<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
CADRE INSTITUTIONAL INVESTORS TRUST
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(Name of Registrant as Specified In Its Charter)
WILLIAM M. SULLIVAN, ESQ. SECRETARY
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transactions applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identity the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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CADRE INSTITUTIONAL INVESTORS TRUST
LIQUID ASSET FUND
905 Marconi Avenue
Ronkonkoma, New York 11779-7255
October [ ], 1998
Dear Shareholder:
On behalf of the Board of Trustees of Cadre Institutional Investors Trust (the
"Trust"), it is my pleasure to invite you to attend a Special Meeting of
Shareholders of Liquid Asset Fund, a series of the Trust. The meeting will be
held on October 30, 1998 at 9:00 a.m. at the offices of Ambac Financial Group,
Inc., One State Street Plaza, 17th Floor, New York, New York 10004.
The business to be conducted at the meeting is outlined in the attached Notice
of Special Meeting and Proxy Statement.
It is important that your shares be represented at the meeting. Please complete
and return the enclosed proxy card in the postage-paid envelope provided whether
or not you expect to attend the meeting. If you attend the meeting and wish to
vote in person, you make revoke your proxy at that time.
We look forward to seeing you on October 30th.
William T. Sullivan, Jr.
Chairman
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Cadre Institutional Investors Trust
Liquid Asset Fund
905 Marconi Avenue,
Ronkonkoma, New York 11779-7255
1-800-221-4524
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on October 30, 1998
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To the Shareholders of Liquid Asset Fund:
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Liquid Asset Fund (the "Fund"), a series of Cadre Institutional
Investors Trust (the "Trust") will be held at the offices of Ambac Financial
Group, Inc., One State Street Plaza, 17th Floor, New York, New York 10004, at
9:00 a.m. Eastern time, for the following purposes:
1. To amend the diversification policy and concentration policy of the
Fund;
2. To approve a new investment advisory agreement between the Trust and
Cadre Financial Services, Inc.;
3. To elect four (4) members of the Board of Trustees of the Trust to serve
until their successors are elected and qualified; and
4. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
These items are discussed in greater detail in the attached Proxy Statement.
The close of business on September 22, 1998 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
Meeting and any adjournments thereof.
By order of the Board of Trustees
William M. Sullivan, Esq.
Secretary
October [ ], 1998
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING ARE URGED TO MARK, SIGN, DATE AND RETURN A PROXY
CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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Cadre Institutional Investors Trust
905 Marconi Avenue
Ronkonkoma, New York 11779-7255
1-800-221-4524
SPECIAL MEETING OF SHAREHOLDERS
OF LIQUID ASSET FUND
To Be Held on October 30, 1998
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Trustees (the "Board") of Cadre Institutional
Investors Trust (the "Trust"). The Board is requesting your proxy for use at a
Special Meeting of Shareholders of Liquid Asset Fund (the "Fund"), a series of
the Trust. The meeting will be held on October 30, 1998, at 9:00 a.m. Eastern
time at the offices of Ambac Financial Group, Inc., One State Street Plaza, 17th
Floor, New York, New York 10004. The purposes of the meeting are set forth in
the accompanying Notice of Special Meeting of Shareholders. Your proxy may also
be voted at any adjournment of the meeting.
In addition to the soliciting proxies by mail, officers of the Trust, and
officers and employees of the Trust's investment adviser and administrator,
Cadre Financial Services, Inc.(the "Investment Adviser"), or other
representatives of the Trust, may solicit proxies by telephone, telegraph or in
person, without special compensation. The costs of solicitation and the expenses
of preparing this Proxy Statement and its enclosures are being paid by the
Trust. The Trust's most recent annual report to shareholders of the Fund and
most recent semi-annual report to shareholders are available upon request,
without charge, by writing the Trust at 905 Marconi Avenue, Ronkonkoma, New York
11779-7255, or by calling 1-800-221-4524.
If you properly execute and return the enclosed proxy card in time to be
voted at the meeting, your shares of the Fund will be voted in accordance with
the instructions marked on the proxy card. Unless instructions to the contrary
are marked, proxies will be voted: (a) FOR the proposal to amend the
diversification policy and concentration policy of the Fund; (b) FOR approval of
the proposed investment advisory agreement between the Trust and the Investment
Adviser, and (c) FOR the election of the four nominees to serve as Trustees. You
have the right to revoke your proxy at any time prior to its exercise either by
attending the meeting and voting in person or by sending a letter of revocation
or a later dated proxy to the Trust at the above address prior to the date of
the meeting.
If a quorum is not present at the meeting, or if a quorum is present but
sufficient votes to approve any proposal are not received, the persons named as
proxies may propose one or more adjournments of the meeting to permit further
solicitation of proxies. A shareholder vote may be taken on one or more
proposals prior to such adjournment if sufficient votes have been received. Any
adjournment will require the affirmative vote of a majority of those shares
present at the meeting in person or by proxy. If any adjournments are proposed
by the proxies, the persons named as proxies will
<PAGE> 5
vote those proxies which they are entitled to vote FOR either Proposal 1 or
Proposal 2 in favor of adjournment and will vote those proxies required to be
voted AGAINST Proposals 1 and 2 against adjournment. Under the By-Laws of the
Trust, a quorum is the presence in person or by proxy of the holders of 40% or
more of the outstanding shares of the Fund entitled to vote at the meeting.
The close of business on September 22, 1998, has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting and any adjournment.
Each share (and fractional share) is entitled to one vote (or fraction
thereof). On the record date there were 104,373,730 shares of the Trust
outstanding, representing interests in the Fund. The Fund is presently the sole
portfolio of the Trust with shares outstanding.
The Investment Adviser also serves as the Fund's administrator. Cadre
Securities, Inc. (the "Distributor"), an affiliate of the Investment Adviser,
serves as the distributor of shares of the Fund. The principal executive offices
of the Investment Adviser, the Distributor and the Trust are each located at 905
Marconi Avenue, Ronkonkoma, New York, 11779.
This Proxy Statement is first being mailed to shareholders on or about
October __, 1998.
Information regarding shareholders owning of record or known by the Trust
to own beneficially 5% or more of the outstanding shares of the Fund as of the
record date is contained in Exhibit A.
THE PROPOSED MASTER/FEEDER FUND STRUCTURE
Subject to the approval by shareholders of Proposals 1 and 2, the Board has
approved the implementation of a master/feeder fund structure for the Fund.
Under this structure, the Fund would pursue its investment objective by
investing all of its investable assets in shares of the U.S. Government Money
Market Portfolio (the "Portfolio"), a newly formed series of the Trust. The
Portfolio will invest in money market instruments in accordance with investment
policies and restrictions that are in all material respects the same as those of
the Fund. The Board believes that the master/feeder fund structure will be
advantageous to the Fund and its shareholders.
Background
At its meeting on June 17, 1998, the Board approved an amendment to the
investment policy of the Fund under which the Fund would pursue its investment
objective by investing in shares of the Portfolio. The Board also approved
certain amendments to the investment restrictions of the Fund and a new
investment advisory agreement with the Investment Adviser, in order to permit
implementation of this new policy. Two of the amendments to the Fund's
investment restrictions and the new investment advisory agreement cannot become
effective without shareholder approval.
Under the new investment policy, the Fund would no longer invest directly
in money market instruments. Instead, it would invest all of its investable
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assets in shares of the Portfolio. The Portfolio is a series of the Trust that
has substantially the same investment objective, policies and restrictions as
the Fund. Subject to shareholder approval of the new investment advisory
agreement, the Investment Adviser will manage the investment portfolio of the
Portfolio and invest its assets in money market instruments of the type
purchased by the Fund. This investment arrangement is known as a "master/feeder
fund structure."
In a master/feeder fund structure, one or more funds ("feeder funds")
pursue their investment goals by investing in another fund (the "master fund").
This permits the feeder funds to pool their assets for investment and offers
potential efficiencies and cost economies. For example, when the master fund
purchases or sells a portfolio security, total transaction costs may be lower
than would be the case if two or more feeder funds each effected a transaction
in the same security. Moreover, the costs of the transaction will effectively be
shared by each of the feeder funds. Other economies exist to the extent that all
or a portion of certain fixed (or relatively fixed) costs normally borne by the
feeder funds are incurred by the master fund and thus shared by the feeder
funds. Although the master/feeder fund structure also creates some duplication
of expenses (because certain costs, such as audit expenses, are incurred by both
the master fund and the feeder funds), the structure can generally permit lower
per share costs (and thus a higher investment return to investors) to be
achieved if the assets of the master fund are substantially larger than the
assets of the individual feeder funds.
If the master/feeder fund structure is implemented, the Fund will pursue
its investment objective by investing in the Portfolio. The Investment Adviser
will manage the assets of the Portfolio pursuant to the terms of an investment
advisory agreement with the Trust (see Proposal 2) and the presently effective
investment advisory agreement under which the Investment Adviser manages the
assets of the Fund will be terminated. The Investment Adviser will also supply
administrative and transfer agent services to the Portfolio. Shares of the
Portfolio will not be available for purchase directly by members of the general
public, and will sold only to the Fund and other series of the Trust and,
possibly, to other investment funds that determine to pursue their objectives by
investing in the Portfolio.
Under the proposed arrangements, a single fee will be payable by the
Portfolio to the Investment Adviser for investment advisory and administrative
services. This fee will be computed at the annual rate of 0.06% of the
Portfolio's daily net assets. (The Fund presently pays the Investment Adviser
fees which are computed at the rate of 0.15% of its net assets for investment
advisory services and 0.10% of its net assets for administrative services.) As
an investor in the Portfolio, the Fund will indirectly bear a pro rata portion
of the fees paid by the Portfolio. No separate fee would be payable by the
Portfolio to the Investment Adviser for transfer agent services.
The Fund will continue to pay fees to the Investment Adviser for
administrative and transfer agent services if the master/feeder fund structure
is implemented. In this regard, the Board has approved an amended Administration
Agreement and an amended Transfer Agent Agreement with the Investment Adviser to
accommodate the master/feeder fund structure, as well as the organization of new
series of the Trust. The terms of the amended Administration Agreement and the
amended Transfer Agent Agreement are the same
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in all material respects as the terms of those agreement as now in effect,
except that that the fee payable under the Administration Agreement will be
increased, as discussed below. The Board approved the higher fee in recognition
of the scope and costs of the various administrative services that the
Investment Adviser provides to the Fund and will continue to provide under the
master/feeder fund structure.
The master/feeder fund structure will be implemented only if shareholders
approve Proposals 1 and 2. If these proposals are approved, the Board intends to
convert the Fund to the new structure on or about November 1, 1998, or as soon
as practicable thereafter. The value of a shareholder's investment in the Fund
will not be affected. If either Proposal 1 or Proposal 2 is not approved, the
Fund will continue to operate in accordance with the contractual arrangements
now in effect.
Comparative Fees and Expenses
The following table compares the present fees and estimated expenses of the
Fund with the proposed fees and estimated expenses under the master/feeder fund
structure. It is designed to assist shareholders in understanding the various
direct and indirect costs and expenses (including the fees and estimated
expenses of the Portfolio) that they will bear if the proposed structure is
implemented.
The percentage set forth under "Other Expenses" in the column relating to
the present fees and expenses of the Fund is based upon the Fund's expenses for
the fiscal year ended October 31, 1997. The percentage set forth under "Other
Expenses" in the column relating to the proposed fees and estimated expenses
under the master/feeder fund structure are estimates of expenses for the coming
year. The table assumes that the combined estimated expenses of the Fund and the
Portfolio (excluding investment advisory and administration fees) will be the
same as the present expenses of the Fund (also excluding such fees) and thus,
that there will initially be no increase or decrease in such expenses under the
master/feeder fund structure.
The Investment Adviser has agreed voluntarily to waive its fees and absorb
expenses of the Fund as necessary to limit the Fund's ordinary operating
expenses to 0.45% of the Fund's average daily net assets. This voluntary
undertaking will continue if the Fund implements the master/feeder fund
structure, but may be modified or terminated at any time by the Investment
Adviser on prior notice to the Fund.
Proposed Under
Shareholder Transaction Master/Feeder Fund
Expenses Present Arrangements Structure
- ----------------------- -------------------- ------------------
Maximum Sales Load
Imposed on Purchases None None
Maximum Sales Load
Imposed on Rein-
vested Dividends None None
Deferred Sales Load None None
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Redemption Fee None None
Exchange Fee None None
Proposed Fees and
Present Fees and Estimated Expenses under
Estimated Expenses of the Master/Feeder Fund
Fund (as percentage of Structure (as percentage
average net assets of of average net assets of
the Fund) the Fund)
---------------------- ------------------------
Fund Investment Advisory 0.15% None
Fee
Portfolio Investment None 0.06%
Advisory Fee
Administration Fee* 0.10% 0.19%
Other Expenses 0.24% 0.24%
Total Fund Operating 0.49% 0.49%
Expenses
Fee Waiver and Expense (0.04%) (0.04%)
Absorption
Fees and Expenses after 0.45% 0.45%
waiver/absorption
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* The Administration Agreement as now in effect provides for a fee
payable to the Investment Adviser that is computed at the following annual
rates as a percentage of the average daily net assets of the Fund: 0.10% of
such assets on up to $250 million of such assets; 0.075% on the next $750
million of such assets; and 0.05% on such assets exceeding $1 billion. The
amendment to the Administration Agreement approved by the Board provides for a
fee computed at the following annual rates if the master/feeder fund structure
is implemented: 0.19% of such assets on up to $250 million of such assets;
0.165% on the next $750 million of such assets; and 0.14% on such assets
exceeding $1 billion.
EXAMPLE:
Under both the present fee and expense structure and under the fee and expense
structure associated with the proposed master/feeder fund structure, you would
pay the following expenses on a $1,000 investment in the Fund, assuming: (1) a
5% annual return and (2) redemption at the end
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of each time period:
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
$4.60 $14.44 $25.20 $56.69
The example is based upon on Total Fund Operating Expenses as set forth in
the table above, after giving effect to the fee waiver and absorption of
expenses by the Investment Adviser. Actual expenses and annual return may be
greater or less than the amounts shown above. The example should not be
considered representative of past or future expenses.
Potential Advantages of the Master/Feeder Fund Structure
The master/feeder fund structure will permit money market funds in addition
to the Fund, as well as certain other types of collective investment vehicles,
to invest in the Portfolio. Since investors in these other funds and investment
vehicles might not otherwise invest in the Fund due to various considerations,
there is a potential for increasing the Portfolio's asset base over that which
could be achieved by the Fund.
A larger asset base would benefit the Fund and its shareholders to the
extent that it results in economies of scale which reduce the Fund's per share
operating costs. Certain expenses of the Fund and the Portfolio are relatively
fixed and should not increase in direct proportion to an increase in the level
of the Fund's or the Portfolio's assets. Currently, the Fund bears these
expenses alone. However, after the conversion to the master/feeder fund
structure, they would be borne in whole or in part by the Portfolio and shared
pro rata by the Fund and other investors in the Portfolio. In this way, it may
be possible for the Fund to have lower per share operating expenses.
If lower operating expenses are achieved, the Fund could become a more
attractive investment option for certain investors. This could result in
additional growth of the Fund's assets, which could in turn produce further
economies in costs that would benefit all Fund shareholders. A reduction in per
share expenses could result from the spreading of fixed costs across a larger
asset base. It could also result from reductions in certain fees charged by the
Investment Adviser which would be applicable with respect to net assets
exceeding certain amounts. For example, fees paid by the Fund for administrative
services and transfer agent services are computed as a percentage of the Fund's
assets. Under the applicable fee schedules, lower percentage rates apply to Fund
assets exceeding specified dollar amounts.
Although benefits could also be realized by the direct growth of the Fund's
assets without implementing the master/feeder fund structure, the Board believes
that growth of assets can more likely be achieved through investments in the
Portfolio by entities in addition to the Fund. In this regard, the Board
reviewed the Investment Adviser's marketing plans for the Fund and the Portfolio
and its plans to organize six new series of the Trust. Three of these new series
will pursue their objectives by investing in the Portfolio. Thus, the Board
believes that there is a reasonable likelihood that the potential benefits of
the master/feeder fund structure can be achieved. There can be no assurance,
however, that an increase in assets of the Portfolio or that the potential
benefits of such an increase in assets will be realized.
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In considering the proposed master/feeder fund structure, the Board
recognized that the Investment Adviser could also realize benefits from the
arrangement. The master/feeder fund structure may enable the Investment Adviser
to increase assets under its management, which would result in increased
investment advisory and other fees being received by the Investment Adviser. It
is likely that the Investment Adviser and its affiliates would provide various
other services to new investors attracted to the Fund and other funds investing
in the Portfolio. This would also result in the receipt of increased fees and
revenues by the Investment Adviser and its affiliates. In addition, because the
Investment Adviser frequently agrees voluntarily to waive its fees and absorb
fund expenses to the extent necessary to maintain the ordinary operating
expenses of a fund at a specified annual percentage of fund assets, the need for
the Investment Adviser to waive its fees or reimburse expenses will be reduced
if the master/feeder fund structure results in lower expenses for the funds
investing in the Portfolio, including the Fund. In the case of the Fund, the
Investment Adviser has voluntarily agreed to waive fees and absorb expenses of
the Fund as necessary to limit the Fund's ordinary operating expenses to 0.45%
of the Fund's average daily net assets.
The Board believes that over time the aggregate per share expenses of the
Fund and the Portfolio should not be more than the expenses that would exist if
the Fund continued to retain the services of an investment adviser and invested
directly in securities, although there can be no assurance that any expense
savings will be realized. The Board also considered risks associated with an
investment in the Portfolio and concluded that the Portfolio's investment
policies and restrictions involve substantially the same risks as are associated
with the Fund's direct investment in securities.
In approving the steps necessary to implement a master/feeder fund
structure for the Fund, the Board has taken into account and evaluated the
possible effects that increased assets in the Portfolio may have on the expense
ratio of the Fund and has considered the expense limitation voluntarily agreed
to by the Investment Adviser. After weighing the costs involved against the
anticipated benefits of the new structure, the Board approved the various
matters necessary to implement the master/feeder fund structure for the Fund.
Additional Considerations
Future events or circumstances may possibly cause the proposed
master/feeder fund structure to cease being an attractive investment structure
for the Fund. The Fund may withdraw its assets from the Portfolio at any time,
and will do so if the Trustees believe it to be in the best interest of the
Fund's shareholders. If the Fund were to withdraw its investment in the
Portfolio, the Fund could either invest directly in securities in accordance
with its investment policies or invest in another pooled investment vehicle
having the same investment objective and substantially the same investment
policies as the Fund. In connection with the withdrawal of its investment in the
Portfolio, the Fund could receive securities and other investments from the
Portfolio instead of cash, which could cause the Fund to incur brokerage, tax
and other charges.
The Portfolio may change its investment objective and certain of its
investment policies and restrictions without approval by its investors, but
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<PAGE> 11
the Portfolio will notify the Fund (which in turn will notify its shareholders)
at least 30 days before implementing any such changes. A change in the
objective, policies or restrictions of the Portfolio may cause the Fund to
withdraw its investment in the Portfolio. Alternatively, the policies of the
Fund could be amended, if deemed appropriate by the Board, to conform to those
of the Portfolio. Certain investment restrictions of the Portfolio may not be
changed without the approval of investors in the Portfolio.
When the Fund is asked to vote on matters concerning the Portfolio, the
Fund will hold a shareholders meeting and vote its shares of the Portfolio in
the same manner as shares of the Fund are voted on the matter. However, the Fund
could be outvoted, or otherwise adversely affected, by other investors in the
Portfolio.
Shares of the Portfolio will be held by investors other than the Fund.
These investors, which may include other series of the Trust, other mutual funds
and other types of pooled investment vehicles, offer shares (or interests) to
their investors which have costs and expenses that differ from those of the
Fund. Thus, the investment returns for investors in each fund that invests in
the Portfolio may differ. These differences in returns are also present in other
fund structures.
The Portfolio and the Fund are each series of the Trust. Thus, the Board
will have the responsibility to act in the best interests of both the Portfolio
and the Fund. The Board will also have the responsibility to act in the best
interests of other series of the Trust that invest in the Portfolio. However,
the interests of the Portfolio and the Fund, or the interests of the Fund and
other series of the Trust that invest in the Portfolio, may conflict with
respect to certain matters arising in the future. In such event, there will not
be Trustees who are in a position to act solely in the best interests of the
Fund and its shareholders without regard to the interests of the Portfolio or
other series of the Trust. The Board will be cognizant of potential conflicts
between the interests of the Fund and the interests of the Portfolio and other
investors in the Portfolio, and will take such steps as may be required to help
assure that the interests of the Fund and its shareholders are properly
considered and represented.
PROPOSAL 1
PROPOSED AMENDMENTS TO THE DIVERSIFICATION POLICY AND
CONCENTRATION POLICY OF THE FUND
Shareholders are being asked to approve amendments to the diversification
policy and concentration policy of the Fund to enable implementation of the
master/feeder fund structure.
The Fund's policy on diversification governs the percentage of the Fund's
assets that may be invested in the securities of any one issuer. It is proposed
that this policy be amended to enable the Fund to invest without limit in the
Portfolio or in another investment vehicle that has the same investment
objective and substantially the same investment policies as the Fund. The Fund's
diversification policy is proposed to be amended to read as follows (portions
in brackets are being added):
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<PAGE> 12
The Fund shall not purchase a security, other than a U.S. government
security, if as a result of such purchase more than 5% of the value
of the Fund's assets would be invested in the securities of any one
issuer, or the Fund would own more than 10% of the voting
securities, or of any class of securities, of any one issuer;
[provided that the Fund may invest all of its investable assets in
another investment portfolio or fund that is registered under the
Investment Company Act of 1940 and has the same investment objective
and substantially the same investment policies as the Fund]. (For
purposes of this restriction, all outstanding indebtedness of an
issuer is deemed to be a single class.)
The Fund's policy on concentration governs the percentage of the Fund's
assets that may be invested in the securities of issuers engage in any one
industry. It is proposed that this policy be amended to enable the Fund to
invest without limit in the Portfolio or in another investment vehicle that has
the same investment objective and substantially the same investment policies as
the Fund. The Fund's concentration policy is proposed to be amended to read as
follows (portions in brackets are being added):
The Fund shall not purchase a security, other than a U.S. government
security, if as a result of such purchase 25% or more of the value
of the Fund's total assets would be invested in the securities of
issuers engaged in any one industry; [provided that the Fund may
invest all of its investable assets in another investment portfolio
or fund that is registered under the Investment Company Act of 1940
and has the same investment objective and substantially the same
investment policies as the Fund].
Required Vote
Approval by shareholders of Proposal 1 requires the affirmative vote of a
majority of the outstanding voting securities of the Fund, as defined by the
Investment Company Act of 1940 (the "1940 Act"). Such a majority (a "Majority
Shareholder Vote") means the vote of (i) 67% or more of the shares of the Fund
present at the meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy or (ii) 50% of the
outstanding shares of the Fund, whichever is less.
The Board of Trustees recommends that shareholders vote to approve the
proposed amendments to the Fund's policies on diversification and concentration.
PROPOSAL 2
APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT BETWEEN
THE TRUST AND THE INVESTMENT ADVISER
In connection with implementation of the master/feeder fund structure, it
is proposed that the Trust enter into a new investment advisory agreement with
the Investment Adviser pursuant to which the Investment Adviser will be
responsible to manage the investments of the Portfolio and to provide
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<PAGE> 13
administrative services to the Portfolio (the "Proposed Advisory Agreement"). At
the meeting, shareholders of the Fund will be asked to approve the Proposed
Advisory Agreement. A copy of the Proposed Advisory Agreement is included as
Exhibit B.
The Investment Adviser
The Investment Adviser, Cadre Financial Services, Inc., presently serves as
the investment adviser of the Fund. Under the master/feeder fund structure, the
Investment Adviser would manage the Portfolio's investments and provide
administrative services to the Portfolio, subject to the supervision of the
Board. The Investment Adviser is a wholly-owned subsidiary of Ambac Capital
Corporation which, in turn, is a wholly-owned subsidiary of Ambac Financial
Group, Inc. ("Ambac"). Through its subsidiaries, Ambac is a leading insurer of
municipal and structured finance obligations and a provider of investment
contracts, and investment advisory and administration services to states,
municipalities and municipal authorities. Ambac is a publicly held company whose
shares are traded on the New York Stock Exchange. Its principal office and the
office of Ambac Capital Corporation is located at One State Street Plaza, New
York, New York 10004.
The name and principal occupation of the principal executive officer and
the directors of the Investment Adviser are as follows:
Position Held with Principal
Name the Investment Adviser Occupation
----- ---------------------- ------------
William T. Sullivan, Jr. Chairman of the Board and Chief Executive
Chief Executive Officer Officer of Cadre
Financial Services,
Inc. and Cadre
Securities, Inc.
David L. Boyle Director Vice Chairman
One State Street Plaza Ambac Financial
New York, New York 10004 Group, Inc.
Frank J. Bivona Director Chief Financial
One State Street Plaza Officer and
New York, New York 10004 Treasurer, Ambac
Financial Group, Inc.
Francis X. Sullivan Director, President Chief Operating
and Chief Operating Officer of Cadre
Officer Financial Services,
Inc. and Cadre
Securities, Inc.
Michael J. Kelly Director Managing Director of
One State Street Plaza Ambac Financial
New York, New York 10004 Services Swap and
Municipal Investment
Contract subsidiaries
The business address of Messrs. W.T. Sullivan, Boyle, Bivona, F.X.
Sullivan and Kelly is 905 Marconi Avenue, Ronkonkoma, New York 11779.
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<PAGE> 14
The following Trustee and officers of the Trust hold positions with the
Investment Adviser:
Position Held with Position Held with Cadre
Name the Trust Financial Services, Inc.
------- -------------------- --------------------------
William T. Sullivan, Jr. Trustee, Chairman, CEO Chairman and Chief
and President Executive Officer
Martin Flanigan Treasurer Vice President and
Controller
William M. Sullivan, Esq. Secretary General Counsel
Linda Cassesse Assistant Secretary Registration Manager
Mr. Roderick O'Neil, another Trustee of the Trust who does not hold any
position with the Investment Adviser, may also be deemed to have a material
indirect interest in Ambac and such other companies because of his ownership of
Ambac common stock.
In addition to serving as the investment adviser of the Fund, the
Investment Adviser provides investment advisory services to two other funds,
which like the Fund are money market funds that are series of registered
investment companies. Information concerning these funds and their investment
advisory fees is contained in Exhibit C.
The Present Investment Advisory Agreement
The Investment Adviser presently provides investment advisory services to
the Fund pursuant to the terms of an Investment Advisory Agreement dated
November 1, 1995 (the "Present Advisory Agreement). Under the Present Advisory
Agreement, the Investment Adviser is responsible for managing the investment
operations of the Fund in accordance with the Fund's investment objective and
policies, subject to overall supervision by the Board. The Investment Adviser
formulates a continuing investment program for the Fund and makes all decisions
regarding securities to be purchased and sold by the Fund. In addition, the
Investment Adviser is responsible for providing certain administrative services
to the Trust to the extent that those services are not provided by other
organizations, and for furnishing, at its own expense such office space,
facilities, equipment, clerical help and other personnel and services as may
reasonably be necessary to render the services under the Present Advisory
Agreement. The Investment Adviser provides the services of its personnel to
serve as officers and Trustees of the Trust, and is also required to pay the
salaries of officers of the Trust and any fees and expenses of Trustees who are
also officers, directors or employees of the Investment Adviser or are officers
or employees of any company affiliated with the Investment Adviser. Pursuant to
the Present Advisory Agreement, the Investment Adviser is entitled to receive
from the Fund a monthly fee computed daily at the annual rate of 0.15% of the
Fund's net assets.
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<PAGE> 15
The Present Advisory Agreement provides that, in the absence of willful
misfeasance, bad faith, negligence or reckless disregard of its obligations
under the agreement, the Investment Adviser is not liable to the Trust or any of
its shareholders for any act or omission by the Investment Adviser or for any
losses sustained by the Trust or its shareholders.
The Board of Trustees, including a majority of the then Trustees who were
not "interested persons" (as defined by the 1940 Act) of the Investment Adviser
or the Trust (the "Independent Trustees"), approved the Present Advisory
Agreement for an initial term expiring September 30, 1997, at a meeting held in
person on October 9, 1995. The agreement was also approved on that date by the
Investment Adviser, as the then sole shareholder of the Trust. The Present
Advisory Agreement provides that it may be continued in effect from year to year
after its initial term upon the annual approval of the Trust's shareholders or
the Board, and in each case, the approval of a majority of the Independent
Trustees by vote cast in person at a meeting called for the purpose of voting on
such continuance. The Trustees, including the Independent Trustees, approved the
annual continuance of the Present Advisory Agreement on September 18, 1997.
The Present Advisory Agreement provides that it may be terminated at any
time, without penalty, on sixty days' written notice by the Board of Trustees of
the Trust, by vote of the holders of a majority (as defined by the 1940 Act) of
the outstanding shares of the Fund, or by the Investment Adviser. In addition,
the agreement provides for its automatic termination in the event of its
assignment (as defined by the 1940 Act and the rules thereunder).
For the fiscal year ended October 31, 1997, fees payable to the Investment
Adviser pursuant to the Present Advisory Agreement were $157,391. The Investment
Adviser has served as the administrator and transfer agent of the Fund since
August 1, 1997. From such date through October 31, 1997, fees payable by the
Fund to the Investment Adviser for administrative services and transfer agent
services were $36,303 and $18,152, respectively. Portions of these fees payable
to the Investment Adviser were waived pursuant the Investment Adviser's
voluntary agreement to limit the total ordinary operating expenses of the Fund.
The Investment Adviser will continue to serve as the Fund's administrator and
transfer agent if the Proposed Advisory Agreement is approved and implemented.
Terms of the Proposed Advisory Agreement
Under the master/feeder fund structure, the Fund will pursue its investment
objective by investing in the Portfolio. For this reason it is proposed that the
Trust enter into the Proposed Advisory Agreement pursuant to which the
Investment Adviser will be responsible to manage the investments of the
Portfolio and to provide certain other services. If this agreement is approved
by shareholders and the new structure is implemented, the Present Advisory
Agreement will be terminated.
Under the Proposed Advisory Agreement, and subject to overall supervision
by the Board of Trustees of the Trust, the Investment Adviser will manage the
investment of the assets of the Portfolio, and place orders for the purchase and
sale of investments for the Portfolio. The Investment Adviser will also provide
or furnish, at its own expense, such office space, facilities,
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<PAGE> 16
equipment, clerical help, and other personnel and services as may reasonably be
necessary to render the services under the Proposed Advisory Agreement. In
addition, the Investment Adviser will provide all necessary administrative
services to the Portfolio, and will pay the salaries of officers of the Trust
and any fees and expenses of Trustees of the Trust who are also officers,
directors or employees of the Investment Adviser, or who are officers or
employees of any company affiliated with the Investment Adviser, and bear the
cost of telephone service, heat, light, power and other utilities associated
with the services it provides.
The Proposed Advisory Agreement provides for the payment by the Portfolio
of a monthly fee to the Investment Adviser. This fee is calculated daily and
computed at the annual rate of 0.06% of the net assets of the Portfolio. As an
investor in the Portfolio, the Fund and its shareholders will indirectly bear
this fee. The Proposed Advisory Agreement has an initial term expiring August
31, 2000.
If the Proposed Advisory Agreement had been in effect during the fiscal
year ended October 31, 1997, and if the Portfolio had the same net assets as the
Fund throughout such period, the fees payable by the Portfolio to the Adviser
under the agreement would have been $62,158, which would have been $94,436 less
than the fees payable by the Fund under the Present Agreement during the same
period. This is equivalent to a 40% reduction in investment advisory fees.
However, it should be recognized that the reduction in advisory fees will be
offset by an increase in the fees payable by the Fund for administrative
services until such time as the net assets of the Portfolio are $250 million or
more. The net assets of the Fund on September 22 1998, were $104,373,730
million, and no assurance can be given that the assets of the Portfolio will
equal or exceed $250 million.
The Trust acknowledges and agrees in the Proposed Advisory Agreement that,
in accordance with the provisions of the Trust's Declaration of Trust dated June
27, 1995, as amended and restated June 30, 1997, the name "Cadre" and the Cadre
logo and all rights to the use of such name or logo as part of the name of the
Trust and the Portfolio belong to the Investment Adviser and other affiliates of
Ambac. In the event that the Trust ceases to employ the Investment Adviser to
provide services to the Trust, the Investment Adviser or Ambac could require the
Trust to cease using the Cadre name and logo.
Except as discussed above, the terms of the Proposed Advisory Agreement are
the same in all material respects as the terms of the Present Advisory
Agreement.
Consideration By the Trustees
The Proposed Advisory Agreement was approved by the Board, including a
majority of the Independent Trustees, at a meeting held in person on June 17,
1998. The approval of the agreement was one of several actions taken by the
Board to implement the master/feeder fund structure.
In determining to approve the Proposed Advisory Agreement, the Board
considered the potential benefits of the master/feeder fund structure to the
Fund and its shareholders. These potential benefits and the Board's
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<PAGE> 17
evaluation of them are discussed above under "THE PROPOSED MASTER/FEEDER FUND
STRUCTURE - Potential Benefits of the Master/Feeder Fund Structure."
The Board also considered the nature and quality of the investment advisory
services that the Investment Adviser has provided to the Fund. Based upon this
consideration, the Board believes that the advisory services the Investment
Adviser will provide to the Portfolio can be expected to be of a high quality.
The qualifications of the Investment Adviser and its personnel were also
considered.
In addition, the fee that will be payable by the Portfolio under the
Proposed Advisory Agreement was evaluated by the Board, together with the fees
that would be payable by the Fund to the Investment Adviser for administrative
and transfer agent services if the master/feeder fund structure is implemented.
The Board considered as part of its evaluation the estimated total operating
expenses of the Fund (including the expenses of the Portfolio), and compared the
level of the proposed fees and estimated expenses to the fees and expenses of
other money market funds. Based upon this evaluation and comparison, and
consideration of other factors which it deemed relevant to its review, the Board
concluded that the fee that would be payable under the Proposed Advisory
Agreement is fair and reasonable.
In considering the Proposed Advisory Agreement, the Board was cognizant of
the potential benefits that the master/feeder fund structure may have for the
Investment Adviser. In particular, it recognized that the Investment Adviser and
its affiliates are likely to derive revenues by providing advisory and other
services (such a securities brokerage services) to investors who may be
attracted to the Fund because of the new structure or otherwise, and will also
derive increased advisory and other revenues if the assets of the Portfolio, the
Fund and other funds that invest in the Portfolio grow as a consequence of the
master/feeder fund structure. Although the extent of these benefits cannot be
quantified, the Board believes that the potential benefits to the Fund and its
shareholders of the master/feeder fund structure are sufficient to support
approval of the Proposed Advisory Agreement independent of any benefits to the
Investment Adviser.
The Board's decision was based also on the fact that combined investment
advisory and administrative fees under the master/feeder fund structure will not
be higher than combined investment advisory and administrative fees now in
effect, and may in the future be somewhat lower in the aggregate if the assets
of the Fund increase. Its decision was also based on the potential economies of
expenses that may result from that structure.
For these various reasons, the Board determined that approval of the
Proposed Advisory Agreement was in the best interests of the Fund and its
shareholders, and approved the Proposed Advisory Agreement and directed that it
be submitted to shareholders for their approval.
Required Vote
Approval of Proposal 2 by shareholders requires a Majority Shareholder
Vote.
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<PAGE> 18
The Board of Trustees recommends that shareholders vote to approve the
Proposed Advisory Agreement.
PROPOSAL 3
PROPOSAL TO ELECT FOUR TRUSTEES OF THE TRUST
Shareholders are being asked to elect four nominees to serve as Trustees of
the Trust. The nominees include David L. Boyle and Donald E. Gray, Jr., who each
presently serve as a Trustee having been appointed to serve by the Board, but
who have not been elected by shareholders. The two other nominees are Harvey A.
Fein and Don I. Tharpe.
The persons named on the accompanying proxy card intend, in the absence of
contrary instructions, to vote all proxies in favor of the election of the four
nominees named above to serve as Trustees until their successors are duly
elected and qualified. The nominees have each consented to stand for election
and to serve if elected. If any of the nominees should be unable to serve, an
event that is not now anticipated, proxies will be voted for such other person
or persons, if any, as shall be designated by the Board.
The Board of Trustees recommends that shareholders vote in favor of the
election of the nominees.
The following table sets forth certain information concerning the four
nominees. Unless otherwise noted, the nominees have engaged in the principal
occupation or employment listed in the following table for more than five years,
but not necessarily in the same capacity.
Name, Age, Present Position With Trust Principal Occupations During Last
(if any) and Address Five Years
- -------------------------------------- ---------------------------------
David L. Boyle,* 51 Vice Chairman of Ambac Financial
Trustee Group, Inc. Prior to joining Ambac,
Ambac Financial Group, Inc. Managing Director of Worldwide
One State Street Plaza Services, Citibank, N.A.
New York, NY 10004
Donald E. Gray, Jr., 48 Director of Finance, City of New
Trustee London; Executive Director, New
Director of Finance England State Government Finance
City of New London Officers Association
181 State Street
New London, CT 06320
Harvey A. Fein, 52 Chief Financial Officer, Molina
2238 Glendon Avenue Medical Centers; formerly,
Los Angeles, California 90064 independent financial consultant
(1994-1995) and Director of Finance,
Blue Cross of California - Wellpoint
Health Networks
Don I. Tharpe, 46 Executive Director, Association of
3105 Franklins Way School Business Officials
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<PAGE> 19
Herndon, Virginia 22071 International; Chairman and Trustee,
Investment Services for Education
Association Trust
- --------
* Mr. Boyle is a Trustee who is an "interested person" (as defined in the 1940
Act) of the Trust by virtue of his employment as an officer of Ambac and its
affiliates, and his ownership of the common stock of Ambac. Mr. Boyle is also
an "interested person" of the Investment Adviser and the Distributor.
The following table sets forth certain information concerning the present
Trustees of the Trust who are not standing for election by shareholders at the
meeting, having been elected previously by shareholders, and the present
officers of the Trust. Such persons will continue to serve in their present
capacities after the meeting. Unless otherwise noted, each Trustee and officer
named below has engaged in the principal occupation or employment listed in the
following table for more than five years, but not necessarily in the same
capacity.
Name, Age, Present Position With Trust Principal Occupations During Last
and Address Five Years
- -------------------------------------- ---------------------------------
William T. Sullivan, Jr.,* 53 Chairman and Chief Executive
Trustee, Chairman, CEO and Officer, Cadre Financial Services,
President Inc. and Cadre Securities, Inc.
(brokerage services)
C. Roderick O'Neil,* 67 Chairman, O'Neil Associates
Trustee (investment and financial
375 Park Avenue consulting firm); Director,
Suite 2602 Ambac Financial Group, Inc.,
New York, New York 10152 Ambac Assurance Corporation,
Fort Dearborn Income Securities,
Inc. and Beckman Instruments, Inc.;
Trustee, Memorial Drive Trust
(finance)
Russell E. Galipo, 66 Vice President and Manager of Trustee
4538 Alpine Drive Shawmut Bank CT, N.A. from 1973
Lakeland, Florida 33801 to 1994
William J. Reynolds, 74 Retired
Trustee
51 Fox Run Court
Newington, Connecticut
Martin G. Flanigan, 34 [To be added.]
Treasurer
William M. Sullivan, Esq., 31 General Counsel, Cadre Financial
Secretary Services, Inc. and Cadre Securities,
Inc.
Linda Cassesse, 46 Registration Manager, Cadre
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<PAGE> 20
Assistant Secretary Financial Service, Inc. and
Cadre Securities, Inc.; formerly
assisted New York City Marshall
Henry Daley (1995 to 1997), and
Registration Manager, Lanborn
Asset Management (1990 to 1995).
- --------
* Trustees who are "interested persons" (as defined in the 1940 Act) of the
Trust by virtue of affiliation with Ambac, an Ambac affiliate or both, and by
virtue of ownership of the common stock of Ambac. These Trustees are also
"interested persons" of the Investment Adviser and the Distributor. Except as
otherwise indicated above, the address of each Trustee and officer of the
Trust is 905 Marconi Avenue, Ronkonkoma, New York 11779.
The following table sets forth certain information regarding the
compensation received by the Trustees of the Trust for the fiscal year ended
October 31, 1997.
Compensation Table
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued from Trust
Compensation as Part of Complex Paid to
Name of Perosn From Trust Fund Expenses Trust
- -------------- ------------ ---------------- ---------------
William T. Sullivan, Jr. $0 $0 $0
Donald W. Green* $8750 $0 $8750
Eugene J. McDonald* $6750 $0 $6750
C. Roderick O'Neil $8750 $0 $8750
W. Dayle Nattress* $0 $0 $0
Stephen A Attanasio* $0 $0 $0
Russell E. Galipo` $6250 $0 $6250
- --------
* These persons no longer serve as Trustees. Messrs. Boyle, Gray and Reynolds,
who presently are Trustees, did not serve as Trustees during the 1997 fiscal
year.
Trustees who are not employees of the Investment Adviser or one of its
affiliated companies and who also are not affiliated with investors in the Fund
(or any other series of the Trust) or with investors in funds that invest in the
portfolio (or another series of the Trust), are each paid fees by the Trust.
Each such Trustee is paid an annual retainer of $5,000 and receives an
attendance fee of $750 for each meeting of the Board attended. Such Trustees who
serve as members of the Audit Committee, of which each of the Independent
Trustees is a member, each receive an attendance fee of $750 for each Audit
Committee meeting they attend, with the Chairman of the Audit Committee
receiving an additional $1,000 annual fee. Trustees who are not employees of
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<PAGE> 21
the Investment Adviser or its affiliates are entitled to be reimbursed for
out-of-pocket expenses incurred as a Trustee. Officers of the Trust receive no
compensation from the Trust. As of the date of this Proxy Statement, the
Trustees and officers of the Trust, as a group, did not own any of the
outstanding shares of the Trust.
Six meetings of the Board and two meetings of the Audit Committee were held
during the fiscal year ended October 31, 1997. Each Trustee then serving in such
capacity attended at least 75% of the meetings of Trustees and of any Committee
of which he is a member. The Audit Committee is responsible for recommending the
selection of the Trust's independent accountants and reviewing all audit as well
as non-audit accounting services performed for the Trust.
Required Vote
A plurality of the votes cast is required for the election of each nominee
for Trustee.
ADDITIONAL INFORMATION
Abstentions
If a proxy card is properly executed and returned unmarked or marked with
an abstention, the shares represented by that proxy will be considered to be
present at the meeting for purposes of determining the existence of a quorum for
the transaction of business. Unmarked proxy cards will be voted to approve
Proposals 1 and 2 and in favor of the election of the nominees for Trustee named
in Proposal 3. Proposals 1 and 2 each require a Majority Shareholder Vote to be
approved. Because such a vote requires the affirmative vote of either 67% of the
shares present at the meeting or more than 50% of the outstanding shares of the
Fund, a proxy card that is marked with an abstention as to either of those
matters will have the same effect as a vote against the matter. Trustees will be
elected by a plurality of shares voting. Thus, if a quorum is present at the
meeting, an abstention will not affect the outcome of voting on the nominees for
election as Trustees.
Results of Voting
Shareholders will be informed of the voting results of the meeting in the
Fund's 1998 Annual Report, which will be sent to shareholders on or before
December 30, 1998.
Other Matters To Come Before The Meeting
The Trustees do not intend to present any other business at the meeting
other than the matters discussed in this Proxy Statement and are not aware of
any shareholder that intends to present any matter at the meeting. If, however,
any other matters are properly brought before the meeting, the persons named in
the enclosed proxy card will vote on such matters in accordance with their
judgment.
Deadline For Shareholder Proposals
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<PAGE> 22
The Trust does not hold annual meetings of shareholders. Any shareholder
desiring to present a proposal for inclusion at the next meeting of shareholders
should submit such proposal to the Trust.
Dated: _________, 1998
SHAREHOLDERS ARE REQUESTED TO MARK, DATE AND SIGN THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE
UNITED STATES.
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<PAGE> 23
EXHIBIT A
INFORMATION REGARDING CERTAIN SHAREHOLDERS
The following entities owned of record or are known by the Trust to own
beneficially 5% or more of the outstanding shares of the Funds as of the record
date:
Liquid Asset Fund Shares Owned
- ----------------------------- --------------
Ambac Financial Group, Inc. 1
One State Street Plaza
New York, New York 6.17%
Bridgeport, City of
45 Lyons Terrace
Bridgeport, Connecticut 06604 16.92%
East Haven, Town of
250 Main Street
East Haven, Connecticut 06512 5.38%
Fort Walton Beach, City of
107 Miracle Strip Parkway SW
Fort Walton Beach, Florida 32549 6.16%
New Britain, City of
7 West Main Street
New Britain, Connecticut 06051 23.53%
Suffield, Town of - Treasurer's Office
83 Mountain Road
Suffield, Connecticut 06078 11.23%
- --------
1 Ownership percentage includes indirect beneficial ownership of the shares of
the Fund owned by subsidiaries of Ambac Financial Group, Inc., including
Ambac Assurance Corporation.
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<PAGE> 24
EXHIBIT B
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the 2nd day of November, 1998 by and between Cadre
Institutional Investors Trust, a Delaware business trust (hereinafter called the
"Trust"), and Cadre Financial Services, Inc., a Delaware corporation
(hereinafter called the "Adviser"):
WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and the Adviser is registered as an investment
adviser under the Investment Advisers Act of 1940, and engages in the business
of acting as investment adviser; and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory with respect to certain series of the Trust and to provide certain
other services in the manner and on the terms and conditions hereinafter set
forth; and
WHEREAS, the Adviser desires to be retained to perform such services on
said terms and conditions:
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Trust and the Adviser agree as follows:
1. The Trust hereby retains the Adviser to act as investment adviser
to the series of the Trust identified in Schedule A of this Agreement (each, a
"Portfolio" and collectively, the "Portfolios") and, subject to the supervision
of the Board of Trustees of the Trust, to manage the investment activities of
the Portfolios and to provide certain other services as hereinafter set forth.
Without limiting the generality of the foregoing, the Adviser
shall: obtain and evaluate such information and advice relating to the economy,
securities and commodities markets, and securities and commodities as it deems
necessary or useful to discharge its duties hereunder; continuously manage the
assets of the Portfolios in a manner consistent with the investment objectives,
policies and restrictions of each Portfolio and applicable laws and regulations;
determine the securities and commodities to be purchased, sold or otherwise
disposed of by the Portfolios and the timing of such purchases, sales and
dispositions; and take such further action, including the placing of purchase
and sale orders and the voting of securities on behalf of the Portfolios, as the
Adviser shall deem necessary or appropriate. The Adviser shall furnish to or
place at the disposal of the Trust such of the information, evaluations,
analyses and opinions formulated or obtained by the Adviser in the discharge of
its duties as the Trust may, from time to time, reasonably request.
2. The Adviser shall also provide such administrative services
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<PAGE> 25
as may be necessary in connection with the operations of the Portfolios, and
including without limitation: maintenance of the accounting books and records of
the Portfolios; valuation of the assets of the Portfolios; calculation of the
net asset values per share; maintenance of records regarding the ownership of
shares of the Portfolios; preparation and filing of tax returns of the
Portfolios; and preparation of materials for meetings of the Board of Trustees
of the Trust and meetings of shareholders and preparation of regulatory reports
and filings, insofar as the foregoing relate to the Portfolios, and the
distribution and filing of such materials.
3. The Adviser shall, at its own expense, maintain such staff and employ or
retain such personnel and consult with such other persons as may be necessary to
render the services required to be provided or furnished by it pursuant to this
Agreement. Without limiting the generality of the foregoing, the staff and
personnel of the Adviser shall be deemed to include persons employed or
otherwise retained by the Adviser to furnish statistical and other factual data,
advice regarding economic factors and trends, information with respect to
technical and scientific developments, and such other information, advice and
assistance as the Adviser may desire.
4. The Trust will, from time to time, furnish or otherwise make available
to the Adviser such financial reports, proxy statements, policies and procedures
and other information relating to the business and affairs of the Trust as the
Adviser may reasonably require in order to discharge its duties and obligations
hereunder.
5. The Adviser shall bear the cost of rendering the services to be
performed by it under this Agreement, and shall provide the Trust with such
office space, facilities, equipment, clerical help, and other personnel and
services as the Trust shall reasonably require in connection with the operations
of the Portfolios. The salaries of officers of the Trust, and the fees and
expenses of Trustees of the Trust, who are also directors, officers or employees
of the Adviser, or who are officers or employees of any company affiliated with
the Adviser, shall be paid and borne by the Adviser or such affiliated company.
6. The Trust assumes and shall pay or cause to be paid all expenses of the
Trust and the Portfolios not expressly assumed by the Adviser under this
Agreement, including without limitation: any payments pursuant to any plan of
distribution adopted by the Trust; the fees, charges and expenses of any
registrar, custodian, accounting agent, administrator, stock transfer and
dividend disbursing agent; brokerage commissions; taxes; registration costs of
the Trust and its shares under federal and state securities laws; the costs and
expenses of engraving and printing stock certificates; the costs and expenses of
preparing, printing, including typesetting, and distributing prospectuses and
statements of additional information of the Trust and the Portfolios and
supplements thereto to the Trust's shareholders; all expenses of shareholders
and Trustees meetings and of preparing, printing and mailing proxy statements
and reports to shareholders; fees and travel expenses of Trustees and members of
any advisory board or committee who are not also officers, directors or
employees of the Adviser or who are not officers or employees of any company
affiliated with the Adviser; all expenses incident to any dividend, withdrawal
or redemption options; charges and expenses of any outside service used for
pricing of the Trust's shares; fees and expenses of
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<PAGE> 26
legal counsel to the Trust and its Trustees; fees and expenses of the Trust's
independent accountants; membership dues of industry associations; interest
payable on Trust borrowings; postage; insurance premiums on property or
personnel (including officers and Trustees) of the Trust which inure to its
benefit; and extraordinary expenses (including but not limited to, legal claims
and liabilities and litigation costs and any indemnification related thereto).
7. As full compensation for the services and facilities furnished to the
Trust and the expenses assumed by the Adviser under this Agreement, each
Portfolio shall pay to the Adviser a fee with respect to such Portfolio,
calculated in accordance with Schedule B hereto. This fee shall be paid monthly.
Subject to the provisions of paragraph 8 hereof, payment of the Adviser's
compensation for the preceding month shall be made as promptly as possible after
completion of the computations contemplated by paragraph 8 hereof.
8. In the event the operating expenses of a Portfolio, including amounts
payable to the Adviser pursuant to paragraph 7 hereof, for any fiscal year
ending on a date on which this Agreement is in effect, exceed the expense
limitation applicable to the Portfolio under any state securities laws or
regulations that may then be applicable to the Trust (as such limitations may be
raised or lowered, or as they may be waived upon application of the Trust or the
Adviser from time to time), the Adviser shall reduce its fee to the extent of
such excess and, if required pursuant to any such laws or regulations, will
reimburse the Portfolio for annual operating expenses in excess of such expense
limitation; provided, however, that there shall be excluded from expenses the
amount of any interest, taxes, brokerage commissions, distribution fees and
extraordinary expenses (including but not limited to legal claims and
liabilities and litigation costs and any indemnification relating thereto) paid
or payable by the Trust or the Portfolios to the extent permissible under
applicable laws and regulations. The amount of any such reduction in fee or
reimbursement of expenses shall be calculated and accrued daily and settled on a
monthly basis, based upon the expense limitation applicable as at the end of the
last business day of the month. Should two or more such expense limitations be
applicable as at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Adviser's fee shall be
applicable.
For purposes of this provision, should any applicable expense limitation be
based upon the gross income of a Portfolio, such gross income shall include, but
not be limited to, interest on debt securities held by the Portfolio accrued to
and including the last day of the Portfolio's fiscal year, and dividends
declared on equity securities held by the Portfolio, the record dates for which
fall on or prior to the last day of such fiscal year, but shall not include
gains from the sale of securities.
9. The Adviser will use its best efforts in the supervision and management
of the investment activities of the Portfolios and in providing services
hereunder, but shall not be liable to the Trust, the Portfolios or shareholders
for any error in investment judgment, or in the absence of willful misfeasance,
bad faith, negligence or reckless disregard of its obligations hereunder, for
any mistake of law or for any act or omission by the Adviser.
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<PAGE> 27
10. Nothing contained in this Agreement shall prevent the Adviser or any
affiliated person of the Adviser from acting as investment adviser or manager
for any other person, firm or corporation and shall not in any way bind or
restrict the Adviser or any such affiliated person from buying, selling or
trading any securities or commodities for their own accounts or for the account
of others for whom they may be acting. Nothing in this Agreement shall limit or
restrict the right of any director, officer or employee of the Adviser to engage
in any other business or to devote his time and attention in part to the
management or other aspects of any other business whether of a similar or
dissimilar nature.
11. The Trust acknowledges and agrees, in accordance with the provisions of
Article VIII, Section 9 of the Trust's Declaration of Trust dated June 27, 1995,
as amended and restated June 30, 1997, that the name "Cadre" and the Cadre logo
and all rights to the use of such name or logo as part of the name of the Trust
and the Portfolios belong to the Adviser and other affiliates of Ambac Financial
Group, Inc.
12. This Agreement shall remain in effect as to each Portfolio until
October 30, 2000, and shall continue in effect for each Portfolio from year to
year thereafter provided such continuance as to such Portfolio is approved at
least annually by the vote of a majority of the outstanding voting securities of
the Portfolio, as defined by the Act and the rules thereunder, or by the Board
of Trustees of the Trust; provided that in either event such continuance is also
approved by a majority of the Trustees of the Trust who are not parties to this
Agreement or "interested persons" (as defined in the Act) of any such party (the
"Independent Trustees"), by vote cast in person at a meeting called for the
purpose of voting on such approval; and provided, however, that (a) the Trust
may at any time, without payment of any penalty, terminate this Agreement as to
the Trust (or any Portfolio) upon sixty days written notice to the Adviser,
either by majority vote of the Trustees of the Trust or by the vote of a
majority of the outstanding voting securities of the Trust (or such Portfolio)
(as defined in the Act and the rules thereunder); (b) this Agreement shall
immediately terminate in the event of its assignment (to the extent required by
the Act and the rules thereunder) unless such automatic termination shall be
prevented by an exemptive order of the Securities and Exchange Commission; and
(c) the Adviser may terminate this Agreement as to the Trust or any of the
Portfolios without payment of penalty on sixty days written notice to the Trust.
The failure to approve a continuance of this Agreement as to any Portfolio, or
any termination of this Agreement as to any Portfolio, shall not affect the
continuation of the Agreement as to the Trust or any other Portfolios which have
approved a continuance and not terminated this Agreement.
13. Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed post-paid, to the other party at the principal office
of such party.
14. This Agreement may be amended only by the written agreement of the
parties. Any amendment shall be required to be approved by the Trustees of the
Trust and by a majority of the Independent Trustees in accordance with the
provisions of Section 15(c) of the Act and the rules thereunder. Any amendment
shall also be required to be approved by a vote of shareholders as,
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<PAGE> 28
and to the extent, required by the Act and the rules thereunder. Except as
otherwise provided by the Act and the rules thereunder, an amendment to this
Agreement may be effected without the vote of shareholders: to reduce the fees
payable hereunder by any Portfolio; to amend Schedule A and Schedule B to
reflect the addition of a Portfolio which is newly formed and has not commenced
it operations and the fee initially payable hereunder by that Portfolio; to
amend Schedule A and Schedule B to reflect the deletion of a Portfolio; to
supply any omission; to cure, correct or supplement any ambiguous, defective of
inconsistent provision hereof; or if necessary, to conform this Agreement to the
requirements of applicable laws or regulations, but neither the Trust nor the
Adviser shall be liable for failing to do so.
15. This Agreement shall be construed in accordance with the laws of the
State of New York, without reference to conflict of law principles, and the
applicable provisions of the Act. To the extent the applicable law of the State
of New York, or any of the provisions herein, conflict with the applicable
provisions of the Act, the latter shall control.
16. The Trust represents that this Agreement has been duly approved by the
Trustees, including a majority of the Independent Trustees, and by shareholders
of the Liquid Asset Fund series of the Trust (which is the sole series of the
Trust operating as of the date hereof and is expected to be the initial investor
in the U.S. Government Money Market Portfolio), in accordance with the
requirements of the Act and the rules thereunder.
17. The Trust and the Adviser agree that the obligations of the Trust under
this Agreement shall not be binding upon any of the members of the Board of
Trustees, shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Trust, individually, but are binding only upon the
assets and property of the Portfolios, as provided in the Declaration of Trust.
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<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the day and year first above written.
CADRE INSTITUTIONAL INVESTORS TRUST
By: ____________________________
Title:
Attest:
- -------------------
Title:
CADRE FINANCIAL SERVICES, INC.
By:_____________________________
Title:
Attest:
- --------------------
Title:
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<PAGE> 30
SCHEDULE A
It is agreed by the parties hereto that the Adviser shall provide services
as set forth herein to the following Portfolios:
U.S. Government Money Market Portfolio
Money Market Portfolio
This Schedule A may be amended from time to time by the parties hereto.
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<PAGE> 31
SCHEDULE B
Fees
As full compensation for the services and facilities furnished to the Trust
and the expenses assumed by the Adviser under this Agreement, each of U.S.
Government Money Market Portfolio and Money Market Portfolio shall pay to the
Adviser monthly compensation calculated daily at the annual rate of 0.06% of
each such Portfolio's net assets. Such calculations shall be made by applying
1/365th of the annual rate to the net assets of each Portfolio each day
determined as of the close of business on that day or the last previous business
day, if such day is not a business day. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day of
a month, compensation for that part of the month this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above.
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<PAGE> 32
EXHIBIT C
INFORMATION REGARDING OTHER MONEY MARKET FUNDS PROVIDED
INVESTMENT ADVICE BY CADRE FINANCIAL SERVICES, INC.
In addition to providing investment advisory services to the Fund, the
Investment Adviser provides investment advisory services to the following two
money market funds which, like the Fund, are series of registered investment
companies:
Net Assets as of Annual Rate of
Name of Fund September 22, 1998 Investment Advisory Fee
- -------------- ------------------ -----------------------
Investment Services for $8.3 million 0.15% of average daily
Education Money Market net assets.
Fund (a series of
Investment Services for (The Investment Adviser
Education Trust) has agreed to waive its
fee and to reimburse
expenses of the fund to the
extent necessary to
maintain the total
operating expenses of the
fund, other than interest,
taxes and extraordinary
expenses, at an annual rate
of not more than 0.85% of
the fund's average net
assets.)
Cadre Network Health $73.6 million 0.40% on the first
Financial Services $250 million of average
Liquid Asset Fund daily net assets; 0.3675%
(a series of Cadre on the next $250 million
Network Health Financial of such assets; and
Services Trust) 0.3350% of such assets in
excess of $500 million.
(The Investment Adviser has
agreed to waive its fee or
to take other action as
necessary to maintain the
annualized expenses of the
fund at not more than 0.85%
of average net assets.)
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<PAGE> 33
CADRE INSTITUTIONAL INVESTORS TRUST
LIQUID ASSET FUND
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
OF THE TRUST FOR A SPECIAL MEETING OF SHAREHOLDERS
October 30, 1998
The undersigned hereby appoints William M. Sullivan and Linda J. Cassesse,
jointly and severally, as Proxies, with full power to appoint his or her
substitute, and hereby authorizes them to represent and vote, as designated
below, all shares held of record by the undersigned on September 22, 1998 at the
Special Meeting of Shareholders of Liquid Asset Fund (the "Fund"), a series of
Cadre Institutional Investors Trust (the "Trust"), to be held on October 30,
1998 and at any and all adjournments thereof, with all the powers the
undersigned would possess if personally present at such meeting, and hereby
revokes any proxies that may previously have been given by the undersigned with
respect to the shares covered hereby.
The Board of Trustees of the Trust Recommends a Vote "FOR" each of the following
Proposals.
1. Proposal to amend diversification For Against Abstain
policy and concentration policy of [ ] [ ] [ ]
the Fund
2. Proposal to approve new investment For Against Abstain
advisory agreement between the [ ] [ ] [ ]
Trust and Cadre Financial Services,
Inc.
3. Election of Trustees For all WITHHOLD
nominees AUTHORITY
listed below
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in the list below.)
David L. Boyle
Harvey A. Fein
Donald E. Gray, Jr.
Don I. Tharpe
4. In their discretion on such other business as may properly be brought
before the meeting.
If this proxy is properly executed and returned, the shares represented hereby
will be voted in the manner directed herein. If not otherwise specified, this
proxy will be voted FOR Proposals 1 and 2 and to elect each of the nominees for
election as Trustees.
<PAGE> 34
Please date and sign below exactly as name appears on this proxy. Executors,
administrators, trustees, etc. should give full title. If shares are held
jointly, each holder should sign.
- --------------------------
Name of Shareholder
- --------------------------
Authorized Signature
Title:
- --------------------------
Authorized Signature
Title:
Date:_____________________
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 35
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Trust involved in validating your vote
if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. All Other Accounts: The capacity of the individuals signing the proxy
card should be indicated unless it is reflected in the form of registration.
For example:
Registration Valid Signature
- ------------ ---------------
Corporate Accounts or Government Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe
(4) ABC Corp., Profit Sharing Plan John Doe, Trustee
