As filed with the Securities and Exchange Commission on June 8, 2007
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21715
LEHMAN BROTHERS INSTITUTIONAL LIQUIDITY FUNDS
---------------------------------------------
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices - Zip Code)
Registrant's telephone number, including area code: (212) 476-8800
Peter E. Sundman, Chairman of the Board and Chief Executive Officer
Lehman Brothers Institutional Liquidity Funds
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur Delibert, Esq.
Kirkpatrick & Lockhart Preston Gates Ellis LLP
1601 K Street, N.W.
Washington, D.C. 20006-1600
(Names and Addresses of agents for service)
Date of fiscal year end: March 31, 2007
Date of reporting period: March 31, 2007
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO SHAREHOLDERS
[LOGO] LEHMAN BROTHERS ASSET MANAGEMENT
Lehman Brothers
Institutional Liquidity Funds
Institutional Class Administrative Class
Cash Management Class Service Class
Capital Class Premier Class
Select Class
Money Market Portfolio
Prime Portfolio
Government Portfolio
Treasury Portfolio
Annual Report
March 31, 2007
- --------------------------------------------------------------------------------
Contents
THE PORTFOLIOS
Chairman's Letter ...................................................1
PORTFOLIO COMMENTARY/MATURITY DIVERSIFICATION
Money Market Portfolio...............................................2
Prime Portfolio......................................................3
Government Portfolio.................................................4
Treasury Portfolio...................................................5
Portfolio Expense Information........................................9
FINANCIAL STATEMENTS................................................12
FINANCIAL HIGHLIGHTS/PER SHARE DATA
Money Market Portfolio..............................................23
Prime Portfolio.....................................................27
Government Portfolio................................................31
Treasury Portfolio..................................................35
Reports of Independent Registered Public Accounting Firms...........41
THE MASTER SERIES'
SCHEDULE OF INVESTMENTS
Money Market Master Series..........................................43
Prime Master Series.................................................47
Government Master Series............................................51
Treasury Master Series..............................................53
FINANCIAL STATEMENTS................................................55
FINANCIAL HIGHLIGHTS
Money Market Master Series..........................................61
Prime Master Series.................................................62
Government Master Series............................................63
Treasury Master Series..............................................64
Reports of Independent Registered Public Accounting Firms...........66
Directory...........................................................70
Trustees and Officers...............................................71
Proxy Voting Policies and Procedures................................80
Quarterly Portfolio Schedule........................................80
Board Consideration of the Management and Sub-Advisory Agreements...80
- --------------------------------------------------------------------------------
(C)2007 Lehman Brothers Asset Management LLC All rights reserved.
- --------------------------------------------------------------------------------
Chairman's Letter
Dear Shareholder,
I am pleased to present to you this annual report for the Lehman Brothers
Institutional Liquidity Funds for the period ended March 31, 2007. The report
includes portfolio commentary, a listing of the Portfolios' investments, and
their audited financial statements for the reporting period.
After two final 25 basis point increases through June 2006, the Federal Reserve
paused in the policy of monetary tightening it had been pursuing since June of
2004. The Fed has kept the Fed Funds rate at 5.25% at each of its meetings from
June 2006 through March 2007. The central bank continues to articulate concerns
about inflation; it has noted that it will look to future data releases to
assess the impact of past rate increases in containing inflation and
engineering a soft landing for the economy. This will determine whether, in the
view of the Fed, further increases will be necessary or if rates can be reduced.
The Portfolios performed admirably and as expected throughout the period. Our
investment strategy combines a distinct process for interest rate risk
management with dedicated credit research to build a portfolio of high-quality
securities that seeks to respond quickly to changes in interest rates without
sacrificing yield.
As always, we intend to proceed with caution to protect our clients' principal
and maintain daily liquidity and diversification.
Sincerely,
/s/ Peter Sundman
PETER SUNDMAN
CHAIRMAN OF THE BOARD
LEHMAN BROTHERS INSTITUTIONAL LIQUIDITY FUNDS
1
- --------------------------------------------------------------------------------
Institutional Liquidity Funds Portfolio Commentaries
We are pleased to report that both the Money Market Portfolio Institutional
Class and the Prime Portfolio Institutional Class delivered positive returns
and outperformed the iMoneyNet Money Fund Report First Tier Institutional
Average for their first full quarter of operation, from January 1, 2007 through
March 31, 2007.
The Federal Reserve remained on hold throughout the first quarter of 2007, and
at the March 21st meeting, it removed the tightening bias from language in the
accompanying statement. This is a significant shift and suggests that board
members may be a bit more sanguine with respect to economic prospects. During
the reporting period, investors were focused on strains in the U.S. sub-prime
mortgage market, inflationary pressures, and a vibrant U.S. employment picture.
In recent months there has been considerable anxiety surrounding the sub-prime
mortgage market as delinquencies and foreclosures continue to climb higher. The
employment picture remains benign as monthly non-farm payrolls for the quarter
averaged gains of 152,000 and the unemployment rate dropped to 4.4% in March.
The Core Personal Consumption Expenditures (PCE) Price Index, policy makers'
preferred measure of inflation, increased to an annualized rate of 2.4% in
February. This is above Fed officials' avowed comfort levels.
Going forward, we expect the Federal Reserve to leave rates unchanged in the
short term as it assesses the macroeconomic impact of a housing led slowdown on
the broader economy. Inherent problems persist in the sub-prime sector, though
it is unclear whether these problems will permeate to the prime sector.
Inflation remains stubbornly high, although we feel the Federal Reserve will be
hard-pressed to raise short-term rates, despite its confessed willingness to do
so. Ultimately, we anticipate the next move by the Fed will be to take rates
lower, or to take no action and remain neutral. In the interim, we anticipate
that rates will remain in a limited range as the market and the Fed digest
incoming data. We will seek to capitalize on pockets of interest rate
volatility in order to provide consistent and secure returns to our
shareholders.
Money Market Portfolio
For the first full quarter of the portfolio's operation, ending on March 31,
2007, the Money Market Portfolio Institutional Class returned 1.31% compared to
the iMoneyNet Money Fund Report Taxable First Tier Institutional Average's
1.24%. The Portfolio's Institutional Class closed fiscal 2007 with a 5.29%
seven-day current yield and a 5.43% seven-day effective yield; this more
closely reflects current earnings than the six-month or one-year figures.
(Performance information for the other classes of the Portfolio is available in
the chart following this commentary.)
MONEY MARKET MASTER SERIES
Maturity Diversification (% by Maturity)
1 - 7 Days 25.6%
8 - 30 Days 26.5
31 - 90 Days 27.9
91 - 180 Days 9.8
181+ Days 10.2
2
- --------------------------------------------------------------------------------
Prime Portfolio
For the first full quarter of the portfolio's operation, ending on March 31,
2007, the Prime Portfolio Institutional Class returned 1.30% compared to the
iMoneyNet Money Fund Report Taxable First Tier Institutional Average's 1.24%.
The Portfolio's Institutional Class closed fiscal 2007 with a 5.27% seven-day
current yield and a 5.41% seven-day effective yield; this more closely reflects
current earnings than the six-month or one-year figures. (Performance
information for the other classes of the Portfolio is available in the chart
following this commentary.)
Sincerely,
/s/ John C. Donohue /s/ Timothy J. Robey
JOHN C. DONOHUE AND TIMOTHY J. ROBEY
Portfolio Co-Managers
PRIME MASTER SERIES
Maturity Diversification (% by Maturity)
1 - 7 Days 22.8%
8 - 30 Days 30.2
31 - 90 Days 30.6
91 - 180 Days 11.5
181+ Days 4.9
AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE
PORTFOLIO SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE PORTFOLIO.
THE COMPOSITION, INDUSTRIES AND HOLDINGS OF THE PORTFOLIO ARE SUBJECT TO
CHANGE. INVESTMENT RETURN WILL FLUCTUATE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS.
PERFORMANCE HIGHLIGHTS
The seven-day current and seven-day effective yields as of March 31, 2007 were as follows:/8/
Lehman Brothers Institutional Liquidity Funds
Cash
Institutional Management Capital Select Administrative Service
Class/4/ Class/3/ Class/2/ Class/6/ Class/1/ Class/7/
7-day 7-day 7-day 7-day 7-day 7-day 7-day 7-day 7-day 7-day 7-day 7-day
Current Effective Current Effective Current Effective Current Effective Current Effective Current Effective
Yield Yield Yield Yield Yield Yield Yield Yield Yield Yield Yield Yield
Money
Market
Portfolio 5.29% 5.43% 5.24% 5.38% 5.19% 5.32% 5.14% 5.27% 5.04% 5.17% 4.89% 5.01%
Prime
Portfolio 5.27% 5.41% 5.22% 5.36% 5.17% 5.30% 5.12% 5.25% 5.02% 5.15% 4.87% 4.99%
The seven-day current and seven-day effective yields as of March 31, 2007 were as follows:/8/
Lehman Brothers Institutional Liquidity Funds
Premier
Class/5/
7-day 7-day
Current Effective
Yield Yield
Money
Market
Portfolio 4.79% 4.90%
Prime
Portfolio 4.77% 4.88%
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS. THE INVESTMENT RETURN ON AN INVESTMENT IN A MONEY MARKET FUND
WILL FLUCTUATE. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE
PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END, CALL 888.556.9030. THE COMPOSITION, INDUSTRIES AND HOLDINGS OF
EACH PORTFOLIO ARE SUBJECT TO CHANGE.
AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH EACH PORTFOLIO SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN EACH PORTFOLIO.
3
- --------------------------------------------------------------------------------
Institutional Liquidity Funds Portfolio Commentaries
We are pleased to report that both the Government Portfolio Institutional Class
and the Treasury Portfolio Institutional Class delivered positive returns and
outperformed their respective iMoneyNet Money Fund Report Averages for their
first full quarter of operation, from January 1, 2007 through March 31, 2007.
The Federal Reserve remained on hold throughout the first quarter of 2007, and
at the March 21st meeting, it removed the tightening bias from language in the
accompanying statement. This is a significant shift and suggests that board
members may be a bit more sanguine with respect to economic prospects. During
the reporting period, investors were focused on strains in the U.S. sub-prime
mortgage market, inflationary pressures, and a vibrant U.S. employment picture.
In recent months there has been considerable anxiety surrounding the sub-prime
mortgage market as delinquencies and foreclosures continue to climb higher. The
employment picture remains benign as monthly non-farm payrolls for the quarter
averaged gains of 152,000 and the unemployment rate dropped to 4.4% in March.
The Core Personal Consumption Expenditures (PCE) Price Index, policy makers'
preferred measure of inflation, increased to an annualized rate of 2.4% in
February. This is above Fed officials' avowed comfort levels.
Going forward we expect the Federal Reserve to leave rates unchanged in the
short term as it assesses the macroeconomic impact of a housing led slowdown on
the broader economy. Inherent problems persist in the sub-prime sector, though
it is unclear whether these problems will permeate to the prime sector.
Inflation remains stubbornly high, although we feel the Federal Reserve will be
hard-pressed to raise short-term rates, despite its confessed willingness to do
so. Ultimately, we anticipate the next move by the Fed will be to take rates
lower, or to take no action and remain neutral. In the interim, we anticipate
that rates will remain in a limited range as the market and the Fed digest
incoming data. We will seek to capitalize on pockets of interest rate
volatility in order to provide consistent and secure returns to our
shareholders.
Government Portfolio
For the first full quarter of the portfolio's operation, ending on March 31,
2007, the Government Portfolio Institutional Class returned 1.29% compared to
the iMoneyNet Money Fund Report Government & Agencies Average's 1.22%. The
Government Portfolio Institutional Class closed fiscal 2007 with a 5.20%
seven-day current yield and a 5.33% seven-day effective yield; this more
closely reflects current earnings than the six-month or one-year figures.
(Performance information for the other classes of the Portfolio is available in
the chart following this commentary.)
GOVERNMENT MASTER SERIES
Maturity Diversification (% by Maturity)
1 - 7 Days 36.4%
8 - 30 Days 31.1
31 - 90 Days 14.1
91 - 180 Days 14.7
181+ Days 3.7
4
- --------------------------------------------------------------------------------
Treasury Portfolio
For the first full quarter of the portfolio's operation, ending on March 31,
2007, the Treasury Portfolio Institutional Class returned 1.26% compared to the
iMoneyNet Money Fund Report Treasury & Repo Institutional Average's 1.20%. The
Treasury Portfolio Institutional Class closed fiscal 2007 with a 5.11%
seven-day current yield and a 5.24% seven-day effective yield; this more
closely reflects current earnings than the six-month or one-year figures.
(Performance information for the other classes of the Portfolio is available in
the chart following this commentary.)
Sincerely,
/s/ John C. Donohue /s/ Scott Riecke
JOHN C. DONOHUE AND SCOTT F. RIECKE
PORTFOLIO CO-MANAGERS
TREASURY MASTER SERIES
Maturity Diversification (% by Maturity)
1 - 7 Days 59.4%
8 - 30 Days 21.1
31 - 90 Days 5.4
91 - 180 Days 14.1
181+ Days 0.0
AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE
PORTFOLIO SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE PORTFOLIO.
THE COMPOSITION, INDUSTRIES AND HOLDINGS OF THE PORTFOLIO ARE SUBJECT TO
CHANGE. INVESTMENT RETURN WILL FLUCTUATE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS.
PERFORMANCE HIGHLIGHTS
The seven-day current and seven-day effective yields as of March 31, 2007 were as follows:/8/
Lehman Brothers Institutional Liquidity Funds
Cash
Institutional Management Capital Select Administrative Service
Class/4/ Class/3/ Class/2/ Class/6/ Class/1/ Class/7/
7-day 7-day 7-day 7-day 7-day 7-day 7-day 7-day 7-day 7-day 7-day 7-day
Current Effective Current Effective Current Effective Current Effective Current Effective Current Effective
Yield Yield Yield Yield Yield Yield Yield Yield Yield Yield Yield Yield
Govern-
ment
Portfolio 5.20% 5.33% 5.15% 5.28% 5.10% 5.23% 5.05% 5.18% 4.95% 5.07% 4.80% 4.91%
Treasury
Portfolio 5.11% 5.24% 5.06% 5.19% 5.01% 5.14% 4.96% 5.08% 4.86% 4.98% 4.71% 4.82%
The seven-day current and seven-day effective yields as of March 31, 2007 were as follows:/8/
Lehman Brothers Institutional Liquidity Funds
Premier
Class/5/
7-day 7-day
Current Effective
Yield Yield
Govern-
ment
Portfolio 4.70% 4.81%
Treasury
Portfolio 4.62% 4.73%
PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS. THE INVESTMENT RETURN ON AN INVESTMENT IN A MONEY MARKET FUND
WILL FLUCTUATE. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE
PERFORMANCE QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT
MONTH-END, CALL 888.556.9030. THE COMPOSITION, INDUSTRIES AND HOLDINGS OF
EACH PORTFOLIO ARE SUBJECT TO CHANGE.
AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH EACH PORTFOLIO SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN EACH PORTFOLIO.
5
- --------------------------------------------------------------------------------
Endnotes
1 Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo
current payment of fees and/or reimburse certain expenses of the
Administrative Class of each Portfolio through 3/31/2010, so that the total
annual operating expenses of the Administrative Class of each Portfolio are
limited to 0.45% of its average net assets. This arrangement does not cover
interest, taxes, brokerage commissions and extraordinary expenses. Each
Portfolio has agreed that its Administrative Class will repay NBMI for fees
and expenses foregone or reimbursed for that Class provided that repayment
does not cause the annual operating expenses of that Class of the Portfolio
to exceed the above-stated expense limitation and the reimbursements are
made within three years after the year that Management incurred the
expense. For the period ended March 31, 2007, if this reimbursement was not
made, performance would be lower for the Administrative Class of each
Portfolio.
2 Management has contractually agreed to forgo current payment of fees and/or
reimburse certain expenses of the Capital Class of each Portfolio through
3/31/2010, so that the total annual operating expenses of the Capital Class
of each Portfolio are limited to 0.30% of its average net assets. This
arrangement does not cover interest, taxes, brokerage commissions and
extraordinary expenses. Each Portfolio has agreed that its Capital Class
will repay NBMI for fees and expenses foregone or reimbursed for that Class
provided that repayment does not cause the annual operating expenses of
that Class of the Portfolio to exceed the above-stated expense limitation
and the reimbursements are made within three years after the year that
Management incurred the expense. For the period ended March 31, 2007, if
this reimbursement was not made, performance would be lower for the Capital
Class of each Portfolio.
3 Management has contractually agreed to forgo current payment of fees and/or
reimburse certain expenses of the Cash Management Class of each Portfolio
through 3/31/2010, so that the total annual operating expenses of the Cash
Management Class of each Portfolio are limited to 0.25% of its average net
assets. This arrangement does not cover interest, taxes, brokerage
commissions and extraordinary expenses. Each Portfolio has agreed that its
Cash Management Class will repay NBMI for fees and expenses foregone or
reimbursed for that Class provided that repayment does not cause the annual
operating expenses of that Class of the Portfolio to exceed the
above-stated expense limitation and the reimbursements are made within
three years after the year that Management incurred the expense. For the
period ended March 31, 2007, if this reimbursement was not made,
performance would be lower for the Cash Management Class of each Portfolio.
4 Management has contractually agreed to forgo current payment of fees and/or
reimburse certain expenses of the Institutional Class of each Portfolio
through 3/31/2010, so that the total annual operating expenses of the
Institutional Class of each Portfolio are limited to 0.20% of its average
net assets. This arrangement does not cover interest, taxes, brokerage
commissions and extraordinary expenses. Each Portfolio has agreed that its
Institutional Class will repay NBMI for fees and expenses foregone or
reimbursed for that Class provided that repayment does not cause the annual
operating expenses of that Class of the Portfolio to exceed the
above-stated expense limitation and the reimbursements are made within
three years after the year that Management incurred the expense. For the
period ended March 31, 2007, if this reimbursement was not made,
performance would be lower for the Institutional Class of each Portfolio.
5 Management has contractually agreed to forgo current payment of fees and/or
reimburse certain expenses of the Premier Class of each Portfolio through
3/31/2010, so that the total annual operating expenses of the Premier Class
of each Portfolio are limited to 0.70% of its average net assets. This
arrangement does not cover interest, taxes, brokerage commissions and
extraordinary expenses. Each Portfolio has agreed that its Premier Class
will repay NBMI for fees and expenses foregone or reimbursed for that Class
provided that repayment does not cause the annual operating expenses of
that Class of the Portfolio to exceed the above-stated expense limitation
and the reimbursements are made within three years after the year that
Management incurred the expense. For the period ended March 31, 2007, if
this reimbursement was not made, performance would be lower for the Premier
Class of each Portfolio.
6
- --------------------------------------------------------------------------------
6 Management has contractually agreed to forgo current payment of fees and/or
reimburse certain expenses of the Select Class of each Portfolio through
3/31/2010, so that the total annual operating expenses of the Select Class
of each Portfolio are limited to 0.35% of its average net assets. This
arrangement does not cover interest, taxes, brokerage commissions and
extraordinary expenses. Each Portfolio has agreed that its Select Class
will repay NBMI for fees and expenses foregone or reimbursed for that Class
provided that repayment does not cause the annual operating expenses of
that Class of the Portfolio to exceed the above-stated expense limitation
and the reimbursements are made within three years after the year that
Management incurred the expense. For the period ended March 31, 2007, if
this reimbursement was not made, performance would be lower for the Select
Class of each Portfolio.
7 Management has contractually agreed to forgo current payment of fees and/or
reimburse certain expenses of the Service Class of each Portfolio through
3/31/2010, so that the total annual operating expenses of the Service Class
of each Portfolio are limited to 0.60% of its average net assets. This
arrangement does not cover interest, taxes, brokerage commissions and
extraordinary expenses. Each Portfolio has agreed that its Service Class
will repay NBMI for fees and expenses foregone or reimbursed for that Class
provided that repayment does not cause the annual operating expenses of
that Class of the Portfolio to exceed the above-stated expense limitation
and the reimbursements are made within three years after the year that
Management incurred the expense. For the period ended March 31, 2007, if
this reimbursement was not made, performance would be lower for the Service
Class of each Portfolio.
8 "Current yield" of a money market fund refers to the income generated by an
investment in a Portfolio over a recent 7-day period. This income is then
"annualized." The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in the Portfolio is assumed
to be reinvested. The "effective yield" will be slightly higher than the
"current yield" because of the compounding effect of this assumed
reinvestment. Yields of a money market fund will fluctuate and past
performance is not a guarantee of future results. Unaudited performance
data current to the most recent month-end are available by calling
888-556-9030 or visiting www.lehman.com/lbilf.
7
- --------------------------------------------------------------------------------
Glossary of Indices
THE iMONEYNET MONEY FUND Measures the performance of institutional money
REPORT TAXABLE FIRST TIER market mutual funds which invest in anything
INSTITUTIONAL AVERAGE: allowable, except Second Tier Commercial Paper.
THE iMONEYNET MONEY FUND Measures the performance of institutional money
REPORT GOVERNMENT & market mutual funds which invest in obligations
AGENCIES INSTITUTIONAL of the U.S. Treasury (T-Bills), repurchase
AVERAGE: agreements, or U.S. Government Agency securities.
THE iMONEYNET MONEY FUND Measures the performance of institutional money
REPORT TREASURY & REPO market mutual funds which invest in obligations
INSTITUTIONAL AVERAGE: of the U.S. Treasury (T-Bills) and repurchase
agreements.
Please note that an index does not take into account any fees and expenses or
any tax consequences of investing in the individual securities that they track
and that individuals cannot invest directly in any index. Data about the
performance of this index are prepared or obtained by Neuberger Berman
Management Inc. and include reinvestment of all dividends and capital gain
distributions. The Portfolios may invest in securities not included in the
above-described index.
8
- --------------------------------------------------------------------------------
Information About Your Portfolio's Expenses
These tables are designed to provide information regarding costs related to
your investments. All mutual funds incur operating expenses, which include each
portfolio's proportionate share of expenses of its corresponding master series,
administrative service fees and other expenses. The following examples are
based on an investment of $1,000 made at the beginning of the period shown and
held for the entire period. The tables illustrate the portfolio's costs in two
ways:
Actual Expenses and The first section of the table provides
Performance: information about actual account values and
actual expenses in dollars, based on the
portfolio's actual performance during the
period. You may use the information in this
line, together with the amount you invested, to
estimate the expenses you paid over the period.
Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the
number in the first section of the table under
the heading entitled "Expenses Paid During the
Period" to estimate the expenses you paid over
the period.
Hypothetical Example The second section of the table provides
for Comparison Purposes: information about hypothetical account values
and hypothetical expenses based on the
portfolio's actual expense ratio and an assumed
rate of return at 5% per year before expenses.
This return is not the portfolio's actual
return. The hypothetical account values and
expenses may not be used to estimate the actual
ending account balance or expenses you paid for
the period. You may use this information to
compare the ongoing costs of investing in these
portfolios versus other funds. To do so, compare
the expenses shown in this 5% hypothetical
example with the 5% hypothetical examples that
appear in the shareholder reports of other funds.
9
- --------------------------------------------------------------------------------
Expense Information As of 3/31/07 (Unaudited)
MONEY MARKET PORTFOLIO
Beginning Account Ending Account Expenses Paid During
Value Value the Period* Expense
Actual 12/18/06^ 3/31/07 12/18/06 - 3/31/07 Ratio
- -----------------------------------------------------------------------------------
Institutional Class $1,000.00 $1,026.40 $0.29 .10%
Cash Management Class $1,000.00 $1,026.30 $0.44 .15%
Capital Class $1,000.00 $1,026.10 $0.59 .20%
Select Class $1,000.00 $1,026.00 $0.73 .25%
Administrative Class $1,000.00 $1,025.70 $1.02 .35%
Service Class $1,000.00 $1,025.20 $1.46 .50%
Premier Class $1,000.00 $1,024.90 $1.75 .60%
Hypothetical (5% annual return before expenses)**
- -----------------------------------------------------------------------------------
Institutional Class $1,000.00 $1,014.10 $0.29 .10%
Cash Management Class $1,000.00 $1,013.95 $0.44 .15%
Capital Class $1,000.00 $1,013.81 $0.58 .20%
Select Class $1,000.00 $1,013.66 $0.73 .25%
Administrative Class $1,000.00 $1,013.37 $1.02 .35%
Service Class $1,000.00 $1,012.94 $1.45 .50%
Premier Class $1,000.00 $1,012.66 $1.74 .60%
PRIME PORTFOLIO
Beginning Account Ending Account Expenses Paid During
Value Value the Period* Expense
Actual 12/18/06^ 3/31/07 12/18/06 - 3/31/07 Ratio
- -----------------------------------------------------------------------------------
Institutional Class $1,000.00 $1,026.50 $0.29 .10%
Cash Management Class $1,000.00 $1,026.50 $0.44 .15%
Capital Class $1,000.00 $1,026.30 $0.59 .20%
Select Class $1,000.00 $1,026.20 $0.73 .25%
Administrative Class $1,000.00 $1,025.90 $1.02 .35%
Service Class $1,000.00 $1,025.40 $1.46 .50%
Premier Class $1,000.00 $1,025.20 $1.75 .60%
Hypothetical (5% annual return before expenses)**
- -----------------------------------------------------------------------------------
Institutional Class $1,000.00 $1,014.10 $0.29 .10%
Cash Management Class $1,000.00 $1,013.95 $0.44 .15%
Capital Class $1,000.00 $1,013.81 $0.58 .20%
Select Class $1,000.00 $1,013.66 $0.73 .25%
Administrative Class $1,000.00 $1,013.37 $1.02 .35%
Service Class $1,000.00 $1,012.94 $1.45 .50%
Premier Class $1,000.00 $1,012.66 $1.74 .60%
* For each class of the portfolio, expenses are equal to the annualized expense
ratio for the class, multiplied by the average account value over the period,
multiplied by 105/365 (to reflect the period shown). Each portfolio's expense
ratio includes its proportionate share of the expenses of its corresponding
master series.
**Hypothetical 5% annual return before expenses is calculated by multiplying
the number of days in the most recent period divided by 365.
^ The date investment operations commenced.
10
- --------------------------------------------------------------------------------
GOVERNMENT PORTFOLIO
Beginning Account Ending Account Expenses Paid During
Value Value the Period* Expense
Actual 12/18/06^ 3/31/07 12/18/06 - 3/31/07 Ratio
- -----------------------------------------------------------------------------------
Institutional Class $1,000.00 $1,015.00 $0.29 .10%
Cash Management Class $1,000.00 $1,014.90 $0.44 .15%
Capital Class $1,000.00 $1,014.70 $0.58 .20%
Select Class $1,000.00 $1,014.60 $0.73 .25%
Administrative Class $1,000.00 $1,014.30 $1.01 .35%
Service Class $1,000.00 $1,013.90 $1.45 .50%
Premier Class $1,000.00 $1,013.60 $1.74 .60%
Hypothetical (5% annual return before expenses)**
- -----------------------------------------------------------------------------------
Institutional Class $1,000.00 $1,014.10 $0.29 .10%
Cash Management Class $1,000.00 $1,013.95 $0.44 .15%
Capital Class $1,000.00 $1,013.81 $0.58 .20%
Select Class $1,000.00 $1,013.66 $0.73 .25%
Administrative Class $1,000.00 $1,013.38 $1.01 .35%
Service Class $1,000.00 $1,012.94 $1.45 .50%
Premier Class $1,000.00 $1,012.65 $1.74 .60%
TREASURY PORTFOLIO
Beginning Account Ending Account Expenses Paid During
Value Value the Period* Expense
Actual 12/18/06^ 3/31/07 12/18/06 - 3/31/07 Ratio
- -----------------------------------------------------------------------------------
Institutional Class $1,000.00 $1,014.70 $0.29 .10%
Cash Management Class $1,000.00 $1,014.50 $0.44 .15%
Capital Class $1,000.00 $1,014.40 $0.58 .20%
Select Class $1,000.00 $1,014.20 $0.73 .25%
Administrative Class $1,000.00 $1,013.90 $1.02 .35%
Service Class $1,000.00 $1,013.50 $1.45 .50%
Premier Class $1,000.00 $1,013.20 $1.73 .60%
Hypothetical (5% annual return before expenses)**
- -----------------------------------------------------------------------------------
Institutional Class $1,000.00 $1,014.10 $0.29 .10%
Cash Management Class $1,000.00 $1,013.95 $0.44 .15%
Capital Class $1,000.00 $1,013.80 $0.58 .20%
Select Class $1,000.00 $1,013.66 $0.73 .25%
Administrative Class $1,000.00 $1,013.37 $1.02 .35%
Service Class $1,000.00 $1,012.94 $1.45 .50%
Premier Class $1,000.00 $1,012.66 $1.74 .60%
* For each class of the portfolio, expenses are equal to the annualized expense
ratio for the class, multiplied by the average account value over the period,
multiplied by 105/365 (to reflect the period shown). Each portfolio's expense
ratio includes its proportionate share of the expenses of its corresponding
master series.
**Hypothetical 5% annual return before expenses is calculated by multiplying
the number of days in the most recent period divided by 365.
^ The date investment operations commenced.
11
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
Institutional Liquidity Funds
(000's omitted except per share amounts)
Money Market Government Treasury
Portfolio Prime Portfolio Portfolio Portfolio
-------------- --------------- -------------- --------------
March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007
Assets
Investment in corresponding Master Series, at
value (Note A) $165,042 $2,434,732 $503,849 $456,240
Receivable from administrator-net (Note B) 122 132 20 130
-------------------------------------------------------------
Total Assets 165,164 2,434,864 503,869 456,370
-------------------------------------------------------------
Liabilities
Dividends payable 112 1,999 2,063 2,036
Accrued expenses and other payables 50 24 40 39
-------------------------------------------------------------
Total Liabilities 162 2,023 2,103 2,075
-------------------------------------------------------------
Net Assets at value $165,002 $2,432,841 $501,766 $454,295
-------------------------------------------------------------
Net Assets consist of:
Paid-in capital $165,002 $2,432,847 $501,766 $454,295
Undistributed net investment income (loss) -- -- -- --
Accumulated net realized gains (losses) on
investment -- (6) -- --
-------------------------------------------------------------
Net Assets at value $165,002 $2,432,841 $501,766 $454,295
-------------------------------------------------------------
Net Assets
Institutional Class $159,002 $2,419,501 $494,314 $448,295
Cash Management Class 1,000 1,000 1,000 1,000
Capital Class 1,000 1,000 1,000 1,000
Select Class 1,000 1,000 1,000 1,000
Administrative Class 1,000 1,000 2,452 1,000
Service Class 1,000 1,000 1,000 1,000
Premier Class 1,000 8,340 1,000 1,000
Shares Outstanding ($.001 par value;
unlimited shares authorized)
Institutional Class 159,002 2,419,508 494,314 448,295
Cash Management Class 1,000 1,000 1,000 1,000
Capital Class 1,000 1,000 1,000 1,000
Select Class 1,000 1,000 1,000 1,000
Administrative Class 1,000 1,000 2,452 1,000
Service Class 1,000 1,000 1,000 1,000
Premier Class 1,000 8,340 1,000 1,000
Net Asset Value, offering and redemption
price per share
Institutional Class $1.00 $1.00 $1.00 $1.00
Cash Management Class 1.00 1.00 1.00 1.00
Capital Class 1.00 1.00 1.00 1.00
Select Class 1.00 1.00 1.00 1.00
Administrative Class 1.00 1.00 1.00 1.00
Service Class 1.00 1.00 1.00 1.00
Premier Class 1.00 1.00 1.00 1.00
See Notes to Financial Statements
12
- --------------------------------------------------------------------------------
Statements of Operations
Institutional Liquidity Funds
(000's omitted)
MONEY MARKET PRIME GOVERNMENT TREASURY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------------- ----------------- -----------------
Period from Period from Period from Period from
December 18, 2006 December 18, 2006 December 18, 2006 December 18, 2006
(Commencement (Commencement (Commencement (Commencement
of Operations) to of Operations) to of Operations) to of Operations) to
March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007
Investment Income
Investment income from
corresponding Master Series
(Note A) $1,525 $14,293 $6,686 $6,887
Expenses from corresponding
Master Series (Notes A & B) (28) (294) (170) (164)
---------------------------------------------------------------------------
Net investment income from
corresponding Master Series $1,497 $13,999 $6,516 $6,723
---------------------------------------------------------------------------
Expenses:
Administration fees (Note B) 28 267 126 133
Distribution fees (Note B):
Service Class -- -- -- --
Premier Class 1 1 1 1
Audit fees 18 9 18 9
Legal fees 10 10 10 10
Registration and filing fees 99 99 -- 99
Shareholder reports 17 17 8 17
Shareholder servicing agent fees
(Note B):
Cash Management Class -- 1 -- --
Capital Class -- -- -- --
Select Class -- -- -- --
Administrative Class 1 1 1 1
Service Class 1 1 1 1
Premier Class 1 1 1 1
Trustees' fees and expenses 2 2 2 2
Miscellaneous 21 8 7 23
---------------------------------------------------------------------------
Total expenses 199 417 175 297
Expenses reimbursed by
administrator (Note B) (166) (171) (89) (191)
Expenses waived by administrator
(Note B) (28) (267) (126) (133)
---------------------------------------------------------------------------
Total net expenses 5 (21) (40) (27)
---------------------------------------------------------------------------
Net investment income (loss) $1,492 $14,020 $6,556 $6,750
---------------------------------------------------------------------------
Realized and Unrealized Gain
(Loss) on Investments
(Note A):
Net gain (loss) on investments
from corresponding Master Series -- (6) -- --
---------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations $1,492 $14,014 $6,556 $6,750
---------------------------------------------------------------------------
See Notes to Financial Statements
13
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
Institutional Liquidity Funds
(000's omitted)
MONEY MARKET PRIME GOVERNMENT TREASURY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------- ----------------- ----------------- -----------------
Period from Period from Period from Period from
December 18, 2006 December 18, 2006 December 18, 2006 December 18, 2006
(Commencement (Commencement (Commencement (Commencement
of Operations) to of Operations) to of Operations) to of Operations) to
March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) $1,492 $14,020 $6,556 $6,750
Net realized gain (loss) on investments
from corresponding Master Series -- (6) -- --
Net increase (decrease) in net assets
resulting from operations 1,492 14,014 6,556 6,750
Distributions to Shareholders From (Note A):
Net investment income
Institutional Class (1,405) (13,921) (6,456) (6,667)
Cash Management Class (15) (15) (15) (14)
Capital Class (15) (15) (15) (15)
Select Class (15) (15) (15) (14)
Administrative Class (14) (14) (28) (14)
Service Class (14) (14) (14) (13)
Premier Class (14) (27) (13) (13)
Total distributions to shareholders (1,492) (14,021) (6,556) (6,750)
From Portfolio Share Transactions (Note D):
Proceeds from shares sold in initial
capitalization
Institutional Class -- -- 100 --
Proceeds from shares sold
Institutional Class 818,316 6,998,533 3,470,000 3,323,735
Cash Management Class 1,000 1,000 1,000 1,000
Capital Class 1,000 1,000 1,000 1,000
Select Class 1,000 1,000 1,000 1,000
Administrative Class 1,000 1,000 2,814 1,000
Service Class 1,000 1,000 1,000 1,000
Premier Class 1,000 12,304 1,000 1,000
Proceeds from reinvestment of
dividends and distributions
Institutional Class 1,309 9,616 214 560
Administrative Class -- -- 14 --
Premier Class -- 11 -- --
Payments for shares redeemed
Institutional Class (660,623) (4,588,641) (2,976,000) (2,876,000)
Administrative Class -- -- (376) --
Premier Class -- (3,975) -- --
Net increase (decrease) from Portfolio
share transactions 165,002 2,432,848 501,766 454,295
Net Increase (Decrease) in Net
Assets 165,002 2,432,841 501,766 454,295
Net Assets:
Beginning of period -- -- -- --
End of period $165,002 $2,432,841 $501,766 $454,295
Undistributed net investment income
(loss) at end of period $-- $-- $-- $--
See Notes to Financial Statements
14
- --------------------------------------------------------------------------------
Notes to Financial Statements Institutional Liquidity Funds
Note A--Summary of Significant Accounting Policies:
1 General: Money Market Portfolio ("Money Market"), Prime Portfolio
("Prime"), Government Portfolio ("Government"), and Treasury Portfolio
("Treasury") (individually a "Portfolio," collectively, the "Portfolios"),
are separate operating series of Lehman Brothers Institutional Liquidity
Funds (the "Trust"), a Delaware statutory trust organized pursuant to a
Trust Instrument dated October 1, 2004. The Trust is registered as a
diversified, open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and its shares are
registered under the Securities Act of 1933 (the "1933 Act"), as amended.
Each Portfolio (except Government) had no operations until December 18,
2006, other than matters relating to their organization and registration of
shares under the 1933 Act. Government had no operations until December 18,
2006, other than the matters relating to its organization and the sale to
Neuberger Berman Management Inc., the Portfolio's investment manager
("Management"), on December 4, 2006 of 100,000 shares of beneficial
interest of the Institutional Class for $100,000 ($1.00 per share). Each
Portfolio offers Institutional Class shares, Cash Management Class shares,
Capital Class shares, Select Class shares, Administrative Class shares,
Service Class shares, and Premier Class shares. The Board of Trustees of
the Trust (the "Board") may establish additional series or classes of
shares without the approval of shareholders.
The assets of each Portfolio belong only to that Portfolio, and the
liabilities of each Portfolio are borne solely by that Portfolio and no
other series of the Trust.
Each Portfolio seeks to achieve its investment objective by investing all
of its net investable assets in a Master Series of Institutional Liquidity
Trust (each a "Master Series," collectively, the "Master Series") that has
an investment objective identical to, and a name similar to, that of each
respective Portfolio. Money Market invests in Money Market Master Series
(formerly, Institutional Liquidity Portfolio), Prime invests in Prime
Master Series (formerly, Prime Portfolio), Government invests in Government
Master Series (commencement of operations December 18, 2006), and Treasury
invests in Treasury Master Series (commencement of operations December 18,
2006). The value of each Portfolio's investment in its corresponding Master
Series reflects the Portfolio's proportionate interest in the net assets of
its corresponding Master Series (6.62% for Money Market, 37.56% for Prime,
65.46% for Government, and 100.00% for Treasury, at March 31, 2007). The
performance of each Portfolio is directly affected by the performance of
its corresponding Master Series. The financial statements of the Master
Series, including the Schedules of Investments, are included elsewhere in
this report and should be read in conjunction with the Portfolios'
financial statements.
It is the policy of the Portfolios to maintain a continuous net asset value
per share of $1.00; the Portfolios have adopted certain investment,
valuation, and distribution policies, which conform to general industry
practice, to enable them to do so. However, there is no assurance the
Portfolios will be able to maintain a stable net asset value per share.
Each of these Portfolios complies with Rule 2a-7 of the 1940 Act.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires Management to make estimates and
assumptions at the date of the financial statements. Actual results could
differ from those estimates.
2 Portfolio valuation: Each Portfolio records its investment in its
corresponding Master Series at value. Investment securities held by the
corresponding Master Series are valued as indicated in the notes following
the Master Series' Schedules of Investments.
3 Income tax information: The Portfolios are treated as separate entities for
U.S. federal income tax purposes. It is the intention of each Portfolio to
qualify as a regulated investment company by complying with the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all of its
earnings to its shareholders. Therefore, no federal income or excise tax
provision is required.
15
- --------------------------------------------------------------------------------
Income distributions and capital gain distributions are determined in
accordance with income tax regulations, which may differ from U.S.
generally accepted accounting principles. These differences are primarily
due to differing treatments of income and gains on various investment
securities held by each Master Series, timing differences and differing
characterization of distributions made by each Portfolio as a whole.
As determined on March 31, 2007, permanent differences resulting from
different book and tax accounting for distribution redesignations and
non-deductible 12b-1 fees were reclassified at fiscal year-end. These
reclassifications had no effect on net income, net asset value or net asset
value per share of each Portfolio.
The tax character of distributions paid during the period ended March 31,
2007 was as follows:
Distributions Paid From:
Ordinary Income Total
2007 2007
Money Market $1,492,525 $1,492,525
Prime 14,021,217 14,021,217
Government 6,555,363 6,555,363
Treasury 6,750,442 6,750,442
As of March 31, 2007, the components of distributable earnings (accumulated
losses) on a U.S. federal income tax basis were as follows:
Undistributed Loss
Ordinary Carryforwards
Income and Deferrals Total
Money Market $113,102 $(110) $112,992
Prime $1,999,670 (6,250) $1,993,420
Government $2,064,101 -- $2,064,101
Treasury $2,037,384 -- $2,037,384
The difference between book and tax basis distributable earnings is
attributable primarily to timing differences of distribution payments and
post October loss deferrals.
To the extent each Portfolio's net realized capital gains, if any, can be
offset by capital loss carryforwards, it is the policy of each Portfolio
not to distribute such gains. As determined on March 31, 2007, the
Portfolios did not have unused capital loss carryforwards available for
federal income tax purposes to offset net realized capital gains.
Under current tax law, certain net capital losses realized after October 31
within the taxable year may be deferred and treated as occurring on the
first day of the following tax year. For the period ended March 31, 2007,
the Portfolios elected to defer the following net capital losses arising
between December 18, 2006 and March 31, 2007:
Money Market $(110)
Prime (6,250)
Government --
Treasury --
4 Distributions to shareholders: Each Portfolio earns income, net of
expenses, daily on its investment in its corresponding Master Series. It is
the policy of each Portfolio to declare distributions from net investment
income on each business day; such distributions are paid or reinvested
monthly. Distributions from net realized capital gains, if any, will be
made annually. Income distributions and capital gain distributions to
shareholders are recorded on the ex-date.
16
- --------------------------------------------------------------------------------
5 Expense allocation: Certain expenses are applicable to multiple funds.
Expenses directly attributable to a Portfolio are charged to that
Portfolio. Expenses of the Trust that are not directly attributed to a
Portfolio are allocated among the series of the Trust, on the basis of
relative net assets, except where a more appropriate allocation of expenses
to each of the series can otherwise be made fairly. Expenses borne by the
complex of related investment companies, which includes open-end and
closed-end investment companies for which Management serves as investment
manager, that are not directly attributed to a Portfolio or the Trust, are
allocated among the Portfolios and the other investment companies in the
complex or series thereof, on the basis of relative net assets, except
where a more appropriate allocation of expenses to each investment company
in the complex or series thereof can otherwise be made fairly.
Each Portfolio bears its proportionate share of its corresponding Master
Series' expenses. Each Portfolio's expenses (other than those allocated to
a class of the Portfolio) are allocated proportionally each day among the
classes based on the relative net assets of each class. Expenses
attributable to a specific class are allocated to that class.
6 Organization expenses: Costs incurred by each Portfolio in connection with
its organization, which amounted to approximately $26,456, $26,456, and
$26,456 for Money Market, Prime, and Treasury, respectively, have been
borne by Management. Government's organization expenses and offering costs
of approximately $146,951 have also been borne by Management.
7 Other: All net investment income and realized and unrealized capital gains
and losses of a Master Series are allocated pro rata among its respective
Portfolios and any other investment companies that invest in that Master
Series, if any.
8 Indemnifications: Like many other companies, the Trust's organizational
documents provide that its officers and trustees are indemnified against
certain liabilities arising out of the performance of their duties to the
Trust. In addition, both in some of its principal service contracts and in
the normal course of its business, the Trust enters into contracts that
provide indemnifications to other parties for certain types of losses or
liabilities. The Trust's maximum exposure under these arrangements is
unknown as this could involve future claims against the Trust.
Note B--Management Fees, Administration Fees, Distribution Arrangements, and
Other Transactions with Affiliates:
Each Portfolio retains Management as its administrator under an
Administration Agreement. Each Portfolio pays Management an administration
fee at the annual rate of 0.10% of its average daily net assets under this
agreement. Additionally, Management retains State Street Bank and Trust
Company ("State Street") as its sub-administrator under a
Sub-Administration Agreement. Management pays State Street a fee for all
services received under the agreement. Each Portfolio indirectly pays for
investment management services through its investment in its corresponding
Master Series at the annual rate of 0.08% of average daily net assets (see
Note B of Notes to Financial Statements of the Master Series).
For the Service and Premier Class of each Portfolio, Management acts as
agent in arranging for the sale of class shares without commission and
bears advertising and promotion expenses. The Board has adopted
distribution plans (each a "Plan", collectively, the "Plans") with respect
to these classes, pursuant to Rule 12b-1 under the 1940 Act. The Plans
provide that, as compensation for administrative and other services
provided to these classes, Management's activities and expenses related to
the sale and distribution of these classes, and ongoing services provided
to investors in these classes, Management receives from each of these
classes a fee at the annual rate of 0.15% of such Service Class' and 0.25%
of such Premier Class' average daily net assets. Management receives this
amount to provide distribution and shareholder servicing for those classes
and pays a portion of it to institutions that provide such services. Those
institutions may use the payments for, among other purposes, compensating
employees engaged in sales and/or shareholder servicing. The amount of fees
paid by each class during any year may be more or less than the cost of
distribution and other services provided to that class. NASD rules limit the
17
- --------------------------------------------------------------------------------
amount of annual distribution fees that may be paid by a mutual fund and
impose a ceiling on the cumulative distribution fees paid. The Trust's
Plans comply with those rules.
The Trust, on behalf of each Portfolio, has entered into a Shareholder
Servicing Agreement with Management with respect to the Cash Management,
Capital, Select, Administrative, Service and Premier Class of each
Portfolio ("Shareholder Servicing Agreement"). Pursuant to the Shareholder
Servicing Agreement, Management provides to the shareholders and beneficial
owners of the Cash Management, Capital, Select, Administrative, Service and
Premier Class varying levels of shareholder services, some or all of which
may be provided by banks, trust companies or other institutions that
provide such shareholder services to their accounts ("Accounts") and their
account holders and which have entered into a service agreement with
Management (each, a "Service Organization"). Management may compensate a
Service Organization for the shareholder services it provides to Accounts
and account holders pursuant to such service agreement. The Shareholder
Servicing Agreement requires each of the Cash Management, Capital, Select,
Administrative, Service and Premier Class to compensate Management for the
shareholder services provided to that Class. For the shareholder services
provided pursuant to the Shareholder Servicing Agreement, Management
receives from the Cash Management, Capital, Select, Administrative, Service
and Premier Class of each Portfolio a fee at the annual rate of 0.05%,
0.10%, 0.15%, 0.25%, 0.25%, 0.25%, respectively, of such Class' average
daily net assets.
18
- --------------------------------------------------------------------------------
Management has contractually undertaken to forgo current payment and/or
reimburse each respective class of each Portfolio for its operating
expenses plus its pro rata portion of its corresponding Master Series'
operating expenses (including the fees payable to Management but excluding
interest, taxes, brokerage commissions and extraordinary expenses)
("Operating Expenses") which exceed the expense limitation as detailed in
the following table:
Contractual
Reimbursement/ Voluntary
Waiver of Fees Reimbursement
from Management from Management
Contractual for the for the Period
Expense Period Ended Ended
Limitation/(1)/ Expiration March 31, 2007 March 31, 2007/(2)/
Money Market Institutional Class 0.20% 3/31/10 $137,243 $26,626
Money Market Cash Management Class 0.25% 3/31/10 4,787 285
Money Market Capital Class 0.30% 3/31/10 4,787 285
Money Market Select Class 0.35% 3/31/10 4,787 285
Money Market Administrative Class 0.45% 3/31/10 4,787 285
Money Market Service Class 0.60% 3/31/10 4,787 285
Money Market Premier Class 0.70% 3/31/10 4,787 285
Prime Institutional Class 0.20% 3/31/10 165,552 264,524
Prime Cash Management Class 0.25% 3/31/10 885 285
Prime Capital Class 0.30% 3/31/10 885 285
Prime Select Class 0.35% 3/31/10 885 285
Prime Administrative Class 0.45% 3/31/10 885 285
Prime Service Class 0.60% 3/31/10 885 285
Prime Premier Class 0.70% 3/31/10 1,102 566
Government Institutional Class 0.20% 3/31/10 87,201 123,887
Government Cash Management Class 0.25% 3/31/10 321 285
Government Capital Class 0.30% 3/31/10 321 285
Government Select Class 0.35% 3/31/10 321 285
Government Administrative Class 0.45% 3/31/10 482 567
Government Service Class 0.60% 3/31/10 321 285
Government Premier Class 0.70% 3/31/10 321 285
Treasury Institutional Class 0.20% 3/31/10 188,154 130,518
Treasury Cash Management Class 0.25% 3/31/10 529 285
Treasury Capital Class 0.30% 3/31/10 529 285
Treasury Select Class 0.35% 3/31/10 529 285
Treasury Administrative Class 0.45% 3/31/10 529 285
Treasury Service Class 0.60% 3/31/10 529 285
Treasury Premier Class 0.70% 3/31/10 529 285
/(1)/ Expense limitation per annum of the respective class' average daily net
assets.
/(2)/ In addition to the contractual limitations listed above, Management has
voluntarily undertaken to reimburse an additional 0.10% per annum of the
average daily net assets of each class of each Portfolio.
Each class of each Portfolio has agreed to repay Management for fees and
expenses foregone and/or its excess Operating Expenses previously
reimbursed by Management, pursuant to a contractual expense limitation, so
long as its annual Operating Expenses during that period do not exceed its
expense limitation and the repayments are made within three years after the
year in which Management issued the reimbursement.
19
- --------------------------------------------------------------------------------
During the period ended March 31, 2007, there was no reimbursement to
Management under this agreement. At March 31, 2007, contingent liabilities
to Management under the agreement were as follows:
Expiring in:
-----------------
2010 Total
Money Market Institutional Class $137,243 $137,243
Money Market Cash Management Class 4,787 4,787
Money Market Capital Class 4,787 4,787
Money Market Select Class 4,787 4,787
Money Market Administrative Class 4,787 4,787
Money Market Service Class 4,787 4,787
Money Market Premier Class 4,787 4,787
Prime Institutional Class 165,552 165,552
Prime Cash Management Class 885 885
Prime Capital Class 885 885
Prime Select Class 885 885
Prime Administrative Class 885 885
Prime Service Class 885 885
Prime Premier Class 1,102 1,102
Government Institutional Class 87,201 87,201
Government Cash Management Class 321 321
Government Capital Class 321 321
Government Select Class 321 321
Government Administrative Class 482 482
Government Service Class 321 321
Government Premier Class 321 321
Treasury Institutional Class 188,154 188,154
Treasury Cash Management Class 529 529
Treasury Capital Class 529 529
Treasury Select Class 529 529
Treasury Administrative Class 529 529
Treasury Service Class 529 529
Treasury Premier Class 529 529
Management and Lehman Brothers Asset Management LLC ("LBAM"), sub-adviser
to each Master Series, are wholly-owned subsidiaries of Lehman Brothers
Holdings Inc., a publicly-owned holding company. Several individuals who
are officers and/or trustees of the Trust are also employees of LBAM and/or
Management.
Each Portfolio also has a distribution agreement with Management with
respect to each class of shares. Management receives no compensation under
it and no commissions for sales or redemptions of shares of beneficial
interest of each Portfolio, but receives fees from the Service Class and
Premier Class under their Plans, as described above.
Each Master Series has an expense offset arrangement in connection with its
custodian contract. For the period ended March 31, 2007, the impact of this
arrangement was a reduction of expenses of $431, $4,422, $564, and $1,269
for Money Market, Prime, Government, and Treasury, respectively.
20
- --------------------------------------------------------------------------------
Note C--Investment Transactions:
During the period ended March 31, 2007, contributions and withdrawals in
each Portfolio's investment in its corresponding Master Series were as
follows:
(000's omitted) Contributions Withdrawals
Money Market $767,164 $603,619
Prime 5,329,189 2,908,450
Government 669,942 172,609
Treasury 814,760 365,243
Note D--Portfolio Share Transactions:
Share activity at $1.00 per share for the period ended March 31, 2007 was
as follows:
For the Period Ended
March 31, 2007
------------------------------------------------------------
Shares
Issued on
Reinvestment
of Dividends
Initial Shares and Shares
(000's omitted) Capitalization Sold Distributions Redeemed Total
Money Market:
Institutional Class -- 818,316 1,309 (660,623) 159,002
Cash Management Class -- 1,000 -- -- 1,000
Capital Class -- 1,000 -- -- 1,000
Select Class -- 1,000 -- -- 1,000
Administrative Class -- 1,000 -- -- 1,000
Service Class -- 1,000 -- -- 1,000
Premier Class -- 1,000 -- -- 1,000
Prime:
Institutional Class -- 6,998,533 9,616 (4,588,641) 2,419,508
Cash Management Class -- 1,000 -- -- 1,000
Capital Class -- 1,000 -- -- 1,000
Select Class -- 1,000 -- -- 1,000
Administrative Class -- 1,000 -- -- 1,000
Service Class -- 1,000 -- -- 1,000
Premier Class -- 12,304 11 (3,975) 8,340
Government:
Institutional Class 100 3,470,000 214 (2,976,000) 494,314
Cash Management Class -- 1,000 -- -- 1,000
Capital Class -- 1,000 -- -- 1,000
Select Class -- 1,000 -- -- 1,000
Administrative Class -- 2,814 14 (376) 2,452
21
- --------------------------------------------------------------------------------
For the Period Ended
March 31, 2007
----------------------------------------------------------
Shares
Issued on
Reinvestment
of Dividends
Initial Shares and Shares
(000's omitted) Capitalization Sold Distributions Redeemed Total
Service Class -- 1,000 -- -- 1,000
Premier Class -- 1,000 -- -- 1,000
Treasury:
Institutional Class -- 3,323,735 560 (2,876,000) 448,295
Cash Management Class -- 1,000 -- -- 1,000
Capital Class -- 1,000 -- -- 1,000
Select Class -- 1,000 -- -- 1,000
Administrative Class -- 1,000 -- -- 1,000
Service Class -- 1,000 -- -- 1,000
Premier Class -- 1,000 -- -- 1,000
Note E--Recent Accounting Pronouncements:
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income
Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions
should be recognized, measured, presented and disclosed in the financial
statements. FIN 48 clarifies the accounting for income taxes, by
prescribing a minimum recognition threshold a tax position is required to
meet before being recognized in the financial statements. FIN 48 requires
that a "more-likely-than-not" threshold be met before the benefit of a tax
position may be recognized in the financial statements and prescribes how
such benefit should be measured. Adoption of FIN 48 is required for fiscal
years beginning after December 15, 2006 and is to be applied to all open
tax years as of the effective date. The Securities and Exchange Commission
will permit investment companies to delay implementation of FIN 48 until
September 30, 2007. At this time, Management is evaluating the implications
of FIN 48 and its impact in the financial statements has not yet been
determined.
In September 2006, FASB issued FASB Statement No. 157, "Fair Value
Measurement" ("SFAS 157"), which defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair
value measurements. SFAS 157 is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years.
Management believes the adoption of SFAS 157 will not have a material
impact on the Portfolios' financial position or results of operations.
22
- --------------------------------------------------------------------------------
Financial Highlights
Money Market Portfolio/+/
The following tables include selected data for a share outstanding throughout
the period and other performance information derived from the Financial
Statements. They should be read in conjunction with their corresponding Master
Series' Financial Statements and notes thereto.
Institutional Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0152
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0152
Less Distributions From:
Net Investment Income (.0152)
Total Distributions (.0152)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.53%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $159.0
Ratio of Gross Expenses to Average Net Assets/#/ .10%*
Ratio of Net Expenses to Average Net Assets/+++/ .10%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.26%*
See Notes to Financial Highlights
23
- --------------------------------------------------------------------------------
Cash Management Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0150
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0150
Less Distributions From:
Net Investment Income (.0150)
Total Distributions (.0150)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.51%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .15%*
Ratio of Net Expenses to Average Net Assets/+++/ .15%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.21%*
Capital Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0149
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0149
Less Distributions From:
Net Investment Income (.0149)
Total Distributions (.0149)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.50%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .20%*
Ratio of Net Expenses to Average Net Assets/+++/ .20%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.16%*
See Notes to Financial Highlights
24
- --------------------------------------------------------------------------------
Select Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0148
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0148
Less Distributions From:
Net Investment Income (.0148)
Total Distributions (.0148)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.48%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .25%*
Ratio of Net Expenses to Average Net Assets/+++/ .25%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.12%*
Administrative Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0145
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0145
Less Distributions From:
Net Investment Income (.0145)
Total Distributions (.0145)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.45%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .35%*
Ratio of Net Expenses to Average Net Assets/+++/ .35%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.02%*
See Notes to Financial Highlights
25
- --------------------------------------------------------------------------------
Service Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0140
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0140
Less Distributions From:
Net Investment Income (.0140)
Total Distributions (.0140)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.41%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .50%*
Ratio of Net Expenses to Average Net Assets/+++/ .50%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.87%*
Premier Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0138
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0138
Less Distributions From:
Net Investment Income (.0138)
Total Distributions (.0138)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.38%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .60%*
Ratio of Net Expenses to Average Net Assets/+++/ .60%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.77%*
See Notes to Financial Highlights
26
- --------------------------------------------------------------------------------
Financial Highlights
Prime Portfolio/+/
The following tables include selected data for a share outstanding throughout
the period and other performance information derived from the Financial
Statements. They should be read in conjunction with their corresponding Master
Series' Financial Statements and notes thereto.
Institutional Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0151
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0151
Less Distributions From:
Net Investment Income (.0151)
Total Distributions (.0151)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.52%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $2,419.5
Ratio of Gross Expenses to Average Net Assets/#/ .10%*
Ratio of Net Expenses to Average Net Assets/+++/ .10%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.25%*
See Notes to Financial Highlights
27
- --------------------------------------------------------------------------------
Cash Management Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0150
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0150
Less Distributions From:
Net Investment Income (.0150)
Total Distributions (.0150)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.51%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .15%*
Ratio of Net Expenses to Average Net Assets/+++/ .15%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.20%*
Capital Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0149
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0149
Less Distributions From:
Net Investment Income (.0149)
Total Distributions (.0149)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.49%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .20%*
Ratio of Net Expenses to Average Net Assets/+++/ .20%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.15%*
See Notes to Financial Highlights
28
- --------------------------------------------------------------------------------
Select Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0147
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0147
Less Distributions From:
Net Investment Income (.0147)
Total Distributions (.0147)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.48%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .25%*
Ratio of Net Expenses to Average Net Assets/+++/ .25%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.10%*
Administrative Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0144
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0144
Less Distributions From:
Net Investment Income (.0144)
Total Distributions (.0144)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.45%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .35%*
Ratio of Net Expenses to Average Net Assets/+++/ .35%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.00%*
See Notes to Financial Highlights
29
- --------------------------------------------------------------------------------
Service Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0140
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0140
Less Distributions From:
Net Investment Income (.0140)
Total Distributions (.0140)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.41%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .50%*
Ratio of Net Expenses to Average Net Assets/+++/ .50%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.85%*
Premier Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0137
Net Gains or Losses on Securities (.0000)
Total From Investment Operations .0137
Less Distributions From:
Net Investment Income (.0137)
Total Distributions (.0137)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.38%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $8.3
Ratio of Gross Expenses to Average Net Assets/#/ .60%*
Ratio of Net Expenses to Average Net Assets/+++/ .60%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.75%*
See Notes to Financial Highlights
30
- --------------------------------------------------------------------------------
Financial Highlights
Government Portfolio/+/
The following tables include selected data for a share outstanding throughout
the period and other performance information derived from the Financial
Statements. They should be read in conjunction with their corresponding Master
Series' Financial Statements and notes thereto.
Institutional Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0149
Net Gains or Losses on Securities --
Total From Investment Operations .0149
Less Distributions From:
Net Investment Income (.0149)
Total Distributions (.0149)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.50%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $494.3
Ratio of Gross Expenses to Average Net Assets/#/ .10%*
Ratio of Net Expenses to Average Net Assets/+++/ .10%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.19%*
See Notes to Financial Highlights
31
- --------------------------------------------------------------------------------
Cash Management Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0148
Net Gains or Losses on Securities --
Total From Investment Operations .0148
Less Distributions From:
Net Investment Income (.0148)
Total Distributions (.0148)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.49%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .15%*
Ratio of Net Expenses to Average Net Assets/+++/ .15%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.13%*
Capital Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0147
Net Gains or Losses on Securities --
Total From Investment Operations .0147
Less Distributions From:
Net Investment Income (.0147)
Total Distributions (.0147)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.47%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .20%*
Ratio of Net Expenses to Average Net Assets/+++/ .20%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.08%*
See Notes to Financial Highlights
32
- --------------------------------------------------------------------------------
Select Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0145
Net Gains or Losses on Securities --
Total From Investment Operations .0145
Less Distributions From:
Net Investment Income (.0145)
Total Distributions (.0145)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.46%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .25%*
Ratio of Net Expenses to Average Net Assets/+++/ .25%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.03%*
Administrative Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0142
Net Gains or Losses on Securities --
Total From Investment Operations .0142
Less Distributions From:
Net Investment Income (.0142)
Total Distributions (.0142)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.43%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $2.5
Ratio of Gross Expenses to Average Net Assets/#/ .35%*
Ratio of Net Expenses to Average Net Assets/+++/ .35%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.94%*
See Notes to Financial Highlights
33
- --------------------------------------------------------------------------------
Service Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0138
Net Gains or Losses on Securities --
Total From Investment Operations .0138
Less Distributions From:
Net Investment Income (.0138)
Total Distributions (.0138)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.39%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .50%*
Ratio of Net Expenses to Average Net Assets/+++/ .50%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.78%*
Premier Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0135
Net Gains or Losses on Securities --
Total From Investment Operations .0135
Less Distributions From:
Net Investment Income (.0135)
Total Distributions (.0135)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.36%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .60%*
Ratio of Net Expenses to Average Net Assets/+++/ .60%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.68%*
See Notes to Financial Highlights
34
- --------------------------------------------------------------------------------
Financial Highlights
Treasury Portfolio/+/
The following tables include selected data for a share outstanding throughout
the period and other performance information derived from the Financial
Statements. They should be read in conjunction with their corresponding Master
Series' Financial Statements and notes thereto.
Institutional Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0146
Net Gains or Losses on Securities .0000
Total From Investment Operations .0146
Less Distributions From:
Net Investment Income (.0146)
Total Distributions (.0146)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.47%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $448.3
Ratio of Gross Expenses to Average Net Assets/#/ .10%*
Ratio of Net Expenses to Average Net Assets/+++/ .10%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.08%*
See Notes to Financial Highlights
35
- --------------------------------------------------------------------------------
Cash Management Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0144
Net Gains or Losses on Securities .0000
Total From Investment Operations .0144
Less Distributions From:
Net Investment Income (.0144)
Total Distributions (.0144)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.45%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .15%*
Ratio of Net Expenses to Average Net Assets/+++/ .15%*
Ratio of Net Investment Income (Loss) to Average Net Assets 5.00%*
Capital Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0143
Net Gains or Losses on Securities .0000
Total From Investment Operations .0143
Less Distributions From:
Net Investment Income (.0143)
Total Distributions (.0143)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.44%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .20%*
Ratio of Net Expenses to Average Net Assets/+++/ .20%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.95%*
See Notes to Financial Highlights
36
- --------------------------------------------------------------------------------
Select Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0141
Net Gains or Losses on Securities .0000
Total From Investment Operations .0141
Less Distributions From:
Net Investment Income (.0141)
Total Distributions (.0141)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.42%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .25%*
Ratio of Net Expenses to Average Net Assets/+++/ .25%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.90%*
Administrative Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0139
Net Gains or Losses on Securities .0000
Total From Investment Operations .0139
Less Distributions From:
Net Investment Income (.0139)
Total Distributions (.0139)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.39%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .35%*
Ratio of Net Expenses to Average Net Assets/+++/ .35%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.80%*
See Notes to Financial Highlights
37
- --------------------------------------------------------------------------------
Service Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0134
Net Gains or Losses on Securities .0000
Total From Investment Operations .0134
Less Distributions From:
Net Investment Income (.0134)
Total Distributions (.0134)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.35%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .50%*
Ratio of Net Expenses to Average Net Assets/+++/ .50%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.65%*
Premier Class
Period from
December 18, 2006^
to March 31,
2007
Net Asset Value, Beginning of Period $1.0000
Income From Investment Operations:
Net Investment Income (Loss) .0131
Net Gains or Losses on Securities .0000
Total From Investment Operations .0131
Less Distributions From:
Net Investment Income (.0131)
Total Distributions (.0131)
Net Asset Value, End of Period $1.0000
Total Return/++/ +1.32%**
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $1.0
Ratio of Gross Expenses to Average Net Assets/#/ .60%*
Ratio of Net Expenses to Average Net Assets/+++/ .60%*
Ratio of Net Investment Income (Loss) to Average Net Assets 4.56%*
See Notes to Financial Highlights
38
- --------------------------------------------------------------------------------
Notes to Financial Highlights Institutional Liquidity Funds
/+/ The per share amounts and ratios which are shown reflect income and
expenses, including the Portfolio's proportionate share of its
corresponding Master Series' income and expenses.
/++/ Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of the Portfolio during the
fiscal period and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Current returns may be lower or higher than the performance data
quoted. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. Total return would
have been lower if Management had not reimbursed and/or waived certain
expenses (see Note B of Notes to Financial Statements of Institutional
Liquidity Funds).
/+++/ After reimbursement and/or waiver of certain expenses by Management (see
Note B of Notes to Financial Statements of Institutional Liquidity Funds).
Had Management not undertaken such actions, the annualized ratios of net
expenses to average daily net assets would have been:
Period Ended
March 31,
2007/(1)/
Money Market Institutional Class 0.71%
Money Market Cash Management Class 1.91
Money Market Capital Class 1.96
Money Market Select Class 2.01
Money Market Administrative Class 2.11
Money Market Service Class 2.26
Money Market Premier Class 2.36
Prime Institutional Class 0.26
Prime Cash Management Class 0.56
Prime Capital Class 0.61
Prime Select Class 0.66
Prime Administrative Class 0.76
Prime Service Class 0.91
Prime Premier Class 0.89
Government Institutional Class 0.27
Government Cash Management Class 0.36
Government Capital Class 0.41
Government Select Class 0.46
Government Administrative Class 0.53
Government Service Class 0.71
Government Premier Class 0.81
Treasury Institutional Class 0.34
Treasury Cash Management Class 0.43
Treasury Capital Class 0.48
Treasury Select Class 0.53
Treasury Administrative Class 0.63
Treasury Service Class 0.78
Treasury Premier Class 0.88
39
- --------------------------------------------------------------------------------
/(1)/ Period from December 18, 2006 (Commencement of Operations) to March
31, 2007.
^ The date investment operations commenced.
* Annualized.
** Not annualized.
/#/ The Portfolio is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
40
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Lehman Brothers Institutional Liquidity Funds
and Shareholders of Money Market Portfolio and Government Portfolio:
We have audited the accompanying statements of assets and liabilities of Money
Market Portfolio and Government Portfolio (two of the series constituting
Lehman Brothers Institutional Liquidity Funds) (collectively the "Portfolios"),
as of March 31, 2007, and the related statements of operations, changes in net
assets and the financial highlights for the period from December 18, 2006
(commencement of operations) to March 31, 2007. These financial statements and
financial highlights are the responsibility of the Portfolios' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Portfolios'
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Portfolios' internal
control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements and financial highlights, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of March 31, 2007, by
correspondence with the custodian and brokers. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Money
Market Portfolio and Government Portfolio, each a portfolio of Lehman Brothers
Institutional Liquidity Funds, at March 31, 2007, the results of their
operations, changes in their net assets and the financial highlights for the
period from December 18, 2006 (commencement of operations) to March 31, 2007,
in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 16, 2007
41
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of
Lehman Brothers Institutional Liquidity Funds and
Shareholders of Prime Portfolio and Treasury Portfolio
We have audited the accompanying statements of assets and liabilities of Prime
Portfolio and Treasury Portfolio (the "Portfolios"), each a series of Lehman
Brothers Institutional Liquidity Funds, as of March 31, 2007, and the related
statements of operations, the statements of changes in net assets, and the
financial highlights for the period from December 18, 2006 (commencement of
operations) to March 31, 2007. These financial statements and financial
highlights are the responsibility of the Portfolios' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The Portfolios are not required to have, nor were we engaged to
perform, an audit of their internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Portfolios' internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Prime
Portfolio and Treasury Portfolio as of March 31, 2007, and the results of their
operations, the changes in their net assets, and the financial highlights for
the period from December 18, 2006 to March 31, 2007, in conformity with
accounting principles generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
May 11, 2007
42
- --------------------------------------------------------------------------------
Schedule of Investments Money Market Master Series
PRINCIPAL AMOUNT RATING(S) VALUE++
(000's omitted) Moody's S&P (000's omitted)
U.S. Government Agency Securities (1.2%)
$30,000 Federal Home Loan Bank, Bonds, 5.38%, due 4/9/08 AGY AGY $30,000
Certificates of Deposit (4.2%)
50,000 Barclays Bank NY, Yankee CD, 5.35% & 5.39%, due 1/31/08 & 4/23/08 P-1 A-1+ 50,000
10,000 Calyon NY, Euro CD, 5.35%, due 5/7/07 P-1 A-1+ 10,000
15,000 Charter One Bank NA, CD, 5.32%, due 4/17/07 P-1 A-1+ 15,000
30,000 Natexis Banques Populaires, Yankee CD, 5.38% & 5.40%, due 1/9/08 &
1/15/08 P-1 A-1+ 30,000
Total Certificates of Deposit 105,000
Floating Rate Certificates of Deposit (3.0%)(mu)
40,000 Calyon NY, Floating Rate Yankee CD,
5.26% & 5.29%, due 4/2/07 & 6/13/07 P-1 A-1+ 39,995
30,000 Credit Suisse First Boston, Floating Rate Yankee CD,
5.31% & 5.36%, due 4/2/07 & 4/24/07 P-1 A-1+ 30,000
5,000 Unicredito Italiano NY, Floating Rate Yankee CD, 5.34%, due 6/13/07 P-1 A-1 5,000
Total Floating Rate Certificates of Deposit 74,995
Commercial Paper (49.0%)
Asset Backed (33.0%)
40,000 Ajax Bambino Funding, Inc., 5.27%, due 4/11/07 P-1 A-1+ 39,947
75,000 Amstel Funding Corp., 5.18% - 5.24%, due 4/3/07 - 5/25/07 P-1 A-1+ 74,727
36,347 Cancara Asset Securitization Ltd., 5.22%, due 6/6/07 P-1 A-1+ 36,005
15,800 Chariot Funding LLC, 5.22%, due 6/5/07 P-1 A-1 15,653
20,000 CRC Funding LLC, 5.21%, due 6/11/07 P-1 A-1+ 19,797(n)
25,000 Crown Point Capital Co., 5.24%, due 6/20/07 P-1 A-1 24,712
20,266 Erasmus Capital Corp., 5.25%, due 5/15/07 P-1 A-1+ 20,139
43,832 Fairway Finance, 5.26%, due 4/13/07 P-1 A-1 43,762(n)
40,000 Grampian Funding LLC, 5.21%, due 7/24/07 P-1 A-1+ 39,346
40,000 Lexington Parker Capital, 5.21%, due 7/17/07 P-1 A-1 39,387
55,000 North Sea Funding BV, 5.19% & 5.25%, due 4/30/07 & 5/3/07 P-1 A-1+ 54,762
30,000 Park Avenue Receivables Co. LLC, 5.22%, due 6/5/07 P-1 A-1 29,722
65,000 Picaros Funding, 5.15% - 5.25%, due 5/23/07 - 7/10/07 P-1 A-1+ 64,374
20,354 Scaldis Capital LLC, 5.19% & 5.22%, due 7/20/07 & 8/10/07 P-1 A-1+ 20,003
15,000 Sigma Finance, Inc., 5.19%, due 8/16/07 P-1 A-1+ 14,706
61,000 Solitaire Funding LLC, 5.24%, due 5/21/07 & 6/1/07 P-1 A-1+ 60,532
36,636 Tempo Finance Ltd., 5.25%, due 4/23/07 P-1 A-1+ 36,524
See Notes to Schedule of Investments
43
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT RATING(S) VALUE++
(000's omitted) Moody's S&P (000's omitted)
$51,442 Thames Asset Securitization LLC, 5.23%, due 6/12/07 P-1 A-1 $50,911
67,953 Thunderbay Funding, Inc., 5.23% - 5.26%, due 4/5/07 - 6/22/07 P-1 A-1 67,563
70,000 Yorktown Capital, 5.25% & 5.26%, due 4/19/07 & 4/20/07 P-1 A-1+ 69,823
822,395
Banking/Foreign (13.6%)
30,000 Bank of Ireland, 5.24%, due 5/14/07 P-1 A-1 29,816
65,000 Danske Corp., 5.09% - 5.23%, due 4/10/07 - 10/29/07 P-1 A-1+ 63,361
35,000 Depfa Bank, 5.24%, due 5/21/07 P-1 A-1+ 34,750
65,000 DZ Bank AG, 5.25% & 5.26%, due 4/25/07 P-1 A-1 64,782
70,000 Societe Generale NA, 5.15% - 5.27%, due 4/4/07 - 9/12/07 P-1 A-1+ 69,029
25,000 UBS Finance, Inc., 5.19%, due 8/15/07 P-1 A-1+ 24,514
25,000 Unicredito Italiano PLC, 5.24%, due 5/7/07 P-1 A-1 24,873
30,000 Westpac Banking Corp., 5.18%, due 8/8/07 P-1 A-1+ 29,447
340,572
Financial Services (0.4%)
10,000 Morgan Stanley, 5.19%, due 7/23/07 P-1 A-1 9,839
Heavy Machinery/Equipment (2.0%)
50,000 Caterpillar, Inc., 5.25%, due 5/17/07 P-1 A-1 49,672
Total Commercial Paper 1,222,478
Time Deposits (3.6%)
50,000 KeyBank National, 5.25%, due 4/2/07 P-1 A-1 50,000
40,000 SunTrust Bank, Grand Cayman, Inc., 5.25%, due 4/2/07 P-1 A-1 40,000
Total Time Deposits 90,000
Corporate Debt Securities (4.3%)
Asset Backed (3.2%)
80,000 Cullinan Finance Corp., Medium-Term Notes,
5.34% - 5.41%, due 10/10/07 - 4/10/08 P-1 A-1+ 79,999(n)
Banking/Foreign (0.6%)
15,000 UBS AG, Medium-Term Notes, 5.42%, due 1/11/08 P-1 A-1+ 15,000
Financial Services (0.5%)
11,020 CIT Group, Inc., Senior Notes, 5.75%, due 9/25/07 P-1 A-1 11,038
Total Corporate Debt Securities 106,037
See Notes to Schedule of Investments
44
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT RATING(S) VALUE++
(000's omitted) Moody's S&P (000's omitted)
Floating Rate Corporate Debt Securities (34.1%)(mu)
Asset Backed (9.3%)
$20,000 American Honda Finance, Floating Rate Medium-Term Notes,
5.36%, due 4/12/07 P-1 A-1 $20,000(n)
35,000 K2 (USA) LLC, Guaranteed Floating Rate Medium-Term Notes,
5.30% & 5.33%, due 5/15/07 & 6/11/07 P-1 A-1+ 34,995(n)
20,000 Links Finance LLC, Floating Rate Medium-Term Notes,
5.28%, due 4/4/07 P-1 A-1+ 20,000(n)
65,000 Parkland (USA) LLC, Floating Rate Medium-Term Notes,
5.32% - 5.34%, due 4/10/07 - 6/25/07 P-1 A-1+ 64,995(n)
10,880 Schreiber Capital Co., Floating Rate Bonds, 5.32%, due 4/5/07 P-1 10,880
40,000 Tango Finance Corp., Floating Rate Medium-Term Notes,
5.31% - 5.33%, due 5/7/07 - 6/21/07 P-1 A-1+ 39,997(n)
40,000 Whistlejacket Capital LLC, Floating Rate Medium-Term Notes,
5.28% & 5.32%, due 4/16/07 & 6/5/07 P-1 A-1+ 39,998(n)
230,865
Banking/Domestic (6.4%)
30,000 Bank of America NA, Floating Rate Bank Notes, 5.32%, due 5/15/07 P-1 A-1+ 30,000
55,000 JP Morgan Master Note, 5.52%, due 4/2/07 P-1 A-1+ 55,000
30,000 Wachovia Corp., Senior Floating Rate Notes, 5.44%, due 4/23/07 P-1 A-1+ 30,011
45,000 Wells Fargo & Co., Floating Rate Notes, 5.33%, due 4/16/07 P-1 A-1+ 45,000(n)
160,011
Banking/Foreign (10.0%)
20,000 Banesto SA, Senior Unsubordinated Floating Rate Notes,
5.33%, due 7/18/07 P-1 A-1 20,000(n)
25,000 Bank of Ireland, Unsecured Floating Rate Medium-Term Notes,
5.30%, due 4/19/07 P-1 A-1 25,000(n)
20,000 Calyon NY, Floating Rate Notes, 5.33%, due 5/10/07 P-1 A-1+ 19,999
33,300 Credit Suisse First Boston, Floating Rate Medium-Term Notes,
5.46%, due 4/5/07 P-1 A-1+ 33,300
15,000 HBOS Treasury Services PLC, Guaranteed Floating Rate Medium-Term
Notes, 5.29%, due 4/10/07 P-1 A-1+ 15,000(n)
10,000 HSBC Finance Corp., Floating Rate Medium-Term Notes,
5.40%, due 4/4/07 P-1 A-1+ 10,004
15,000 HSBC Finance Corp., Floating Rate Notes, 5.37%, due 4/24/07 P-1 A-1+ 15,000
20,425 Nationwide Building, Floating Rate Notes, 5.48%, due 4/20/07 P-1 A-1 20,433(n)
See Notes to Schedule of Investments
45
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT RATING(S) VALUE++
(000's omitted) Moody's S&P (000's omitted)
$50,000 Royal Bank of Canada, Floating Rate Medium-Term Notes,
5.31%, due 4/2/07 P-1 A-1+ $50,000(n)
39,000 Unicredito Italiano PLC, Guaranteed Floating Rate Notes,
5.33% & 5.34%, due 4/10/07 & 4/16/07 P-1 A-1 39,000(n)
247,736
Financial Services (8.4%)
45,000 Bear Stearns Master Note, 5.37%, due 4/2/07 P-1 A-1 45,000
22,973 CIT Group, Inc., Floating Rate Medium-Term Notes, 5.58%, due 5/18/07 P-1 A-1 22,979
20,000 CIT Group, Inc., Senior Unsecured Floating Rate Medium-Term Notes,
5.43%, due 5/21/07 P-1 A-1 20,016
7,000 CIT Group, Inc., Senior Floating Rate Medium-Term Notes,
5.58%, due 6/20/07 P-1 A-1 7,008
25,000 Merrill Lynch & Co., Floating Rate Medium-Term Notes, Ser. C,
5.49%, due 4/27/07 P-1 A-1+ 25,011
35,000 Merrill Lynch & Co., Senior Unsecured Floating Rate Notes,
5.30%, due 4/18/07 P-1 A-1+ 35,000
55,000 Morgan Stanley, Senior Floating Rate Notes,
5.36% & 5.44%, due 4/2/07 & 4/3/07 P-1 A-1 55,000
210,014
Total Floating Rate Corporate Debt Securities 848,626
Promissory Notes (1.8%)(mu)
45,000 Goldman Sachs Group, 5.36% - 5.37%, due 4/2/07 P-1 A-1 45,000
Asset-Backed Securities (0.5%)
5,565 CIT Equipment Collateral, Ser. 2006-VT2, Class A1, 5.34%, due 11/20/07 P-1 A-1+ 5,565
7,547 USAA Auto Owner Trust, Ser. 2006-4, Class A1, 5.34%, due 12/13/07 P-1 A-1+ 7,547
Total Asset-Backed Securities 13,112
Total Investments (101.7%) 2,535,248
Liabilities, less cash, receivables and other assets [(1.7%)] (42,012)
Total Net Assets (100.0%) $2,493,236
See Notes to Schedule of Investments
46
- --------------------------------------------------------------------------------
Schedule of Investments Prime Master Series
PRINCIPAL AMOUNT RATING(S) VALUE++
(000's omitted) Moody's S&P (000's omitted)
U.S. Government Agency Securities (0.9%)
$60,000 Federal Home Loan Bank, Bonds, 5.38%, due 4/9/08 AGY AGY $60,000
Certificates of Deposit (2.2%)
60,000 Barclays Bank NY, Yankee CD, 5.35%, due 4/23/08 P-1 A-1+ 60,000
35,000 Charter One Bank NA, CD, 5.32%, due 4/17/07 P-1 A-1+ 35,000
50,000 Credit Suisse First Boston, Yankee CD, 5.31%, due 4/4/07 P-1 A-1+ 50,000
Total Certificates of Deposit 145,000
Floating Rate Certificates of Deposit (2.4%)(mu)
25,000 Barclays Bank NY, Floating Rate Yankee CD, 5.30%, due 6/5/07 P-1 A-1+ 24,997
90,000 Calyon NY, Floating Rate Yankee CD, 5.26% & 5.32%, due 4/2/07 P-1 A-1+ 89,990
40,000 Credit Suisse First Boston, Floating Rate Yankee CD,
5.31% & 5.36%, due 4/2/07 & 4/24/07 P-1 A-1+ 40,000
Total Floating Rate Certificates of Deposit 154,987
Commercial Paper (61.6%)
Asset Backed (47.8%)
184,416 Ajax Bambino Funding, Inc., 5.25% - 5.29%, due 4/10/07 - 6/11/07 P-1 A-1+ 183,755
10,000 Amstel Funding Corp., 5.18%, due 4/3/07 P-1 A-1+ 9,999
50,000 Amstel Funding Corp., 5.22%, due 4/16/07 P-1 A-1+ 49,899(n)
109,730 Barton Capital Corp., 5.25% & 5.26%, due 4/4/07 & 4/24/07 P-1 A-1+ 109,579(n)
43,240 Barton Capital Corp., 5.26%, due 4/10/07 P-1 A-1+ 43,189
60,840 Cancara Asset Securitization Ltd., 5.22%, due 6/6/07 & 6/11/07 P-1 A-1+ 60,259
53,823 Chariot Funding LLC, 5.25%, due 4/23/07 P-1 A-1 53,658
215,000 Charta LLC, 5.24% - 5.26%, due 4/9/07 - 6/25/07 P-1 A-1 213,683
203,586 Ciesco LLC, 5.23% & 5.25%, due 5/8/07 & 6/27/07 P-1 A-1+ 201,296
50,000 CRC Funding LLC, 5.25%, due 4/9/07 P-1 A-1+ 49,949
125,000 CRC Funding LLC, 5.21% & 5.24%, due 5/2/07 & 6/11/07 P-1 A-1+ 124,022(n)
184,192 Crown Point Capital Co., 5.16% - 5.26%, due 4/5/07 - 9/10/07 P-1 A-1 183,722
50,000 Cullinan Finance Ltd., 5.18%, due 4/4/07 P-1 A-1+ 49,986
118,390 Edison Asset Securitization LLC, 5.18% - 5.24%, due 4/9/07 - 7/6/07 P-1 A-1+ 117,385
41,891 Erasmus Capital Corp., 5.15% - 5.29%, due 4/25/07 - 10/11/07 P-1 A-1+ 41,278
68,108 Fairway Finance, 5.26%, due 4/13/07 P-1 A-1 67,999(n)
11,509 Fairway Finance, 5.20%, due 8/1/07 P-1 A-1 11,308
75,000 Grampian Funding LLC, 5.22%, due 4/13/07 P-1 A-1+ 74,880
28,011 Ivory Funding Corp., 5.23% & 5.24%, due 5/29/07 & 6/1/07 P-1 A-1 27,771
230,083 Jupiter Securitization Corp., 5.15% - 5.25%, due 4/3/07 - 9/17/07 P-1 A-1 226,227
See Notes to Schedule of Investments
47
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT RATING(S) VALUE++
(000's omitted) Moody's S&P (000's omitted)
$19,680 K2 (USA) LLC, 5.21%, due 4/25/07 P-1 A-1+ $19,614
40,000 Lexington Parker Capital, 5.24%, due 5/8/07 P-1 A-1 39,790
60,516 Mane Funding Corp., 5.23%, due 6/19/07 P-1 A-1+ 59,830
10,297 Mont Blanc Capital Corp., 5.24%, due 5/15/07 P-1 A-1+ 10,233
84,957 Old Line Funding LLC, 5.25%, due 4/20/07 & 4/27/07 P-1 A-1+ 84,691
50,000 Park Avenue Receivables Co. LLC, 5.25%, due 4/23/07 P-1 A-1 49,847
70,000 Park Granada LLC, 5.17% & 5.21%, due 7/30/07 & 9/25/07 P-1 A-1+ 68,512
137,500 Picaros Funding, 5.15% - 5.25%, due 5/3/07 - 7/10/07 P-1 A-1+ 136,486
16,736 Regency Markets No. 1 LLC, 5.28%, due 4/25/07 P-1 A-1 16,680
16,047 Sheffield Receivables Corp., 5.26%, due 4/2/07 P-1 A-1+ 16,047
50,000 Sigma Finance, Inc., 5.21%, due 8/16/07 P-1 A-1+ 49,016
20,000 Solitaire Funding LLC, 5.24%, due 5/21/07 P-1 A-1+ 19,857
20,200 Tango Finance Corp., 5.24%, due 5/23/07 P-1 A-1+ 20,050
111,655 Thames Asset Securitization LLC, 5.23% - 5.26%, due 4/5/07 - 6/12/07 P-1 A-1 111,442
187,210 Thunderbay Funding, Inc., 5.25% - 5.27%, due 4/18/07 - 5/7/07 P-1 A-1 186,472
45,000 Variable Funding Capital Corp., 5.26%, due 4/2/07 P-1 A-1+ 45,000
124,483 Wal-Mart Funding Corp., 5.23%, due 5/24/07 P-1 A-1+ 123,543
141,935 Yorktown Capital, 5.24% - 5.26%, due 4/11/07 - 5/21/07 P-1 A-1+ 141,285
3,098,239
Banking/Foreign (13.8%)
28,005 Bank of America NA, 5.09%, due 10/12/07 P-1 A-1+ 27,241
145,000 Barclays U.S. Funding Corp., 5.20% - 5.24%, due 4/16/07 - 8/13/07 P-1 A-1+ 143,390
100,000 Calyon NA, Inc., 5.21%, due 7/9/07 P-1 A-1+ 98,583
35,000 Credit Suisse First Boston, 5.24%, due 4/17/07 P-1 A-1+ 34,923
50,000 Danske Corp., 5.09%, due 10/29/07 P-1 A-1+ 48,515
137,000 HSBC Bank USA, 5.20% & 5.22%, due 6/27/07 & 8/6/07 P-1 A-1+ 134,736
11,000 ING America Insurance Holdings, Inc., 5.23%, due 4/5/07 P-1 A-1+ 10,995
50,000 Rabobank U.S. Financial Corp., 5.12%, due 9/28/07 P-1 A-1+ 48,728
145,000 Societe Generale NA, 5.08% - 5.20%, due 8/8/07 - 10/29/07 P-1 A-1+ 141,383
209,595 UBS Finance, Inc., 5.18% - 5.24%, due 5/2/07 - 7/11/07 P-1 A-1+ 208,088
896,582
Total Commercial Paper 3,994,821
Floating Rate Commercial Paper (3.0%)(mu)
Financial Services (3.0%)
75,000 Lexington Parker Capital, 5.31%, due 5/10/07 P-1 A-1 74,995
120,000 Morgan Stanley, 5.31% - 5.32%, due 4/2/07 - 4/8/07 P-1 A-1 120,000
Total Floating Rate Commercial Paper 194,995
See Notes to Schedule of Investments
48
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT RATING(S) VALUE++
(000's omitted) Moody's S&P (000's omitted)
Time Deposits (2.7%)
$177,000 Suntrust Bank, Grand Cayman, Inc., 5.25%, due 4/2/07 P-1 A-1 $177,000
Corporate Debt Securities (1.8%)
Asset Backed (1.6%)
100,000 Cullinan Finance Corp., Medium-Term Notes,
5.34% - 5.41%, due 10/10/07 - 4/10/08 P-1 A-1+ 99,998(n)
Banking/Foreign (0.2%)
15,000 UBS AG, Medium-Term Notes, 5.42%, due 1/11/08 P-1 A-1+ 15,000
Total Corporate Debt Securities 114,998
Floating Rate Corporate Debt Securities (25.9%)(mu)
Asset Backed (16.8%)
15,000 American Honda Finance, Floating Rate Medium-Term Notes,
5.36%, due 4/12/07 P-1 A-1 15,000(n)
50,000 Beta Finance, Inc., Guaranteed Floating Rate Medium-Term Notes,
5.31% & 5.54%, due 4/2/07 & 5/18/07 P-1 A-1+ 49,994(n)
75,000 Cullinan Finance Corp., Floating Rate Medium-Term Notes,
5.32%, due 5/15/07 P-1 A-1+ 74,995(n)
25,000 Dorada Finance, Inc., Floating Rate Medium-Term Notes,
5.31%, due 5/16/07 P-1 A-1+ 24,995(n)
160,000 K2 (USA) LLC, Guaranteed Floating Rate Medium-Term Notes,
5.30% - 5.36%, due 4/25/07 - 6/22/07 P-1 A-1+ 159,992(n)
240,000 Links Finance LLC, Floating Rate Medium-Term Notes,
5.28% - 5.32%, due 4/10/07 - 6/1/07 P-1 A-1+ 239,973(n)
197,500 Parkland (USA) LLC, Floating Rate Medium-Term Notes,
5.30% - 5.34%, due 4/10/07 - 6/25/07 P-1 A-1+ 197,492(n)
85,000 Sigma Finance, Inc., Guaranteed Floating Rate Medium-Term Notes,
5.28% - 5.32%, due 4/20/07 - 6/20/07 P-1 A-1+ 84,997(n)
152,500 Tango Finance Corp., Floating Rate Medium-Term Notes,
5.31% - 5.33%, due 4/30/07 - 6/25/07 P-1 A-1+ 152,495(n)
90,000 Whistlejacket Capital LLC, Floating Rate Medium-Term Notes,
5.28% - 5.35%, due 4/16/07 - 6/13/07 P-1 A-1+ 89,997(n)
1,089,930
Banking/Domestic (5.2%)
75,000 American Express Bank FSB, Floating Rate Bank Notes,
5.29%, due 4/12/07 P-1 A-1 74,998
See Notes to Schedule of Investments
49
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT RATING(S) VALUE++
(000's omitted) Moody's S&P (000's omitted)
$50,000 Bank of America NA, Floating Rate Bank Notes, 5.32%, due 5/15/07 P-1 A-1+ $50,000
17,000 Citigroup, Inc., Floating Rate Notes, 5.41%, due 6/4/07 P-1 A-1+ 17,002
100,000 National City Bank, Floating Rate Bank Notes, 5.34%, due 4/25/07 P-1 A-1 100,012
66,100 Wachovia Corp., Senior Floating Rate Notes, 5.44%, due 4/23/07 P-1 A-1+ 66,124
28,000 Wells Fargo & Co., Floating Rate Notes, 5.33%, due 4/16/07 P-1 A-1+ 28,000(n)
336,136
Banking/Foreign (2.0%)
40,000 Calyon NY, Floating Rate Notes, 5.33%, due 5/10/07 P-1 A-1+ 39,998
50,000 HSBC Finance Corp., Floating Rate Medium-Term Notes,
5.40%, due 4/4/07 P-1 A-1+ 50,017
40,000 Royal Bank of Canada, Floating Rate Medium-Term Notes,
5.31%, due 4/2/07 P-1 A-1+ 40,000(n)
130,015
Financial Services (1.9%)
45,000 Bear Stearns Master Note, 5.56%, due 11/6/07 P-1 A-1 45,000
75,000 Merrill Lynch & Co., Senior Unsecured Floating Rate Notes,
5.30%, due 4/18/07 P-1 A-1+ 75,000
120,000
Total Floating Rate Corporate Debt Securities 1,676,081
Promissory Notes (1.6%)(mu)
100,000 Goldman Sachs Group, 5.35% - 5.43%, due 4/2/07 P-1 A-1+ 100,000
Asset-Backed Securities (0.3%)
8,904 CIT Equipment Collateral, Ser. 2006-VT2, Class A1,
5.34%, due 11/20/07 P-1 A-1+ 8,904
12,579 USAA Auto Owner Trust, Ser. 2006-4, Class A1, 5.34%, due 12/13/07 P-1 A-1+ 12,579
Total Asset-Backed Securities 21,483
Total Investments (102.4%) 6,639,365
Liabilities, less cash, receivables and other assets [(2.4%)] (156,561)
Total Net Assets (100.0%) $6,482,804
See Notes to Schedule of Investments
50
- --------------------------------------------------------------------------------
Schedule of Investments Government Master Series
PRINCIPAL AMOUNT RATING(S) VALUE++
(000's omitted) Moody's S&P (000's omitted)
U.S. Government Agency Securities (61.7%)
$71,046 Fannie Mae, Disc. Notes, 5.03% - 5.20%, due 4/4/07 - 11/30/07 AGY AGY $70,539
2,705 Fannie Mae, Notes, 4.25% - 6.63%, due 9/15/07 - 10/30/07 AGY AGY 2,699
100 Federal Farm Credit Bank, Bonds, 7.25%, due 6/12/07 AGY AGY 100
2,506 Federal Farm Credit Bank, Disc. Notes,
5.05% - 5.11%, due 7/10/07 - 2/1/08 AGY AGY 2,458
86,400 Federal Farm Credit Bank, Floating Rate Bonds,
5.17% - 5.22%, due 4/18/07 - 5/28/07 AGY AGY 86,392(mu)
21,055 Federal Home Loan Bank, Bonds, 3.00% - 7.63%, due 4/23/07 - 4/9/08 AGY AGY 21,047
2,185 Federal Home Loan Bank, Disc. Notes,
5.12% - 5.16%, due 5/14/07 - 7/25/07 AGY AGY 2,159
70,500 Federal Home Loan Bank, Floating Rate Notes,
5.18% - 5.28%, due 4/4/07 - 6/22/07 AGY AGY 70,480(mu)
100 Federal Home Loan Bank, Notes, 3.38%, due 9/14/07 AGY AGY 99
138,850 Freddie Mac, Disc. Notes, 5.02% - 5.22%, due 4/9/07 - 12/28/07 AGY AGY 137,026
56,400 Freddie Mac, Floating Rate Notes, 5.17% - 5.23%, due 4/10/07 - 6/30/07 AGY AGY 56,376(mu)
25,300 Freddie Mac, Notes, 3.75% - 5.38%, due 4/5/07 - 3/27/08 AGY AGY 25,281
Total U.S. Government Agency Securities 474,656
Mortgage-Backed Securities (2.9%)
22,800 Fannie Mae, Pass-Through Certificates, 5.19%, due 5/1/07 AGY AGY 22,705(mu)
Repurchase Agreements (35.2%)
20,000 Bank of America Repurchase Agreement,
5.26%, due 4/10/07, dated 2/9/07, Maturity Value $20,175,333,
Collateralized by $49,469,887, Freddie Mac, 5.50%, due 1/1/33
(Collateral value $20,400,000) 20,000
25,000 Bank of America Repurchase Agreement,
5.26%, due 4/9/07, dated 1/9/07, Maturity Value $25,328,750,
Collateralized by $26,465,144, Fannie Mae, 5.00%, due 2/1/37
(Collateral value $25,500,001) 25,000
101,000 Goldman Sachs Repurchase Agreement,
5.37%, due 4/2/07, dated 3/30/07, Maturity Value $101,045,197,
Collateralized by $94,955,416, Fannie Mae,
0.00% - 7.35%, due 6/25/23 - 3/25/36 and $21,804,000, Freddie Mac,
5.00% & 7.00%, due 12/15/22 & 8/15/29 (Collateral value
$103,020,000) 101,000
See Notes to Schedule of Investments
51
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT RATING(S) VALUE++
(000's omitted) Moody's S&P (000's omitted)
$125,000 Merrill Lynch Repurchase Agreement, 5.39%, due 4/2/07, dated 3/30/07,
Maturity Value $125,056,146, Collateralized by $193,063,247, Freddie
Mac, 4.00% - 7.50%, due 2/1/10 - 3/1/37 (Collateral value $127,501,085) $125,000
Total Repurchase Agreements 271,000
Total Investments (99.8%) 768,361
Cash, receivables and other assets, less liabilities (0.2%) 1,398
Total Net Assets (100.0%) $769,759
See Notes to Schedule of Investments
52
- --------------------------------------------------------------------------------
Schedule of Investments Treasury Master Series
PRINCIPAL AMOUNT RATING(S) VALUE++
(000's omitted) Moody's S&P (000's omitted)
U.S. Treasury Securities--Backed by the Full Faith and
Credit of the U.S. Government (49.3%)
$40,000 U.S. Treasury Bills, 4.92%, due 4/5/07 TSY TSY $39,984
40,000 U.S. Treasury Bills, 5.14%, due 4/12/07 TSY TSY 39,943
30,000 U.S. Treasury Bills, 5.09%, due 4/16/07 TSY TSY 29,941
15,225 U.S. Treasury Bills, 4.96%, due 4/19/07 TSY TSY 15,189
11,000 U.S. Treasury Bills, 5.13%, due 4/19/07 TSY TSY 10,973
25,000 U.S. Treasury Bills, 4.88%, due 6/21/07 TSY TSY 24,729
400 U.S. Treasury Bills, 4.95%, due 7/12/07 TSY TSY 394
300 U.S. Treasury Bills, 4.97%, due 7/19/07 TSY TSY 296
20,000 U.S. Treasury Bills, 4.96%, due 8/2/07 TSY TSY 19,664
15,000 U.S. Treasury Bills, 4.97%, due 8/9/07 TSY TSY 14,733
20,000 U.S. Treasury Bills, 4.91%, due 9/6/07 TSY TSY 19,572
10,000 U.S. Treasury Bills, 4.88%, due 9/20/07 TSY TSY 9,768
Total U.S. Treasury Securities--Backed by the Full Faith and
Credit of the U.S. Government 225,186
Repurchase Agreements (50.6%)
75,000 Bank of America Repurchase Agreement, 5.10%, due 4/2/07,
dated 3/30/07, Maturity Value $75,031,875, Collateralized by
$72,555,000, U.S Treasury Notes, 5.13%, due 5/15/16 (Collateral value
$76,500,727) 75,000
80,700 Merrill Lynch Repurchase Agreement, 5.15%, due 4/2/07, dated 3/30/07,
Maturity Value $80,734,634, Collateralized by $81,245,000, U.S Treasury
Notes, 4.75%, due 12/31/08 (Collateral value $82,317,283) 80,700
25,000 Merrill Lynch Repurchase Agreement, 5.21%, due 4/5/07, dated 1/5/07,
Maturity Value $25,325,625, Collateralized by $25,170,000, U.S Treasury
Notes, 4.75%, due 12/31/08 (Collateral value $25,502,197) 25,000
50,000 Morgan Stanley Repurchase Agreement, 5.10%, due 4/2/07,
dated 3/30/07, Maturity Value $50,021,250, Collateralized by
$93,273,000, U.S. Treasury Strips, due 5/15/18 - 5/15/20 (Collateral value
$51,000,304) 50,000
Total Repurchase Agreements 230,700
Total Investments (99.9%) 455,886
Cash, receivables and other assets, less liabilities (0.1%) 355
Total Net Assets (100.0%) $456,241
See Notes to Schedule of Investments
53
- --------------------------------------------------------------------------------
Notes to Schedule of Investments Institutional Liquidity Trust
++ Investment securities are valued at amortized cost, which approximates U.S.
federal income tax cost.
(n) Restricted security subject to restrictions on resale under federal
securities laws. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers under Rule 144A
and have been deemed by the investment manager to be liquid. At March 31,
2007, these securities amounted to $577,976,000 or 23.2% of net assets for
Money Market Master Series and $1,609,427,000 or 24.8% of net assets for
Prime Master Series.
(mu)Floating rate securities are securities whose yields vary with a designated
market index or market rate. These securities are shown at their current
rates as of March 31, 2007.
(S) Credit ratings are unaudited.
See Notes to Financial Statements
54
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
Institutional Liquidity Trust
(000's omitted)
MONEY MARKET PRIME GOVERNMENT TREASURY
MASTER SERIES MASTER SERIES MASTER SERIES MASTER SERIES
-------------- -------------- -------------- --------------
March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007
Assets
Investments in securities, at value*
(Note A)-see Schedule of Investments:
Unaffiliated issuers $2,535,248 $6,639,365 $497,361 $225,186
Repurchase agreements -- -- 271,000 230,700
-----------------------------------------------------------
2,535,248 6,639,365 768,361 455,886
Cash 221 -- -- 25
Interest receivable 8,005 14,767 1,528 402
Receivable for securities sold -- 24,949 -- --
Prepaid expenses and other assets 55 156 12 4
-----------------------------------------------------------
Total Assets 2,543,529 6,679,237 769,901 456,317
-----------------------------------------------------------
Liabilities
Due to custodian -- 65,673 29 --
Payable for securities purchased 49,998 129,986 -- --
Payable to investment manager-net
(Note B) 184 547 54 38
Accrued expenses and other payables 111 227 59 38
-----------------------------------------------------------
Total Liabilities 50,293 196,433 142 76
-----------------------------------------------------------
Net Assets applicable to investors'
beneficial interests $2,493,236 $6,482,804 $769,759 $456,241
-----------------------------------------------------------
Net Assets consist of:
Paid-in capital $2,493,236 $6,482,804 $769,759 $456,241
-----------------------------------------------------------
*Cost of investments:
Unaffiliated issuers $2,535,248 $6,639,365 $768,361 $455,886
-----------------------------------------------------------
See Notes to Financial Statements
55
- --------------------------------------------------------------------------------
Statements of Operations
Institutional Liquidity Trust
(000's omitted)
MONEY MARKET PRIME GOVERNMENT TREASURY
MASTER SERIES MASTER SERIES MASTER SERIES MASTER SERIES
------------------ ------------------ ----------------- -----------------
Period from Period from
December 18, 2006 December 18, 2006
(Commencement of (Commencement of
For the Year Ended For the Year Ended Operations) to Operations) to
March 31, 2007 March 31, 2007 March 31, 2007 March 31, 2007
Investment Income
Income:
Interest income-unaffiliated
issuers (Note A) $132,112 $296,858 $7,958 $6,887
-----------------------------------------------------------------------------
Expenses:
Investment management fees
(Note B) 2,368 5,199 120 106
Audit fees 32 29 31 11
Custodian fees (Note B) 413 846 25 25
Insurance expense 110 112 1 1
Legal fees 3 3 3 3
Rating agency fees -- 25 2 2
Shareholder reports 8 6 4 4
Trustees' fees and expenses 26 26 7 7
Miscellaneous 22 40 6 6
-----------------------------------------------------------------------------
Total expenses 2,982 6,286 199 165
Investment management fees
waived (Note B) (360) (719) -- --
Expenses reduced by custodian
fee expense offset arrangement
(Note B) (36) (39) (1) (1)
-----------------------------------------------------------------------------
Total net expenses 2,586 5,528 198 164
-----------------------------------------------------------------------------
Net investment income $129,526 $291,330 $7,760 $6,723
-----------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
(Note A)
Net realized gain (loss) on:
Sales of investment securities of
unaffiliated issuers (78) (95) -- --
-----------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations $129,448 $291,235 $7,760 $6,723
-----------------------------------------------------------------------------
See Notes to Financial Statements
56
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
Institutional Liquidity Trust
(000's omitted)
MONEY MARKET MASTER SERIES
------------------------------
Year Ended Year Ended
March 31, 2007 March 31, 2006
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) $129,526 $82,975
Net realized gain (loss) on investments (78) (56)
Net increase (decrease) in net assets resulting from operations 129,448 82,919
Transactions in Investors' Beneficial Interest:
Contribution from initial capitalization -- --
Contributions 5,640,176 4,162,855
Withdrawals (5,506,910) (4,433,678)
Net increase (decrease) from transactions in investors' beneficial interest 133,266 (270,823)
Net Increase (Decrease) in Net Assets 262,714 (187,904)
Net Assets:
Beginning of period 2,230,522 2,418,426
End of period $2,493,236 $2,230,522
See Notes to Financial Statements
57
- --------------------------------------------------------------------------------
GOVERNMENT TREASURY
PRIME MASTER SERIES MASTER SERIES MASTER SERIES
------------------------------ ----------------- -----------------
Period from Period from
December 18, 2006 December 18, 2006
(Commencement of (Commencement of
Year Ended Year Ended Operations) to Operations) to
March 31, 2007 March 31, 2006 March 31, 2007 March 31, 2007
$291,330 $76,803 $7,760 $6,723
(95) (78) -- --
291,235 76,725 7,760 6,723
-- -- 101 --
35,971,111 14,573,443 1,008,073 814,761
(32,985,741) (12,721,501) (246,175) (365,243)
2,985,370 1,851,942 761,999 449,518
3,276,605 1,928,667 769,759 456,241
$3,206,199 1,277,532 -- --
$6,482,804 $3,206,199 $769,759 $456,241
58
- --------------------------------------------------------------------------------
Notes to Financial Statements Institutional Liquidity Trust
Note A--Summary of Significant Accounting Policies:
1 General: The Money Market Master Series (formerly, Institutional Liquidity
Portfolio), Prime Master Series (formerly, Prime Portfolio), Government
Master Series, and Treasury Master Series (individually a "Master Series,"
collectively, the "Master Series") are separate operating series of
Institutional Liquidity Trust (the "Trust"), a Delaware statutory trust
organized pursuant to a Trust Instrument dated October 1, 2004. The Trust
is registered as a diversified, open-end management investment company
under the Investment Company Act of 1940, as amended. Government Master
Series had no operations until December 18, 2006 other than the
contribution of beneficial interest from the Institutional Class of
Government Portfolio and Neuberger Berman Management Inc., ("Management")
the Master Series' investment manager of $100,000 and $1,000, respectively,
on December 4, 2006. Treasury Master Series had no operations until
December 18, 2006.
Other investment companies sponsored by Management and Lehman Brothers
Asset Management LLC ("LBAM"), the sub-adviser to the Master Series, whose
financial statements are not presented herein, also invest in the Master
Series.
The assets of each Master Series belong only to that Master Series, and the
liabilities of each Master Series are borne solely by that Master Series
and no other series of the Trust.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires Management to make estimates and
assumptions at the date of the financial statements. Actual results could
differ from those estimates.
2 Portfolio valuation: Investment securities are valued as indicated in the
notes following the Master Series' Schedule of Investments.
3 Securities transactions and investment income: Securities transactions are
recorded on trade date for financial reporting purposes. Interest income,
including accretion of discount (adjusted for original issue discount,
where applicable), and amortization of premium, where applicable, is
recorded on the accrual basis. Realized gains and losses from securities
transactions are recorded on the basis of identified cost and stated
separately in the Statements of Operations.
4 Income tax information: It is the policy of the Money Market Master Series
and Prime Master Series and it is the intention of the Government Master
Series and Treasury Master Series, to comply with the requirements of the
Internal Revenue Code. It is also the policy of the Money Market Master
Series and Prime Master Series and the intention of the Government Master
Series and Treasury Master Series to conduct their operations so that each
of its investors that are regulated investment companies and invest
substantially all of their net investable assets therein will continue to
qualify as such for Money Market Master Series and Prime Master Series and
so that its investors will be able to qualify as a regulated investment
company for Government Master Series and Treasury Master Series. Each
Master Series will be treated as a partnership for U.S. federal income tax
purposes and is therefore not subject to U.S. federal income tax.
5 Concentration of risk: Money Market Master Series and Prime Master Series
normally concentrate in the financial services industries; therefore,
factors influencing the health of those industries could have a significant
negative effect on these Master Series' performance. These may include
economic trends, governmental action, changes in interest rates, as well as
the availability and cost of capital funds.
6 Expense allocation: Certain expenses are applicable to multiple funds.
Expenses directly attributable to a Master Series are charged to that
Master Series. Expenses of the Trust that are not directly attributed to a
series of the Trust are allocated among the series', on the basis of
relative net assets, except where a more appropriate allocation of expenses
to each of the Master Series can otherwise be made fairly. Expenses borne
by the complex of related investment companies, which includes open-end and
closed-end investment companies for which Management
59
- --------------------------------------------------------------------------------
serves as investment manager, that are not directly attributed to a Master
Series or the Trust, are allocated among the Master Series and the other
investment companies in the complex or series thereof, on the basis of
relative net assets, except where a more appropriate allocation of expenses
to each investment company in the complex or series thereof can otherwise
be made fairly.
7 Repurchase agreements: Each Master Series may enter into repurchase
agreements with institutions that Management has determined are
creditworthy. Each repurchase agreement is recorded at cost. Each Master
Series requires that the securities purchased in a repurchase agreement be
transferred to the custodian in a manner sufficient to enable the Master
Series to assert a perfected security interest in those securities in the
event of a default under the repurchase agreement. Each Master Series
monitors, on a daily basis, the value of the securities transferred to
ensure that their value, including accrued interest, is greater than
amounts owed to the Master Series under each such repurchase agreement.
8 Indemnifications: Like many other companies, the Trust's organizational
documents provide that its officers and trustees are indemnified against
certain liabilities arising out of the performance of their duties to the
Trust. In addition, both in some of its principal service contracts and in
the normal course of its business, the Trust enters into contracts that
provide indemnifications to other parties for certain types of losses or
liabilities. The Trust's maximum exposure under these arrangements is
unknown as this could involve future claims against the Trust.
Note B--Management Fees and Other Transactions with Affiliates:
Each Master Series retains Management as its investment manager under a
Management Agreement. For such investment management services, prior to
December 18, 2006, the Money Market Master Series and Prime Master Series
paid Management a fee at the annual rate of 0.10% of its average daily net
assets. Management voluntarily agreed to waive its management fee in the
amount of 0.02% of the average daily net assets of each Master Series. For
the year ended March 31, 2007, such waived fees amounted to $359,405 for
Money Market Master Series and $719,512 for Prime Master Series,
respectively. Effective December 18, 2006, each Master Series pays
Management a fee at the annual rate of 0.08% of its average daily net
assets.
Management and LBAM, the sub-adviser to the Master Series, are wholly-owned
subsidiaries of Lehman Brothers Holdings Inc., a publicly-owned holding
company. LBAM is retained by Management to provide day-to-day investment
management services. LBAM, as sub-adviser to each Master Series, receives a
monthly fee paid by Management, based on an annual rate of each Master
Series' average daily net assets. The Master Series do not pay a fee
directly to LBAM for such services. As investment adviser, Management is
responsible for overseeing the investment activities of LBAM. Several
individuals who are officers and/or Trustees of the Trust are also
employees of LBAM and/or Management.
Each Master Series has an expense offset arrangement in connection with its
custodian contract. For the year ended March 31, 2007, the impact of this
arrangement was a reduction of expenses of $36,060, $38,957, $725, and
$1,269 for Money Market Master Series, Prime Master Series, Government
Master Series and Treasury Master Series, respectively.
Note C--Securities Transactions:
All securities transactions for Money Market Master Series, Prime Master
Series, Government Master Series, and Treasury Master Series were
short-term.
Note D--Recent Accounting Pronouncement:
In September 2006, FASB issued FASB Statement No. 157, "Fair Value
Measurement" ("SFAS 157"), which defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair
value measurements. SFAS 157 is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years.
Management believes the adoption of SFAS 157 will not have a material
impact on the Master Series' financial position or results of operations.
60
- --------------------------------------------------------------------------------
Financial Highlights
Money Market Master Series
Period from
December 30, 2004^
Year Ended March 31, to March 31,
2007 2006 2005
Ratios to Average Net Assets:
Gross Expenses/#/ .10% .11% .11%*
Net Expenses/++/ .10% .11% .11%*
Net Investment Income (Loss) 5.14% 3.72% 2.38%*
Total Return/+/ +5.27% +3.87% +0.63%**
Net Assets, End of Period (in millions) $2,493.2 $2,230.5 $2,418.4
See Notes to Financial Highlights
61
- --------------------------------------------------------------------------------
Financial Highlights
Prime Master Series
Period from
December 27, 2004^
Year Ended March 31, to March 31,
2007 2006 2005
Ratios to Average Net Assets:
Gross Expenses/#/ .10% .11% .12%*
Net Expenses/++/ .10% .10% .11%*
Net Investment Income (Loss) 5.19% 3.78% 2.43%*
Total Return/+/ +5.29% +3.87% +0.66%**
Net Assets, End of Period (in millions) $6,482.8 $3,206.2 $1,277.5
See Notes to Financial Highlights
62
- --------------------------------------------------------------------------------
Financial Highlights
Government Master Series
Period from
December 18, 2006^
to March 31,
2007
Ratios to Average Net Assets:
Gross Expenses/#/ .13%*
Net Expenses .13%*
Net Investment Income (Loss) 5.17%*
Total Return/+/ +1.49%**
Net Assets, End of Period (in millions) $769.8
See Notes to Financial Highlights
63
- --------------------------------------------------------------------------------
Financial Highlights
Treasury Master Series
Period from
December 18, 2006^
to March 31,
2007
Ratios to Average Net Assets:
Gross Expenses/#/ .12%*
Net Expenses .12%*
Net Investment Income (Loss) 5.05%*
Total Return/+/ +1.46%**
Net Assets, End of Period (in millions) $456.2
See Notes to Financial Highlights
64
- --------------------------------------------------------------------------------
Notes to Financial Highlights Institutional Liquidity Trust
/#/ The Master Series is required to calculate an expense ratio without taking
into consideration any expense reductions related to expense offset
arrangements.
/++/ After waiver of a portion of the investment management fee by Management.
Had Management not undertaken such action, the annualized ratios of net
expenses to average daily net assets would have been:
Year Ended Year Ended Period Ended
March 31, March 31, March 31,
2007 2006 2005
Money Market Master Series .12% .13% .13%/(1)/
Prime Master Series .11% .12% .13%/(2)/
/(1)/ Period from December 30, 2004 (commencement of operations) to March
31, 2005.
/(2)/ Period from December 27, 2004 (commencement of operations) to March
31, 2005.
/+/ Total return for the Master Series has been calculated based on the total
return for the feeder funds that invest all of their net investable assets
in the Master Series. Total return assumes all distributions were
reinvested and adjusted for the difference in expenses as set forth in the
Notes to the Financial Statements of the feeder funds. Results represent
past performance and do not guarantee future results. Current returns may
be lower or higher than the performance data quoted. Total return would
have been lower had Management not waived a portion of the investment
management fee for Money Market Master Series and Prime Master Series.
^ The date investment operations commenced.
* Annualized.
** Not annualized.
65
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Institutional Liquidity Trust
and Owners of Beneficial Interest of Money Market Master Series:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Money Market Master Series (formerly,
Institutional Liquidity Portfolio) (one of the series constituting
Institutional Liquidity Trust) (the "Master Series"), as of March 31, 2007, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Master Series' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Master Series'
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Master Series' internal
control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements and financial highlights, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of March 31, 2007, by
correspondence with the custodian and brokers. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Money
Market Master Series, a portfolio of Institutional Liquidity Trust, at
March 31, 2007, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the periods indicated therein, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 16, 2007
66
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of
Institutional Liquidity Trust and
Owners of Beneficial Interest of Prime Master Series
We have audited the accompanying statement of assets and liabilities of Prime
Master Series (the "Master Series") (formerly known as Prime Portfolio), a
series of Institutional Liquidity Trust, including the schedule of investments,
as of March 31, 2007, and the related statement of operations for the year then
ended, the statements of changes in net assets and the financial highlights for
each of the two years in the period then ended, and the financial highlights
for the period from December 27, 2004 to March 31, 2005. These financial
statements and financial highlights are the responsibility of the Master
Series' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The "Master Series" is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Master Series' internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
Our procedures included confirmation of securities owned as of March 31, 2007,
by correspondence with the custodian and brokers or by other appropriate
auditing procedures where replies from brokers were not received. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Prime
Master Series as of March 31, 2007, the results of its operations for the year
then ended, and the changes in its net assets and the financial highlights for
each of the two years in the period then ended, and the financial highlights
for the period from December 27, 2004 to March 31, 2005, in conformity with
accounting principles generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
May 11, 2007
67
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Institutional Liquidity Trust
and Owners of Beneficial Interest of Government Master Series:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Government Master Series (one of the series
constituting Institutional Liquidity Trust) (the "Master Series"), as of
March 31, 2007, and the related statements of operations, changes in net assets
and the financial highlights for the period from December 18, 2006
(commencement of operations) to March 31, 2007. These financial statements and
financial highlights are the responsibility of the Master Series' management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Master Series'
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Master Series' internal
control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements and financial highlights, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of March 31, 2007, by
correspondence with the custodian and brokers. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Government Master Series, a portfolio of Institutional Liquidity Trust, at
March 31, 2007, the results of its operations, changes in its net assets and
the financial highlights for the period from December 18, 2006 (commencement of
operations) to March 31, 2007, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 16, 2007
68
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of
Institutional Liquidity Trust and
Owners of Beneficial Interest of Treasury Master Series
We have audited the accompanying statement of assets and liabilities of
Treasury Master Series (the "Master Series"), a series of Institutional
Liquidity Trust, including the schedule of investments, as of March 31, 2007,
and the related statement of operations, the statement of changes in net
assets, and the financial highlights for the period from December 18, 2006
(commencement of operations) to March 31, 2007. These financial statements and
financial highlights are the responsibility of the Master Series' management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. The "Master Series" is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Master Series' internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
Our procedures included confirmation of securities owned as of March 31, 2007,
by correspondence with the custodian. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Treasury Master Series as of March 31, 2007, the results of its operations, the
changes in its net assets, and the financial highlights for the period from
December 18, 2006 to March 31, 2007, in conformity with accounting principles
generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
May 11, 2007
69
- --------------------------------------------------------------------------------
Directory
Investment Manager, Administrator and Distributor
Neuberger Berman Management Inc.
605 Third Avenue, 2nd Floor
New York, NY 10158-0180
888.556.9030
Sub-Adviser
Lehman Brothers Asset Management LLC
399 Park Avenue
New York, NY 10022
Custodian and Shareholder Servicing Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Kirkpatrick & Lockhart Preston Gates Ellis LLP
1601 K Street, NW
Washington, DC 20006
Independent Registered Public Accounting Firms
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
Tait Weller & Baker LLP
1818 Market Street
Suite 2400
Philadelphia, PA 19103
70
- --------------------------------------------------------------------------------
Trustee and Officer Information
The following tables set forth information concerning the trustees and officers
of the Trust. All persons named as trustees and officers also serve in similar
capacities for other funds administered or managed by Management. The Statement
of Additional Information includes additional information about fund trustees
and is available upon request, without charge, by calling (888) 556-9030.
Information about the Board of Trustees
Name, Age, and Address/(1)/ Position and Principal Occupation(s)/(3)/ Number of Other Directorships Held
Length of Funds in Outside Fund Complex by
Time Served/(2)/ Fund Complex Fund Trustee
Overseen by
Fund Trustee/(4)/
Independent Fund Trustees
John Cannon (77) Trustee since Consultant; formerly, 61 Independent Trustee or
2005 Chairman, CDC Investment Director of three series of
Advisers (registered Oppenheimer Funds: Limited
investment adviser), 1993 to Term New York Municipal
January 1999; formerly, Fund, Rochester Fund
President and Chief Executive Municipals, and
Officer, AMA Investment Oppenheimer Convertible
Advisors, an affiliate of the Securities Fund since 1992.
American Medical
Association.
Faith Colish (71) Trustee since Counsel, Carter Ledyard & 61 Formerly, Director (1997 to
2005 Milburn LLP (law firm) since 2003) and Advisory Director
October 2002; formerly, (2003 to 2006), ABA
Attorney-at-Law and Retirement Funds (formerly,
President, Faith Colish, A American Bar Retirement
Professional Corporation, Association) (not-for-profit
1980 to 2002. membership corporation).
C. Anne Harvey (69) Trustee since President, C.A. Harvey 61 Formerly, President, Board of
2005 Associates since October Associates to The National
2001; formerly, Director, Rehabilitation Hospital's
AARP, 1978 to December Board of Directors, 2001 to
2001. 2002; formerly, Member,
Individual Investors Advisory
Committee to the New York
Stock Exchange Board of
Directors, 1998 to June
2002.
71
- --------------------------------------------------------------------------------
Name, Age, and Address/(1)/ Position and Principal Occupation(s)/(3)/ Number of Other Directorships Held
Length of Funds in Outside Fund Complex by
Time Served/(2)/ Fund Complex Fund Trustee
Overseen by
Fund Trustee/(4)/
Robert A. Kavesh (79) Trustee since Marcus Nadler Professor 61 Formerly, Director, The
2005 Emeritus of Finance and Caring Community (not-for-
Economics, New York profit), 1997 to 2006;
University Stern School of formerly, Director, DEL
Business; formerly, Executive Laboratories, Inc. (cosmetics
Secretary-Treasurer, and pharmaceuticals), 1978
American Finance to 2004; formerly, Director,
Association, 1961 to 1979. Apple Bank for Savings, 1979
to 1990; formerly, Director,
Western Pacific Industries,
Inc., 1972 to 1986 (public
company).
Michael M. Knetter (47) Trustee since Dean, School of Business, 61 Trustee, Northwestern
2007 University of Wisconsin - Mutual Series Fund, Inc. since
Madison; formerly, Professor February 2007; Director,
of International Economics Wausau Paper since 2005;
and Associate Dean, Amos Director, Great Wolf Resorts
Tuck School of Business - since 2004.
Dartmouth College, 1998 to
2002.
Howard A. Mileaf (70) Trustee since Retired; formerly, Vice 61 Director, Webfinancial
2005 President and General Corporation (holding
Counsel, WHX Corporation company) since December
(holding company), 1993 to 2002; formerly, Director
2001. WHX Corporation (holding
company), January 2002 to
June 2005; formerly,
Director, State Theatre of
New Jersey (not-for-profit
theater), 2000 to 2005.
George W. Morriss (59) Trustee since Formerly, Executive Vice 61 Member, Board of Managers,
2007 President and Chief Financial Old Mutual Funds of Hedge
Officer, People's Bank (a Funds (registered hedge
financial services company), fund) since October 2006.
1991 to 2001.
72
- --------------------------------------------------------------------------------
Name, Age, and Address/(1)/ Position and Principal Occupation(s)/(3)/ Number of Other Directorships Held
Length of Funds in Outside Fund Complex by
Time Served/(2)/ Fund Complex Fund Trustee
Overseen by
Fund Trustee/(4)/
Edward I. O'Brien (78) Trustee since Formerly, Member, 61 Director, Legg Mason, Inc.
2005 Investment Policy Committee, (financial services holding
Edward Jones, 1993 to 2001; company) since 1993;
President, Securities Industry formerly, Director, Boston
Association ("SIA") (securities Financial Group (real estate
industry's representative in and tax shelters), 1993 to
government relations and 1999.
regulatory matters at the
federal and state levels),
1974 to 1992; Adviser to SIA,
November 1992 to
November 1993.
William E. Rulon (74) Trustee since Retired; formerly, Senior Vice 61 Formerly, Director, Pro-Kids
2005 President, Foodmaker, Inc. Golf and Learning Academy
(operator and franchiser of (teach golf and computer
restaurants) until January usage to "at risk" children),
1997. 1998 to 2006; formerly,
Director, Prandium, Inc.
(restaurants), March 2001 to
July 2002.
Cornelius T. Ryan (75) Trustee since Founding General Partner, 61 None.
2005 Oxford Partners and Oxford
Bioscience Partners (venture
capital investing) and
President, Oxford Venture
Corporation since 1981.
73
- --------------------------------------------------------------------------------
Name, Age, and Address/(1)/ Position and Principal Occupation(s)/(3)/ Number of Other Directorships Held
Length of Funds in Outside Fund Complex by
Time Served/(2)/ Fund Complex Fund Trustee
Overseen by
Fund Trustee/(4)/
Tom D. Seip (57) Trustee since General Partner, Seip 61 Director, H&R Block, Inc.
2005; Lead Investments LP (a private (financial services company)
Independent investment partnership); since May 2001; Chairman,
Trustee formerly, President and CEO, Compensation Committee,
beginning Westaff, Inc. (temporary H&R Block, Inc. since 2006;
2006 staffing), May 2001 to Director, America One
January 2002; formerly, Foundation since 1998;
Senior Executive at the formerly, Chairman,
Charles Schwab Corporation, Governance and Nominating
1983 to 1998, including Committee, H&R Block, Inc.,
Chief Executive Officer, 2004 to 2006; Director,
Charles Schwab Investment Forward Management, Inc.
Management, Inc. and (asset management
Trustee, Schwab Family of company), 1999 to 2006;
Funds and Schwab formerly Director, E-Bay
Investments, 1997 to 1998, Zoological Society, 1999 to
and Executive Vice President- 2003; formerly, Director,
Retail Brokerage, Charles General Magic (voice
Schwab & Co., Inc., 1994 to recognition software), 2001
1997. to 2002; formerly, Director,
E-Finance Corporation (credit
decisioning services), 1999 to
2003; formerly, Director,
Save-Daily.com (micro
investing services), 1999 to
2003.
Candace L. Straight (59) Trustee since Private investor and 61 Director, Montpelier Re
2005 consultant specializing in the (reinsurance company) since
insurance industry; formerly, 2006; Director, National
Advisory Director, Securitas Atlantic Holdings
Capital LLC (a global private Corporation (property and
equity investment firm casualty insurance company)
dedicated to making since 2004; Director, The
investments in the insurance Proformance Insurance
sector), 1998 to December Company (property and
2003. casualty insurance company)
since March 2004; formerly,
Director, Providence
Washington Insurance
Company (property and
casualty insurance company),
December 1998 to March
2006; formerly, Director,
Summit Global Partners
(insurance brokerage firm),
2000 to 2005.
74
- --------------------------------------------------------------------------------
Name, Age, and Address/(1)/ Position and Principal Occupation(s)/(3)/ Number of Other Directorships Held
Length of Funds in Outside Fund Complex by
Time Served/(2)/ Fund Complex Fund Trustee
Overseen by
Fund Trustee/(4)/
Peter P. Trapp (62) Trustee since Regional Manager for Mid- 61 None.
2005 Southern Region, Ford Motor
Credit Company since
September 1997; formerly,
President, Ford Life Insurance
Company, April 1995 to
August 1997.
Fund Trustees who are "Interested Persons"
Jack L. Rivkin* (66) President and Executive Vice President and 61 Director, Dale Carnegie and
Trustee since Chief Investment Officer, Associates, Inc. (private
2005 Neuberger Berman Inc. company) since 1998;
(holding company) since Director, Solbright, Inc.
2002 and 2003, respectively; (private company) since
Managing Director and Chief 1998.
Investment Officer,
Neuberger Berman, LLC since
December 2005 and 2003,
respectively; formerly,
Executive Vice President,
Neuberger Berman, LLC,
December 2002 to 2005;
Director and Chairman,
Management since
December 2002; formerly,
Executive Vice President,
Citigroup Investments, Inc.,
September 1995 to February
2002; formerly, Executive
Vice President, Citigroup Inc.,
September 1995 to February
2002.
75
- --------------------------------------------------------------------------------
Name, Age, and Address/(1)/ Position and Principal Occupation(s)/(3)/ Number of Other Directorships Held
Length of Funds in Outside Fund Complex by
Time Served/(2)/ Fund Complex Fund Trustee
Overseen by
Fund Trustee/(4)/
Peter E. Sundman* (48) Chairman of Executive Vice President, 61 Director and Vice President,
the Board, Neuberger Berman Inc. Neuberger & Berman
Chief (holding company) since Agency, Inc. since 2000;
Executive 1999; Head of Neuberger formerly, Director, Neuberger
Officer and Berman Inc.'s Mutual Funds Berman Inc. (holding
Trustee since Business (since 1999) and company), October 1999 to
2005 Institutional Business (1999 March 2003; Trustee, Frost
to October 2005); Valley YMCA; Trustee,
responsible for Managed College of Wooster.
Accounts Business and
intermediary distribution
since October 1999;
President and Director,
Management since 1999;
Managing Director,
Neuberger Berman, LLC since
2005; formerly, Executive
Vice President, Neuberger
Berman, LLC, 1999 to
December 2005; formerly,
Principal, Neuberger Berman,
LLC, 1997 to 1999; formerly,
Senior Vice President,
Management, 1996 to 1999.
/(1)/ The business address of each listed person is 605 Third Avenue, New York,
New York 10158.
/(2)/ Pursuant to the Trust's Trust Instrument, each Fund Trustee shall hold
office for life or until his or her successor is elected or the Trust
terminates; except that (a) any Fund Trustee may resign by delivering a
written resignation; (b) any Fund Trustee may be removed with or without
cause at any time by a written instrument signed by at least two-thirds
of the other Fund Trustees; (c) any Fund Trustee who requests to be
retired, or who has become unable to serve, may be retired by a written
instrument signed by a majority of the other Fund Trustees; and (d) any
Fund Trustee may be removed at any shareholder meeting by a vote of at
least two-thirds of the outstanding shares.
/(3)/ Except as otherwise indicated, each individual has held the positions
shown for at least the last five years.
/(4)/ For funds organized in a master-feeder structure, we count the master
fund and its associated feeder funds as a single portfolio.
* Indicates a Fund Trustee who is an "interested person" within the meaning
of the 1940 Act. Mr. Sundman and Mr. Rivkin are interested persons of the
Trust by virtue of the fact that they are officers and/or directors of
Management and/or LBAM.
76
- --------------------------------------------------------------------------------
Information about the Officers of the Trust
Name, Age, and Address/(1)/ Position and Principal Occupation(s)/(3)/
Length of Time
Served/(2)/
Andrew B. Allard (45) Anti-Money Senior Vice President, Neuberger Berman, LLC since 2006; Deputy General
Laundering Counsel, Neuberger Berman, LLC since 2004; formerly, Vice President,
Compliance Neuberger Berman, LLC, 2000 to 2006; formerly, Associate General Counsel,
Officer since Neuberger Berman, LLC, 1999 to 2004; Anti-Money Laundering Compliance
2005 Officer, sixteen registered investment companies for which Management
acts as investment manager and administrator (seven since 2002, three since
2003, four since 2004, one since 2005 and one since 2006) and one
registered investment company for which Management acts as investment
adviser (since 2006).
Michael J. Bradler (37) Assistant Vice President, Neuberger Berman, LLC since 2006; Employee, Management
Treasurer since since 1997; Assistant Treasurer, sixteen registered investment companies for
2005 which Management acts as investment manager and administrator (fifteen
since 2005 and one since 2006) and one registered investment company for
which Management acts as investment adviser (since 2006).
Claudia A. Brandon (50) Secretary since Senior Vice President, Neuberger Berman, LLC since 2007; Vice President-
2005 Mutual Fund Board Relations, Management since 2000 and Assistant
Secretary since 2004; formerly, Vice President, Neuberger Berman, LLC, 2002
to 2006 and Employee since 1999; Secretary, sixteen registered investment
companies for which Management acts as investment manager and
administrator (three since 1985, four since 2002, three since 2003, four
since 2004, one since 2005 and one since 2006) and one registered
investment company for which Management acts as investment adviser
(since 2006).
Robert Conti (50) Vice President Managing Director, Neuberger Berman, LLC since 2007; formerly, Senior
since 2005 Vice President, Neuberger Berman, LLC, 2003 to 2006; formerly, Vice
President, Neuberger Berman, LLC, 1999 to 2003; Senior Vice President,
Management since 2000; Vice President, sixteen registered investment
companies for which Management acts as investment manager and
administrator (three since 2000, four since 2002, three since 2003, four
since 2004, one since 2005 and one since 2006) and one registered
investment company for which Management acts as investment adviser
(since 2006).
Brian J. Gaffney (53) Vice President Managing Director, Neuberger Berman, LLC since 1999; Senior Vice
since 2005 President, Management since 2000; Vice President, sixteen registered
investment companies for which Management acts as investment manager
and administrator (three since 2000, four since 2002, three since 2003, four
since 2004, one since 2005 and one since 2006) and one registered
investment company for which Management acts as investment adviser
(since 2006).
77
- --------------------------------------------------------------------------------
Name, Age, and Address/(1)/ Position and Principal Occupation(s)/(3)/
Length of Time
Served/(2)/
Maxine L. Gerson (56) Chief Legal Senior Vice President, Neuberger Berman, LLC since 2002; Deputy General
Officer since Counsel and Assistant Secretary, Neuberger Berman, LLC since 2001;
2005 (only for Secretary and General Counsel, Management since 2004; Chief Legal Officer
purposes of (only for purposes of sections 307 and 406 of the Sarbanes-Oxley Act of
sections 307 2002), sixteen registered investment companies for which Management acts
and 406 of the as investment manager and administrator (fifteen since 2005 and one since
Sarbanes-Oxley 2006) and one registered investment company for which Management acts
Act of 2002) as investment adviser (since 2006).
Sheila R. James (41) Assistant Assistant Vice President, Neuberger Berman, LLC since 2007 and Employee
Secretary since since 1999; Assistant Secretary, sixteen registered investment companies for
2005 which Management acts as investment manager and administrator (seven
since 2002, three since 2003, four since 2004, one since 2005 and one since
2006) and one registered investment company for which Management acts
as investment adviser (since 2006).
Kevin Lyons (51) Assistant Employee, Neuberger Berman, LLC since 1999; Assistant Secretary, sixteen
Secretary since registered investment companies for which Management acts as investment
2005 manager and administrator (ten since 2003, four since 2004, one since 2005
and one since 2006) and one registered investment company for which
Management acts as investment adviser (since 2006).
John M. McGovern (37) Treasurer and Senior Vice President, Neuberger Berman, LLC since 2007; formerly, Vice
Principal President, Neuberger Berman, LLC, 2004 to 2006; Employee, Management
Financial and since 1993; Treasurer and Principal Financial and Accounting Officer, sixteen
Accounting registered investment companies for which Management acts as investment
Officer since manager and administrator (fifteen since 2005 and one since 2006) and one
2005 registered investment company for which Management acts as investment
adviser (since 2006); formerly, Assistant Treasurer, fifteen registered
investment companies for which Management acts as investment manager
and administrator, 2002 to 2005.
Frank Rosato (36) Assistant Vice President, Neuberger Berman, LLC since 2006; Employee, Management
Treasurer since since 1995; Assistant Treasurer, sixteen registered investment companies for
2005 which Management acts as investment manager and administrator (fifteen
since 2005 and one since 2006) and one registered investment company for
which Management acts as investment adviser (since 2006).
Frederic B. Soule (61) Vice President Senior Vice President, Neuberger Berman, LLC since 2003; formerly, Vice
since 2005 President, Neuberger Berman, LLC, 1999 to 2003; Vice President, sixteen
registered investment companies for which Management acts as investment
manager and administrator (three since 2000, four since 2002, three since
2003, four since 2004, one since 2005 and one since 2006) and one
registered investment company for which Management acts as investment
adviser (since 2006).
78
- --------------------------------------------------------------------------------
Name, Age, and Address/(1)/ Position and Principal Occupation(s)/(3)/
Length of Time
Served/(2)/
Chamaine Williams (35) Chief Senior Vice President, Lehman Brothers Inc. since 2007; formerly, Vice
Compliance President, Lehman Brothers Inc., 2003 to 2006; Chief Compliance Officer,
Officer since sixteen registered investment companies for which Management acts as
2005 investment manager and administrator (fifteen since 2005 and one since
2006) and one registered investment company for which Management acts
as investment adviser (since 2005); Chief Compliance Officer, Lehman
Brothers Asset Management Inc. since 2003; Chief Compliance Officer,
Lehman Brothers Alternative Investment Management LLC since 2003;
formerly, Vice President, UBS Global Asset Management (US) Inc. (formerly,
Mitchell Hutchins Asset Management, a wholly-owned subsidiary of
PaineWebber Inc.), 1997 to 2003.
/(1)/ The business address of each listed person is 605 Third Avenue, New York,
New York 10158.
/(2)/ Pursuant to the By-Laws of the Trust, each officer elected by the Fund
Trustees shall hold office until his or her successor shall have been
elected and qualified or until his or her earlier death, inability to
serve, or resignation. Officers serve at the pleasure of the Fund
Trustees and may be removed at any time with or without cause.
/(3)/ Except as otherwise indicated, each individual has held the positions
shown for at least the last five years.
79
- --------------------------------------------------------------------------------
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine
how to vote proxies relating to portfolio securities is available, without
charge, by calling 1-888-556-9030 (toll-free) and on the website of the
Securities and Exchange Commission, at www.sec.gov. Information regarding how
the Trust voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is also available, without charge, by calling
1-888-556-9030 (toll-free) and on the website of the Securities and Exchange
Commission, at www.sec.gov.
Quarterly Portfolio Schedule
The Trust files a complete schedule of portfolio holdings for each Master
Series with the Securities and Exchange Commission for the first and third
quarters of each fiscal year on Form N-Q. Each Trust's Forms N-Q are available
on the Securities and Exchange Commission's website at www.sec.gov and may be
reviewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330. The information on
Form N-Q is available upon request, without charge, by calling 1-888-556-9030
(toll-free).
Board Consideration of the Management and Sub-Advisory Agreements
At a meeting held on September 27, 2006, the Board of Trustees of Institutional
Liquidity Trust ("Board"), including the Trustees who are not "interested
persons" of Neuberger Berman Management Inc. ("Management") (including its
affiliates) or Institutional Liquidity Trust ("Independent Fund Trustees"),
approved the Management and Sub-Advisory Agreements ("Agreements") between
Management and Institutional Liquidity Trust, on behalf of Money Market Master
Series, Prime Master Series, Government Master Series and Treasury Master
Series (each, a "Master Series"). Each of Money Market Portfolio, Prime
Portfolio, Government Portfolio and Treasury Portfolio (each, a "Feeder
Portfolio") invests all of its net investable assets in Money Market Master
Series, Prime Master Series, Government Master Series and Treasury Master
Series, respectively. The term "Fund" is used throughout this section to refer
to each Feeder Portfolio or its corresponding Master Series, as appropriate.
In evaluating the Agreements, the Board, including the Independent Fund
Trustees, reviewed materials furnished by Management and Lehman Brothers Asset
Management Inc. ("Lehman Brothers Asset Management") and met with senior
representatives of Management and Lehman Brothers Asset Management regarding
their personnel and operations. The Independent Fund Trustees were advised by
counsel that is experienced in Investment Company Act of 1940 matters and that
is independent of Management and Lehman Brothers Asset Management.
The Board considered the following factors, among others, in connection with
its approval of the Agreements: (1) the nature, extent, and quality of the
services to be provided by Management and Lehman Brothers Asset Management;
(2) the performance of similar funds managed by Management; (3) the costs of
the services to be provided; (4) the extent to which economies of scale might
be realized as each Fund grows; and (5) whether fee levels reflect those
potential economies of scale for the benefit of investors in each Fund. In
their deliberations, the Board members did not identify any particular
information that was all-important or controlling, and each Trustee may have
attributed different weights to the various factors.
The Board evaluated the terms of the Agreements, the overall fairness of the
Agreements to each Fund and whether the Agreements were in the best interests
of each Fund and its shareholders.
With respect to the nature, extent and quality of the services provided, the
Board considered the performance of similar funds managed by Management and the
degree of risk likely to be undertaken by each Fund's portfolio managers. The
Board considered the experience and staffing of portfolio management and the
investment research personnel of Management and Lehman Brothers Asset
Management that would be dedicated to performing services for the Funds. The
Board noted that Management also would provide certain administrative services,
including fund accounting and compliance oversight. In addition, the Board
noted the positive compliance history of Management, as the firm has been free
of significant compliance problems.
80
- --------------------------------------------------------------------------------
With respect to the performance of Money Market Portfolio and Prime Portfolio,
the Board considered the performance of Neuberger Berman Institutional Cash
Fund and Cash Management Prime Portfolio, respectively, relative to each Fund's
benchmark and a peer group of investment companies pursuing broadly similar
strategies as each Fund. Neuberger Berman Institutional Cash Fund and Cash
Management Prime Portfolio invest in the same Master Series as Money Market
Portfolio and Prime Portfolio, respectively. The Board also considered the
previous performance of Management in managing Neuberger Berman Institutional
Cash Fund, a series of Neuberger Berman Income Funds and the predecessor to
Neuberger Berman Institutional Cash Fund.
With respect to the performance of Government Portfolio and Treasury Portfolio,
the Board considered the performance of similar funds managed by Management
relative to a peer group of investment companies pursuing broadly similar
strategies as each Fund.
With respect to the overall fairness of the Agreements, the Board considered
the fee structure of each Fund's Agreement as compared to a peer group of
comparable funds and any fall-out benefits likely to accrue to Management or
Lehman Brothers Asset Management or their affiliates.
The Board reviewed a comparison of each Fund's management fee and overall
expense ratio to a peer group of comparable funds. In addition, the Board
considered the contractual limits on Fund expenses undertaken by Management for
the Funds.
The Board considered whether there were other funds that were advised or
sub-advised by Management or its affiliates or separate accounts managed by
Management or its affiliates with similar investment objectives, policies and
strategies as the Funds. The Board compared the fees charged to any comparable
separate accounts to the fees charged to the Funds at various asset levels. The
Board considered the appropriateness and reasonableness of any differences
between the fees charged between each Fund and the comparable separate accounts
and determined that any differences in fees were consistent with the management
and other services provided.
The Board also evaluated any anticipated economies of scale in relation to the
services Management provides to each Fund. The Board considered the relatively
low level of the management fee and the contractual expense limit for each
class of each Fund.
Conclusions
In approving the Agreements, the Board concluded that the terms of each
Agreement are fair and reasonable and that approval of the Agreements is in the
best interest of each Fund and its shareholders. In reaching this
determination, the Board considered that Management and Lehman Brothers Asset
Management could be expected to provide a high level of service to each Fund;
that each Fund's fee structure appeared to the Board to be reasonable given the
nature and quality of services expected to be provided; and that the expected
benefits accruing to Management and its affiliates by virtue of their
relationship to the Funds were reasonable in comparison with the expected costs
of providing the investment advisory services and the expected benefits
accruing to each Fund.
81
Investment manager: Neuberger Berman Management Inc.
Sub-adviser: Lehman Brothers Asset Management LLC
Neuberger Berman Management Inc.
605 Third Avenue, 2nd Floor
New York, NY 10158-0180
888.556.9030
Web site: www.lehman.com/lbilf
STATISTICS AND PROJECTIONS IN THIS REPORT ARE DERIVED FROM SOURCES DEEMED TO BE
RELIABLE BUT CANNOT BE REGARDED AS A REPRESENTATION OF FUTURE RESULTS OF THE
PORTFOLIOS. THIS REPORT IS PREPARED FOR THE GENERAL INFORMATION OF SHAREHOLDERS
AND IS NOT AN OFFER OF SHARES OF THE PORTFOLIOS. SHARES ARE SOLD ONLY THROUGH
THE CURRENTLY EFFECTIVE PROSPECTUS, WHICH MUST PRECEDE OR ACCOMPANY THIS REPORT.
H0297 05/07
ITEM 2. CODE OF ETHICS
The Board of Trustees ("Board") of Lehman Brothers Institutional Liquidity Funds
("Registrant") adopted a code of ethics that applies to the Registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions ("Code of
Ethics"). For the period covered by this Form N-CSR, there were no waivers from
the Code of Ethics granted to the Registrant's principal executive officer,
principal financial officer, principle accounting officer or controller, or
persons performing similar functions.
A copy of the Code of Ethics is incorporated by reference to Lehman Brothers
Reserve Liquidity Funds' Form N-CSR, Investment Company Act file number
811-21716 (filed June 5, 2006). The Code of Ethics is also available, without
charge, by calling 1-800-877-9700 (toll-free).
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that the Registrant has one audit committee financial
expert serving on its audit committee. The Registrant's audit committee
financial expert is Howard Mileaf. Mr. Mileaf is an independent director as
defined by Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The financial information provided below is that of the registrant, Lehman
Brothers Institutional Liquidity Funds. This N-CSR relates only to Money Market
Portfolio, Prime Portfolio, Treasury Portfolio and Government Portfolio,
(collectively, the "Funds"). Ernst & Young, LLP ("E&Y") serves as independent
registered public accounting firm to Money Market Portfolio and Government
Portfolio. Tait, Weller & Baker LLP ("TW&B") serves as independent registered
public accounting firm to Prime Portfolio and Treasury Portfolio. Since the
Registrant did not complete one full year of operations in 2007, the 2007 fees
are only shown from commencement of operations.
(a) Audit Fees
----------
The aggregate fees billed for professional services rendered by E&Y for the
audit of the annual financial statements or services that are normally provided
by E&Y in connection with statutory and regulatory filings or engagements were
$30,000 for the fiscal period ended 2007.
The aggregate fees billed for professional services rendered by TW&B for the
audit of the annual financial statements or services that are normally provided
by TW&B in connection with statutory and regulatory filings or engagements were
$9,400 for the fiscal period ended 2007.
(b) Audit-Related Fees
------------------
The aggregate fees billed to the Registrant for assurance and related services
by E&Y that are reasonably related to the performance of the audit of the
Registrant's financial statements and are not reported above in AUDIT FEES were
$0 for the fiscal period ended 2007.
The fees billed to other entities in the investment company complex for
assurance and related services by E&Y that are reasonably related to the
performance of the audit that the Audit Committee was required to approve
because the engagement related directly to the operations and financial
reporting of the Registrant were $0 for the fiscal period ended 2007.
The aggregate fees billed to the Registrant for assurance and related services
by TW&B that are reasonably related to the performance of the audit of the
Registrant's financial statements and are not reported above in AUDIT FEES were
$0 for the fiscal period ended 2007.
The fees billed to other entities in the investment company complex for
assurance and related services by TW&B that are reasonably related to the
performance of the audit that the Audit Committee was required to approve
because the engagement related directly to the operations and financial
reporting of the Registrant were $0 for the fiscal period ended 2007.
(c) Tax Fees
--------
The aggregate fees billed to the Registrant for professional services rendered
by E&Y for tax compliance, tax advice, and tax planning were $6,000 for the
fiscal period ended 2007. The nature of the services provided were tax
compliance, tax advice, and tax planning. The Audit Committee approved 0% of
these services provided by E&Y for the fiscal period ended 2007, pursuant to the
waiver provisions of Rule 2-01(c)(7)(i)(C) of Regulation S-X.
The fees billed to other entities in the investment company complex for
professional services rendered by E&Y for tax compliance, tax advice, and tax
planning that the Audit Committee was required to approve because the engagement
related directly to the operations and financial reporting of the Registrant
were $14,000 for the fiscal period ended 2007. The Audit Committee approved 0%
of these services provided by E&Y for the fiscal period ended 2007, pursuant to
the waiver provisions of Rule 2-01(c)(7)(i)(C) of Regulation S-X.
The aggregate fees billed to the Registrant for professional services rendered
by TW&B for tax compliance, tax advice, and tax planning were $2,600 for the
fiscal period ended 2007. The nature of the services provided were tax
compliance, tax advice, and tax planning. The Audit Committee approved 0% of
these services provided by TW&B for the fiscal period ended 2007, pursuant to
the waiver provisions of Rule 2-01(c)(7)(i)(C) of Regulation S-X.
The fees billed to other entities in the investment company complex for
professional services rendered by TW&B for tax compliance, tax advice, and tax
planning that the Audit Committee was required to approve because the engagement
related directly to the operations and financial reporting of the Registrant
were $3,000 for the fiscal period ended 2007. The Audit Committee approved 0% of
these services provided by TW&B for the fiscal period ended 2007, pursuant to
the waiver provisions of Rule 2-01(c)(7)(i)(C) of Regulation S-X.
(d) All Other Fees
--------------
The aggregate fees billed to the Registrant for products and services provided
by E&Y, other than services reported in AUDIT FEES, AUDIT-RELATED FEES, and TAX
FEES were $0 for the fiscal period ended 2007.
The fees billed to other entities in the investment company complex for products
and services provided by E&Y, other than services reported in AUDIT FEES,
AUDIT-RELATED FEES, and TAX FEES, that the Audit Committee was required to
approve because the engagement related directly to the operations and financial
reporting of the Registrant were $0 for the fiscal period ended 2007.
The aggregate fees billed to the Registrant for products and services provided
by TW&B, other than services reported in AUDIT FEES, AUDIT-RELATED FEES, and TAX
FEES were $0 for the fiscal period ended 2007.
The fees billed to other entities in the investment company complex for products
and services provided by TW&B, other than services reported in Audit Fees,
Audit-Related Fees, and Tax Fees, that the Audit Committee was required to
approve because the engagement related directly to the operations and financial
reporting of the Registrant were $0 for the fiscal period ended 2007.
(e) Audit Committee's Pre-Approval Policies and Procedures
------------------------------------------------------
(1) The Audit Committee's pre-approval policies and procedures for the
Registrant to engage an accountant to render audit and non-audit services
delegate to each member of the Committee the power to pre-approve services
between meetings of the Committee.
(2) None of the services described in paragraphs (b) through (d) above were
approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(f) Hours Attributed to Other Persons
---------------------------------
Not applicable.
(g) Non-Audit Fees
--------------
Non-audit fees billed by E&Y for services rendered to the Registrant were $6,000
for the fiscal period ended 2007.
Non-audit fees billed by E&Y for services rendered to the Registrant's
investment adviser and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the Registrant were
$239,000 for the fiscal period ended 2007.
Non-audit fees billed by TW&B for services rendered to the Registrant $2,600 for
the fiscal period ended 2007.
Non-audit fees billed by TW&B for services rendered to the Registrant's
investment adviser and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the Registrant were
$40,100 for the fiscal period ended 2007.
(h) The Audit Committee of the Board considered whether the provision of
non-audit services rendered to the Registrant's investment adviser and any
entity controlling, controlled by, or under common control with the adviser that
provides ongoing services to the Registrant that were not pre-approved by the
Audit Committee because the engagement did not relate directly to the operations
and financial reporting of the Registrant is compatible with maintaining E&Y's
and TW&B's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable to the Registrant.
ITEM 6. SCHEDULE OF INVESTMENTS
The complete schedule of investments for each series is disclosed in the
Registrant's Annual Report, which is included as Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable to the Registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable to the Registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no changes to the procedures by which shareholders may recommend
nominees to the Board.
ITEM 11. CONTROLS AND PROCEDURES
(a) Based on an evaluation of the disclosure controls and procedures (as
defined in rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "Act")) as of a date within 90 days of the filing date of this
document, the Chief Executive Officer and Treasurer and Principal Financial
and Accounting Officer of the Registrant have concluded that such
disclosure controls and procedures are effectively designed to ensure that
information required to be disclosed by the Registrant on Form N-CSR and
Form N-Q is accumulated and communicated to the Registrant's management to
allow timely decisions regarding required disclosure.
(b) There were no significant changes in the Registrant's internal controls
over financial reporting (as defined in rule 30a-3(d) under the Act) that
occurred during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, the Registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS
(a)(1) A copy of the Code of Ethics is incorporated by reference to Lehman
Brothers Reserve Liquidity Funds' Form N-CSR, Investment Company Act
file number 811-21716 (filed June 5, 2006).
(a)(2) The certifications required by Rule 30a-2(a) of the Act and Section 302
of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act") are attached
hereto.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) of the Act and Section 906
of the Sarbanes-Oxley Act are attached hereto.
The certifications provided pursuant to Rule 30a-2(a) of the Act and Section 906
of the Sarbanes-Oxley Act are not deemed "filed" for purposes of Section 18 of
the Securities Exchange Act of 1934 ("Exchange Act"), or otherwise subject to
the liability of that section. Such certifications will not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933 or
the Exchange Act, except to the extent that the Registrant specifically
incorporates them by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LEHMAN BROTHERS INSTITUTIONAL LIQUIDITY FUNDS
By: /s/Peter E. Sundman
-------------------
Peter E. Sundman
Chief Executive Officer
Date: June 7, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/Peter E. Sundman
-------------------
Peter E. Sundman
Chief Executive Officer
Date: June 7, 2007
By: /s/John M. McGovern
-------------------
John M. McGovern
Treasurer and Principal Financial
and Accounting Officer
Date: June 7, 2007