<PAGE> 1
LIQUID ASSET FUND
A SERIES OF CADRE INSTITUTIONAL INVESTORS TRUST
905 Marconi Avenue
Ronkonkoma, New York 11779
Liquid Asset Fund (the "Fund") is a series of Cadre Institutional
Investors Trust (the "Trust"), a diversified, open-end management investment
company. The Fund is a money market fund and seeks to maintain a stable net
asset value of $1.00 per share. The investment objective of the Fund is high
current income, consistent with preservation of capital and maintenance of
liquidity. The Fund pursues this objective by investing all of its investable
assets in the U.S. Government Money Market Portfolio (the "Portfolio"), a
separate series of the Trust that has the same investment objective and
substantially the same investment policies as the Fund. The Portfolio invests
exclusively in short-term debt securities that are issued or guaranteed by the
U.S. government or an agency or instrumentality of the U.S. government
("Government Securities") and repurchase agreements collateralized by Government
Securities. See "Investment Objective and Policies." Cadre Financial Services,
Inc. (the "Investment Adviser") serves as the investment adviser of the
Portfolio.
Shares of the Fund are offered for sale on a no-load basis to states
and municipalities, and their subdivisions and agencies, as well as to other
institutional investors. No sales commissions or other charges are imposed upon
the purchase or redemption of shares. No minimum initial or subsequent
investment in the Fund is required. See "Purchasing Shares." Shares of the Fund
are not insured by Ambac Assurance Corporation.
An investment in the Fund is neither insured nor guaranteed by the U.S.
government and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share. See "Net Asset Value."
This Prospectus sets forth concisely the information about the Fund and
the Trust that a prospective investor should know before investing. Additional
information about the Fund and the Trust has been filed with the Securities and
Exchange Commission (the "SEC") in a Statement of Additional Information dated
July 27, 1998, as supplemented December 15, 1998, which is incorporated herein
by reference and is available without charge by writing to the Transfer Agent or
by calling 1-800-221-4524.
Investors are advised to read this Prospectus and retain it for future
reference.
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.
The date of this Prospectus is July 27, 1998, as supplemented December
15, 1998
<PAGE> 2
SUMMARY OF EXPENSES
The following table is designed to assist prospective investors in
understanding the various direct and indirect costs and expenses that a
shareholder in the Fund will bear. It summarizes the estimated shareholder
transaction and annual operating expenses of the Fund and the Portfolio in which
the Fund invests. The amounts set forth below under "Other Expenses," as well as
the amounts in the example below, are based upon estimates of expenses for the
current fiscal year.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases......................... None
Maximum Sales Load Imposed on Reinvested Dividends.............. None
Deferred Sales Load............................................. None
Redemption Fee.................................................. None
Exchange Fee.................................................... None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
Net of Expense
Reimbursement
(as a percentage of average net assets)
<S> <C>
Investment Advisory Fee......................................... 0.06%
12b-1 Fees...................................................... None
Other Expenses.................................................. 0.39%
Total Fund Operating Expenses................................... 0.45%
</TABLE>
The Investment Adviser has voluntarily agreed to waive its fees or absorb
expenses to the extent necessary to assure that the ordinary operating expenses
of the Fund do not exceed annually .45% of the Fund's average daily net assets.
Absent this agreement, other estimated expenses and estimated total operating
expenses of the Fund annually would be 0.42% and 0.48%, respectively, of the
Fund's average daily net assets. The Investment Adviser reserves the right to
modify or terminate at any time its agreement to waive fees and absorb expenses
upon prior written notice to the Fund.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------- ------ ------- -------- --------
<S> <C> <C> <C> <C>
You 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: $4.60 $14.44 $25.20 $56.69
</TABLE>
The example is based upon estimated 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 a representation of past or future expenses.
For a more complete description of costs and expenses, see "Management
of the Fund."
2
<PAGE> 3
LIQUID ASSET FUND
FINANCIAL HIGHLIGHTS
The following Information has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon appears in the Fund's annual report
dated October 31, 1997. This information should be read in conjunction with the
financial statements, the notes thereto and the independent auditors report
which is incorporated by reference in the Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996(1)
---------------- -------------------
<S> <C> <C>
Net Asset Value, beginning of
period $ 1.000 $ 1.000
------------ ------------
Income from Investment
Operations:
Net investment income (2) 0.053 0.027
------------ ------------
Less Distributions from:
Net investment income (0.053) (0.027)
------------ ------------
Net Realized Gain (0.000)*** --
------------ ------------
Total Distributions (0.053) (0.027)
Net increase in net asset value . -- --
------------ ------------
Net Asset Value, End of period $ 1.000 $ 1.000
============ ============
Total Return 5.39% 2.72%*
Ratios/Supplemental Data:
Net Assets, End of period (000s) $ 138,661 $ 70,881
------------ ------------
Ratios to average net assets:
Net investment income
including reimbursement/
waiver 5.38% 5.18%**
Operating expenses including
reimbursement/waiver .26% 0.20%**
Operating expenses excluding
reimbursement/waiver .49% 0.75%**
</TABLE>
* Not Annualized
** Annualized
*** Amount is less than 0.000 per share
(1) The Fund commenced investment operations on April 24, 1996.
(2) Net investment income per share before reimbursement/waiver of fees and
expenses by the Investment Adviser for the year ended October 31, 1997 and
period ended October 31, 1996 was $0.0514 and $0.024, respectively.
SUITABLE INVESTORS
The Fund is specifically designed for investors concerned about the safety
of their investments and is a low-cost, professionally managed cash management
vehicle for states, municipalities, and their subdivisions and agencies,
including school and special purpose districts, and for other institutional
investors. It offers investment diversification, administrative convenience and
operating economies of scale to investors whose investment policies and
guidelines are consistent with those of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek high current income,
consistent with preservation of capital and maintenance of liquidity. The Fund
pursues this objective by investing all of its investable assets in the U.S.
Government Money Market Portfolio (the "Portfolio"). The Portfolio is a series
of the Trust that has the same investment objective and substantially the same
investment policies as the Fund and invests exclusively in short-term debt
securities issued or guaranteed by the U.S. government or an agency or
instrumentality of the U.S. government ("Government Securities") and repurchase
agreements collateralized by Government Securities. The Portfolio maintains a
dollar-weighted average portfolio maturity of 90 days or less, and invests only
in securities having remaining maturities of 397 days or less. As a money market
fund, the Fund seeks to maintain a stable net asset value of $1.00
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<PAGE> 4
per share. No assurance can be given that the Fund will be able to achieve its
investment objective or maintain a stable net asset value. See "Net Asset
Value."
Government Securities include obligations that are issued by the U.S.
Treasury. These obligations, which include Treasury bills, notes and bonds, are
backed by the full faith and credit of the U.S. government. Government
Securities also include obligations issued by federal agencies and
instrumentalities ("Agency Securities"). Certain Agency Securities, such as the
Export-Import Bank of the United States, the General Services Administration,
the Government National Mortgage Association, and the Small Business
Administration, are backed by the full faith and credit of the U.S. government.
Other Agency Securities, such as obligations of the Federal Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association and Student Loan Marketing Association, are backed
by the right of the issuer to borrow from the U.S. Treasury under certain
circumstances or are backed by the credit of the agency or instrumentality
issuing the obligation. These types of Agency Securities are not deemed direct
obligations of the United States, and therefore involve more risk than
obligations which are backed by the full faith and credit of the U.S.
government. All securities purchased by the Portfolio, including repurchase
agreements, must be of high quality and be determined by the Investment Adviser
to present minimal credit risks pursuant to procedures adopted by the Board of
Trustees of the Trust.
THE PORTFOLIO MAY INVEST IN CERTAIN VARIABLE AND FLOATING RATE SECURITIES,
AS DESCRIBED BELOW, BUT DOES NOT INVEST IN ANY OTHER SECURITIES COMMONLY KNOWN
AS DERIVATIVES.
The Fund's investment objective is fundamental and may not be changed
without the approval of the holders of a majority of the outstanding voting
securities of the Fund, as defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"). No assurances can be given that the Fund
will achieve its investment objective.
Repurchase Agreements. A repurchase agreement involves the purchase of a
security by the Portfolio with an agreement by the seller of the security to
repurchase it from the Portfolio at a mutually agreed upon day and price,
frequently the next business day. The resale price is in excess of the purchase
price and reflects the rate of return earned by the Portfolio. The maturities of
repurchase agreements entered into by the Portfolio normally do not exceed seven
days. However, the Portfolio may enter into a repurchase agreement maturing in
more than seven days provided that not more than 10% of the Portfolio's net
assets would, as a result, be invested in repurchase agreements having
maturities in excess of seven days and under which the Portfolio also does not
have the right to repayment within seven days. Repurchase agreements will at all
times be fully collateralized by their underlying securities ("collateral") in
an amount at least equal to the purchase price plus accrued interest, marked to
market daily. The collateral for repurchase agreements is held by the Trust's
custodian (or a subcustodian) and is required to consist of Government
Securities (without regard to the maturity of such obligations). If the seller
defaults and the value of the collateral securing a repurchase agreement
declines, the Fund may incur a loss. The Portfolio, however, enters into
repurchase agreements only with banks or primary dealers designated as such by
the Federal Reserve Bank of New York and which have been determined by the
Investment Adviser to present minimal credit risk in accordance with guidelines
established by the Board of Trustees of the Trust.
Variable and Floating Rate Securities. Government Securities purchased by
the Portfolio may include variable and floating rate securities. The interest
rates payable on these securities are adjusted either at predesignated intervals
or whenever there is a change in an established benchmark rate of interest, and,
upon reset, the market value approximates par. These securities may also have a
demand feature under which the Portfolio can demand repayment of principal on
specified dates or after giving specified notice. The Portfolio only purchases
variable and floating rate Government Securities that are eligible for purchase
by money market funds under applicable regulations, and therefore does not
purchase securities such as inverse floaters, range floaters, COFI floaters,
capped floaters or dual index floaters. In determining the maturities of
securities and calculating the Portfolio's dollar-weighted average portfolio
maturity, variable rate Government Securities are deemed to have a maturity
equal to the period remaining until the next readjustment of the interest rate.
Floating rate Government Securities with demand features are deemed to have a
maturity equal to the period remaining until the principal amount can be
recovered through demand.
When-Issued and Delayed Delivery Securities. The Portfolio may purchase or
sell securities on a when-issued or delayed delivery basis. In these
transactions, securities are purchased or sold with payment and delivery taking
place as much as a month or more in the future. The transactions are used to
secure an advantageous price and yield at the time of entering into the
transactions. However, the value of securities purchased on a when-issued basis
is subject to market fluctuation and no interest accrues to the purchaser during
the period between purchase and settlement.
4
<PAGE> 5
Borrowings. The Fund and the Portfolio do not borrow for purposes of making
investments (a practice known as "leverage"). However, they each may borrow
money from banks in an amount not exceeding one-third of the value of its total
assets (calculated at the time of the borrowing, for temporary extraordinary or
emergency purposes. The Fund and the Portfolio may pledge their assets to secure
these borrowings. Additional investments will not be made by the Fund or the
Portfolio while it has any borrowings outstanding.
Investment Restrictions. The Fund and the Portfolio are subject to various
additional restrictions on their investments. Certain of these restrictions are
deemed fundamental policies and cannot be changed without the approval of the
holders of a majority of the Fund's or the Portfolio's outstanding voting
securities, as defined in the Investment Company Act. See "Investment
Restrictions" in the Statement of Additional Information.
Investment Characteristics. The Portfolio invests exclusively in obligations
issued or guaranteed by the U.S. government or an agency or instrumentality of
the U.S. government, and repurchase agreements collateralized by such
securities. Government Securities are of very high credit quality. Shares of the
Fund and the Portfolio are not insured or guaranteed by the U.S. government or
any government agency. The return on an investment in the Fund will increase or
decrease in response to changes in short-term market interest rates. The market
value of the Portfolio's investments will fluctuate, with investments increasing
in value as interest rates fall and decreasing in value as interest rates rise.
However, due to the method used by the Portfolio and the Fund in valuing their
assets, it is expected but cannot be assured that the net asset value of shares
of the Fund will be a stable $1.00 per share. See "Net Asset Value." Virtually
all portfolio transactions for the Portfolio will be effected on a principal
basis with issuers, underwriters or dealers serving as primary market-makers.
Special Information Concerning Investment Structure. The Fund does not
invest directly in securities. Instead, it invests all of its investable assets
in the Portfolio, which is a series of the Trust that has the same investment
objective and substantially the same investment policies as the Fund. The
Portfolio, in turn, purchases, holds and sells investments in accordance with
that objective and those policies. The Trustees of the Trust believe that the
per share expenses of the Fund (including its share of the Portfolio's expenses)
will be less than or approximately equal to the expenses that the Fund would
incur if its assets were invested directly in securities and other investments.
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 the
investment policies described above 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
interest 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 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 may be
amended 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. These restrictions are described in
the Statement of Additional Information. When the Fund is asked to vote on
matters concerning the Portfolio, the Fund will hold a shareholder 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. Information about other holders of shares of the Portfolio is
available from the Transfer Agent.
PURCHASING SHARES
Shares of the Fund are offered for sale, without sales charge, at the net
asset value per share next determined after receipt and acceptance of a purchase
order by Cadre Securities, Inc., as distributor of the Fund's shares (the
"Distributor"), subject to timely receipt of federal funds as described below .
Net asset value is computed as of 4:00 p.m. (Eastern time) on each day on which
both the
5
<PAGE> 6
New York Stock Exchange is open for trading and the Federal Reserve Bank of New
York is open (each, a "Business Day"), except on days for which the Public
Securities Association (the "PSA") recommends an early closing of the U.S.
government securities markets when the net asset value will be computed as of
such earlier closing time. See "Net Asset Value." There are no minimum initial
or subsequent investment requirements. Although the Fund does not impose any
charges in connection with purchases or redemptions of shares, banks and other
financial intermediaries may impose charges for their services in connection
with such transactions.
Shares become entitled to receive dividends beginning on the day of
purchase. For this reason, the Fund must have federal funds available to it
(i.e., monies credited to its custodian bank by a Federal Reserve bank) on the
day the purchase order is accepted. An order for the purchase of shares of the
Fund is accepted (i) immediately upon receipt of federal funds by wire as
described below or (ii) when a check is credited to the shareholder's account in
the form of federal funds (generally one Business Day after receipt of a check).
Shares will be issued at the net asset value next determined after acceptance of
the purchase order and will be entitled to that day's dividend. The Fund
reserves the right to reject any purchase order and to modify or suspend the
continuous offering of its shares.
In order to permit the Investment Adviser to manage the Portfolio most
effectively, investors should place purchase orders as early in the day as
possible by calling Cadre Financial Services, Inc., in its capacity as the
Fund's transfer agent (the "Transfer Agent"), toll-free at 1-800-221-4524.
Prior to making an initial investment by wire or check, an account number
must be obtained by calling the Transfer Agent toll-free at 1-800-221-4524, or
by mailing a completed registration form to:
Liquid Asset Fund
905 Marconi Avenue
Ronkonkoma, New York 11779
In order to receive an account number by telephone, an investor must provide
the name, address, and tax identification number of the account owner, the
amount being wired or mailed as the initial investment, and the name of the
wiring bank. Promptly after opening accounts by telephone, investors should mail
an original completed registration form for each account opened to the Transfer
Agent. Although share purchases can be made before a registration form is
submitted, shares may not be redeemed until a completed registration form has
been submitted.
Purchases by Federal Funds. Shares may be purchased by wiring federal funds
directly to the Fund in accordance with the instructions below. The Fund does
not impose any transaction charges; however, wire charges may be imposed by the
shareholder's transmitting bank. Shares will be issued at the net asset value
next determined after receipt of an order to purchase shares and will be
entitled to the dividend declared on the date the order is received if the
Trust's custodian receives payment in federal funds in the amount of the
purchase order not later than the close of the Federal Reserve wire on that day.
If a purchase order is not received and accepted prior to 4:00 p.m. (Eastern
time), or as of the closing time of the U.S. government securities markets on
days when the PSA recommends an early closing of such markets, or if federal
funds are not received by the close of the Federal Reserve wire, shares will not
be issued or entitled to receive dividends until the next computation of net
asset value following the receipt of the purchase order or of federal funds by
the Trust's custodian.
Additional purchases of shares can be made by calling the Transfer Agent
toll-free at 1-800-221-4524, to place a purchase order and then wiring federal
funds in the amount of the purchase.
With respect to both initial and subsequent purchases of shares, the wiring
bank should be instructed to wire federal funds to:
US Bank, NA
Minneapolis, MN
ABA#: 091 000 022
CR: CIIT LAF
Account#: 1702 2503 5030
FUR CR: ______________ ______________
Name Acct#
6
<PAGE> 7
Purchases by Check. Shares may be purchased by check in accordance with the
instructions below. Shares will be issued on the next Business Day after receipt
of a check at the net asset value determined on such day. Shareholders will
become entitled to dividends when a check is credited to the shareholder's
account in the form of federal funds (generally one Business Day after receipt
of a check).
Checks for both initial and subsequent purchases of shares should indicate
the account name and number and be made payable to Liquid Asset Fund and sent by
mail to the Transfer Agent at:
Liquid Asset Fund
905 Marconi Avenue
Ronkonkoma, New York 11779
SHAREHOLDER ACCOUNTS
The Trust does not issue certificates for shares of the Fund. Instead, one
or more accounts are maintained for each shareholder reflecting full and
fractional shares of the Fund the shareholder owns. Shareholders are sent
confirmations of each account transaction, and monthly statements showing
account balances.
Sub-Account Services. Special sub-accounting procedures are available for
investors wishing to open multiple accounts to meet requirements regarding the
commingling of funds or for accounting convenience. Sub-accounts can be
established at any time by calling the Transfer Agent. Please call toll-free at
1-800-221-4524 for further information and appropriate forms. Investors who have
established sub-accounts will receive periodic confirmations and statements of
holdings and transactions.
Minimum Account Balance. There is no minimum account balance for the Fund.
However, in order to avoid costs associated with inactive accounts, if there has
been no activity in an account with no balance for a period of six months, the
Fund may close the account. A shareholder will be given 60 days' written notice
of the Fund's intention to close the account.
REDEEMING SHARES
Shareholders may redeem all or any portion of the shares in their accounts
at any time at the net asset value next computed after the receipt of a
redemption request in proper form. Redemptions may be made by telephone, mail,
or check, as described below. Redemption proceeds will be paid by federal funds
wire to one or more of the bank accounts that have been predesignated by the
shareholder, normally on the day the redemption request is received. If a
redemption request is not received prior to 2:00 p.m. (Eastern time), or as of
the closing time of the U.S. government securities markets on days when the PSA
recommends an early closing of such markets, it will be processed on the
following Business Day. Shares are not entitled to receive dividends declared on
the day the shares are redeemed. See "Dividends and Distributions." In the case
of complete redemption of all shares in an account, the redemption payment will
include the amount of all dividends declared for the month-to-date on shares
held in the account. Except in unusual circumstances described in the Statement
of Additional Information, the Fund will not suspend the right of redemption or
postpone the payment of redemption proceeds for more than seven days; however,
if shares have recently been purchased by check (including, in each case,
certified checks and cashiers checks), the payment of redemption proceeds will
be delayed until the purchase check has cleared (the time varies from state to
state) which may take up to 15 days. For this reason, shareholders who
anticipate the need for immediate access to their investments should purchase
shares with federal funds.
A completed registration form must be on file with the Transfer Agent in
order to redeem shares. See "Purchasing Shares." Shareholders will be asked to
designate a primary recipient bank account on their registration form. The
primary recipient account may be changed at any time, and any number of
secondary recipient bank accounts can be added, provided proper written
instructions are on file. Please call the Transfer Agent to receive additional
information and appropriate forms.
In order to permit the Investment Adviser to manage the Fund most
effectively, investors should place telephone redemption requests as early in
the day as possible by calling the Transfer Agent toll-free at 1-800- 221-4524.
Telephone Redemption Procedures. A request to redeem shares may be placed by
calling the Transfer Agent at 1-800-221-4524. The shareholder will be asked to
provide the account name and number, and the amount of the redemption. Proceeds
of the
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<PAGE> 8
redemption will be sent to the primary recipient bank account designated by the
shareholder unless the shareholder requests that payment be made to a
predesignated secondary recipient bank account. Proceeds will be sent by Federal
Reserve wire, normally on the day the redemption request is received. Redemption
requests that are not received prior to 2:00 p.m. (Eastern time), or as of the
closing time of the U.S. government securities markets on days when the PSA
recommends an early closing of such markets, will be processed the following
Business Day.
The Transfer Agent employs reasonable procedures to confirm that telephone
redemption instructions are genuine such as recording telephone calls, providing
written confirmation of transactions, or requiring a form of personal
identification or other information prior to effecting a telephone redemption.
To the extent such procedures are used, neither the Trust or the Fund, nor the
Investment Adviser or any of its affiliates, will be liable for a loss due to
fraudulent or unauthorized telephone instructions. A REDEMPTION BY TELEPHONE MAY
BE MADE ONLY IF THE TELEPHONE REDEMPTION PRIVILEGE HAS BEEN SELECTED ON THE
REGISTRATION FORM, OR WRITTEN INSTRUCTIONS HAVE BEEN FILED WITH THE TRANSFER
AGENT.
During periods of severe market or economic conditions, it may be difficult
to contact the Transfer Agent by telephone. In such an event a shareholder
should send a written redemption request by overnight delivery to the Transfer
Agent and follow the procedures for written redemption requests described below.
Written Redemption Requests. Shares of the Fund may be redeemed by written
redemption request. A written redemption request must be signed by each of the
persons who the shareholder has specified as required to sign such requests. The
request must include the complete account name and address, the amount of the
redemption, and the predesignated primary or secondary recipient bank account to
which the proceeds of the redemption are to be sent. The signature of each
person signing the request must be guaranteed by an eligible guarantor
institution. Organizations that may qualify as eligible guarantor institutions
include banks, brokers, dealers, national securities exchanges, clearing
agencies, credit unions, and savings associations. The Transfer Agent reserves
the right to request additional information from, and to make reasonable
inquiries of, any eligible guarantor institution.
Written redemption requests should be sent to:
Liquid Asset Fund
905 Marconi Avenue
Ronkonkoma, New York 11779
Check Redemption Privilege. Shareholders may make arrangements to redeem
shares of the Fund by check by filling out a checkwriting authorization form and
signing the subcustodian bank's certificate of authority form. Shareholders may
write checks in any dollar amount. Checks will be honored only if they are
properly signed by a person authorized on the certificate of authority. Checks
will be furnished without charge, and may be written in any amount (not
exceeding the balance of the shareholder's account) and made payable to any
person. Redemption checks will not be honored if there is an insufficient share
balance to pay the check or if the check requires the redemption of shares
recently purchased by check which has not cleared. There is a charge for
stop-payments or if the Fund cannot honor a redemption check due to insufficient
funds or other valid reasons. Checkwriting privileges may be modified or
terminated at any time by the Fund.
EXCHANGE PRIVILEGE
Shareholders may exchange shares of the Fund for shares of Institutional
Cash Fund (another series of the Trust) based upon the relative net asset values
per share of the funds at the time the exchange is effected. No sales charge or
other fee is imposed in connection with exchanges. Before requesting an
exchange, shareholders should obtain and read the prospectus of the fund whose
shares will be acquired in the exchange. Prospectuses can be obtained by calling
the Transfer Agent at 1-800-221-4524.
All exchanges into Institutional Cash Fund are subject to the minimum
initial investment requirement of that fund. In addition, an exchange is
permitted only between accounts that have identical registrations. Shares of
Institutional Cash Fund may be acquired in an exchange only if the shares are
currently being offered and are legally available for sale in the state of the
shareholder's residence.
An exchange involves the redemption of shares of the Fund and the purchase
of shares of another fund. Shares of the Fund will be redeemed at the net asset
value per share of the Fund next computed after receipt of an exchange request
in proper form. See "Net Asset Value." Shares of the fund being acquired in the
exchange will be purchased when the proceeds of the redemption become
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<PAGE> 9
available (normally, on the day the exchange request is received) at the net
asset value of those shares then in effect. See "Redeeming Shares." The acquired
shares will be entitled to receive dividends in accordance with the policies of
the applicable fund.
The exchange privilege may be modified or terminated at any time. However,
60 days' prior notification of any modification or termination will be given to
shareholders.
Telephone Exchange Procedures. A request to exchange shares may be placed by
calling the Transfer Agent at 1-800-221-4524. Telephone exchange requests that
are not received prior to 2:00 p.m. (Eastern time), or as of the closing time of
the U.S. government securities markets on days when the PSA recommends an early
closing of such markets, will be proceeds the following Business Day. A written
confirmation of the exchange transaction will be sent to the shareholder. As in
the case of telephone redemption requests, the Transfer Agent employs reasonable
procedures to confirm that telephone exchange instructions are genuine. To the
extent such procedures are used, neither the Trust or the Fund, nor the
Investment Adviser or any of its affiliates, will be liable for a loss due to
fraudulent or unauthorized telephone exchange instructions. An exchange by
telephone may be made only if the telephone exchange privilege has been selected
on the account application, or written instructions have been filed with the
Transfer Agent.
During periods of severe market or economic conditions, it may be difficult
to contact the Transfer Agent by telephone. In such event, a shareholder should
send a written exchange request by overnight delivery to the Transfer Agent and
follow the procedures for written exchange requests described below.
Written Exchange Procedures. Requests to exchange shares may be submitted in
writing. Each written exchange request should specify the complete account name
and number of the shareholder's account with the Fund and the amount to be
exchanged. The request must be signed by each of the persons who the shareholder
has specified as required to sign redemption requests. The signature of each
person signing the exchange request must be guaranteed by an eligible guarantor
institution. Written exchange requests should be sent to the Transfer Agent at
the address indicated above under "Redeeming Shares--Written Redemption
Requests."
NET ASSET VALUE
The Fund's share price, or net asset value per share, is calculated as of
4:00 p.m. (Eastern time) each Business Day, except on days for which the PSA
recommends an early closing of the U.S. government securities markets when the
net asset value will be computed as of such earlier closing time. Net asset
value per share is determined by subtracting the Fund's liabilities (including
accrued expenses and dividends payable) from the total value of the Fund's
investments and other assets (including the Fund's interest in the Portfolio)
and dividing the result by the total number of outstanding shares of the Fund.
For purposes of calculating net asset value per share, securities held by
the Portfolio are valued using the "amortized cost" method of valuation. This
method involves valuing each investment at cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the investment.
Amortized cost valuation provides certainty in valuation, but may result in
periods during which the value of an investment, as determined by amortized
cost, is higher or lower than the price that would be received if the investment
were sold. Use of this valuation method permits the maintenance of the Fund's
net asset value at $1.00 per share. There can be no assurance, however, that the
Fund will be able to maintain a stable net asset value of $1.00 per share.
In using this method, the Trust has adopted certain procedures and adheres
to various investment limitations as required by Rule 2a-7 under the Investment
Company Act. These procedures, among other things, require the Investment
Adviser to monitor the deviation between net asset value determined by using
available market quotations or market equivalents and net asset value determined
by using amortized cost.
FUND EXPENSES
The Fund's expenses are deducted from total income before dividends are
paid. The Fund bears all expenses of its operations other than those expressly
assumed by the Investment Adviser. Expenses borne by the Fund, which include its
proportionate share of the fees and expenses of the Portfolio, include, but are
not limited to: investment advisory, administration and transfer agent fees; the
fees and expenses of the Trust's independent auditors, legal counsel and
custodian; taxes; brokerage fees and commissions; interest; costs incident to
meetings of Trustees and shareholders, printing and mailing prospectuses and
reports to shareholders, and the filing of
9
<PAGE> 10
reports with regulatory bodies and the maintenance of the Trust's legal
existence; federal and state registration fees; the fees and expenses of
non-interested Trustees of the Trust; and any extraordinary expenses of a
non-recurring nature.
As discussed under "Summary of Expenses," the Investment Adviser has
voluntarily undertaken to waive its fees or to absorb expenses of the Fund as
may be necessary to limit total ordinary operating expenses of the Fund to a
specified percentage of the Fund's average daily net assets. The Investment
Adviser may modify or terminate this undertaking at any time upon prior written
notice to the Fund.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and accrued daily on each Business Day based upon the
Fund's net investment income, including any net realized short-term capital
gains, and are paid monthly. Distributions of net realized long-term capital
gains, if any, are declared and paid annually at the end of the Fund's fiscal
year in which they have been earned. All dividends and other distributions are
automatically reinvested in full and fractional shares of the Fund at net asset
value unless otherwise requested by the shareholder. A shareholder can request
that dividends and other distributions be paid by wire transfer to a
predesignated bank account by sending a written request to the Transfer Agent.
Any such request must be received by the Transfer Agent at least five Business
Days prior to a payment date in order to be effective on such date.
Dividends are payable to all shareholders of record as of the time of
declaration. Shareholders will begin receiving dividends on shares the day the
shares are purchased, but will not be entitled to receive dividends declared the
day shares are redeemed. Shares purchased through dividend reinvestment will
begin earning dividends the day after they are credited to the shareholder's
account.
The Fund does not expect to realize any long-term capital gains. Should any
such gains be realized, they will be distributed annually. In addition, in order
to satisfy certain distribution requirements of the Internal Revenue Code of
1986, as amended (the "Code"), the Fund may declare special or regular year-end
dividend and capital gains distributions during October, November or December.
Such distributions, if received by shareholders by January 31, are deemed to
have been paid by the Fund and received by shareholders on December 31 of the
prior year.
TAXES
Taxation of the Fund. The Fund has elected and intends to qualify each year
as a "regulated investment company" under Subchapter M of the Code. If so
qualified, the Fund will not be subject to federal income tax to the extent it
distributes its net income to shareholders. Certain federal income and excise
taxes would be imposed on the Fund if it failed to make certain required
distributions of income to shareholders. The Fund intends to make distributions
in a manner which will avoid the imposition of such tax. If the Fund should fail
to qualify as a "regulated investment company," it would be subject to regular
federal income tax on its taxable income. The Fund intends to carry on its
operations so that it will continue to qualify as a regulated investment
company.
Federal Taxation of Shareholders. Dividend distributions, whether received
in cash or reinvested in additional shares, will be taxable as ordinary income.
Although the Fund does not expect to distribute any long-term capital gains,
investors will also be subject to tax on any capital gains distributions they
receive. Since the Fund does not expect to earn dividend income, dividends and
other distributions from the Fund will generally not qualify for the
dividends-received deduction available to corporate investors. In January of
each year, the Fund sends each shareholder a statement showing the tax status of
distributions for the past calendar year.
Section 115(1) of the Code provides, in part, that gross income does not
include income derived from the exercise of any essential government function
accruing to a state or any political subdivision thereof. Shareholders are urged
to consult their own tax advisors to determine any limitations on the
applicability of Section 115(1) to earnings from their investment in the Fund. A
portion of the earnings derived from funds which are subject to the arbitrage
limitations or rebate requirements of the Code may be required to be paid to the
U.S. Treasury as computed in accordance with such requirements.
The redemption of shares of the Fund is a taxable event, and may result in a
capital gain or loss. However, because the Fund seeks to maintain a stable net
asset value of $1.00 per share for both purchases and redemptions, it is
generally expected that shareholders will not ordinarily realize any capital
gain or loss upon redemptions of shares.
10
<PAGE> 11
The Fund is required to withhold 31% of all taxable distributions and
redemption proceeds paid to shareholders who either have not complied with IRS
taxpayer identification regulations or are otherwise subject to backup
withholding. Shareholders are asked to certify on their registration forms that
their taxpayer identification numbers are correct and that they are not subject
to backup withholding. Failure to so certify will result in backup withholding.
State and Local Taxes. Investors may be subject to state and local taxes on
their investment. For example, dividends and other distributions made by the
Fund and received by an investor may be subject to state and local taxes.
Although shareholders of the Fund do not directly receive interest on Government
Securities held by the Fund, certain states and localities may allow the
character of the Fund's income to pass through to shareholders. If so, the
portion of dividends paid by the Fund that is derived from interest on certain
Government Securities may be exempt from state and local taxes. Applicable rules
vary from state to state, and interest on certain Agency Securities may not
qualify for exemption from income tax in some states. The United States Supreme
Court has ruled that income from certain types of repurchase agreements
involving Government Securities does not constitute interest on Government
Securities for this purpose. However, it is not clear whether the Court's
holding extends to all types of repurchase agreements involving Government
Securities in which the Fund may invest. Any exemption from state and local
income taxes does not preclude states from assessing other taxes (such as
intangible property taxes) on the ownership of Government Securities.
The tax discussion set forth above regarding federal and state income
taxation is included for general information only. Prospective investors should
consult their own tax advisors concerning the federal and state tax consequences
of an investment in the Fund.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust is responsible for supervising the
operations and affairs of the Trust, the Fund and the Portfolio. The Trust's
officers, who are all officers or employees of the Investment Adviser, are
responsible for the daily management and administration of the Fund's
operations.
Investment Adviser. The Investment Adviser, Cadre Financial Services, Inc.,
905 Marconi Avenue, Ronkonkoma, New York 11779, 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
state municipalities and municipal authorities. Ambac is a publicly held company
whose shares are traded on the New York Stock Exchange.
As of October 23, 1998, the Investment Adviser provided investment
management services to 24 investment accounts and had aggregate assets under
management in excess of $3 billion. In addition, through its subsidiaries, Ambac
manages its own investment portfolios of approximately $5 billion.
Subject to overall supervision by the Board of Trustees, the Investment
Adviser is responsible for managing the assets of the Portfolio in accordance
with the its investment objective and policies. The Investment Adviser
formulates a continuing investment program and makes all decisions regarding
securities to be purchased or sold for the Portfolio. In addition, the
Investment Adviser provides all necessary administrative services to the
Portfolio and furnishes, without expense to the Fund, the services of its
personnel to serve as officers and Trustees of the Trust. The Portfolio pays the
Investment Adviser a monthly fee computed at the annual rate of 0.06% of the
Portfolio's net assets.
Administrator. The Investment Adviser also provides administration services
to the Fund pursuant to a separate Administration Agreement. The administrative
services provided include, but are not limited to: overseeing the preparation
and maintenance of all documents and records required to be maintained by the
Trust; preparing and updating required regulatory filings, prospectuses and
shareholder reports; providing, at its own expense, the services of its
personnel to serve as officers of the Trust; and preparing and disseminating
material for meetings of the Board of Trustees. For these services, the Fund
pays the Investment Adviser a monthly fee calculated at an annual rate of 0.19%
of the Fund's average daily net assets on the first $250 million of net assets
of the Fund, 0.165% on the next $750 million of average daily net assets of the
Fund and 0.14% on average daily net assets of the Trust in excess of $1 billion.
The Investment Adviser also provides the Trust with fund accounting services for
which it is not paid any additional compensation.
PERFORMANCE INFORMATION
11
<PAGE> 12
The Fund may publish its "current yield" and "effective yield" in
advertisements, sales materials and shareholder reports. Current yield refers to
the income generated by an investment in the Fund over a seven-day period; the
income is then annualized. In annualizing income, the amount of income generated
by the investment during the period 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 in the same manner, but when annualized, the income earned
by an investment in the Fund is assumed to be reinvested. The effective yield
will be slightly higher than the current yield because of the compounding effect
of the assumed reinvestment. All quotations of investment performance are based
upon historical investment results and are not intended to predict future
performance.
In addition, comparative performance information may be used from time to
time in advertisements, sales literature and shareholder reports. This
information may include data, ratings and rankings from Lipper Analytical
Services, Inc., IBC Financial Data Money Fund Report, The Bank Rate Monitor,
Morningstar and other industry publications, business periodicals and services.
Comparisons to recognized market indices and to the returns on specific money
market securities or types of securities or investments may also be used. The
Fund may disseminate yields for periods longer than seven days, and may report
its total return. The "total return" of the Fund refers to the average annual
compounded rate of return over a specified period (as stated in the
advertisement) that would equate an initial amount invested at the beginning of
the period to the end of period redeemable value of the investment, assuming the
reinvestment of all dividends and distributions.
GENERAL INFORMATION
Description of Shares. The Trust is a Delaware business trust organized
pursuant to a Certificate of Trust dated June 27, 1995, as amended, and is
authorized to issue an unlimited number of shares of beneficial interest, $.001
par value. As of the date of this Prospectus, the Trust has nine authorized
series of its shares, each representing interests in a separate investment
portfolio. One of those series represents interests in the Fund. The Board of
Trustees has the power to establish additional series of shares, representing
interests in separate investment portfolios and, subject to applicable laws and
regulations, to issue two or more classes of shares of each series. Shares are
fully paid and non-assessable, and have no preemptive or conversion rights.
Generally, shareholders of the Fund, together with shareholders of each
other series of the Trust, are entitled to vote on the election of Trustees and
the ratification of the Trust's independent auditors when those matters are
voted upon at a meeting of shareholders. On other matters affecting the Fund on
which shareholders are entitled to vote, shares of the Fund will generally be
voted as a separate class from other series. Each share of the Fund (and
fractional share) is entitled to one vote (or function thereof), except that
where shares of more than one series vote together, each share (and fractional
share) is entitled to that number of votes which equals the net asset value of
such share (or fraction thereof). All shares have non-cumulative voting rights,
meaning that shareholders entitled to cast more than 50% of the votes for the
election of Trustees can elect all of the Trustees standing for election if they
choose to do so.
Under Delaware law, shareholders of the Fund could, under certain
circumstances, be held personally liable for the obligations of the Trust but
only to the extent of the shareholder's investment. However, the Declaration of
Trust disclaims liability of shareholders, Trustees or officers of the Trust for
acts or obligations of the Trust, which are binding only on the assets and
property of the Trust. The risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and should be considered remote.
Annual meetings of shareholders will not be held except as required by the
Investment Company Act or other applicable law. A meeting will be held on the
removal of a Trustee or Trustees of the Trust if requested in writing by holders
of not less than 10% of the outstanding shares of the Trust.
Transfer Agent. The Investment Adviser serves as the Trust's transfer agent,
shareholder servicing agent and dividend disbursing agent. Shareholders of the
Fund should call 1-800-221-4524 with their questions regarding transactions in
shares of the Fund and share account balances.
Custodian. U.S. Bank National Association, U.S. Bank Place, 601 Second
Avenue South, Minneapolis, Minnesota 55402, serves as custodian of the Trust,
and in that capacity maintains custody of all securities and cash assets of the
Fund and the Portfolio. The custodian is authorized to hold the Portfolio's
investments in securities depositories and to use subcustodians approved by the
Trust.
12
<PAGE> 13
Distributor. Cadre Securities, Inc., 905 Marconi Avenue, Ronkonkoma, New
York, 11779, serves as distributor of the Fund's shares. The Distributor may,
from time to time, enter into selling agreements with dealers or other financial
institutions, and in accordance therewith, pay to such dealers or institutions,
in connection with sales or the distribution of shares of the Fund, material
compensation or promotional incentives, in the form of cash or other
compensation. Such compensation and incentives are not paid by the Fund and will
not be a Fund expense.
Additional Information. This Prospectus, including the Statement of
Additional Information which has been incorporated by reference herein, does not
contain all the information set forth in the Registration Statement filed by the
Trust with the SEC under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the office of the SEC in Washington, D.C.
Shareholder Reports. The Trust sends shareholders annual and semi-annual
reports without charge. These reports include further information regarding the
Fund's performance. The financial statements of the Fund appearing in the
Trust's annual reports are audited by KPMG Peat Marwick LLP, the Trust's
independent auditors.
Shareholder Inquiries. For questions concerning shareholder accounts,
dividends and share purchase and redemption procedures, contact the Transfer
Agent toll free at 1-800-221-4524 or at 905 Marconi Avenue, Ronkonkoma, New York
11779.
13
<PAGE> 14
INVESTMENT ADVISER, ADMINISTRATOR
AND TRANSFER AGENT
Cadre Financial Services, Inc.
905 Marconi Avenue,
Ronkonkoma, New York 11779
DISTRIBUTOR
Cadre Securities, Inc.
905 Marconi Avenue
Ronkonkoma, New York 11779
CUSTODIAN
U.S. Bank National Association
U.S. Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
LEGAL COUNSEL
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
14
<PAGE> 15
Investors are advised to read this Prospectus and retain it for future
reference.
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS. IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER BY THE TRUST OR BY THE DISTRIBUTOR TO SELL OR A SOLICITATION
OR AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
LIQUID ASSET FUND
A SERIES OF CADRE INSTITUTIONAL INVESTORS TRUST
.........................................................................
SUMMARY OF EXPENSES 2
.........................................................................
FINANCIAL HIGHLIGHTS 3
.........................................................................
SUITABLE INVESTORS 3
.........................................................................
INVESTMENT OBJECTIVE AND POLICIES 4
.........................................................................
PURCHASING SHARES 6
.........................................................................
SHAREHOLDER ACCOUNTS 7
.........................................................................
REDEEMING SHARES 7
.........................................................................
EXCHANGE PRIVILEGE 8
.........................................................................
NET ASSET VALUE 9
.........................................................................
FUND EXPENSES 10
.........................................................................
DIVIDENDS AND DISTRIBUTIONS 10
.........................................................................
TAXES 10
.........................................................................
MANAGEMENT OF THE FUND 12
.........................................................................
PERFORMANCE INFORMATION 12
.........................................................................
GENERAL INFORMATION 13
.........................................................................
- ---------------------------------------------------------
Prospectus
July 27, 1998, as supplemented December 15, 1998
15
<PAGE> 16
INSTITUTIONAL CASH FUND
A SERIES OF CADRE INSTITUTIONAL
INVESTORS TRUST
905 Marconi Avenue
Ronkonkoma, New York 11779
Institutional Cash Fund (the "Fund") is a series of Cadre Institutional
Investors Trust (the "Trust"), a diversified, open-end management investment
company. The Fund is a money market fund and seeks to maintain a stable net
asset value of $1.00 per share. The investment objective of the Fund is high
current income, consistent with preservation of capital and maintenance of
liquidity. The Fund pursues this objective by investing all of its investable
assets in the U.S. Government Money Market Portfolio (the "Portfolio"), a
separate series of the Trust that has the same investment objective and
substantially the same investment policies as the Fund. The Portfolio invests
exclusively in short-term debt securities that are issued or guaranteed by the
U.S. government or an agency or instrumentality of the U.S. government
("Government Securities") and repurchase agreements collateralized by Government
Securities. See "Investment Objective and Policies." Cadre Financial Services,
Inc. (the "Investment Adviser") serves as the investment adviser of the
Portfolio.
Shares of the Fund are offered for sale on a no-load basis to states and
municipalities, and their subdivisions and agencies, as well as to other
institutional investors. No sales commissions or other charges are imposed
upon the purchase or redemption of shares. The minimum initial investment in
shares of the Fund is $1 million. Subsequent investments may be made in any
amount. See "Purchasing Shares." Investors in the Fund must maintain a
minimum share account balance of $1 million. Shares of the Fund are not
insured by Ambac Assurance Corporation.
An investment in the Fund is neither insured nor guaranteed by the U.S.
government and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share. See "Net Asset Value."
This Prospectus sets forth concisely the information about the Fund and
the Trust that a prospective investor should know before investing.
Additional information about the Fund and the Trust has been filed with the
Securities and Exchange Commission (the "SEC") in a Statement of Additional
Information dated July 27, 1998, as supplemented December 15, 1998, which is
incorporated herein by reference and is available without charge by writing
to the Transfer Agent or by calling 1-800-221-4524.
Investors are advised to read this Prospectus
and retain it for future reference.
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.
The date of this Prospectus is July 27, 1998, as supplemented December 15, 1998
<PAGE> 17
SUMMARY OF EXPENSES
The following table is designed to assist prospective investors in
understanding the various direct and indirect costs and expenses that a
shareholder in the Fund will bear. It summarizes the estimated shareholder
transaction and annual operating expenses of the Fund and the Portfolio in which
the Fund it invests. The amounts set forth below under "Other Expenses," as well
as the amounts in the example below, are based upon estimates of expenses for
the current fiscal year.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases........................... None
Maximum Sales Load Imposed on Reinvested Dividends................ None
Deferred Sales Load............................................... None
Redemption Fee.................................................... None
Exchange Fee...................................................... None
ANNUAL FUND OPERATING EXPENSES
Net of Expense
(as a percentage of average net assets) Reimbursement
Investment Advisory Fee........................................... 0.06%
12b-1 Fees........................................................ None
Other Expenses (after reimbursement).............................. 0.14%
Total Fund Operating Expenses..................................... 0.20%
The Investment Adviser has voluntarily agreed to waive its fees or absorb
expenses to the extent necessary to assure that the ordinary operating expenses
of the Fund do not exceed annually 0.20% of the Fund's average daily net assets.
Absent this agreement, other estimated expenses and estimated total operating
expenses annually would be 0.24% and 0.30%, respectively, of the Fund's average
daily net assets. The Investment Adviser reserves the right to modify or
terminate at any time its agreement to waive fees and absorb expenses upon prior
written notice to the Fund.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
---------------------------------------- -------- --------
<S> <C> <C>
You 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: $2.05 $6.44
</TABLE>
The example is based upon estimated 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 a representation of past or future expenses.
For a more complete description of costs and expenses, see "Management of
the Fund."
2
<PAGE> 18
SUITABLE INVESTORS
The Fund is specifically designed for investors concerned about the safety
of their investments and is a low-cost, professionally managed cash management
vehicle for states, municipalities, and their subdivisions and agencies,
including school and special purpose districts, and for other institutional
investors. It offers investment diversification, administrative convenience and
operating economies of scale to investors whose investment policies and
guidelines are consistent with those of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek high current income,
consistent with preservation of capital and maintenance of liquidity. The Fund
pursues this objective by investing all of its investable assets in the U.S.
Government Money Market Portfolio (the "Portfolio"). The Portfolio is a series
of the Trust that has the same investment objective and substantially the same
investment policies as the Fund and invests exclusively in short-term debt
securities issued or guaranteed by the U.S. government or an agency or
instrumentality of the U.S. government ("Government Securities") and repurchase
agreements collateralized by Government Securities. The Portfolio maintains a
dollar-weighted average portfolio maturity of 90 days or less, and invests only
in securities having remaining maturities of 397 days or less. As a money market
fund, the Fund seeks to maintain a stable net asset value of $1.00 per share. No
assurance can be given that the Fund will be able to achieve its investment
objective or maintain a stable net asset value. See "Net Asset Value."
Government Securities include obligations that are issued by the U.S.
Treasury. These obligations, which include Treasury bills, notes and bonds, are
backed by the full faith and credit of the U.S. government. Government
Securities also include obligations issued by federal agencies and
instrumentalities ("Agency Securities"). Certain Agency Securities, such as the
Export-Import Bank of the United States, the General Services Administration,
the Government National Mortgage Association, and the Small Business
Administration, are backed by the full faith and credit of the U.S. government.
Other Agency Securities, such as obligations of the Federal Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association and Student Loan Marketing Association, are backed
by the right of the issuer to borrow from the U.S. Treasury under certain
circumstances or are backed by the credit of the agency or instrumentality
issuing the obligation. These types of Agency Securities are not deemed direct
obligations of the United States, and therefore involve more risk than
obligations which are backed by the full faith and credit of the U.S.
government. All securities purchased by the Portfolio, including repurchase
agreements, must be of high quality and be determined by the Investment Adviser
to present minimal credit risks pursuant to procedures adopted by the Board of
Trustees of the Trust.
THE PORTFOLIO MAY INVEST IN CERTAIN VARIABLE AND FLOATING RATE SECURITIES,
AS DESCRIBED BELOW, BUT DOES NOT INVEST IN ANY OTHER SECURITIES COMMONLY KNOWN
AS DERIVATIVES.
The Fund's investment objective is fundamental and may not be changed
without the approval of the holders of a majority of the outstanding voting
securities of the Fund, as defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"). No assurance can be given that the Fund
will achieve its investment objective.
Repurchase Agreements. A repurchase agreement involves the purchase of a
security by the Portfolio with an agreement by the seller of the security to
repurchase it from the Portfolio at a mutually agreed upon day and price,
frequently the next business day. The resale price is in excess of the purchase
price and reflects the rate of return earned by the Portfolio. The maturities of
repurchase agreements entered into by the Portfolio normally do not exceed seven
days. However, the Portfolio may enter into a repurchase agreement maturing in
more than seven days provided that not more than 10% of its net assets would, as
a result, be invested in repurchase agreements having maturities in excess of
seven days and under which the Portfolio also does not have the right to
repayment within seven days. Repurchase agreements will at all times be fully
collateralized by their underlying securities ("collateral") in an amount at
least equal to the purchase price plus accrued interest, marked to market daily.
The collateral for repurchase agreements is held by the Trust's custodian (or a
subcustodian) and is required to consist of Government Securities (without
regard to the maturity of such obligations). If the seller defaults and the
value of the collateral securing a repurchase agreement declines, the Fund may
incur a loss. The Portfolio, however, enters into repurchase agreements only
with banks or primary dealers designated as such by the Federal Reserve Bank of
New York and which have been determined by the Investment Adviser to present
minimal credit risk in accordance with guidelines established by the Board of
Trustees of the Trust.
3
<PAGE> 19
Variable and Floating Rate Securities. Government Securities purchased by
the Portfolio may include variable and floating rate securities. The interest
rates payable on these securities are adjusted either at predesignated intervals
or whenever there is a change in an established benchmark rate of interest, and,
upon reset, the market value approximates par. These securities may also have a
demand feature under which the Portfolio can demand repayment of principal on
specified dates or after giving specified notice. The Portfolio only purchases
variable and floating rate Government Securities that are eligible for purchase
by money market funds under applicable regulations, and therefore does not
purchase securities such as inverse floaters, range floaters, COFI floaters,
capped floaters or dual index floaters. In determining the maturities of
securities and calculating the dollar-weighted average portfolio maturity,
variable rate Government Securities are deemed to have a maturity equal to the
period remaining until the next readjustment of the interest rate. Floating rate
Government Securities with demand features are deemed to have a maturity equal
to the period remaining until the principal amount can be recovered through
demand.
When-Issued and Delayed Delivery Securities. The Portfolio may purchase or
sell securities on a when-issued or delayed delivery basis. In these
transactions, securities are purchased or sold with payment and delivery taking
place as much as a month or more in the future. These transactions are used to
secure an advantageous price and yield at the time of entering into the
transactions. However, the value of securities purchased on a when-issued basis
is subject to market fluctuation and no interest accrues to the purchaser during
the period between purchase and settlement.
Borrowings. The Fund and the Portfolio do not borrow for purposes of making
investments (a practice known as "leverage"). However, they each may borrow
money from banks in an amount not exceeding one-third of the value of its total
assets (calculated at the time of the borrowing) for temporary extraordinary or
emergency purposes. The Fund and the Portfolio may pledge their assets to secure
these borrowings. Additional investments will not be made by the Fund or the
Portfolio while it has any borrowings outstanding.
Investment Restrictions. The Fund and the Portfolio are subject to various
additional restrictions on their investments. Certain of these restrictions are
deemed fundamental policies and cannot be changed without the approval of the
holders of a majority of the Fund's or the Portfolio's outstanding voting
securities, as defined in the Investment Company Act. See "Investment
Restrictions" in the Statement of Additional Information.
Investment Characteristics. The Portfolio invests exclusively in obligations
issued or guaranteed by the U.S. government or an agency or instrumentality of
the U.S. government, and repurchase agreements collateralized by such
securities. Government Securities are of very high credit quality. Shares of the
Fund and the Portfolio are not insured or guaranteed by the U.S. government or
any government agency. The return on an investment in the Fund will increase or
decrease in response to changes in short-term market interest rates. The market
value of the Portfolio's investments will fluctuate, with investments increasing
in value as interest rates fall and decreasing in value as interest rates rise.
However, due to the method used by the Portfolio and the Fund in valuing their
assets, it is expected but cannot be assured that the net asset value of shares
of the Fund will be a stable $1.00 per share. See "Net Asset Value." Virtually
all portfolio transactions for the Portfolio will be effected on a principal
basis with issuers, underwriters or dealers serving as primary market-makers.
Special Information Concerning Investment Structure. The Fund does not
invest directly in securities. Instead, it invests all of its intestables assets
in the Portfolio, which is a series of the Trust that has the same investment
objective and substantially the same investment policies as the Fund. The
Portfolio, in turn, purchases, holds and sells investments in accordance with
that objective and those policies. The Trustees of the Trust believe that the
per share expenses of the Fund (including its share of the Portfolio's expenses)
will be less then or approximately equal to the expenses that the Fund would
incur if its assets were invested directly in securities and other investments.
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 the
investment policies described above 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
interest 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 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 may be
amended to conform to those of the Portfolio.
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<PAGE> 20
Certain investment restrictions of the Portfolio may not be changed without
the approval of investors in the Portfolio. These restrictions are described in
the Statement of Additional Information. When the Fund is asked to vote on
matters concerning the Portfolio, the Fund will hold a shareholder 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. Information about other holders of shares of the Portfolio is
available from the Transfer Agent.
PURCHASING SHARES
Shares of the Fund are offered for sale, without sales charge, at the net
asset value per share next determined after receipt and acceptance of a purchase
order by Cadre Securities, Inc., as distributor of the Fund's shares (the
"Distributor"), subject to timely receipt of federal funds as described below.
Net asset value is computed as of 4:00 p.m. (Eastern time) on each day on which
both the New York Stock Exchange is open for trading and the Federal Reserve
Bank of New York is open (each, a "Business Day"), except on days for which the
Public Securities Association (the "PSA") recommends an early closing of the
U.S. government securities markets when the net asset value will be computed as
of such earlier closing time. See "Net Asset Value." A minimum initial
investment of $1 million is required (except in special circumstances as
described in the Statement of Additional Information). Subsequent investments
may be made in any amount. Although the Fund does not impose any charges in
connection with purchases and redemptions of shares, banks and other financial
intermediaries may impose charges for their services in connection with such
transactions.
Shares become entitled to receive dividends beginning on the day of
purchase. For this reason, the Fund must have federal funds available to it
(i.e., monies credited to its custodian bank by a Federal Reserve bank) on the
day the purchase order is accepted. An order for the purchase of shares of the
Fund is accepted (i) immediately upon receipt of federal funds by wire as
described below or (ii) when a check is credited to the shareholder's account in
the form of federal funds (generally one Business Day after receipt of a check).
Shares will be issued at the net asset value next determined after acceptance of
the purchase order and will be entitled to that day's dividend. The Fund
reserves the right to reject any purchase order and to modify or suspend the
continuous offering of its shares.
In order to permit the Investment Adviser to manage the Portfolio most
effectively, investors should place purchase orders as early in the day as
possible by calling Cadre Financial Services, Inc., in its capacity as the
Fund's transfer agent (the "Transfer Agent"), toll-free at 1-800-221-4524.
Prior to making an initial investment by wire or check, an account number
must be obtained by calling the Transfer Agent toll-free at 1-800-221-4524, or
by mailing a completed registration form to:
Institutional Cash Fund
905 Marconi Avenue
Ronkonkoma, New York 11779
In order to receive an account number by telephone, an investor must provide
the name, address, and tax identification number of the account owner, the
amount being wired or mailed as the initial investment, and the name of the
wiring bank. Promptly after opening accounts by telephone, investors should mail
an original completed registration form for each account opened to the Transfer
Agent. Although share purchases can be made before a registration form is
submitted, shares may not be redeemed until a completed registration form has
been submitted.
Purchases by Federal Funds. Shares may be purchased by wiring federal funds
directly to the Fund in accordance with the instructions below. The Fund does
not impose any transaction charges; however, wire charges may be imposed by the
shareholder's transmitting bank. Shares will be issued at the net asset value
next determined after receipt of an order to purchase shares and will be
entitled to the dividend declared on the date the order is received if the
Trust's custodian receives payment in federal funds in the
5
<PAGE> 21
amount of the purchase order not later than the close of the Federal Reserve
wire on that day. If a purchase order is not received and accepted prior to 4:00
p.m. (Eastern time), or as of the closing time of the U.S. government securities
markets on days when the PSA recommends an early closing of such markets, or if
federal funds are not received by the close of the Federal Reserve wire, shares
will not be issued or entitled to receive dividends until the next computation
of net asset value following the receipt of the purchase order or of federal
funds by the Trust's custodian.
Additional purchases of shares can be made by calling the Transfer Agent
toll-free at 1-800-221-4524, to place a purchase order and then wiring federal
funds in the amount of the purchase.
With respect to both initial and subsequent purchases of shares, the wiring
bank should be instructed to wire federal funds to:
US Bank, NA
Minneapolis, MN
ABA#: 091 000 022
CR: CIIT IC
Account #: 104755879103
FUR CR: ______________ ______________
Name Acct #
Purchases by Check. Shares may be purchased by check in accordance with the
instructions below. Shares will be issued on the next Business Day after receipt
of a check at the net asset value determined on such day. Shareholders will
become entitled to dividends when a check is credited to the shareholder's
account in the form of federal funds (generally one Business Day after receipt
of a check).
Checks for both initial and subsequent purchases of shares should indicate
the account name and number and be made payable to Institutional Cash Fund and
sent by mail to the Transfer Agent at:
Institutional Cash Fund
905 Marconi Avenue
Ronkonkoma, New York 11779
SHAREHOLDER ACCOUNTS
The Trust does not issue certificates for shares of the Fund. Instead, one
or more accounts are maintained for each shareholder reflecting full and
fractional shares of the Fund the shareholder owns. Shareholders are sent
confirmations of each account transaction, and monthly statements showing
account balances.
Sub-Account Services. Special sub-accounting procedures are available for
investors wishing to open multiple accounts to meet requirements regarding the
commingling of funds or for accounting convenience. Sub-accounts can be
established at any time by calling the Transfer Agent. Please call toll-free at
1-800-221-4524 for further information and appropriate forms. Investors who have
established sub-accounts will receive periodic confirmations and statements of
holdings and transactions.
Minimum Account Balance. In order to avoid costs associated with small
accounts, the Fund requires a minimum account balance of $1 million. Accounts
with balances of less than that amount as a result of one or more redemptions of
shares are subject to redemption at the option of the Fund. However, a
shareholder will first be sent written notice of the Fund's intention and given
60 days to purchase additional shares to increase the account balance.
REDEEMING SHARES
Shareholders may redeem all or any portion of the shares in their accounts
at any time at the net asset value next computed after the receipt of a
redemption request in proper form. Redemptions may be made by telephone or mail
as described below. Redemption proceeds will be paid by federal funds wire to
one or more of the bank accounts that have been predesignated by the
shareholder, normally on the day the redemption request is received. If a
redemption request is not received prior to 2:00 p.m. (Eastern time), or as of
the closing time of the U.S. government securities markets on days when the PSA
recommends an early closing of such markets, it
6
<PAGE> 22
will be processed on the following Business Day. Shares are not entitled to
receive dividends declared on the day the shares are redeemed. See "Dividends
and Distributions." In the case of complete redemption of all shares in an
account, the redemption payment will include the amount of all dividends
declared for the month-to-date on shares held in the account. Except in unusual
circumstances described in the Statement of Additional Information, the Fund
will not suspend the right of redemption or postpone the payment of redemption
proceeds for more than seven days; however, if shares have recently been
purchased by check (including, in each case, certified checks and cashiers
checks), the payment of redemption proceeds will be delayed until the purchase
check has cleared (the time varies from state to state) which may take up to 15
days. For this reason, shareholders who anticipate the need for immediate access
to their investments should purchase shares with federal funds.
A completed registration form must be on file with the Transfer Agent in
order to redeem shares. See "Purchasing Shares." Shareholders will be asked to
designate a primary recipient bank account on their registration form. The
primary recipient account may be changed at any time, and any number of
secondary recipient bank accounts can be added, provided proper written
instructions are on file. Please call the Transfer Agent to receive additional
information and appropriate forms.
In order to permit the Investment Adviser to manage the Fund most
effectively, investors should place telephone redemption requests as early in
the day as possible by calling the Transfer Agent toll-free at 1-800- 221-4524.
Telephone Redemption Procedures. A request to redeem shares may be placed by
calling the Transfer Agent at 1-800-221-4524. The shareholder will be asked to
provide the account name and number, and the amount of the redemption. Proceeds
of the redemption will be sent to the primary recipient bank account designated
by the shareholder unless the shareholder requests that payment be made to a
predesignated secondary recipient bank account. Proceeds will be sent by Federal
Reserve wire, normally on the day the redemption request is received. Redemption
requests that are not received prior to 2:00 p.m. (Eastern time), or as of the
closing time of the U.S. government securities markets on days when the PSA
recommends an early closing of such markets, will be processed the following
Business Day.
The Transfer Agent employs reasonable procedures to confirm that telephone
redemption instructions are genuine such as recording telephone calls, providing
written confirmation of transactions, or requiring a form of personal
identification or other information prior to effecting a telephone redemption.
To the extent such procedures are used, neither the Trust or the Fund, nor the
Investment Adviser or any of its affiliates, will be liable for a loss due to
fraudulent or unauthorized telephone instructions. A REDEMPTION BY TELEPHONE MAY
BE MADE ONLY IF THE TELEPHONE REDEMPTION PRIVILEGE HAS BEEN SELECTED ON THE
REGISTRATION FORM, OR WRITTEN INSTRUCTIONS HAVE BEEN FILED WITH THE TRANSFER
AGENT.
During periods of severe market or economic conditions, it may be difficult
to contact the Transfer Agent by telephone. In such an event a shareholder
should send a written redemption request by overnight delivery to the Transfer
Agent and follow the procedures for written redemption requests described below.
Written Redemption Requests. Shares of the Fund may be redeemed by written
redemption request. A written redemption request must be signed by each of the
persons who the shareholder has specified as required to sign such requests. The
request must include the complete account name and address, the amount of the
redemption, and the predesignated primary or secondary recipient bank account to
which the proceeds of the redemption are to be sent. The signature of each
person signing the request must be guaranteed by an eligible guarantor
institution. Organizations that may qualify as eligible guarantor institutions
include banks, brokers, dealers, national securities exchanges, clearing
agencies, credit unions, and savings associations. The Transfer Agent reserves
the right to request additional information from, and to make reasonable
inquiries of, any eligible guarantor institution.
Written redemption requests should be sent to:
Institutional Cash Fund
905 Marconi Avenue
Ronkonkoma, New York 11779
EXCHANGE PRIVILEGE
Shareholders may exchange shares of the Fund for shares of Liquid Asset Fund
(another series of the Trust) based upon the relative net asset values per share
of the funds at the time the exchange is effected. No sales charge or other fee
is imposed in
7
<PAGE> 23
connection with exchanges. Before requesting an exchange, shareholders should
obtain and read the prospectus of the fund whose shares will be acquired in the
exchange. Prospectuses can be obtained by calling the Transfer Agent at
1-800-221-4524.
All exchanges into Liquid Asset Fund are subject to any then applicable
minimum initial investment requirements of that fund. In addition, an exchange
is permitted only between accounts that have identical registrations. Shares of
Liquid Asset Fund may be acquired in an exchange only if the shares are
currently being offered and are legally available for sale in the state of the
shareholder's residence.
An exchange involves the redemption of shares of the Fund and the purchase
of shares of another fund. Shares of the Fund will be redeemed at the net asset
value per share of the Fund next computed after receipt of an exchange request
in proper form. See "Net Asset Value." Shares of the fund being acquired in the
exchange will be purchased when the proceeds of the redemption become available
(normally, on the day the exchange request is received) at the net asset value
of those shares then in effect. See "Redeeming Shares." The acquired shares will
be entitled to receive dividends in accordance with the policies of the
applicable fund.
The exchange privilege may be modified or terminated at any time. However,
60 days' prior notification of any modification or termination will be given to
shareholders.
Telephone Exchange Procedures. A request to exchange shares may be placed by
calling the Transfer Agent at 1-800-221-4524. Telephone exchange requests that
are not received prior to 2:00 p.m. (Eastern time), or as of the closing time of
the U.S. government securities markets on days when the PSA recommends an early
closing of such markets, will be proceeds the following Business Day. A written
confirmation of the exchange transaction will be sent to the shareholder. As in
the case of telephone redemption requests, the Transfer Agent employs reasonable
procedures to confirm that telephone exchange instructions are genuine. To the
extent such procedures are used, neither the Trust or the Fund, nor the
Investment Adviser or any of its affiliates, will be liable for a loss due to
fraudulent or unauthorized telephone exchange instructions. An exchange by
telephone may be made only if the telephone exchange privilege has been selected
on the account application, or written instructions have been filed with the
Transfer Agent.
During periods of severe market or economic conditions, it may be difficult
to contact the Transfer Agent by telephone. In such event, a shareholder should
send a written exchange request by overnight delivery to the Transfer Agent and
follow the procedures for written exchange requests described below.
Written Exchange Procedures. Requests to exchange shares may be submitted in
writing. Each written exchange request should specify the complete account name
and number of the shareholder's account with the Fund and the amount to be
exchanged. The request must be signed by each of the persons who the shareholder
has specified as required to sign redemption requests. The signature of each
person signing the exchange request must be guaranteed by an eligible guarantor
institution. Written exchange requests should be sent to the Transfer Agent at
the address indicated above under "Redeeming Shares--Written Redemption
Requests."
NET ASSET VALUE
The Fund's share price, or net asset value per share, is calculated as of
4:00 p.m. (Eastern time) each Business Day, except on days for which the PSA
recommends an early closing of the U.S. government securities markets when the
net asset value will be computed as of such earlier closing time. Net asset
value per share is determined by subtracting the Fund's liabilities (including
accrued expenses and dividends payable) from the total value of the Fund's
investments and other assets (including the Fund's interest in the Portfolio)
and dividing the result by the total number of outstanding shares of the Fund.
For purposes of calculating net asset value per share, securities held by
the Portfolio are valued using the "amortized cost" method of valuation. This
method involves valuing each investment at cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the investment.
Amortized cost valuation provides certainty in valuation, but may result in
periods during which the value of an investment, as determined by amortized
cost, is higher or lower than the price that would be received if the investment
were sold. Use of this valuation method permits the maintenance of the Fund's
net asset value at $1.00 per share. There can be no assurance, however, that the
Fund will be able to maintain a stable net asset value of $1.00 per share.
8
<PAGE> 24
In using this method, the Trust has adopted certain procedures and adheres
to various investment limitations as required by Rule 2a-7 under the Investment
Company Act. These procedures, among other things, require the Investment
Adviser to monitor the deviation between net asset value determined by using
available market quotations or market equivalents and net asset value determined
by using amortized cost.
FUND EXPENSES
The Fund's expenses are deducted from total income before dividends are
paid. The Fund bears all expenses of its operations other than those expressly
assumed by the Investment Adviser. Expenses borne by the Fund, which include its
proportionate share of the fees and expenses of the Portfolio, include, but are
not limited to: investment advisory, administration and transfer agent fees; the
fees and expenses of the Trust's independent auditors, legal counsel and
custodian; taxes; brokerage fees and commissions; interest; costs incident to
meetings of Trustees and shareholders, printing and mailing prospectuses and
reports to shareholders, and the filing of reports with regulatory bodies and
the maintenance of the Trust's legal existence; federal and state registration
fees; the fees and expenses of Trustees of the Trust who are not employees of
the Investment Adviser or one of its affiliates; and any extraordinary expenses
of a non-recurring nature.
As discussed under "Summary of Expenses," the Investment Adviser has
voluntarily undertaken to waive its fees or to absorb expenses of the Fund as
may be necessary to limit total ordinary operating expenses of the Fund to a
specified percentage of the Fund's average daily net assets. The Investment
Adviser may modify or terminate this undertaking at any time upon prior written
notice to the Fund.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and accrued daily on each Business Day based upon the
Fund's net investment income, including any net realized short-term capital
gains, and are paid monthly. Distributions of net realized long-term capital
gains, if any, are declared and paid annually at the end of the Fund's fiscal
year in which they have been earned. All dividends and other distributions are
automatically reinvested in full and fractional shares of the Fund at net asset
value unless otherwise requested by the shareholder. A shareholder can request
that dividends and other distributions be paid by wire transfer to a
predesignated bank account by sending a written request to the Transfer Agent.
Any such request must be received by the Transfer Agent at least five Business
Days prior to a payment date in order to be effective on such date.
Dividends are payable to all shareholders of record as of the time of
declaration. Shareholders will begin receiving dividends on shares the day the
shares are purchased, but will not be entitled to receive dividends declared the
day shares are redeemed. Shares purchased through dividend reinvestment will
begin earning dividends the day after they are credited to the shareholder's
account.
The Fund does not expect to realize any long-term capital gains. Should any
such gains be realized, they will be distributed annually. In addition, in order
to satisfy certain distribution requirements of the Internal Revenue Code of
1986, as amended (the "Code"), the Fund may declare special or regular year-end
dividend and capital gains distributions during October, November or December.
Such distributions, if received by shareholders by January 31, are deemed to
have been paid by the Fund and received by shareholders on December 31 of the
prior year.
TAXES
Taxation of the Fund. The Fund has elected and intends to qualify each year
as a "regulated investment company" under Subchapter M of the Code. If so
qualified, the Fund will not be subject to federal income tax to the extent it
distributes its net income to shareholders. Certain federal income and excise
taxes would be imposed on the Fund if it failed to make certain required
distributions of income to shareholders. The Fund intends to make distributions
in a manner which will avoid the imposition of such tax. If the Fund should fail
to qualify as a "regulated investment company," it would be subject to regular
federal income tax on its taxable income. The Fund intends to carry on its
operations so that it will continue to qualify as a regulated investment
company.
Federal Taxation of Shareholders. Dividend distributions, whether received
in cash or reinvested in additional shares, will be taxable as ordinary income.
Although the Fund does not expect to distribute any long-term capital gains,
investors will also be subject to tax on any capital gains distributions they
receive. Since the Fund does not expect to earn dividend income, dividends and
other
9
<PAGE> 25
distributions from the Fund will generally not qualify for the
dividends-received deduction available to corporate investors. In January of
each year, the Fund sends each shareholder a statement showing the tax status of
distributions for the past calendar year.
Section 115(1) of the Code provides, in part, that gross income does not
include income derived from the exercise of any essential government function
accruing to a state or any political subdivision thereof. Shareholders are urged
to consult their own tax advisors to determine any limitations on the
applicability of Section 115(1) to earnings from their investment in the Fund. A
portion of the earnings derived from funds which are subject to the arbitrage
limitations or rebate requirements of the Code may be required to be paid to the
U.S. Treasury as computed in accordance with such requirements.
The redemption of shares of the Fund is a taxable event, and may result in a
capital gain or loss. However, because the Fund seeks to maintain a stable net
asset value of $1.00 per share for both purchases and redemptions, it is
generally expected that shareholders will not ordinarily realize any capital
gain or loss upon redemptions of shares.
The Fund is required to withhold 31% of all taxable distributions and
redemption proceeds paid to shareholders who either have not complied with IRS
taxpayer identification regulations or are otherwise subject to backup
withholding. Shareholders are asked to certify on their registration forms that
their taxpayer identification numbers are correct and that they are not subject
to backup withholding. Failure to so certify will result in backup withholding.
State and Local Taxes. Investors may be subject to state and local taxes on
their investment. For example, dividends and other distributions made by the
Fund and received by an investor may be subject to state and local taxes.
Although shareholders of the Fund do not directly receive interest on Government
Securities held by the Fund, certain states and localities may allow the
character of the Fund's income to pass through to shareholders. If so, the
portion of dividends paid by the Fund that is derived from interest on certain
Government Securities may be exempt from state and local taxes. Applicable rules
vary from state to state, and interest on certain Agency Securities may not
qualify for exemption from income tax in some states. The United States Supreme
Court has ruled that income from certain types of repurchase agreements
involving Government Securities does not constitute interest on Government
Securities for this purpose. However, it is not clear whether the Court's
holding extends to all types of repurchase agreements involving Government
Securities in which the Fund may invest. Any exemption from state and local
income taxes does not preclude states from assessing other taxes (such as
intangible property taxes) on the ownership of Government Securities.
The tax discussion set forth above regarding federal and state income
taxation is included for general information only. Prospective investors should
consult their own tax advisors concerning the federal and state tax consequences
of an investment in the Fund.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust is responsible for supervising the
operations and affairs of the Trust, the Fund and the Portfolio. The Trust's
officers, who are all officers or employees of the Investment Adviser, are
responsible for the daily management and administration of the Fund's
operations.
Investment Adviser. The Investment Adviser, Cadre Financial Services, Inc.,
905 Marconi Avenue, Ronkonkoma, New York 11779, 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
state municipalities and municipal authorities. Ambac is a publicly held company
whose shares are traded on the New York Stock Exchange.
As of October 23, 1998, the Investment Adviser provided investment
management services to 24 investment accounts and had aggregate assets under
management in excess of $3 billion. In addition, through its subsidiaries, Ambac
manages its own investment portfolios of approximately $5 billion.
Subject to overall supervision by the Board of Trustees, the Investment
Adviser is responsible for managing the assets of the Portfolio in accordance
with the its investment objective and policies. The Investment Adviser
formulates a continuing investment program and makes all decisions regarding
securities to be purchased or sold for the Portfolio. In addition, the
Investment Adviser provides all necessary administrative services to the
Portfolio and furnishes, without expense to the Fund, the services of its
personnel
10
<PAGE> 26
to serve as officers and Trustees of the Trust. The Portfolio pays the
Investment Adviser a monthly fee computed at the annual rate of 0.06% of the
Portfolio's net assets.
Administrator. The Investment Adviser also provides administration services
to the Fund pursuant to a separate Administration Agreement. The administrative
services provided include, but are not limited to: overseeing the preparation
and maintenance of all documents and records required to be maintained by the
Trust; preparing and updating required regulatory filings, prospectuses and
shareholder reports; providing, at its own expense, the services of its
personnel to serve as officers of the Trust; and preparing and disseminating
material for meetings of the Board of Trustees. For these services, the Fund
pays the Investment Adviser a monthly fee calculated at an annual rate of 0.10%
of the Fund's average daily net assets on the first $250 million of average
daily net assets of the Fund, 0.075% on the next $750 million of average daily
net assets of the Fund and 0.05% on average daily net assets of the Trust in
excess of $1 billion. The Investment Adviser also provides the Trust with fund
accounting services for which it is not paid any additional compensation.
PERFORMANCE INFORMATION
The Fund may publish its "current yield" and "effective yield" in
advertisements, sales materials and shareholder reports. Current yield refers to
the income generated by an investment in the Fund over a seven-day period; the
income is then annualized. In annualizing income, the amount of income generated
by the investment during the period 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 in the same manner, but when annualized, the income earned
by an investment in the Fund is assumed to be reinvested. The effective yield
will be slightly higher than the current yield because of the compounding effect
of the assumed reinvestment. All quotations of investment performance are based
upon historical investment results and are not intended to predict future
performance.
In addition, comparative performance information may be used from time to
time in advertisements, sales literature and shareholder reports. This
information may include data, ratings and rankings from Lipper Analytical
Services, Inc., IBC Financial Data Money Fund Report, The Bank Rate Monitor,
Morningstar and other industry publications, business periodicals and services.
Comparisons to recognized market indices and to the returns on specific money
market securities or types of securities or investments may also be used. The
Fund may disseminate yields for periods longer than seven days, and may report
its total return. The "total return" of the Fund refers to the average annual
compounded rate of return over a specified period (as stated in the
advertisement) that would equate an initial amount invested at the beginning of
the period to the end of period redeemable value of the investment, assuming the
reinvestment of all dividends and distributions.
GENERAL INFORMATION
Description of Shares. The Trust is a Delaware business trust organized
pursuant to a Certificate of Trust dated June 27, 1995, as amended, and is
authorized to issue an unlimited number of shares of beneficial interest, $.001
par value. As of the date of this Prospectus, the Trust has nine authorized
series of its shares, each representing interests in a separate investment
portfolio. One of those series represents interests in the Fund. The Board of
Trustees has the power to establish additional series of shares, representing
interests in separate investment portfolios and, subject to applicable laws and
regulations, to issue two or more classes of shares of each series. Shares are
fully paid and non-assessable, and have no preemptive or conversion rights.
Generally, shareholders of the Fund, together with shareholders of each
other series of the Trust, are entitled to vote on the election of Trustees and
the ratification of the Trust's independent auditors when those matters are
voted upon at a meeting of shareholders. On other matters affecting the Fund on
which shareholders are entitled to vote, shares of the Fund will generally be
voted as a separate class from other series. Each share of the Fund (and
fractional share) is entitled to one vote (or fraction thereof), except that
where shares of more than one series vote together, each share (and fractional
share) is entitled to that number of votes which equals the net asset value of
such share (or fraction thereof). All shares have non-cumulative voting rights,
meaning that shareholders entitled to cast more than 50% of the votes for the
election of Trustees can elect all of the Trustees standing for election if they
choose to do so.
Under Delaware law, shareholders of the Fund could, under certain
circumstances, be held personally liable for the obligations of the Trust but
only to the extent of the shareholder's investment. However, the Declaration of
Trust disclaims liability of shareholders, Trustees or officers of the Trust for
acts or obligations of the Trust, which are binding only on the assets and
property of the Trust.
11
<PAGE> 27
The risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations and should be considered remote.
Annual meetings of shareholders will not be held except as required by the
Investment Company Act or other applicable law. A meeting will be held on the
removal of a Trustee or Trustees of the Trust if requested in writing by holders
of not less than 10% of the outstanding shares of the Trust.
Transfer Agent. The Investment Adviser serves as the Trust's transfer agent,
shareholder servicing agent and dividend disbursing agent. Shareholders of the
Fund should call 1-800-221-4524 with their questions regarding transactions in
shares of the Fund and share account balances.
Custodian. U.S. Bank Trust National Association, U.S. Bank Place, 601 Second
Avenue South, Minneapolis, Minnesota 55402, serves as custodian of the Trust,
and in that capacity maintains custody of all securities and cash assets of the
Fund and the Portfolio. The custodian is authorized to hold the Portfolio's
investments in securities depositories and to use subcustodians approved by the
Trust.
Distributor. Cadre Securities, Inc., 905 Marconi Avenue, Ronkonkoma, New
York, 11779, serves as distributor of the Fund's shares. The Distributor may,
from time to time, enter into selling agreements with dealers or other financial
institutions, and in accordance therewith, pay to such dealers or institutions,
in connection with sales or the distribution of shares of the Fund, material
compensation or promotional incentives, in the form of cash or other
compensation. Such compensation and incentives are not paid by the Fund and will
not be a Fund expense.
Additional Information. This Prospectus, including the Statement of
Additional Information which has been incorporated by reference herein, does not
contain all the information set forth in the Registration Statement filed by the
Trust with the SEC under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the office of the SEC in Washington, D.C.
Shareholder Reports. The Trust sends shareholders annual and semi-annual
reports without charge. These reports include further information regarding the
Fund's performance. The financial statements of the Fund appearing in the
Trust's annual reports will be audited by KPMG Peat Marwick LLP, the Trust's
independent auditors.
Shareholder Inquiries. For questions concerning shareholder accounts,
dividends and share purchase and redemption procedures, contact the Transfer
Agent toll free at 1-800-221-4524 or at 905 Marconi Avenue, Ronkonkoma, New York
11779.
12
<PAGE> 28
INVESTMENT ADVISER, ADMINISTRATOR
AND TRANSFER AGENT
Cadre Financial Services, Inc.
905 Marconi Avenue,
Ronkonkoma, New York 11779
DISTRIBUTOR
Cadre Securities, Inc.
905 Marconi Avenue
Ronkonkoma, New York 11779
CUSTODIAN
U.S. Bank National Association
U.S. Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
345 Park Avenue
New York, New York 10154
LEGAL COUNSEL
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
13
<PAGE> 29
Investors are advised to read this Prospectus and retain it for future
reference.
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS. IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER BY THE TRUST OR BY THE DISTRIBUTOR TO SELL OR A SOLICITATION
OR AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
INSTITUTIONAL CASH FUND
A SERIES OF CADRE INSTITUTIONAL INVESTORS TRUST
........................................................................
SUMMARY OF EXPENSES 2
........................................................................
FINANCIAL HIGHLIGHTS 3
........................................................................
SUITABLE INVESTORS 3
........................................................................
INVESTMENT OBJECTIVE AND POLICIES 4
........................................................................
PURCHASING SHARES 6
........................................................................
SHAREHOLDER ACCOUNTS 7
........................................................................
REDEEMING SHARES 7
........................................................................
EXCHANGE PRIVILEGE 7
........................................................................
NET ASSET VALUE 9
........................................................................
FUND EXPENSES 10
........................................................................
DIVIDENDS AND DISTRIBUTIONS 10
........................................................................
TAXES 10
........................................................................
MANAGEMENT OF THE FUND 12
........................................................................
PERFORMANCE INFORMATION 12
........................................................................
GENERAL INFORMATION 13
........................................................................
- --------------------------------------------------------------------------------
Prospectus
July 27, 1998, as supplemented December 15, 1998
14
<PAGE> 30
INSTITUTIONAL CASH FUND
LIQUID ASSET FUND
(SERIES OF CADRE INSTITUTIONAL INVESTORS TRUST)
905 Marconi Avenue
Ronkonkoma, New York
11779-7255
STATEMENT OF ADDITIONAL INFORMATION DATED JULY 27, 1998, AS SUPPLEMENTED
DECEMBER 15, 1998
Cadre Institutional Investors Trust (the "Trust") is a diversified,
open-end, management investment company. Institutional Cash Fund ("Institutional
Fund") and Liquid Asset Fund ("Liquid Asset Fund") (each, a "Fund") are separate
series of the Trust. The Funds are money market funds which seek to maintain
stable net asset values of $1.00 per share. The Funds seek high current income,
consistent with preservation of capital and maintenance of liquidity. See
"Investment Policies and Practices." The Funds pursue their investment
objectives by investing all of their investable assets in the U.S. Government
Money Market Portfolio (the "Government Money Market Portfolio"), a separate
series of the Trust that has the same investment objective and substantially the
same investment policies as the Funds. Cadre Financial Services, Inc. (the
"Investment Adviser") serves as the investment adviser of the Portfolio. See
"Investment Advisory Arrangements."
Shares of the Funds are offered for sale on a no-load basis. No sales
commissions or other charges are imposed upon the purchase or redemption of
shares. No minimum initial investment in the Funds is required, except in the
case of Institutional Fund which has a minimum initial investment requirement of
$1 million. See "Purchasing Shares." Shares of the Funds are not insured by
Ambac Assurance Corporation.
AN INVESTMENT IN A FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT AND
THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. SEE "DETERMINATION OF NET ASSET VALUE."
Information about the Funds is set forth in the Prospectuses of the Funds dated
July 27, 1998, as supplemented December 15, 1998 (the "Prospectuses"), which
provide the basic information you should know before investing. The Prospectuses
may be obtained without charge by writing to the Transfer Agent or by calling
1-800-221-4524. This Statement of Additional Information is not a prospectus,
but contains information in addition to and more detailed than that set forth in
the Prospectuses of the Funds. It is intended to provide you with additional
information regarding the activities and operations of the Funds and the Trust,
and should be read in conjunction with the Funds' Prospectuses.
TABLE OF CONTENTS
PAGE
INVESTMENT POLICIES AND PRACTICES .......... 2
INVESTMENT RESTRICTIONS .................... 6
PORTFOLIO TRANSACTIONS AND BROKERAGE ....... 7
PURCHASING SHARES .......................... 8
SHAREHOLDER ACCOUNTS ....................... 9
REDEEMING SHARES ........................... 9
EXCHANGE PRIVILEGE ......................... 9
DETERMINATION OF NET ASSET VALUE ........... 10
TAXES ...................................... 10
INVESTMENT ADVISORY AND OTHER SERVICES ..... 11
<PAGE> 31
TRUSTEES AND OFFICERS ...................... 12
EXPENSES ................................... 14
PERFORMANCE INFORMATION .................... 15
GENERAL INFORMATION ........................ 16
INVESTMENT POLICIES AND PRACTICES
Institutional Fund and Liquid Asset Fund (collectively, the "Funds") pursue
their objectives by investing all of their investable assets in the U.S.
Government Money Market Portfolio (the "Portfolio"), a separate series of the
Trust that has the same investment objective and substantially the same
investment policies as the Funds. The Portfolio has elected to be treated as a
diversified investment company. The sections below provide additional
information regarding the types of investments that may be made by the Portfolio
and the investment practices in which the Portfolio may engage. The investment
objectives and general investment policies of the Funds and the Portfolio are
described in the Funds' Prospectuses.
Each of the Funds may withdraw its investment from the Portfolio at any time
if the Board of Trustees of the Trust (the "Board of Trustees") determines that
it is in the best interest of the Fund to do so. Upon any such withdrawal, a
Fund's assets would either be invested in another investment fund having the
same investment objective and substantially the same investment policies as the
Fund or be directly invested in securities in accordance with the investment
policies described below with respect to the Portfolio. The approval of the
investors in the Portfolio would not be required to change the Portfolio's
investment objective or, except as otherwise stated in the Prospectuses or this
Statement of Additional Information, any of the Portfolio's investment policies
or restrictions.
Treasury, Government and Agency Securities. The Portfolio invests in
short-term debt securities that are issued or guaranteed by the U.S. government
or an agency or instrumentality of the U.S. government ("Government
Securities"). These securities include obligations issued by the U.S. Treasury
("Treasury Securities"), including Treasury bills, notes and bonds. These are
direct obligations of the U.S. government and differ primarily in their rates of
interest and the length of their original maturities. Treasury Securities are
backed by the full faith and credit of the U.S. government. Government
Securities include Treasury Securities as well as securities issued or
guaranteed by the U.S. government or its agencies and instrumentalities ("Agency
Securities"). As described in the Prospectuses, Agency Securities are in some
cases backed by the full faith and credit of the U.S. government. In other
cases, Agency Securities are backed solely by the credit of the governmental
issuer. Certain issuers of Agency Securities have the right to borrow from the
U.S. Treasury, subject to certain conditions. Government Securities purchased by
the Portfolio may include variable and floating rate securities, which are
described in the Prospectuses.
Repurchase Agreements. As discussed in the Prospectuses, the Portfolio may
enter into repurchase agreements. A repurchase agreement, which may be viewed as
a type of secured lending by the Portfolio, involves the acquisition by the
Portfolio of a security from a selling financial institution such as a bank or
broker-dealer. The agreement provides that the Portfolio will sell back to the
institution, and that the institution will repurchase, the underlying security
("collateral") at a specified price and at a fixed time in the future. The
Portfolio will receive interest from the institution until the time when the
repurchase is to occur. Although such date is deemed to be the maturity date of
a repurchase agreement, the maturities of securities that are purchased by the
Portfolio through repurchase agreements are not subject to any limitation as to
maturity. The Portfolio may enter into repurchase agreements maturing in more
than seven days. However, the Portfolio may not enter into such a repurchase
agreement if, as a result, more than 10% of the value of its net assets would be
invested in repurchase agreements under which the Portfolio does not have the
right to obtain repayment in seven days or less.
Because repurchase agreements involve certain risks not associated with
direct investment in securities, the Trust follows procedures designed to
minimize these risks. These procedures include requirements that the Investment
Adviser effect repurchase transactions only with banks or primary dealers
designated as such by the Federal Reserve Bank of New York, and that the bank or
dealer has been determined by the Investment Adviser to present minimal credit
risk in accordance with guidelines established and monitored by the Board of
Trustees. In addition, the collateral underlying a repurchase agreement is
required to be held by the Trust's custodian (or a subcustodian) in a segregated
account on behalf of the respective Portfolio. The collateral is marked to
market daily and required to be maintained in an amount at least equal to the
repurchase price plus accrued interest. In the event of a default or bankruptcy
by a selling financial institution, the Trust will seek to liquidate the
collateral. However, the exercise of the Trust's right to
2
<PAGE> 32
liquidate collateral could involve certain costs or delays and, to the extent
that the proceeds from any sale upon a default of the obligation to repurchase
are less than the repurchase price, a Portfolio will suffer a loss.
When-Issued and Delayed Delivery Securities. As noted in the Prospectuses,
the Portfolio may purchase and sell securities on a when-issued or delayed
delivery basis. These transactions arise when the Portfolio purchases or sells a
security, with payment and delivery taking place in the future beyond the normal
settlement period. A transaction of this type will be effected in order to
secure for the Portfolio an attractive price or yield at the time of entering
into the transaction. When purchasing securities on a when-issued or delayed
delivery basis, the Portfolio assumes the rights and risks of ownership,
including the risk of price and yield fluctuations. Because the Portfolio is not
required to pay for securities until the delivery date, these risks are in
addition to the risks associated with the Portfolio's other investments. If the
Portfolio remains fully invested at a time during which when-issued or delayed
delivery purchases are outstanding, such purchases will result in a form of
leverage. When the Portfolio enters into purchase transactions of this type, the
Trust's custodian maintains, in a segregated account for the Portfolio, cash and
debt obligations held by the Portfolio and having a value equal to or greater
than the Portfolio's purchase commitments. When the Portfolio has sold a
security on a when-issued or delayed delivery basis, the Portfolio does not
participate in further gains or losses with respect to the security. If the
counterparty fails to deliver or pay for the securities, the Portfolio could
miss a favorable price or yield opportunity, or could suffer a loss. When the
Portfolio enters into a sales transaction of this type, the Trust's custodian
segregates the securities sold on a delayed delivery basis to cover the
Portfolio's settlement obligations.
Investment Characteristics. In managing the Portfolio, the Investment
Adviser attempts to balance the Portfolio's goal of seeking high income with its
goal of seeking to preserve capital. For this reason, the Portfolio does not
necessarily invest in securities offering the highest available yields. The
maturities of the securities purchased by the Portfolio and the Portfolio's
average portfolio maturity will vary from time to time as the Investment Adviser
deems consistent with the Portfolio's investment objective, which is the same as
the investment objective of the Funds investing in the Portfolio, and the
Investment Adviser's assessment of risks, subject to applicable limitations on
the maturities of investments and dollar-weighted average portfolio maturity.
When market rates of interest increase, the market value of debt obligations
held by the Portfolio will decline. Conversely, when market rates of interest
decrease, the market value of obligations held by the Portfolio will increase.
Debt obligations having longer maturities generally pay higher rates of
interest, but the market values of longer term obligations can be expected to be
subject to greater fluctuations from general changes in interest rates than
shorter term obligations. These changes will cause fluctuations in the amount of
daily dividends of a Fund and, in extreme cases, changes in interest rates could
cause the net asset value per share of a Fund to decline. See "Determination of
Net Asset Value." In the event of unusually large redemption demands, securities
may have to be sold at a loss prior to maturity, or a Fund or the Portfolio may
have to borrow money and incur interest expense. The Investment Adviser seeks to
manage investment risk by purchasing and selling investments for the Portfolio
consistent with its best judgment and expectations regarding anticipated changes
in interest rates. However, there can be no assurance that the Funds or the
Portfolio will achieve their investment objectives.
INVESTMENT RESTRICTIONS
The Funds and the Portfolio are subject to a variety of investment
restrictions. Certain of these restrictions are deemed fundamental, and may not
be changed without the approval of the holders of a majority of a Fund's or the
Portfolio's outstanding voting securities. A "majority of the outstanding voting
securities" of a Fund or the Portfolio for this purpose means the lesser of (i)
67% of the shares of that Fund or the Portfolio represented at a meeting at
which holders of more than 50% of the outstanding shares are present in person
or represented by proxy or (ii) more than 50% of the outstanding shares of the
Fund or the Portfolio. Whenever there is a vote on a change in the fundamental
restrictions of the Portfolio or in a policy of the Portfolio which cannot be
changed without a shareholder vote, the Trust will hold meetings of shareholders
of the Funds that invest in the Portfolio and will vote each Fund's shares of
the Portfolio as instructed by shareholders of that Fund. Each Fund's shares of
the Portfolio will be voted for and against the proposed change in the same
proportion as shares of that Fund are voted. As to shares of a Fund that are not
voted by shareholders, the Fund will vote those shares in the same proportion as
shares of that Fund's shareholders who give voting instructions are voted. Thus,
shareholders of the Funds who do not vote will have no effect on the outcome of
matters being voted upon by the Funds as investors in the Portfolio. As
fundamental investment restrictions, the Funds and the Portfolio may not:
(1) Purchase a security, other than a Government Security, if as a result of
such purchase, more than 5% of the value of the Fund's or Portfolio's assets
would be invested in the securities of any one issuer, or the Fund or Portfolio
would own more than 10% of the voting securities, or of any class of securities,
of any one issuer; provided that each Fund may invest all of its investable
assets
3
<PAGE> 33
in another investment portfolio of the Trust or another fund that has the same
investment objective and substantially the same investment policies as that
Fund. (For purposes of this restriction, all outstanding indebtedness of an
issuer is deemed to be a single class.)
(2) Purchase a security, other than a Government Security, if as a result of
such purchase 25% or more of the value of the Fund's or Portfolio's total assets
would be invested in the securities of issuers engaged in any one industry;
provided that each Fund may invest all of its investable assets in another
investment portfolio of the Trust or another fund that has the same investment
objective and substantially the same investment policies as that Fund.
(3) Issue senior securities as defined by the Investment Company Act of
1940, as amended (the "1940 Act") or borrow money, except that the Funds and the
Portfolio may borrow from banks for temporary extraordinary or emergency
purposes (but not for investment) in an amount up to one-third of the value of
their respective total assets (calculated at the time of the borrowing). Neither
of the Funds nor the Portfolio may make additional investments while it has any
borrowings outstanding. This restriction shall not be deemed to prohibit a Fund
or the Portfolio from purchasing or selling securities on a when-issued or
delayed delivery basis, or entering into repurchase agreements.
(4) Purchase or sell commodities or commodity contracts, or real estate or
interests in real estate (including limited partnership interests), except that
the Funds and the Portfolio, to the extent not prohibited by other investment
policies, may purchase and sell securities of issuers engaged in real estate
activities and may purchase and sell securities secured by real estate or
interests therein.
(5) Underwrite the securities of other issuers, except to the extent that,
in connection with the disposition of securities, a Fund or the Portfolio may be
deemed to be an underwriter under the Securities Act of 1933, as amended (the
"1933 Act").
(6) Make loans of money or securities, except through the purchase of
permitted investments, including repurchase agreements.
(7) Make short sales of securities or purchase securities on margin, except
for such short-term credits as may be necessary for the clearance of
transactions.
(8) Pledge, hypothecate, mortgage or otherwise encumber a Fund's or the
Portfolio's assets, except as may be necessary to secure permitted borrowings.
(Collateral and other arrangements incident to permissible investment practices
are not deemed to be subject to this restriction.)
The Funds and the Portfolio have the following additional investment
restrictions which are not fundamental and may be changed by the Board of
Trustees, without a vote of shareholders. Under these restrictions, neither of
the Funds nor the Portfolio may:
(1) Make investments for the purpose of exercising control or management of
another company.
(2) Participate on a joint or joint and several basis in any trading account
in securities.
(3) Purchase any illiquid securities, except that they may invest in
repurchase agreements maturing in more than seven days provided that a Fund or a
Portfolio may not enter into such a repurchase agreement if more than 10% of the
value of its net assets would, as a result, be invested in repurchase agreements
under which the Fund or the Portfolio does not have the right to obtain
repayment in seven days or less.
(4) Invest in oil, gas or other mineral leases, rights, royalty contracts,
or exploration or development programs.
(5) Invest in warrants or rights.
(6) Purchase the securities of another investment company, except in
connection with a merger, consolidation, reorganization or acquisition of
assets, and except insofar as each Fund may invest all of its investable assets
in another portfolio of the Trust or another fund which has the same investment
objective and substantially the same investment policies as that Fund.
4
<PAGE> 34
Unless otherwise specified, all percentage and other restrictions,
requirements and limitations on investments set forth in this Statement of
Additional Information, and those set forth in the Prospectuses, apply
immediately after purchase of an investment, and subsequent changes and events
do not constitute a violation or require the sale of any investment by the
Portfolio or a Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the general supervision of the Board of Trustees, the Investment
Adviser is responsible for decisions to buy and sell securities for the
Portfolio and for the selection of dealers to effect those transactions.
Purchases of securities for the Portfolio will be made from issuers,
underwriters and dealers. Sales of securities will be made to dealers and
issuers. The Portfolio does not normally incur brokerage commissions on
transactions in the types of securities in which they invest. These transactions
are generally traded on a "net" basis, with dealers acting as principal in such
transactions. However, the price at which securities are purchased from and sold
to dealers will usually include a spread which represents a profit to the
dealer. Securities purchased in underwritten offerings include a fixed amount of
compensation to the underwriter (an underwriting concession).
In placing orders for the purchase and sale of investments for the
Portfolio, the Investment Adviser gives primary consideration to the ability of
dealers to provide the most favorable prices and efficient executions on
transactions. If such price and execution are obtainable from more than one
dealer, transactions may be placed with dealers who also furnish research
services to the Trust or the Investment Adviser. Such services may include, but
are not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investments; wire services; and appraisals
or evaluations of securities. These research services may be of benefit to the
Investment Adviser or its affiliates in the management of accounts of other
clients, or the accounts of the Investment Adviser and its affiliated companies,
and may not in all cases benefit the Funds or the Portfolio. While such services
are useful and important in supplementing the Investment Adviser's own research
and facilities, the Investment Adviser believes the value of such services is
not determinable and does not significantly reduce its expenses.
The Investment Adviser serves as the investment adviser to other clients,
including other series of the Trust, other investment funds and companies, and
follows a policy of allocating investment opportunities and purchase and sale
transactions equitably among its clients. In making such allocations, the
primary factors considered are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, and
the availability of cash for investment. This procedure may have an adverse
effect on a client, including the Portfolio, in a particular transaction, but is
expected to benefit all clients on a general basis.
The Investment Adviser and its affiliates may invest in the same securities
that are purchased for its clients. This at times may adversely affect the
prices that can be obtained in transactions for the Portfolio or the
availability of securities for purchase by the Portfolio. In the case of
simultaneous orders to purchase or sell the same securities being handled by the
Investment Adviser and involving a client account and the account of the
Investment Adviser or one of its affiliates, client orders will be given
preference so that client transactions will not be adversely affected by
transactions being placed by the Investment Adviser for its own account or for
the accounts of its affiliates. Investments made on behalf of the Investment
Adviser or its affiliates are effected in transactions which are separate from
any transactions for the accounts of clients in the same securities.
PURCHASING SHARES
As described under "Purchasing Shares" in the Prospectuses, shares of the
Funds are offered for sale, without a sales charge, at the net asset value per
share next computed after receipt of a purchase order by Cadre Securities, Inc.,
as distributor of the Funds' shares (the "Distributor"). The minimum initial
investment in Institutional Fund is $1 million. However, this minimum may be
waived by the Distributor when such waiver is deemed appropriate based on the
expected investments of an investor in Institutional Fund and other relevant
factors. Net asset value is computed once daily for each Fund, on each day on
which both the New York Stock Exchange is open for trading and the Federal
Reserve Bank of New York is open (each, a "Business Day"). See "Determination of
Net Asset Value." The following shows the calculation of the offering price of
shares of the Funds as of October 31, 1997:
<TABLE>
<CAPTION>
NET ASSETS SHARES OUTSTANDING OFFERING PRICE
---------- ------------------ --------------
<S> <C> <C> <C>
Institutional Cash Fund N/A N/A N/A
Liquid Asset Fund $138,660,616 138,660,882 $1.00
</TABLE>
5
<PAGE> 35
Purchases by Check. Shares of the Funds may be purchased by check as
described in the Prospectuses. If a check to purchase shares does not clear, the
shares purchased may be redeemed by the Distributor and the investor will be
responsible for any loss or expenses incurred by the Funds or the Distributor as
a result of the redemption or non-clearance.
Distribution Agreement. The Distributor serves as the exclusive distributor
of shares of the Funds pursuant to an amended and restated distribution
agreement with the Trust dated as of June 17, 1998 (the "Distribution
Agreement"). Pursuant to the Distribution Agreement, the Distributor is
authorized to enter into selling agreements with securities dealers and other
financial institutions for the distribution of shares. Shares of the Funds are
available for purchase from the Distributor and from organizations which have
entered into selling agreements. The Distributor may, from time to time, pay to
such dealers and institutions, in connection with sales or the distribution of
shares of the Funds, material cash compensation. Such compensation and
incentives are not paid by either of the Funds and will not be an expense of the
Funds.
The Board of Trustees, including a majority of the Trustees who are not
parties to the Distribution Agreement or "interested persons" of the Investment
Adviser or the Distributor, as defined by the 1940 Act (the "Independent
Trustees"), approved the Distribution Agreement at a meeting held in person on
June 17, 1998. The Distribution Agreement will remain in effect for an initial
term of two years from the date of its execution and may be continued in effect
from year to year thereafter if approved annually by the Board of Trustees,
including a majority of the Independent Trustees, by vote cast in person at a
meeting called for such purpose. The Distribution Agreement may be terminated at
any time, without penalty, by either party upon 60 days written notice and
terminates automatically in the event of an "assignment" as defined by the 1940
Act and the rules thereunder. Under the Distribution Agreement, the Distributor
is required to bear all of the costs associated with distribution of shares of
the Funds, including the incremental cost of printing prospectuses, annual
reports and other periodic reports for distribution to prospective investors and
the costs of preparing, distributing and publishing sales literature and
advertising materials. In the Distribution Agreement, the Trust has agreed to
indemnify the Distributor to the extent permitted by applicable law against
certain liabilities under the 1933 Act.
The Distributor is a wholly-owned subsidiary of Ambac Capital Corporation,
which in turn is a wholly-owned subsidiary of Ambac Financial Group, Inc. The
Distributor's address is 905 Marconi Avenue, Ronkonkoma, New York 11779.
SHAREHOLDER ACCOUNTS
Cadre Financial Services, Inc., in its capacity as transfer agent for the
Funds (the "Transfer Agent"), maintains one or more accounts for each
shareholder reflecting the amount of full and fractional shares of the Funds the
shareholder owns. Shareholders are sent confirmations of each account
transaction, and monthly statements showing account balances. The Trust does not
issue certificates for shares of the Funds.
Sub-Account Services. Special procedures have been designed for investors
wishing to open multiple accounts to meet requirements regarding the commingling
of funds or for accounting convenience. Individual sub-accounts may be opened at
any time by written advice or by filing forms supplied by the Transfer Agent.
Procedures are available to identify sub-accounts by name and number.
When sub-accounts have been established, the Transfer Agent provides written
confirmations of transactions in sub-accounts. The Transfer Agent also provides
monthly statements setting forth the share balance of and the dividends and
other distributions paid to each sub-account for the current month, as well as
for the year-to-date. Further information on this service is available from the
Transfer Agent.
Minimum Account Balance. Under the Declaration of Trust, the Trust has the
right to redeem all shares of a Fund held by a shareholder if as a result of one
or more redemptions the aggregate value of shares held in the shareholder's
account is less than $1 million or such lesser dollar amount as may be specified
by the Trustees, which lesser amount may be no greater than the then applicable
minimum initial investment amount in the Fund. There is currently no minimum
account balance required for Liquid Asset Fund. As described in the Prospectus
of Institutional Fund, the Trust may effect a redemption of shares of that Fund
if, as a result of one or more redemptions, the balance of an account in that
Fund is less than $1 million. Accounts in Liquid Asset Fund are not presently
subject to this redemption procedure because that Fund does not presently impose
a minimum initial investment requirement. However, an inactive account in the
Liquid Asset Fund with no balance for a period of six months may be closed at
the discretion of the Trust. The applicable procedures are described in the
Prospectuses. The Trust is under no obligation to compel the redemption of any
account.
6
<PAGE> 36
REDEEMING SHARES
Redemption proceeds are normally paid as described in the Prospectuses.
However, the payment of redemption proceeds by the Funds or the Portfolio may be
postponed for more than seven days or the right of redemption suspended at times
(a) when the New York Stock Exchange is closed for other than customary weekends
and holidays, (b) when trading on the New York Stock Exchange is restricted, (c)
when an emergency exists as a result of which disposal by a Fund or the
Portfolio of securities owned by it is not reasonably practicable or it is not
reasonably practicable for a Fund to determine fairly the value of its net
assets, or (d) during any other period when the Securities and Exchange
Commission (the "SEC"), by order, so permits for the protection of shareholders.
Applicable rules and regulations of the SEC will govern as to whether the
conditions described in (b) or (c) exist. In addition, in the event that the
Board of Trustees determines that it would be detrimental to the best interests
of remaining shareholders of a Fund or to investors in the Portfolio to pay any
redemption or redemptions in cash, a redemption payment by a Fund or the
Portfolio may be made in whole or in part by a distribution in kind of portfolio
securities, subject to applicable rules of the SEC. Any securities distributed
in kind will be readily marketable and will be valued, for purposes of the
redemption, in the same manner as such securities are normally valued in
computing net asset value per share. In the unlikely event that shares are
redeemed in kind, the redeeming shareholder would incur transaction costs in
converting the distributed securities to cash. The Trust has elected to be
governed by Rule 18f-1 under the 1940 Act and is therefore obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net asset value
of a Fund during any 90 day period for any one shareholder.
EXCHANGE PRIVILEGE
As described under "Exchange Privilege" in each Fund's Prospectus,
shareholders may exchange shares of Liquid Asset Fund for shares of
Institutional Fund, and exchange shares of Institutional Fund for shares of
Liquid Asset Fund, based upon the relative net asset values per share of the
Funds at the time the exchange is effected. The Funds currently do not impose
any limitation on the frequency of exchanges, but may impose such limitations
upon notice to shareholders.
DETERMINATION OF NET ASSET VALUE
The Prospectuses describe the days on which the net asset value per share of
the Funds are computed for purposes of purchases and redemptions of shares by
investors, and also sets forth the times as of which such computations are made.
Net asset value is computed once daily as of 4:00 p.m. (Eastern time) on each
day on which both the New York Stock Exchange is open for trading and the
Federal Reserve Bank of New York is open, except as described below. The New
York Stock Exchange currently observes the following holidays: New Year's Day;
Martin Luther King's Birthday (third Monday in January); Presidents' Day (third
Monday in February); Good Friday (Friday before Easter); Memorial Day (last
Monday in May); Independence Day; Labor Day (first Monday in September);
Thanksgiving Day (fourth Thursday in November); and Christmas Day. The Federal
Reserve Bank of New York currently observes all the holidays listed above except
Good Friday, and also observes Columbus Day (second Monday in October) and
Veterans Day.
Net asset value is computed as of the closing time of the U.S. government
securities markets on days when the Public Securities Association recommends an
early closing of such markets. Early closings may occur the Fridays preceding
the following holidays: Martin Luther King's Birthday, Presidents' Day, Memorial
Day, Labor Day and Columbus Day, and the business days preceding the following
holidays: Independence Day, Veterans Day, Thanksgiving Day, Christmas Day, and
New Year's Day, and the Friday succeeding Thanksgiving Day.
The value of the Portfolio's net assets (its securities and other assets,
less its liabilities, including expenses payable or accrued) is determined at
the same time and on the same days as the net asset values per share of the
Funds are determined.
In accordance with rules adopted by the SEC, the amortized cost method of
valuation is used to determine the value of the investments held by the
Portfolio. This method of valuation is used in seeking to maintain stable net
asset values of $1.00 per share for the Portfolio and the Funds. However, no
assurance can be given that the Portfolio or the Funds will be able to maintain
stable share prices.
Amortized cost involves valuing a security at its cost and amortizing any
discount or premium over the period remaining until the maturity of the
security. This method of valuation does not take into account unrealized capital
gains and losses resulting from
7
<PAGE> 37
changes in the market values of the securities. The market values of debt
securities purchased by the Portfolio will generally fluctuate as a result of
changes in prevailing interest rate level and other factors.
In order to use the amortized cost method of valuation, the Portfolio is
required to maintain a dollar-weighted average portfolio maturity of 90 days or
less, to purchase securities with remaining maturities of 397 days or less and
to invest only in securities which have been determined by the Investment
Adviser, under procedures adopted by the Board of Trustees, to present minimal
credit risks and to be of eligible credit quality under applicable regulations.
In addition, procedures have been adopted by the Board of Trustees which are
designed to stabilize, to the extent reasonably possible, the prices of shares
of the Portfolio and the Funds as computed for purposes of sales and redemptions
at $1.00. These procedures include review by the Board of Trustees, at such
intervals as it deems appropriate, to determine whether the net asset value per
share calculated by using available market quotations deviates from the net
asset value per share of $1.00 computed by using the amortized cost method. If
such deviation exceeds 1/2 of 1%, the Board of Trustees will promptly consider
what action, if any, should be taken. The Board of Trustees will take such
action as it deems appropriate to eliminate or to reduce, to the extent
reasonably practicable, any material dilution or other unfair results which
might arise from differences between the two valuation methods. Such action may
include selling instruments prior to maturity to realize capital gains or losses
or to shorten average maturity, redeeming shares in kind, withholding dividends,
paying distributions from capital gains, or utilizing a net asset value per
share based upon available market quotations.
TAXES
It is the policy of the Trust to distribute each fiscal year substantially
all of each Fund's net investment income and net realized capital gains, if any,
to shareholders. The Trust intends that the Funds will each qualify as a
regulated investment company under the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"). If so qualified, a Fund will not be subject to
federal income tax on that part of its net investment income and net realized
capital gains which it distributes to its shareholders. To qualify for such tax
treatment, a Fund must generally, among other things: (a) derive at least 90% of
its gross income from dividends, interest, payments received with respect to
loans of stock and securities, and gains from the sale or other disposition of
stock or securities and certain related income; and (b) diversify its holdings
so that at the end of each fiscal quarter (i) 50% of the market value of the
Fund's assets is represented by cash, Government Securities, securities of other
regulated investment companies, and other securities limited, in respect of any
one issuer, to an amount not greater than 5% of the Fund's assets or 10% of the
voting securities of any issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than Government
Securities). The Portfolio has elected to be treated as a partnership for
federal income tax purposes and therefore believes that it will not be required
to pay any federal or state income or excise taxes.
The Code requires regulated investment companies to pay a nondeductible 4%
excise tax to the extent they do not distribute 98% of their ordinary income,
determined on a calendar year basis, and 98% of their capital gains, determined
on an October 31 year end. The Trust intends to distribute the income and
capital gains of the Funds in the manner necessary to avoid imposition of the 4%
excise tax by the end of each calendar year.
Dividends of the Funds declared in October, November or December and paid
the following January will be taxable to shareholders as if received on December
31 of the year in which they are declared.
INVESTMENT ADVISORY AND OTHER SERVICES
The Investment Adviser, a Delaware corporation, with offices at 905 Marconi
Avenue, Ronkonkoma, New York 11779, 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
state municipalities, and municipal authorities. Ambac is a publicly held
company whose shares are traded on the New York Stock Exchange.
Investment Advisory Agreement. Pursuant to an investment advisory agreement
with the Trust dated June 17, 1998 (the "Advisory Agreement"), the Investment
Adviser manages the investment of the assets of the Portfolio, and places orders
for the purchase and sale of investments for the Portfolio. The Investment
Adviser also provides or furnishes, 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 Advisory Agreement. In
addition, the Investment Adviser provides all necessary administrative services
to the Portfolio, and pays 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
8
<PAGE> 38
Investment Adviser, or who are officers or employees of any company affiliated
with the Investment Adviser, and bears the cost of telephone service, heat,
light, power and other utilities associated with the services it provides. As
compensation for services rendered and expenses assumed by the Investment
Adviser, the Advisory Agreement provides for the payment by the Portfolio of a
monthly fee to the Investment Adviser, which fee is calculated daily and
computed at the annual rate of 0.06% of the net assets of the Portfolio. As
investors in the Portfolio, the Funds and their shareholders indirectly bear
this fee.
Prior to December 15, 1998, Liquid Asset Fund invested its assets directly
and did not invest in the Portfolio. For the period April 24, 1996 (commencement
of operations of Liquid Asset Fund) through October 31, 1996, fees payable to
the Investment Adviser by Liquid Asset Fund pursuant to the then effective
investment advisory agreement were $48,338, all of which were waived. In
addition, the Investment Adviser reimbursed expenses of Liquid Asset Fund in the
amount of $129,216 during such period. For the year ended October 31, 1997, fees
payable by Liquid Asset Fund to the Investment Adviser pursuant to that advisory
agreement were $157,391, a portion of which was waived. During such year, the
Investment Adviser also reimbursed expenses of Liquid Asset Fund of $70,147.
Institutional Fund and the Portfolio commenced operations on December 15, 1998.
The Advisory Agreement requires that the Investment Adviser use its best
efforts in the supervision and management of the investment activities of the
Portfolio and in providing services, and provides that the Adviser shall not be
liable to the Trust, the Portfolio 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. The Advisory Agreement in no way restricts
the Investment Adviser from acting as investment adviser to others.
The Advisory Agreement was approved by the Board of Trustees, including a
majority of the Independent Trustees, who are not parties to the Advisory
Agreement or interested persons of the Investment Adviser, for an initial term
expiring June 17, 2000 at a meeting held in person on June 17, 1998. The
Advisory Agreement was also approved by the shareholders of Liquid Asset Fund,
the then sole operating series of the Trust, on October 30, 1998. The Agreement
may be continued in effect from year to year after its initial term upon the
approval of the holders of shares of the Portfolio or the approval of the Board
of Trustees. In seeking such approval by the holders of shares of the Portfolio,
each of the Funds will seek instructions from its shareholders as to how that
Fund's shares of the Portfolio will be voted and will vote its shares of the
Portfolio in accordance with those instructions. Similar instructions will also
be sought by any other series of the Trust and by each other registered
investment company that may invest its assets in the Portfolio. In the case of
certain other investment funds that invest in the Portfolio, such funds may vote
their shares of the Portfolio either in accordance with the same procedures or
in the same proportion as the shares of other holders of shares of the Portfolio
are voted. Each annual continuance of the Advisory Agreement also requires
approval by a vote of a majority of the Independent Trustees cast in person at a
meeting called for the purpose of voting on such continuance. The Advisory
Agreement 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 in the 1940 Act) of the outstanding securities of the
Portfolio, or by the Investment Adviser. The Advisory Agreement provides for its
automatic termination in the event of its assignment (as defined in the 1940 Act
and the rules thereunder).
The Trust has acknowledged that the name "Cadre" is a property right of the
Investment Adviser and other affiliates of Ambac Financial Group, Inc., and has
agreed that the Investment Adviser and its affiliated companies may use and
permit others to use that name. If the Advisory Agreement is terminated, the
Trust may be required to cease using the name Cadre as part of its name or the
name of any series of the Trust unless otherwise permitted by Ambac Financial
Group, Inc. or any successor to its interest in such name.
Administration Agreement. The Investment Adviser provides administration
services to the Funds, pursuant to an administration agreement with the Trust
dated August 1, 1997, as amended November 1, 1998 (the "Administration
Agreement"). Pursuant to the Administration Agreement, the Investment Adviser
provides the Funds with various administrative services required in connection
with the operations of the Trust and the Funds. These services include, among
other things: accounting services and the maintenance of required books and
records, valuation of assets and the calculation of the net asset values per
share of the Funds, preparation of financial statements, regulatory filings and
tax returns, monitoring of investment compliance and the preparation of
materials for meetings of the Board of Trustees and shareholders. Under the
Administration Agreement, the Investment Adviser is required to provide persons
affiliated with the Investment Adviser to serve as officers of the Trust and to
maintain such office facilities as necessary to provide the administrative
services it furnishes to the Trust. The Prospectuses contain a description of
the fees payable to the Investment Adviser under the Administration Agreement.
9
<PAGE> 39
The Administration Agreement has an initial term expiring August 1, 1999,
and may be continued in effect from year to year thereafter if such continuance
is approved annually by the Board of Trustees, including the vote of a majority
of the Independent Trustees. The Administration Agreement terminates
automatically in the event of its "assignment," as defined by the 1940 Act and
the rules thereunder, and may be terminated by either party without penalty on
not less than 60 days' written notice. The agreement also provides that neither
the Investment Adviser nor its personnel shall be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the Investment Adviser's performance of its obligations and duties under
the agreement, except for those resulting from its willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its duties.
Liquid Asset Fund paid the former administrator for the Trust $47,686 for
the period April 24, 1996 (commencement of operations) through October 31, 1996
and $44,753 for the period November 1, 1996 through July 31, 1997. For the
period August 1, 1997 through October 31, 1997, fees payable by Liquid Asset
Fund to the Investment Adviser for administrative services were $36,303, a
portion of which were waived.
Transfer Agent Agreement. The Investment Adviser serves as the transfer
agent of the Funds and the Portfolio pursuant to the terms of an amended
transfer agent agreement dated November 1, 1998. Each of the Funds pays fees to
the Investment Adviser for transfer agency services. These fees are computed at
the annual rates of 0.05% of the first $250 million of each Fund's net assets,
0.04% on the next $750 million of each Fund's net assets, and 0.03% of each
Fund's net assets exceeding $1 billion. No fee is paid by the Portfolio for
transfer agent services. During the period August 1, 1997 through October 31,
1997, fees payable by Liquid Asset Fund to the Investment Adviser for transfer
agent services were $18,152, a portion of which was waived.
TRUSTEES AND OFFICERS
The Board of Trustees has the overall responsibility for monitoring the
operations of the Trust, the Funds and the Portfolio and for supervising the
services provided by the Investment Adviser and other organizations. The
officers of the Trust are responsible for managing the day-to-day operations of
the Trust and the Funds.
Set forth below is information with respect to each of the Trustees and
officers of the Trust, including their principal occupations during the past
five years.
10
<PAGE> 40
NAME, POSITION WITH TRUST, AGE PRINCIPAL OCCUPATIONS
AND ADDRESS DURING LAST FIVE YEARS
*William T. Sullivan, Jr. Chairman and Chief Executive Officer,
Trustee, Chairman, CEO and Cadre Financial Services, Inc. and
President, 53 Cadre Securities, Inc.
(brokerage services)
*David L. Boyle Vice Chairman of Ambac Financial
Trustee, 51 Group, Inc. Prior to joining Ambac,
Ambac Financial Group, Inc. Managing Director
One State Street of Worldwide Services,
New York, New York 10004 Citibank, N.A.
Harvey A. Fein Chief Financial Officer, Molina Medical
2238 Glendon Avenue Medical Centers; formerly, independent
Los Angeles, California 90064 financial consultant (1994-1995) and
Trustee, 52 Director of Finance, Blue Cross of
California - Wellpoint Health Networks
Donald E. Gray, Jr. Director of Finance, City of New London
Trustee, 48 Executive Director, New England
Director of Finance States Government
City of New London Finance Officers Association
181 State St.
New London, CT 06320
*C. Roderick O'Neil Chairman, O'Neil Associates (investment
Trustee, 67 and financial consulting firm); Director,
375 Park Avenue Ambac Financial Group, Inc., AMBAC
Suite 2602 Assurance Corporation, Fort Dearborn
New York, New York 10152 Income Securities, Inc. and Beckman
Instruments, Inc.; Trustee, Memorial
Drive Trust (finance)
Russell E. Galipo Vice President and Manager of Shawmut
Trustee, 66 Bank CT., N.A. from 1973 to 1994
4538 Alpine Drive
Lakeland, Florida 33801-0502
William J. Reynolds Retired
Trustee, 74
51 Fox Run Court
Newington, CT 06111
Don Irvin Tharpe Executive Director, Association of
3105 Franklins Way School Business Officials International;
Herndon, Virginia 22071 formerly, Chairman and Trustee,
Trustee, 46 Investment Services for Education Trust
Martin Flanigan Vice President and Controller, Cadre
Treasurer, 35 Financial Services, Inc. Formerly, Vice
President, Concord Holding
Corporation,; Vice President and
Mutual Funds Controller, Union Bank of
Switzerland; and Assistant Treasurer
of Pacific Horizon Funds, Emerald
Funds, Vista Funds, Prairie Funds,
Infinity Funds, 231 Funds, Pilot Funds
and BNY Hamilton Funds
William M. Sullivan, Esq. General Counsel of Cadre Financial
Secretary, 31 Services, Inc. and Cadre
Securities, Inc.
Linda Cassesse Registration Manager of Cadre Financial
Assistant Secretary, 46 Services, Inc. and Cadre Securities
Inc.; from 1995 to 1997 assisted New York
City Marshall Henry Daley; 1990 to 1995
Registration Manager Lanborn Asset
Management.
- --------------------
* Trustee who is an "interested person" of the Trust, as defined in the 1940
Act.
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<PAGE> 41
Except as otherwise indicated above, the address of each Trustee and officer
of the Trust is 905 Marconi Avenue, Ronkonkoma, New York 11779. Mr. Sullivan,
Mr. Boyle, and Mr. O'Neil are Trustees who are "interested persons" of the
Trust, as defined in the 1940 Act, by virtue of their affiliations with the
Investment Adviser or companies affiliated with the Investment Adviser.
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 Funds
or with investors in other funds that invest in the Portfolio, are paid fees by
the Trust. Such Trustees are paid an annual retainer of $5,000 and receive an
attendance fee of $750 for each meeting of the Board of Trustees they attend. If
such Trustees serve as members of the Audit Committee they 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. The Audit
Committee is comprised of the Independent Trustees. Officers of the Trust
receive no compensation from the Trust. All Trustees who are not employees of
the Investment Adviser or its affiliated companies are reimbursed for reasonable
out-of-pocket expenses incurred in connection with the performance of their
responsibilities, including travel related expenses. As of the date of this
Statement of Additional Information, the Trustees and officers of the Trust, as
a group, owned less than 1% of the outstanding shares of the Trust and the Fund.
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*
<TABLE>
<CAPTION>
NAME OF PERSON AGGREGATE
COMPENSATION PENSION OR RETIREMENT TOTAL COMPENSATION
FROM TRUST BENEFITS ACCRUED FROM TRUST PAID
AS PART OF FUND EXPENSES TO TRUSTEES
<S> <C> <C> <C>
William T. Sullivan, Jr. $ 0 $ 0 $ 0
Donald W. Green* $ 8,750 $ 0 $ 8,750
Eugene J. McDonald* $ 6,750 $ 0 $ 6,750
C. Roderick O'Neil $ 8,750 $ 0 $ 8,750
W. Dayle Nattress* $ 0 $ 0 $ 0
Stephen A. Attanasio* $ 0 $ 0 $ 0
Russell E. Galipo $ 6,250 $ 0 $ 6,250
</TABLE>
*These persons no longer serve as Trustees. It should also be noted that Messrs.
Boyle, Fein, Gray, Reynolds and Tharpe, who currently serve as Trustees, were
not Trustees during the 1997 fiscal year.
EXPENSES
All expenses of the Trust, the Funds and the Portfolio not expressly assumed
by the Investment Adviser or the Distributor are paid by the Trust. The Funds
bear pro rata portions of the expenses of the Trust and the Portfolio. Expenses
borne by the Trust, the Funds and the Portfolio include, but are not limited to:
fees for investment advisory and administration services, the fees and expenses
of any registrar, custodian, accounting agent, transfer agent or dividend
disbursing agent; brokerage commissions; taxes; registration costs of the Trust
and its shares under federal and state securities laws; the cost and expense of
printing, including typesetting, and distributing prospectuses and supplements
thereto to shareholders; all expenses of shareholders' and Trustees' meetings
and of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Adviser or any
affiliate of the Investment Adviser; all expenses incident to any dividend,
withdrawal or redemption options; charges and expenses of any outside service
used for pricing shares of the Trust; fees and expenses of legal counsel; fees
and expenses of the Trust's independent auditors; membership dues of industry
associations; interest 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 relating
thereto).
PERFORMANCE INFORMATION
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<PAGE> 42
Calculation of Yield. The Funds may publish quotations of "current yield"
and "effective yield" in advertisements, sales materials and shareholder
reports. Current yield is the simple annualized yield for an identified seven
calendar day period. This yield calculation is based on a hypothetical account
having a balance of exactly one share of a Fund at the beginning of the
seven-day period. The base period return is the net change in the value of the
hypothetical account during the seven-day period, including dividends declared
on any shares purchased with dividends on the shares but excluding any capital
changes. Yield will vary as interest rates and other conditions change. The
yield of Liquid Asset Fund for the seven-day period ended October 31, 1997, was
5.26%, which is equivalent to an effective yield of 5.40%. Yields also depend on
the quality, length of maturity and type of instruments held and operating
expenses of the Fund. For the fiscal year ended October 31, 1997, the Investment
Adviser had voluntarily agreed to waive its fees and to reimburse certain
expenses of Liquid Asset Fund. The yield of Liquid Asset Fund quoted above
reflects the effect of this fee waiver and reimbursement of expenses without
which the yield would have been lower.
Effective yield is computed by compounding the unannualized seven-day period
return as follows: by adding 1 to the unannualized seven-day base period return,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from the
result.
365/7
Effective yield = [(base period return + 1) ]-1
Calculation of Total Return. The Funds may also disseminate quotations of
their average annual total return and other total return data from time to time.
Average annual total return quotations for the specified periods are computed by
finding the average annual compounded rates of return (based on net investment
income and any realized and unrealized capital gains or losses on investments
over such periods) that would equate the initial amount invested to the
redeemable value of such investment at the end of each period. In making these
computations, all dividends and distributions are assumed to be reinvested and
all applicable recurring and non-recurring expenses are taken into account. The
Funds also may quote annual, average annual and annualized total return and
aggregate total return performance data, both as a percentage and as a dollar
amount based on a hypothetical investment amount, for various periods.
Total return quotations will be computed in accordance with the following
formula, except that as required by the periods of the quotations, actual
annual, annualized or aggregate data, rather than average annual data, may be
quoted:
n
P (1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n - number of years
ERV = ending redeemable value of the hypothetical $1,000
payment made at the beginning of the period.
Actual annual or annualized total return data generally will be lower than
average annual total return data because the average rates of return reflect
compounding of return. Aggregate total return data, which is calculated
according to the following formula, generally will be higher than average annual
total return data because the aggregate rates of return reflect compounding over
longer periods of time:
ERV - P
-------
P
Where: P - a hypothetical initial payment of $1,000.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.
Yield and total return quotations are based upon the historical performance
of the Funds and are not intended to indicate future performance. The yield and
total return of the Funds fluctuate and will depend upon not only changes in
prevailing interest rates, but also upon any realized gains and losses and
changes in the Funds' expenses.
GENERAL INFORMATION
13
<PAGE> 43
Description Of Shares. Interests in the Funds are represented by shares of
beneficial interest, $.001 par value. The Trust is authorized to issue an
unlimited number of shares, and may issue shares in series, with each series
representing interests in a separate portfolio of investments (a "series"). As
of the date of this Statement of Additional Information, there were nine
authorized series of the Trust, of which only Liquid Asset Fund, Institutional
Fund and the Portfolio have commenced operations. Shares of the Portfolio may be
held only by other series of the Trust (including the Funds) and by certain
other investment funds.
Each share of each Fund represents an equal proportionate interest in that
Fund with each other share of that Fund, without any priority or preference over
other shares. All consideration received from the sale of shares of a particular
Fund, all assets in which such consideration is invested, and all income,
earnings and profits derived therefrom are allocated to and belong to that Fund.
As such, the interest of shareholders in each Fund is separate and distinct from
the interest of shareholders of the other Funds, and shares of a Fund are
entitled to dividends and distributions only out of the net income and gains, if
any, of that Fund as declared by the Board of Trustees. The assets of each Fund
and each other series of the Trust (including the Portfolio) are segregated on
the Trust's books and are charged with: the expenses and liabilities of that
Fund or series; a pro rata share of the general expenses and liabilities of the
Trust not attributable solely to any particular series; and a pro rata share of
the expenses and liabilities of the Portfolio. The Board of Trustees determines
those expenses and liabilities deemed to be general expenses and liabilities of
the Trust, and these items are allocated among Funds and other series of the
Trust in a manner deemed fair and equitable by the Board of Trustees in its sole
discretion.
As of October 26, 1998, the following entities owned of record or are known
by the Trust to own beneficially 5% or more of the outstanding shares of Liquid
Asset Fund (which was the only outstanding series of the Trust's shares on such
date):
Ambac Financial Group, Inc. 5.52%(1)
One State Street Plaza
New York, New York
City of New Britain 25%
27 West Main Street
New Britain, Connecticut 06051
City of Bridgeport 17.98%
45 Lyons Terrace
Bridgeport, Connecticut 06604
Town of Suffield 12.19%
83 Mountain Road
Suffield, Connecticut 06078
Town of East Haven 5.80%
250 Main Street
East Haven, Connecticut
(1) Shares held by subsidiaries, including Ambac Capital Corporation.
The Portfolio. The Portfolio is organized as a separate series of the Trust.
Investors in the Portfolio may include the Funds and other series of the Trust,
other registered investment companies (or series thereof), and certain other
types of investment funds. Each investor in the Portfolio, including the Funds,
may add to or reduce its investment in the Portfolio on each Business Day. At
4:00 p.m. (Eastern time) on each such Business Day, the net asset value per
share of the Portfolio is determined. On days for which the Public Securities
Association recommends an early closing of the U.S. government securities
markets, the computation of net asset value per share will be made as of such
earlier closing time, rather than as of 4:00 p.m.
Trustee and Officer Liability. Under the Trust's Declaration of Trust and
its By-Laws, and under Delaware law, the Trustees, officers, employees and
agents of the Trust are entitled to indemnification under certain circumstances
against liabilities, claims and expenses arising from any threatened, pending or
completed action, suit or proceeding to which they are made parties by reason of
the fact that they are or were such Trustees, officers, employees or agents of
the Trust, subject to the limitations of the 1940 Act which
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prohibit indemnification which would protect such persons against
liabilities to the Trust or its shareholders to which they would otherwise be
subject by reason of their own bad faith, willful misfeasance, gross negligence
or reckless disregard of duties.
Independent Auditors. KPMG Peat Marwick LLP, 345 Park Avenue, New York, New
York 10154, are the independent auditors of the Trust. The independent auditors
are responsible for auditing the financial statements and prepare the tax
returns of the Funds and the Portfolio. The selection of the independent
auditors is approved annually by the Board of Trustees.
Custodian. U.S. Bank National Association, U.S. Bank Place, 601 Second
Avenue South, Minneapolis, Minnesota 55402, serves as custodian of the Trust's
assets and maintains custody of the cash and investments of the Funds and the
Portfolio. Cash held by the custodian, which may at times be substantial, is
insured by the Federal Deposit Insurance Corporation up to the amount of
available insurance coverage limits (presently, $100,000).
Shareholder Reports. Shareholders of the Trust are kept fully informed
through annual and semi-annual reports showing diversification of investments,
securities owned and other information regarding the activities of the Funds.
The financial statements of the Funds and the Portfolio are audited each year by
the Trust's independent auditors.
Legal Counsel. Schulte Roth & Zabel LLP, New York, New York, serves as
counsel to the Trust.
Registration Statement. This Statement of Additional Information and the
Prospectuses do not contain all of the information set forth in the Registration
Statement the Trust has filed with the SEC. The complete Registration Statement
may be obtained from the SEC upon payment of the fee prescribed by the rules and
regulations of the SEC.
Financial Statements. The statement of assets and liabilities of Liquid
Asset Fund and the portfolio of its investments as of October 31, 1997, and the
related statements of operations and changes in net assets, together with the
notes to financial statements and the report of independent auditors, all as set
forth in the Trust's 1997 Annual Report to Shareholders, are incorporated by
reference into this Statement of Additional Information. No other information or
statement contained in the Annual Report, other than those referred to above, is
incorporated by reference or is a part of this Statement of Additional
Information.
A copy of the most recent annual report of the Trust accompanies this
Statement of Additional Information.
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