April 29, 1994
FIRST PRAIRIE MUNICIPAL MONEY MARKET FUND
Supplement to Prospectus
Dated April 29, 1994
The following information supplements and should be read in
conjunction with the section of the Fund's Prospectus entitled "Management
of the Fund."
The Dreyfus Corporation ("Dreyfus") has entered into an Agreement and
Plan of Merger providing for the merger of Dreyfus with a subsidiary of
Mellon Bank Corporation ("Mellon").
Following the merger, it is planned that Dreyfus will be a direct
subsidiary of Mellon Bank, N.A. Closing of this merger is subject to a
number of contingencies, including receipt of certain regulatory approvals
and approvals of the stockholders of Dreyfus and of Mellon. The merger is
expected to occur in mid-1994, but could occur significantly later.
<PAGE>
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FIRST
First Prairie [LOGO] PRAIRIE
Municipal Money Market Fund FUNDS
PROSPECTUS
The First National Bank of Chicago
MANAGER
Dreyfus Service Corporation
DISTRIBUTOR
Prospectus begins on page one.
[ARTWORK]
<PAGE>
FIRST
First Prairie [LOGO] PRAIRIE
Municipal Money Market Fund FUNDS
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PROSPECTUS--April 29, 1994
First Prairie Municipal Money Market Fund (the "Fund") is an open-end,
diversified, management investment company, known as a money market mutual fund.
Its goal is to provide investors with as high a level of current income exempt
from Federal income tax as is consistent with the preservation of capital and
the maintenance of liquidity.
Investors can invest, reinvest or redeem shares at any time without charge
or penalty imposed by the Fund.
The First National Bank of Chicago (the "Manager") serves as the Fund's
investment adviser. Dreyfus Service Corporation (the "Distributor"), a
wholly-owned subsidiary of The Dreyfus Corporation, serves as the Fund's
distributor.
The Fund bears certain costs of advertising, administration and/or
distribution pursuant to a plan adopted in accordance with Rule 12b-1 under the
Investment Company Act of 1940.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Fund will be able to maintain a
stable net asset value of $1.00 per share.
The Fund's shares are not deposits or obligations of, or guaranteed by,
the Manager or any of its affiliates or any bank, and are not insured by the
Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board or any
other agency. The Fund's shares involve certain investment risks, including the
possible loss of principal. The Fund's yield fluctuates and is not guaranteed.
----------
This Prospectus sets forth concisely information about the Fund that an investor
should know before investing. It should be read and retained for future
reference.
Part B (also known as the Statement of Additional Information), dated
April 29, 1994, which may be revised from time to time, provides a further
discussion of certain areas in this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. For a free copy, write to
the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call
1-800-346-3621. When telephoning, ask for Operator 666.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PAGE 1
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Table of Contents
<TABLE>
<S> <C>
Annual Fund Operating Expenses................ 3
Condensed Financial Information............... 4
Highlights.................................... 6
Yield Information............................. 9
Description of the Fund....................... 10
Management of the Fund........................ 20
How to Buy Fund Shares........................ 24
Shareholder Services.......................... 28
How to Redeem Fund Shares..................... 32
Service Plan.................................. 37
Dividends, Distributions and Taxes............ 39
General Information........................... 42
</TABLE>
PAGE 2
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
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Management Fee .55%
12b-1 Fees (distribution and servicing) .25%
Other Expenses .15%
Total Fund Operating Expenses .95%
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EXAMPLE
An investor would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual return
<TABLE>
<S> <C> <C>
and (2) redemption at the end of each time period:
1 YEAR $ 10
3 YEARS $ 30
5 YEARS $ 53
10 YEARS $117
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE
THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL
PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist investors in
understanding the various costs and expenses borne by the
Fund, and therefore indirectly by investors, the payment of
which will reduce investors' return on an annual basis.
Long-term investors could pay more in 12b-1 fees than the
economic equivalent of paying a front-end sales charge. The
information in the foregoing table does not reflect any fee
waivers or expense reimbursement arrangements that may be in
effect. The Manager, affiliates of the Manager and certain
Service Agents (as defined below) may charge their clients
direct fees for effecting transactions in Fund shares; such
fees are not reflected in the foregoing table. See
"Management of the Fund," "How to Buy Fund Shares" and
"Service Plan."
PAGE 3
<PAGE>
Condensed Financial Information
The information in the following table has been audited by Ernst & Young, the
Fund's independent auditors, whose report on the five years in the period ended
December 31, 1993, appears in the Statement of Additional Information. Further
financial data and related notes are included in the Statement of Additional
Information, available upon request.
FINANCIAL HIGHLIGHTS Contained below is per share operating performance data for
a share of beneficial interest outstanding, total investment return, ratios to
average net assets and other supplemental data for each year indicated. This
information has been derived from information provided in the Fund's financial
statements.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1986* 1987 1988 1989
------- ------ ------ ------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
year $1.0000 $.9998 $.9999 $.9999
------- ------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net .0383 .0410 .0480 .0580
Net realized and unrealized
gain (loss) on investments (.0002) .0001 -- --
------- ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS .0381 .0411 .0480 .0580
------- ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income--net (.0383) (.0410) (.0480) (.0580)
------- ------ ------ ------
Net asset value, end of year $ .9998 $.9999 $.9999 $.9999
------- ------ ------ ------
TOTAL INVESTMENT RETURN 4.30% 4.18% 4.91% 5.96%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets .71% .96% .98% .98%
Ratio of net investment income
to average net assets 4.02% 4.08% 4.79% 5.79%
Decrease reflected in above
expense ratios due to expense
reimbursement .34% -- -- --
Net Assets, end of year (000's
omitted) $211,271 $145,524 $142,806 $158,515
<FN>
- ------------------------
*From February 5, 1986 (commencement of operations) to December 31, 1986.
</TABLE>
PAGE 4
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1990 1991 1992 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
year $.9999 $.9999 $.9999 $.9999
------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net .0527 .0413 .0236 .0174
Net realized and unrealized
gain (loss) on investments -- -- -- --
------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS .0527 .0413 .0236 .0174
------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income--net (.0527) (.0413) (.0236) (.0174)
------ ------ ------ ------
Net asset value, end of year $.9999 $.9999 $.9999 $.9999
------ ------ ------ ------
TOTAL INVESTMENT RETURN 5.40% 4.21% 2.38% 1.75%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets 1.00% .98% .95% .79%
Ratio of net investment income
to average net assets 5.27% 4.11% 2.38% 1.74%
Decrease reflected in above
expense ratios due to expense
reimbursement -- -- .01% .16%
Net Assets, end of year (000's
omitted) $176,009 $233,675 $210,000 $177,698
</TABLE>
PAGE 5
<PAGE>
Highlights
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
THE FUND The Fund is an open-end, diversified, management investment company,
known as a money market mutual fund.
INVESTMENT OBJECTIVE The Fund's goal is to provide investors with as high a
level of current income exempt from Federal income tax as is consistent with the
preservation of capital and the maintenance of liquidity.
MANAGEMENT POLICIES The Fund will invest at least 80% of its net assets (except
when maintaining a temporary defensive position) in Municipal Obligations.
The Fund seeks to maintain a stable net asset value of $1.00 per share
for purchases and redemptions. There can be no assurance that it will be able to
do so.
In accordance with Rule 2a-7 under the Investment Company Act of 1940,
the Fund will maintain a dollar-weighted average portfolio maturity of 90 days
or less, purchase only instruments with remaining maturities of 13 months or
less, and purchase only instruments which are rated in one of the two highest
rating categories by at least two nationally recognized independent rating
agencies (or of comparable quality).
MUNICIPAL OBLIGATIONS Municipal Obligations are debt obligations issued by
states, territories and possessions of the United States, by the District of
Columbia, and by their political subdivisions, agencies and instrumentalities or
multistate agencies or authorities, the interest from which, in the opinion of
bond counsel to the issuer, is exempt from Federal income tax.
Municipal Obligations are generally issued to obtain funds for various
public purposes. They also include certain industrial development bonds issued
by or on behalf of public authorities. Municipal Obligations are classified as
general obligation bonds, revenue bonds and notes.
PAGE 6
<PAGE>
MANAGER AND MANAGEMENT FEE The First National Bank of Chicago ("Manager") is the
Fund's investment adviser.
The Fund has agreed to pay the Manager a monthly fee at the annual rate
of .55 of 1% of the value of the Fund's average daily net assets.
SALES CHARGES AND EXPENSES Investors may invest, reinvest or redeem shares at
any time without charge or penalty imposed by the Fund.
All expenses incurred in the operation of the Fund are borne by the Fund,
including investment advisory fees. Shareholders also bear certain costs of
administration and/or distribution pursuant to a plan adopted in accordance with
Rule 12b-1 under the Investment Company Act of 1940.
HOW TO BUY FUND SHARES Orders for the purchase of shares may be placed through a
number of institutions including the Manager, the Distributor and affiliates of
the Manager including First Chicago Investment Services, Inc., a registered
broker-dealer, and through certain other banks, securities dealers and other
industry professionals, such as investment advisers, accountants and estate
planning firms (collectively, "Service Agents").
The minimum initial investment is $1,000. All subsequent investments must
be at least $100.
See "How to Buy Fund Shares."
SHAREHOLDER SERVICES The Fund offers its shareholders certain services and
privileges including: Exchange Privilege, Auto-Exchange Privilege, Automatic
Asset Builder, Government Direct Deposit Privilege, Dividend Options privileges,
Automatic Withdrawal Plan and TeleTransfer Privilege. (Certain services and
privileges may not be available through all Service Agents.)
FREE CHECKWRITING Investors may request on the Account Application that the Fund
provide Redemption Checks drawn on the Fund's account. Redemption Checks may be
made payable to any person in the amount of $500 or more. There is no charge for
this service.
PAGE 7
<PAGE>
MONTHLY DIVIDENDS The Fund ordinarily declares dividends from its net investment
income daily. Dividends are usually paid on the last calendar day of each month,
and are automatically reinvested in additional shares unless the investor elects
payment in cash.
TAXES Substantially all dividends derived from Municipal Obligations are not
subject to Federal income tax. However, certain types of income from the Fund
may not be tax exempt. Notice as to the tax status of an investor's dividends
will be mailed annually.
HOW TO REDEEM FUND SHARES Generally, investors should contact their
representatives at the Manager or appropriate Service Agent for redemption
instructions. Investors who are not clients of the Manager or a Service Agent
may redeem Fund shares by written request or through the Wire Redemption
Privilege, Telephone Redemption Privilege, or the TeleTransfer Privilege.
See "How to Redeem Fund Shares."
RISKS AND SPECIAL CONSIDERATIONS Moneys invested in the Fund are not bank
deposits or obligations of, or guaranteed by, the Manager or any of its
affiliates and are not insured by the FDIC or any other governmental agency.
There can be no assurance the Fund will be able to maintain a stable net
asset value of $1.00 per share.
See "Description of the Fund--Investment Considerations."
PAGE 8
<PAGE>
Yield Information
From time to time, the Fund advertises its yield and effective yield. Both yield
figures are based on historical earnings and are not intended to indicate future
performance. It can be expected that these yields will fluctuate substantially.
The yield of the Fund refers to the income generated by an investment in the
Fund over a seven-day period (which period will be stated in the advertisement).
This income is then annualized. That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly, but, when annualized, the income earned by an investment
in the Fund is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment. The Fund's yield and effective yield may reflect absorbed expenses
pursuant to any undertaking that may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax yield
which, after being taxed at a stated rate, would be equivalent to a stated yield
or effective yield calculated as described above.
Yield information is useful in reviewing the Fund's performance, but
because yields will fluctuate, under certain conditions such information may not
provide a basis for comparison with domestic bank deposits, other investments
which pay a fixed yield for a stated period of time, or other investment
companies which may use a different method of computing yield.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Bank Rate MonitorTM, N. Palm Beach, Fla. 33408,
IBC/Donoghue's Money Fund Report, Morningstar, Inc. and other
industry publications.
"Yield" refers to the Fund's income over a
7-day period, which is then annualized.
"Effective yield" assumes that income is reinvested; it will be slightly higher
than "yield" because of the effect of compounding reinvested income.
"Tax equivalent yield" is the pre-tax yield of a taxable investment which equals
the stated yield or effective yield after being taxed at a given rate.
Yields fluctuate, so this information may not be directly comparable to bank
deposits or other
investments which pay a fixed yield for a stated period of time.
PAGE 9
<PAGE>
Description of the Fund
INVESTMENT OBJECTIVE The Fund's goal is to provide investors with as high a
level of current income exempt from Federal income tax as is consistent with the
preservation of capital and the maintenance of liquidity. To accomplish this
goal, the Fund invests primarily in Municipal Obligations (described below). The
Fund's investment objective cannot be changed without approval by the holders of
a majority (as defined in the Investment Company Act of 1940) of the Fund's
outstanding voting shares. There can be no assurance that the Fund's investment
objective will be achieved. Securites in which the Fund invests may not earn as
high a level of current income as long-term or lower quality securities which
generally have less liquidity, greater market risk and more fluctuation in
market value.
MUNICIPAL OBLIGATIONS Municipal Obligations are debt obligations issued by
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities, the interest from which is, in the opinion
of bond counsel to the issuer, exempt from Federal income tax. Municipal
Obligations generally include debt obligations issued to obtain funds for
various public purposes as well as certain industrial development bonds issued
by or on behalf of public authorities. Municipal Obligations are classified as
general obligation bonds, revenue bonds and notes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds are payable from the revenue
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source, but not
from the general taxing power. Tax exempt industrial development bonds, in most
cases, are revenue bonds that generally do not carry the pledge of the credit of
the issuing municipality, but generally are guaranteed by the corporate entity
on whose behalf they are issued. Notes are short-term instruments which are
obligations of the issuing municipalities or agencies and are sold in
anticipation of a bond sale, collection of taxes or receipt of other revenues.
Municipal Obliga-
PAGE 10
<PAGE>
tions include municipal lease/purchase agreements which are similar to
installment purchase contracts for property or equipment issued by
municipalities. Municipal Obligations bear fixed, floating or variable rates of
interest.
The Fund's goal is to provide as high a level of current income exempt from
Federal income tax as is consistent with preservation of capital and maintenance
of liquidity.
The Fund invests primarily in a portfolio of Municipal Obligations, the interest
from which is exempt from Federal income tax.
MANAGEMENT POLICIES It is a fundamental policy of the Fund that it will invest
at least 80% of the value of its net assets (except when maintaining a temporary
defensive position) in Municipal Obligations.
The Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Fund uses the amortized cost method of
valuing its securities pursuant to Rule 2a-7 under the Investment Company Act of
1940, certain requirements of which are summarized as follows. In accordance
with Rule 2a-7, the Fund will maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase only instruments having remaining
maturities of 13 months or less and invest only in U.S. dollar denominated
securities determined in accordance with procedures established by the Board of
Trustees to present minimal credit risks and which are rated in one of the two
highest rating categories for debt obligations by at least two nationally
recognized statistical rating organizations (or one rating organization if the
instrument was rated only by one such organization) or, if unrated,
are of comparable quality as determined in accordance with
procedures established by the Board of Trustees. The
nationally recognized statistical rating organizations
currently rating instruments of the type the Fund may
purchase are Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Corporation ("S&P"),
Fitch Investors Service, Inc. ("Fitch"), and IBCA Limited
and IBCA Inc. ("IBCA") and their rating criteria are
described in the Appendix to the Fund's Statement of Additional
Information. For further information regarding the amortized cost method of
valuing securities, see "Determination of Net Asset Value" in the Fund's
Statement of Additional Information. There can be no assurance that the Fund
will be able to maintain a stable net asset value of $1.00 per share.
The Fund may invest more than 25% of the value of its total assets in
Municipal Obligations which are related in such a way that an economic, business
or political development or change affecting one such security also would affect
the other securities; for example, securities the interests upon which is
paid from revenues of similar types of projects, or securities whose issuers
are located in the same state. As a result, the Fund may be subject to greater
risk as compared to a fund that does not follow this practice.
PAGE 11
The Fund seeks to maintain a net asset value of $1.00 per share for purchases
and redemptions. There can be no assurance it will be able to do so.
The Fund purchases debt obligations rated in
one of the two highest rating categories by at
least two nationally recognized statistical rating
organizations, or of comparable rating.
From time to time, the Fund may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental users. Interest on Municipal Obligations
(including certain industrial development bonds) which are specified private
activity bonds, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"), issued after August 7, 1986, while exempt from Federal income tax, is a
preference item for the purpose of the alternative minimum tax. Where a
regulated investment company receives such interest, a proportionate share of
any exempt-interest dividend paid by the investment company may be treated as
such a preference item to shareholders. The Fund may invest without limitation
in such Municipal Obligations if the Manager determines their purchase is
consistent with the Fund's investment objective.
The Fund may purchase floating and variable rate demand notes and bonds,
which are tax exempt obligations ordinarily having stated maturities in excess
of 13 months, but which permit the holder to demand payment of principal at any
time, or at specified intervals not exceeding 13 months, in each case upon not
more than 30 days' notice. Variable rate demand obligations include master
demand notes which are obligations that permit the Fund to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct arrangements
between the Fund, as lender, and the borrower. The interest rates on these notes
fluctuate from time to time. Frequently, such obligations are secured by letters
of credit or other credit support arrangements provided by banks. Use of letters
of credit or other credit support arrangements will not adversely affect the tax
exempt status of these obligations. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated that such
instruments generally will be traded, and there generally is no established
secondary market for these obligations, although they are redeemable at face
value. Accordingly, where these
Some Municipal Obligations are secured by letters of credit or other credit
support arrangements provided by banks.
PAGE 12
<PAGE>
obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Each obligation purchased by
the Fund will meet the quality criteria established for the purchase of
Municipal Obligations. The Manager, on behalf of the Fund, will consider on an
ongoing basis the creditworthiness of the issuers of the floating and variable
rate demand obligations in the Fund's portfolio. The Fund will not invest more
than 10% of the value of its net assets in floating or variable rate demand
obligations as to which the Fund cannot exercise the demand feature on not more
than seven days' notice if there is no secondary market available for these
obligations, and in other illiquid securities.
The Fund may purchase from financial institutions participation interests
in Municipal Obligations (such as industrial development bonds and municipal
lease/purchase agreements). A participation interest gives the Fund an undivided
interest in the Municipal Obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the Municipal
Obligation. These instruments may have fixed, floating or variable rates of
interest, with remaining maturities of 13 months or less. If the participation
interest is unrated, or has been given a rating below that which otherwise is
permissible for purchase by the Fund, the participation interest will be backed
by an irrevocable letter of credit or guarantee of a bank that the Board of
Trustees has determined meets the prescribed quality standards for banks set
forth below, or the payment obligation otherwise will be collateralized by U.S.
Government securities, or, in the case of an unrated participation interest, the
Manager must have determined that the instrument is of comparable quality to
those instruments in which the Fund may invest. For certain participation
interests, the Fund will have the right to demand payment, on not more than
seven days' notice, for all or any part of the Fund's participation interest in
the Municipal Obligation, plus accrued interest. As to these instruments, the
Fund intends to exercise its right to demand payment only upon a default under
the terms of the Municipal Obligation, as needed to provide liquidity to meet
redemptions, or to maintain or improve the quality of its investment portfolio.
The
PAGE 13
<PAGE>
Fund will not invest more than 10% of the value of its net assets in
participation interests that do not have this demand feature, and in other
illiquid securities.
The Fund may acquire "stand-by commitments" with respect to Municipal
Obligations held in its portfolio. Under a stand-by commitment, the Fund
obligates a broker, dealer or bank to repurchase, at the Fund's option,
specified securities at a specified price and, in this respect, stand-by
commitments are comparable to put options. The exercise of a stand-by
commitment, therefore, is subject to the ability of the seller to make payment
on demand. The Fund will acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The Fund may pay for stand-by commitments if such action is
deemed necessary, thus increasing to a degree the cost of the underlying
Municipal Obligation and similarly decreasing such security's yield to
investors.
The Fund may purchase tender option bonds. A tender option bond is a
Municipal Obligation (generally held pursuant to a custodial arrangement) having
a relatively long maturity and bearing interest at a fixed rate substantially
higher than prevailing short-term tax exempt rates, that has been coupled with
the agreement of a third party, such as a bank, broker-dealer or other financial
institution, pursuant to which such institution grants the security holders the
option, at periodic intervals, to tender their securities to the institution and
receive the face value thereof. As consideration for providing the option, the
financial institution receives periodic fees equal to the difference between the
Municipal Obligation's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the securities, coupled with the tender option, to trade at par on
the date of such determination. Thus, after payment of this fee, the security
holder effectively holds a demand obligation that bears interest at the
prevailing short-term tax exempt rate. The Manager, on behalf of the Fund, will
consider on an ongoing basis the creditworthiness of the issuer of the
underlying Municipal Obligation, of any custodian and of the third party
provider of the tender option. In certain instances and for
PAGE 14
<PAGE>
certain tender option bonds, the option may be terminable in the event of a
default in payment of principal or interest on the underlying Municipal
Obligations and for other reasons. The Fund will not invest more than 10% of the
value of its net assets in securities that are illiquid, which would include
tender option bonds as to which it cannot exercise the tender feature on not
more than seven days' notice if there is no secondary market available for these
obligations.
From time to time, on a temporary basis other than for temporary
defensive purposes (but not to exceed 20% of the value of the Fund's net assets)
or for temporary defensive purposes, the Fund may invest in taxable short-term
investments ("Taxable Investments") consisting of: notes of issuers having, at
the time of purchase, a quality rating within the two highest grades of Moody's,
S&P, Fitch or IBCA; obligations of the U.S. Government, its agencies or
instrumentalities; commercial paper; certificates of deposit of U.S. domestic
banks, including foreign branches of domestic banks, with assets of one billion
dollars or more; time deposits; bankers' acceptances and other short-term bank
obligations; and repurchase agreements in respect of any of the foregoing.
Dividends paid by the Fund that are attributable to income earned by the Fund
from Taxable Investments will be taxable to investors. See "Dividends,
Distributions and Taxes." Except for temporary defensive purposes, at no time
will more than 20% of the value of the Fund's net assets be invested in Taxable
Investments. If the Fund purchases Taxable Investments, it will value them using
the amortized cost method and comply with the provisions of Rule 2a-7 relating
to purchases of taxable instruments. Under normal market conditions, the Fund
anticipates that not more than 5% of the value of its total assets will be
invested in any one category of Taxable Investments. Taxable Investments are
more fully described in the Statement of Additional Information, to which
reference hereby is made.
The Fund may invest up to 10% of the value of its net assets in
securities as to which a liquid trading market does not exist, provided such
investments are consistent with the Fund's investment objective. Such securities
may include securities that are not readily marketable, such as certain
securities that are
PAGE 15
<PAGE>
subject to legal or contractual restrictions on resale and repurchase agreements
providing for settlement in more than seven days after notice. As to these
securities, the Fund is subject to a risk that should the Fund desire to sell
them when a ready buyer is not available at a price that the Fund deems
representative of their value, the value of the Fund's net assets could be
adversely affected. However, if a substantial market of qualified institutional
buyers develops pursuant to Rule 144A under the Securities Act of 1933, as
amended, for certain of these securities held by the Fund, the Fund intends to
treat such securities as liquid securities in accordance with procedures
approved by the Fund's Board of Trustees. Because it is not possible to predict
with assurance how the market for restricted securities pursuant to Rule 144A
will develop, the Fund's Board of Trustees has directed the Manager to monitor
carefully the Fund's investments in such securities with particular regard to
trading activity, availability of reliable price information and other relevant
information. To the extent that for a period of time qualified institutional
buyers cease purchasing such restricted securities pursuant to Rule 144A, the
Fund's investing in such securities may have the effect of increasing the level
of illiquidity in the Fund's portfolio during such period.
From time to time, the Fund may lend securities from its portfolio to
brokers, dealers and other financial institutions needing to borrow securities
to complete certain transactions. Such loans may not exceed 33 1/3% of the value
of the Fund's total assets. In connection with such loans, the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable letters
of credit issued by financial institutions. Such collateral will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. The Fund can increase its income through the investment
of such collateral. The Fund continues to be entitled to payments in amounts
equal to the interest or other distributions payable on the loaned security and
receives interest on the amount of the loan. Such loans will be terminable at
any time upon specified notice. The Fund might experience risk of loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the
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Fund. The Fund will limit the entities with which it will enter into securities
lending transactions to those whose securities are eligible for purchase by the
Fund.
CERTAIN FUNDAMENTAL POLICIES The Fund may (i) borrow money from banks (other
than the Manager or its affiliates), but only for temporary or emergency (not
leveraging) purposes, in an amount up to 15% of the value of the Fund's total
assets (including the amount borrowed) valued at the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of the Fund's total assets, the Fund will
not make any additional investments; (ii) invest up to 5% of its total assets in
the obligations of any single issuer, except that up to 25% of the value of the
Fund's total assets may be invested, and securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities may be purchased for
temporary defensive purposes, without regard to any such limitation; and (iii)
invest up to 25% of its total assets in the securities of issuers in any single
industry, provided that there shall be no such limitation on investments in
Municipal Obligations and, for temporary defensive purposes, obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities
(industrial development bonds, where the payment of principal and interest is
the ultimate responsibility of companies within the same industry, are grouped
together as an "industry"). This paragraph describes fundamental policies that
cannot be changed without approval by the holders of a majority (as defined in
the Investment Company Act of 1940) of the Fund's outstanding voting shares. See
"Investment Objective and Management Policies--Investment Restrictions" in the
Statement of Additional Information.
The Fund has adopted certain fundamental policies intended to limit the risk of
its investment portfolio. Fundamental policies cannot be changed without
approval by a majority of shareholders.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES The Fund may (i) pledge,
hypothecate, mortgage or otherwise encumber its assets, but only to secure
permitted borrowings and to the extent related to the deposit of assets in
escrow in connection with the purchase of securities on a when-issued or
delayed-delivery basis; and (ii) invest up to 10% of its net assets in
repurchase agreements providing for settlement in more than
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seven days after notice and in other illiquid securities (which securities could
include participation interests (including municipal lease/purchase agreements)
that are not subject to the demand feature described above and floating and
variable rate demand obligations as to which the Fund cannot exercise the
related demand feature described above and as to which there is no secondary
market). See "Investment Objective and Management Policies--Investment
Restrictions" in the Statement of Additional Information.
INVESTMENT CONSIDERATIONS Even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities are inversely affected by changes in interest rates and, therefore,
are subject to the risk of market price fluctuations. The value of fixed-income
securities also may be affected by changes in the credit rating or financial
condition of the issuing entities.
The Fund's investments are subject to the
risk of market price fluctuations.
New issues of Municipal Obligations usually are offered on a when-issued
basis, which means that delivery and payment for such Municipal Obligations
ordinarily take place within 45 days after the date of the commitment to
purchase. The payment obligation and the interest rate that will be received on
the Municipal Obligations are fixed at the time the Fund enters into the
commitment. The Fund will make commitments to purchase such Municipal
Obligations only with the intention of actually acquiring the securities, but
the Fund may sell these securities before the settlement date if it is deemed
advisable, although any gain realized on such sale would be taxable. The Fund
will not accrue income in respect of a when-issued security prior to its stated
delivery date. No additional when-issued commitments will be made if more than
20% of the value of the Fund's net assets would be so committed.
Municipal Obligations purchased on a when-issued basis and the securities
held in the Fund's portfolio are subject to changes in value (both generally
changing in the same way, i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's perception of the
creditworthiness of the issuer and changes, real or anticipated, in the level of
interest rates. Municipal Obligations purchased on a when-issued basis may
expose the Fund to risk because they may experience such fluctuations prior to
their actual delivery. Purchasing Municipal Obligations on a when-
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<PAGE>
issued basis can involve the additional risk that the yield available in the
market when the delivery takes place actually may be higher than that obtained
in the transaction itself. A segregated account of the Fund consisting of cash,
cash equivalents or U.S. Government securities or other high quality liquid debt
securities at least equal at all times to the amount of the when-issued
commitments will be established and maintained at the Fund's custodian bank.
Purchasing Municipal Obligations on a when-issued basis when the Fund is fully
or almost fully invested may result in greater potential fluctuation in the
value of the Fund's net assets and its net asset value per share.
Certain municipal lease/purchase obligations in which the Fund may invest
may contain "non-appropriation" clauses which provide that the municipality has
no obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Although "non-appropriation"
lease/purchase obligations are secured by the leased property, disposition of
the leased property in the event of foreclosure might prove difficult. In
evaluating the credit quality of a municipal lease/purchase obligation that is
unrated, the Manager will consider, on an ongoing basis, a number of factors
including the likelihood that the issuing municipality will discontinue
appropriating funding for the leased property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase the
cost of the Municipal Obligations available for purchase by the Fund and thus
reduce the available yield. Shareholders should consult their tax advisers
concerning the effect of these provisions on an investment in the Fund.
Proposals that may restrict or eliminate the income tax exemption for interest
on Municipal Obligations may be introduced in the future. If any such proposal
were enacted that would reduce the availability of Municipal Obligations for
investment by the Fund so as to adversely affect Fund shareholders, the Fund
would reevaluate its investment objective and policies and submit possible
changes in the Fund's structure to shareholders for their consideration. If
legislation were enacted that would treat a type of Municipal Obligation
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<PAGE>
as taxable, the Fund would treat such security as a permissible Taxable
Investment within the applicable limits set forth herein.
Investment decisions for the Fund are made independently from those of
other investment companies, investment advisory accounts, custodial accounts,
individual trust accounts and commingled funds that may be advised by the
Manager. However, if such other investment companies or managed accounts are
prepared to invest in, or desire to dispose of, Municipal Obligations or Taxable
Investments at the same time as the Fund, available investments or opportunities
for sales will be allocated equitably to each of them. In some cases, this
procedure may adversely affect the size of the position obtained for or disposed
of by the Fund or the price paid or received by the Fund.
Management of the Fund
MANAGER The Manager, located at Three First National Plaza, Chicago, Illinois
60670, is the Fund's investment adviser. The Manager, a wholly-owned subsidiary
of First Chicago Corporation, a registered bank holding company, is a commercial
bank offering a wide range of banking and investment services to customers
throughout the United States and around the world. As of March 31, 1994, it was
one of the largest commercial banks in the United States and the largest in the
mid-Western United States in terms of assets ($59.8 billion) and in terms of
deposits ($28.8 billion). As of March 31, 1994, the Manager provided investment
management services to portfolios containing approximately $15.5 billion in
assets. The Manager serves as investment adviser for the Fund pursuant to a
Management Agreement dated April 30, 1993. Prior thereto, the Manager provided
investment advisory services to the Fund pursuant to an Investment Advisory
Agreement (the "Prior Advisory Agreement"). Under the Management Agreement, the
Manager, subject to the supervision of the Fund's Board of Trustees and in
conformity with Massachusetts law and the stated policies of the Fund, manages
the investment of the Fund's assets. The Manager is responsible for making
investment decisions for the Fund, placing purchase and sale orders and
providing research, statistical analysis and continuous
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<PAGE>
supervision of the investment portfolio. The Manager provides these services
through its Investment Management Department. The investment advisory services
of the Manager are not exclusive under the terms of the Management Agreement.
The Manager is free to, and does, render investment advisory services to others,
including other investment companies as well as commingled trust funds and a
broad spectrum of individual trust and investment management portfolios, which
have varying investment objectives. The Manager has advised the Fund that in
making its investment decisions the Manager does not obtain or use material
inside information in the possession of any other division or department of the
Manager or in the possession of any affiliate of the Manager.
The Manager and its affiliates underwrite, deal, trade and invest for
their own accounts in Municipal Obligations and may have deposit, loan and
commercial banking relationships with the issuers of securities purchased by the
Fund. The Manager and its affiliates sell and purchase Municipal Obligations to
and from other investment companies. The Manager will not invest any Fund assets
in any Municipal Obligations purchased directly or indirectly from itself or any
affiliate, although under certain circumstances the Fund may purchase such
securities from other members of an underwriting syndicate in which the Manager
or an affiliate is a member. This restriction may limit the amount or type of
Municipal Obligations available to be purchased by the Fund. In addition, the
Manager and its affiliates from time to time issue letters of credit securing
obligations of certain corporate guarantors of industrial revenue bonds issued
by various state municipalities. The Manager will not invest any Fund assets in
any such obligations and this restriction also may limit the amount or type of
such obligations available for purchase by the Fund.
The Manager and its affiliates presently intend to continue to charge and
collect customary account and account transaction fees with respect to accounts
through which or for which Fund shares are purchased or redeemed. This will
result in the receipt by the Manager and its affiliates of customer account fees
in addition to advisory and Service Agent fees from the Fund with respect to
assets in certain accounts. See "Service Plan."
The investment adviser, The First National Bank of Chicago, is one of the
largest commercial banks in the United States and the largest in the mid-Western
United States and manages $15.5 billion of investment assets.
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<PAGE>
The Manager has engaged The Dreyfus Corporation ("Dreyfus"), located at
200 Park Avenue, New York, New York 10166, to assist it in providing certain
administrative services for the Fund pursuant to a Master Administration
Agreement between the Manager and Dreyfus effective April 30, 1993. Prior
thereto, Dreyfus provided administrative services to the Fund pursuant to an
Administration Agreement with the Fund (the "Prior Administration Agreement").
Dreyfus was formed in 1947 and, as of March 31, 1994, managed or administered
approximately $74 billion in assets for more than 1.9 million investor accounts
nationwide.
The Dreyfus Corporation, which manages or administers approximately $74 billion
in mutual fund assets, will assist the Manager in providing certain
administrative services for the Fund.
Under the terms of the Prior Advisory Agreement and Prior Administration
Agreement, which were terminated on April 30, 1993, the Fund agreed to pay the
Manager and Dreyfus monthly fees at the annual rate of .40 and .20,
respectively, of 1% of the value of the Fund's average daily net assets. Under
the terms of the Management Agreement, the Fund has agreed to pay the Manager a
monthly management fee at the annual rate of .55 of 1% of the value of the
Fund's average daily net assets, which is .05 of 1% less than the combined fees
payable by the Fund to the Manager and Dreyfus under the Prior Advisory
Agreement and Prior Administration Agreement. Pursuant to its agreement with
Dreyfus, the Manager, from its own funds, will pay Dreyfus for Dreyfus'
services. For the fiscal year ended December 31, 1993, the Fund paid the Manager
pursuant to the Management Agreement and Prior Advisory Agreement a monthly fee
at the effective aggregate annual rate of .41 of 1% of the value of the Fund's
average daily net assets pursuant to an undertaking in effect. For the period
January 1, 1993 to April 29, 1993, the Fund paid Dreyfus pursuant to the Prior
Administration Agreement a monthly administration fee at the annual rate of .20
of 1% of the value of the Fund's average daily net assets.
GLASS-STEAGALL ACT The Glass-Steagall Act and other applicable laws prohibit
Federally chartered or supervised banks from engaging in certain aspects of the
business of issuing, underwriting, selling and/or distributing securities,
although banks such as the Manager are permitted to purchase and sell securities
upon the order and for the account of their customers. The Manager has advised
the Fund of its belief that it may
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perform the services for the Fund contemplated by the Management Agreement and
this Prospectus without violating the Glass-Steagall Act or other applicable
banking laws or regulations. The Manager has pointed out, however, that there
are no cases deciding whether a bank such as the Manager may perform services
comparable to those performed by the Manager and that future changes in either
Federal or state statutes and regulations relating to permissible activities of
banks and their subsidiaries and affiliates, as well as future judicial or
administrative decisions or interpretations of present and future statutes and
regulations, could prevent the Manager from continuing to perform such services
for the Fund. If the Manager were to be prevented from providing such services
to the Fund, the Fund's Board of Trustees would review the Fund's relationship
with the Manager and consider taking all actions necessary in the circumstances.
For a discussion of the Glass-Steagall Act in connection with the Fund's
Service Plan, see "Service Plan."
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
The Shareholder Services Group, Inc., a subsidiary of First Data Corporation,
P.O. Box 9671, Providence, Rhode Island 02940-9671, is the Fund's Transfer and
Dividend Disbursing Agent (the "Transfer Agent"). The Bank of New York, 110
Washington Street, New York, New York 10286, is the Fund's Custodian.
The Shareholder Services Group, Inc. is the Fund's transfer agent.
EXPENSES All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The expenses
borne by the Fund include the following: taxes, interest, brokerage fees and
commissions, if any, fees of Trustees who are not officers, directors, employees
or holders, directly or indirectly, of 5% or more of the outstanding voting
securities of the Manager or Dreyfus, Securities and Exchange Commission fees,
state Blue Sky qualification fees, advisory fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses, costs of
independent pricing services, costs of maintaining the Fund's existence, costs
attributable to investor services (including,
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without limitation, telephone and personnel expenses), costs of shareholders'
reports and meetings and any extraordinary expenses.
In addition, the Fund bears certain costs of distributing Fund shares in
accordance with a plan (the "Service Plan") adopted pursuant to Rule 12b-1 under
the Investment Company Act of 1940. See "Annual Fund Operating Expenses" and
"Service Plan."
The imposition of the management fee, as well as other operating
expenses, including the fees paid under the Fund's Service Plan, will have the
effect of reducing the yield to investors.
How to Buy Fund Shares
INFORMATION APPLICABLE TO ALL PURCHASERS The Fund's distributor is Dreyfus
Service Corporation, a wholly-owned subsidiary of Dreyfus, located at 200 Park
Avenue, New York, New York 10166. The shares it distributes are not deposits or
obligations of The Dreyfus Security Savings Bank, F.S.B. or the Manager and
therefore are not insured by the FDIC.
The Fund offers a number of convenient ways to purchase shares.
Fund shares may be purchased by all clients of the Manager and its
affiliates, including qualified custody, agency and trust accounts, through
their accounts with the Manager and its affiliates, or by clients of certain
Service Agents through their accounts with the Service Agent. Fund shares also
may be purchased directly through the Distributor. Share certificates will not
be issued. It is not recommended that the Fund be used as a vehicle for Keogh,
IRA or other qualified retirement plans. The Fund reserves the right to reject
any purchase order.
The minimum initial investment is $1,000. All subsequent investments must
be at least $100. The initial investment must be accompanied by the Fund's
Account Application. The Manager and Service Agents may impose initial or
subsequent investment minimums which are higher or lower than those specified
above and may impose different minimums for different types of accounts or
purchase arrangements.
You can open an account with as little as $1,000. Subsequent investments can be
as little as $100.
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form and Federal Funds (monies of
member banks within the Federal Reserve System which are held on deposit at a
Federal
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Reserve Bank) are received by the Transfer Agent. If an investor does not remit
Federal Funds, his payment must be converted into Federal Funds. This usually
occurs within one business day of receipt of a bank wire and within two business
days of receipt of a check drawn on a member bank of the Federal Reserve System.
Checks drawn on banks which are not members of the Federal Reserve System may
take considerably longer to convert into Federal Funds. Prior to receipt of
Federal Funds, the investor's money will not be invested.
The Fund's net asset value per share is determined as of 12:00 Noon, New
York time, on each day the New York Stock Exchange is open for business, except
on Martin Luther King, Jr. Day, Columbus Day and Veterans Day. Net asset value
per share is computed by dividing the value of the Fund's net assets (i.e., the
value of its assets less liabilities) by the total number of shares outstanding.
See "Determination of Net Asset Value" in the Fund's Statement of Additional
Information.
Federal regulations require that an investor provide a certified Taxpayer
Identification Number ("TIN") upon opening or reopening an account. See
"Dividends, Distributions and Taxes" and the Fund's Account Application for
further information concerning this requirement. Failure to furnish a certified
TIN to the Fund could subject an investor to a $50 penalty imposed by the
Internal Revenue Service (the "IRS").
PURCHASING SHARES THROUGH ACCOUNTS WITH THE MANAGER OR A SERVICE AGENT Investors
who desire to purchase shares through their accounts at the Manager or its
affiliates or a Service Agent should contact such entity directly for
appropriate instructions, as well as for information about conditions pertaining
to the account and any related fees. Service Agents and the Manager may charge
clients direct fees for effecting transactions in Fund shares, as well as fees
for other services provided to clients in connection with accounts through which
Fund shares are purchased. These fees, if any, would be in addition to fees
received by a Service Agent under the Service Plan or management fees received
by the Manager under the Management Agreement. Each Service Agent has agreed to
transmit to its clients a schedule of such fees. In addition, Service Agents and
the Manager may impose minimum account and other conditions, including
conditions
Contact your investment representative or Service Agent to learn how to
purchase shares.
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which might affect the availability of certain shareholder privileges described
in this Prospectus. Certain investor accounts with the Manager and its
affiliates and certain Service Agents may be eligible for an automatic
investment privilege, commonly called a "sweep," under which amounts in excess
of a certain minimum held in these accounts will be invested automatically in
Fund shares at predetermined intervals. Each investor desiring to use this
privilege should consult the Manager or his Service Agent for details. It is the
responsibility of the Manager and Service Agents to transmit client orders on a
timely basis.
Copies of the Fund's Prospectus and Statement of Additional Information
may be obtained from the Distributor, the Manager, certain affiliates of the
Manager or certain Service Agents, as well as from the Fund.
PURCHASING SHARES THROUGH THE DISTRIBUTOR Fund shares also may be purchased
directly through the Distributor by check or wire, or through the TeleTransfer
Privilege described below. The initial investment must be accompanied by the
Fund's Account Application which can be obtained from the Distributor and
certain Service Agents. Checks should be made payable to "The First Prairie
Family of Funds." Payments to open new accounts which are mailed should be sent
to The First Prairie Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with the investor's Account Application. For subsequent
investments, the investor's Fund account number should appear on the check and
an investment slip should be enclosed and sent to The First Prairie Family of
Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor
subsequent investments should be made by third party check. A charge will be
imposed if any check used for investment in an investor's account does not
clear. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks.
Wire payments may be made if the investor's bank account is in a
commercial bank that is a member of the Federal Reserve System or any other bank
having a correspondent bank in New York City or Chicago. Immediately available
funds may be transmitted by wire to The Bank of New York, DDA #8900052074/First
Prairie Municipal Money Market Fund, for purchase of Fund shares in the
investor's name. The
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wire must include the investor's account number (for new accounts, the
investor's TIN should be included instead), account registration and dealer
number, if applicable. If the investor's initial purchase of Fund shares is by
wire, the investor should call 1-800-645-6561 after completing his wire payment
to obtain a Fund account number. An investor must include his Fund account
number on the Fund's Account Application and promptly mail the Account
Application to the Fund, as no redemptions will be permitted until the Account
Application is received. Further information about remitting funds in this
manner is provided in "Payment and Mailing Instructions" on the Fund's Account
Application.
Subsequent investments also may be made by electronic transfer of funds
from an account maintained in a bank or other domestic financial institution
that is an Automated Clearing House member. The investor must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit the
investor's Fund account. The instruction must specify the investor's Fund
account registration and the investor's Fund account number preceded by the
digits "1111."
TELETRANSFER PRIVILEGE An investor may purchase Fund shares (minimum $500,
maximum $150,000 per day) by telephone if he has checked the appropriate box and
supplied the necessary information on the Fund's Account Application or has
filed a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
the investor's Fund account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be so
designated. The Fund may modify or terminate this Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
You can purchase additional shares by telephone after you supply the necessary
information on your Account Application.
Investors who have selected the TeleTransfer Privilege may request
TeleTransfer purchase of Fund shares by calling
1-800-227-0072 or, if calling from overseas, 1-401-455-3309.
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Shareholder Services
The services and privileges described under this heading may not be available to
clients of certain Service Agents and some Service Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. Each investor should consult his Service Agent in this regard.
EXCHANGE PRIVILEGE The Exchange Privilege enables an investor to purchase, in
exchange for shares of the Fund, shares of certain other funds advised by the
Manager, or shares of certain funds advised by Dreyfus, to the extent such
shares are offered for sale in the investor's state of residence. These funds
have different investment objectives that may be of interest to investors. The
Exchange Privilege may be expanded to permit exchanges between the Fund and
other funds that, in the future, may be advised by the Manager. Investors will
be notified of any such change. If an investor desires to use this Privilege, he
should consult his Service Agent or the Distributor to determine if it is
available and whether any conditions are imposed on its use.
You can exchange your shares for shares of other eligible First Prairie funds.
To use this Privilege, an investor or his Service Agent acting on his
behalf must give exchange instructions to the Transfer Agent in writing, by wire
or by telephone. If an investor previously has established the Telephone
Exchange Privilege, he may telephone exchange instructions by calling
1-800-227-0072 or, if calling from overseas, 1-401-455-3309. See "How to Redeem
Fund Shares--Procedures." Before any exchange, the investor must obtain and
should review a copy of the current prospectus of the fund into which the
exchange is being made. Prospectuses may be obtained from the Distributor, the
Manager, certain affiliates of the Manager or certain Service Agents. The shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have a
value of at least the minimum initial investment required for the fund into
which the exchange is being made. Telephone exchanges may be made only if the
appropriate "YES" box has been checked on the Account Application, or a separate
signed Shareholder Services Form is on file with the Transfer Agent.
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Upon an exchange into a new account, the following shareholder services
and privileges, as applicable and where available, will be automatically carried
over to the fund into which the exchange is made: Exchange Privilege, Check
Redemption Privilege, Wire Redemption Privilege, Telephone Redemption Privilege,
TeleTransfer Privilege and the dividend/ capital gain distribution option
(except for Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value; however,
a sales load may be charged with respect to exchanges into funds sold with a
sales load. If an investor is exchanging into a fund that charges a sales load,
the investor may qualify for share prices which do not include the sales load or
which reflect a reduced sales load, if the shares of the fund from which the
investor is exchanging were: (a) purchased with a sales load, (b) acquired by a
previous exchange from shares purchased with a sales load, or (c) acquired
through reinvestment of dividends or distributions paid with respect to the
foregoing categories of shares. To qualify, at the time of an exchange, the
investor must notify the Transfer Agent or the investor's Service Agent must
notify the Distributor. Any such qualification is subject to confirmation of the
investor's holdings through a check of appropriate records. See "Shareholder
Services" in the Statement of Additional Information. No fees currently are
charged shareholders directly in connection with exchanges, although the Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal fee in accordance with rules promulgated by the
Securities and Exchange Commission. The Fund reserves the right to reject any
exchange request in whole or in part. The Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated for
Federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.
AUTO - EXCHANGE PRIVILEGE The Auto-Exchange Privilege enables an investor to
invest regularly (on a semi-monthly, monthly, quarterly or annual basis), in
exchange for shares of the Fund, in shares of certain other funds in the First
Prairie Family of Funds or certain other funds advised by Dreyfus of which he is
currently an investor. The amount an investor designates, which can be expressed
either in terms of a specific
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<PAGE>
dollar or share amount ($100 minimum), will be exchanged automatically on the
first and/or fifteenth of the month according to the exchange schedule that the
investor has selected. Shares will be exchanged at the then-current net asset
value; however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. See "Shareholder Services" in the Statement of
Additional Information. The right to exercise this Privilege may be modified or
cancelled by the Fund or the Transfer Agent. The investor or the investor's
Service Agent may modify or cancel this Privilege at any time by writing to The
First Prairie Family of Funds, P.O. Box 9671, Providence, Rhode Island
02940-9671. The Fund may charge a service fee for the use of this Privilege. No
such fee currently is contemplated. The exchange of shares of one fund for
shares of another is treated for Federal income tax purposes as a sale of the
shares given in exchange by the shareholder and, therefore, an exchanging
shareholder may realize a taxable gain or loss. For more information concerning
this Privilege and the funds eligible to participate in this Privilege, or to
obtain an Auto-Exchange Authorization Form, please call toll free in Illinois
1-800-621-6592, or, outside Illinois 1-800-537-4938 if Fund shares were
purchased through First Chicago Investment Services, Inc. or 1-800-645-6561 if
Fund shares were purchased through the Distributor.
You can exchange Fund shares automatically at regular intervals which you
select.
AUTOMATIC ASSET BUILDER Automatic Asset Builder permits
an investor to purchase Fund shares (minimum of $100 and
maximum of $150,000 per transaction) at regular
intervals selected by the investor. Fund shares are purchased by transfer-
ring funds from the bank account designated by an investor. At the investor's
option, the bank account designated by the investor will be debited in the
specified amount, and Fund shares will be purchased, once a month, on either the
first or fifteenth day, or twice a month, on both days. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish an Automatic Asset Builder
account, the investor must file an authorization form with the Transfer Agent.
The necessary authorization form may be obtained from the Distributor, the
Manager, certain affiliates of the Manager or certain Service Agents. An
investor may cancel his participation in this Privilege or change the amount of
purchase at any time by mailing written notification to The First Prairie Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671, and the
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<PAGE>
notification will be effective three business days following receipt. The Fund
may modify or terminate this Privilege at any time or charge a service fee. No
such fee currently is contemplated.
You can purchase shares automatically at regular
intervals which you select.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE Government Direct Deposit Privilege enables
an investor to purchase Fund shares (minimum of $100 and maximum of $50,000 per
transaction) by having Federal salary, Social Security or certain veterans',
military or other payments from the Federal government automatically deposited
into the investor's Fund account. An investor may deposit as much of such
payments as he elects. To enroll in Government Direct Deposit, the investor must
file with the Transfer Agent a completed Direct Deposit Sign-Up form for each
type of payment that the investor desires to include in this Privilege. The
appropriate form may be obtained from the Distributor, the Manager, certain
affiliates of the Manager or certain Service Agents. Death or legal incapacity
will terminate an investor's participation in this Privilege. An investor may
elect at any time to terminate his participation by notifying in writing the
appropriate Federal agency. Further, the Fund may terminate an investor's
participation upon 30 days' notice to the investor.
Many Federal payments are eligible for full or partial direct deposit into your
account to purchase shares.
DIVIDEND OPTIONS Dividend Sweep enables an investor to
invest automatically dividends or dividends and capital
gain distributions, if any, paid by the Fund in shares of another fund
in the First Prairie Family of Funds or certain other funds
advised or administered by Dreyfus of which the investor is a
shareholder. Shares of the other fund will be purchased at the then-current net
asset value; however, a sales load may be charged with respect to investments in
shares of a fund sold with a sales load. If an investor is investing in a fund
that charges a sales load, the investor may qualify for share prices which do
not include the sales load or which reflect a reduced sales load. If an investor
is investing in a fund that charges a contingent deferred sales charge, the
shares purchased will be subject to the contingent deferred sales charge, if
any, applicable to the purchased shares. See "Shareholder Services" in the
Statement of Additional Information. Dividend ACH permits a shareholder to
transfer electronically on the payment date their dividends or dividends and
capital gain distributions, if any, from the Fund to a designated bank account.
Only an account
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maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. Banks may charge a fee for this service.
For more information concerning these privileges,
or to request a Dividend Options Form, investors should call
toll free in Illinois 1-800-621-6592; or, outside Illinois, 1-800-537-4938 if
Fund shares were purchased through First Chicago Investment Services, Inc., or
1-800-645-6561 if Fund shares were purchased through the Distributor. To cancel
these privileges, the investor or the investor's Service Agent must mail written
notification to The First Prairie Family of Funds, P.O. Box 9671, Providence,
Rhode Island 02940-9671. Enrollment in or cancellation of these privileges is
effective three business days following receipt by the Transfer Agent. These
privileges are available only for existing accounts and may not be used to open
new accounts. Minimum subsequent investments do not apply for Dividend Sweep.
The Fund may modify or terminate these privileges at any time or charge a
service fee. No such fee currently is contemplated.
You can "sweep" your dividends and capital
gain distributions into certain other First Prairie funds.
AUTOMATIC WITHDRAWAL PLAN The Automatic Withdrawal Plan permits an investor to
request withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if the investor has a $5,000 minimum account. An
application for the Automatic Withdrawal Plan can be obtained from the
Distributor, the Manager, certain affiliates of the Manager or certain Service
Agents. The Automatic Withdrawal Plan may be ended at any time by the investor,
the Fund or the Transfer Agent.
You can withdraw a specified dollar amount from your account every month or
quarter.
How to Redeem Fund Shares
GENERAL An investor may request redemption of his shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When a
request is received in proper form, the Fund will redeem the shares at the next
determined net asset value.
You can redeem Fund shares at any time.
The Fund imposes no charges when shares are redeemed. Service Agents may
charge a nominal fee for effecting redemptions of Fund shares. The value of the
shares redeemed may be more or less than their original cost, depend-
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ing upon the Fund's then-current net asset value. As described in "Determination
of Net Asset Value" in the Statement of Additional Information, the Fund seeks
to maintain a net asset value of $1.00 per share for purchases and redemptions.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in proper
form, except as provided by the rules of the Securities and Exchange Commission.
HOWEVER, IF AN INVESTOR HAS PURCHASED FUND SHARES BY CHECK, BY TELETRANSFER
PRIVILEGE OR THROUGH AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMITS A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION WILL BE EFFECTIVE AND
THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO THE INVESTOR PROMPTLY UPON BANK
CLEARANCE OF THE INVESTOR'S PURCHASE CHECK, TELETRANSFER PURCHASE OR AUTOMATIC
ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN
ADDITION, THE FUND WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION
PRIVILEGE, AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE TELETRANSFER PRIVILEGE, FOR A PERIOD OF EIGHT BUSINESS DAYS
AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE TELETRANSFER
PURCHASE OR THE AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF THE INVESTOR'S SHARES WERE
PURCHASED BY WIRE PAYMENT, OR IF THE INVESTOR OTHERWISE HAS A SUFFICIENT
COLLECTED BALANCE IN HIS ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE
TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE
PAYABLE, AND THE INVESTOR WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer Agent
has received the investor's Account Application.
The Fund reserves the right to redeem an investor's account at the Fund's
option upon not less than 30 days' written notice if the account's net asset
value is $500 or less and remains so during the notice period.
PROCEDURES An investor who has purchased shares through his account at the
Manager or a Service Agent must redeem shares by following instructions
pertaining to such account. If an investor has given his Service Agent authority
to instruct the Transfer Agent to redeem shares and to credit the proceeds of
such redemptions to a designated account at the Service Agent,
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the investor may redeem shares only in this manner and in accordance with a
written redemption request pursuant to the regular redemption procedure
described below. Investors who wish to use the other redemption methods
described below, must arrange with their Service Agent for delivery of the
required application(s) to the Transfer Agent. It is the responsibility of the
Manager or the Service Agent, as the case may be, to transmit the redemption
order and credit the investor's account with the redemption proceeds on a timely
basis. Other investors may redeem shares by using the regular redemption
procedure through the Transfer Agent, using the Check Redemption Privilege, the
Wire Redemption Privilege, the Telephone Redemption Privilege, or the
TeleTransfer Privilege, as described below.
An investor may redeem or exchange shares by telephone if the investor
has checked the appropriate box on the Fund's Account Application or has filed a
Shareholder Services Form with the Transfer Agent. By selecting a telephone
redemption or exchange privilege, an investor authorizes the Transfer Agent to
act on telephone instructions from any person representing himself or herself to
be the investor, or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. The Fund will require
the Transfer Agent to employ reasonable procedures, such as requiring a form of
personal identification, to confirm that instructions are genuine and, if it
does not follow such procedures, the Fund or the Transfer Agent may be liable
for any losses due to unauthorized or fraudulent instructions. Neither the Fund
nor the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, investors may
experience difficulty in contacting the Transfer Agent by telephone to request a
redemption or exchange of Fund shares. In such cases, investors should consider
using the other redemption procedures described herein. Use of these other
redemption procedures may result in the investor's redemption request being
processed at a later time than it would have been if telephone redemption had
been used.
The Fund offers a number of convenient ways to access your investment.
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REGULAR REDEMPTION Under the regular redemption procedure, an investor may
redeem shares by written request mailed to The First Prairie Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671. Redemption requests must be
signed by the individual shareholder, including each owner of a joint account,
and each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. For more
information with respect to signature-guarantees, please call the telephone
number shown on the front cover.
Redemption proceeds of at least $1,000 will be wired to any member bank
of the Federal Reserve System in accordance with a written signature-guaranteed
request.
Shares may be redeemed by written request.
CHECK REDEMPTION PRIVILEGE An investor may request on the Account Application,
Shareholder Services Form or by later written request to the Fund that the Fund
provide Redemption Checks drawn on the Fund's account. Redemption Checks may be
made payable to the order of any person in the amount of $500 or more.
Redemption Checks should not be used to close an account. Redemption Checks are
free, but the Transfer Agent will impose a fee for stopping payment of a
Redemption Check at the investor's request or if the Transfer Agent cannot honor
the Redemption Check due to insufficient funds or other valid reason. An
investor should date his Redemption Checks with the current date when the
investor writes them. Investors should not postdate Redemption Checks. If an
investor does, the Transfer Agent will honor, upon presentment, even if
presented before the date of the check, all postdated Redemption Checks which
are dated within six months of presentment for payment, if they are otherwise in
good order. This Privilege may be modified or terminated at any time by the Fund
or the Transfer Agent upon notice to shareholders.
You can write checks of $500 or more using a special checkbook provided by the
Fund, if you request it on your Account Application.
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WIRE REDEMPTION PRIVILEGE An investor may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to his account at a bank which is
a member of the Federal Reserve System, or a correspondent bank if the
investor's bank is not a member. To establish the Wire Redemption Privilege, an
investor must check the appropriate box and supply the necessary information on
the Fund's Account Application or file a Shareholder Services Form with the
Transfer Agent. An investor may direct that redemption proceeds be paid by check
(maximum $150,000 per day) made out to the owners of record and mailed to the
investor's address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts may
have redemption proceeds of only up to $250,000 wired within any 30-day period.
An investor may telephone redemption requests by calling 1-800-227-0072 or, if
calling from overseas, 1-401-455-3309. The Fund reserves the right to refuse any
redemption request, including requests made shortly after a change of address,
and may limit the amount involved or the number of such requests. This Privilege
may be modified or terminated at any time by the Transfer Agent or the Fund. The
Fund's Statement of Additional Information sets forth instructions for
transmitting redemption requests by wire.
You can redeem shares by wire if you check the appropriate box on your Account
Application.
TELEPHONE REDEMPTION PRIVILEGE An investor may redeem Fund shares (maximum
$150,000 per day) by telephone if he has checked the appropriate box on the
Fund's Account Application or has filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to the
investor's address. An investor may telephone redemption instructions by calling
1-800-227-0072 or, if calling from overseas, 1-401-455-3309. The Fund reserves
the right to refuse any request made by telephone, including requests made
shortly after a change of address, and may limit the amount involved or the
number of telephone redemption requests. This Privilege may be modified or
terminated at any time by the Transfer Agent or the Fund.
You can redeem shares by telephone if you have checked the appropriate box on
your Account Application.
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TELETRANSFER PRIVILEGE An investor may redeem Fund shares (maximum $150,000 per
day) by telephone if he has checked the appropriate box and supplied the
necessary information on the Fund's Account Application or has filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the investor's Fund account and the bank account designated
in one of these documents. Only such an account maintained in a domestic
financial institution which is an Automated Clearning House member may be so
designated. Redemption proceeds will be on deposit in the investor's account at
an Automated Clearning House member bank ordinarily two days after receipt of
the redemption request or, at the investor's request, paid by check (maximum
$150,000 per day) and mailed to his address. Holders of jointly registered Fund
or bank accounts may redeem through the TeleTransfer Privilege for transfer to
their bank account only up to $250,000 within any 30-day period. The Fund
reserves the right to refuse any request made by telephone, including requests
made shortly after a change of address, and may limit the amount involved or the
number of such requests. The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No such fee currently
is contemplated.
Call 1-800-227-0072 for TeleTransfer transactions.
Investors who have selected the TeleTransfer Privilege may request a
TeleTransfer redemption of Fund shares by telephoning 1-800-227-0072 or, if
calling from overseas, 1-401-455-3309.
Service Plan
Under the Service Plan, adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940, the Fund bears the costs and expenses in connection with
advertising and marketing its shares and pays the fees of Service Agents for
Servicing, as defined below, at a rate not exceeding .25 of 1% per annum of the
value of the Fund's average daily net assets. Service Agents receive fees based
upon the average daily value of the Fund's shares owned by shareholders for
which the Service Agent is the dealer or holder of record, or for which the
Service Agent has a Servicing relationship. The Service Plan provides that the
Manager, Dreyfus and the Distributor may act as Service Agents
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and receive fees under the Service Plan. From time to time, the Manager, Dreyfus
and/or the Distributor may defer or waive receipt of fees under the Service Plan
while retaining the ability to be paid by the Fund under the Service Plan
thereafter. The fees payable to the Manager, Dreyfus and/or the Distributor for
Servicing are payable without regard to actual expenses incurred.
The Fund has adopted a plan so that it can pay for advertising and marketing
and to compensate others for providing services to you.
The Fund also bears the costs of preparing and printing prospectuses and
statements of additional information used for regulatory purposes and for
distribution to existing shareholders. Under the Service Plan, the Fund bears
(a) the costs of preparing, printing and distributing prospectuses and
statements of additional information used for other purposes and (b) the costs
associated with implementing and operating the Service Plan (such as costs of
printing and mailing service agreements), the aggregate of such amounts not to
exceed in any fiscal year of the Fund the greater of $100,000 or .005 of 1% of
the value of the Fund's average daily net assets for such fiscal year. Each item
for which a payment may be made under the Service Plan may constitute an expense
of distributing Fund shares as the Securities and Exchange Commission construes
such term under Rule 12b-1.
Expenses under the Service Plan may be carried forward from one year to
another to the extent they remain unpaid. All or part of any such amount will be
paid at such time, if ever, as the Board of Trustees determines to pay it. The
Fund will not be charged for interest, carrying or other finance charges on any
unreimbursed distribution or other expense incurred and not paid in a prior
year.
Servicing may include, among other things, one or more of the following:
answering client inquiries regarding the Fund; assisting clients in changing
dividend options, account designations and addresses; performing sub-accounting;
establishing and maintaining shareholder accounts and records; processing
purchase and redemption transactions; investing client cash account balances
automatically in Fund shares; providing periodic statements showing a client's
account balance and integrating such statements with those of other transactions
and balances in the client's other accounts serviced by the Service Agent;
arranging for bank wires; and such other services as the Fund may request, to
the extent the Service Agent is permitted by applicable statute, rule or
regulation.
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The Glass-Steagall Act and other applicable laws prohibit Federally
chartered or supervised banks from engaging in certain aspects of the business
of issuing, underwriting, selling and/or distributing securities. Accordingly,
banks will be engaged to act as Service Agents only to perform administrative
and shareholder servicing functions. While the matter is not free from doubt,
the Fund's Board of Trustees believes that such laws should not preclude a bank
from acting as a Service Agent. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
statutes or regulations relating to the permissible activities of banks or their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its Servicing activities. If a bank were prohibited from so acting,
its shareholder clients would be permitted to remain Fund shareholders and
alternative means for continuing the Servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and
shareholders serviced by such bank might no longer be able to avail themselves
of any automatic investment or other services then being provided by such bank.
The Fund does not expect that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
Dividends, Distributions
and Taxes
The Fund ordinarily declares dividends from net investment income on each day
the New York Stock Exchange is open for business, except on Martin Luther King,
Jr. Day, Columbus Day and Veterans Day. Dividends usually are paid on the last
calendar day of each month, and are automatically reinvested in additional Fund
shares unless the investor elects payment in cash, or the investor's customer
arrangement with the Manager or a Service Agent provides for payment in cash.
Fund shares begin earning income dividends on the day the purchase order is
effective. The Fund's earnings for Saturdays, Sundays and holdays are declared
as dividends on the preceding business day. If an investor redeems all shares in
his account at any time during the month, all dividends to which the investor is
The Fund declares dividends from net investment income on each business day.
Dividends are usually paid on the last day of each month.
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entitled are paid along with the proceeds of the redemption. Distributions from
net realized securities gains, if any, generally are declared and paid once a
year, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the Investment Company Act of 1940. The Fund
will not make distributions from net realized securities gains unless capital
loss carryovers, if any, have been utilized or have expired. Investors may
choose whether to receive distributions in cash or to reinvest in additional
Fund shares at net asset value. All expenses are accrued daily and deducted
before declaration of dividends to investors.
Except for dividends from Taxable Investments, the Fund anticipates that
substantially all dividends paid by the Fund will not be subject to Federal
income tax. Dividends derived from Taxable Investments, together with
distributions from any net realized short-term securities gains and all or a
portion of gains realized from the sale or other disposition of certain market
discount bonds, are taxable as ordinary income whether or not reinvested. No
dividend paid by the Fund will qualify for the dividends received deduction
allowable to certain U.S. corporations. Distributions from net realized long-
term securities gains of the Fund generally are taxable as long-term capital
gains for Federal income tax purposes, if you are a citizen or resident of the
United States. The Code provides that the net capital gain of an individual
generally will not be subject to Federal income tax at a rate in excess of 28%.
Under the Code, interest on indebtedness incurred or continued to purchase or
carry Fund shares which is deemed to relate to exempt-interest dividends is not
deductible. Dividends and distributions may be subject to state and local taxes.
Substantially all dividends derived from Municipal Obligations are not subject
to Federal income tax. However, certain types of income dividends may not be tax
exempt.
Although all or a substantial portion of the dividends paid by the Fund
may be excluded by shareholders of the Fund from their gross income for Federal
income tax purposes, the Fund may purchase specified private activity bonds, the
interest from which may be (i) a preference item for purposes of the alternative
minimum tax, (ii) a component of the "adjusted current earnings" preference item
for purposes of the corporate alternative minimum tax as well as a component in
computing the corporate environmental tax or (iii) a factor in determining the
extent to which a shareholder's Social Security benefits are taxable. If the
Fund purchases such securities, the portion of
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the Fund's dividends related thereto will not necessarily be tax exempt to an
investor who is subject to the alternative minimum tax and/or tax on Social
Security benefits and may cause an investor to be subject to such taxes.
Taxable dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a portion
of gains realized from the sale or other dispositions of certain market discount
bonds, paid by the Fund to a foreign investor, generally are subject to U.S.
nonresident withholding taxes at the rate of 30%, unless the foreign investor
claims the benefit of a lower rate specified in a tax treaty. Distributions from
net realized long-term securities gains paid by the Fund to a foreign investor
generally will not be subject to U.S. nonresident withholding tax. However, such
distributions may be subject to backup withholding, as described below, unless
the foreign investor certifies his non-U.S. residency status.
Notice as to the tax status of an investor's dividends and distributions
will be mailed to such investor annually. Each investor also will receive
periodic summaries of his account which will include information as to dividends
and distributions from securities gains, if any, paid during the year. These
statements set forth the dollar amount of income exempt from Federal tax and the
dollar amount, if any, subject to Federal tax. These dollar amounts will vary
depending on the size and length of time of the investor's investment in the
Fund. If the Fund pays dividends derived from taxable income, it intends to
designate as taxable the same percentage of the day's dividend as the actual
taxable income earned on that day bears to total income earned on that day.
Thus, the percentage of the dividend designated as taxable, if any, may vary
from day to day.
Notice as to the tax status of your dividends and distributions will be mailed
to you each year. You'll also receive regular summaries of your account.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends and
distributions from net realized securities gains of the Fund paid to a
shareholder if such shareholder fails to certify either that the TIN furnished
in connection with opening an account is correct, or that such shareholder has
not received notice from the IRS of being subject to backup withholding as a
result of a failure to properly report taxable dividend or interest income on a
Federal income tax return. Furthermore, the IRS may notify the Fund to institute
backup withholding if the IRS determines a
If you have not furnished us with a correct Taxpayer Identification Number, you
may be subject to tax withholding of 31% of all
taxable dividends and distributions.
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shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the record
owner of the account, and may be claimed as a credit on the record owner's
Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended December 31, 1993 as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such qualification is in
the best interests of its shareholders. Such qualification relieves the Fund of
any liability for Federal income tax to the extent its earnings are distributed
in accordance with applicable provisions of the Code. The Fund is subject to a
non-deductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable investment income and capital gains.
Consult your tax adviser regarding specific questions about Federal, state or
local taxes.
Each investor should consult his tax adviser regarding specific questions
as to Federal, state or local taxes.
General Information
The Fund was organized as an unincorporated business trust under the laws of the
Commonwealth of Massachusetts pursuant to an Agreement and Declaration of Trust
(the "Trust Agreement") dated October 8, 1985, and commenced operations on
February 5, 1986. Effective February 1, 1994, the Fund's name was changed from
First Prairie Tax Exempt Money Market Fund to First Prairie Municipal Money
Market Fund. The Fund is authorized to issue an unlimited number of shares of
beneficial interest, par value $.01 per share. Each share has one vote.
On February 19, 1993, Fund shareholders voted to (a) approve a Management
Agreement between the Fund and the Manager to replace the Prior Advisory
Agreement and the Prior Administration Agreement; and (b) change certain of the
Fund's fundamental policies and investment restrictions, among other things, to
(i) increase the amount the Fund may borrow for temporary or emergency purposes
from 10% to
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15% of the Fund's total assets, (ii) increase the amount of the Fund's assets
which it may pledge to the extent necessary to secure such borrowings and make
such policy non-fundamental, (iii) permit the Fund to invest up to 10% of its
net assets in illiquid securities and make such policy non-fundamental and (iv)
permit the Fund to lend its portfolio securities in an amount not to exceed
33-1/3% of the value of the Fund's total assets.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or a Trustee. The
Trust Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility which
management believes is remote. Upon payment of any liability incurred by the
Fund, the shareholder paying such liability will be entitled to reimbursement
from the general assets of the Fund. The Trustees intend to conduct the
operations of the Fund in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of the Fund. As discussed
under "Management of the Fund" in the Statement of Additional Information, the
Fund ordinarily will not hold shareholder meetings; however, shareholders under
certain circumstances may have the right to call a meeting of shareholders for
the purpose of voting to remove Trustees.
The Transfer Agent maintains a record of each investor's ownership and
sends confirmations and statements of account.
Investor inquiries may be made to the investor's Service Agent, including
the Manager, or by writing to the Fund at the address shown on the front cover
or by calling the appropriate telephone number.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUND'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
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369pros10
FIRST PRAIRIE MUNICIPAL MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
APRIL 29, 1994
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
First Prairie Municipal Money Market Fund (the "Fund"), dated April 29,
1994, as it may be revised from time to time. To obtain a copy of the
Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call toll free 1-800-346-3621.
The First National Bank of Chicago (the "Manager") serves as the Fund's
investment adviser.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned
subsidiary of The Dreyfus Corporation ("Dreyfus"), is the distributor of the
Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . .B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . .B-9
Management Agreement. . . . . . . . . . . . . . . . . . . . .B-11
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . .B-13
Service Plan. . . . . . . . . . . . . . . . . . . . . . . . .B-14
Redemption of Fund Shares . . . . . . . . . . . . . . . . . .B-15
Shareholder Services. . . . . . . . . . . . . . . . . . . . .B-17
Determination of Net Asset Value. . . . . . . . . . . . . . .B-19
Dividends, Distributions and Taxes. . . . . . . . . . . . . .B-20
Yield Information . . . . . . . . . . . . . . . . . . . . . .B-20
Portfolio Transactions. . . . . . . . . . . . . . . . . . . .B-21
Information About the Fund. . . . . . . . . . . . . . . . . .B-22
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . . . .B-22
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . .B-24
Financial Statements. . . . . . . . . . . . . . . . . . . . .B-32
Report of Independent Auditors. . . . . . . . . . . . . . . .B-40
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the
Fund."
The distribution of investments (at value) in Municipal Obligations by
ratings for the fiscal year ended December 31, 1993, computed on a monthly
basis, was as follows:
Fitch Moody's Standard
Investors Investors & Poor's
Service, Inc. or Service, Inc. or Corporation
Percentage
("Fitch") ("Moody's") ("S&P") of Value
VMIG 1\MIG1, SP-1+\SP-1,
F-1+\F-1 P-1 A1+/A1 87.1%
AAA/AA Aaa/Aa AAA/AA 1.4%
Not Rated Not Rated Not Rated 11.5%
------
100.0%
======
- -------------
* The Fund may use IBCA Limited and IBCA, Inc. ("IBCA") as an additional
nationally statistical rating organization. As of December 31, 1993,
none of the Fund's investments were rated by IBCA.
Municipal Obligations. The term "Municipal Obligations" generally
includes debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities
such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses and
lending such funds to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated housing
facilities, sports facilities, convention or trade show facilities, airport,
mass transit, industrial, port or parking facilities, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal; the interest paid on such
obligations may be exempt from Federal income tax, although current tax laws
place substantial limitations on the size of such issues. Such obligations
are considered to be Municipal Obligations if the interest paid thereon
qualifies as exempt from Federal income tax in the opinion of bond counsel
to the issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification and between
classifications.
Floating and variable rate demand notes and bonds are tax exempt
obligations ordinarily having stated maturities in excess of 13 months, but
which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding 13 months, in each case upon not more than
30 days' notice. The issuer of such obligations ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders thereof. The interest rate
on a floating rate demand obligation is based on a known lending rate, such
as a bank's prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals.
Municipal lease/purchase agreements take the form of a lease for
accounting purposes but are considered installment purchase contracts issued
by state or local governmental authorities to obtain funds to acquire a wide
variety of equipment and facilities such as fire and sanitation vehicles,
computer equipment and other capital assets. These obligations make it
possible for state or local governmental authorities to acquire property and
equipment without being required to meet constitutional and statutory
requirements for the issuance of debt. Thus, municipal leases have special
risks not ordinarily associated with Municipal Obligations. These
obligations frequently contain "non-appropriation" clauses that provide that
the governmental issuer of the obligation has no obligation to make future
payments under the lease or contract unless money is appropriated for such
purposes by the legislative body on a yearly or other periodic basis.
However, such instruments typically contain a "non-substitution" clause
which prohibits the municipality from substituting other assets for those
underlying the obligation. Although the obligations will be secured by the
financed equipment, the disposition of the equipment in the event of
foreclosure might prove difficult. The Fund will seek to minimize these
risks by investing only in those municipal lease obligations that (1) are
rated in one of the two highest rating categories for debt obligations by at
least two nationally recognized statistical rating organizations (or one
rating organization if the obligation was rated only by one such
organization) or (2) if unrated, are purchased principally from the issuer
or domestic banks or other responsible third parties, in each case only if
the seller shall have entered into an agreement with the Fund providing that
the seller or other responsible third party will either remarket or
repurchase the lease obligation within a short period after demand by the
Fund. The staff of the Securities and Exchange Commission currently
considers certain municipal lease obligations to be illiquid. Accordingly,
not more than 10% of the value of the Fund's net assets will be invested in
municipal lease obligations that are illiquid and in other illiquid
securities. See "Investment Restriction No. 12" below.
For the purpose of diversification under the Investment Company Act of
1940, as amended (the "Act"), the identification of the issuer of Municipal
Obligations depends on the terms and conditions of the security. When the
assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating the
subdivision and the security is backed only by the assets and revenues of
the subdivision, such subdivision would be deemed to be the sole issuer.
Similarly, in the case of an industrial development bond, if that bond is
backed only by the assets and revenues of the non-governmental user, then
such non-governmental user would be deemed to be the sole issuer. If,
however, in either case, the creating government or some other entity
guarantees a security, such a guaranty would be considered a separate
security and will be treated as an issue of such government or other entity.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a
particular offering, maturity of the obligation and rating of the issue.
The imposition of the Fund's management fee, as well as other operating
expenses, including fees paid under the Fund's Service Plan, will have the
effect of reducing the yield to investors.
The Fund will not purchase tender option bonds unless (a) the demand
feature applicable thereto is exercisable by the Fund within 13 months of
the date of such purchase upon no more than 30 days' notice and thereafter
is exercisable by the Fund no less frequently than annually upon no more
than 30 days' notice and (b) at the time of such purchase, the Manager
reasonably expects (i) based upon its assessment of current and historical
interest rate trends, that prevailing short-term tax exempt rates will not
exceed the stated interest rate on the underlying Municipal Obligations at
the time of the next tender fee adjustment, and (ii) that the circumstances
which might entitle the grantor of a tender option to terminate the tender
option would not occur prior to the time of the next tender opportunity. At
the time of each tender opportunity, the Fund will exercise the tender
option with respect to any tender option bonds unless the Manager reasonably
expects, (x) based upon its assessment of current and historical interest
rate trends, that short-term tax exempt rates will not exceed the stated
interest rate on the underlying Municipal Obligations at the time of the
next tender fee adjustment, and (y) that the circumstances which might
entitle the grantor of a tender option to terminate the tender option would
not occur prior to the time of the next tender opportunity. The Fund will
exercise the tender feature with respect to tender option bonds, or
otherwise dispose of its tender option bonds, prior to the time the tender
option is scheduled to expire pursuant to the terms of the agreement under
which the tender option is granted. The Fund otherwise will comply with the
provisions of Rule 2a-7 in connection with the purchase of tender option
bonds, including, without limitation, the requisite determination that the
tender option bonds in question meet the quality standards described in
Rule 2a-7, which, in the case of a tender option bond subject to a
conditional demand feature, would include a determination that the security
has received both the required short-term and long-term quality rating or is
determined to be of comparable quality. In the event of a default of the
Municipal Obligation underlying a tender option bond, or the termination of
the tender option agreement, the Fund would look to the maturity date of the
underlying security for purposes of compliance with Rule 2a-7 and, if its
remaining maturity was greater than 13 months, the Fund would sell the
security as soon as would be practicable. The Fund will purchase tender
option bonds only when it is satisfied that the custodial and tender option
arrangements, including the fee payment arrangements, will not adversely
affect the tax exempt status of the underlying Municipal Obligations and
that payment of any tender fees will not have the effect of creating taxable
income for the Fund. Based on the tender option bond agreement, the Fund
expects to be able to value the tender option bond at par; however, the
value of the instrument will be monitored to assure that it is valued at
fair value.
Ratings of Municipal Obligations. If, subsequent to its purchase by
the Fund, (a) an issue of rated Municipal Obligations ceases to be rated in
the highest rating category by at least two rating organizations (or one
rating organization if the instrument was rated by only one such
organization) or the Fund's Board determines that it is no longer of
comparable quality or (b) the Manager becomes aware that any portfolio
security not so highly rated or any unrated security has been given a rating
by any rating organization below the rating organization's second highest
rating category, the Fund's Board will reassess promptly whether such
security presents minimal credit risk and will cause the Fund to take such
action as it determines is in the best interest of the Fund and its
shareholders; provided that the reassessment required by clause (b) is not
required if the portfolio security is disposed of or matures within five
business days of the Manager becoming aware of the new rating and the Fund's
Board is subsequently notified of the Manager's actions.
To the extent that the ratings given by Moody's, S&P, Fitch or IBCA for
Municipal Obligations may change as a result of changes in such
organizations or their rating systems, the Fund will attempt to use
comparable ratings as standards for its investments in accordance with the
investment policies contained in the Fund's Prospectus and this Statement of
Additional Information. The ratings of Moody's, S&P, Fitch and IBCA
represent their opinions as to the quality of the Municipal Obligations
which they undertake to rate. It should be emphasized, however, that
ratings are relative and subjective and are not absolute standards of
quality. Although these ratings may be an initial criterion for selection
of portfolio investments, the Manager also will evaluate these securities
and the creditworthiness of the issuers of such securities.
Lending Portfolio Securities. To a limited extent, the Fund may lend
its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value
of the securities loaned. By lending its portfolio securities, the Fund can
increase its income through the investment of the cash collateral. For the
purposes of this policy, the Fund considers collateral consisting of U.S.
Government securities or irrevocable letters of credit issued by banks whose
securities meet the standards for investment by the Fund to be the
equivalent of cash. Such loans may not exceed 33 1/3% of the value of the
Fund's total assets. From time to time, the Fund may return to the borrower
and/or a third party, which is unaffiliated with the Fund, and which is
acting as a "placing broker," a part of the interest earned from the
investment of collateral received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Fund may pay only reasonable custodian fees in connection
with the loan. These conditions may be subject to future modification.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Treasury Bills have initial maturities of one year or less;
Treasury Notes have initial maturities of one to ten years; and Treasury
Bonds generally have initial maturities of greater than ten years. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, Government National Mortgage Association
pass-through certificates, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Federal Home Loan Banks, by the
right of the issuer to borrow from the U.S. Treasury; others, such as those
issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the
agency or instrumentality; and others, such as those issued by the Student
Loan Marketing Association, only by the credit of the agency or
instrumentality. These securities bear fixed, floating or variable rates of
interest. Interest may fluctuate based on generally recognized reference
rates or the relationship of rates. While the U.S. Government provides
financial support to such U.S. Government-sponsored agencies or
instrumentalities, no assurance can be given that it will always do so,
since it is not so obligated by law. The Fund will invest in such
securities only when it is satisfied that the credit risk with respect to
the issuer is minimal.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Investments in time deposits generally are limited to London branches of
domestic banks that have total assets in excess of $1 billion. Time
deposits which may be held by the Fund will not benefit from insurance from
the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
Repurchase agreements involve the acquisition by the Fund of an
underlying debt instrument, subject to an obligation of the seller to
repurchase, and the Fund to resell, the instrument at a fixed price, usually
not more than one week after its purchase. The Fund's custodian or sub-
custodian will have custody of, and will hold in a segregated account,
securities acquired by the Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange
Commission to be loans by the Fund. In an attempt to reduce the risk of
incurring a loss on a repurchase agreement, the Fund will enter into
repurchase agreements only with domestic banks with total assets in excess
of $1 billion or primary government securities dealers reporting to the
Federal Reserve Bank of New York, with respect to securities of the type in
which the Fund may invest, and will require that additional securities be
deposited with it if the value of the securities purchased should decrease
below resale price. The Manager will monitor on an ongoing basis the value
of the collateral to assure that it always equals or exceeds the repurchase
price. Certain costs may be incurred by the Fund in connection with the
sale of the securities if the seller does not repurchase them in accordance
with the repurchase agreement. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the securities, realization on the
securities by the Fund may be delayed or limited. The Fund will consider on
an ongoing basis the creditworthiness of the institutions with which it
enters into repurchase agreements.
Investment Restrictions. The Fund has adopted investment restrictions
numbered 1 through 8 as fundamental policies. These restrictions cannot be
changed without approval by the holders of a majority (as defined in the
Act) of the Fund's outstanding voting shares. Investment restrictions
numbered 9 through 13 are not fundamental policies and may be changed by a
vote of a majority of the Trustees at any time. The Fund may not:
1. Invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of the Fund's total assets may be
invested, and securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities may be purchased for temporary defensive
purposes, without regard to any such limitation.
2. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no such
limitation on the purchase of Municipal Obligations and, for temporary
defensive purposes, securities issued by banks and obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
3. Borrow money, except from banks (other than the Manager or its
affiliates) for temporary or emergency (not leveraging) purposes in an
amount up to 15% of the value of the Fund's total assets (including the
amount borrowed) based on the lesser of cost or market, less liabilities
(not including the amount borrowed) at the time the borrowing is made.
While borrowings exceed 5% of the value of the Fund's total assets, the Fund
will not make any additional investments.
4. Purchase or sell real estate, commodities or commodities
contracts, or oil and gas interests, but this shall not prevent the Fund
from investing in Municipal Obligations secured by real estate or interests
therein.
5. Underwrite the securities of other issuers, except that the Fund
may bid separately or as part of a group for the purchase of Municipal
Obligations directly from an issuer for its own portfolio to take advantage
of the lower purchase price available, and except to the extent the Fund may
be deemed an underwriter under the Securities Act of 1933, as amended, by
virtue of disposing of portfolio securities.
6. Make loans to others except through the purchase of debt
obligations and the entry into repurchase agreements; however, the Fund may
lend its portfolio securities in an amount not to exceed 33 1/3% of the value
of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Fund's Board of Trustees.
7. Issue any senior security (as such term is defined in Section
18(f) of the Act), except to the extent that the activities permitted in
Investment Restriction Nos. 3 and 11 may be deemed to give rise to a senior
security.
8. Sell securities short or purchase securities on margin.
9. Purchase securities other than Municipal Obligations and Taxable
Investments.
10. Invest in securities of other investment companies, except to the
extent permitted under the Act.
11. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and to the
extent related to the deposit of assets in escrow in connection with the
purchase of securities on a when-issued or delayed-delivery basis.
12. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid
(which securities could include participation interests (including municipal
lease/purchase agreements) that are not subject to the demand feature
described in the Fund's Prospectus and floating and variable rate demand
obligations as to which the Fund cannot exercise the demand feature
described in the Fund's Prospectus on less than seven days' notice and as to
which there is no secondary market) if, in the aggregate, more than 10% of
its net assets would be so invested.
13. Invest in companies for the purpose of exercising control.
While not a fundamental policy, the Fund will not invest in oil, gas or
other mineral leases, or real estate limited partnerships.
Notwithstanding any of the foregoing Investment Restrictions, the Fund
reserves the right to enter into interest rate futures contracts, and
municipal bond index futures contracts, and any options that may be offered
in respect thereof, subject to the restrictions then in effect of the
Securities and Exchange Commission and the Commodity Futures Trading
Commission and to the receipt or taking, as the case may be, of appropriate
consents, approvals and other actions from or by those regulatory bodies.
In any event, no such contracts or options will be entered into until a
general description of the terms thereof is set forth in a subsequent
prospectus and statement of additional information, and a registration
statement with respect thereto has been filed with and declared effective by
the Securities and Exchange Commission.
For purposes of Investment Restriction No. 2, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together
as an "industry."
If a percentage restriction is adhered to at the time of investment, a
later increase in percentage resulting from a change in values or assets
will not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Trustees and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below. The Trustee who is deemed to be an "interested person" of
the Fund, as defined in the Act, is indicated by an asterisk.
Trustees and Officers of the Fund
*JOSEPH S. DiMARTINO, President and Trustee. President, Chief Operating
Officer and a Director of Dreyfus, Executive Vice President and a
Director of the Distributor and an officer, director or trustee of
other investment companies advised or administered by Dreyfus. He is
also a Director of Noel Group, Inc., Director and Corporate
Member of The Muscular Dystrophy Association and a Trustee of Bucknell
University. His address is 200 Park Avenue, New York, New York 10166.
JOHN P. GOULD, Trustee. Distinguished Service Professor of Economics of the
University of Chicago Graduate School of Business. Since 1986, he has
served as a Director of DFA Investment Dimensions Group, a series
mutual fund. Dean Gould also serves as a Director of Harpor Capital
Advisors. From 1983 to 1993, Dean of the University of Chicago
Graduate School of Business. His address is 1101 East 58th Street,
Chicago, Illinois 60637.
MARILYN McCOY, Trustee. Vice President of Administration and Planning of
Northwestern University. From 1981 to 1985, she was the Director of
Planning and Policy Development for the University of Colorado. She
also serves on the Board of Directors of Evanston Hospital, the Chicago
Metropolitan YMCA, the Chicago Network and United Charities. Mrs.
McCoy is also a member of the Chicago Economic Club. Her address is
1100 North Lake Shore Drive, Chicago, Illinois 60611.
RAYMOND D. ODDI, Trustee. Private consultant. A Director of Caremark
International, Inc. and Medisense, Inc., companies in the health care
industry and Baxter Credit Union. From 1978 to 1986, Senior Vice
President of Baxter International, Inc., a company engaged in the
production of medical care products. He also is a member of the
Illinois Society of Certified Public Accountants. His address is
1181 Loch Lane, Lake Forest, Illinois 60045.
Each of the "non-interested" Trustees also is a trustee of First
Prairie Cash Management, First Prairie Diversified Asset Fund, First Prairie
Money Market Fund, First Prairie U.S. Government Income Fund and First
Prairie U.S. Treasury Securities Cash Management and a director of First
Prairie Municipal Bond Fund.
The Fund does not pay any remuneration to its officers and Trustees
other than fees and expenses to Trustees who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of
Manager or Dreyfus or any affiliate of either of them, which totalled $9,247
for the fiscal year ended December 31, 1993 for all such Trustees as a
group.
Trustees (except Mrs. McCoy) were elected at the meeting of
shareholders held on September 28, 1987. No further shareholder meetings
will be held for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Under the Act,
shareholders of record of not less than two-thirds of the outstanding shares
of the Fund may remove a Trustee through a declaration in writing or by vote
cast in person or by proxy at a meeting called for that purpose. Under the
Fund's Agreement and Declaration of Trust, the Trustees are required to call
a meeting of shareholders for the purpose of voting upon the question of
removal of any such Trustee when requested in writing to do so by the
shareholders of record of not less than 10% of the Fund's outstanding
shares.
For so long as the Fund's plan described in the section captioned
"Service Plan" remains in effect, the Trustees of the Fund who are not
"interested persons" of the Fund, as defined in the Act, will be selected
and nominated by the Trustees who are not "interested persons" of the Fund.
Officers of the Fund Not Listed Above
DANIEL C. MACLEAN, Vice President. Vice President and General Counsel of
Dreyfus, Secretary of the Distributor and an officer of other
investment companies advised or administered by Dreyfus.
JEFFREY N. NACHMAN, Vice President-Financial. Vice President-Mutual Fund
Accounting of Dreyfus and an officer of other investment companies
advised or administered by Dreyfus.
JOHN J. PYBURN, Treasurer. Assistant Vice President of Dreyfus and an
officer of other investment companies advised or administered by
Dreyfus.
PAUL T. MOLLOY, Controller. Senior Accounting Manager of the Fund
Accounting Department of Dreyfus and an officer of other investment
companies advised or administered by Dreyfus.
MARK N. JACOBS, Secretary. Secretary and Deputy General Counsel of Dreyfus
and an officer of other investment companies advised or administered by
Dreyfus.
ROBERT I. FRENKEL, Assistant Secretary. Senior Assistant General Counsel of
Dreyfus and an officer of other investment companies advised or
administered by Dreyfus.
CHRISTINE PAVALOS, Assistant Secretary. Assistant Secretary of Dreyfus, the
Distributor and other investment companies advised or administered by
Dreyfus.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Trustees and officers of the Fund, as a group, owned less than 1% of
the Fund's shares of beneficial interest outstanding on April 15, 1994.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
Management Agreement. The Manager provides management services to the
Fund pursuant to the Management Agreement (the "Management Agreement") dated
April 30, 1993 with the Fund, which is subject to annual approval by (i) the
Fund's Board of Trustees or (ii) vote of a majority (as defined in the Act)
of the outstanding voting securities of the Fund, provided that in either
event the continuance also is approved by a majority of the Trustees who are
not "interested persons" (as defined in the Act) of the Fund or the Manager,
by vote cast in person at a meeting called for the purpose of voting on such
approval. Shareholders last approved the Management Agreement on February
19, 1993 and the Board of Trustees, including a majority of the Trustees who
are not "interested persons" of any party to the Management Agreement, last
voted to renew the Management Agreement at a meeting held on December 10,
1993. The Management Agreement is terminable without penalty, on not more
than 60 days' notice, by the Fund's Board of Trustees or by vote of the
holders of a majority of the Fund's shares or, upon not less than 90 days'
notice, by the Manager. The Management Agreement will terminate
automatically in the event of its assignment (as defined in the Act).
The Manager is responsible for the Fund's investment decisions and
manages the Fund's portfolio of investments in accordance with the stated
policies of the Fund, subject to the approval of the Fund's Board of
Trustees. All purchases and sales are reported for the Trustees' review at
the meeting subsequent to such transactions.
The Manager pays the salaries of all officers and employees employed by
both it and the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
The Manager has engaged Dreyfus to assist it in providing certain
administrative services to the Fund. Pursuant to its agreement with the
Manager, Dreyfus furnishes the Fund clerical help and accounting, data
processing, bookkeeping, internal auditing and legal services and certain
other services required by the Fund, prepares reports to the Fund's
shareholders, tax returns, reports to and filings with the Securities and
Exchange Commission and state Blue Sky authorities, calculates the net asset
value of the Fund's shares and generally assists the Manager in providing
for all aspects of the Fund's operation, other than providing investment
advice. The fees payable to Dreyfus for its services are paid by the
Manager.
The Fund has agreed that the Manager will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which the Manager's agreement with the Fund
relates, except for a loss resulting from wilful misfeasance, bad faith or
gross negligence on the part of the Manager in the performance of its
obligations or from reckless disregard by it of its obligations and duties
under its agreement with the Fund.
As compensation for the Manager's services to the Fund, the Fund has
agreed to pay the Manager a monthly management fee at the annual rate of .55
of 1% of the value of the Fund's average daily net assets. Prior to April
30, 1993, the Manager provided investment advisory services to the Fund
pursuant to an Investment Advisory Agreement (the "Prior Advisory
Agreement") with the Fund dated December 16, 1985 and Dreyfus provided
administration services to the Fund pursuant to an Administration Agreement
(the "Prior Administration Agreement") with the Fund dated December 16,
1985. Pursuant to the Prior Advisory Agreement, the Fund agreed to pay the
Manager an advisory fee at the annual rate of .40 of 1% of the value of the
Fund's average daily net assets. Pursuant to the Prior Administration
Agreement, the Fund agreed to pay Dreyfus an administration fee at the
annual rate of .20 of 1% of the value of the Fund's average daily net
assets. Pursuant to the Prior Advisory Agreement, the fees payable to the
Manager for the fiscal years ended December 31, 1991 and December 31, 1992
and for the period January 1, 1993 through April 29, 1993 were $878,703,
$914,834 and $266,582, respectively. For the period from April 30, 1993
(effective date of Management Agreement) through December 31, 1993, the fee
payable to the Manager pursuant to the Management Agreement was $699,072.
For the fiscal years ended December 31, 1992 and 1993, the fees payable to
the Manager were reduced pursuant to undertakings in effect resulting in net
fees paid of $895,911 in fiscal 1992 and $647,661 in fiscal 1993. The fees
paid to Dreyfus pursuant to the Prior Administration Agreement for the
fiscal years ended December 31, 1991 and 1992 and for the period January 1,
1993 through April 29, 1993 were $439,352, $457,417 and $133,291,
respectively.
Expenses and Expense Information. All expenses incurred in the
operation of the Fund are borne by the Fund, except to the extent
specifically assumed by the Manager. The expenses borne by the Fund include
the following: taxes, interest, brokerage fees and commissions, if any, fees
of Trustees who are not officers, directors, employees or holders of 5% or
more of the outstanding voting securities of the Manager or Dreyfus,
Securities and Exchange Commission fees, state Blue Sky qualification fees,
advisory fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, industry association fees, outside
auditing and legal expenses, costs of maintaining the Fund's existence,
costs of independent pricing services, costs attributable to investor
services (including, without limitation, telephone and personnel expenses),
costs of shareholders' reports and meetings, and any extraordinary expenses.
The Fund bears certain advertising, marketing and Servicing expenses in
accordance with the Fund's Service Plan and also bears costs of preparing,
printing and distributing certain prospectuses and statements of additional
information and costs associated with implementing and operating such plan.
See "Service Plan."
The Manager has agreed that if in any fiscal year the aggregate
expenses of the Fund (including management fees, but excluding taxes,
brokerage, interest on borrowings and, with the prior written consent of the
necessary state securities commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over the Fund, the Fund
may deduct from the fees to be paid to the Manager, or the Manager will
bear, such excess expense, to the extent required by state law. Such
deduction or payment, if any, will be estimated daily and reconciled and
effected or paid, as the case may be, on a monthly basis.
The fee payable to the Manager is not subject to reduction as the value
of the Fund's net assets increases.
Glass-Steagall Act. For an additional discussion of the Glass-Steagall
Act in connection with the Fund's operations, see the Fund's Prospectus.
From time to time, legislation has been introduced and may be
reintroduced in Congress, which would permit a bank, a bank holding company
or a subsidiary thereof to organize, sponsor, control and distribute shares
of an investment company such as the Fund, notwithstanding present
restrictions under the Glass-Steagall Act and the Federal Bank Holding
Company Act of 1956. As described herein, the Fund is currently distributed
by the Distributor, and Dreyfus, its parent, sponsors the Fund and provides
it with administrative services. If current restrictions preventing a bank
from legally sponsoring, organizing, controlling or distributing shares of
an investment company were relaxed, the Fund expects that the Manager would
consider the possibility of offering to perform some or all of the services
now provided by Dreyfus or the Distributor. It is not possible, of course,
to predict whether or in what form such legislation might be enacted or the
terms upon which the Manager might offer to provide services.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the First Prairie Family of
Funds, the funds in the Dreyfus Family of Funds and certain other investment
companies.
Using Federal Funds. The Shareholder Services Group, Inc., the Fund's
transfer and dividend disbursing agent (the "Transfer Agent"), or the Fund
may attempt to notify the investor upon receipt of checks drawn on banks
that are not members of the Federal Reserve System as to the possible delay
in conversion into Federal Funds and may attempt to arrange for a better
means of transmitting the money. If the investor is a customer of a
securities dealer, bank or other financial institution and his order to
purchase Fund shares is paid for other than in Federal Funds, the securities
dealer, bank or other financial institution, acting on behalf of its
customer, will complete the conversion into, or itself advance, Federal
Funds generally on the business day following receipt of the customer order.
The order is effective only when so converted and received by the Transfer
Agent. An order for the purchase of Fund shares placed by an investor with
sufficient Federal Funds or cash balance in his brokerage account with a
securities dealer, bank or other financial institution will become effective
on the day that the order, including Federal Funds, is received by the
Transfer Agent.
TeleTransfer Privilege. TeleTransfer purchase orders may be made
between the hours of 8:00 a.m. and 4:00 p.m., New York time, on any business
day that the Transfer Agent and the New York Stock Exchange are open, except
Martin Luther King, Jr. Day, Columbus Day and Veterans Day. Such purchases
will be credited to the shareholder's Fund account on the next bank business
day. To qualify to use the TeleTransfer Privilege, the initial payment for
purchase of Fund shares must be drawn on, and redemption proceeds paid to,
the same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request must
be in writing and signature-guaranteed. See "Redemption of Fund
Shares--TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
SERVICE PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Service Plan."
Rule 12b-1 (the "Rule") adopted by the Securities and Exchange
Commission under the Act, provides, among other things, that an investment
company may bear expenses of distributing its shares only pursuant to a plan
adopted in accordance with the Rule. Because some or all of the fees paid
for advertising or marketing the Fund's shares and the fees paid to certain
financial institutions (which may include banks), securities dealers and
other industry professionals (collectively, "Service Agents") could be
deemed to be payment of distribution expenses, the Fund's Board of Trustees
has adopted such a plan (the "Plan"). The Fund's Board of Trustees believes
that there is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders. In some states, banks or other financial institutions
effecting transactions in Fund shares may be required to register as dealers
pursuant to state law.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Board of Trustees for its review. In addition, the Plan provides that it
may not be amended to increase materially the costs which the Fund may bear
for distribution pursuant to the Plan without shareholder approval and that
other material amendments of the Plan must be approved by the Board of
Trustees, and by the Trustees who are not "interested persons" (as defined
in the Act) of the Fund and have no direct or indirect financial interest in
the operation of the Plan or in the related service agreements, by vote cast
in person at a meeting called for the purpose of considering such
amendments. The Plan and the related service agreements are subject to
annual approval by such vote of the Trustees cast in person at a meeting
called for the purpose of voting on the Plan. The Plan was so approved by
the Board of Trustees at a meeting held on December 10, 1993. The Plan may
be terminated at any time by vote of a majority of the Trustees who are not
"interested persons" and have no direct or indirect financial interest in
the operation of the Plan or in any of the related service agreements or by
vote of a majority of the Fund's shares. Any service agreement may be
terminated without penalty, at any time, by such vote of the Trustees or,
upon not more than 60 days' written notice to the Service Agent, by vote of
the holders of a majority of the Fund's shares. Each service agreement will
terminate automatically in the event of its assignment (as defined in the
Act).
During the fiscal year ended December 31, 1993, an aggregate of
$484,374 was charged to the Fund under the Plan, of which $387,499 was paid
to the Manager and its affiliates, $9,092 was paid for preparing, printing
and distributing prospectuses and operating the Plan, and $96,875 was
charged for advertising, marketing and Servicing the Fund's shares.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Check Redemption Privilege. An investor may indicate on the Account
Application or by later written request that the Fund provide Redemption
Checks ("Checks") drawn on the Fund's account. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Account Application or later written request must be manually signed by
the registered owner(s). Checks may be made payable to the order of any
person in an amount of $500 or more. When a Check is presented to the
Transfer Agent for payment, the Transfer Agent, as the investor's agent,
will cause the Fund to redeem a sufficient number of full or fractional
shares in the investor's account to cover the amount of the Check.
Dividends are earned until the Check clears. After clearance, a copy of the
Check will be returned to the investor. Investors generally will be subject
to the same rules and regulations that apply to checking accounts, although
election of this Privilege creates only a shareholder-transfer agent
relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the shares in
an investor's account, the Check will be returned marked insufficient funds.
Checks should not be used to close an account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege on
the same business day if the Transfer Agent receives the redemption request
in proper form prior to Noon on such day; otherwise the Fund will initiate
payment on the next business day. Redemption proceeds will be transferred
by Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form.
Redemption proceeds, if wired, must be in the amount of $1,000 or more and
will be wired to the investor's account at the bank of record designated in
the investor's file at the Transfer Agent, if the investor's bank is a
member of the Federal Reserve System, or to a correspondent bank if the
investor's bank is not a member. Fees ordinarily are imposed by such bank
and usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmission:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator toll free at
1-800-654-7171. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Signatures."
TeleTransfer Privilege. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a wire redemption will
be effected as a TeleTransfer transaction through the Automated Clearing
House ("ACH") system unless more prompt transmittal specifically is
requested. Redemption proceeds will be on deposit in the investor's account
at an ACH member bank ordinarily two business days after receipt of the
redemption request. See "Purchase of Fund Shares--TeleTransfer Privilege."
Signatures. Written redemption requests must be signed by the
individual shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP") and the Stock Exchanges Medallion
Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other
suitable verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call the telephone number listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such
amount, the Board of Trustees reserves the right to make payments in whole
or in part in securities or other assets of the Fund in case of an emergency
or any time a cash distribution would impair the liquidity of the Fund to
the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If
the recipient sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Fund's investments or determination of
its net asset value is not reasonably practicable, or (c) for such other
periods as the Securities and Exchange Commission by order may permit to
protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Exchange Privilege. The Exchange Privilege permits investors to
purchase, in exchange for all or part of their shares of the Fund, shares of
certain other funds advised by the Manager or shares of certain funds
advised by Dreyfus, on the basis of relative net asset value per share at
the time of the exchange, as follows:
A. Exchanges for shares of any funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the applicable sales
load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of dividends or
distributions of any such funds (collectively referred to herein as
"Purchased Shares") may be exchanged for shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the maximum sales load
that could have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, an investor must notify
the Transfer Agent of his prior ownership of fund shares and his account
number.
To use this Privilege, an investor or the investor's Service Agent
acting on the investor's behalf must give exchange instructions to the
Transfer Agent in writing, by wire or by telephone. Telephone exchanges may
be made only if the appropriate "YES" box has been checked on the Account
Application, or a separate signed Shareholder Services Form is on file with
the Transfer Agent. By using this Privilege, the investor authorizes the
Transfer Agent to act on telephonic, telegraphic or written exchange
instructions from any person representing himself or herself to be the
investor or a representative of the investor's Service Agent, and reasonably
believed by the Transfer Agent to be genuine. Telephone exchanges may be
subject to limitations as to the amount involved or the number of telephone
exchanges permitted.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an
investor to purchase, in exchange for shares of the Fund, shares of certain
other funds in the First Prairie Family of Funds or certain other funds
advised by Dreyfus. This Privilege is available only for existing accounts.
Shares will be exchanged on the basis of relative net asset value as
described above under "Exchange Privilege." Enrollment in or modification
or cancellation of this Privilege is effective three business days following
notification by the investor. An investor will be notified if his account
falls below the amount designated to be exchanged under this Privilege. In
this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Auto-Exchange transaction. Shares held under IRA and other retirement plans
are eligible for this Privilege. Exchanges of IRA shares may be made
between IRA accounts and from regular accounts to IRA accounts, but not from
IRA accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
The Exchange Privilege and Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained from the Distributor, 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144. The Fund reserves the right to reject any exchange request
in whole or in part. The Exchange Privilege or Auto-Exchange Privilege may
be modified or terminated at any time upon notice to shareholders.
Dividend Sweep. Dividend Sweep enables investors to invest
automatically dividends or dividends and capital gain distributions, if any,
paid by the Fund in shares of another fund in the First Prairie Family of
Funds or certain other funds advised or administered by Dreyfus of which the
investor is a shareholder. Shares of other funds purchased pursuant to this
Privilege will be purchased on the basis of relative net asset value per
share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are offered
without a sales load.
B. Dividends and distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges
a sales load may be invested in shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum sales load charged by
the fund from which dividends or distributions are being swept, without
giving effect to any reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales charge and the
applicable contingent deferred sales charge, if any, will be imposed upon
redemption of such shares.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by completing the
appropriate application available from the Distributor, the Manager, certain
affiliates of the Manager or certain Service Agents. Automatic Withdrawal
may be terminated at any time by the investor, the Fund or the Transfer
Agent.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Amortized Cost Pricing. The valuation of the Fund's portfolio
securities is based upon their amortized cost, which does not take into
account unrealized capital gains or losses. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method
provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price
the Fund would receive if it sold the instrument.
The Board of Trustees has established, as a particular responsibility
within the overall duty of care owed to the Fund's investors, procedures
reasonably designed to stabilize the Fund's price per share as computed for
the purpose of sales and redemptions at $1.00. Such procedures include
review of the Fund's portfolio holdings by the Board of Trustees, at such
intervals as it deems appropriate, to determine whether the Fund's net asset
value calculated by using available market quotations or market equivalents
deviates from $1.00 per share based on amortized cost. Market quotations
and market equivalents used in such review are obtained from an independent
pricing service (the "Service") approved by the Board of Trustees. The
Service values the Fund's investments based on methods which include
consideration of: yields or prices of municipal obligations of comparable
quality, coupon, maturity and type; indications of values from dealers; and
general market conditions. The Service also may employ electronic data
processing techniques and/or a matrix system to determine valuations.
The extent of any deviation between the Fund's net asset value based
upon available market quotations or market equivalents and $1.00 per share
based on amortized cost will be examined by the Board of Trustees. If such
deviation exceeds 1/2 of 1%, the Board of Trustees promptly will consider
what action, if any, will be initiated. In the event the Board of Trustees
determines that a deviation exists which may result in material dilution or
other unfair results to investors or existing shareholders, it has agreed to
take such corrective action as it deems necessary and appropriate,
including: selling portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity;
withholding dividends or paying distributions from capital or capital gains;
redeeming shares in kind; or establishing a net asset value per share by
using available market quotations or market equivalents.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in Fund's Prospectus entitled "Dividends, Distributions and
Taxes."
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gain
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income under Section 1276 of the Internal
Revenue Code of 1986, as amended.
YIELD INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Yield Information."
For the seven-day period ended December 31, 1993, the Fund's yield was
2.09% and its effective yield was 2.11%. These yields reflect the waiver of
a portion of the management fee, without which the Fund's yield and
effective yield for the seven-day period ended December 31, 1993 would have
been 1.82% and 1.84%, respectively. Yield is computed in accordance with a
standardized method which involves determining the net change in the value
of a hypothetical pre-existing Fund account having a balance of one share at
the beginning of a seven calendar day period for which yield is to be
quoted, dividing the net change by the value of the account at the beginning
of the period to obtain the base period return, and annualizing the results
(i.e., multiplying the base period return by 365/7). The net change in the
value of the account reflects the value of additional shares purchased with
dividends declared on the original share and any such additional shares and
fees that may be charged to shareholder accounts, in proportion to the
length of the base period and the Fund's average account size, but does not
include realized gains and losses or unrealized appreciation and
depreciation. Effective yield is computed by adding 1 to the base period
return (calculated as described above), raising that sum to a power equal to
365 divided by 7, and subtracting 1 from the result.
Based upon a 1993 Federal tax rate of 39.60% and a yield of 2.09% for
the seven-day period ended December 31, 1993 the Fund's tax equivalent yield
for this period was 3.46%. Without the management fee waiver then in
effect, the Fund's tax equivalent for the seven-day period ended December
31, 1993 would have been 3.01%. Tax equivalent yield is computed by dividing
that portion of the yield or effective yield (calculated as described above)
which is tax exempt by 1 minus a stated tax rate and adding the quotient to
that portion, if any, of the yield of the Fund that is not tax exempt.
The tax equivalent yield noted above represents the application of the
highest Federal marginal personal income tax rate presently in effect. The
tax equivalent figure, however, does not include the potential effect of any
state or local (including, but not limited to, county, district or city)
taxes, including applicable surcharges. In addition, there may be pending
legislation which could affect such stated tax rates or yields. Each
investor should consult its tax adviser, and consider its own factual
circumstances and applicable tax laws, in order to ascertain the relevant
tax equivalent yield.
Yields will fluctuate and are not necessarily representative of future
results. Each investor should remember that yield is a function of the type
and quality of the instruments in the portfolio, portfolio maturity and
operating expenses. An investor's principal in the Fund is not guaranteed.
See "Determination of Net Asset Value" for a discussion of the manner in
which the Fund's price per share is determined.
From time to time, the Fund may use hypothetical tax equivalent yields
or charts in its advertising. These hypothetical yields or charts will be
used for illustrative purposes only and not as representative of the Fund's
past or future performance.
From time to time, advertising for the Fund may describe the costs of a
college education at public or private institutions; how such costs may
increase over time, based on an assumed rate of growth; and how investments
in the Fund can be used to help pay for such costs. Advertisements for the
Fund also may refer to how an investment in the Fund may be used as a
savings vehicle for various purposes such as a down payment on the purchase
price of a home or to fund retirement or medical costs. Advertisements for
the Fund may also refer to comparisons of the Fund's performance with
historical rates of inflation.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities are purchased
directly from the issuer or from an underwriter; other purchases and sales
usually are placed with those dealers from which it appears that the best
price or execution will be obtained. Ordinarily, no brokerage commissions,
as such, are paid by the Fund for such purchases and sales, although the
price paid usually includes an undisclosed compensation to the dealer acting
as agent. The prices paid to underwriters of newly-issued securities
usually include a concession paid by the issuer to the underwriter, and
purchases of after-market securities from dealers ordinarily are executed at
a price between the bid and asked price. No brokerage commissions have been
paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's investment
personnel in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and
analysis with the views and information of other securities firms and may be
selected based upon their sales of Fund shares.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds
or accounts it may advise and, conversely, research services furnished to
the Manager by brokers in connection with other funds or accounts the
Manager may advise may be used by the Manager in advising the Fund.
Although it is not possible to place a dollar value on these services, it is
the opinion of the Manager that the receipt and study of such services
should not reduce its overall research expenses.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares are of one class and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights
and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders and sends statements concerning shareholder accounts monthly.
On March 15, 1989, the Fund's name was changed from First Lakeshore Tax
Exempt Money Market Fund to First Prairie Tax Exempt Money Market Fund. On
February 1, 1994, the Fund changed its name from First Prairie Tax Exempt
Money Market Fund to First Prairie Municipal Money Market Fund.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT AUDITORS
The Bank of New York, 110 Washington Street, New York, New York 10286,
is the Fund's custodian. The Shareholder Services Group, Inc., a subsidiary
of First Data Corporation, P.O. Box 9671, Providence, Rhode Island
02940-9671, is the Fund's transfer and dividend disbursing agent. Neither
The Bank of New York nor The Shareholder Services Group, Inc. has any part
in determining the investment policies of the Fund or which securities are
to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares of beneficial interest being sold pursuant to the Fund's Prospectus.
Ernst & Young, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX
Description of S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
The AA rating may be modified by the addition of a plus (+) or minus (-
) sign to show relative standing within the category.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
Commercial Paper Ratings
The designation A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are denoted
with a plus sign (+) designation. Capacity for timely payment on issues
with an A-2 designation is strong. However, the relative degree of safety
is not as high as for issues designated A-1.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities. Moody's applies the numerical modifiers 1, 2
and 3 to show relative standing within the rating category. The modifier 1
indicates a ranking for the security in the higher end of a rating category;
the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a
ranking in the lower end of a rating category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG). Such ratings recognize
the difference between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in
bond risk, long term secular trends for example, may be less important over
the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated VMIG, or, if the demand feature is
not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such characteristics
as payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to
the fact that the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is
not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.
Issues (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of senior short-term promissory obligations.
This ordinarily will be evidenced by many of the characteristics cited above
but to a lesser degree. Earnings trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The ratings
take into consideration special features of the issue, its relationship to
other obligations of the issuer, the current financial condition and
operative performance of the issuer and of any guarantor, as well as the
political and economic environment that might affect the issuer's financial
strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
Demand Bond or Notes Ratings
Certain demand securities empower the holder at his option to require
the issuer, usually through a remarketing agent, to repurchase the security
upon notice at par with accrued interest. This is also referred to as a put
option. The ratings of the demand provision may be changed or withdrawn at
any time if, in Fitch's judgment, changing circumstances warrant such
action.
Fitch demand provision ratings carry the same symbols and related
definitions as its short-term ratings.
IBCA
Corporate Ratings
An IBCA corporate rating represents IBCA's current assessment of the
business and financial risks of the company, including the economic
environment, industry characteristics, nature of operations, market
position, ownership, accounting policies, earnings trends and sensitivities,
cash flow, capital and debt structure, liquidity position and contingent
risks.
The corporate ratings consist of Long- and Short-Term Ratings. The
Short-Term Ratings relate to debt which has a maturity of less than one
year. The Long-Term Ratings relate to debt instruments with maturity of one
year or longer.
Long-Term Ratings
AAA
Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA
Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk, albeit not very significantly.
Note: A plus (+) or minus (-) sign may be appended to a rating to denote
relative status within major rating categories.
Short-Term Ratings
A1+
Obligations supported by the highest capacity for timely repayment.
A1
Obligations supported by a very strong capacity for timely repayment.
A2
Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.
International and U.S. Bank Ratings
An IBCA bank rating represents IBCA's current assessment of the
strength of the bank and whether such bank would receive support should it
experience difficulties. In assigning a bank rating, IBCA considers the
bank's results, asset quality and contingencies, liquidity and funding,
capital and management.
In its assessment of a bank, IBCA uses a dual rating system comprised
of Legal Ratings and Individual Ratings. In addition, IBCA assigns banks Long-
and Short-Term Ratings as used in the corporate ratings discussed above.
Legal Ratings address the question of whether the bank would receive support
provided by central banks or shareholders if it experienced difficulties,
and such ratings are considered by IBCA to be a prime factor in its
assessment of credit risk. Individual Ratings represent IBCA's assessment
of a bank's economic merits and address the question of how the bank would
be viewed if it were entirely independent and could not rely on support from
state authorities or its owners.
Legal Ratings
1
A bank for which there is a clear legal guarantee on the part of its
home state to provide any necessary support or a bank of such importance
both internationally and domestically that support from the state would be
forthcoming, if necessary. The state in question must be a major developed
country which is clearly prepared to support its principal banks.
2
A bank for which there is no legal obligation on the part of a
sovereign entity to provide support but for which state support would be
forthcoming, for example, because of its importance to the total economy or
its historic relationship with the government or Central Bank. The country
in question must clearly have sufficient resources to provide such support.
3
A bank which has owners who are of sufficient reputation and possess
such resources that shareholder support would be forthcoming, if necessary.
4
A bank for which support from owners or outside authorities is likely
but not certain. In the case of owners, their limited size may preclude
assurance of support or, where there is a large number of owners, it may be
that they consider the bank an investment rather than a long-term
commitment.
5
A bank which cannot rely on outside assistance.
Individual Ratings
A
A bank with a strong balance sheet, favorable credit profile and a
consistent record of above-average profitability.
B
A bank with a sound credit profile and without significant problems.
The bank's performance generally has been in line with or better than that
of its peers.
C
A bank which has an adequate credit profile but possesses one or more
troublesome aspects, giving rise to the modest possibility of risk
developing, or which has generally failed to perform in line with its peers.
D
A bank which is currently underperforming in some notable manner. The
balance sheet is likely to be below average and profitability poor. The
bank has the capability of recovering using its own resources, but this is
likely to take some time.
E
A bank with very serious problems which either requires or is likely to
require external support.
Note: In addition, gradations are used between these five ratings (i.e.,
A/B, B/C, C/D and D/E.
<TABLE>
<CAPTION>
FIRST PRAIRIE TAX EXEMPT MONEY MARKET FUND
STATEMENT OF INVESTMENTS DECEMBER 31, 1993
PRINCIPAL
TAX EXEMPT INVESTMENTS-100.0% AMOUNT VALUE
------------ ------------
ALABAMA-2.0%
<S> <C> <C>
Phenix Industrial Development Board, EIR, Refunding, VRDN
(Mead Coated Board Project) 4.75% (LOC; Sumitomo Bank) (a,b)............... $ 1,500,000 $ 1,500,000
Port City Medical Clinic Board of Mobile, HR, CP
2.40%, 2/1/94 (LOC: Fuji Bank and Mitsubishi Bank) (b)..................... 2,075,000 2,075,000
ARIZONA-2.8%
Maricopa County Pollution Control Corp., PCR, CP (Southern California Edison-
Paloverdi) 2.50%, 1/27/94 (Guaranteed by; Southern California Edison Co.).. 4,000,000 4,000,000
City of Mesa Municipal Development, Special Tax, CP
2.60%, 1/12/94 (LOC; Union Bank of Switzerland) (b)........................ 1,000,000 1,000,000
CALIFORNIA-3.0%
State of California, GO, RAN 3.50%, 6/28/94.................................... 1,600,000 1,604,302
Orange County, TRAN 3%, 6/30/94................................................ 3,750,000 3,759,012
COLORADO-1.9%
Regional Transportation District, Special Passenger Fare Revenue, VRDN:
3.20% (LOC; Banque Nationale de Paris) (a,b)............................... 2,000,000 2,000,000
3.30% (LOC; Bank of Tokyo) (a,b)........................................... 1,400,000 1,400,000
CONNECTICUT-1.7%
Connecticut Development Authority, PCR, VRDN (Connecticut Light and Power)
3.10% (LOC; Deutsche Bank) (a,b)........................................... 3,000,000 3,000,000
DELAWARE-1.1%
Delaware Economic Development Authority, IDR, CP (WL Gore and Associates-Barksdale)
2.60%, 2/24/94 (LOC; Morgan Guaranty Trust Co.) (b)........................ 2,000,000 2,000,000
DISTRICT OF COLUMBIA-2.9%
District of Columbia, Revenue Bonds (Supplemental Student Loan-Consern)
2.80%, 7/1/94 (LOC; Mitsubishi Bank) (b)................................... 5,065,000 5,065,000
FLORIDA-5.0%
Palm Beach County Health Facilities Authority, Revenue, Refunding, CP
(Pooled Hospital Loan Program) 2.20%, 2/15/94
(Insured; MBIA and Liquidity; Credit Suisse)............................... 2,000,000 2,000,000
Sarasota County Public Hospital District, HR, CP (Sarasota Memorial Hospital Project)
2.60%, 1/26/94 (LOC; Sumitomo Bank) (b).................................... 2,080,000 2,080,000
West Orange Memorial Hospital Tax District, Revenue, CP:
2.60%, Series A-1, 1/5/94 (LOC; Societe Generale) (b)...................... 1,100,000 1,100,000
2.35%, Series A-2, 1/6/94 (LOC; Societe Generale) (b)...................... 1,700,000 1,700,000
2.45%, Series A-2, 3/22/94 (LOC; Societe Generale) (b)..................... 2,000,000 2,000,000
GEORGIA-1.9%
Peachtree City Development Authority, Revenue, VRDN (Hoshizaki American Inc.)
3.05% (LOC; Bank of Tokyo) (a,b)........................................... 3,300,000 3,300,000
ILLINOIS-3.4%
Decatur, Water Revenue, CP (Newsouth Water Treatment)
2.30%, 3/7/94 (LOC; Sumitomo Bank) (b)..................................... 1,000,000 1,000,000
State of Illinois, GO, Notes:
3.25%, 5/16/94............................................................. 2,000,000 2,002,540
3.50%, 6/15/94............................................................. 3,000,000 3,007,277
FIRST PRAIRIE TAX EXEMPT MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1993
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
------------ ------------
INDIANA-2.9%
Indiana Development Finance Authority, Solid Waste Disposal Revenue, CP
(Pure Air On Lake Project) 2.50%, 1/5/94 (LOC; Fuji Bank) (b).............. $ 1,100,000 $ 1,100,000
Jasper County, PCR, Refunding, CP (Northern Indiana Public Service)
2.40%, 3/8/94 (LOC; Barclays Bank) (b)..................................... 4,000,000 4,000,000
KANSAS-2.8%
Burlington, PCR, Refunding, CP (Kansas City Power and Light Project)
2.30%, 2/16/94 (LOC; Deutsche Bank) (b).................................... 4,900,000 4,900,000
KENTUCKY-1.7%
Trimble County, PCR, CP 2.55%, 1/25/94 (LOC; Louisville Gas and Electric Co.) (b) 3,000,000 3,000,000
LOUISIANA-.6%
East Baton Rouge Parish, PCR, VRDN (Georgia-Pacific Corp.)
2.85% (LOC; Toronto-Dominion Bank) (a,b)................................... 1,000,000 1,000,000
MINNESOTA-1.1%
City of Rochester, Health Care Facilities, Revenue, CP
(Mayo Foundation Project) 2.45%, 3/2/94 (Guaranteed by; Mayo Foundation)... 2,000,000 2,000,000
MISSOURI-3.7%
City of Columbia, Special Obligation, VRDN 3.20% (LOC; Toronto-Dominion Bank) (a,b) 1,500,000 1,500,000
Missouri Environmental Improvement and Energy Resource Authority, PCR, CP
(Union Electric Co. Project):
2.60%, 1/5/94 (LOC; Union Bank of Switzerland) (b)..................... 1,000,000 1,000,000
2.55%, 3/10/94 (LOC; Union Bank of Switzerland) (b).................... 4,000,000 4,000,000
MONTANA-3%
City of Forsyth, PCR, VRDN (Portland General Electric)
3.40% (LOC; Banque Nationale de Paris) (a,b)............................... 5,200,000 5,200,000
NEBRASKA-.9%
Nebraska Public Power District, Revenue, CP
2.75%, 1/11/94 (LOC; Morgan Guaranty Trust) (b)............................ 1,500,000 1,500,000
NEW HAMPSHIRE-.6%
New Hampshire Business Finance Authority, PCR, Refunding, VRDN (Connecticut Power
and Light Co. Project) 3.40% (LOC; Canadian Imperial Bank of Commerce) (a,b) 1,000,000 1,000,000
NEW JERSEY-2.8%
State of New Jersey, TRAN 3%, 6/15/94.......................................... 5,000,000 5,023,521
NEW MEXICO-3.8%
Hurley, PCR, CP (Kennecott Sante Fe):
2.35%, 1/11/94 (Guaranteed by; British Petroleum).......................... 3,000,000 3,000,000
2.40%, 3/9/94 (Guaranteed by; British Petroleum)........................... 3,700,000 3,700,000
NEW YORK-1.1%
New York State Energy, Research and Development Authority, PCR Bonds
(Electric and Gas Co.) 2.85%, 10/15/94 (LOC; Union Bank of Switzerland) (b) 2,000,000 2,000,000
NORTH CAROLINA-4.7%
North Carolina Municipal Power Agency, Power System Revenue
2.50%, 2/9/94 (LOC; Industrial Bank of Japan) (b).......................... 5,000,000 5,000,000
Wake County Industrial Facilities and Pollution Control Financing Authority,
Revenue, VRDN (Carolina Power and Light Co.) 4.40% (LOC; Sumitomo Bank) (a,b) 3,200,000 3,200,000
FIRST PRAIRIE TAX EXEMPT MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1993
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
------------ ------------
Allen County, IDR, VRDN (Nickles Bakery) 3% (LOC; Society National Bank) (a,b) $ 4,200,000 $ 4,200,000
City of Bedford Heights, IDR, VRDN (Olympic Steel Inc. Project)
3% (LOC; Society National Bank) (a,b)...................................... 900,000 900,000
Village of Brooklyn Heights, IDR, VRDN (Keynote Office Centre Limited Project)
3% (LOC; Society National Bank) (a,b)...................................... 3,500,000 3,500,000
Cuyahoga County, IDR, VRDN:
(Puritas Association Project) 3% (LOC; Society National Bank) (a,b)........ 2,125,000 2,125,000
(Suburban Pavillion) 3% (LOC; Society National Bank) (a,b)................. 4,450,000 4,450,000
Hancock County, EDR, VRDN (Quality Material Equipment)
3% (LOC; Society National Bank) (a,b)...................................... 2,300,000 2,300,000
Village of Oakwood, IDR, VRDN (Oakleaf Industrial Mall Project)
3% (LOC; Society National Bank) (a,b)...................................... 1,800,000 1,800,000
Ohio Air Quality Development Authority, PCR, CP (Cleveland Electric)
2.70%, 2/1/94 (Insured; FGIC).............................................. 4,000,000 4,000,000
OKLAHOMA-1.6%
Oklahoma Industries Authority, Health Revenue, CP (Saint Anthony's Hospital Project)
2.60% 1/3/94 (LOC; Mitsubishi Bank) (a,b).................................. 2,900,000 2,900,000
OREGON-.6%
State of Oregon, EDR, VRDN (Stagg Foods Inc. Project)
3.50% (LOC; Bank of America) (a,b)......................................... 1,050,000 1,050,000
PENNSYLVANIA-7.9%
Beaver County Industrial Development Authority, PCR, Refunding, VRDN
(Duquesne-Beaver UV) 3.40% (LOC; Barclays Bank) (a,b)...................... 700,000 700,000
Carbon County Industrial Development Authority, RRR, CP (Panther Creek
Partners Project) 2.30%, 2/2/94 (LOC; National Westminster Bank) (b)....... 4,000,000 4,000,000
Emmaus General Authority, Local Government Revenue, VRDN:
3.40% (LOC; Canadian Imperial Bank of Commerce) (a,b)...................... 2,000,000 2,000,000
3.45% (LOC; Hong Kong Shanghai Banking Corp.) (a,b)........................ 3,700,000 3,700,000
Montgomery County Industrial Development Authority, IDR, VRDN
(Valley Square Association) 3.30% (LOC: Banca Nazionale del
Lavoro and Mellon Bank) (a,b).............................................. 2,500,000 2,500,000
City of Philadelphia, TRAN 3.25%, 6/15/94
(LOC; Canadian Imperial Bank of Commerce) (b).............................. 1,000,000 1,002,200
SOUTH CAROLINA-1.1%
York County, PCR, Refunding, CP (Duke Power Co. Project)
2.40%, 1/11/94 (Guaranteed by; Duke Power Co. Project)..................... 2,000,000 2,000,000
TEXAS-15.8%
Austin County Industrial Corp., IDR, CP (Travis and Williamson Counties
Combined Utilities) 2.60%, 1/24/94 (LOC; Swiss Bank Corp.) (b)............. 4,050,000 4,050,000
Capital Industrial Development Corp., PCR, VRDN (Motorola Inc. Project)
3.10% (Guaranteed by; Motorola Inc.) (a)................................... 2,100,000 2,100,000
Grapevine Industrial Development Corp., Revenue, VRDN
(Multiple Mode-American Airlines):
4.75%, Series A-3 (LOC; Sanwa Bank) (a,b).............................. 1,500,000 1,500,000
4.75%, Series A-4 (LOC; Sanwa Bank) (a,b).............................. 2,900,000 2,900,000
4.75%, Series B-2 (LOC; Sanwa Bank) (a,b).............................. 800,000 800,000
FIRST PRAIRIE TAX EXEMPT MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1993
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
------------ ------------
TEXAS (CONTINUED)
Harris County Industrial Development Corp., IDR, VRDN (Zeon Chemicals Project)
3.30% (LOC; Industrial Bank of Japan) (a,b)................................ $ 4,100,000 $ 4,100,000
North Central Health Facility Development Corp., HR, VRDN
(Presbyterian Medical Center) 4.30% (Insured; MBIA and BPA; Nations Bank) (a) 4,100,000 4,100,000
State of Texas, TRAN 3.25%, 8/31/94............................................ 4,000,000 4,013,849
Texas Health Facilities Development, Revenue, VRDN (Aces North Texas Pooled Health)
3.50% (LOC; Banque Paribas) (a,b).......................................... 4,200,000 4,200,000
UTAH-2.3%
Intermountain Power Agency, Power Supply Revenue Bonds
2.70%, 6/15/94 (SBPA; Bank of America) (b)................................. 4,000,000 4,000,000
WASHINGTON-.9%
Student Loan Finance Association of Washington, Guaranteed Student Loan Program
Revenue, VRDN (Second Series) 2.90% (LOC; Sanwa Bank) (a,b)................ 1,500,000 1,500,000
WEST VIRGINIA-.6%
Marshall County, PCR, CP (Mountaineer Carbon Co.)
2.40%, 3/9/94 (Guaranteed by; British Petroleum)........................... 1,000,000 1,000,000
WYOMING-.6%
Lincoln County, PCR, Refunding, CP (Pacificorp Project)
2.20%, 1/27/94 (LOC; Union Bank of Switzerland) (b)........................ 1,000,000 1,000,000
------------
TOTAL INVESTMENTS (cost $176,107,701).......................................... $176,107,701
============
SUMMARY OF ABBREVIATIONS
BPA Bond Purchase Agreement LOC Letter of Credit
CP Commercial Paper MBIA Municipal Bond Insurance Association
EDR Economic Development Revenue PCR Pollution Control Revenue
EIR Environmental Improvement Revenue RAN Revenue Anticipation Notes
FGIC Financial Guaranty Insurance Corporation RRR Resources Recovery Revenue
GO General Obligation SBPA Standby Bond Purchase Agreeement
HR Hospital Revenue TRAN Tax and Revenue Anticipation Notes
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- --------- ------- ----------------- -------------------
F1+/F1 VMIG1/MIG1, P1 (d) SP1+/SP1, A1+/A1 (d) 88.0%
AAA/AA (e) Aaa/Aa (e) AAA/AA (e) 1.1
Not Rated (f) Not Rated (f) Not Rated (f) 10.9
------
100.0%
======
NOTES TO STATEMENT OF INVESTMENTS:
(a) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market
interest rates.
(b) Secured by letters of credit. At December 31, 1993, 70.2% of the Fund's
net assets are backed by letters of credit issued by domestic
banks, foreign banks and corporations, of which Society National Bank
provided letters of credit to 10.9% of the Fund's net assets.
(c) Fitch currently provides creditworthiness information for a limited
amount of investments.
(d) P1 and A1 are the highest ratings assigned tax-exempt commercial paper
by Moody's and Standard & Poor's, respectively.
(e) Notes which are not F, MIG or SP rated are represented by bond ratings
of the issuers.
(f) Securities which, while not rated by Fitch, Moody's or Standard & Poor's
have been determined by the Fund's Board of Directors to be of
comparable quality to those rated securities in which the Fund may invest.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST PRAIRIE TAX EXEMPT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1993
ASSETS:
<S> <C> <C>
Investments in securities, at value-Note 1(a).............................. $176,107,701
Cash....................................................................... 1,077,961
Interest receivable........................................................ 704,194
Prepaid expenses........................................................... 60,072
------------
177,949,928
LIABILITIES:
Due to The First National Bank of Chicago.................................. $ 88,169
Due to The Dreyfus Corporation............................................. 96,875
Accrued expenses........................................................... 66,950 251,994
------------ ------------
NET ASSETS..................................................................... $177,697,934
============
REPRESENTED BY:
Paid-in capital............................................................ $177,715,005
Accumulated net realized (loss) on investments............................. (17,071)
------------
NET ASSETS at value applicable to 177,715,005 shares outstanding (unlimited
number of $.01 par value shares of Beneficial Interest authorized)......... $177,697,934
============
NET ASSET VALUE, offering and redemption price per share
($177,697,934 / 177,715,005 shares)........................................ $1.00
=====
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1993
INVESTMENT INCOME:
INTEREST INCOME............................................................ $ 4,883,738
EXPENSES:
Management fee-Note 2(a)............................................... $1,098,945
Shareholder servicing costs-Note 2(b).................................. 562,984
Professional fees...................................................... 82,390
Custodian fees......................................................... 36,925
Prospectus and shareholders' reports-Note 2(b)......................... 22,225
Registration fees...................................................... 18,465
Trustees' fees and expenses-Note 2(c).................................. 9,247
Miscellaneous.......................................................... 8,116
------------
1,839,297
Less-reduction in investment advisory fee
due to undertakings-Note 2(a)...................................... 317,993
------------
TOTAL EXPENSES................................................. 1,521,304
------------
INVESTMENT INCOME-NET.......................................................... 3,362,434
NET REALIZED (LOSS) ON INVESTMENTS-Note 1(b)................................... (2,293)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 3,360,141
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST PRAIRE TAX EXEMPT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
-----------------------------
1992 1993
------------ ------------
OPERATIONS:
<S> <C> <C>
Investment income-net...................................................... $ 5,443,268 $ 3,362,434
Net realized (loss) on investments......................................... (2,293)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... 5,443,268 3,360,141
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net...................................................... (5,443,268) (3,362,434)
------------ ------------
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold.............................................. 562,179,580 409,972,617
Dividends reinvested....................................................... 2,618,570 1,647,251
Cost of shares redeemed.................................................... (588,473,031) (443,919,511)
------------ ------------
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS......... (23,674,881) (32,299,643)
------------ ------------
TOTAL (DECREASE) IN NET ASSETS.................................... (23,674,881) (32,301,936)
------------ ------------
NET ASSETS:
Beginning of year.......................................................... 233,674,751 209,999,870
------------ ------------
End of year................................................................ $209,999,870 $177,697,934
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS
Reference is made to pages 4 and 5 of the Prospectus dated April 29, 1994.
FIRST PRAIRIE TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940
("Act") as a diversified open-end management investment company. The
First National Bank of Chicago ("Manager") serves as the Fund's
investment adviser. The Dreyfus Corporation ("Dreyfus") provides certain
administrative services to the Fund-see Note 2(a). Dreyfus Service
Corporation ("Distributor"), a wholly-owned subsidiary of Dreyfus, acts
as the distributor of the Fund's shares, which are sold without a sales
load.
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00; the Fund has adopted certain investment, portfolio
valuation and dividend and distribution policies to enable it to do so.
Effective February 1, 1994 the Fund changed its name from "First
Prairie Tax Exempt Money Market" to "First Prairie Municipal Money
Market."
(A) PORTFOLIO VALUATION: Investments are valued at amortized cost,
which has been determined by the Fund's Board of Trustees to represent
the fair value of the Fund's investments.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Interest income, adjusted
for amortization of premiums and, when appropriate, discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Realized gain and loss from securities transactions are recorded on
the identified cost basis.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid
monthly. Dividends from net realized capital gain, if any, are normally
declared and paid annually, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the
Internal Revenue Code. To the extent that net realized capital gain can be
offset by capital loss carryovers, it is the policy of the Fund not to
distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax
exempt dividends, by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from all, or substantially all, Federal income
taxes.
The Fund has an unused capital loss carryover of approximately $17,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1993. If
not applied, $14,000 of the carryover expires in 1994, $1,000 expires in
1999, and $2,000 expires in 2001.
At December 31, 1993, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
NOTE 2-INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the
Manager, the management fee is computed at the annual rate of .55 of 1%
of the average daily value of the Fund's net assets and is payable monthly.
The Agreement further provides that if in any full fiscal year the
aggregate expenses of the Fund exclusive of taxes, brokerage, interest on
borrowings and extraordinary expenses, exceed the expense limitation of
any state having jurisdiction over the Fund, the Fund may deduct from the
payments to be made to the Manager, or the Manager will bear such excess
to the extent required by state law. The most stringent state expense
limitation applicable to the Fund presently requires reimbursement of
expenses in any full year that such expenses (exclusive of distribution
expenses and certain expenses as described above) exceed 2 1/2% of the
first $30 million, 2% of the next $70 million and
1 1/2% of the excess over $100 million of the average value of the Fund's
net assets in accordance with California "blue sky" regulations. However,
the Manager has undertaken from January 1, 1993 through December 19,
1993
FIRST PRAIRIE TAX EXEMPT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
to reduce the management fee paid by the Fund to the extent that the
Fund's aggregate expenses (excluding certain expenses as described above)
exceeded specified annual percentages of the Fund's average daily net
assets. The Manager has currently undertaken from December 20, 1993 to
assume all expenses of the Fund in excess of an annual rate of .65 of 1% of
the Fund's average daily net assets. The reduction in management fee,
pursuant to the undertakings, amounted to $317,993 for the year ended
December 31, 1993.
The undertaking may be modified by the Manager from time to time,
provided that the resulting expense
reimbursement would not be less than the amount required pursuant to the
Agreement.
Effective April 30, 1993 the Manager has engaged Dreyfus to assist it
in providing certain administrative services for the Fund pursuant to a
Master Administration Agreement between the Manager and Dreyfus.
Pursuant to its agreement with Dreyfus, the Manager has agreed to pay
Dreyfus for Dreyfus' services.
Prior to April 30, 1993, pursuant to an Investment Advisory Agreement
with the Manager and an Administration Agreement with Dreyfus, the
Investment Advisory Fee and the Administration Fee were computed at
annual rates of .40 of 1% and .20 of 1%, respectively, of the average daily
value of the Fund's net assets. The agreements provided that if in any full
year the aggregate expenses of the Fund (excluding certain expenses as
described above), exceeded the expense limitation of any state having
jurisdiction over the Fund, the Fund could deduct from the payments to be
made to the Manager and Dreyfus, or the Manager and Dreyfus would bear
their proportionate share of such excess to the extent required by state
law.
(B) The Fund has adopted a Service Plan (the "Plan") pursuant to which
it has agreed to pay costs and expenses in connection with advertising and
marketing shares of the Fund and payments made to one or more Service
Agents (which may include the Manager, Dreyfus and the Distributor) based
on the value of the Fund's shares owned by clients of the Service Agent.
These advertising and marketing expenses and fees of the Service Agents
may not exceed an annual rate of .25 of 1% of the Fund's average daily net
assets. The Plan also separately provides for the Fund to bear the costs of
preparing, printing and distributing certain of the Fund's prospectuses and
statements of additional information and costs associated with
implementing and operating the Plan, not to exceed the greater of
$100,000 or .005 of 1% of the Fund's average daily net assets for any full
year. For the year ended December 31, 1993, the Fund was charged
$493,466 pursuant to the Plan, substantially all of which was retained by
the Manager and Dreyfus.
(C) Certain officers and trustees of the Fund are "affiliated persons,"
as defined in the Act, of the Manager or Dreyfus. Each trustee who is not
an "affiliated person" receives an annual fee of $2,500 and an attendance
fee of $500 per meeting.
(D) On December 5, 1993, Dreyfus entered into an Agreement and Plan of
Merger providing for the merger of Dreyfus with a subsidiary of Mellon
Bank Corporation ("Mellon").
Following the merger, it is planned that Dreyfus will be a direct
subsidiary of Mellon Bank, N.A. Closing of this merger is subject to a
number of contingencies, including the receipt of certain regulatory
approvals and the approvals of the stockholders of the Manager and of
Mellon. The merger is expected to occur in mid-1994, but could occur
significantly later.
FIRST PRAIRIE TAX EXEMPT MONEY MARKET FUND
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
FIRST PRAIRIE TAX EXEMPT MONEY MARKET FUND
We have audited the accompanying statement of assets and liabilities
of First Prairie Tax Exempt Money Market Fund, including the statement of
investments, as of December 31, 1993, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and financial highlights
for each of the years indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's 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 generally accepted auditing
standards. 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. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1993 by
correspondence with the custodian. An audit also includes 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 First Prairie Tax Exempt Money Market Fund at December 31,
1993, 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 indicated years, in conformity with
generally accepted accounting principles.
(Ernst & Young Signature Logo)
New York, New York
February 4, 1994
