PROSPECTUS
100% Government Obligations 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
100% Government Obligations Money Market 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 those obligations issued or guaranteed as to principal and
interest by the U.S. government or by agencies or
instrumentalities thereof the interest income from which, under
current law, generally may not be subject to state income tax by
reason of federal law. To the extent permissible by federal and
state law, the Fund is structured to provide shareholders with
income that is exempt or excluded from taxation at the state and
local level. See "Taxes." The Fund is also designed to provide an
economical and convenient means for the investment of short-term
funds 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 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: 004; Class B
shares code: 104; Class C shares code: 204); 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 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 applicable fee waivers)*
0
.
0
0
%
0
.
0
0
%
0
.
0
0
%
Rule 12b-1 fees
n
o
n
e
.
2
5
%
.
3
5
%
Other Expenses_including
Administration Fees
(net of applicable fee waiversand expense
reimbursements)*
0
.
1
6
%
0
.
1
6
%
0
.
1
6
%
Total Fund Operating
Expenses (after fee waivers and
expensereimbursements)*
.
1
6
%
.
4
1
%
.
5
1
%
_____
_Fn_
* The Expense Summary above has been restated to reflect
current
expected fees and the Fund's Investment Adviser's and
Administrator's
voluntary fee waivers 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 Funds' 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 shareholders 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 and reimbursement of expenses, the Total Fund
Operating Expenses of Class A, Class B and Class C are expected to
be .36%, .61% and .71%, respectively, of the Fund's 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
3
0
4
Dividends from net investment income
(
0
.
0
3
0
4
)
Net asset value, end of period
$
1
.
0
0
Total return(2)
3
.
0
9
%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's)
$
4
1
,
7
0
9
Ratio of net investment income to
average net assets(3)
3
.
1
1
%
Ratio of operating expenses to average
net assets(3)(4)
0
.
0
6
%
_Fn_
*
The 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%.
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 obligations issued
or guaranteed as to principal and interest by the U.S. government
or by agencies or instrumentalities thereof the interest income
from which, under current law, generally may not be subject to
state income tax by reason of federal law, including securities
issued by the U.S. Treasury and by certain agencies or
instrumentalities such as the Federal Home Loan Bank, Federal Farm
Credit Banks Funding Corp. and the Student Loan Marketing
Association. Investors in a particular state that imposes an
income tax should determine through consultation with their own
tax advisors whether such interest income, when distributed by the
Fund, will be considered by the state to have retained exempt
status, and whether the Fund's capital gain and other income, if
any, when distributed will be subject to the state's income tax.
See "Taxes." Due to state income tax considerations, the Fund will
not enter into repurchase agreements.
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, 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 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.
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 for temporary
purposes and then in an amount not exceeding 10% 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 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.Make loans except that the Fund
may purchase or hold debt obligations in accordance with its
investment objective and policies.
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 between noon and 1:00
P.M., Eastern time, will be executed at 1:00 P.M., Eastern time,
if payment has been received by Boston Safe by 1:00 P.M., Eastern
time, and will be executed at 4:00 P.M. if payment has been
received by 4:00 P.M. Orders received after 1:00 P.M., 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 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 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, should
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 prior to
1:00 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 after 1:00 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 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, 1:00 P.M. and 4:00 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, 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
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 its investments held by the Fund.
The Fund's net investment income is declared daily as a dividend
to shares held 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 a shareholder'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 share of the 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 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 as 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 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.
To the extent permissible by federal and state law, the Fund
is structured to provide investors with income that is exempt or
excluded from taxation at the state and local level. Substantially
all dividends paid to investors residing in certain states will be
exempt or excluded from state income tax. 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. 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 Three 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 $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 Service 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 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. 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 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 shareholder 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. 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 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 and Class C 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. 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 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." 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, 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 or
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: 004; Class B shares code: 104; Class C shares code: 204) 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 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 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 or Class C 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. 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
5
Dividends
7
Taxes
7
Management of the Fund
8
Yields
1
0
Description of Shares
1
1
100% Government
Obligations
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
PROSPECTUS
California Municipal 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
California Municipal Money Market Fund portfolio (the "Fund"), one
of a family of portfolios of the Trust.
The Fund's investment objective is to provide California
investors with as high a level of current income exempt from
federal income tax and, to the extent possible, from California
state personal income tax as is consistent with relative stability
of principal. All or a portion of the Fund's dividends may be a
specific preference item for purposes of the federal individual
and corporate alternative minimum taxes.
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 shares and
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
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: 010; Class B
shares code: 110; Class C shares code: 210); 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 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
0
%
0
.
0
0
%
0
.
0
0
%
Rule 12b-1 fees
n
o
n
e
.
2
5
%
.
3
5
%
Other Expenses_including
Administration Fees (net of applicable fee
waivers and expense reimbursements)*
.
1
6
%
.
1
6
%
.
1
6
%
Total Fund Operating
Expenses (after fee waivers and expense
reimbursements)*
.
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 reimbursement arrangements
described above will not be changed unless shareholders 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 and reimbursement of expenses, the Total Fund Operating
Expenses of Class A, Class B and Class C are expected to be .37%,
.62% and .72%, respectively, of the Fund's 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
P
e
r
i
o
d
E
n
d
e
d
1
/
3
1
/
9
4
*
C
l
a
s
s
B
Net asset value,
beginning of period
$
1
.
0
0
$
1
.
0
0
Net investment income(1)
0
.
0
2
2
5
0
.
0
0
0
3
Dividends from net
investment income
(
0
.
0
2
2
5
)
(
0
.
0
0
0
3
)
Net asset value, end of
period
$
1
.
0
0
$
1
.
0
0
Total return(2)
2
.
2
9
%
_
(
3
)
Ratios to average net
assets/supplemental data:
Net assets, end of
period (in 000's)
$
9
,
5
7
5
_
(
4
)
Ratio of net investment
income to average net
assets(5)
2
.
3
1
%
2
.
0
6
%
Ratio of operating
expenses to average net
assets(5)(6)
0
.
0
9
%
0
.
3
4
%
___________
* The California Municipal Money Market Fund Class A and Class
B shares commenced operations on February 8, 1993 and January 6,
1994, respectively.
(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 for Class A and Class B were $0.0058 and $0.0001,
respectively.
(2) Total return represents aggregate total return for the
period indicated.
(3) Full amount of shares offered to the public on January 6,
1994 and were redeemed on January 11, 1994, therefore total return
deemed not to be meaningful.
(4) Total net assets for Class B was $100 at January 31, 1994.
(5) Annualized.
(6) 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 for Class A and Class B were 1.80% and 2.05%,
respectively.
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
and, to the extent possible, from California state personal income
tax as is consistent with relative stability of principal. All or
a portion of the Fund's dividends may be a specific tax preference
item for purposes of the federal individual and corporate
alternative minimum taxes.
In pursuing its investment objective, the Fund, which
operates as a non-diversified investment company, invests
substantially all of its assets in debt obligations issued by or
on behalf of the State of California and other states, territories
and possessions of the United States, the District of Columbia and
their respective authorities, agencies, instrumentalities and
political sub-divisions, and tax-exempt derivative securities such
as tender option bonds, participations, beneficial interests in
trusts and partnership interests (collectively "Municipal
Obligations"). Dividends paid by the Fund that are derived from
interest on obligations that are exempt from taxation under the
Constitution or statutes of California ("California Municipal
Obligations") are exempt from regular federal income tax and
California state personal income tax. California Municipal
Obligations include municipal securities issued by the State of
California and its political sub-divisions. Dividends derived from
interest on Municipal Obligations other than California Municipal
Obligations are exempt from federal income tax but may be subject
to California state personal income tax. The Fund expects that,
except during temporary defensive periods, the Fund's assets will
be invested primarily in California Municipal Obligations,
although the amount of the Fund's assets invested in such
securities will vary from time to time. At least 50% of the Fund's
assets must be invested in such obligations and Federal
Obligations (as defined under "Taxes" below) at the close of each
quarter of its taxable year so as to permit the Fund to pay
dividends that are exempt from California state personal income
tax. Dividends, regardless of their source, may be subject to
local taxes.
Price and Portfolio Maturity. The Fund will not knowingly
purchase securities the interest on which is subject to regular
federal income tax. (See, however, "Taxes" below concerning
treatment of exempt-interest dividends paid by the Fund for
purposes of the federal alternative minimum tax applicable to
particular classes of investors.) Except during temporary
defensive periods, the Fund will invest substantially all, but in
no event less than 80%, of its total assets in Municipal
Obligations 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 follows these
policies to maintain a constant net asset value of $1.00 per
share, although there is no assurance it can do so on a continuing
basis. The Fund may hold uninvested cash reserves pending
investment during temporary defensive periods, including when
suitable tax-exempt obligations are unavailable. Uninvested cash
reserves will not earn income.
Portfolio Quality and Diversification. The Fund will purchase
only Municipal Obligations which are "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. Eligible Securities consist of (i) instruments that are
rated at the time of purchase in one of the top two rating
categories by at least two unaffiliated nationally recognized
statistical rating organizations ("NRSROs"), (ii) instruments
rated in one of the top two rating categories by one such NRSRO
(if only one such organization rates the instrument),
(iii) instruments issued by issuers with short-term debt having
such ratings, and (iv) unrated instruments determined by the
Investment Adviser, pursuant to procedures approved by the Board
of Trustees, to be of comparable quality. The Appendix to the
Statement of Additional Information includes a description of
applicable NRSRO ratings.
Investment Limitations
There can be no assurance that the Fund will achieve its
investment objective. The Fund's investment objective and the
policies described herein may 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, except that the Fund's policy of
investing at least 80% of its assets in Municipal Obligations and
the following investment limitations are fundamental and may not
be changed without such a vote of shareholders. (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 for temporary purposes
and then in amounts not exceeding 10% of the value of the Fund's
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.
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 this
limitation shall not apply to Municipal Obligations or
governmental guarantees of Municipal Obligations; and provided
further that, for the purpose of this limitation only, industrial
development bonds that are considered to be issued by
non-governmental users (see the third investment limitation below)
shall not be deemed to be Municipal Obligations; and provided,
further, 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 (a) up to 50% of the
value of the Fund's assets may be invested without regard to this
5% limitation; provided that no more than 25% of the value of the
Fund's assets are invested in the securities of any one issuer and
(b) this 5% limitation does not apply to U.S. government
securities. For purposes of this limitation, a security is
considered to be issued by the governmental entity (or entities)
whose assets and revenues back the security, or, with respect to a
private activity bond that is backed only by the assets and
revenues of a non-governmental user, by such non-governmental
user. In certain circumstances, the guarantor of a guaranteed
security may also be considered to be an issuer in connection with
such guarantee, except that a guarantee of a security shall not be
deemed to be a security issued by the guarantor when the value of
all securities issued and guaranteed by the guarantor and owned by
the Fund does not exceed 10% of the value of the Fund's total
assets.
Opinions relating to the validity of Municipal Obligations
and to the exemption of interest thereon from federal income tax
(and, with respect to California Municipal Obligations, to the
exemption of interest thereon from California state personal
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 derivatives are rendered by counsel to the respective
sponsors of such derivatives. 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 derivatives or the
bases for such opinions.
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 may include private activity bonds. Such bonds may be
issued by or on behalf of public authorities to finance various
privately operated facilities, and are not payable from the
unrestricted revenues of the issuer. As a result, the credit
quality of private activity bonds is frequently related directly
to the credit standing of private corporations or other entities.
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"
securities, which are normally issued by special purpose public
authorities. If the issuer of moral obligation securities 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
that 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 an 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 agrees 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.
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.
Risk Factors
The Fund intends to follow the diversification standards set
forth in the Investment Company Act of 1940, as amended (the "1940
Act"), except to the extent, in the judgment of the Investment
Adviser, that non-diversification is appropriate in order to
maximize the percentage of the Fund's assets that are California
Municipal Obligations. The investment return on a non-diversified
portfolio typically is dependent upon the performance of a smaller
number of issuers relative to the number of issuers held in a
diversified portfolio. In the event of changes in the financial
condition or in the market's assessment of certain issuers, the
Fund's maintenance of large positions in the obligations of a
small number of issuers may affect the value of the Fund's
portfolio to a greater extent than that of a diversified
portfolio.
Although the Fund does not presently intend to do so on a
regular basis, it may invest more than 25% of its assets in
Municipal Obligations the interest on which is paid solely from
revenues on similar projects if such investment is deemed
necessary or appropriate by the Fund's Investment Adviser. To the
extent that the Fund's assets are concentrated in Municipal
Obligations payable from revenues on similar projects, are issued
by issuers located in California or are private activity bonds,
the Fund will be subject to the particular risks presented by such
state, projects and bonds to a greater extent than it would be if
the Fund's assets were not so concentrated.
The Fund's ability to achieve its investment objective is
dependent upon various factors, including the ability of the
issuers of California Municipal Obligations to meet their
continuing payment obligations with respect to the municipal
obligations in a timely manner. Currently, the State of California
and many other issuers of California Municipal Obligations are
experiencing financial and budgetary problems which could affect
their ability to meet their financial obligations in a timely
manner. Any resulting reductions in the creditworthiness of
issuers of California Municipal Obligations could adversely affect
the market values and marketability of California Municipal
Obligations, and, consequently, the net asset value of the Fund's
portfolio.
On July 15, 1992 and July 6, 1992, respectively, Standard &
Poor's Corporation and Moody's Investors Service, Inc., citing the
State of California's deteriorating financial position, lowered
their ratings of the State's general obligation bonds from AA and
Aa2, respectively, to A+ and Aa, respectively.
Certain California constitutional amendments, legislative
measures, executive orders, administrative regulations and voter
initiatives could result in certain adverse consequences affecting
California Municipal Obligations. Significant financial and other
considerations relating to the Fund's investments in California
Municipal Obligations are summarized 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 a day 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 (9:00 A.M., Pacific 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 (1:00 P.M., Pacific time), will be
executed at 4:00 P.M., Eastern time. Orders received after noon,
and orders for which payment has not been received by 4:00 P.M.,
Eastern time (1:00 P.M., Pacific 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 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 (9:00 A.M., Pacific 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 redeemed shares
for which a redemption order is received by Lehman Brothers after
noon, Eastern time (9:00 A.M., Pacific time), on such a business
day is normally made in federal funds wired to the redeeming
shareholder on the next business day following redemption. 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 and/or sub-investment adviser, an earlier
payment could adversely affect the Fund.
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
judgement of the Investment Advisor, an earlier payment could
adversely affect the Fund. The Fund shall have the right to redeem
shares involuntarily 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 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 (1:00 P.M.,
Pacific 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 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 number of the Fund's outstanding shares. Portfolio
securities are valued on the basis of amortized cost. Under this
method, the Fund values a portfolio security at cost on the date
of purchase and thereafter assumes a constant amortization of any
discount or premium until maturity of the security. As a result,
the value of the security for purposes of determining net asset
value normally does not change in response to fluctuating interest
rates. While the amortized cost method seems to provide certainty
in portfolio valuation, it may result in periods during which
values, as determined by amortized cost, are higher or lower than
the amount the Fund would receive if it sold the securities. The
Fund's net asset value for purposes of pricing purchase and
redemption orders is determined independently of the net asset
value of the shares 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 customers' 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. The
Fund's net investment income is declared daily as a dividend to
shares held 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 expenses 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 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 with respect to dividends paid after its receipt by
TSSG.
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 and California 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 and
California franchise and income taxes on amounts distributed to
its shareholders. 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 (known as "exempt-interest
dividends") 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.")
The Fund may hold without limit 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 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 or
Railroad Retirement Act benefits should note that all
exempt-interest dividends will be taken into account in
determining the taxability of such benefits.
Dividends that are paid by the Fund to non-corporate
investors and are derived from interest on California Municipal
Obligations (as defined above) or Federal Obligations are also
exempt from California state personal income tax. For this
purpose, Federal Obligations are obligations the interest on which
is excludable from gross income for state income tax purposes
under the Constitution or laws of the United States. However,
dividends paid to corporate investors subject to California state
franchise tax or California state corporate income tax will be
taxed as ordinary income to such investors, notwithstanding that
all or a portion of such dividends is exempt from California state
personal income tax. Moreover, to the extent that the Fund's
dividends are derived from interest on debt obligations other than
California Municipal Obligations or Federal Obligations, such
dividends will be subject to California state personal income tax,
even though such dividends may be exempt for federal income tax
purposes.
Except as noted with respect to California state personal
income tax, dividends and distributions paid to investors that are
derived from income on Municipal Obligations may be taxable income
under state or local law even though all or a portion of such
distributions may be derived from interest on tax-exempt
obligations that, if paid directly to investors, would be
tax-exempt income. To the extent, if any, that 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 or California state personal income tax,
whether paid in the form of cash or additional shares, and may
also be subject to other state and local 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 as well as the California state personal income
tax, status and consequences of dividends and distributions made
each year.
The foregoing is only a brief summary of some of the
important 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 advisors with specific reference to
their own tax situations.
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 Global Asset Management
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 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. Under the terms of the agreements,
Service Organizations are required to provide to their Customers a
schedule of any fees that they may charge to their 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 such servicing agreements with the Fund in connection
with its 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 shareholder 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. 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 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" of its Class A, Class B and 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 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 week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in a
particular class of Fund shares 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. It is calculated by increasing the Fund's yield
(calculated as above) by the amount necessary to reflect the
payment of federal and California income 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 or
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: 010; Class B shares code: 110; Class C shares code: 210) to
obtain current yield information.
DESCRIPTION OF SHARES
The Trust was organized as a Massachusetts business trust 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 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 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 upon 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 or Class C 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 Fund and of the Trust's other
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.) 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.
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
4
Purchase and Redemption of Shares
9
Dividends
1
1
Taxes
1
2
Management of the Fund
1
3
Yields
1
5
Description of Shares
1
6
California Municipal
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
PROSPECTUS
Government Obligations 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
Government Obligations Money Market Fund portfolio (the "Fund"),
one of a family of portfolios of the Trust.
The Fund's investment objective 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 by the U.S. government, its
agencies or instrumentalities and repurchase agreements relating
to such obligations.
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: 003; Class B
shares code: 103; Class C shares code: 203); 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 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
9
%
0
.
0
9
%
0
.
0
9
%
Rule 12b-1 fees
n
o
n
e
.
2
5
%
.
3
5
%
Other Expenses_including
Administration Fees (net of applicable fee
waivers)*
0
.
0
7
%
0
.
0
7
%
0
.
0
7
%
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 shareholders 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 .25%, .50% and .60%,
respectively, of the Fund's 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
P
e
r
i
o
d
E
n
d
e
d
1
/
3
1
/
9
4
*
C
l
a
s
s
B
Net asset value,
beginning of period
$
1
.
0
0
$
1
.
0
0
Net investment income(1)
0
.
0
3
0
9
0
.
0
0
9
1
Dividends from net
investment income
(
0
.
0
3
0
9
)
(
0
.
0
0
9
1
)
Net asset value, end of
period
$
1
.
0
0
$
1
.
0
0
Total return(2)
3
.
1
4
%
0
.
9
0
%
Ratios to average net
assets/supplemental data:
Net assets, end of
period (in 000's)
$
1
2
1
,
5
3
2
_
(
3
)
Ratio of net investment
income to average net
assets(4)
3
.
1
8
%
2
.
9
3
%
Ratio of operating
expenses to average net
assets(4)(5)
0
.
0
3
%
0
.
2
8
%
___________
* The Government Obligations Money Market Fund Class A and
Class B Shares commenced operations on February 8, 1993,
August 16, 1993, respectively.
(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 for Class A and Class B were $0.0261 and $0.0075,
respectively.
(2) Total return represents aggregate total return for the
period indicated.
(3) Total net assets for Class B was $100 at January 31, 1994.
(4) Annualized.
(5) 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 for Class A and Class B were 0.53% and 0.78%,
respectively.
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 obligations issued
or guaranteed by the U.S. government, its agencies or
instrumentalities (in addition to direct Treasury obligations) and
repurchase agreements relating to such obligations. The Fund
invests only in securities which are purchased with and payable in
U.S. dollars (i.e., U.S. dollar denominated securities) and which
have (or, pursuant to regulations adopted by the Securities and
Exchange Commission, are deemed to have) remaining maturities of
12 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.
The "instrumentalities" or "agencies" of the U.S. government
the obligations of which may be purchased by the Fund include: the
Central Bank for Cooperatives, Export-Import Bank of the United
States, Farmers Home Administration, Federal Farm Credit Banks,
Federal Financing Bank, Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation, Federal Housing Administration, Federal
Intermediate Credit Banks, Federal Land Banks, Federal National
Mortgage Association, Financing Corporation, General Services
Administration, Government National Mortgage Association, Maritime
Administration, Private Export Funding Corp., Resolution Trust
Corporation, Small Business Administration, Student Loan Marketing
Association, Tennessee Valley Authority, U.S. Postal Service and
Washington, D.C. Armory Board. Some obligations issued or
guaranteed by agencies or instrumentalities of the U.S. Government
are backed by the full faith and credit of the United States;
others are backed by the right of the issuer to borrow from the
U.S. Treasury or are backed only by the credit of the agency or
instrumentality issuing the obligation.
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. Certain government securities held by the Fund may have
remaining maturities exceeding 12 months if such securities
provide for adjustments in their interest rates not less
frequently than every 12 months.
The Fund may invest in zero coupon U.S. Treasury securities,
which are Treasury notes and bonds that have been stripped of
their unmatured interest coupons, the coupons themselves and
receipts or certificates representing interests in such stripped
debt obligations and coupons. A zero coupon security pays no
interest to its holder during its life and is sold at a discount
to its face value at maturity. The amount of the discount
fluctuates with the market price of the security. The market
prices of zero coupon securities generally are more volatile than
the market prices of securities that pay interest periodically and
are likely to respond to a greater degree to changes in interest
rates than non-zero coupon securities having similar maturities
and credit qualities. Although zero coupon securities do not make
interest payments, for tax purposes a portion of the difference
between a zero coupon security's maturity value and its purchase
price is taxable income of the Fund each year and distributed to
Fund shareholders. Distributions to shareholders with respect to
taxable income on zero coupon securities will reduce cash
available for the purchase of income producing securities.
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 12 months,
provided the repurchase agreement itself matures in one year 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 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 policies described above
are not fundamental and 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 borrowing
limitation 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 borrow money except from banks for
temporary purposes and then in an amount not exceeding 10% 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 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.
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 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 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. and will be
executed at 4:00 P.M. if payment has been received by 4:00 P.M.
Orders received after 3:00 P.M., 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. Payments 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 on
fiduciary funds that are invested 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
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 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, 3:00 P.M. and 4:00 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 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
values of the shares 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 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 its investments. The Fund's net
investment income is declared daily as a dividend to its
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 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, 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 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 expect to distribute 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.
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 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 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. Under the terms of the agreements,
Service Organizations are required to provide to their Customers a
schedule of any fees that they may charge to the Customers in
connection with their investment 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 shareholder 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. 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 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" and "effective yields" for
Class A, Class B and Class C shares may be quoted in
advertisements or in reports to investors. The "yield" quoted in
advertisements for a particular class or sub-class 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 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 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 Fund's yields may be compared to those of other mutual
funds with similar objectives, 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, The Wall
Street Journal and The New York Times, reports prepared by Lipper
Analytical Service, Inc. and publications of local or regional
nature.
The Fund's yield figures for a Class of shares represents
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 or
Class C shares bear all 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: 003; Class B shares code: 103; Class C shares code: 203) 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.
May 31, 1994
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 upon 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 or Class C 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.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
4
Purchase and Redemption of Shares
6
Dividends
8
Taxes
8
Management of the Fund
9
Yields
1
1
Description of Shares
1
2
Government
Obligations
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.
PROSPECTUS
Municipal 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
Municipal 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. All or a portion of the Fund's dividends
may be a specific preference item for purposes of the federal
individual and corporate alternative minimum taxes.
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: 009; Class B
shares code: 109; Class C shares code: 209); 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 it 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 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
0
.
1
0
%
0
.
1
0
%
0
.
1
0
%
Rule 12b-1 fees
n
o
n
e
.
2
5
%
.
3
5
%
Other Expenses_including
Administration Fees (net of applicable
waivers)*
0
.
0
6
%
0
.
0
6
%
0
.
0
6
%
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 shareholders 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 .24%, .49% and .59%,
respectively, of the Fund's 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
4
3
Dividends from net investment income
(
0
.
0
2
4
3
)
Net asset value, end of period
$
1
.
0
0
Total return(2)
2
.
4
6
%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's)
$
3
5
0
,
9
7
5
Ratio of net investment income to
average net assets(3)
2
.
5
3
%
Ratio of operating expenses to average
net assets(3)(4)
0
.
1
3
%
___________
* The Municipal 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 $0.0201.
(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 0.51%.
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. All or a
portion of the Fund's dividends may be a specific preference item
for purposes of the federal individual and corporate alternative
minimum taxes.
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. (See, however, "Taxes" below concerning
treatment of exempt-interest dividends paid by the Fund for
purposes of the federal alternative minimum tax applicable to
particular categories of investors.)
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 "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. Eligible Securities consist of (i) securities that
either (a) have short-term debt ratings at the time of purchase
within the two highest rating categories 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 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 Municipal Obligations 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 Municipal Obligations 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 shareholders 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 exceeding 10% of the value of the Fund's
assets; 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 an 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 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
shares involuntarily in any account at its 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
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 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 customers' 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 its 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. 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. Shares begin accruing
dividends on the day the purchase order for the shares is effected
and continue to accrue dividends through the day 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 share of the Fund
irrespective of class, except that Class B or Class C shares bear
all the expense of fees paid to Service Organizations.
Institutional investors may elect to have their dividends
reinvested in additional full and fractional shares of the same
class 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 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.")
The Fund may hold without limit 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 shareholders 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 Advisor to
investment companies 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 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 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 shareholder 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. 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 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," and "effective 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 each 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. 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: 009; Class B shares code: 109; Class C shares code: 209) to
obtain current yield information.
DESCRIPTION OF SHARES
The Trust was organized as a Massachusetts business trust 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 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 (Preimer and Select Shares) and
Short Duration U.S. Government Fund (Preimer 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.) 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. 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
0
Management of the Fund
1
1
Yields
1
3
Description of Shares
1
4
Municipal
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
PROSPECTUS
Prime 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
Prime Money Market Fund portfolio (the "Fund"), one of a family of
portfolios of the Trust.
The Fund's investment objective is to provide current income
and stability of principal. The Fund invests in a portfolio
consisting of a broad range of short-term instruments, including
U.S. government and U.S. bank and commercial obligations and
repurchase agreements relating to such obligations.
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: 001; Class B
shares code: 101; Class C shares code: 201); 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 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
0
.
1
0
%
0
.
1
0
%
0
.
1
0
%
Rule 12b-1 fees
n
o
n
e
.
2
5
%
.
3
5
%
Other Expenses_including
Administration Fees
(net of applicable fee waivers)*
0
.
0
6
%
0
.
0
6
%
0
.
0
6
%
Total Fund Operating
Expenses (after fee waivers)*
.
1
6
%
.
4
1
%
.
5
1
%
_____
_Fn_
* 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 Funds' 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 fee
reimbursement arrangements described above will not be changed
unless shareholders 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 .24%, .49% and .59%,
respectively, of the Fund's 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
P
e
r
i
o
d
E
n
d
e
d
1
/
3
1
/
9
4
*
C
l
a
s
s
B
P
e
r
i
o
d
E
n
d
e
d
1
/
3
1
/
9
4
*
C
l
a
s
s
C
Net asset value,
beginning of period
$
1
.
0
0
$
1
.
0
0
$
1
.
0
0
Net investment
income(1)
0
.
0
3
1
0
0
.
0
1
1
0
0
.
0
0
0
1
Dividends from net
investment income
(
0
.
0
3
1
0
)
(
0
.
0
1
1
0
)
(
0
.
0
0
0
1
)
Net asset value, end
of period
$
1
.
0
0
$
1
.
0
0
$
1
.
0
0
Total return(2)
3
.
1
4
%
0
.
9
9
%
_
(
3
)
Ratios to average net
assets/supplemental data:
Net assets, end of
period (in 000's)
$
2
,
8
6
6
,
3
5
3
$
3
5
0
,
6
6
6
_
(
4
)
Ratio of net
investment income to average
net assets(5)
3
.
1
6
%
2
.
9
1
%
2
.
8
1
%
Ratio of operating
expenses to average net
assets(5)(6)
0
.
1
1
%
0
.
3
6
%
0
.
4
6
%
_Fn_
*
The Prime Money Market Fund Class A, Class B and Class C Shares
commenced operations on February 8, 1993, September 2, 1993 and
December 27, 1993, respectively.
(
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 for Class A, Class B and
Class C were $0.0289, $0.0102 and $0.0001, respectively.(2)Total
return represents aggregate total return for the period
indicated.(3)Full amount of shares offered to the public on
December 27, 1993 and were redeemed on December 28, 1993,
therefore,
total return deemed not to be meaningful.(4)Total net assets for
Class C was $100 at January 31, 1994.(5)Annualized.(6)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 for Class A, Class B and
Class C were 0.33%, 0.58% and 0.68%, respectively.
INVESTMENT OBJECTIVE AND POLICIES
In General
The Fund's investment objective is to provide current income
and stability of principal. In pursuing its investment objective,
the Fund, which operates as a diversified investment portfolio,
invests in a broad range of short-term instruments, including U.S.
government and U.S. bank and commercial obligations and repurchase
agreements relating to such obligations.
Price and Portfolio Maturity. The Fund invests only in
securities that are purchased with and payable in U.S. dollars and
that have (or, pursuant to regulations adopted by the Securities
and Exchange Commission, will be deemed to have) remaining
maturities of thirteen 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. The Fund follows these policies to
maintain a constant net asset value of $1.00 per share, although
there is no assurance that it can do so on a continuing basis.
Portfolio Quality and Diversification. The Fund will limit its
portfolio investments to securities that the Trust's Board of
Trustees determines present minimal credit risks and which are
"First Tier Eligible Securities" at the time of acquisition by the
Fund. The term First Tier Eligible Securities includes securities
rated by the "Requisite NRSROs" in the highest short-term rating
categories, securities of issuers that have received such ratings
with respect to other short-term debt securities and comparable
unrated securities. "Requisite NRSROs" means (a) any two
nationally recognized statistical rating organizations ("NRSROs")
that have issued a rating with respect to a security or class of
debt obligations of an issuer, or (b) one NRSRO, if only one NRSRO
has issued such a rating at the time that the Fund acquires the
security. Currently, there are six NRSROs: Standard & Poor's
Corporation, Moody's Investors Service, Inc., Fitch Investors
Services, Inc., Duff and Phelps, Inc., IBCA Limited and its
affiliate, IBCA, Inc. and Thomson Bankwatch. A discussion of the
ratings categories of the NRSROs is contained in the Appendix to
the Statement of Additional Information. The Fund generally may
not invest more than 5% of its total assets in the securities of
any one issuer, except for U.S. government securities.
The following descriptions illustrate the kinds of
instruments in which the Fund invests:
The Fund may purchase U.S. bank and bank holding company
obligations such as commercial paper, notes, certificates of
deposit, bankers' acceptances and time deposits, including
instruments issued or supported by the credit of domestic banks or
savings institutions having total assets at the time of purchase
in excess of $1 billion. The Fund may also make interest- bearing
savings deposits in commercial and savings banks in amounts not in
excess of 5% of the Fund's assets.
The Fund may invest in commercial paper and other short-term
obligations. The Fund may not invest in commercial paper or
obligations of foreign issuers.
The Fund may purchase variable or floating rate notes, which
are unsecured instruments that provide for adjustments in the
interest rate on certain reset dates or whenever a specified
interest rate index changes, respectively. Such notes may not be
actively traded in a secondary market, but, in some cases, the
Fund may be able to resell such notes in the dealer market.
Variable and floating notes typically are rated by credit rating
agencies, and their issuers must satisfy the same quality criteria
as set forth above. The Fund invests in variable or floating rate
notes only when the Investment Adviser deems the investment to
involve minimal credit risk.
The Fund may purchase instruments 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 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.
Default by 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 also 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 purchase obligations issued or guaranteed by
the U.S. government or its agencies and instrumentalities.
Obligations of certain agencies and instrumentalities of the U.S.
government are backed by the full faith and credit of the United
States. Others are backed by the right of the issuer to borrow
from the U.S. Treasury or are backed only by the credit of the
agency or instrumentality issuing the obligation.
In addition, the Fund may, when deemed appropriate in light
of the Fund's investment objective, invest in high quality,
short-term obligations issued by the state and local governmental
issuers which carry yields that are competitive with those of
other types of money market instruments of comparable quality.
The Fund will not knowingly invest more than 10% of the
value of its total 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.
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 are not fundamental and 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 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 pledge 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 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 obligations and obligations of domestic banks.
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 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 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. and will be
executed at 4:00 P.M. if payment has been received by 4:00 P.M.
Orders received after 3:00 P.M., 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 on
fiduciary funds that are invested 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
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 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 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, 3:00 P.M. and 4:00 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 Fund
shares 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
values of the shares 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
shares held 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 executed and continue to accrue
dividends through, and including, the day before the redemption
order for the shares is executed. 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 shareholders 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 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 dividends and short-term capital gains, if any) 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 Fund 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.
Investors will be advised at least annually as to the
federal income tax status of distributions made to them 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 the 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 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. 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 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 shareholder 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. 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 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.
May 31, 1994
YIELDS From time to time the "yields" and "effective yields" for
Class A, Class B and 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
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 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, 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 or
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: 001; Class B shares code: 101; Class C shares code: 201) 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 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 upon 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, Fund 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
shareholders pertaining to the Fund's arrangements with Service
Organizations with respect to the relevant Class. Further,
shareholders of the Fund and of the Trust's other 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 "Additional Description Concerning
Fund Shares" 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.
TABLE OF CONTENTS
Page
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
4
Purchase and Redemption of Shares
6
Dividends
8
Taxes
9
Management of the Fund
9
Yields
1
2
Description of Shares
1
2
Prime 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.
PROSPECTUS
Prime Value 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
Prime Value Money Market Fund portfolio (the "Fund"), one of a
family of portfolios of the Trust.
The Fund's investment objective is to provide current income
and stability of principal. The Fund invests in a portfolio
consisting of a broad range of short-term instruments, including
U.S. government and U.S. bank and commercial obligations and
repurchase agreements relating to such obligations. Under normal
market conditions, at least 25% of the Fund's total assets will be
invested in obligations of issuers in the banking industry and
repurchase agreements relating to such obligations.
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: 001; Class B
shares code: 101; Class C shares code: 201; 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 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
0
.
1
0
%
0
.
1
0
%
0
.
1
0
%
Rule 12b-1 fees
n
o
n
e
.
2
5
%
.
3
5
%
Other Expenses including
Administration Fees (net of applicable fee
waivers)
0
.
0
6
%
0
.
0
6
%
0
.
0
6
%
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 shareholders 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 .24%, .49% and .59%,
respectively, of the Fund's 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 are derived from the Fund's Financial Statement
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
P
e
r
i
o
d
E
n
d
e
d
1
/
3
1
/
9
4
*
C
l
a
s
s
B
P
e
r
i
o
d
E
n
d
e
d
1
/
3
1
/
9
4
*
C
l
a
s
s
D
Net asset value,
beginning of period
$
1
.
0
0
$
1
.
0
0
$
1
.
0
0
Net investment
income(1)
0
.
0
3
1
5
0
.
0
1
2
5
0
.
0
0
2
1
Dividends from net
investment income
(
0
.
0
3
1
5
)
(
0
.
0
1
2
5
)
(
0
.
0
0
2
1
)
Net asset value,
end of period
$
1
.
0
0
$
1
.
0
0
$
1
.
0
0
Total return(2)
3
.
2
1
%
1
.
2
6
%
0
.
2
6
%
Ratios to average
net assets/supplemental
data:
Net assets, end of
period (in 000's)
$
3
,
9
8
1
,
1
8
4
$
1
7
,
5
0
4
$
1
0
Ratio of net
investment income to
average net assets(3)
3
.
2
3
%
2
.
9
8
%
3
.
1
0
%
Ratio of operating
expenses to average net
assets(3)(4)
0
.
0
7
%
0
.
3
2
%
0
.
2
0
%
___________
* The Prime Value Money Market Fund Class A, Class B and
Class D Shares commenced operations on February 8, 1993,
September 1, 1993 and January 6, 1994, respectively. As of
March 14, 1994 the Fund no longer offered Class D shares.
(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 for Class A, Class B and Class D were $0.0287,
$0.0113 and $0.0010, respectively.
(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 for Class A, Class B and Class D were 0.36%, 0.61%
and 0.49%, respectively.
INVESTMENT OBJECTIVE AND POLICIES
In General
The Fund's investment objective is to provide current income
and stability of principal. In pursuing its investment objective,
the Fund, which operates as a diversified investment portfolio,
invests in a broad range of short-term instruments, including U.S.
government and U.S. and foreign bank and commercial obligations
and repurchase agreements relating to such obligations.
Price and Portfolio Maturity. The Fund invests only in
securities that are purchased with and payable in U.S. dollars and
that have (or, pursuant to regulations adopted by the Securities
and Exchange Commission, will be deemed to have) remaining
maturities of thirteen 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. The Fund follows these policies to
maintain a constant net asset value of $1.00 per share, although
there is no assurance that it can do so on a continuing basis.
Portfolio Quality and Diversification. The Fund will limit its
portfolio investments to securities that the Trust's Board of
Trustees determines present minimal credit risks and which are
"Eligible Securities" at the time of acquisition by the Fund. The
term Eligible Securities includes securities rated by the
"Requisite NRSROs" in one of the two highest short-term rating
categories, securities of issuers that have received such ratings
with respect to other short-term debt securities and comparable
unrated securities. "Requisite NRSROs" means (a) any two
nationally recognized statistical rating organizations ("NRSROs")
that have issued a rating with respect to a security or class of
debt obligations of an issuer, or (b) one NRSRO, if only one NRSRO
has issued such a rating at the time that the Fund acquires the
security. Currently, there are six NRSROs: Standard & Poor's
Corporation, Moody's Investors Service, Inc., Fitch Investors
Services, Inc., Duff and Phelps, Inc., IBCA Limited and its
affiliate, IBCA, Inc. and Thomson Bankwatch. A discussion of the
ratings categories of the NRSROs is contained in the Appendix to
the Statement of Additional Information.
The Fund generally may not invest more than 5% of it total
assets in the securities of any one issuer, except for U.S.
government securities. In addition, the Fund may not invest more
than 5% of its total assets in Eligible Securities that have not
received the highest rating from the Requisite NRSROs and
comparable unrated securities ("Second Tier Securities") and may
not invest more than 1% of its total asset in the Second Tier
Securities of any one issuer. The Fund may invest more than 5%
(but no more than 25%) of the then-current value of the Fund's
total assets in the securities of a single issuer for a period of
up to three business days, provided that (a) the securities either
are rated by the Requisite NRSROs in the highest short-term rating
category or are securities of issuers that have received such
rating with respect to other short-term debt securities or are
comparable unrated securities, and (b) the Fund does not make more
than one such investment at any one time.
The following descriptions illustrate the kinds of
instruments in which the Fund invests:
The Fund may purchase obligations of issuers in the banking
industry, such as commercial paper, notes, certificates of
deposit, bankers' acceptances and time deposits and U.S.
dollar-denominated instruments issued or supported by the credit
of U.S. or foreign banks or savings institutions having total
assets at the time of purchase in excess of $1 billion. The Fund
may also make interest-bearing savings deposits in commercial and
savings banks in amounts not in excess of 5% of its assets.
The Fund may invest in commercial paper and other short-term
obligations. The Fund may invest without limit in commercial paper
and obligations of foreign issuers.
The Fund may invest substantially in securities of foreign
issuers, including obligations of foreign banks or foreign
branches of U.S. banks and debt securities of foreign issuers,
where the Investment Adviser deem the instrument to present
minimal credit risks. Investments in foreign banks or foreign
issuers present certain risks, including those resulting from
fluctuations in currency exchange rates, revaluation of
currencies, future political and economic developments and the
possible imposition of currency exchange blockages or other
foreign governmental laws or restrictions and reduced availability
of public information. Foreign issuers are not generally subject
to uniform accounting, auditing and financial reporting standards
or to other regulatory practices and requirements applicable to
domestic issuers.
The Fund may purchase variable or floating rate notes, which
are unsecured instruments that provide for adjustments in the
interest rate on certain reset dates or whenever a specified
interest rate index changes, respectively. Such notes may not be
actively traded in a secondary market but, in some cases, the Fund
may be able to resell such notes in the dealer market. Variable
and floating rate notes typically are rated by credit rating
agencies, and their issuers must satisfy the same quality criteria
as set forth above. The Fund invests in variable or floating rate
notes only when the Investment Adviser deems the investment to
involve minimal credit risk.
The Fund may purchase instruments 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 seller under a repurchase
agreement will be required to maintain the value of the securities
subject to the agreement at an amount not less than the repurchase
price. Default by 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 also 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 purchase obligations issued or guaranteed by
the U.S. government or its agencies and instrumentalities.
Obligations of certain agencies and instrumentalities of the U.S.
government are backed by the full faith and credit of the United
States. Others are backed by the right of the issuer to borrow
from the U.S. Treasury or are backed only by the credit of the
agency or instrumentality issuing the obligation.
In addition, the Fund may, when deemed appropriate in light
of the Fund's investment objective, invest in high quality,
short-term obligations issued by state and local governmental
issuers which carry yields that are competitive with those of
other types of money market instruments of comparable quality.
The Fund will not knowingly invest more than 10% of the
value of its total 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.
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 are not fundamental and 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 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 pledge 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 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, at the time
of purchase, less than 25% of the value of its total assets to be
invested in obligations of issuers in the banking industry or in
obligations, such as repurchase agreements, secured by such bank
obligations (unless the Fund is in a temporary defensive position)
or which would cause, at the time of purchase, 75% or more of the
value of its total assets to be invested in the obligations of
issuers in any other industry, provided that there is no
limitation with respect to investments in U.S. government
obligations.
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 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 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. and will be
executed at 4:00 P.M., if payment has been received by 4:00 P.M.
Orders received after 3:00 P.M., 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
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 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 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, 3:00 P.M. and 4:00 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 Fund
shares 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
values of the shares 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
shares held 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, 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 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 dividends and short-term capital gains, if any) 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 Fund 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.
Investors will be advised at least annually as to the
federal income tax status of distributions made to them each year.
The foregoing discussion is only a brief summary of some of
the important federal tax considerations generally affecting the
Fund and its shareholders. 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 $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 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. 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 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 shareholder 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. 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 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" and "effective yields" for
Class A, Class B and Class C shares may be quoted in
advertisements or in reports to shareholders. 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
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 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, 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 or
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; and, such fees, if charged, would reduce the
actual return received by customers on their investments. 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: 001; Class B shares
code: 101; Class C shares code: 201) 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 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, 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 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 upon 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, Fund 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
shareholders pertaining to the Fund's arrangements with Service
Organizations with respect to the relevant Class. Further,
shareholders of the Fund and of the Trust's other 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 "Additional Description Concerning
Fund Shares" 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.
May 31, 1994
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
4
Purchase and Redemption of Shares
6
Dividends
8
Taxes
9
Management of the Fund
1
0
Yields
1
2
Description of Shares and Miscellaneous
1
2
Prime Value 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.
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
PROSPECTUS
Treasury Instruments 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
Treasury Instruments Money Market Fund portfolio (the "Fund"), one
of a family of money market portfolios of the Trust.
The Fund's investment objective 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 direct
obligations of the U.S. Treasury and repurchase agreements
relating to direct Treasury obligations.
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."
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.
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 800-851-3134; for yield
information call 800-238-2560 (Class A shares code: 005; Class B
shares code: 105; Class C shares code: 205); for other information
call 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 , 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 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.
___________
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 , 1994
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 Class B and C shares bear fees payable by
the Fund (at the rate of .25% and .35% per annum, respectively) to
institutional investors 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
9
%
*
0
.
0
9
%
*
0
.
0
9
%
*
Rule 12b-1 fees
n
o
n
e
.
2
5
%
.
3
5
%
Other Expenses_including
Administration Fees
(net of applicable fee waivers)
0
.
0
6
%
0
.
0
6
%
*
0
.
0
6
%
*
Total Fund Operating
Expenses (after fee waivers)*
.
1
6
%
.
4
1
%
.
5
1
%
___________
* The Expense Summary above has been restated to reflect the
Fund's Investment Adviser's and Administrator's Voluntary
reimbursement arrangements in effect for the Fund's fiscal year
ending January 31, 1995. With respect to Class A, Class B and
Class C share for the month of January, 1995, the Total Fund
Operating Expenses including reimbursement of expenses are
anticipated to be .18%, .43%, and .53%, respectively.
In order to maintain a competitive expense ratio during
1994, the Funds' Investment Adviser and Administrator have
voluntarily agreed to reimburse the Fund 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 the years 1995-1997, the Investment Adviser and Administrator
intend to continue voluntarily to reimburse the Fund to the extent
necessary to maintain an annualized expense ratio at a level no
greater than .18% of average daily net assets. The voluntary
reimbursement arrangements described above will not be changed
unless shareholders 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 reimbursement of expenses, the Total Fund Operating
Expenses of Class A, Class B and Class C would be .25%, .50% and
.60%, respectively, of the Fund's 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
Treasury Instruments Money Market Fund
P
e
r
i
o
d
E
n
d
e
d
1
/
3
1
/
9
4
*
P
e
r
i
o
d
E
n
d
e
d
1
/
3
1
/
9
4
*
C
l
a
s
s
A
C
l
a
s
s
B
Net asset value, beginning of period
$
1
.
0
0
$
1
.
0
0
Net investment income(1)
0
.
0
2
9
2
0
.
0
1
0
0
Dividends from net investment income
(
0
.
0
2
9
2
)
(
0
.
0
1
0
0
)
Net asset value, end of period
$
1
.
0
0
$
1
.
0
0
Total return(2)
2
.
9
4
%
1
.
0
0
%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)
$
3
,
0
0
0
_
#
Ratio of net investment income to
average net assets(3)
2
.
9
9
%
2
.
7
4
%
Ratio of operating expenses to
average net assets(3)(4)
0
.
0
0
%
0
.
2
5
%
___________
* The Treasury Instruments Money Market Fund Class A and
Class B Shares commenced operations on February 8, 1993, and
April 21, 1993, respectively.
(1) Net investment loss before waiver of fees by the Investment
Adviser, Administrator, Custodian and Transfer Agent and expenses
reimbursed by the Investment Adviser and Administrator for Class A
and Class B were $(0.0003) and $(0.0010), respectively.
(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 for Class A and Class B were 3.02% and 3.27%,
respectively.
# Total net assets for Class B was $100 at January 31, 1994.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is current income with
liquidity and security of principal. The Fund, which operates as a
diversified investment company, invests solely in direct
obligations of the U.S. Treasury, such as Treasury bills and notes
and repurchase agreements relating to direct Treasury obligations.
The Fund invests only in securities which are purchased with and
payable in U.S. dollars (i.e., U.S. dollar denominated securities)
and which have (or, 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 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. Certain government securities
held by the Fund may have remaining maturities exceeding thirteen
months if such securities provide for adjustments in their
interest rates not less frequently than every thirteen months.
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 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 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 policies described above
are not fundamental and may be changed by the Trust's Board of
Trustees without a vote of shareholders. If there is a change in
the investment objective, shareholders should consider whether the
Fund remains an appropriate investment in light of their then
current financial position and needs. The Fund's borrowing
limitation summarized below may not be changed without the
affirmative vote of the holders of 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 borrow money except from banks for
temporary purposes and then in an amount not exceeding 10% 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 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.
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 800-851-3134. Orders received before 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. and will be
executed at 4:00 P.M. if payment has been received by 4:00 P.M.
Orders received after 3:00 P.M. 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 on
fiduciary funds that are invested 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, should
consult their legal advisors 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 at
1-800-581-3134. Payment for redeemed shares for which a redemption
order is received by Lehman Brothers before 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 a shareholder
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 and
sub-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 sixty days'
prior written notice to the shareholder. Any such redemption shall
be effected at the net asset value per share next determined after
the redemption order is entered. If during the sixty-day period
the shareholder 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, 3:00 P.M. and 4:00 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
customary national business holidays of New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day (Washington's Birthday),
Good Friday, Memorial Day (observed), Independence Day (observed),
Labor Day, Columbus Day, 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
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.
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 Distributors, 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 Three World Financial Center,
New York, New York 10285, is the Distributor of the Fund's shares.
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 Lehman Brothers Holdings Inc. ("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 in excess of
$15 billion.
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 performance. For its services LBGAM will be paid a monthly
fee by 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
an advisory fee from the Fund in the amount of . % of average
daily net assets.
Administrator and Transfer Agent_Shareholder Services Group
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
Institutional investors, such as banks, savings and loan
associations and other financial 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 Funds_Service Organizations,"
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;
and 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. 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 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 shareholders, 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 shareholder 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. 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 reimburse the Fund
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 shareholders are 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.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and
distributions arising only from the net investment income and
capital gains, if any, earned on its investments held by the Fund.
The Fund's net investment income is declared daily as a dividend
to shares held 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 a shareholder'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 share of the Fund 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 shareholders may elect to have their dividends
reinvested in additional full and fractional shares of the same
class 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 TSSG with respect to dividends
paid.
TSSG, as transfer agent, will send each Fund shareholder or
its authorized representative an annual statement designating the
amount, if any, of any dividends and distributions made during
each year and their federal tax qualification.
TAXES
The Fund qualified in its last taxable year and intends to
qualify each year 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 shareholders.
Qualification as a regulated investment company under the
Code for a taxable year requires, among other things, that the
Fund distribute to its shareholders 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 shareholders 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 expect to distribute any "capital gain dividends" as
described in the Code.
Dividends declared in October, November or December of any
year payable to shareholders of record on a specified date in such
months will be deemed to have been received by the shareholders
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.
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 is only a brief summary of some of the
important federal tax considerations generally affecting the Fund
and its shareholders. As indicated above, IRAs receive special tax
treatment. No attempt is made to present a detailed explanation of
the federal, state or local income tax treatment of the Fund or
its shareholders and this discussion is not intended as a
substitute for careful tax planning. Accordingly, potential
investors in the Fund should consult their tax advisors with
specific reference to their own tax situation.
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 offers twelve 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 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 (Class A and Class B) and Short Duration U.S. Government Fund
(Class A and Class B). 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.
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 800-368-5556.
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 upon 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 nonassessable.
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
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."
YIELDS
From time to time the "yields" and "effective yields" for
Class A, Class B and Class C 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 period or one-year 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 stock or 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, 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 or
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 800-238-2560 (Class A shares code:
005; Class B shares code: 105; Class C shares code: 205) to obtain
current yield information.
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 the
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
Investment Objective and Policies
3
Purchase and Redemption of Shares
5
Management of the Fund
7
Dividends
9
Taxes
9
Description of Shares and
Miscellaneous
1
0
Yields
1
1
Treasury Instruments
Money Market Fund
__________
PROSPECTUS
May , 1994
__________
LEHMAN BROTHERS
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
