. LEHMAN BROTHERS INSTITUTIONAL FUNDS
GROUP TRUST
Prime Money Market Fund
Prime Value Money Market Fund
Government Obligations Money Market Fund
100% Government Obligations Money Market Fund
Treasury Instruments Money Market 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
P
a
g
e
Background and Expense Information
2
Financial Highlights
3
Investment Objective and Policies
3
Purchase and Redemption of Shares
8
Dividends
1
0
Taxes
1
1
Management of the Fund
1
2
Yields
1
4
Description of Shares
1
4
Tax-Free Money
Market Fund
PROSPECTUS
May 31, 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.
May 31, 1994
